Nevada
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45-1352286
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Large Accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐
(Do not check if a smaller reporting company)
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Smaller reporting company ☒
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Emerging growth company ☐
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|
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Page
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3
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||
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PART I. FINANCIAL INFORMATION
|
|
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Item 1.
|
4
|
|
|
4
|
|
|
5
|
|
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6
|
|
|
7
|
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Item 2.
|
24
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Item 3.
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34
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Item 4.
|
34
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|
|
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PART II. OTHER INFORMATION
|
|
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Item 1.
|
35
|
|
Item 1A.
|
35
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Item 2.
|
35
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|
Item 3.
|
35
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Item 4.
|
35
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Item 5.
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35
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Item 6.
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35
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36
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November 30,
|
May 31,
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||||||
|
2017
|
2017
|
||||||
ASSETS
|
(unaudited)
|
|||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
259,189
|
$
|
78,310
|
||||
Prepaid expenses
|
26,410
|
1,410
|
||||||
Other current assets
|
36,381
|
-
|
||||||
Total current assets
|
321,980
|
79,720
|
||||||
|
||||||||
Security deposit
|
-
|
50,000
|
||||||
Property, plant and equipment, net of accumulated depreciation of $2,230 and $1,784
|
444
|
890
|
||||||
Intangible assets, net of accumulated amortization of $1,044 and $828
|
1,114
|
1,330
|
||||||
|
||||||||
Total assets
|
$
|
323,538
|
$
|
131,940
|
||||
|
||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued liabilities
|
$
|
669,554
|
$
|
581,765
|
||||
Accrued compensation, related party
|
91,250
|
53,750
|
||||||
Due to related party
|
17,930
|
17,930
|
||||||
Accrued interest
|
746
|
20,171
|
||||||
Accrued interest, related party
|
158,303
|
106,022
|
||||||
Notes payable, related parties
|
100,841
|
699,208
|
||||||
Convertible notes payable, net of discount of $332,917 and $57,644
|
30,083
|
252,356
|
||||||
Convertible notes payable, related party, net of discount of $0 and $0
|
48,000
|
-
|
||||||
Derivative liability
|
353,093
|
95,276
|
||||||
|
||||||||
Total current liabilities
|
1,469,800
|
1,826,478
|
||||||
|
||||||||
Noncurrent liabilities
|
||||||||
Convertible notes payable, related parties, net of discount of $346,471 and $0
|
746,525
|
192,000
|
||||||
|
||||||||
Total Liabilities
|
2,216,325
|
2,018,478
|
||||||
|
||||||||
Commitments and contingencies
|
-
|
-
|
||||||
|
||||||||
Stockholder’s equity
|
||||||||
Common stock, $0.0001 par value; 250,000,000 shares authorized; 39,126,944 and 32,852,944 shares issued and outstanding at November 30, 2017 and May 31, 2017, respectively
|
3,913
|
3,286
|
||||||
Preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued
|
-
|
-
|
||||||
Additional paid-in capital
|
10,117,243
|
7,032,836
|
||||||
Stock payable
|
68,950
|
68,950
|
||||||
Accumulated deficit
|
(12,082,893
|
)
|
(8,991,610
|
)
|
||||
Total stockholder’s equity (deficit)
|
(1,892,787
|
)
|
(1,886,538
|
)
|
||||
|
||||||||
Total liabilities and stockholders’ equity (deficit)
|
$
|
323,538
|
$
|
131,940
|
|
For the Three
|
For the Thee
|
For the Six
|
For the Six
|
||||||||||||
|
Months Ended
|
Months Ended
|
Months Ended
|
Months Ended
|
||||||||||||
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November 30, 2017
|
November 30, 2016
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November 30, 2017
|
November 30, 2016
|
||||||||||||
|
||||||||||||||||
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Cost of goods sold
|
-
|
-
|
-
|
-
|
||||||||||||
Gross margin
|
-
|
-
|
-
|
-
|
||||||||||||
|
||||||||||||||||
Selling, general and administrative expenses
|
85,218
|
163,122
|
298,421
|
337,867
|
||||||||||||
Professional fees
|
172,161
|
197,050
|
318,162
|
503,231
|
||||||||||||
Total operating expenses
|
257,379
|
360,172
|
616,583
|
841,098
|
||||||||||||
|
||||||||||||||||
Operating loss
|
(257,379
|
)
|
(360,172
|
)
|
(616,583
|
)
|
(841,098
|
)
|
||||||||
|
||||||||||||||||
Other (income) expense:
|
||||||||||||||||
Interest expense
|
806,965
|
756,292
|
881,831
|
1,014,362
|
||||||||||||
Gain on settlement of debt
|
-
|
-
|
(3,480
|
)
|
-
|
|||||||||||
Loss on modification of debt
|
-
|
33,334
|
29,145
|
33,334
|
||||||||||||
Loss on note exchange
|
404,082
|
-
|
404,082
|
-
|
||||||||||||
Loss on extinguishment of debt
|
989,032
|
-
|
989,032
|
-
|
||||||||||||
Change in fair value of derivative
|
68,140
|
(24,345
|
)
|
174,090
|
(148,266
|
)
|
||||||||||
Total other expense
|
2,268,219
|
765,281
|
2,474,700
|
899,430
|
||||||||||||
|
||||||||||||||||
Income (Loss) before income taxes
|
(2,525,598
|
)
|
(1,125,453
|
)
|
(3,091,283
|
)
|
(1,740,528
|
)
|
||||||||
|
||||||||||||||||
Income tax expense
|
-
|
-
|
-
|
-
|
||||||||||||
|
||||||||||||||||
Net income (loss)
|
$
|
(2,525,598
|
)
|
$
|
(1,125,453
|
)
|
$
|
(3,091,283
|
)
|
$
|
(1,740,528
|
)
|
||||
|
||||||||||||||||
Net income (loss) per share - basic
|
$
|
(0.07
|
)
|
$
|
(0.06
|
)
|
$
|
(0.09
|
)
|
$
|
(0.09
|
)
|
||||
|
||||||||||||||||
Net income (loss) per share - diluted
|
$
|
(0.07
|
)
|
$
|
(0.06
|
)
|
$
|
(0.09
|
)
|
$
|
(0.09
|
)
|
||||
|
||||||||||||||||
Weighted average shares outstanding - basic
|
35,039,032
|
20,350,003
|
33,946,441
|
20,350,003
|
||||||||||||
|
||||||||||||||||
Weighted average shares outstanding - diluted
|
35,039,032
|
20,350,003
|
33,946,441
|
20,350,003
|
|
For the Six
|
For the Six
|
||||||
|
Months Ended
|
Months Ended
|
||||||
|
November 30, 2017
|
November 30, 2016
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income (loss)
|
$
|
(3,091,283
|
)
|
$
|
(1,740,528
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Imputed interest
|
539
|
539
|
||||||
Change in fair value of derivative
|
174,090
|
(148,266
|
)
|
|||||
Loss on modification of debt
|
29,145
|
33,334
|
||||||
(Gain) loss on note exchange
|
404,082
|
-
|
||||||
Loss on extinguishment of debt
|
989,032
|
-
|
||||||
Gain on settlement of debt
|
(3,480
|
)
|
-
|
|||||
Amortization of debt discounts
|
572,856
|
889,392
|
||||||
Amortization of deferred financing costs
|
3,119
|
-
|
||||||
Depreciation and amortization expense
|
662
|
662
|
||||||
Changes in assets and liabilities:
|
||||||||
Other assets
|
50,000
|
-
|
||||||
Prepaid expenses
|
(25,000
|
)
|
(16,049
|
)
|
||||
Other current assets
|
(39,500 | ) | - | |||||
Accounts payable and accrued expenses
|
383,583
|
135,976
|
||||||
Accrued compensation
|
112,500
|
75,000
|
||||||
Due to related parties
|
-
|
251
|
||||||
Accrued interest, related party
|
52,281
|
80,311
|
||||||
Deferred rent
|
(49,565
|
)
|
-
|
|||||
Accrued interest
|
12,189
|
1,545
|
||||||
Net cash used in operating activities
|
(424,750
|
)
|
(687,833
|
)
|
||||
|
||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Payment for construction in progress
|
-
|
(35,013
|
)
|
|||||
Net cash used in investing activities
|
-
|
(35,013
|
)
|
|||||
|
||||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from related party convertible notes payable
|
-
|
150,000
|
||||||
Proceeds from related party notes payable
|
275,629
|
621,000
|
||||||
Proceeds from convertible notes
|
330,000
|
-
|
||||||
Principal payments on related party notes payable
|
-
|
(61,000
|
)
|
|||||
Repayments of convertible notes payable
|
-
|
(50,000
|
)
|
|||||
Net cash provided by financing activities
|
605,629
|
660,000
|
||||||
|
||||||||
Net increase in cash and cash equivalents
|
180,879
|
(62,846
|
)
|
|||||
|
||||||||
Cash and cash equivalents at beginning of period
|
78,310
|
88,244
|
||||||
|
||||||||
Cash and cash equivalents at end of period
|
$
|
259,189
|
$
|
25,398
|
||||
|
||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Interest paid
|
$
|
-
|
$
|
-
|
||||
Income taxes paid
|
$
|
-
|
$
|
-
|
||||
|
||||||||
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Convertible note issued for unpaid accrued salary
|
$
|
75,000
|
$
|
250,000
|
||||
Related party notes payable reclassified as related party convertible notes payable
|
$
|
873,996
|
$
|
222,750
|
||||
Note payable exchanged for common stock
|
$ | 936,478 | $ | - | ||||
Beneficial conversion feature on convertible notes payable
|
$
|
508,988
|
$
|
518,720
|
||||
Shares issued for settlement of accounts payable
|
$
|
6,000
|
$
|
-
|
||||
Extinguishment of debt
|
$ | - |
$
|
254,114
|
||||
Discount on convertible notes payable due to derivative
|
$ |
802,381
|
$ | - |
|
November 30,
|
May 31,
|
||||||
|
2017
|
2017
|
||||||
Prepaid legal fees
|
$
|
1,410
|
$
|
1,410
|
||||
Prepaid expenses
|
25,000
|
-
|
||||||
Total
|
$
|
26,410
|
$
|
1,410
|
|
November 30,
|
May 31,
|
||||||
|
2017
|
2017
|
||||||
Computer equipment
|
$
|
2,674
|
$
|
2,674
|
||||
Property and equipment, gross
|
2,674
|
2,674
|
||||||
Less: accumulated depreciation
|
(2,230
|
)
|
(1,784
|
)
|
||||
Property and equipment, net
|
$
|
444
|
$
|
890
|
|
November 30,
|
May 31,
|
||||||
|
2017
|
2017
|
||||||
Domain name
|
$
|
2,158
|
$
|
2,158
|
||||
|
2,158
|
2,158
|
||||||
Less: accumulated amortization
|
(1,044
|
)
|
(828
|
)
|
||||
Intangible assets, net
|
$
|
1,114
|
$
|
1,330
|
|
November 30,
|
May 31,
|
||||||
|
2017
|
2017
|
||||||
Trade payables
|
$
|
577,278
|
$
|
497,213
|
||||
Accrued payroll and related liabilities
|
36,577
|
34,987
|
||||||
Deferred rent liability
|
55,699
|
49,565
|
||||||
Total accounts payable and accrued liabilities
|
$
|
669,554
|
$
|
581,765
|
|
November 30,
|
May 31,
|
||||||
|
2017
|
2017
|
||||||
|
||||||||
Notes payable to Jeffrey Binder, an officer and director of the Company, for advances to fund operations (the “Binder Funding Notes”). The Binder Funding Notes bear interest at a rate of 6% for loans made through November 30, 2016, and at a rate of 10% for loans made after November 30, 2016. The Binder Funding Notes have no maturity date and are due on demand. During the twelve months ended May 31, 2016, Mr. Binder advanced a total of $95,250 to the Company under the Binder Funding Notes; during the year ended May 31, 2016, $92,500 of this amount was transferred out of the Binder Funding Notes and used to fund two new convertible notes payable to Mr. Binder (See Binder Convertible Notes 1 and 2 below). During the twelve months ended May 31, 2016, the Company accrued interest in the amount of $1,308 on the Binder Funding Notes. In July 2016, the remaining principal balance of $2,750 in the Binder Funding Notes was transferred to a new Convertible Note payable to Mr. Binder (the “Binder Convertible Note 3”).
