UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Or
For the transition period from _______ to _______.
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| (Address of Principal Executive Offices) | (Zip Code) | ||
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| ¨ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of outstanding shares of the registrant’s common stock was as of March 31, 2022.
| Life On Earth, Inc. |
| Form 10-Q |
| TABLE OF CONTENTS |
| PART I - FINANCIAL INFORMATION | Page | |||
| Item 1. | Unaudited Financial Statements | |||
| Condensed Balance Sheets | 3 | |||
| Condensed Statements of Operations | 4 | |||
| Condensed Statements of Changes in Stockholders’ Equity (Deficiency) | 5 | |||
| Condensed Statements of Cash flows | 8 | |||
| Notes to Unaudited Condensed Financial Statements | 9 | |||
| Item 2. | Management’s Discussions and Analysis of Financial Condition and Results of Operations | 25 | ||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 30 | ||
| Item 4. | Controls and Procedures | 30 | ||
| PART II - OTHER INFORMATION | ||||
| Item 1. | Legal Proceedings | 31 | ||
| Item 1a. | Risk Factors | 31 | ||
| Item 2. | Unregistered sales of Equity Securities and Use of Proceeds | 31 | ||
| Item 3. | Defaults Upon Senior Securities | 31 | ||
| Item 4. | Mining Safety Disclosure | 31 | ||
| Item 5. | Other Information | 32 | ||
| Item 6. | Exhibits | 32 | ||
| SIGNATURES | 33 | |||
PART I – FINANCIAL INFORMATION
| Life On Earth, Inc. |
| Condensed Balance Sheets |
| February 28, | May 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other current receivable | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Other Assets | ||||||||
| Investment in CareClix | ||||||||
| Note receivable | ||||||||
| Other assets of discontinued operations | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued dividends payable on preferred shares | ||||||||
| Accrued interest of related party debt | ||||||||
| Accrued contingent liability for the purchase cost of the SA acquisition | ||||||||
| Contingent liability | ||||||||
| Derivative liability | ||||||||
| Notes payable - related party, net of unamortized deferred financing costs of $ and $0 as of February 28, 2022 and May 31, 2021, respectively | ||||||||
| Notes payable | ||||||||
| Convertible notes payable, net of unamortized deferred financing costs of $ and $ as of February 28, 2022 and May 31, 2021, respectively | ||||||||
| Lines of credit | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' Deficiency | ||||||||
| Preferred stock, par value; shares authorized, | ||||||||
| Series A Preferred Stock, and shares issued and outstanding as of February 28, 2022 and May 31, 2021, respectively | ||||||||
| Series B Preferred Stock, and shares issued and outstanding as of February 28, 2022 and May 31, 2021, respectively | ||||||||
| Series C Preferred Stock, and shares issued and outstanding as of Februar 28, 2022 and May 31, 2021, respectively | ||||||||
| Series D Preferred Stock, and shares issued and outstanding as of February 28, 2022 and May 31, 2021, respectively | ||||||||
| Common stock, par value; shares authorized, and shares issued and outstanding as of February 28, 2022 and May 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders' Deficiency | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders' Deficiency | $ | $ | ||||||
| The accompanying notes are an integral part of these condensed financial statements. | ||||||||
3
| Life On Earth, Inc. |
| Condensed Consolidated Statements of Operations |
| (Unaudited) |
| For the three months ended February 28, | For the nine months ended February 28, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Sales, net | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Officers compensation | ||||||||||||||||
| Salaries and benefits | ||||||||||||||||
| Other selling, general and administrative | ( | ) | ||||||||||||||
| Total expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income and (expenses): | ||||||||||||||||
| Change in fair value of contingent consideration | ( | ) | ( | ) | ||||||||||||
| Change in fair value of derivative liability | ||||||||||||||||
| Interest and financing costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on discontinued operations | ( | ) | ( | ) | ||||||||||||
| Loss on sale of subsidiary | ( | ) | ( | ) | ||||||||||||
| Gain on disposal of subsidiaries | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per share from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per share on discontinued operations | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Basic and diluted weighted average number | ||||||||||||||||
| Basic and diluted weighted average number of shares outstanding | ||||||||||||||||
| The accompanying notes are an integral part of these condensed financial statements. | ||||||||||||||||
4
| Life On Earth, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Condensed Statements of Stockholders' Deficiency | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the nine months ended February 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred | Series B Preferred | Series C Preferred | Series D Preferred | Common Stock | Additional | Accumulated | Total Stockholders | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Paid in capital | Deficit | Deficiency | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 1, 2021 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A Preferred shares for CareClix Acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of Series C preferred shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C preferred shares for convertible debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series C Preferred shares to Common | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of Series D Preferred shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for SA Acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common shares issued for SA acquisition that were returned and cancelled | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for convertible debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of common shares to related parties at $0.001 per share | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares to related parties as consideration at $0.001 per share | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of Series C preferred shares to related parties at $0.001 per share | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares as consideration shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for JCG contingency shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for services at prices ranging from $0.07 to $0.156 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for settlement of legal claim | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for settlement of legal claim | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, February 28, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| The accompanying notes are an integral part of these condensed financial statements. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
5
| Life On Earth, Inc. |
| Condensed Statements of Stockholders' Deficiency |
| For the nine months ended February 28, 2021 |
| (Unaudited) |
| Series A Preferred | Series B Preferred | Series C Preferred | Common Stock | Additional | Accumulated | Total Stockholders | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Paid in capital | Deficit | Deficiency | ||||||||||||||||||||||||||||||||||
| Balance, June 1, 2020 | $ | — | $ | — | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||
| Sale of Series B preferred shares | ||||||||||||||||||||||||||||||||||||||||||||
| Sale of Series C preferred shares | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for convertible debt | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, February 28, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| The accompanying notes are an integral part of these condensed financial statements. | ||||||||||||||||||||||||||||||||||||||||||||
6
| Life On Earth, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Condensed Statements of Stockholders' Deficiency | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the three months ended February 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred | Series B Preferred | Series C Preferred | Series D Preferred | Common Stock | Additional | Accumulated | Total Stockholders | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Paid in capital | Deficit | Deficiency | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 1, 2021 | 1,200,000 | $ | 1,200 | 100,000 | $ | 100 | 1,135,209 | $ | 1,136 | 210,000 | $ | 210 | 62,483,802 | $ | 62,484 | $ | 18,877,601 | $ | (19,695,421 | ) | $ | (752,692 | ) | |||||||||||||||||||||||||||||
| Issuance of Series A Preferred shares for CareClix Acquisition | 2,500,000 | 2,500 | 2,500 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of Series C preferred shares | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C preferred shares for convertible debt | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series C Preferred shares to Common | (50,000 | ) | (50 | ) | 525,000 | 525 | (475 | ) | — | |||||||||||||||||||||||||||||||||||||||||||
| Cancellation of Series D Preferred shares | (193,764 | ) | (194 | ) | 194 | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Common shares issued for SA acquisition that were returned and cancelled | (7,974,695 | ) | (7,975 | ) | (526,330 | ) | (534,305 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for convertible debt | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of common shares to related parties at $0.001 per share | 12,503,177 | 12,503 | 952,742 | 965,245 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares to related parties as consideration at $0.001 per share | 3,056,332 | 3,056 | 232,893 | 235,949 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of Series C preferred shares to related parties at $0.001 per share | 1,528,166 | 1,528 | 1,526,640 | 1,528,168 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares as consideration shares | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for services at prices ranging from $0.07 to $0.10 | 1,079,137 | 1,079 | 95,649 | 96,728 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for settlement of legal claim | 150,000 | 150 | 14,850 | 15,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
| — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (2,873,853 | ) | (2,873,853 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, February 28, 2022 | 3,700,000 | $ | 3,700 | 100,000 | $ | 100 | 2,613,375 | $ | 2,614 | 16,236 | $ | 16 | 71,822,753 | $ | 71,823 | $ | 21,173,764 | $ | (22,569,274 | ) | $ | (1,317,257 | ) | |||||||||||||||||||||||||||||
| The accompanying notes are an integral part of these condensed financial statements. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life On Earth, Inc. | ||||||||||||||||||||||||||||||||||||||||||||
| Condensed Statements of Stockholders' Deficiency | ||||||||||||||||||||||||||||||||||||||||||||
| For the three months ended February 28, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred | Series B Preferred | Series C Preferred | Common Stock | Additional | Accumulated | Total Stockholders | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Paid in capital | Deficit | Deficiency | ||||||||||||||||||||||||||||||||||
