This Form 10-Q contains forward-looking statements rather than historical facts
that involve risks and uncertainties. You can identify these statements by the
use of forward- looking words such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. Such forward-looking statements
discuss our current expectations of future results of operations or financial
condition. However, there may be events in the future that we are unable to
accurately predict or control and there may be risks, uncertainties and events
that may cause our actual results to differ materially from the expectations we
describe in our forward-looking statements, which could have a material adverse
effect on our business, operating results and financial condition. The
forward-looking statements included herein are only made as of the date of the
filing of this Form 10-Q, and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of Life On Earth, Inc.
(the "Company," "our" or "we"), should be read in conjunction with the notes
thereto. In the opinion of management, the unaudited condensed consolidated
financial statements presented herein reflect all adjustments (consisting only
of normal recurring adjustments) necessary for fair presentation. Interim
results are not necessarily indicative of results to be expected for the entire
year.
We prepare our financial statements in accordance with accounting principles
generally accepted in the United States of America, which require that
management make estimates and assumptions that affect reported amounts. Actual
results could differ from these estimates.
COMPANY OVERVIEW
Life On Earth, Inc. was incorporated in April 2013 as Hispanica International
Delights of America, Inc. as a Delaware corporation. In February 2018, the
Company changed its name to Life On Earth, Inc. and is engaged in the
distribution of its own proprietary functional beverages throughout the United
States.
In October 2013, we signed a distribution agreement with Gran Nevada Beverage,
Inc. ("Gran Nevada"), an entity related through common management and ownership.
The agreement provides us with the right to sell and distribute Gran Nevada's
beverages in the United States with purchase prices at the then applicable
wholesale prices charged to Gran Nevada's distributors. The agreement was for an
initial term of five years with automatic renewals of successive five-year terms
unless terminated. We initiated sales and distribution operations in March 2014.
This agreement was renewed for an additional 5 years as per the agreement.
During the years ended 2018 and 2019, the Company sold $506,581 and $73,592
respectively. These products were produced by a third party copacker and were
not purchased from Gran Nevada. The decrease in sales from 2018 to 2019 was
related to limited production capacity for the Gran Nevada Horchata that the
company was producing. The availability of 3rd party copackers that can produce
an Horchata are limited and it directly impacted the sales. As there is
currently no co-packing available for this product the Company does not know if
they will be able to produce this product again in the future.
In July 2016, we entered into a Stock Purchase and Sale Agreement to acquire all
of the issued and outstanding common stock of Energy Sources Distributors, Inc.
("ESD") from its three founding shareholders. ESD provides wholesale
distribution of specialty beverage products from its headquarters in Gilroy,
California. The total purchase price for the acquisition was $450,000 in cash.
We retained one of the selling founders as General Manager for a term of twelve
(12) months pursuant to an employment agreement to manage operations at the ESD
facility in Gilroy, California. ESD is now a wholly owned subsidiary of the
Company. The acquisition of ESD in July 2016 allowed the Company to expand
distribution on the West Coast. In June 2019, the Company further decided to
discontinue the wholesale beverage distribution operations in Northern
California and, on November 4, 2019, ESD filed a voluntary petition for relief
under Chapter 7 of Title 11 of the United States Code in the United States
Bankruptcy Court for the Northern District of California.
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In October 2017, the Company acquired Victoria's Kitchen, LLC ("VK"). VK is a
specialty beverage company that makes exceptional European-inspired drinks. VK's
beverages are natural and all the beverages are Gluten-Free, GMO-Free,
Dairy-Free, Vegan and contain no artificial ingredients or preservatives.
On April 30, 2018, the Company acquired The Giant Beverage Company Inc. ("Giant"
or "GBC"). Giant is a Direct Store Delivery (DSD) business that covers the five
boroughs of New York City under an eight-route distribution system. GBC serviced
over 600 accounts in the five boroughs. Giant services mainly independent
retailers but was expanding to service authorized chain accounts.