During the twelve months ended May 31, 2017, Mr. Binder advanced a total of $145,850 to the Company under the Binder Funding Notes. Also during the year ended May 31, 2017, Mr. Binder loaned the Company an additional $49,700; which was credited to the Binder Funding Notes. Also during the year ended May 31, 2017, principal in the amount of $59,750 and accrued interest in the amount of $813 was transferred out of the Binder Funding Notes and used to fund two new convertible notes payable to Mr. Binder (See Binder Convertible Notes 3 and 4 below). Also during the year ended May 31, 2017, the Company made principal payments in the aggregate amount of $61,000 under the Binder Funding Notes. During the year ended May 31, 2017, the Company accrued interest in the amount of $1,910 on the Binder Funding Notes. Effective May 31, 2017, pursuant to the Omnibus Loan Agreement, a conversion feature was added to the Binder Funding Notes whereby principal and accrued interest is convertible into common stock of the Company at a rate of $0.25 per share.
During the three months ended August 31, 2017, Mr. Binder advanced a total of $47,767 to the Company under the Binder Funding Notes. During the three months ended August 31, 2017, interest in the amount of $2,466 was accrued on the Binder Funding Notes. Also during the three months ended August 31, 2017, principal in the amount of $77,550 and accrued interest in the amount of $3,630 were transferred from the Binder Funding Notes to a new convertible note payable to Mr. Binder (the “Binder Convertible Note 5”), and principal in the amount of $47,767 was transferred from the Binder Funding Notes to a new Convertible Note payable to Mr. Binder (the “Binder Convertible Note 6”).
During the three months ended November 30, 2017, Mr. Binder advanced a total of $112,862 to the Company under the Binder Funding Notes. A discount in the amount of $70,790 related to the beneficial conversion feature of the Binder Funding Notes was charged to additional paid-in capital and amortized to interest expense. During these three months ended November 30, 2017, interest in the amount of $642 was accrued on the Binder Funding Notes. Also during the three months ended November 30, 2017, principal in the amount of $27,021 and accrued interest in the amount of $122 was transferred from the Binder Funding Notes to a new convertible note payable to Mr. Binder (the “Binder Convertible Note 7”).
|
$
|
84,841
|
$
|
77,550
|
|
November 30,
2017
|
May 31,
2017
|
||||||
|
||||||||
Note payable to Frank Koretsky, a director of the Company, for advances to fund operations (the “Koretsky Funding Notes”). The Koretsky Funding Notes bear interest at a rate of 6% for loans made through November 30, 2016, and at a rate of 10% for loans made after November 30, 2016. The Koretsky Funding Notes have no maturity date and are due on demand. During the twelve months ended May 31, 2017, Mr. Koretsky advanced $550,000 to the Company under the Koretsky Funding Notes. Also during the twelve months ended May 31, 2017, $210,000 of principal and $1,346 of accrued interest was transferred out of the Koretsky Funding Notes and used to fund a new convertible notes payable to Mr. Koretsky. Also during the twelve months ended May 31, 2017, principal and accrued interest in the amounts of $410,000 and $4,046, respectively, were transferred out of the Koretsky Funding Notes and contributed to the Newcan Funding Notes (see Newcan Funding Notes, below).
|
-
|
-
|
||||||
|
||||||||
Notes payable to Newcan Investment Partners, LLC (“Newcan”), an entity owned by Frank Koretsky, a director of the Company, for advances to fund operations (the “Newcan Funding Notes”). The Newcan Funding Notes bear interest at a rate of 10%. The Newcan Funding Notes have no maturity date and are due on demand. During the twelve months ended May 31, 2017, principal and interest in the amount of $410,000 and $4,046, respectively, were transferred from the Koretsky Funding Notes into the Newcan Funding Notes. Also during the year ended May 31, 2017, Newcan advanced $791,658 to the Company under the Newcan Funding Notes. Also during the year ended May 31, 2017, principal in the amount of $460,000 and accrued interest in the amount of $7,747, respectively, were transferred from the Newcan Finding Notes and used to fund the Newcan Convertible Notes 2 and 3 (see below); also during the year ended May 31, 2017, principal and accrued interest in the amounts of $120,000 and $2,121, respectively, were transferred out of the Newcan Funding Notes in order to fund the Newcan Convertible Note 1; see below. During the twelve months ended May 31, 2017, the Company accrued interest in the amount of $13,434 on this note. Effective May 31, 2017, pursuant to the Omnibus Loan Agreement, a conversion feature was added to the Newcan Funding Notes whereby principal and accrued interest is convertible into common stock of the Company at a rate of $0.25 per share.
During the three months ended August 31, 2017, Newcan advanced $70,000 to the Company under the Newcan Funding Notes. Also during the three months ended August 31, 2017, interest in the amount of $14,964 was accrued on the Newcan Funding Notes. Also during the three months ended August 31, 2017, principal in the amount of $621,658 and accrued interest in the amount of $23,856 were transferred to a new Convertible Note payable to Newcan (the “Newcan Convertible Note 4”), and principal in the amount of $70,000 was transferred to a new Convertible Note payable to Newcan (the “Newcan Convertible Note 5”).
During the three months ended November 30, 2017, Newcan advanced $45,000 to the Company under the Newcan Funding Notes. Also during the three months ended November 30, 2017, interest in the amount of $247 was accrued on the Newcan Funding Notes. A discount in the amount of $58,600 related to the beneficial conversion feature of the Binder Funding Notes was charged to additional paid-in capital and amortized to interest expense. Also, during the three months ended November 30, 2017, principal in the amount of $30,000 and accrued interest in the amount of $148 were transferred to a new Convertible Notes payable to Newcan (the “Newcan Convertible Note 6”).
|
15,000
|
621,658
|
||||||
|
||||||||
Total – Demand Convertible Notes Payable, Related Parties
|
$
|
100,841
|
$
|
699,208
|
||||
Current portion
|
$
|
100,841
|
$
|
699,208
|
||||
Long term portion
|
$
|
-
|
$
|
-
|
|
November 30,
|
May 31,
|
||||||
|
2017
|
2017
|
||||||
|
||||||||
Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated March 31, 2017 (the “Binder Convertible Note 4”). The Binder Convertible Note 4 was funded with the conversion of $112,500 of unpaid accrued salary due to Mr. Binder and $47,000 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until April 1, 2018, at which time all accrued interest becomes due and payable. Commencing on July 1, 2018, the first of eight principal payments in the amount of $19,938 will become due; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “Unit” for each $0.25 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $0.25 per share.
Pursuant to the Omnibus Loan Agreement, on May 31, 2017, the requirement to issue warrants upon conversion was deleted, and principal in the amount of $87,500 was converted into a total of 350,000 shares of common stock. The remaining principal balance of $72,000 will be due in eight quarterly payments in the amount of $9,000 commencing July 1, 2018; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. During the twelve months ended May 31, 2017, the Company accrued interest in the amount of $2,666 on the Binder Convertible Note 4.
During the three and six months ended November 30, 2017, interest in the amount of $1,798 and $3,610 was accrued on Binder Convertible Note 4, respectively.
|
$
|
72,000
|
$
|
72,000
|
||||
|
||||||||
Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated March 31, 2017 (the “Newcan Convertible Note 1”). The Newcan Convertible Note 1 was funded with the conversion of $120,000 of advances made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until April 1, 2018, at which time all accrued interest becomes due and payable. Commencing on July 1, 2018, the first of eight principal payments in the amount of $15,000 will become due; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “Unit” for each $0.25 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $0.25 per share. During the twelve months ended May 31, 2017, the Company accrued interest in the amount of $2,005 on the Koretsky Convertible Note 4. Pursuant to the Omnibus Loan Agreement, on May 31, 2017, the requirement to issue warrants upon conversion was deleted.
During the three and six months ended November 30, 2017, interest in the amount of $2,992 and $6,016 was accrued on Newcan Convertible Note 1, respectively.
|
120,000
|
120,000
|
||||||
|
||||||||
Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated August 23, 2017 in the original principal amount of $115,050 (the “Binder Convertible Note 5”). The Binder Convertible Note 5 was funded with the conversion of $37,500 of unpaid accrued salary due to Mr. Binder and $77,550 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $14,381 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $46,020 on the Binder Convertible Note 5 related to the value of the beneficial conversion feature at the time of issuance; $3,824 and $4,160 of this discount was amortized during the three and six months ended November 30, 2017, respectively. During the three and six months ended November 30, 2017, interest in the amount of $2,868 and $3,121 was accrued on Binder Convertible Note 5, respectively, and $3,630 of accrued interest was transferred from the Binder Funding Notes.
|
115,050
|
-
|
|
|
November 30,
2017
|
|
|
May 31,
2017
|
|
||
|
|
|
|
|
|
|
||
Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated August 23, 2017 in the original principal amount of $72,767 (the “Binder Convertible Note 6”). The Binder Convertible Note 6 was funded with the conversion of $25,000 of unpaid accrued salary due to Mr. Binder and $47,767 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $9,096 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $29,107 on the Binder Convertible Note 6 related to the value of the beneficial conversion feature at the time of issuance; $2,419 and $2,632 of this discount was amortized during the three and six months ended November 30 2017, respectively. During the three and six months ended November 30, 2017, interest in the amount of $1,814 and $1,974 was accrued on Binder Note 6, respectively.
|
|
|
72,767
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated August 23, 2017 in the original principal amount of $621,658 (the “Newcan Convertible Note 4”). The Newcan Convertible Note 4 was funded with the conversion of $621,658 of advances Newcan made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $69,074 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $248,663 on the Newcan Convertible Note 4 related to the value of the beneficial conversion feature at the time of issuance; $20,665 and $22,482 of this discount was amortized during the three and six months ended November 30, 2017, respectively. During the three and six months ended November 30, 2017, interest in the amount of $15,499 and $16,861 was accrued on Newcan Convertible Note 4, respectively, and $23,856 of accrued interest was transferred from the Newcan Funding Notes.
|
|
|
621,658
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated August 23, 2017 in the original principal amount of $70,000 (the “Newcan Convertible Note 5”). The Newcan Convertible Note 5 was funded with the conversion of $70,000 of advances Newcan made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $8,750 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $28,000 on the Newcan Convertible Note 5 related to the value of the beneficial conversion feature at the time of issuance; $2,327 and $2,532 of this discount was amortized during the three and six months ended November 30, 2017. During the three and six months ended November 30, 2017, interest in the amount of $1,745 and $1,899 was accrued on Newcan Convertible Note 5, respectively.