| Balance, December 1, 2020 | 1,200,000 | $ | 1,200 | 100,000 | $ | 100 | — | $ | — | 20,728,833 | $ | 20,729 | $ | 13,067,729 | $ | (17,918,484 | ) | $ | (4,828,726 | ) | ||||||||||||||||||||||||
| Sale of Series C preferred shares | 150,000 | 150 | 149,850 | 150,000 | ||||||||||||||||||||||||||||||||||||||||
| Net loss | (170,105 | ) | (170,105 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, February 28, 2021 | 1,200,000 | $ | 1,200 | 100,000 | $ | 100 | 150,000 | $ | 150 | 20,728,833 | $ | 20,729 | $ | 13,217,579 | $ | (18,088,589 | ) | $ | (4,848,831 | ) | ||||||||||||||||||||||||
| The accompanying notes are an integral part of these condensed financial statements. | ||||||||||||||||||||||||||||||||||||||||||||
7
| Life On Earth, Inc. |
| Condensed Statements of Cash Flows |
| (Unaudited) |
| For the nine months ended February 28, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Stock based compensation | ||||||||
| Stock based compensation - related parties | ||||||||
| Loss from discontinued operations | ||||||||
| Amortization of interest and financing costs | ||||||||
| Share based finance costs | ||||||||
| Provision for bad debts | ||||||||
| Change in fair value of contingent liability | ( | ) | ||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Changes in operating assets and liabilities: (Increase) decrease in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Other receivable | ||||||||
| Note receivable | ( | ) | ||||||
| Increase (decrease) in: | ||||||||
| Accounts payable, accrued expenses and contingent liability | ( | ) | ||||||
| Cash used by operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds of notes payable - related parties | ||||||||
| Repayment of notes payable - related party | ( | ) | ||||||
| Proceeds of notes payable | ||||||||
| Proceeds of convertible notes payable | ||||||||
| Repayment of convertible notes payable | ( | ) | ||||||
| Proceeds from lines of credit, net of financing costs | ||||||||
| Payment of lines of credit | ( | ) | ( | ) | ||||
| Proceeds from sales of Series B preferred stock | ||||||||
| Proceeds from sales of Series C preferred stock | ||||||||
| Proceeds from sales of Series C preferred stock to related parties | ||||||||
| Proceeds from sales of common stock to related parties | ||||||||
| Cash (used)/provided by financing activities | ||||||||
| Net Increase (decrease) in Cash and Cash Equivalents | $ | $ | ||||||
| Cash and Cash Equivalents - beginning | ||||||||
| Cash and Cash Equivalents - end | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information | ||||||||
| Noncash investing and financing activities: | ||||||||
| Common stock issued for convertible debt | $ | $ | ||||||
| Series C preferred shares issued for convertible debt | $ | $ | ||||||
| Common stock issued with convertible debt as financing cost | $ | $ | ||||||
| Common stock issued as consideration to related parties | $ | $ | ||||||
| Common stock issued for settlement of legal claims | $ | $ | ||||||
| Derivative liability associated with convertible devbt | $ | $ | ||||||
| Common stock issued for JCG acquisition contingency shares | $ | $ | ||||||
| Common stock issued for SA Acquisition | $ | $ | ||||||
| Common stock returned and cancelled | $ | ( | ) | $ | ||||
| Series A preferred shares issued for CareClix acquisition | $ | $ | ||||||
| The accompanying notes are an integral part of these condensed financial statements. | ||||||||
8
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Presentation
Life On Earth, Inc. (the “Company”) is a public holding company formed in Delaware in April 2013, operating through wholly owned subsidiaries. Until December 31, 2021 as a result of the acquisition of SmartAxiom, Inc. in May 2021, the Company offered software that manages and secures the Internet-of-Things (IoT) through patented, lite blockchain technology running among those devices at the edge of the Internet and enabling them to defend themselves. The Company has acted as a brand accelerator and incubator company that was focused on building and scaling concepts in the natural consumer products category. The Company’s previous business model focused on a long-term forward-looking vision to consumers in the health, wellness and lifestyle spaces through superior branding, product quality, and direct to consumer and retail experience within the CPG industry.
On December 17, 2021, the Company entered into a Stock Purchase Agreement (“SPA”) with CareClix Holdings, Inc., a Florida corporation (“SOLI”) to acquire four CareClix subsidiary companies On December 31, 2021, under the terms of a Management Operating Agreement, the Company agreed to a partial closing of the transaction set forth in the SPA with the final closing to occur on the effectiveness of a registration statement to be filed by the Company
for the shares to be issued as part of the consideration
Under the terms of the SPA, the Company will acquired 100% ownership of the four subsidiaries of SOLI, which included CareClix, Inc., a Virginia corporation, CareClix Services, Inc., a Florida corporation, MyCareClix, Inc., a Florida corporation, and CareClix RPM, Inc., a Florida corporation (collectively, the “CareClix Group”) effective with the final closing. In exchange for ownership of the CareClix Group, the Company agreed to issue the following securities to the common shareholders of SOLI:
| 1. | 50,000,000 shares of common stock; |
| 2. | 2,100,000 shares of a new class of preferred stock to be designated as Series E Preferred Stock. The shares of Series E Preferred stock to be designated and issued to the shareholders of CareClix have a convertibility ratio, under the current share structure, of 100 to 1 into shares of common stock with conversion occurring automatically when the Company’s Articles of Incorporation have been amended to authorize sufficient common shares for the conversion. The net effect of these two share issuances will be that common shares of SOLI held before the transaction will be exchanged for common shares of the Company on a 1 for 1 basis. |
| 3. | 4,000,000 shares of Series A Preferred Stock, over a period of time, to Mr. Charles Scott, the Chairman and majority shareholder of SOLI, with 2,500,000 shares issued at the December 31, 2021 partial closing, 600,000 shares to be issued 45 days after closing, and 900,000 shares to be issued 90 days after closing. The second installment of Series A shares was to be issued by February 14, 2022 but have not yet been issued and the final installment was due to be issued by March 31, 2022, but have also not yet been issued at the date of this Report. Shares of our Series A Preferred Stock, which are not convertible and do not receive dividends, are entitled to cast 50 votes per share on all matters submitted to the vote or consent of our shareholders. |
Upon the final closing of the transaction, the former shareholders of SOLI will hold approximately seventy-five percent of the Company’s issued and outstanding common equity on a fully diluted basis and will hold more than eighty-five percent of the total shareholder voting power.
The final closing of the transaction is subject to the effectiveness of a registration statement on Form S-4 to be filed by the Company registering the issuance of the shares of common stock and shares of Series E Preferred Stock to the common shareholders of SOLI. The Company has undertaken to file the S-4 registration statement, which will be filed as soon as a pending audit of the financial statements of the acquired CareClix companies by the Company is completed.
Pending the final closing, SOLI and the Company completed the operational changes under the Management Operating Agreement effective December 31, 2021, so that the CareClix Group and the Company began acting as a unit pending the effective date of the S-4 registration statement and issuance by the Company of the remainder of the agreed consideration. Under GAAP, the financial results of the CareClix subsidiaries cannot be consolidated with the Company’s financial results in this Report and will not be consolidated until the final closing but are reported on a pro forma basis in these Footnotes. See Note 5.
On March 8, 2022, the Company executed a Stock Purchase and Mutual Release Agreement (the “Agreement”) under which the Company divested its ownership of the former subsidiary SmartAxiom, Inc. (“SA”), effective December 31, 2021. The decision was made due to certain critical factors including, but not limited to, 1) the Company’s new focus exclusively on the medical technology industry, 2) the slow progress of performance from SA in comparison to the results already underway with the CareClix acquisition, and 3) redeployment of resources to the growth potential of the CareClix group of companies. Under the Agreement, the Company agreed to transfer all of its equity ownership in SA to Amit Biyani in exchange for Mr. Biyani’s agreement to return to the Company for cancellation: (ii) 7,794,695 shares of our common stock; and (ii) 128,822 shares of our Series D Preferred Stock. In addition, SA and Mr. Biyani agreed to arrange for the return and cancellation of remaining 64,942 shares of Series D Preferred Stock currently held by other former shareholders of SA. A total of 16,236 Preferred D shares are expected to remain outstanding. By agreement among the parties, the divestiture of SA was deemed legally effective as of December 31, 2021. The Agreement also contains mutual releases amongst the parties.
9
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Effective December 31, 2021, the Company determined that its subsidiaries Victoria’s Kitchen and The Chill Group both of which had been inactive for some time, should be discontinued, resulting in a loss for the period ended February 28, 2022. See, Note 6. Discontinued Operations.
The accompanying financial statements include only the financial statements of the Company and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
Revenue Recognition
In May 2014, the FASB issued guidance codified in ASC 606 which amends the guidance in former ASC 605, “Revenue Recognition.” The core principle of the standard is to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. The standard also requires additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation
Because the Company’s agreements generally have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations. The Company’s performance obligations are satisfied at the point in time when services are received by the customer, which is when the customer has title and the significant risks and rewards of ownership. Therefore, the Company’s contracts have a single performance obligation (shipment of product or delivery of services). The Company primarily receives fixed consideration for sales of product and services. Shipping and handling amounts are included in cost of goods sold. Sales tax and other similar taxes are excluded from net sales. Sales are recorded net of provisions for discounts The amount of revenue recognized represents the amount that will not be subject to a significant future reversal of revenue.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the balance sheets and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year.
Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutive. As of February 28, 2022, and May 31, 2021, respectively, warrants and convertible notes payable could be converted into approximately 4,804,000 and 3,088,000 shares of common stock, respectively.
Income Taxes
The Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized when it is more likely than not that such tax benefits will not be realized.
10
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any unrecognized tax benefits as of February 28, 2022, and May 31, 2021, and does not expect this to change significantly over the next 12 months.
Accounting for Equity Awards
The cost of services received in exchange for an award of equity instruments related to employees and non-employees is based on the grant-date unadjusted fair value of the award and allocated over the requisite service period of the award.
Cash and Cash Equivalents
The Company considers only those investments which are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents.
On February 28, 2022, and May 31, 2021, respectively,
the Company had cash and cash equivalents of $
Advertising
Advertising and promotion costs are expensed
as incurred and amounted to approximately $
Business combination
GAAP requires that all business combinations not involving entities or businesses under common control be accounted for under the acquisition method. The Company applies ASC 805, “Business combinations”, whereby the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the statements of operations and comprehensive income.
The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values are based on the expected life of products and forecasted life cycle and forecasted cash flows over that period. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any changes to provisional amounts identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined.
The Company expects to have an independent valuation and allocation of the consideration for the CareClix acquisition to be completed on the final closing of the transaction.
Deferred Finance Cost
Deferred financing costs or debt issuance costs are costs associated with issuing debt, such as various fees and commissions paid to investment banks, law firms, auditors, regulators, and so on. Since these payments do not generate future benefits, they are treated as a contra debt account. The costs are capitalized, reflected in the balance sheet as a contra long-term liability, and amortized using the effective interest method or over the finite life of the underlying debt instrument, if below de minimis.
Derivative Liability
The Company accounts for certain instruments, which do not have fixed settlement provisions, as derivative instruments in accordance with FASB ASC 815-40, Derivative and Hedging – Contracts in Entity’s Own Equity. This is due to the conversion features of certain convertible notes payable being tied to the market value of our common stock. As such, our derivative liabilities are initially measured at fair value on the contract date and are subsequently re-measured to fair value at each reporting date. Changes in estimated fair value are recorded as non-cash adjustments within other income (expenses), in the Company’s accompanying Statements of Operations. There were no derivative liabilities remaining at February 28, 2022.
11
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Recent Accounting Pronouncements
Management does not believe that any recently issued, or not yet effective, accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
Note 2 - BASIS OF REPORTING AND GOING CONCERN
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.
The Company has incurred losses from inception
of approximately $
Note 3 - CONCENTRATIONS
Concentration of Credit Risk
The Company’s financial instruments that
are exposed to concentrations of credit risk consist primarily of cash. The Company places its cash with high quality credit institutions.
At times, balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. Cash in
banks is insured by the FDIC up to $
Sales and Accounts Receivable
The Company had no sales and no accounts receivable at February 28, 2022 or at May 31, 2021.
Note 4 – FAIR VALUE MEASUREMENTS
The Company follows the provisions of ASC 820-10, Fair Value Measurements and Disclosures Topic, or ASC 820-10, for our financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value under GAAP and requires expanded disclosures regarding fair value measurements. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
Financial assets and liabilities recorded on the accompanying condensed balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 – Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.
Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 – Inputs include the following:
• Quoted prices for similar assets and liabilities in active markets
• Quoted prices for identical or similar assets or liabilities in markets that are not active
• Observable inputs other than quoted prices that are used in the valuation of the assets or liabilities (i.e., interest rate and yield curve quotes at commonly quoted intervals)
• Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 – Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
The level in the fair value hierarchy within which the fair value measurement is classified is determined based upon the lowest level of input that is significant to the fair value measurement in its entirety.
Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as cash and cash equivalents, accounts payable and accrued expenses and notes payable.
12
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
The carrying value of our contingent liability approximated the fair value as of February 28, 2022, in considering Level 1 inputs within the hierarchy.
The carrying value of our derivative liability as of May 31, 2021, approximated the fair value in considering Level 3 inputs within the hierarchy. The Company’s derivative liability was measured at fair value using the Black Scholes valuation methodology. There was no derivative liability remaining at February 28, 2022.
Note 5 – CareClix Acquisition
On December 17, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) with CareClix Holdings, Inc., a Florida corporation (“SOLI”). On December 31, 2021, under the terms of a Management Operating Agreement, the Company agreed to a partial closing of the transaction set forth in the SPA with the final closing to occur on the effectiveness of a registration statement for the shares to be issued to the SOLI shareholders as part of the consideration.
In the partial closing, the Company acquired 100% ownership of four subsidiaries of SOLI, which included CareClix, Inc., a Virginia corporation, CareClix Services, Inc., a Florida corporation, MyCareClix, Inc., a Florida corporation, and CareClix RPM, Inc., a Florida corporation (collectively, the “CareClix Group”). In exchange for ownership of the CareClix Group, the Company agreed to issue the following securities directly to the common shareholders of SOLI:
| · | 50,000,000 shares of common stock; and 2,100,000 shares of a new class of preferred stock to be designated as Series E Preferred Stock, with a convertibility ratio, under the current share structure, of 100 to 1 into shares of common stock with conversion occurring automatically when the Company’s Articles of Incorporation are amended to authorize sufficient common shares for the conversion. |
| · | 4,000,000 shares of Series A Preferred Stock, over a period of time, to Mr. Charles Scott, the Chairman and majority shareholder of SOLI, with 2,500,000 shares issued at the December 31, 2021 partial closing, 600,000 shares to be issued 45 days after closing, and 900,000 shares to be issued 90 days after closing. The second and third installments have not yet been issued as of the date of this report. Shares of Series A Preferred Stock, which are not convertible and do not receive dividends, are entitled to cast 50 votes per share on all matters submitted to the vote or consent of our shareholders. |
Upon the final closing of the transaction, the former shareholders of SOLI will hold approximately 75 percent of our issued and outstanding common equity on a fully diluted basis and will hold more than 85 percent of the Company’s total shareholder voting power.
The final closing of the transaction is subject to the effectiveness of a registration statement on Form S-4 to be filed by the Company registering the issuance of the shares of common stock and shares of Series E Preferred Stock to the common shareholders of CareClix. The S-4 registration statement will be filed as soon as a pending audit of the financial statements of the acquired CareClix companies by the Company is completed.
Pending the final closing, SOLI and the Company have completed the operational changes under the Management Operating Agreement effective December 31, 2021, so that the CareClix Group and the Company began acting as a unit pending the effective date of the S-4 registration statement and issuance by the Company of the remainder of the agreed consideration.