On May 7, 2019, Life On Earth, Inc., GBC, and Frank Iemmiti and Anthony Iemmiti
("Frank and Anthony Iemmiti") entered into a Dispute Resolution and Resale
agreement that will resolve all existing disputes between the two parties and
will also result in the sale of the ownership of Giant back to Frank and Anthony
Iemmiti. Under the terms of the agreement, the Company deposited $50,000 into an
Attorney's Trust Account. Frank and Anthony Iemmiti have a continuing obligation
to provide the Company with all financial information of Giant (the "Giant
Financial Information") that the Company needs to complete its SEC reporting
requirements. On July 4, 2019 the Company and Frank and Anthony Iemmiti executed
a Dispute Resolution and Resale agreement that at the closing the Company
authorized the release of the $50,000 to Frank and Anthony Iemmiti. Also, at
closing, the Company also paid Frank and Anthony Iemmiti the agreed upon
consideration of $62,718 of the Company shares at $0.80 per share. Lastly at the
closing, with an effective date of March 2, 2019 the Company sold GBC to Frank
and Anthony Iemmiti for 291,000 shares of the Company stock that they owned. The
sale of the Giant Beverage Company to Frank and Anthony Iemmiti became effective
March 1, 2019.
On June 21, 2019, LFER made the determination to shut down and discontinue the
operations of ESD and further focus on the brand portfolio. Effective November
4, 2019, ESD filed for Chapter 7 bankruptcy protection. On December 11, 2019,
the Company received a final decree from the United States Bankruptcy Court
ruling that a Chapter 7 bankruptcy estate for ESD had been fully administered.
The results of ESD are included herein as discontinued operations in the
financial statements.
Our management team has over 50 years of combined experience in the food and
beverage industry. In July 2016, we acquired Energy Source Distributors to
establish a presence on the West Coast in an all-cash purchase. Since then, we
have also acquired the Victoria's Kitchen brand, the Just Chill brand and The
Giant Beverage Company, Inc. During fiscal 2019, LFER needed to prioritize its
available resources and made the decision to focus on growing the brands in its
portfolio. As a result of this, LFER sold the Giant Beverage Company back to the
original owners of the company effective March 1, 2019. The results of
operations for Giant Beverage Companies from the acquisition through February
28, 2019 have been reclassified as a discontinued operation in the consolidated
statements of LFER. Subsequent to year end LFER further decided to discontinue
the operations of ESD and is moving away from the DSD business. This will allow
LFER to focus all its resources on its current and future portfolio of brands.
In November and December 2020, in discussions with the owners of a Cloud
Enterprise Technology Company, the Company's management discussed the business
of such company, which has developed a Cloud Enterprise software technology
designed to map and help companies reduce application development costs by up to
50%, as well as ensure compliance at application code levels to key compliance
regulations like European Union's GDPR, California's CCPA, Canada's PIPEDA and
more. After examining the business and proposed purchase terms , the Company
proposed to the Cloud Enterprise Technology Company owners, the purchase of
cloud based software technology assets and all of its intellectual property via
an Asset Purchase Agreement ("APA"). The APA is a subsequent event disclosed in
the Company's January 7, 2021 Form 8-K.
Our principal executive offices are located at 575 Lexington Avenue, 4th Floor,
New York NY 10022 and our telephone number (646) 844-9897.
Coronavirus Risks
In December 2019, a novel strain of coronavirus was reported to have surfaced in
Wuhan, China, which has and is continuing to spread throughout China and other
parts of the world, including the United States. On January 30, 2020, the World
Health Organization declared the outbreak of the coronavirus disease (COVID-19)
a "Public Health Emergency of International Concern." On January 31, 2020, U.S.
Health and Human Services Secretary Alex M. Azar II declared a public health
emergency for the United States to aid the U.S. healthcare community in
responding to COVID-19, and on March 11, 2020 the World Health Organization
characterized the outbreak as a "pandemic".
The ultimate extent of the impact of any epidemic, pandemic or other health
crisis on our business, financial condition and results of operations will
depend on future developments, which are highly uncertain and cannot be
predicted, including new information that may emerge concerning the severity of
such epidemic, pandemic or other health crisis and actions taken to contain or
prevent their further spread, among others. The significant outbreak of COVID-19
has resulted in a widespread health crisis that has adversely affected the
economies and financial markets worldwide, and may continue to do so, which
could adversely affect our business, results of operations and financial
condition.