|
|
|
70,000
|
|
|
|
-
|
|
|
November 30,
2017
|
May 31,
2017
|
||||||
|
||||||||
Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated October 9, 2017 in the original amount of $30,000 (the “Newcan Convertible Note 6”). The Newcan Convertible Note 6 was funded with the conversion of $30,000 of advances Newcan made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until January 2, 2019, at which time all accrued interest becomes due and payable. Commencing on April 1, 2019, the first of eight principal payments in the amount of $3,750 will become due; subsequent principal payments will become due on the first day of each July, October, January and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $15,808 on the Newcan Convertible Note 6 related to the value of the beneficial conversion feature at the time of issuance; $751 of this discount was amortized during the three months ended November 30, 2017. During the three months ended November 30, 2017, interest in the amount of $427 was accrued on the Newcan Convertible Note 6 and $148 of accrued interest was transferred from the Newcan Funding Notes.
|
30,000
|
- | ||||||
|
||||||||
Unsecured convertible note issued to Jeffery Binder, an officer and director of the Company, dated October 9, 2017 in the original principal amount of $39,521 (the “Binder Convertible Note 7”). The Binder Notes 7 was funded with the conversion of $12,500 of unpaid accrued salary due to Mr. Binder and $27,021 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until January 2, 2019, at which time all accrued interest becomes due and payable. Commencing April 1, 2019, the first of eight principal payments in the amount of $4,940 will become due, subsequent payments will become due on the first day of each July, October, January and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $12,000 on the Binder Convertible Note 7 related to the value of the beneficial conversion feature at the time of issuance; $570 of this discount was amortized during the three months ended November 30, 2017. During the three months ended November 30, 2017, interest in the amount of $563 was accrued on the Binder Convertible Note 7 and $122 of accrued interest was transferred from the Binder Funding Notes.
|
39,521
|
- | ||||||
|
||||||||
Total – Convertible Notes Payable, Related Parties
|
$
|
1,140,996
|
$
|
192,000
|
||||
Less: Discount
|
(346,471
|
)
|
-
|
|||||
Convertible Notes Payable, Related Parties, Net of Discounts
|
$
|
794,525
|
$
|
192,000
|
||||
|
||||||||
Convertible Notes Payable, Related Parties, Net of Discounts, Current Portion
|
$
|
48,000
|
$
|
-
|
||||
Convertible Notes Payable, Related Parties, Net of Discounts, Long-term Portion
|
746,525
|
192,000
|
|
November 30,
2017
|
May 31,
2017
|
||||||
|
||||||||
Convertible promissory note issued to an unaffiliated third party due April 29, 2018 (the “April 2015 Note”). During the twelve months ended May 31, 2015, the lender loaned the Company the amount of $200,000 pursuant to this note. The April 2015 Note bears interest at a rate of 15% per annum. On the first anniversary of this note, the all then accrued interest became due. Thereafter, the Company is required to make eight equal payments of principal together with accrued interest, quarterly in arrears, commencing on July 1, 2016 until paid in full. The note and any accrued unpaid interest is convertible into common stock of the Company. For each dollar converted, the note holder shall receive two shares of common stock and one three-year warrant to purchase 1.33 shares of common stock at $0.75 per share. The Company recognized a discount of $200,000 on the April 2015 Note related to the value of the beneficial conversion feature at the time of issuance. During the twelve months ended May 31, 2016, $66,667 of this discount was charged to operations. During the twelve months ended May 31, 2016, the Company accrued interest in the amount of $30,082 on this note. During the year ended May 31, 2017, the Company repaid principal in the amount of $100,000 and interest in the amount of $53,837 on this note. Also during the year ended May 31, 2017, the Company charged $100,545 of the discount to operations, and accrued interest in the amount of $22,440 on the April 2015 Note.
On September 20, 2017, the Company entered into an Exchange Agreement, whereby it agreed to exchange the April 2015 Note for 1,500,000 shares of its common stock. The holder of the April 2015 Note had previously sold it for $105,219, which represented the balance due by the Company, to StarForce Media, Inc., an entity that is not affiliated with the Company. The Company recognized a loss on this exchange in the amount of $404,082, which was charged to operations during the three months ended November 30, 2017. The Company also expensed the remaining discount in the amount of $18,155 to interest expense during the three months ended November 30, 2017.
During the three and six months ended November 30, 2017, the Company accrued interest in the amount of $822 and $4,603, respectively, on the April 2015 Note.
|
$
|
-
|
$
|
100,000
|
November 30,
2017
|
May 31,
2017
|
|||||||
Convertible promissory note payable to Old Main Capital, LLC (“Old Main”) dated March 18, 2016 and bearing interest at a rate of 8% (the “8% Note”). The 8% Note was issued for Old Main’s commitment to enter into an equity line transaction with the Company and prepare all of the related transaction documents. Old Main may, at its option, convert all or a portion of the note and accrued but unpaid interest into shares of common stock at a conversion price of $1.07 per share (post Reverse-Split) (the “8% Fixed Conversion Price”). The 8% Fixed Conversion Price is subject to adjustment if, at any time while this note is outstanding, the Company should issue any equity security with an effective price per share that is lower than the 8% Fixed Conversion Price (the “8% Base Conversion Price”), other than certain exempt issuances. In such an instance, the 8% Fixed Conversion Price will be lowered to match the 8% Base Conversion Price. The shares underlying the 8% Note are subject to a registration rights agreement. At the earlier of September 18, 2016 or two trading days after this registration statement becomes effective, the Company must begin to redeem 1/6th of the face amount of the note and any accrued but unpaid interest on a monthly basis. Such amortization payment may be made, at its option, in cash or, subject to certain conditions, in common stock pursuant to a conversion rate equal to the lower of (a) $1.07 (post Reverse-Split) or (b) 75% of the lowest daily volume weighted average price of the common stock in the twenty consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date. The Company recognized a discount of $172,108 on the value of the embedded derivative.
On November 28, 2016, the 8% Note was amended converting the note from an installment note to a “balloon” note, with all principal and accrued interest due on March 18, 2017. In addition, the Fixed Conversion Price was changed to a variable conversion price equal to the lesser of the prior Fixed Conversion Price or 75% of the lowest VWAP in the fifteen trading days ending on the trading day immediately prior to the conversion date. The November 28, 2016 amendment required an extinguishment analysis of the 8% Note resulting in gain on extinguishment of debt in the amount of $81,496 for the nine months ended February 28, 2017. The gain on extinguishment of debt was included in additional paid-in capital at February 28, 2017. The 8% Note was revalued as of the November 28, 2016 amendment and the Company recognized a discount of $169,476 on the value of the embedded derivative. At February 28, 2017 and May 31, 2016, the amount of discount remaining on these notes was $118,998 and $163,586, respectively.
On March 27, 2017, the Company entered into a further amendment to the 8% Note, whereby the Company agreed to increase the outstanding amount due under the 8% Note as of March 18, 2017 by 5%, or $10,000. In exchange for doing so, Old Main agreed to extend the maturity of the 8% Note until July 1, 2017 and to suspend conversions under the 8% Note until July 1, 2017. Also during the year ended May 31, 2017, the Company accrued interest in the amount of $17,207 on the 8% Note.
On July 6, 2017, the 8% Note was further amended, whereby the maturity date was extended to July 15, 2017 and the outstanding balance was increased by $15,750. On August 23, 2017, the 8% Note was amended again to extend the maturity date to September 15, 2017.
On September 23, 2017, but effective on September 15, 2017, the 8% note was further orally amended, and the outstanding balance was increased by $96,862. The Company recognized the modification of this note as an extinguishment of debt and recognized a gain on the extinguishment of $144,851. The Company also recognized a discount on the modified note of $300,435, which was fully charged to operations during the three months ended November 30, 2017. On September 25, 2017, but effective September 15, 2017, the Company entered into an Exchange Agreement, whereby it agreed to exchange the 8% Note for 4,500,000 shares of its common stock. Old Main, the original holder of the 8% Note, had previously sold it for $382,496. The balance due by the Company under the 8% Note at the time it was sold was $322,612. The Company recognized a loss on this exchange in the amount of $1,113,883, which was charged to operations during the three months ended November 30, 2017.
During the three and six months ended November 30, 2017, the Company accrued interest in the amount of $1,138 and $5,587, respectively, on the 8% Note, and $30,411 of the discount was amortized to interest expense during the six months ended November 30, 2017.
|
-
|
210,000
|
November 30,
2017
|
May 31,
2017
|
|||||||
Senior Convertible promissory note payable to FirstFire Global Opportunities Fund, LLC (the “FirstFire Note”) dated November 15, 2017 and bearing interest at a rate of 5% per annum. The lender loaned the Company $330,000 and the FirstFire Note has an original issue discount of $33,000. The FirstFire Note is due seven months from the date of issue. FirstFire may, at its option, convert all or a portion of the FirstFire Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.40 per share (the “FirstFire Fixed Conversion Price”) for the first 180 calendar days after the issue date. After the 180th day, the conversion price shall equal the lower of (i) the FirstFire Fixed Conversion Price, or (ii) 75% multiplied by the lowest traded price of the common stock during twenty (20) consecutive trading day period immediately preceding the trading day that the Company received a notice of conversion. The Company recognized a discount of $363,000 on the FirstFire Note related to the beneficial conversion feature at the time of issuance. During the three months ended November 30, 2017, $30,083 of this discount was charged to operations. During the three months ended November 30, 2017, the Company accrued interest in the amount of $746 on this note.