The combined financial results of the LFER and CareClix companies for the year ended May 31, 2021 and the nine month periods ended February 28, 2022, on a unaudited, proforma basis are as follows:
13
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
| Life On Earth, Inc. | ||||||||||||||||||||
| Condensed Combined Pro Forma Balance Sheets | ||||||||||||||||||||
| May 31, 2021 | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| LFER | CareClix | Adjustments | Ref | Combined | ||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Prepaid expenses | ||||||||||||||||||||
| Deposited funds | ||||||||||||||||||||
| Current assets of discontinued operations | ||||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Other Assets | ||||||||||||||||||||
| Fixed assets, net | ||||||||||||||||||||
| Goodwill | ( | ) | a | |||||||||||||||||
| Intangible assets, net | b | |||||||||||||||||||
| Right to use asset | ||||||||||||||||||||
| Other assets of discontinued operations | ||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' DEFICIENCY | ||||||||||||||||||||
| Current Liabilities | ||||||||||||||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||||||||||||||
| Accrued dividends payable on preferred shares | ||||||||||||||||||||
| Accrued interest of related party debt | ||||||||||||||||||||
| Accrued contingent liability for the purchase cost of the SA acquisition | ||||||||||||||||||||
| Contingent liability | ||||||||||||||||||||
| Derivative liability | ||||||||||||||||||||
| Deferred revenue | ||||||||||||||||||||
| Notes payable - related party, net of unamortized deferred financing costs of $25,482 and $0 as of February 28, 2022 and May 31, 2021, respectively | ||||||||||||||||||||
| Notes payable | ( | ) | a | |||||||||||||||||
| Convertible notes payable, net of unamortized deferred financing costs of $10,262 and $29,633 as of February 28, 2022 and May 31, 2021, respectively | ||||||||||||||||||||
| Lines of credit | ||||||||||||||||||||
| Operating lease liability | ||||||||||||||||||||
| Current liabilities of discontinued operations | ||||||||||||||||||||
| Total Liabilities | ( | ) | ||||||||||||||||||
| Commitments and contingencies | ||||||||||||||||||||
| Stockholders' Deficiency | ||||||||||||||||||||
| Preferred stock, $0.001 par value; 10,000,000 shares authorized, | ||||||||||||||||||||
| Series A Preferred Stock, 5,200,000 shares issued and outstanding as of May 31, 2021 | b | |||||||||||||||||||
| Series B Preferred Stock, 100,000 and 100,000 shares issued and outstanding as of February 28, 2022 and May 31, 2021, respectively | — | |||||||||||||||||||
| Series C Preferred Stock, 290,000 shares issued and outstanding as of May 31, 2021 | — | |||||||||||||||||||
| Series D Preferred Stock, 210,000 shares issued and outstanding as of May 31, 2021 | — | |||||||||||||||||||
| Series E Preferred Stock, 2,100,000 shares issued and outstanding as of May 31, 2021 | — | b | ||||||||||||||||||
| Common stock, $0.001 par value; 200,000,000 shares authorized, 79,548,676 shares issued and outstanding as of May 31, 2021 | b | |||||||||||||||||||
| Additional paid-in capital | b | |||||||||||||||||||
| Accumulated deficit | ( | ) | ( | ) | a | ( | ) | |||||||||||||
| Total Stockholders' Deficiency | ( | ) | ( | ) | ||||||||||||||||
| Total Liabilities and Stockholders' Deficiency | $ | $ | $ | $ | ||||||||||||||||
| The accompanying notes are an integral part of these condensed combined pro forma financial statements. | ||||||||||||||||||||
14
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
| Life On Earth, Inc. |
| Condensed Combined Pro Forma Statements of Operations |
| For the year ended ended May 31, 2021 |
| (Unaudited) |
| LFER | CareClix | Adjustments | Ref | Combined | ||||||||||||||||
| Revenues | $ | $ | $ | |||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Total operating expenses | ( | ) | a | |||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income and (expenses) | ( | ) | ( | ) | ||||||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss on discontinued operations | ( | ) | ||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||
| The accompanying notes are an integral part of these condensed combined pro forma financial statements. | ||||||||||||||||||||
| Notes to the Condensed Combined Pro Forma Financial Statements | ||||||||||||||||||||
| a -To write off goodwill balance at 5/31/21 and Note Payable not acquired from CareClix |
| b -To record the acquisition of CareClix subsidiaries. |
15
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
| Life On Earth, Inc. |
| Condensed Combined Pro Forma Balance Sheets |
| February 28, 2022 |
| (Unaudited) |
| LFER | CareClix | Adjustments | Ref | Combined | ||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Prepaid expenses | ||||||||||||||||||||
| Due from LFER | ||||||||||||||||||||
| Other current receivable | ||||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Other Assets | ||||||||||||||||||||
| Fixed assets, net | ||||||||||||||||||||
| Investment in CareClix | ( | ) | c | |||||||||||||||||
| Note receivable | ||||||||||||||||||||
| Goodwill | ( | ) | a | |||||||||||||||||
| Intangible assets | b | |||||||||||||||||||
| Amortization of intangible assets | ( | ) | d | ( | ) | |||||||||||||||
| Right to use asset | ||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' DEFICIENCY | ||||||||||||||||||||
| Current Liabilities | ||||||||||||||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||||||||||||||
| Accrued dividends payable on preferred shares | ||||||||||||||||||||
| Accrued interest of related party debt | ||||||||||||||||||||
| Deferred revenue | ||||||||||||||||||||
| Notes payable - related party, net of unamortized deferred financing costs of $25,482 and $0 as of February 28, 2022 and May 31, 2021, respectively | ||||||||||||||||||||
| Notes payable | ( | ) | a | |||||||||||||||||
| Convertible notes payable, net of unamortized deferred financing costs of $10,262 and $29,633 as of February 28, 2022 and May 31, 2021, respectively | ||||||||||||||||||||
| Lines of credit | ||||||||||||||||||||
| Operating lease liability | ||||||||||||||||||||
| Total Liabilities | ( | ) | ||||||||||||||||||
| Commitments and contingencies | ||||||||||||||||||||
| Stockholders' Deficiency | ||||||||||||||||||||
| Preferred stock, $0.001 par value; 10,000,000 shares authorized, | ||||||||||||||||||||
| Series A Preferred Stock, 5,200,000 shares issued and outstanding as of May 31, 2021 | b | |||||||||||||||||||
| Series B Preferred Stock, 100,000 and 100,000 shares issued and outstanding as of February 28, 2022 and May 31, 2021, respectively | — | |||||||||||||||||||
| Series C Preferred Stock, 290,000 shares issued and outstanding as of May 31, 2021 | — | |||||||||||||||||||
| Series D Preferred Stock, 210,000 shares issued and outstanding as of May 31, 2021 | — | |||||||||||||||||||
| Series E Preferred Stock, 2,100,000 shares issued and outstanding as of May 31, 2021 | — | — | b | |||||||||||||||||
| Common stock, $0.001 par value; 200,000,000 shares authorized, 79,548,676 shares issued and outstanding as of May 31, 2021 | b | |||||||||||||||||||
| Additional paid-in capital | b/c | |||||||||||||||||||
| Accumulated deficit | ( | ) | ( | ) | a/d | ( | ) | |||||||||||||
| Total Stockholders' Deficiency | ( | ) | ||||||||||||||||||
| Total Liabilities and Stockholders' Deficiency | $ | $ | $ | $ | ||||||||||||||||
| The accompanying notes are an integral part of these condensed combined pro forma financial statements. | ||||||||||||||||||||
16
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
| Life On Earth, Inc. |
| Condensed Combined Pro Forma Statements of Operations |
| For the nine months ended ended February 28, 2022 |
| (Unaudited) |
| LFER | CareClix | Adjustments | Ref | Combined | ||||||||||||||||
| Revenues | $ | $ | $ | |||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Total operating expenses | ( | ) | a/d | |||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income and (expenses) | ( | ) | ||||||||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss on discontinued operations | ( | ) | ( | ) | ||||||||||||||||
| Loss on sale of subsidiary | ( | ) | ( | ) | ||||||||||||||||
| Gain on disposal of subsidiaries | ||||||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| The accompanying notes are an integral part of these condensed combined pro forma financial statements. | ||||||||||||||||||||
| Notes to the Condensed Combined Pro Forma Financial Statements |
| a -To write off goodwill balance at 5/31/21 and Note Payable not acquired from CareClix |
| b -To record the acquisition of CareClix subsidiaries. |
| c -To eliminate Investment in CareClix |
| d -Amortize intangible assets acquired from CareClix over 60 months |
| ($3,477,849 / 60 mos = $57,964 per mo.) |
17
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Note 6 – Discontinued Operations
SmartAxiom.
On March 8, 2022, the Company executed
a Stock Purchase and Mutual Release Agreement (the “Agreement”) under which the Company divested its ownership of the
former subsidiary SmartAxiom, Inc. (“SA”), effective December 31, 2021. The decision was made due to certain critical
factors including, but not limited to, 1) the focus of the Company exclusively on the medical technology industry, 2) the slow
progress of performance from SA in comparison to the results already underway with the CareClix acquisition, and 3) redeployment
of resources to the growth potential of the CareClix group of companies.
In connection with the Agreement,
SA issued to the Company an
The following table summarizes the disposition of the SA subsidiary:
| Net assets sold | $ | 1,669,584 | ||
| Sales Price | $ | 534,305 | ||
| Loss from sale of Subsidiary | $ | 1,135,279 |
During the three months ended February 28, 2022, the Company’s Board of Directors resolved to dispose of its subsidiaries Victoria’s Kitchen and The Chill Group.