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Sales and Distribution
The Company marketed and sold mainstream functional beverage products through
3rd party Direct Store Delivery (DSD) platforms as well as through other
distributors including KeHe Distributors, LLC ("KeHe") and United Natural Foods,
Incorporated "UNFI". KeHe has a distribution network in more than 30,000 stores
across North America. UNFI is a distributor of natural and organic foods,
specialty foods, and related products in the United States and Canada.
The Company also sells its Victoria's Kitchen brands and Just Chill brands
direct to consumers via Amazon online. The Company had announced that it would
increase or expand its product lines, under its current brands or under new
brands, to include CBD. The Company also decided to pursue other opportunities
in addition to the CPG or CBD spaces.
Production and Distribution
We do not directly manufacture our products because we outsource the
manufacturing process to third-party bottlers and independent contract
manufacturers (co-packers). After the product is manufactured, the finished
products are stored in third-party warehouses. Other than minimum case volume
requirements per production run, we do not have annual minimum production
commitments with our co-packers. As we are using third party co-packers and do
not have minimum production contracts in place, we could experience disruptions
in our ability to deliver products to our customers. We continually review our
contract packing needs in light of regulatory compliance and logistical
requirements and may add or change co-packers based on those needs. These
co-packers are located in different geographic locations throughout the United
States and we currently use multiple co-packers. The material terms of these
relationships are typically negotiated annually and include pricing, quality
standards, delivery times and conditions, purchase orders, and payment terms.
Payment terms are typically net 30, meaning that the total invoiced amount is
expected to be paid in full within 30 days from the date the products or
services are provided. We believe that we have sufficient options for each of
our raw and packaging material needs, as well as our third-party distribution
needs and also have long-term relationships with each of our suppliers and
distributors, resulting in consistency in quality and supply. We also believe
that we have sufficient breadth of retail relationships with distribution in
both large and small retailers and independents and across multiple channels
(mass, club, pharmacies, convenience, and small and large format retailers)
throughout the United States.
The contractual arrangements with all third parties, including suppliers,
manufacturers, distributors, and retailers are typical of the beverage industry
with standard terms. We have no long-term obligations with any of the third
parties nor do any of them have long-term obligations with us. The third-party
supplier, manufacturing and distribution agreements were entered into in the
normal course of business within the guidelines of industry practices and are
not deemed material and definite
Competition
We were solely a Consumer-Packaged Goods ("CPG") company. What sets us apart in
the industry, was our consolidated corporate structure that handles all aspects
of sales, marketing and proprietary distribution from a centralized location.
Our platform is built for accelerating emerging growth brands in the United
States by leveraging sales, supply chain, and distribution relationships.
The CPG industry and the direct selling industries are multi-billion-dollar
industries which are highly competitive. We face intense competition from very
large, international corporations, as well as from local and national companies.
In addition, we face competition from well-known companies that have large
market share. The intensity of competition in the future is expected to
increase, and no assurance can be provided that we can sustain our market
position or expand our business. Many of our current CPG competitors are well
established and have longer operating histories, significantly greater financial
and operational resources, and name recognition than we have. However, if we
develop a diverse product line and obtain adequate financing, we can compete
effectively in the industry. We face intense competition from very large,
international corporations and from local and national companies. In addition,
we face competition from well-known companies that have large market share. The
intensity of competition in the future is expected to increase. Many of our
current and potential competitors are well established and have longer operating
histories, significantly greater financial and operational resources, and have
more name recognition than we have.
31
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Government Regulation
Packaged consumable and digestible products are governed by the U.S. Food and
Drug Administration. As such, it was necessary for the Company to ensure its
products establish, maintain and make available for inspection, records and
labels with nutrition information that meet food labeling requirements. The
Company's products are manufactured by contracted production facilities that are
subject to many regulations, including Food Facility Registration,
recordkeeping, Good Manufacturing Practice Requirements, reporting, preventive
controls and inspections.
Research and Development Activities
Our research and development efforts were focused on two primary paths. The
first was to continually review our existing formulas and production processes
and structure to evaluate opportunities for cost of goods sold improvements,
without degrading the quality or fundamentally changing the consumer appeal
taste profile of our existing products. The second major research and
development efforts in the past were in the development of fundamentally new and
differentiated products, based on consumer insights and trends and competitive
intensity in those segments.