|
363,000
|
-
|
||||||
|
||||||||
Total - Convertible Notes Payable
|
$
|
363,000
|
$
|
310,000
|
||||
Less: Discount
|
(332,917
|
)
|
(57,644
|
)
|
||||
Convertible Notes Payable, Net of Discounts
|
$
|
30,083
|
$
|
252,356
|
||||
|
||||||||
Total - Convertible Notes Payable, Net of Discounts, Current Portion
|
$
|
30,083
|
$
|
252,356
|
||||
Total - Convertible Notes Payable, Net of Discounts, Long-term Portion
|
$
|
-
|
$
|
-
|
Discounts on notes payable amortized to interest expense – 3 months ended November 30:
|
530,796
|
689,196
|
Discounts on notes payable amortized to interest expense – 6 months ended November 30:
|
572,856
|
889,392
|
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||||
average
|
average
|
average
|
||||||||||||||||||||
Range of
|
Number of
|
remaining
|
exercise
|
exercise
|
||||||||||||||||||
exercise
|
warrants
|
contractual
|
price of
|
Number of
|
price of
|
|||||||||||||||||
Prices
|
Outstanding
|
life (years)
|
outstanding Warrants
|
warrants Exercisable
|
exercisable Warrants
|
|||||||||||||||||
$
|
0.75
|
350,000
|
2.96
|
$
|
0.75
|
350,000
|
$
|
0.75
|
||||||||||||||
350,000
|
2.96
|
$
|
0.75
|
350,000
|
$
|
0.75
|
|
Number of
Shares
|
Weighted
Average
ExercisePrice
|
||||||
Warrants outstanding at May 31, 2017
|
-
|
$
|
-
|
|||||
Granted
|
350,000
|
$
|
0.75
|
|||||
Exercised
|
-
|
$
|
-
|
|||||
Cancelled / Expired
|
-
|
$
|
-
|
|||||
Warrants outstanding at November 30, 2017
|
350,000
|
$
|
0.75
|
|
November 30, 2017
|
|||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Liabilities
|
||||||||||||||||
Derivative liabilities
|
$
|
-
|
$
|
-
|
$
|
353,093
|
$
|
353,093
|
|
May 31, 2017
|
|||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Liabilities
|
||||||||||||||||
Derivative liabilities
|
$
|
-
|
$
|
-
|
$
|
95,276
|
$
|
95,276
|
|
Derivative
|
|||
|
Liability
|
|||
Liabilities Measured at Fair Value
|
||||
|
||||
Balance as of May 31, 2017
|
$
|
95,276
|
||
|
||||
Issuances
|
673,891
|
|||
|
||||
Conversions/Redemptions
|
(603,559
|
)
|
||
|
||||
Extinguishment of debt
|
13,395
|
|||
|
||||
Revaluation loss
|
174,090
|
|||
|
||||
Balance as of November 30, 2017
|
$
|
353,093
|
|
November 30,
2017
|
May 31,
2017
|
||||||
Current Assets
|
$
|
321,980
|
$
|
79,720
|
||||
Current Liabilities
|
$
|
1,469,800
|
$
|
1,826,478
|
||||
Working Capital (Deficit)
|
$
|
(1,147,820
|
)
|
$
|
(1,746,758
|
)
|
· |
Estimates and assumptions used in the valuation of derivative liabilities: Management utilizes a lattice model to estimate the fair value of derivative liabilities. The model includes subjective assumptions that can materially affect the fair value estimates.
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
32.2
|
|
101.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
CLS HOLDINGS USA, INC.
|
|
|
|
|
|
|
Date: January 12, 2018
|
By: | /s/ Jeffrey I. Binder | |
Jeffrey I. Binder
|
|||
Chairman and Chief Executive Officer
(Principal Executive Officer)
|
|||
Date: January 12, 2018
|
By: | /s/ David Lamadrid | |
David Lamadrid | |||
President and Chief Financial Officer | |||
(Principal Financial and Accounting Officer)
|
|
|
|
|
January 12, 2018
|
|
/s/ Jeffrey I. Binder |
|
|
|
Jeffrey I. Binder
Chairman and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
January 12, 2018
|
|
/s/ David Lamadrid |
|
|
|
David Lamadrid
President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
Date: January 12, 2018
|
|
/s/ Jeffrey I. Binder |
|
|
|
Jeffrey I. Binder
Chairman and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date: January 12, 2018
|
|
/s/ David Lamadrid
|
|
|
|
David Lamadrid
President and Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
|
Document And Entity Information - shares |
6 Months Ended | |
---|---|---|
Nov. 30, 2017 |
Jan. 09, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CLS HOLDINGS USA, INC. | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --05-31 | |
Entity Common Stock, Shares Outstanding | 39,126,944 | |
Amendment Flag | false | |
Entity Central Index Key | 0001522222 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Filer Category | Smaller Reporting Company | |
Entity Well-known Seasoned Issuer | No | |
Document Period End Date | Nov. 30, 2017 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parentheticals) - USD ($) |
Nov. 30, 2017 |
May 31, 2017 |
---|---|---|
Property, plant and equipment, accumulated depreciation | $ 2,230 | $ 1,784 |
Intangible assets, accumulated amortization | $ 1,044 | $ 828 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 39,126,944 | 32,852,944 |
Common stock, shares outstanding | 39,126,944 | 32,852,944 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Convertible Debt [Member] | Non-Related Party Debt [Member] | ||
Convertible notes payable, discount | $ 332,917 | $ 57,644 |
Convertible Debt [Member] | Related Party Notes [Member] | ||
Convertible notes payable, discount | 0 | 0 |
Convertible notes payable, discount | $ 346,471 | $ 0 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
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Nov. 30, 2017 |
Nov. 30, 2016 |
Nov. 30, 2017 |
Nov. 30, 2016 |
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Revenue | $ 0 | $ 0 | $ 0 | $ 0 |
Cost of goods sold | 0 | 0 | 0 | 0 |
Gross margin | 0 | 0 | 0 | 0 |
Selling, general and administrative expenses | 85,218 | 163,122 | 298,421 | 337,867 |
Professional fees | 172,161 | 197,050 | 318,162 | 503,231 |
Total operating expenses | 257,379 | 360,172 | 616,583 | 841,098 |
Operating loss | (257,379) | (360,172) | (616,583) | (841,098) |
Other (income) expense: | ||||
Interest expense | 806,965 | 756,292 | 881,831 | 1,014,362 |
Gain on settlement of debt | 0 | 0 | (3,480) | 0 |
Loss on modification of debt | 0 | 33,334 | 29,145 | 33,334 |
Loss on note exchange | 404,082 | 0 | 404,082 | 0 |
Loss on extinguishment of debt | 989,032 | 0 | 989,032 | 0 |
Change in fair value of derivative | 68,140 | (24,345) | 174,090 | (148,266) |
Total other expense | 2,268,219 | 765,281 | 2,474,700 | 899,430 |
Income (Loss) before income taxes | (2,525,598) | (1,125,453) | (3,091,283) | (1,740,528) |
Income tax expense | 0 | 0 | 0 | 0 |
Net income (loss) | $ (2,525,598) | $ (1,125,453) | $ (3,091,283) | $ (1,740,528) |
Net income (loss) per share - basic (in Dollars per share) | $ (0.07) | $ (0.06) | $ (0.09) | $ (0.09) |
Net income (loss) per share - diluted (in Dollars per share) | $ (0.07) | $ (0.06) | $ (0.09) | $ (0.09) |
Weighted average shares outstanding - basic (in Shares) | 35,039,032 | 20,350,003 | 33,946,441 | 20,350,003 |
Weighted average shares outstanding - diluted (in Shares) | 35,039,032 | 20,350,003 | 33,946,441 | 20,350,003 |
Note 1 - Nature of Business and Significant Accounting Policies |
6 Months Ended |
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Nov. 30, 2017 | |
Accounting Policies [Abstract] | |
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | Note 1 – Nature of Business and Significant Accounting Policies Nature of Business CLS Holdings USA, Inc. (the “Company”) was originally incorporated as Adelt Design, Inc. (“Adelt”) on March 31, 2011 to manufacture and market carpet binding art. Production and marketing of carpet binding art never commenced. On November 12, 2014, CLS Labs, Inc. (“CLS Labs”) acquired 10,000,000 shares, or 55.6%, of the outstanding shares of common stock of Adelt from its founder, Larry Adelt. On that date, Jeffrey Binder, the Chairman, President and Chief Executive Officer of CLS Labs, was appointed Chairman, President and Chief Executive Officer of the Company. On November 20, 2014, Adelt adopted amended and restated articles of incorporation, thereby changing its name to CLS Holdings USA, Inc. Effective December 10, 2014, the Company effected a reverse stock split of its issued and outstanding common stock at a ratio of 1-for-0.625 (the “Reverse Split”), wherein 0.625 shares of the Company’s common stock were issued in exchange for each share of common stock issued and outstanding. As a result, 6,250,000 shares of the Company’s common stock were issued to CLS Labs in exchange for the 10,000,000 shares that it owned by virtue of the above-referenced purchase from Larry Adelt. On April 29, 2015, the Company, CLS Labs and CLS Merger Inc., a Nevada corporation and wholly owned subsidiary of CLS Holdings (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) and completed a merger, whereby CLS Merger Inc. merged with and into CLS Labs, with CLS Labs remaining as the surviving entity (the “Merger”). Upon the consummation of the Merger, the shares of the common stock of CLS Holdings owned by CLS Labs were extinguished and the former stockholders of CLS Labs were issued an aggregate of 15,000,000 (post Reverse Split) shares of common stock in CLS Holdings in exchange for their shares of common stock in CLS Labs. As a result of the Merger, the Company acquired the business of CLS Labs and abandoned its previous business. The Company has a patent pending proprietary method of extracting cannabinoids from cannabis plants and converting the resulting cannabinoid extracts into concentrates such as oils, waxes, edibles and shatter. These concentrates may be ingested in a number of ways, including through vaporization via electronic cigarettes (“e-cigarettes”), and used for a variety of pharmaceutical and other purposes. Internal testing of this extraction method and conversion process has revealed that it produces a cleaner, higher quality product and a significantly higher yield than the cannabinoid extraction processes currently existing in the marketplace. The Company has not commercialized its patent pending proprietary process or otherwise earned any revenues. The Company plans to generate revenues through licensing, fee-for-service and joint venture arrangements related to its patent pending proprietary method of extracting cannabinoids from cannabis plants and converting the resulting cannabinoid extracts into saleable concentrates. The Company has adopted a fiscal year end of May 31st. Basis of Presentation These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in US dollars. Principals of Consolidation The accompanying consolidated financial statements include the accounts of CLS Holdings USA, Inc., and its wholly owned operating subsidiaries, CLS Labs, Inc. and CLS Labs Colorado, Inc. All material intercompany transactions have been eliminated upon consolidation of these entities. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of $259,189 and $78,310 as of November 30, 2017 and May 31, 2017, respectively. Property, Plant and Equipment Property and equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated using the straight-line method over the estimated useful lives. Computer equipment is being depreciated over a three-year period. Concentrations of Credit Risk The Company maintains its cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts. Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred. The Company incurred no advertising and marketing costs for the three and six months ended November 30, 2017 and 2016. Research and Development Research and development expenses are charged to operations as incurred. The Company incurred no research and development costs for the three and six months ended November 30, 2017 and 2016, respectively. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the establishment of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to the extent deferred tax assets may not be recoverable after consideration of the future reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income. Fair Value of Financial Instruments Pursuant to Accounting Standards Codification (“ASC”) No. 825 - Financial Instruments, the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The carrying amount of the Company’s cash and cash equivalents, note receivable, notes payable, accounts payable and accrued expenses, none of which is held for trading, approximates their estimated fair values due to the short-term maturities of those financial instruments. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly. Level 3 - Significant unobservable inputs that cannot be corroborated by market data. Derivative Financial Instruments Derivatives are recorded on the condensed consolidated balance sheet at fair value. The conversion features of the convertible notes are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. The pricing model the Company used for determining the fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income (see note 11). Revenue Recognition For revenue from product sales, the Company recognizes revenue using four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) is based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. The Company has not generated revenue to date. Basic and Diluted Loss Per Share Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully-diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options and warrants to purchase common stock, and convertible debt. Basic and diluted net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period. The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculation. A net loss causes all outstanding stock options and warrants to be antidilutive. As a result, the basic and dilutive losses per common share are the same for the three and six months ended November 30, 2017 and 2016. Commitments and Contingencies Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims brought to such legal counsel’s attention as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. Recent Accounting Pronouncements Accounting standards promulgated by the Financial Accounting Standards Board (“FASB”) are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following is a summary of recent accounting developments. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The update addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update will be effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Early adoption is permitted. The Company is currently evaluating the potential impact of the update on its financial statements. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU becomes effective for the Company on January 1, 2020. The amendments in this ASU will be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed. In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU requires that an entity account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU becomes effective for the Company on January 1, 2018, and will be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in any interim period. The Company is currently assessing the impact that this standard will have on any awards that are modified once this standard is adopted. Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements. |
Note 2 - Going Concern |
6 Months Ended |
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Nov. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Substantial Doubt about Going Concern [Text Block] | Note 2 – Going Concern As shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit of $12,082,893 as of November 30, 2017. Further losses are anticipated in the development of the Company’s business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans, the proceeds from the sale of securities, and/or revenues from operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. |
Note 3 - Prepaid Expenses |
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Nov. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Other Assets Disclosure [Text Block] | Note 3 – Prepaid Expenses Prepaid expenses consisted of the following at November 30, 2017 and May 31, 2017:
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Note 4 - Security Deposit |
6 Months Ended |
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Nov. 30, 2017 | |
Security Deposits [Abstract] | |
Security Deposits [Text Block] | Note 4 – Security Deposit The Company had a security deposit in the amount of $0 and $50,000 at November 30, 2017 and May 31, 2017, respectively. This amount consisted of a deposit to secure office and warehouse space. In August of 2017, the Company received a demand letter from the landlord requesting the forfeiture of the $50,000 security deposit, $10,000 in expenses, $15,699 in remaining rent due under the lease agreement and $30,000 to buy out the remaining amounts due under the lease; during the six months November 30, 2017, the Company wrote-off the security deposit in the amount of $50,000. |
Note 5 - Property, Plant and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment Disclosure [Text Block] | Note 5 – Property, Plant and Equipment Property, plant and equipment consisted of the following at November 30, 2017 and May 31, 2017.