The following table summarizes the disposition of these subsidiaries:
| Total | Victoria's Kitchen | The Chill Group | ||||||||||
| Net assets disposed | $ | 261,110 | $ | 155,505 | $ | 105,605 | ||||||
| Net liabilities disposed | $ | (287,615 | ) | $ | (151,117 | ) | $ | (136,498 | ) | |||
| Gain on disposal of subsidiaries | $ | (26,505 | ) | $ | 4,388 | $ | (30,893 | ) | ||||
18
Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Note 7 – NOTES PAYABLE – RELATED PARTY PAYABLES
The following table summarizes the Company’s Notes Payable – Related Parties as of February 28, 2022:
| Issue Date | Maturity Date | Interest Rate | Original Amount | Accumulated Payments as of February 28, 2022 | Accumulated Accrued interest on Note | Conversion into Common & Preferred C shares | Unamortized Deferred Financing Costs as of February 28, 2022 | Balance February 28, 2022 | ||||||||||||||||||||||
| % | $ | $ | — | $ | $ | ( | ) | $ | — | |||||||||||||||||||||
| % | $ | $ | — | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| % | $ | $ | $ | $ | ||||||||||||||||||||||||||
| % | $ | $ | — | $ | $ | |||||||||||||||||||||||||
| % | $ | $ | — | $ | $ | $ | ||||||||||||||||||||||||
| % | $ | $ | — | $ | $ | $ | ( | ) | ||||||||||||||||||||||
| % | $ | $ | — | $ | $ | $ | ||||||||||||||||||||||||
| Various | Various | % | $ | $ | — | $ | $ | — | $ | |||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||||||||
The following table summarizes the Company’s Notes Payable – Related Parties as of May 31, 2021:
| Issue Date | Maturity Date | Interest Rate | Original Amount | Accumulated Payments as of May 31, 2021 | Accumulated Accrued interest on Note | Conversion into Common & Preferred C shares | Unamortized Deferred Financing Costs as of May 31, 2021 | Balance May 31, 2021 | ||||||||||||||||||||||
| % | $ | $ | — | $ | $ | — | $ | — | $ | |||||||||||||||||||||
| % | $ | $ | — | $ | $ | — | $ | — | $ | |||||||||||||||||||||
| % | $ | $ | $ | $ | — | $ | — | $ | ||||||||||||||||||||||
| $ | — | $ | ||||||||||||||||||||||||||||
On January 23, 2019, ESD issued a demand note in the amount of $10,000 to a related party. The note is unsecured, bears interest at an annual rate of 20% and had an original maturity date of March 1, 2019. On March 12, 2019, the obligations due under the terms of the note were assigned to the Company. The maturity date on the note has been extended to March 1, 2020. During the three and nine months ended February 28, 2022, the Company recorded interest expense of $208 and $712, respectively, and during the three and nine months ended February 28, 2021, the Company recorded interest expense of $500 and $1,004, respectively. On October 8, 2021, the Note holder converted the full balance of the Note of $15,419, including accrued interest of $5,419, into 77,100 shares of the Company’s common stock at $0.10 per share, and 7,710 of the Company’s Preferred C shares. The Note has been considered paid in full by the conversions.
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Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
On January 28, 2020, the Company issued a demand note in the amount of $8,200 to a related party. The note is unsecured, bears interest at an annual rate of 20% and has maturity date of January 28, 2021. During the three and nine months ended February 28, 2022 the Company recorded interest expense of $171 and $584, respectively, and, during the three and nine months ended February 28, 2021 the Company recorded interest expense of $409 and $821, respectively. On October 8, 2021, the Note holder converted the full balance of the Note of $10,981, including accrued interest of $2,781, into 54,910 shares of the Company’s common stock at $0.10 per share, and 5,498 of the Company’s Preferred C shares. The Note has been considered paid in full by the conversions.
Prior to ESD’s bankruptcy declaration, ESD became indebted to certain creditors in the total amount of $45,169 which indebtedness was personally guaranteed by Fernando Leonzo, the Company’s Chairman. The debt was not protected under the ESD bankruptcy. On February 20, 2020, the Company and Fernando Leonzo entered into an agreement under which Fernando Leonzo would discharge the indebtedness personally and directly and the Company would pay Fernando Leonzo, $3,000 per month beginning on February 21, 2020, until such time that the indebtedness is fully discharged. Interest will accrue at an annual rate of 5% on any monthly payments not made by the 21st of the month. As of February 28, 2022, the Company paid a total of $16,300 to Fernando Leonzo in accordance with this agreement. During the three and nine months ended February 28, 2022, the Company recorded interest expense of $404 and $1,211, respectively, and, during the three and nine months ended February 28, 2021, the Company recorded interest expense of $504 and $1,529, respectively. On February 28, 2022 accrued interest on the note amounted to $3,729.
On June 15, 2021, the Company issued Mahmood Kahn, the Company’s CEO, a note in the amount of $121,976. The note bears interest at 8% per annum and a Maturity date of June 29, 2021. Also on June 15, 2021, the note holder converted $61,000 of the note into 61,000 Shares of Series C Preferred to the Holder at $1.00 per Series C Preferred Share, which upon said issuance reduced the Principal Amount of the note $60,976. During the three and nine months ended February 28, 2022, the Company recorded interest expense of $1,203 and $3,448, respectively. On February 28, 2022, accrued interest on the note amounted to $3,448.
On October 6, 2021, the Company issued a demand note in the amount of $10,000 to Mahmood Kahn, the Company’s CEO. The note is unsecured, bears interest at an annual rate of 10% and has maturity date of October 6, 2022. As consideration for the Note, the Company issued 200,000 of the Company’s common stock at $0.821. As a result of this transaction, Company recorded $16,420 as a capitalized deferred financing cost and during the three and nine months ended February 28, 2022, the Company recorded amortization expense of $4,105 and $6,158, respectively. During the three and nine months ended February 28, 2022, the Company recorded interest expense of $247 and $397, respectively. On February 28, 2022, accrued interest on the note amounted to $397.
On October 6, 2021, the Company issued a demand note in the amount of $7,500 to John Romagosa, the Company’s President. The note is unsecured, bears interest at an annual rate of 10% and has maturity date of October 6, 2022. As consideration for the Note, the Company issued 200,000 of the Company’s common stock at $0.821. As a result of this transaction, Company recorded $16,420 as a capitalized deferred financing cost and during the three and nine months ended February 28, 2022, the Company recorded amortization expense of $4,105 and $6,158, respectively. During the three and nine months ended February 28, 2022, the Company recorded interest expense of $185 and $298, respectively. On February 28, 2022, accrued interest on the note amounted to $298.
On November 10, 2021, the Company issued a demand note in the amount of $10,000 to Mahmood Kahn, the Company’s CEO. The note is unsecured, bears interest at an annual rate of 10% and has maturity date of November, 2022. As consideration for the Note, the Company issued 100,000 of the Company’s common stock at $0.07. As a result of this transaction, Company recorded $7,000 as a capitalized deferred financing cost and during the three and nine months ended February 28, 2022, the Company recorded amortization expense of $1,750 and $2,042, respectively. During the three and nine months ended February 28, 2022, the Company recorded interest expense of $247 and $301, respectively. On February 28, 2022, accrued interest on the note amounted to $301.
During the three months ended February 28, 2022, the Company issued demand notes aggregating to a total amount of $92,600 to CareClix, Inc., a newly acquired subsidiary. The notes are unsecured, bears interest at an annual rate of 6% and each matures a year from the issue date. During the three and nine months ended February 28, 2022, the Company recorded interest expense of $846, respectively. On February 28, 2022, accrued interest on the notes amounted to $846.
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Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Note 8 – NOTES PAYABLE
On September 15, 2020, the Company issued a
Note in the principal amount of $
Note 9 – CONVERTIBLE NOTES PAYABLE
The following table summarizes the Company’s convertible notes payable as of February 28, 2022 and May 31, 2021:
| February 28, 2022 | May 31, 2021 | |||||||||||||||||||||||
| Unamortized deferred finance costs and original issue discount | Principal | Net | Unamortized deferred finance costs and original issue discount | Principal | Net | |||||||||||||||||||
| 2017 NPA Notes | ||||||||||||||||||||||||
| The 2nd Note Offering | ||||||||||||||||||||||||
| 2022 Note Issuances | ||||||||||||||||||||||||
| 2021 Note Issuances | ||||||||||||||||||||||||
| 2020 Note Issuances | ||||||||||||||||||||||||
| 2019 Note Issuances | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
If all convertible notes are converted into common stock, approximately a total of 4,800,000 common shares would be issued
Note 12 – LINES OF CREDIT
In April 2017, the Company entered a credit
line with a small business lender that allows the Company to borrow up to $
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Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Note 13 – CAPITAL STOCK
As of February 28, 2022, the authorized common stock of the Company was shares of common stock, par value per share, and shares of preferred stock, $ par value per share.
Common Stock
At February 28, 2022 there were common shares outstanding.
Shares of common stock issued for services
The Company issues shares of common stock in exchange for financing and services provided by select individuals and or vendors. During the nine months ended February 28, 2022, and 2021 the Company issued 2,581,592 and 0 shares, respectively. The shares were issued at prices ranging from $0.07 to $0.156 per share.