Employees
The Company currently has three full-time employees, as follows: a CEO, COO, and
President.
Certain positions are being filled with paid independent contractors or insider
owners who do not receive cash compensation but may receive stock compensation.
In certain regions of the United States, we utilize the services of direct sales
and distribution companies, which sell our products through their distribution
channels. This can mitigate the need for a large sales and merchandising force.
The Company also outsources its logistics to third parties, which can reduce the
need for employees in these roles.
Intellectual Property Protection
The Company has secured a registered trademark for its name and logo. The
Company also has trademarks registered for the Victoria's Kitchen and Just Chill
brands.
GOING CONCERN QUALIFICATION
Several conditions and events cast substantial doubt about the Company's ability
to continue as a going concern. The Company incurred net losses from inception
of approximately $17,900,000, has limited revenues, and requires additional
financing in order to finance its business activities on an ongoing basis. The
Company's future capital requirements will depend on numerous factors including,
but not limited to, whether it successfully acquires revenue generating
companies or assumes new businesses that generate material revenues.
At November 30, 2020, we had cash on hand of approximately $3,000 and an
accumulated deficit of approximately $17,900,000. See "Liquidity and Capital
Resources."
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") requires management to make judgments, assumptions and estimates that
affect the amounts reported in our financial statements and accompanying notes.
The discussion and analysis of our financial condition and results of operations
is based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates based on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form our basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions, or if management made different judgments or utilized
different estimates. Many of our estimates or judgments are based on anticipated
future events or performance, and as such are forward-looking in nature, and are
subject to many risks and uncertainties, including those discussed below and
elsewhere in this Report. We do not undertake any obligation to update or revise
this discussion to reflect any future events or circumstances. There are certain
critical accounting estimates that we believe require significant judgment in
the preparation of our consolidated financial statements. We have identified
below our accounting policies that we use in arriving at key estimates that we
consider critical to our business operations and the understanding of our
results of operations. This is not a complete list of all of our accounting
policies, and there may be other accounting policies that are significant to us.
For a detailed discussion on the application of these and our other accounting
policies, see Note 1 to Consolidated Financial Statements of this Report.
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Revenue Recognition
The Company recognizes revenue under ASU No. 2014-09, "Revenue from Contracts
with Customers (Topic 606)," ("ASC 606"). The core principle of the revenue
standard is that a company should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the
consideration to which the company expects to be entitled in exchange for those
goods or services. The Company only applies the five-step model (as described in
Note 1 to the Consolidated Financial Statements of this Report) to contracts
when it is probable that the Company will collect the consideration it is
entitled to in exchange for the goods and services transferred to the customer.
Revenue consists of the gross sales price, less allowances for which provisions
are made at the time of sale, and less certain other discounts, allowances, and
rebates that are accounted for as a reduction from gross revenue. Costs incurred
by the Company for shipping and handling charges are included in cost of goods
sold.
Trade Spend and Promotion Expenses
Throughout the year, we run trade spend and promotional programs with
distributors and retailers to help promote on-shelf discounts to our consumers.
Additionally, in more limited instances, we enter into customer marketing
agreements or various other slotting arrangements. The provisions for discounts,
slotting fees and promotion allowances is recorded as an offset to sales and
shown net on the consolidated statement of operations. Estimates are made to
accrue for amounts that have not yet been invoiced in the month that the program
occurs, or in the case of slotting, when the commitment is made.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of acquired businesses over
the estimated fair value of the identifiable net assets acquired. Goodwill and
other intangibles are reviewed for impairment annually or more frequently when
events or circumstances indicates that the carrying value of a reporting unit
more likely than not exceeds its fair value. The goodwill impairment test is
applied by performing a qualitative assessment before calculating the fair value
of the asset. If, on the basis of qualitative factors, it is considered more
likely than not that the fair value of the asset is greater than the carrying
amount, further testing of goodwill for impairment is not required. If the
carrying amount of the asset exceeds the asset's fair value, an impairment loss
is recognized in an amount equal to that excess, limited to the total amount of
goodwill allocated to that asset. Identifiable intangible assets acquired in
business combinations are recorded at the estimated acquisition date fair value.