Depreciation expense totaled $223 and $223 for the three months ended November 30, 2017 and 2016 respectively. Depreciation expense totaled $446 and $446 for the six months ended November 30, 2017 and 2016 respectively. |
Note 6- Deferred Financing Costs |
6 Months Ended |
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Nov. 30, 2017 | |
Disclosure Text Block Supplement [Abstract] | |
Other Current Assets [Text Block] | Note 6- Deferred Financing Costs During the three months ended November 30, 2017, the Company had deferred financing costs of $39,500 related to a convertible note payable. During the three months ended November 30, 2017, the Company amortized $3,119 of these deferred costs. |
Note 7 - Intangible Assets |
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Disclosure Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets Disclosure [Text Block] | Note 7 – Intangible Assets Intangible assets consisted of the following at November 30, 2017 and May 31, 2017.
Total amortization expense charged to operations for the three months ended November 30, 2017 and 2016 was $108 and $108, respectively. Total amortization expense charged to operations for the six months ended November 30, 2017 and 2016 was $216 and $216, respectively. The domain name is being amortized over a period of 60 months. |
Note 8 - Accounts Payable and Accrued Liabilities |
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Accounts Payable and Accrued Liabilities Disclosure [Text Block] | Note 8 – Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following at November 30, 2017 and May 31, 2017.
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Note 9 - Related Party Transactions |
6 Months Ended |
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Nov. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] | Note 9 – Related Party Transactions As of November 30, 2017 and May 31, 2017, the Company owed the amount of $37,500 and $37,500, respectively, to Jeffrey Binder, its President and Chief Executive Officer, for accrued salary. For the three and six months ended November 30, 2017, unpaid accrued salary in the amount of $12,500 and $75,000, respectively, was transferred to a convertible promissory note due to Mr. Binder (see note 9). As of November 30, 2017 and May 31, 2017, the Company had accrued salary due to Alan Bosnett, a former officer of the Company prior to his October 1, 2017 separation, in the amount of $37,500 and $0, respectively. As of November 30, 2017 and May 31, 2017, the Company had accrued salary due to Michael Abrams, a former officer of the Company prior to his September 1, 2015 termination, in the amount of $16,250. As of November 30, 2017 and May 31, 2017, the Company had related party payables in the amount of $17,930 due to officers and directors related to expenses paid on behalf of the Company. The Company imputed interest at the rate of 6% per annum on these liabilities, and recorded imputed interest expense on these liabilities in the amounts of $268 and $539 during the three and six months ended November 30, 2017 and 2016, respectively. These interest accruals were charged to additional paid-in capital. Related Party Notes Payable The Company has convertible notes payable and demand convertible notes payable outstanding to Jeffrey Binder, an officer and director, and to Newcan Investment Partners, LLC, an entity that is wholly owned by Frank Koretsky, a director (see note 10). |
Note 10 - Notes Payable |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Text Block] | Note 10 – Notes Payable Related Party Notes Payable On May 31, 2017, the Company entered into an Omnibus Loan Amendment Agreement (the “Omnibus Loan Amendment”) with Jeffrey I. Binder, Frank Koretsky, Newcan Investment Partners LLC and CLS CO 2016, LLC (collectively, the “Insiders”). Pursuant to the Omnibus Loan Amendment, the Company agreed with the Insiders to amend certain terms of loans the Insiders made to the Company for working capital purposes, which loans were initially demand loans, and, except for loans made in 2017, were later memorialized as convertible loans (the “Insider Loans”), in exchange for the agreement of the Insiders to convert all Insider Loans where funds were advanced prior to January 1, 2017, which totaled $2,537,750, plus $166,490 of accrued interest thereon, into an aggregate of 10,816,960 shares of the Company’s common stock at $0.25 per share, and forego the issuance of warrants to purchase the Company’s common stock upon conversion. This resulted in the issuance of an additional 7,609,910 shares compared to the original number of shares issuable upon conversion of the Insider Loans prior to the Omnibus Loan Agreement. The Company valued the shares at $0.125, which was the market price of the Company’s stock at the conversion date, and charged the amount of $951,239 to loss on modification of debt during the twelve months ended May 31, 2017. The Company entered into the Omnibus Loan Amendment in order to ease the debt burden on the Company and prevent it from defaulting on the Insider Loans. Pursuant to the Omnibus Loan Amendment, the following amendments were made to the Insider Loans: (a) the Company reduced the conversion price on the Insider Loans from between $0.75 and $1.07 per share of common stock to $0.25 per share of common stock, in those cases where the conversion price was greater than $0.25, which reduced conversion price exceeded the closing price of the common stock during the three months prior to the Omnibus Loan Amendment; (b) the Company deleted the requirement to issue warrants to purchase the Company’s common stock upon conversion of the Insider Loans; (c) the Company amended one Insider Loan to permit conversion of only the portion of the Insider Loan related to services that were provided to it prior to January 1, 2017; and (d) the Company amended the terms of the Insider Loans where funds were advanced on or after January 1, 2017, which Insider Loans were not converted into the Company’s common stock, to provide for, where not already the case, a 10% interest rate per annum, a $0.25 conversion price per share of common stock, and the deletion of the requirement that the Company issue warrants to purchase its common stock upon conversion of such Insider Loans. The following tables summarize the Company’s loan balances at November 30, 2017 and May 31, 2017:
Beneficial Conversion Features The 8% Note and FirstFire Note contain conversion features that create derivative liabilities. The pricing model the Company uses for determining fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative component of the 8% Note was valued at issuance, at conversion, at restructure, and at each period end. See note 11. Certain of the Company’s other convertible notes payable contain beneficial conversion features that are not derivatives, but which require valuation in order to determine the discount to the related convertible note payable. The value of these conversion features is calculated using the intrinsic value method, whereby the amount of the discount is calculated as the difference between the conversion price and the market price of the underlying common stock at the date of issuance multiplied by the number of shares issuable. |
Note 11 - Stockholders' Equity |
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Disclosure Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity and Share-based Payments [Text Block] | Note 11 – Stockholders’ Equity The Company’s authorized capital stock consists of 250,000,000 shares of common stock, par value $0.0001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share. The Company had 39,126,944 and 32,852,944 shares of common stock issued and outstanding as of November 30, 2017 and May 31, 2017, respectively. The Company recorded imputed interest of $268 and $271 during the three months ended November 30, 2017 and 2016 on related party payables due to a director and officer of the Company. The Company recorded imputed interest of $539 and $539 during the six months ended November 30, 2017 and 2016 on related party payables due to a director and officer of the Company. Stock Issued for Services On July 13, 2017, the Company issued 24,000 shares of common stock to a consultant in exchange for a $6,000 accrued liability for services previously provided. This resulted in a gain on the settlement of accounts payable in the amount of $3,480. Stock Issued for Note Exchange On September 20, 2017, the Company entered into an Exchange Agreement, whereby it agreed to exchange the April 2015 Note for 1,500,000 shares of its common stock valued at $510,000. The holder of the April 2015 Note had previously sold it for $105,219, which represented the balance due by the Company, to StarForce Media, Inc., an entity that is not affiliated with the Company. The Company recognized a loss on this exchange in the amount of $404,082, which was charged to operations during the three months ended November 30, 2017. On September 25, 2017, the Company entered into an Exchange Agreement, whereby it agreed to exchange the 8% Note for 4,500,000 shares of its common stock valued at $1,844,035. The Company recognized a loss on this exchange in the amount of $989,177, which was charged to operations during the three months ended November 30, 2017. On November 15, 2017, the Company issued 250,000 shares of restricted Common Stock, valued at $95,000, as a commitment fee to a convertible note holder. Warrants On November 15, 2017, the Company issued FirstFire Global Opportunities Fund, LLC (“FirstFire”) a three year common stock purchase warrant to purchase 350,000 shares of the Company’s common stock at an initial exercise price of $0.75 per share. These warrants were valued at $123,950 and were charged to operations during the three months ended November 30, 2017. The following table summarizes the significant terms of warrants outstanding at November 30, 2017. These warrants were granted as part of a financing agreement:
Transactions involving warrants are summarized as follows:
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Note 12 - Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] | Note 12 – Fair Value of Financial Instruments The Company has entered into convertible note agreements containing beneficial conversion features with Old Main and with FirstFire. The Old Main 8% Note was satisfied during the three months ended November 30, 2017, along with the derivative liability associated with the Old Main 8% Note. See note 11. One of the features is a ratchet reset provision which, in general, reduces the conversion price should the Company issue equity with an effective price per share that is lower than the stated conversion price in the note agreement. The Company accounts for the fair value of the conversion feature in accordance with ASC 815- Accounting for Derivatives and Hedging and Emerging Issues Task Force (“EITF”) 07-05- Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-05”). The Company carries the embedded derivative on its balance sheet at fair value and accounts for any unrealized change in fair value as a component of its results of operations. The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis at November 30, 2017 and May 31, 2017.