Also, on February 4, 2022, the Company issued shares of common stock and Series C preferred shares to members of the Board of Directors at par value in exchange for services provided. The following table summarizes the shares issued to the members of the Board of Directors. The difference between the fair value of the shares acquired and the acquisition price has been recognized as officers’ compensation in the statement of operations for the nine months ended February 28, 2022
| Number of Shares Acquired | Acquisition Price | Compensation | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Series C Preferred | Common Stock Consideration Shares | Common Stock | Series C Preferred | Common Stock Consideration Shares | Common Stock | Series C Preferred | Common Stock Consideration Shares | Total | |||||||||||||||||||||||||||||||
| Robert Gunther | 2,678,672 | 327,393 | 654,786 | $ | 2,678 | $ | 327 | $ | — | $ | 204,115 | $ | 327,066 | $ | 50,549 | $ | 581,731 | |||||||||||||||||||||||
| Juan Carlos Romagossa | 2,815,279 | 344,090 | 688,180 | $ | 2,815 | $ | 344 | $ | — | $ | 214,525 | $ | 343,746 | $ | 53,127 | $ | 611,398 | |||||||||||||||||||||||
| Fernando Leonzo | 3,019,602 | 369,062 | 738,124 | $ | 3,020 | $ | 369 | $ | — | $ | 230,093 | $ | 368,693 | $ | 56,983 | $ | 655,769 | |||||||||||||||||||||||
| Mahmood Kahn | 3,989,624 | 487,621 | 975,242 | $ | 3,990 | $ | 486 | $ | — | $ | 304,009 | $ | 487,135 | $ | 75,289 | $ | 866,433 | |||||||||||||||||||||||
| $ | $ | $ | — | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Preferred Stock
On February 28, 2022, the following shares of preferred stock were outstanding:
Series A Preferred Stock
| Holder | ||||
| Shares Outstanding | ||||
| Fernando Oswaldo Leonzo | ||||
| Robert Gunther | ||||
| John Romagosa | ||||
| Mahmood Kahn | ||||
| Charles Scott | ||||
| Total | ||||
The Series A Preferred Shares do not have a liquidation preferences or a preferred dividend, but have 50-1 preferred voting rights.
Series B Preferred Stock
| Holder | Number of Shares | |||
| J.Craig Holding Corp. | ||||
| Massoud Toghraie | ||||
| John Romagosa | ||||
| Total | ||||
The Series B Preferred Shares have no voting rights, are convertible at the election of the holder into common shares on the basis of a 25% premium to the 20 day VWAP price and have an annual cash dividend of 10 percent, payable quarterly
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Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Series C Preferred Stock
| Preferred C Shares - Outstanding as of February 28, 2022 | |
| Holder | Number of Shares |
| Dr. Anshu Sharma, M.D. | |
| Mahmood Kahn | |
| W.S. Gamble | |
| Quick Capital LLC | |
| Juan R Romagosa | |
| Axon Capital Management, Inc. | |
| Odyssey Capital | |
| Robert Ley | |
| Jesus Rodriguez | |
| John Carlos Romagosa | |
| Masoud Taghraie | |
| Shircoo | |
| Robert Gunther | |
| Mahmood Kahn | |
| John Carlos Romagosa | |
| Fernando Leonzo | |
| Total | |
The Company has designated 3,000,000 shares of Series C Preferred Stock, par value $0.001 per share. The Series C Preferred Stock does not have liquidation preferences. has no voting rights except on conversion, and carries a preferred annual cash dividend of 10% payable quarterly. The Series C Preferred Stock are convertible at the election of the holder into common shares on the basis of a 25% premium to the 10 day VWAP price with a $0.10 floor.
Series D Preferred Stock
The Company has designated 210,000 shares of Series D Preferred Stock, par value $0.001 per share. As of February 28, 2022, 16,236 shares of Series D Preferred Stock were issued and outstanding due to the disposition of the SA subsidiary.
The Series D Preferred Stock does not have liquidation preferences. The Series D Preferred Stock has no voting rights except to the extent that they hold Common Stock Shares from conversion, in which case each Common Stock share will be equal to one vote. Each share of the Series D preferred stock converts into 10 shares of the Company’s common stock. The Series D Preferred Stock pays no dividend.
Series E Preferred Stock
The Company has designated 2,100,000 shares as Series E Preferred Stock to be issued at the final closing of the CareClix Group acquisition. The Series E Preferred Shares have no voting rights, preferred dividend or liquidation preference but convert automatically into common stock at a 1 for 100 basis on the increase in authorized common stock in an amount sufficient to permit that conversion.
Warrants outstanding
| February, 28 2022 | May 31, 2021 | |||||||||||||||
| Weighted | Weighted | |||||||||||||||
| Average | Average | |||||||||||||||
| Warrants | Exercise price | Warrants | Exercise price | |||||||||||||
| Exercisable – June 1, | --- | $ | --- | $ | ||||||||||||
| Exercised | — | — | — | — | ||||||||||||
| Expired | $ | --- | ||||||||||||||
| Outstanding | - | - | $ | |||||||||||||
| Exercisable – at end of period | - | 349,000 | $ | 4.25 | ||||||||||||
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Life On Earth, Inc.
Notes to Condensed Financial Statements
For the nine months ended February 28, 2022
(Unaudited)
Note 14 - COMMITMENTS AND CONTINGENCIES
On October 21, 2021, a judgment
was entered against the Company and in favor of a former employee. Under the terms of the judgment, the Company is required to
(i) pay the former employee a total of $
On March 16, 2021, we received a complaint filed by Anshu Sharma and Aditya Sharma against the Company and the Company's officers/directors in the County of Hennepin, Minnesota (District Court; Fourth Judicial District) in connection with our agreement regarding an investment by the Plaintiffs in our Preferred C Shares. On March 29, 2021, we filed “Defendant’s Joint Motion to Dismiss” to dismiss the complaint. The Company believes that there is no merit to the complaint, and it intends to vigorously defend this matter. On February 22, 2022 the Court dismissed the case.
Note 15 - INCOME TAXES
The deferred tax attributes consist of the following:
| February 28, 2022 | May 31, 2021 | |||||||
| Net operating loss carryforward | $ | $ | ||||||
| Stock based compensation | ||||||||
| Valuation allowance | ( |
) | ( |
) | ||||
| Deferred tax asset, net | $ | $ | ||||||
During the nine months ended February 28, 2022,
the valuation allowance increased by approximately $
The deferred tax asset differs from the amount computed by applying the statutory federal and state income tax rates to the loss before income taxes. The sources and tax effects of the differences are as follows:
| Effective Income Tax Rate Reconciliation | ||||||||
| February 28, 2022 | May 31, 2021 | |||||||
| Federal Rate | % | % | ||||||
| State Rate | % | % | ||||||
| Valuation Allowance | ( |
)% | ( |
)% | ||||
| Effective income tax rate | % | % | ||||||
As of February 28, 2022, the Company has net
operating loss carryforwards of approximately $
The Company currently has no federal or state tax examinations in progress, nor has it had any federal or state examinations since its inception. All of the Company’s tax years are subject to federal and state tax examinations
Note 16 - - SUBSEQUENT EVENTS
Effective April 4, 2022, the Company subsidiary, CareClix, Inc, entered into an SaaS contract with GlobeMed Ltd., the largest third party benefits administrator in the Middle East. See Form 8-K filed with the SEC on April 11, 2022.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements rather than historical facts that involve risks and uncertainties. You can identify these statements by the use of forward- looking words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Such forward-looking statements discuss our current expectations of future results of operations or financial condition. However, there may be events in the future that we are unable to accurately predict or control and there may be risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements, which could have a material adverse effect on our business, operating results and financial condition. The forward-looking statements included herein are only made as of the date of the filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
BASIS OF PRESENTATION
The unaudited condensed financial statements of Life on Earth, Inc. should be read in conjunction with the notes thereto. In the opinion of management, the unaudited condensed financial statements presented herein reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation. Interim results are not necessarily indicative of results to be expected for the entire year.
We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America, which require that management make estimates and assumptions that affect reported amounts. Actual results could differ from these estimates.
COMPANY OVERVIEW
Life On Earth, Inc. is a cloud enterprise software developer/ provider that enables rapid innovation to keep enterprise operations safe, compliant and manageable. The Company’s products offered are designed to help organizations innovate and modernize legacy systems while minimizing cost and risk of business disruptions and ensure regulatory compliance. Through its recent acquisition of SmartAxiom, Inc., the Company now has the capabilities of offering software that manages and secures the Internet-of-Things (IoT) through patented, lite blockchain technology running among those devices at the edge of the Internet and enabling them to defend themselves. Our peer-to-peer distributed ledgers improve security, latency, reliability and manageability. We have uniquely created, through our SmartAxiom subsidiary, the endpoint-to-cloud blockchain solution, while our IoT Smart Contracts allow for process intelligence and management of the process. The SmartAxiom technology is proving value in verticals such as smart buildings, manufacturing lines and shipment tracking. It interoperates with enterprise systems such as IBM Blockchain and Microsoft Azure and is proven on many ARM and Intel based microcontrollers such as those from Intel, NXP, Renesas, Marvell, and Broadcom.