Finite lived intangible assets are amortized over the shorter of the contractual
life or their estimated useful life using the straight-line method, which is
determined by identifying the period over which the cash flows from the asset
are expected to be generated.
As part of the Company's annual review of goodwill and intangible assets we
performed an analysis of the goodwill and intangible assets recorded as they
relate to the acquisitions of JC and VK. The intangibles relate to trademarks
and copyrights acquired in the JC acquisition and are being amortized over a
5-year period. The Company recorded an impairment charge of $725,000 against the
intangibles recorded related to the acquisition of JCG during the year ended May
31, 2019 and recorded an impairment charge of $299,000 during the year ended May
31, 2020. The balance of the unamortized intangibles related to the JC
acquisition as of November 30, 2020 was $0.
In addition, based on this analysis, the Company recorded an impairment charge
of $195,000 related to the goodwill recorded in connection with the VK
acquisition during the year ended May 31, 2020 The balance of goodwill as of
November 30, 2020 is $0.
Inventory
Our inventory consists of raw materials and finished goods inventories, which
are manufactured and procured based on our sales forecasts. We value inventory
at the lower of cost or net realizable value and include adjustments for
estimated obsolete or excess inventory, on a first in-first out basis. We
regularly review inventory detail to determine whether a write-down is
necessary. We consider various factors in making this determination, including
recent sales history, market conditions and remaining shelf life of materials
and finished goods. The amount and timing of write-downs for any period could
change if we make different judgments or use different estimates. We also
determine whether a provision for obsolete or excess inventory is required on
products that are over 12 months from production date or any changes.
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Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
stockholders.
Inflation
The amounts presented in the financial statements do not provide for the effect
of inflation on our operations or financial position. The net operating losses
shown would be greater than reported if the effects of inflation were reflected
either by charging operations with amounts that represent replacement costs or
by using other inflation adjustments.
LIQUIDITY AND CAPITAL RESOURCES
During the three and six months ended November 30, 2020, the Company received
$100,000 from the sale of 100,000 shares of Series B Preferred Stock and the
Company received $30,000 from the proceeds of a note payable that was issued
during September 2020.
During the year ended May 31, 2020, the Company received $447,240 from the
issuance of convertible notes payable as compared to $176,000 which the Company
received from the issuance of convertible notes payable during the year ended
May 31, 2019. During the year ended May 31, 2020, the Company made a $6,000
principal payment to a convertible note holder compared to payments of $5,000
for the year ended May 31, 2019. During the year ended May 31, 2020, the Company
received approximately $53,000 from the issuance of notes payable to related
parties and paid $5,300 of notes payable to related parties. During the year
ended May 31, 2019, the Company received approximately $531,000 from the from
the issuance of notes payable during the year ended May 31, 2019. On June 28,
2018, the Company and a note holder mutually agreed to settle the outstanding
debt for a total amount of $560,000, of which $410,000 was paid in cash and
$150,000 was paid with shares of the Company's common stock. The Company also
paid an additional $117,000 of payments for notes payable during the year ended
May 31, 2019. The Company also made payments for loans payable of approximately
$222,000 during the year ended May 31, 2019.
The Company received approximately $0 from the sale of common stock during the
year ended May 31, 2020 compared to $402,000 for the year ended May 31, 2019.
During the six months ended November 30, 2020, the Company received proceed from
various lines of credit in an aggregate amount of approximately $6,000 and
repaid approximately$1,700. During the year ended May 31, 2020, the Company
received proceeds from various lines of credit in an aggregate total of
approximately $59,000 and repaid approximately $67,000. During the year ended
May 31, 2019, the Company received proceeds from various lines of credit in an
aggregate total of approximately $143,000 and repaid approximately $107,000.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2020 AND NOVEMBER 30, 2019:
Sales
Sales for the three months ended November 30, 2020 were $0 compared to
approximately $21,000 for the three months ended November 30, 2019. The
reduction in sales during the three months ended November 30, 2020 of
approximately $21,000 was caused by the lack of sales of CBD products and the
lack of sales of our JCG and VK products during the three months ended November
30, 2020. Sales of our JCG products amounted to $17,000 and sales of our VK
products amounted to $4,000 during the three months ended November 30, 2019.