The estimated fair values of the Company’s derivative liabilities are as follows:
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Note 13 - Commitment and Contingencies |
6 Months Ended |
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Nov. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure [Text Block] | Note 13 – Commitment and Contingencies In connection with the Colorado Arrangement, on April 17, 2015, pursuant to an Industrial Lease Agreement (the “Lease”), CLS Labs Colorado leased 14,392 square feet of warehouse and office space (the “Leased Real Property”) in a building in Denver, Colorado where certain intended activities, including growing, extraction, conversion, assembly and packaging of cannabis and other plant materials, are permitted by and in compliance with state, city and local laws, rules, ordinances and regulations. The Lease has an initial term of seventy-two (72) months and provides CLS Labs Colorado with two options to extend the term of the lease by up to an aggregate of ten (10) additional years. In August 2017, as a result of the Company’s decision to suspend its proposed operations in Colorado, CLS Labs Colorado asked its landlord to be relieved from its obligations under the Lease, but the parties have not yet reached an agreement on how to proceed. In August 2017, the Company’s Colorado subsidiary received a demand letter from its Colorado landlord requesting the forfeiture of the $50,000 security deposit, $10,000 in expenses, $15,699 in remaining rent due under the lease agreement and $30,000 to buy out the remaining amounts due under the lease. These expenses, which are a liability of the Company’s Colorado subsidiary, have been accrued on the Balance Sheet as of November 30, 2017. Employment Agreements CLS Labs and Jeffrey Binder entered into a five-year employment agreement effective October 1, 2014. Under the agreement, Mr. Binder serves as CLS Labs’ Chairman, President and Chief Executive Officer and is entitled to receive an annual salary of $150,000. Under the agreement, Mr. Binder is also entitled to receive a performance bonus equal to 2% of CLS Labs’ annual EBITDA, up to a maximum annual cash compensation of $1 million (including his base salary), and annual stock options, exercisable at the fair market value of CLS Labs’ common stock on the date of grant, in an amount equal to 2% of its annual EBITDA up to $42.5 million and 4% of its annual EBITDA in excess of $42.5 million. On April 28, 2015, CLS Labs and the Company entered into an addendum to Mr. Binder’s employment agreement whereby Mr. Binder agreed that following the merger of CLS Labs and a subsidiary of the Company, in addition to his obligations to CLS Labs, he would serve the Company and its subsidiaries in such roles as the Company may request. In exchange, the Company agreed to assume the obligations of CLS Labs to grant Mr. Binder annual stock options, as referenced above. Mr. Binder continues to receive an annual salary of $150,000 from CLS Labs for serving as its Chairman, President and Chief Executive Officer. My Binder has deferred all of the salary payable to him under his employment agreement through November 30, 2017. On July 20, 2016, March 31, 2017, August 23, 2017, and October 9, 2017 the Company issued Mr. Binder convertible notes in exchange for $250,000, $112,500, $62,500, and $39,521, respectively, in deferred salary, among other amounts owed to Mr. Binder by the Company. As of November 30, 2017 and May 31, 2017, the Company had accrued compensation due to Mr. Binder in the amount of 37,500 and $37,500. Effective August 1, 2015, the Company and Alan Bonsett entered into a five-year employment agreement. Pursuant to the agreement, Mr. Bonsett commenced serving as the Company’s Chief Operating Officer on August 15, 2015. Under the agreement, Mr. Bonsett is entitled to receive an annual salary of $150,000. Further, he is entitled to receive a performance bonus equal to 2% of the Company’s annual EBITDA, up to a maximum annual cash compensation of $1 million (including his base salary), and annual stock options, exercisable at the fair market value of the Company’s common stock on the date of grant, in an amount equal to 2% of its annual EBITDA up to $42.5 million and 4% of its annual EBITDA in excess of $42.5 million. Additionally, Mr. Bonsett received a one-time signing bonus of 250,000 (post Reverse-Split) shares of restricted common stock of the Company, valued at $327,500, which became fully vested one year from the effective date of the agreement. Mr. Bonsett, as an owner of Picture Rock Holdings, LLC (“PRH”), will indirectly receive the benefits of the Colorado Arrangement discussed in Note 12. The business to be operated by PRH pursuant to the Colorado Arrangement has not yet produced revenues. Mr. Bonsett has agreed to defer his salary effective July 1, 2017; at November 30, 2017, the Company had accrued compensation due to Mr. Bonsett in the amount of $37,500. On October 1, 2017, the Company and Mr. Alan Bonsett, the Company’s Chief Operating Officer, mutually agreed to end his employment with the Company. Mr. Bonsett may provide consulting services to the Company in the future on an as needed basis. Effective November 30, 2017, the Company and Mr. Lamadrid entered into a one-year employment agreement. Pursuant to the agreement, Mr. Lamadrid commenced serving as the Company’s President and Chief Financial Officer on December 1, 2017. Under the agreement, Mr. Lamadrid is entitled to receive an annual salary of $175,000. Further, he is entitled to receive a performance bonus equal to 2% of the Company’s annual EBITDA, and annual restricted stock awards of the Company’s common stock in an amount equal to 3% of its annual EBITDA. Additionally, Mr. Lamadrid is entitled to a one-time signing bonus of 500,000 shares of restricted common stock of the Company, which shall become fully vested one year from the effective date of the agreement. At November 30, 2017 and May 31, 2017, the Company had accrued salary due to Michael Abrams, a former officer of the Company, prior to his September 1, 2015 termination, in the amount of $16,250. |
Note 14 - Subsequent Events |
6 Months Ended |
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Nov. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Note 14 – Subsequent Events On December 4, 2017, the Company and Alternative Solutions, LLC (“Alternative Solutions”) entered into a Membership Interest Purchase Agreement (the “Acquisition Agreement”) for the Company to acquire (the “Oasis Acquisition”) the outstanding equity interests in three subsidiaries of Alternative Solutions (collectively, the “Oasis LLCs”). Pursuant to the Acquisition Agreement, the Company paid a non-refundable deposit of $250,000 upon signing, which will be followed by an additional payment of $1,800,000 within 45 days (75 days if an extension fee of $200,000 is paid by the Company) for an initial 10% of each of the Oasis LLCs. At that time, the Company will apply for state regulatory approval to own an interest in the Oasis LLCs. The 10% membership interest cannot be issued to the Company until it receives such approval. If the Company does not receive such regulatory approvals within ninety (90) days, the Company may terminate the Acquisition Agreement and receive the return of its $1,800,000 deposit. Within ninety (90) days after the Company makes the additional payment of $1,800,000, the Company must make the payments to acquire the remaining 90% of the Oasis LLCs, which are equal to cash in the amount of $6,200,000, a $4.0 million promissory note due in December 2018 (the “Oasis Note”), and $6,000,000 in shares (the “Purchase Price Shares”) of its common stock (collectively, the “Closing Consideration”). At that time, the Company must apply for state regulatory approval to own the additional 90% in membership interests in the Oasis LLCs. Upon receipt of such approval, the Company will close on the purchase of the membership interests pursuant to the Acquisition Agreement. The number of Purchase Price Shares shall equal $6,000,000 divided by the lower of $1.00 or the conversion price to receive one share of the Company’s common stock in its next equity offering that commences in 2018, multiplied by 80%. The Oasis Note will be secured by a first priority security interest over the assets of each of the Oasis LLCs and Alternative Solutions, including the Company’s 10% equity interest in the Oasis LLCs, and the Company shall deliver to Alternative Solutions a confession of judgment that will become effective in the event of any event of default under the Oasis Note. Oasis currently owes certain amounts to a consultant known as 4Front Advisors, LLC. If the Company makes any payments to this company post-closing, generally speaking, the Company will be entitled to deduct the present value of such payments from the principal amount due under the Oasis Note. Assuming the Company closes on the Acquisition Agreement, in May 2019, Alternative Solutions will be entitled to a $1,000,000 payment from the Company if the existing dispensary operated by an Oasis LLC has maintained an average revenue of $20,000 per day during the 2018 calendar year. The sale, assignment, transfer, pledge or other disposition of any interest in the Oasis LLCs or Alternative Solutions is ineffective unless approved in advance by the state of Nevada and any municipality in which the Oasis LLC’s operation is licensed. In connection with the Oasis Acquisition, the Company plans to employ Mr. Ben Sillitoe as its COO. The Company plans to issue him 500,000 shares of restricted common stock pursuant to his proposed employment agreement. Upon the Company’s payment of the additional deposit of $1,800,000, it will also issue 500,000 shares of its restricted common stock to each of David Lamadrid, its President and Chief Financial Officer, and J.P. Barton, for introducing it to Alternative Solutions. The closing of the Acquisition Agreement is subject to a number of conditions, including the Company’s ability to raise the $8,000,000 in cash required to close the transaction. As a result, there can be no assurance that the Company will be able to close the Oasis Acquisition. On December 7, 2017, the Company commenced a private offering of its securities pursuant to Rule 506(c) promulgated under the Securities Act of 1933, as amended. The Company is offering for sale a minimum of 1,800,000 units and a maximum of 4,000,000 units at a price of $1.25 per unit. Each unit consists of four shares of common stock and one warrant to purchase common stock at $0.75 per share. Assuming the Company sells the minimum units by January 17, 2018, which date may be extended by up to 60 days in the sole discretion of the Company, the common stock and warrants issued at closing will be restricted securities. The Company intends to use the proceeds of the private offering primarily to make certain payments required under its definitive agreement to purchase the membership interests of the Oasis LLCs from Alternative Solutions. On December 7, 2017, the board of directors of the Company appointed Andrew Glashow as a Class 1 director to fill a vacancy on its board of directors. Mr. Glashow will initially serve for a one-year term expiring at the 2018 meeting of stockholders of the Company. Mr. Glashow is not a party to any arrangement with any other person pursuant to which he was selected as a director. On January 3, 2018, the Company announced that it had received a Notice of Allowance from the U.S. Patent and Trademark Office with respect to its patent application for its proprietary extraction and conversion methodology. On January 5, 2018, the Company issued a convertible promissory note to Newcan, an entity owned by Frank Koretsky, a director of the Company, in the amount of $115,000.00 (the “Koretsky Note”), and to Jeffrey Binder, an officer and director of the Company, in the amount of $165,360.19 (the “Binder Note” and, together with the Koretsky Note, the “Notes”), to finalize the terms of repayment with respect to certain loans made to the Company by Newcan and Mr. Binder between October, 13, 2017 and December 27, 2017, and certain compensation payable to Mr. Binder as of November 30, 2017. The Notes, which otherwise contain identical terms, are unsecured and bear interest at the rate of 10% per annum. No payments are required until April 1, 2019, at which time all accrued interest becomes due and payable. Principal will be paid in eight equal quarterly installments, together with interest accrued thereon, beginning on July 1, 2019. The Notes may be prepaid by the Company with no penalty at any time upon thirty days written notice. The holder of each Note may, at any time prior to payment or prepayment in full, convert all principal and accrued interest thereunder, in whole or in part, into securities of the Company. For each $0.3125 converted, the holder will receive one share of the Company’s common stock. On January 10, 2018, effective December 1, 2017, the Company amended the terms of all of its outstanding convertible promissory notes owed to Mr. Binder and Newcan to increase the conversion price from $0.25 to $0.3125 per share of common stock. |
Accounting Policies, by Policy (Policies) |
6 Months Ended |
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Nov. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in US dollars. |
Consolidation, Policy [Policy Text Block] | Principals of Consolidation The accompanying consolidated financial statements include the accounts of CLS Holdings USA, Inc., and its wholly owned operating subsidiaries, CLS Labs, Inc. and CLS Labs Colorado, Inc. All material intercompany transactions have been eliminated upon consolidation of these entities. |
Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of $259,189 and $78,310 as of November 30, 2017 and May 31, 2017, respectively. |
Property, Plant and Equipment, Policy [Policy Text Block] | Property, Plant and Equipment Property and equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated using the straight-line method over the estimated useful lives. Computer equipment is being depreciated over a three-year period. |
Concentration Risk, Credit Risk, Policy [Policy Text Block] | Concentrations of Credit Risk The Company maintains its cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts. |
Advertising Costs, Policy [Policy Text Block] | Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred. The Company incurred no advertising and marketing costs for the three and six months ended November 30, 2017 and 2016. |
Research, Development, and Computer Software, Policy [Policy Text Block] | Research and Development Research and development expenses are charged to operations as incurred. The Company incurred no research and development costs for the three and six months ended November 30, 2017 and 2016, respectively. |
Income Tax, Policy [Policy Text Block] | Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the establishment of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to the extent deferred tax assets may not be recoverable after consideration of the future reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income. |
Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value of Financial Instruments Pursuant to Accounting Standards Codification (“ASC”) No. 825 - Financial Instruments, the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The carrying amount of the Company’s cash and cash equivalents, note receivable, notes payable, accounts payable and accrued expenses, none of which is held for trading, approximates their estimated fair values due to the short-term maturities of those financial instruments. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly. Level 3 - Significant unobservable inputs that cannot be corroborated by market data. |
Derivatives, Policy [Policy Text Block] | Derivative Financial Instruments Derivatives are recorded on the condensed consolidated balance sheet at fair value. The conversion features of the convertible notes are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. The pricing model the Company used for determining the fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income (see note 11). |
Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition For revenue from product sales, the Company recognizes revenue using four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) is based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. The Company has not generated revenue to date. |
Earnings Per Share, Policy [Policy Text Block] | Basic and Diluted Loss Per Share Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully-diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options and warrants to purchase common stock, and convertible debt. Basic and diluted net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period. The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculation. A net loss causes all outstanding stock options and warrants to be antidilutive. As a result, the basic and dilutive losses per common share are the same for the three and six months ended November 30, 2017 and 2016. |
Commitments and Contingencies, Policy [Policy Text Block] | Commitments and Contingencies Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims brought to such legal counsel’s attention as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements Accounting standards promulgated by the Financial Accounting Standards Board (“FASB”) are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following is a summary of recent accounting developments. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The update addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update will be effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Early adoption is permitted. The Company is currently evaluating the potential impact of the update on its financial statements. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU becomes effective for the Company on January 1, 2020. The amendments in this ASU will be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed. In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU requires that an entity account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU becomes effective for the Company on January 1, 2018, and will be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in any interim period. The Company is currently assessing the impact that this standard will have on any awards that are modified once this standard is adopted. Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements. |
Note 3 - Prepaid Expenses (Tables) |
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Nov. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block] |
Prepaid expenses consisted of the following at November 30, 2017 and May 31, 2017:
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Note 5 - Property, Plant and Equipment (Tables) |
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Property, Plant and Equipment [Table Text Block] |
Property, plant and equipment consisted of the following at November 30, 2017 and May 31, 2017.