The Company previously was a brand accelerator and incubator Company that was focused on building and scaling concepts in the natural consumer products category (“CPG”). During the year ended May 31, 2021, the Company discontinued the wholesale beverage distribution operations, and the Company announced its intention divest away from its business as a Consumer-Packaged Goods (“CPG”) Company. Accordingly, the Company’s results of operations for the year ended May 31, 2021, reflect a charge in the aggregate amount of $786,436,
On December 17, 2021, we entered into a Stock Purchase Agreement (“SPA”) with CareClix Holdings, Inc., a Florida corporation (“SOLI”) to acquire four operating subsidiaries of SOLI. On December 31, 2031, under the terms of a Management Operating Agreement, we agreed to a partial closing of the transaction set forth in the SPA with the final closing to occur on the effectiveness of a registration statement for the shares to be issued as part of the consideration. Although we acquired control of the CareClix
In the partial closing, we now own 100% ownership of the operating subsidiaries of SOLI, which include CareClix, Inc., a Virginia corporation, CareClix Services, Inc., a Florida corporation, MyCareClix, Inc., a Florida corporation, and CareClix RPM, Inc., a Florida corporation (collectively, the “CareClix Group”). In exchange for ownership of the CareClix Group, we will issue the following securities to the common shareholders of SOLI:
| 1. | 50,000,000 shares of our common stock; | |
| 2. | 2,100,000 shares of a new class of preferred stock to be designated as Series E Preferred Stock. The shares of Series E Preferred stock to be designated and issued to the shareholders of CareClix have a convertibility ratio, under the current share structure, of 100 to 1 into our shares of common stock with conversion occurring automatically when our Articles of Incorporation have been amended to authorize sufficient common shares for the conversion. The net effect of these two share issuance will be that shares of SOLI held before the transaction will be exchanged for our common shares on a 1 for 1 basis. |
| 3. | 4,000,000 shares of our Series A Preferred Stock, over a period of time, to Mr. Charles Scott, the Chairman and majority shareholder of SOLI, with 2,500,000 shares issued at the December 31, 2021 partial closing, 600,000 shares to be issued 45 days after closing, and 900,000 shares to be issued 90 days after closing. The second installment of Series A shares are to be issued by February 14, 2022 but have not yet been issued and the finsl installment is due to be issued by March 31`, 2022.. Shares of our Series A Preferred Stock, which are not convertible and do not receive dividends, are entitled to cast 50 votes per share on all matters submitted to the vote or consent of our shareholders. |
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Upon the final closing of the Transaction, the former shareholders of SOLI will hold approximately seventy-frive percent of our issued and outstanding common equity on a fully diluted basis and will hold more than eighty-five percent of our total shareholder voting power.
The final closing of the Transaction is subject to the effectiveness of a registration statement on Form S-4 to be filed registering the issuance of our shares of common stock and shares of Series E Preferred Stock to the common shareholders of CareClix. We are undertaking to file the S-4 registration statement, which will be filed as soon as a pending audit of the financial statements of the acquired CareClix companies is completed.
Pending the final Closing, SOLI and LFER completed the operational changes under the Management Operating Agreement effective December 31, 2021, so that the CareClix Group and LFER began acting as a unit pending the effective date of the S-4 registration statement and our issuance of the remainder of the agreed consideration. The financial result of the CareClix subsidiaries will not be consolidated with our financial results until the final closing but are reported on a pro forma basis in the Notes to the Financial Statements. See, Note 5.
CareClix Plan of Operations
We now own the CareClix Group of Companies which specifically are: CareClix, Inc, CareClix Services, Inc, MyCareClix, Inc, and CareClix RPM, Inc.
CareClix, Inc:
CareClix, Inc is a digital healthcare development company centered around the CareClix® virtual care management platform. The CareClix platform was originally created in 2012 by physicians for physicians and, throughout its 10-year history, development has been led by licensed and practicing physicians and the input of our patients. This differentiates CareClix® from its competitors. Currently the CareClix® virtual telehealth platform is recognized worldwide as one of the most complete telehealth platforms for medical service providers. CareClix software CareClix' suite of services is trusted by some of the best names in healthcare with approximately 20 million individuals in the U.S. and 35 other countries currently having access to CareClix' telehealth platform or services.
CareClix Services Inc:
CareClix Services Inc combines the CareClix software and its multinational multispecialty medical network to offer virtual healthcare services across multiple specialties to networks of patients both domestically and internationally. We offer a wide variety of health care services to: insurers, employers, affinity groups, healthcare systems, provider groups and independent physicians. The combination of our software and services empowers providers to interact with an increasing number of patients with better data in less time. CareClix Services, Inc is a leader in custom multinational telemedicine. Our customers mix and match, add or delete, a wide range of technologies, medical services, and integrations. CareClix® also matches the transparency to our customers or partner’s comfort level allowing them to seamlessly (and sometimes invisibly) grow their practice, their brand, and their revenue.
MyCareClix, Inc:
MyCareClix is a direct-to-consumer family and household health and wellness company. MyCareClix intends to offer the entire suite of CareClix services directly to consumers. For a small monthly subscription fee, both individual and family consumers in the US will have access to the CareClix Network of primary care and specialty doctors, as well as access to testing, prescriptions, and ship-to-home medical products. My CareClix intends to launch a small-business program targeting small and mid-sized businesses in the US and key other countries.
CareClix RPM, Inc:
CareClix RPM will distribute and monitor FDA approved healthcare devices for remote patient monitoring and chronic care management utilizing the CareClix platform to track and report monitored patient data. CareClix RPM, Inc will create turnkey solutions for providers seeking to start or expand their remote patient monitoring, data integration, remote therapeutic monitoring, or chronic care management programs. Anticipated by the end of 2022, CareClix RPM will procure and distribute devices and offer a multi-lingual patient engagement team with qualified medical oversight and thorough reporting for billing and care plan administration.
CareClix Group of Companies
The CareClix Group of Companies are positioned in the anticipation of the global growth of virtual healthcare delivery. The company is well positioned to deliver this service with the technological and operational infrastructure we have created over the last decade. Having endured the initial growing pains essential to the foundation of any telemedicine company—namely, the careful interplay of interoperability, data transmission and organic workflow integration. Over the past decade CareClix created roots throughout the healthcare industry necessary to produce the type of quality health care delivery within a continuation of services that patients require as they navigate their healthcare and wellness needs. CareClix is a full spectrum virtual healthcare product for individuals addressing their diverse healthcare needs and not a niche product that only addresses episodic issues which may ignore comorbidities and co-conditional needs. Since our inception we have planned and implemented an offering that is more comprehensive. As a result, CareClix has gained momentum internationally through its salesforce and strategic relationships. CareClix has a unique global sales force. CareClix utilizes internal sales team, independent sales team and distribution channels such as system integrators, healthcare providers, IT companies, and benefits administrators to reach a growing number of countries and all 50 states. Adding to the growth of the platform, CareClix has undertaken a major reorganization which has produced significant internal cost efficiencies. CareClix has the internal staff and systems to meet the diverse needs of by healthcare providers without the inefficiencies common in our competitors. Combined with our robust sales program, we intend to expand our domestic and international footprint and be operationally profitable by year end.
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We anticipate our new subsidiaries being major players in the telemedicine space. We believe we can capture market share in the United States and across the globe. There are many new telemedicine companies who will not be able to weather the storm and meet the complex needs of the medical provider community which we believe is the most essential element of providing good medical services. As we continue towards our ultimate goal of empowering good healthcare through technology and support, we plan to engage outside parties to help scale the CareClix businesses, both organically and possibly through further M&A.
We acquired the CareClix Group in order to expand into the Telemedicine and Medical Software Services industry. The group of companies under the CareClix Group will operate as our wholly owned subsidiaries and include a telemedicine medical services company, a direct-to-consumer company, a software-as-a-platform company, and an RPM (remote patient monitoring) company.
Our principal executive offices currently are located at 1345 6th Ave. 2nd Floor, New York NY 10022 and our telephone number (646) 844-9897.
Coronavirus Risks
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”.
The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. The significant outbreak of COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide, and may continue to do so, which could adversely affect our business, results of operations and financial condition.
Sales and Distribution
During the quarter ended February 28, 2022, we had no sales activity and no revenue, although our new subsidiaries acquired in the partial closing at December 31, 2022 had operating revenues. See Note 5.
Production and Distribution
The Company strategy is to develop and expand the telemedicine activities of our CareClix subsidiaries both domestically and worldwide.
Employees
The Company currently has no full-time employees and services as needed have been provided by. our original members of the Board of Directors, who also serve as officers or in executive functions.
GOING CONCERN QUALIFICATION
Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern. We incurred net losses from inception of approximately $22,600,000, have limited revenues, and require additional financing in order to finance its business activities on an ongoing basis. Our future capital requirements will depend on numerous factors including, but not limited to, the anticipated success of the CareClix subsidiaries and whether we successfully acquire other revenue generating companies or assume other new businesses that generate material revenues.
At February 28, 2022, we had cash on hand of approximately $17,700 and an accumulated deficit of approximately $22,600,000. See “Liquidity and Capital Resources.”
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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 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 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 Financial Statements of this Report.