Operating Expenses
Operating expenses aggregated to a credit of $34,765 for the three months ended
November 30, 2020 as compared to $1,002,530 for the three months ended November
30, 2019. The decrease in operating expenses of approximately $1,038,000 was
related to several factors, including, decreased professional fees of $344,000,
decreased officer compensation of $242,000, decreased salaries and benefits of
$95,000, decreased other selling, general and administrative expenses of $39,000
and decreased amortization of $23,000.
During the three months ended November 30, 2020 and 2019, the Company recorded a
write off of goodwill of $0 and $145,000, respectively, and an impairment of
intangibles of $0 and $150,000, respectively.
34
Other Expense
During the three months ended November 30, 2020, the Company recorded interest
and financing costs of approximately $263,000 as compared to approximately
$219,000 during the six months ended November 30, 2019. Interest and financing
costs primarily result from the amortization of deferred financing balances that
were incurred by the Company to finance operations. During the six months ended
November 30, 2019, the Company recorded a loss on discontinued operations of
$9,000, related to ESD.
During the year ended May 31, 2019, the Company recorded the change in fair
value of contingent consideration of $382,582 related to the acquisition of Just
Chill. This charge related to contingent consideration arising from the
measurement of LFER stock on the 12-month anniversary of the acquisition. During
the three months ended November 30, 2020, the Company recorded a charge in the
statement of operations for the change in the fair value of contingent
consideration of $60,136 and during the three months ended November 30, 2019,
the Company recorded a credit in the statement of operations for the change in
the fair value of contingent consideration of $239,400.
During the three months ended November 30, 2020 and 2019, the Company recorded
charges in the statement of operations for changes in the fair value of
derivative liabilities of $56,205 and $34,930, respectively.
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2020 AND NOVEMBER 30, 2019:
Sales
Sales for the six months ended November 30, 2020 were approximately $25,000
compared to $53,000 for the six months ended November 30, 2019. The reduction in
sales in 2020 of $28,000 was caused by the increased sales of CBD products of
$25,000 and lack of sales of our JCG and VK products during the six months ended
November 30, 2020. Sales of our JCG products amounted to $40,000 and sales of
our VK products amounted to $13,000 during the six months ended November 30,
2019.
Gross Profit
Gross profit during the six months ended November 30, 2020 decreased to a
negative $335 because the sales of our CBD products were sold at cost.
Operating Expenses
Operating expenses totaled $247,293 for the six months ended November 30, 2020
as compared to $1,706,063 for the six months ended November 30, 2019. The
decrease in operating expenses was related to several factors, including
decreased professional fees of $435,000, decreased officer compensation of
$421,000, decreased salaries and benefits of $187,000, decreased other selling,
general and administrative expenses of $75,000 and decreased amortization of
$46,000.
During the six months ended November 30, 2020 and 2019, the Company recorded a
write off of goodwill of $0 and $145,000, respectively, and an impairment of
intangibles of $0 and $150,000, respectively.
Other Expense
During the six months ended November 30, 2020, the Company recorded interest and
financing costs of approximately $353,000 as compared to approximately $428,000
during the six months ended November 30, 2019. Interest and financing costs
primarily result from the amortization of deferred financing balances that were
incurred by the Company to finance operations. During the six months ended
November 30, 2019, the Company recorded a loss on discontinued operations of
$81,000, related to ESD.
During the year ended May 31, 2019, the Company recorded the change in fair
value of contingent consideration of $382,582 related to the acquisition of Just
Chill. This charge related to contingent consideration arising from the
measurement of LFER stock on the 12-month anniversary of the acquisition. During
the six months ended November 30, 2020, the Company recorded a charge in the
statement of operations for the change in the fair value of contingent
consideration of $60,136 and during the six months ended November 30, 2019, the
Company recorded a credit in the statement of operations for the change in the
fair value of contingent consideration of $239,400.
During the six months ended November 30, 2020 and 2019, the Company recorded
charges in the statement of operations for changes in the fair value of
derivative liabilities of $56,205 and $34,930, respectively.
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