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Note 7 - Intangible Assets (Tables) |
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Nov. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets [Table Text Block] |
Intangible assets consisted of the following at November 30, 2017 and May 31, 2017.
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Note 8 - Accounts Payable and Accrued Liabilities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] |
Accounts payable and accrued liabilities consisted of the following at November 30, 2017 and May 31, 2017.
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Note 10 - Notes Payable (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt [Table Text Block] |
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Convertible Debt [Table Text Block] |
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Schedule of Amortization of Debt Discount [Table Text Block] |
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Note 11 - Stockholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Warrants or Rights, Shares Authorized, by Exercise Price Range [Table Text Block] |
The following table summarizes the significant terms of warrants outstanding at November 30, 2017. These warrants were granted as part of a financing agreement:
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Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block] |
Transactions involving warrants are summarized as follows:
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Note 12 - Fair Value of Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] |
The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis at November 30, 2017 and May 31, 2017.
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Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] |
The estimated fair values of the Company’s derivative liabilities are as follows:
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Note 2 - Going Concern (Details) - USD ($) |
Nov. 30, 2017 |
May 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Retained Earnings (Accumulated Deficit) | $ (12,082,893) | $ (8,991,610) |
Note 3 - Prepaid Expenses (Details) - Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure - USD ($) |
Nov. 30, 2017 |
May 31, 2017 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid legal fees | $ 1,410 | $ 1,410 |
Prepaid expenses | 25,000 | 0 |
Total | $ 26,410 | $ 1,410 |
Note 4 - Security Deposit (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Nov. 30, 2017 |
May 31, 2017 |
|
Note 4 - Security Deposit (Details) [Line Items] | ||
Security Deposit | $ 0 | $ 50,000 |
Loss Contingency Accrual, Provision | 10,000 | |
Increase (Decrease) in Security Deposits | (50,000) | |
Deposits [Member] | ||
Note 4 - Security Deposit (Details) [Line Items] | ||
Loss Contingency Accrual, Provision | 50,000 | |
Rent Expense [Member] | ||
Note 4 - Security Deposit (Details) [Line Items] | ||
Loss Contingency Accrual, Provision | 15,699 | |
Remaining Amounts Due Under Lease [Member] | ||
Note 4 - Security Deposit (Details) [Line Items] | ||
Loss Contingency Accrual, Provision | $ 30,000 |
Note 5 - Property, Plant and Equipment (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 30, 2017 |
Nov. 30, 2016 |
Nov. 30, 2017 |
Nov. 30, 2016 |
|
Property, Plant and Equipment [Abstract] | ||||
Depreciation | $ 223 | $ 223 | $ 446 | $ 446 |
Note 5 - Property, Plant and Equipment (Details) - Schedule of Property, Plant and Equipment - USD ($) |
Nov. 30, 2017 |
May 31, 2017 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 2,674 | $ 2,674 |
Less: accumulated depreciation | (2,230) | (1,784) |
Property and equipment, net | 444 | 890 |
Computer Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 2,674 | $ 2,674 |
Note 6- Deferred Financing Costs (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Nov. 30, 2017 |
Nov. 30, 2017 |
Nov. 30, 2016 |
|
Disclosure Text Block Supplement [Abstract] | |||
Deferred Costs | $ 39,500 | $ 39,500 | |
Amortization of Deferred Charges | $ 3,119 | $ 3,119 | $ 0 |
Note 7 - Intangible Assets (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 30, 2017 |
Nov. 30, 2016 |
Nov. 30, 2017 |
Nov. 30, 2016 |
|
Note 7 - Intangible Assets (Details) [Line Items] | ||||
Amortization of Intangible Assets | $ 108 | $ 108 | $ 216 | $ 216 |
Internet Domain Names [Member] | ||||
Note 7 - Intangible Assets (Details) [Line Items] | ||||
Finite-Lived Intangible Asset, Useful Life | 60 months |
Note 7 - Intangible Assets (Details) - Schedule of Finite-Lived Intangible Assets - USD ($) |
Nov. 30, 2017 |
May 31, 2017 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 2,158 | $ 2,158 |
Less: accumulated amortization | (1,044) | (828) |
Intangible assets, net | 1,114 | 1,330 |
Internet Domain Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 2,158 | $ 2,158 |
Note 8 - Accounts Payable and Accrued Liabilities (Details) - Schedule of Accounts Payable and Accrued Liabilities - USD ($) |
Nov. 30, 2017 |
May 31, 2017 |
---|---|---|
Schedule of Accounts Payable and Accrued Liabilities [Abstract] | ||
Trade payables | $ 577,278 | $ 497,213 |
Accrued payroll and related liabilities | 36,577 | 34,987 |
Deferred rent liability | 55,699 | 49,565 |
Total accounts payable and accrued liabilities | $ 669,554 | $ 581,765 |
Note 10 - Notes Payable (Details) - Schedule of Debt - USD ($) |
Nov. 30, 2017 |
May 31, 2017 |
---|---|---|
Note 10 - Notes Payable (Details) - Schedule of Debt [Line Items] | ||
Notes Payable | $ 100,841 | $ 699,208 |
Current portion | 100,841 | 699,208 |
Long term portion | 0 | 0 |
Chief Executive Officer [Member] | Binder Funding Notes [Member] | ||
Note 10 - Notes Payable (Details) - Schedule of Debt [Line Items] | ||
Notes Payable | 84,841 | 77,550 |
Director [Member] | Koretsky Funding Notes [Member] | ||
Note 10 - Notes Payable (Details) - Schedule of Debt [Line Items] | ||
Notes Payable | 0 | 0 |
Director [Member] | Newcan Funding Notes [Member] | ||
Note 10 - Notes Payable (Details) - Schedule of Debt [Line Items] | ||
Notes Payable | $ 15,000 | $ 621,658 |
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Sep. 25, 2017 |
Sep. 20, 2017 |
Jul. 13, 2017 |
Nov. 30, 2017 |
Nov. 30, 2016 |
Nov. 30, 2017 |
Nov. 30, 2016 |
May 31, 2017 |
|
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Converted | $ 75,000 | $ 250,000 | ||||||
Converted, shares (in Shares) | 10,816,960 | |||||||
Conversion rate (in Dollars per share) | $ 0.25 | |||||||
Discount recognized | 508,988 | 518,720 | ||||||
Exchange Agreement, Shares (in Shares) | 4,500,000 | 1,500,000 | ||||||
Note Previously Sold | 6,000 | 0 | ||||||
Loss on extinguishment of debt | $ (989,177) | $ 3,480 | $ (989,032) | $ 0 | (989,032) | $ 0 | ||
Convertible Debt [Member] | April 2015 Note [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 4,603 | $ 4,603 | $ 22,440 | |||||
Payments | On the first anniversary of this note, the all then accrued interest became due. Thereafter, the Company is required to make eight equal payments of principal together with accrued interest, quarterly in arrears, commencing on July 1, 2016 until paid in full. | On the first anniversary of this note, the all then accrued interest became due. Thereafter, the Company is required to make eight equal payments of principal together with accrued interest, quarterly in arrears, commencing on July 1, 2016 until paid in full. | ||||||
Conversion | The note and any accrued unpaid interest is convertible into common stock of the Company. For each dollar converted, the note holder shall receive two shares of common stock and one three-year warrant to purchase 1.33 shares of common stock at $0.75 per share. | The note and any accrued unpaid interest is convertible into common stock of the Company. For each dollar converted, the note holder shall receive two shares of common stock and one three-year warrant to purchase 1.33 shares of common stock at $0.75 per share. | ||||||
Interest rate | 15.00% | 15.00% | 15.00% | |||||
Amount | $ 200,000 | $ 200,000 | $ 200,000 | |||||
Discount | $ 18,155 | $ 100,545 | ||||||
Note due | Apr. 29, 2018 | Apr. 29, 2018 | ||||||
Exchange Agreement, Shares (in Shares) | 1,500,000 | |||||||
Note Previously Sold | $ 105,219 | |||||||
Loss on extinguishment of debt | 404,082 | |||||||
Convertible Debt [Member] | April 2015 Note [Member] | Three Months Ended November 30, 2017 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | 822 | 822 | ||||||
Convertible Debt [Member] | April 2015 Note [Member] | May 31, 2016 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 30,082 | |||||||
Discount | 66,667 | |||||||
Convertible Debt [Member] | Old Main 8% Note [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 5,587 | $ 5,587 | $ 17,207 | |||||
Payments | At the earlier of September 18, 2016 or two trading days after this registration statement becomes effective, the Company must begin to redeem 1/6th of the face amount of the note and any accrued but unpaid interest on a monthly basis. Such amortization payment may be made, at its option, in cash or, subject to certain conditions, in common stock pursuant to a conversion rate equal to the lower of (a) $1.07 (post Reverse-Split) or (b) 75% of the lowest daily volume weighted average price of the common stock in the twenty consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date. | |||||||
Conversion | the Fixed Conversion Price was changed to a variable conversion price equal to the lesser of the prior Fixed Conversion Price or 75% of the lowest VWAP in the fifteen trading days ending on the trading day immediately prior to the conversion date. | |||||||
Interest rate | 8.00% | 8.00% | 8.00% | |||||
Discount recognized | $ 300,435 | $ 169,476 | ||||||
Discount | $ 30,411 | |||||||
Note due | Jul. 15, 2017 | Jul. 01, 2017 | ||||||
Exchange Agreement, Shares (in Shares) | 4,500,000 | |||||||
Loss on extinguishment of debt | $ 1,113,883 | $ 81,496 | ||||||
Balance increase | 15,750 | 10,000 | ||||||
Discount | $ 118,998 | 118,998 | ||||||
Gain on extinguishment of debt | 144,851 | |||||||
Note Previously Sold | 382,496 | 382,496 | ||||||
Balance at time it was sold | 322,612 | 322,612 | ||||||
Convertible Debt [Member] | Old Main 8% Note [Member] | Three Months Ended November 30, 2017 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | 1,138 | 1,138 | ||||||
Balance increase | 96,862 | |||||||
Convertible Debt [Member] | Old Main 8% Note [Member] | May 31, 2016 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Discount recognized | 172,108 | |||||||
Discount | 163,586 | 163,586 | ||||||