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 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.
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.
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.
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RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 2022 AND FEBRUARY 28, 2021:
Sales
Sales for the three months ended February 28, 2022 were approximately $0 compared to $0 for the three months ended February 28, 2021.
Operating Expenses
Operating expenses totaled approximately $1,408,000 for the three months ended February 28, 2022. as compared to approximately $64,000 for the three months ended February 28, 2021. The increase in operating expenses of $ 1,344,000 was primarily due to increased officers’ compensation of $1,319,000 and increased professional fees of $46,000.
Other Expense
During the three months ended February 28, 2022, the Company recorded interest and financing costs of approximately $74,000 as compared to approximately $70,000 during the three months ended February 28, 2021. Interest and financing costs primarily result from the amortization of deferred financing balances that were incurred by the Company to finance operations. During the three months ended February 28, 2021, the Company recorded a charge for the change in the fair value of contingent consideration related to the acquisition of Just Chill and a gain for the change in the fair value of a derivative liability related to an underlying note that has been converted to 2,138,775 shares of the Company’s common stock and the Company no longer has an obligation for the derivative liability.
Net Loss
For the three months ended February 28, 2022, we incurred a net loss of $2,874,000, compared to a net loss of $170,000 for the three months ended February 28, 2021. The increase in the net loss of S2,704,000 resulted from a number of factors. In addition to those listed above, the Company recorded a loss from the sale of the SA subsidiary of $1,135,000 and a loss from discontinued operations of its SA subsidiary of $283,000. These charges were partially offset by an aggregate gain on the disposal of its VK and JCG subsidiaries of $26,000.
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2022 AND FEBRUARY 28, 2021:
Sales
Sales for the nine months ended February 28, 2022, were approximately $0 compared to $0 for the nine months ended February 28, 2021.
Operating Expenses
Operating expenses totaled approximately $1,917,000 for the nine months ended February 28, 2022, as compared to approximately $311,000 for the nine months ended February 28, 2021. The increase in operating expenses of $1,606,000 was primarily related to increased officers’ compensation of $1,551,000 and increased professional fees of $105,000.
Other Expense
During the nine months ended February 28, 2022, the Company recorded interest and financing costs of approximately $400,000 as compared to approximately $423,000 during the nine months ended February 28, 2021. Interest and financing costs primarily result from the amortization of deferred financing balances that were incurred by the Company to finance operations. During the nine months ended February 28, 2022, the Company recorded a gain for the change in the fair value of its contingent consideration of $352,000 as compared to charge of $163,000 during the three months ended February 28, 2021, related to the acquisition of Just Chill, which had arisen from the measurement of LFER stock on the 12-month anniversary of the acquisition and subsequent Balance Sheet reporting dates. The contingency shares were issued to the JCG Group during the nine months ended February 28, 2022. During the nine months ended February 28, 2022, the Company recorded a gain for the change in the fair value of its derivative liability of $111,000 as compared to a similar gain of $10,000 during the nine months ended February 28, 2021. During the nine months ended February 28, 2022, the underlying note of the derivative liability has been converted to 2,138,775 shares of the Company’s common stock and the Company no longer has an obligation for the derivative liability.
Net Loss
For the nine months ended February 28, 2022, we incurred a net loss of $3,934,000, as compared to a net loss of $887,000 for the nine months ended February 28, 2021. The increase in the net loss of S3,047,000 resulted from several factors. In addition to those listed above, the Company recorded a loss from the sale of the SA subsidiary of $1,135,000 and a loss from discontinued operations of its SA subsidiary of $971,000. These charges were partially offset by an aggregate gain on the disposal of its VK and JCG subsidiaries of $26,000.
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LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 2022, we held current assets in the amount of $17,700 consisting of cash and cash equivalents and other current assets of $3,689. Our current liabilities as of February 28, 2022, totaled $1,591,000, and consisted of accounts payable and accrued expenses in the amount of $704,000, notes payable of $214,000, convertible notes of payable of $665,000, and lines of credit in the amount of $7,000. Our working capital deficit as of February 28, 2022, was $1,570,000. Our recent financings have consisted primarily of private issuances of convertible notes and preferred stock.
During the nine months ended February 28, 2022, the Company received $158,500 from the sale of 158,500 shares of Series C Preferred Stock and received $88,000 from the issuance of a notes payable to related parties, $61,000 from the sale of Series C Preferred Stock to a related party, and, $65,000 from the issuance of a convertible note payable.
For the nine months ended February 28, 2022, our operating activities used $79,734 in cash, compared to $135,156 during the nine months ended February 28, 2021. For the nine months ended February 28, 2022, financing activities provided a net $182,797 in cash, compared to a net $134,304 in cash for the nine months ended February 28, 2021. Investing activities used $95,323 in cash during the nine months ended February 28, 2022, compared to $0 for the nine months ended February 28, 2021. Our cash and cash equivalents increased by a net $17,000 during the nine months ended February 28, 2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure the information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of February 28, 2022, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
The determination that our disclosure controls and procedures were not effective as of February 28, 2022, is a result of not having adequate staffing and supervision within the accounting operations of our Company and the lack of independent directors and executive management. The Company plans to expand its accounting operations as the business of the Company expands, to establish a Board of Directors the majority of which are independent and to appoint an Audit Committee and other Board committees
MANAGEMENT’S QUARTERLY REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting during the quarter ended February 28, 2022, that have materially affected or are reasonably likely to materially affect our internal controls.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Complaint by Anshu Sharma and Aditya Sharma
On March 16, 2021, we received a complaint filed by Anshu Sharma and Aditya Sharma against the Company and the Company's officers/directors in the County of Hennepin, Minnesota (District Court; Fourth Judicial District) in connection with our agreement regarding an investment by the Plaintiffs in our Preferred C Shares. On March 29, 2021, we filed “Defendant’s Joint Motion to Dismiss” to dismiss the complaint. The Company believes that there is no merit to the complaint and it intends to vigorously defend this matter.
Complaint by Note Holder
On December 14, 2020, the Company received a Complaint from the note holder, L & H, Inc. (“L&H”), filed in the First Judicial District Court of Nevada, Carson City, alleging breaches of contract regarding the Company’s failure to repay amounts due or failing to issuing shares upon demand and breach of Implied covenant of good faith and fair dealing in connection with the $110,000 September 10, 2019 Convertible Promissory Note between L&H and the Company. The Complaint seeks an unspecified amount of damages representing the balance of the unconverted debt and penalties.
Complaint by Former Employee
On October 21, 2021, a judgement was entered against the Company and in favor of the former employee. Under the terms of the judgement, the Company shall, (i) pay the former employee a total of $60,000 of scheduled payments, (ii) issue the former employee 500,000 shares of the Company’s common stock at $0.10 per share and, (iii) pay legal fees of up to $8,923 in scheduled payment to the former employee’s attorney. The 500,000 shares of the Company’s common stock were issued to the former employee on October 21, 2021, and as of February 28, 2022, the Company is current in their payments with respect to the judgement.
There are no other legal or governmental proceedings that are presently pending or, to our knowledge, threatened, to which we are a party.
ITEM 1A RISK FACTORS
As a smaller reporting company, we are not required to include risk factors.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
| Date | # of shares | |
| 1/14/2022 | 525,000 | Preferred C Conversion |
| 1/17/2022 | 529,700 | Debt Settlement |
| 1/17/2022 | 529,700 | Debt Settlement |
| 1/28/2022 | 75,000 | Legal Settlement |
| 1/28/2022 | 75,000 | Legal Settlement |
| 2/4/2022 | 3,989,624 | Stock Purchase |
| 2/4/2022 | 975,242 | Preferred C Consideration Shares |
| 2/4/2022 | 3,019,602 | Stock Purchase |
| 2/4/2022 | 738,124 | Preferred C Consideration Shares |
| 2/4/2022 | 654,786 | Preferred C Consieration Shares |
| 2/4/2022 | 2,815,279 | Stock Purchase |
| 2/4/2022 | 688,180 | Preferred C Consideration Shares |
| 2/4/2022 | 2,678,672 | Stock Purchase |
| 2/16/2022 | 19,737 | Services |
| 17,313,646 |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINING SAFETY DISCLOSURE
Not applicable.
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ITEM 5. OTHER INFORMATION
AS a result of the Management Operating Agreement under which we acquired the four CareClix subsidiaries, the CareClix group was entitled to appoint three new directors to our Board of Directors. Two of thise directors, Charles Scott and Dr. John Korangy, were appointed as of January 2, 2022. The third new director has not yet been appointed.
ITEM 6. EXHIBITS
*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of the registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Life On Earth, Inc. | |||
| Date: April 19, 2022 | By: | /s/ Mahmood Alam Khan | |
|
Mahmood Alam Khan Chief Executive Officer and Board of Director (Principal Executive Officer) |
|||
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