Convertible Debt [Member] | Principal [Member] | April 2015 Note [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Convertible Note payments | 100,000 | |||||||
Convertible Debt [Member] | Accrued Interest [Member] | April 2015 Note [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Convertible Note payments | 53,837 | |||||||
Convertible Notes Payable [Member] | FirstFire Note [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | 746 | $ 746 | ||||||
Conversion | FirstFire may, at its option, convert all or a portion of the FirstFire Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.40 per share (the "FirstFire Fixed Conversion Price") for the first 180 calendar days after the issue date. After the 180th day, the conversion price shall equal the lower of (i) the FirstFire Fixed Conversion Price, or (ii) 75% multiplied by the lowest traded price of the common stock during twenty (20) consecutive trading day period immediately preceding the trading day that the Company received a notice of conversion. | |||||||
Dated | Nov. 15, 2017 | |||||||
Amount | $ 330,000 | $ 330,000 | ||||||
Conversion rate (in Dollars per share) | $ 0.40 | $ 0.40 | ||||||
Discount recognized | $ 363,000 | |||||||
Discount | 30,083 | |||||||
Original issue discount | $ 33,000 | $ 33,000 | ||||||
Due | 7 years | |||||||
Chief Executive Officer [Member] | Convertible Debt [Member] | Binder Convertible Notes #4 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 3,610 | $ 3,610 | $ 2,666 | |||||
Payments | The remaining principal balance of $72,000 will be due in eight quarterly payments in the amount of $9,000 commencing July 1, 2018; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. | The remaining principal balance of $72,000 will be due in eight quarterly payments in the amount of $9,000 commencing July 1, 2018; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. | ||||||
Converted | $ 87,500 | |||||||
Converted, shares (in Shares) | 350,000 | |||||||
Conversion | This note and accrued interest under the note may be converted, in whole or in part, into one "Unit" for each $0.25 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $0.25 per share. | This note and accrued interest under the note may be converted, in whole or in part, into one "Unit" for each $0.25 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $0.25 per share. | ||||||
Dated | Mar. 31, 2017 | Mar. 31, 2017 | ||||||
Interest rate | 10.00% | 10.00% | 10.00% | |||||
Chief Executive Officer [Member] | Convertible Debt [Member] | Binder Convertible Notes #4 [Member] | Three Months Ended November 30, 2017 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 1,798 | $ 1,798 | ||||||
Chief Executive Officer [Member] | Convertible Debt [Member] | Binder Convertible Note 5 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 3,121 | $ 3,121 | ||||||
Payments | No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $14,381 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. | |||||||
Dated | Aug. 23, 2017 | |||||||
Interest rate | 10.00% | 10.00% | ||||||
Amount | $ 115,050 | $ 115,050 | ||||||
Conversion rate (in Dollars per share) | $ 0.25 | $ 0.25 | ||||||
Discount recognized | $ 46,020 | |||||||
Discount | 4,160 | |||||||
Chief Executive Officer [Member] | Convertible Debt [Member] | Binder Convertible Note 5 [Member] | Three Months Ended November 30, 2017 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 2,868 | 2,868 | ||||||
Discount | 3,824 | |||||||
Chief Executive Officer [Member] | Convertible Debt [Member] | Binder Convertible Note 6 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 1,974 | $ 1,974 | ||||||
Payments | No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $9,096 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. | |||||||
Dated | Aug. 23, 2017 | |||||||
Interest rate | 10.00% | 10.00% | ||||||
Amount | $ 72,767 | $ 72,767 | ||||||
Conversion rate (in Dollars per share) | $ 0.25 | $ 0.25 | ||||||
Discount recognized | $ 29,107 | |||||||
Discount | 2,632 | |||||||
Chief Executive Officer [Member] | Convertible Debt [Member] | Binder Convertible Note 6 [Member] | Three Months Ended November 30, 2017 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 1,814 | 1,814 | ||||||
Discount | 2,419 | |||||||
Chief Executive Officer [Member] | Convertible Debt [Member] | Binder Convertible Note 7 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 563 | $ 563 | ||||||
Payments | No interest payments are required until January 2, 2019, at which time all accrued interest becomes due and payable. Commencing April 1, 2019, the first of eight principal payments in the amount of $4,940 will become due, subsequent payments will become due on the first day of each July, October, January and April until paid in full. | |||||||
Dated | Oct. 09, 2017 | |||||||
Interest rate | 10.00% | 10.00% | ||||||
Amount | $ 39,521 | $ 39,521 | ||||||
Conversion rate (in Dollars per share) | $ 0.25 | $ 0.25 | ||||||
Discount recognized | $ 12,000 | |||||||
Discount | 570 | |||||||
Affiliated Entity [Member] | Convertible Debt [Member] | Newcan Convertible Note 1 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 6,016 | $ 6,016 | $ 2,005 | |||||
Payments | No interest payments are required until April 1, 2018, at which time all accrued interest becomes due and payable. Commencing on July 1, 2018, the first of eight principal payments in the amount of $15,000 will become due; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. | No interest payments are required until April 1, 2018, at which time all accrued interest becomes due and payable. Commencing on July 1, 2018, the first of eight principal payments in the amount of $15,000 will become due; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. | ||||||
Conversion | This note and accrued interest under the note may be converted, in whole or in part, into one "Unit" for each $0.25 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $0.25 per share. | This note and accrued interest under the note may be converted, in whole or in part, into one "Unit" for each $0.25 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $0.25 per share. | ||||||
Dated | Mar. 31, 2017 | Mar. 31, 2017 | ||||||
Interest rate | 10.00% | 10.00% | 10.00% | |||||
Affiliated Entity [Member] | Convertible Debt [Member] | Newcan Convertible Note 1 [Member] | Three Months Ended November 30, 2017 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 2,992 | $ 2,992 | ||||||
Affiliated Entity [Member] | Convertible Debt [Member] | Newcan Convertible Notes 4 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 16,861 | $ 16,861 | ||||||
Payments | No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $69,074 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. | |||||||
Dated | Aug. 23, 2017 | |||||||
Interest rate | 10.00% | 10.00% | ||||||
Amount | $ 621,658 | $ 621,658 | ||||||
Conversion rate (in Dollars per share) | $ 0.25 | $ 0.25 | ||||||
Discount recognized | $ 248,663 | |||||||
Discount | 22,482 | |||||||
Transferred | 23,856 | |||||||
Affiliated Entity [Member] | Convertible Debt [Member] | Newcan Convertible Notes 4 [Member] | Three Months Ended November 30, 2017 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Discount | 20,665 | |||||||
Affiliated Entity [Member] | Convertible Debt [Member] | Newcan Convertible Notes 5 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 1,899 | $ 1,899 | ||||||
Payments | No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $8,750 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. | |||||||
Dated | Aug. 23, 2017 | |||||||
Interest rate | 10.00% | 10.00% | ||||||
Amount | $ 70,000 | $ 70,000 | ||||||
Conversion rate (in Dollars per share) | $ 0.25 | $ 0.25 | ||||||
Discount recognized | $ 28,000 | |||||||
Discount | 2,532 | |||||||
Affiliated Entity [Member] | Convertible Debt [Member] | Newcan Convertible Notes 5 [Member] | Three Months Ended November 30, 2017 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 1,745 | 1,745 | ||||||
Discount | 2,327 | |||||||
Affiliated Entity [Member] | Convertible Debt [Member] | Newcan Convertible Note 6 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 427 | $ 427 | ||||||
Payments | No interest payments are required until January 2, 2019, at which time all accrued interest becomes due and payable. Commencing on April 1, 2019, the first of eight principal payments in the amount of $3,750 will become due; subsequent principal payments will become due on the first day of each July, October, January and April until paid in full. | |||||||
Dated | Oct. 09, 2017 | |||||||
Interest rate | 10.00% | 10.00% | ||||||
Amount | $ 30,000 | $ 30,000 | ||||||
Conversion rate (in Dollars per share) | $ 0.25 | $ 0.25 | ||||||
Discount recognized | $ 15,808 | |||||||
Discount | 751 | |||||||
Affiliated Entity [Member] | Three Months Ended November 30, 2017 [Member] | Convertible Debt [Member] | Newcan Convertible Notes 4 [Member] | ||||||||
Note 10 - Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||
Accrued interest | $ 15,499 | $ 15,499 |
Note 10 - Notes Payable (Details) - Schedule of Amortization of Debt Discount - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Nov. 30, 2017 |
Nov. 30, 2016 |
Nov. 30, 2017 |
Nov. 30, 2016 |
|
Schedule of Amortization of Debt Discount [Abstract] | ||||
Discounts on notes payable amortized to interest expense – 3 months ended November 30: | $ 530,796 | $ 689,196 | $ 572,856 | $ 889,392 |
Note 11 - Stockholders' Equity (Details) - Schedule of Stockholders' Equity Note, Warrants or Rights - $ / shares |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Nov. 15, 2017 |
Nov. 30, 2017 |
May 31, 2017 |
|
Schedule of Stockholders' Equity Note, Warrants or Rights [Abstract] | |||
Warrants outstanding, Number of Shares | 350,000 | 0 | |
Warrants outstanding, Weighted Average Exercise Price | $ 0.75 | $ 0 | |
Granted, Number of Shares | 350,000 | 350,000 | |
Granted, Weighted Average Exercise Price | $ 0.75 | $ 0.75 | |
Exercised, Number of Shares | 0 | ||
Exercised, Weighted Average Exercise Price | $ 0 | ||
Cancelled / Expired, Number of Shares | 0 | ||
Cancelled / Expired, Weighted Average Exercise Price | $ 0 |
Note 12 - Fair Value of Financial Instruments (Details) - Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation |
6 Months Ended |
---|---|
Nov. 30, 2017
USD ($)
| |
Liabilities Measured at Fair Value | |
Balance as of May 31, 2017 | $ 95,276 |
Issuances | 673,891 |
Conversions/Redemptions | (603,559) |
Extinguishment of debt | 13,395 |
Revaluation loss | 174,090 |
Balance as of November 30, 2017 | $ 353,093 |
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