☒ | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Nevada
|
45-1352286
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
|
Large accelerated filer
☐
|
Accelerated filer
☐
|
Non-accelerated filer
☐
|
Smaller reporting company
☒
|
(Do not check if a smaller reporting company)
|
Page
|
||
PART I
|
||
Item 1.
|
4
|
|
Item 1A.
|
10
|
|
Item 2.
|
18
|
|
Item 3.
|
18
|
|
Item 4.
|
18
|
|
PART II
|
||
Item 5.
|
19
|
|
Item 6.
|
19
|
|
Item 7.
|
20
|
|
Item 7A.
|
26
|
|
Item 8.
|
27
|
|
Item 9.
|
28
|
|
Item 9A.
|
28
|
|
Item 9B.
|
28
|
|
PART III
|
||
Item 10.
|
29
|
|
Item 11.
|
31
|
|
Item 12.
|
33
|
|
Item 13.
|
34
|
|
Item 14.
|
35
|
|
PART IV
|
||
Item 15.
|
36
|
|
40
|
||
Plan Category
|
Number of shares to be issued upon exercise of
outstanding options, warrants and rights
|
Weighted-average
exercise price
of outstanding options,
warrants and rights
|
Number of shares remaining
available
for future issuance
under equity compensation plans
(excluding shares reflected in the first column)
|
|||||||||
Equity compensation plans approved by security holders
|
--
|
--
|
--
|
|||||||||
Equity compensation plans not approved by security holders (1)
|
--
|
--
|
--
|
|||||||||
Total
|
--
|
--
|
--
|
(1) | Pursuant to their respective employment agreements, Jeffrey Binder and Alan Bonsett are entitled to receive annual stock options, exercisable at the fair market value of our common stock on the date of grant, in an amount equal to 2% of our annual EBITDA up to $42.5 million and 4% of our annual EBITDA in excess of $42.5 million. Michael Abrams was also entitled to receive stock options upon the same terms, but he is not entitled to any future awards pursuant to the terms of his separation from the Company effective September 1, 2015. We are currently unable to determine the number of shares that could be granted under these plans. |
May 31,
|
May 31,
|
|||||||
2016
|
2015
|
|||||||
Current Assets
|
$
|
94,986
|
$
|
240,621
|
||||
Current Liabilities
|
$
|
1,339,444
|
$
|
875,696
|
||||
Working Capital (Deficit)
|
$
|
(1,244,458
|
)
|
$
|
(635,075
|
)
|
· | Estimates and assumptions used in valuation of derivative liability: Management utilizes a lattice model to estimate the fair value of derivative liabilities. The model includes subjective assumptions that can materially affect the fair value estimates. |
Page
|
|
Financial Statements
|
|
F-1
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
May 31,
|
May 31,
|
|||||||
2016
|
2015
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
88,244
|
$
|
208,821
|
||||
Prepaid expenses
|
6,742
|
31,800
|
||||||
Total current assets
|
94,986
|
240,621
|
||||||
Security deposit
|
50,000
|
50,000
|
||||||
Property, plant and equipment, net of accumulated depreciation of $892 and $0
|
1,782
|
-
|
||||||
Construction in progress
|
106,726
|
-
|
||||||
Note receivable related party, noncurrent, net of allowance of $500,000 and $500,000
|
-
|
-
|
||||||
Intangible assets, net of accumulated amortization of $396 and $0
|
1,762
|
2,158
|
||||||
Total assets
|
$
|
255,256
|
$
|
292,779
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued liabilities
|
$
|
431,017
|
$
|
145,024
|
||||
Accrued compensation, related party
|
267,493
|
106,250
|
||||||
Due to related party
|
17,930
|
18,455
|
||||||
Accrued interest
|
41,116
|
2,630
|
||||||
Accrued interest, related party
|
68,148
|
3,337
|
||||||
Convertible notes payable, net of discount of $227,475 and $0
|
72,525
|
-
|
||||||
Convertible notes payable, related party, net of discount of $95,447 and $0
|
22,678
|
-
|
||||||
Derivative liability
|
418,537
|
-
|
||||||
Notes payable, related parties
|
-
|
600,000
|
||||||
Total current liabilities
|
1,339,444
|
875,696
|
||||||
Noncurrent liabilities
|
||||||||
Convertible notes payable, net of discount of $390,021 and $194,444
|
43,312
|
5,556
|
||||||
Convertible notes payable, related parties, net of discount of $1,018,657 and $0
|
230,718
|
-
|
||||||
Notes payable, related parties
|
72,750
|
- | ||||||
Total Liabilities
|
1,686,224
|
881,252
|
||||||
Commitments and contingencies
|
-
|
-
|
||||||
Stockholder’s equity (deficit)
|
||||||||
Common stock, $0.0001 par value; 250,000,000 shares authorized; 20,350,003 and 20,000,003 shares issued and outstanding at May 31, 2016 and 2015
|
2,035
|
2,000
|
||||||
Preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued
|
-
|
-
|
||||||
Additional paid-in capital
|
2,627,183
|
887,614
|
||||||
Stock payable
|
65,700
|
37,500
|
||||||
Accumulated deficit
|
(4,125,886
|
)
|
(1,515,587
|
)
|
||||
Total stockholder’s equity (deficit)
|
(1,430,968
|
)
|
(588,473
|
)
|
||||
Total liabilities and stockholders’ equity (deficit)
|
$
|
255,256
|
$
|
292,779
|
For the
|
For the
|
|||||||
Year Ended
|
Year Ended
|
|||||||
May 31,
|
May 31,
|
|||||||
2016
|
2015
|
|||||||
Revenue
|
$
|
-
|
$
|
-
|
||||
Cost of goods sold
|
-
|
-
|
||||||
Gross margin
|
-
|
-
|
||||||
Selling, general and administrative expenses
|
1,314,225
|
998,994
|
||||||
Professional fees
|
955,810
|
504,354
|
||||||
Total operating expenses
|
2,270,035
|
1,503,348
|
||||||
Operating loss
|
(2,270,035
|
)
|
(1,503,348
|
)
|
||||
Other (income) expense:
|
||||||||
Interest expense
|
402,021
|
12,239
|
||||||
Change in fair value of derivative
|
(61,757
|
)
|
-
|
|||||
Total other expense
|
340,264
|
12,239
|
||||||
Income (Loss) before income taxes
|
(2,610,299
|
)
|
(1,515,587
|
)
|
||||
Income tax expense
|
-
|
-
|
||||||
Net income (loss)
|
$
|
(2,610,299
|
)
|
$
|
(1,515,587
|
)
|
||
Net income (loss) per share - basic
|
$
|
(0.13
|
)
|
$
|
(0.24
|
)
|
||
Net income (loss) per share - diluted
|
$
|
(0.13
|
)
|
$
|
(0.24
|
)
|
||
Weighted average shares outstanding - basic
|
20,146,260
|
6,356,167
|
||||||
Weighted average shares outstanding - diluted
|
20,146,260
|
6,356,167
|
Additional
|
||||||||||||||||||||||||
Common Stock
|
Paid In
|
Stock
|
Accumulated
|
|||||||||||||||||||||
Amount
|
Value
|
Capital
|
Payable
|
Deficit
|
Total
|
|||||||||||||||||||
Balance at May 31, 2014
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Issuance of founders shares
|
15,000,000
|
1,500
|
998,500
|
-
|
-
|
1,000,000
|
||||||||||||||||||
Effect of reverse merger
|
5,000,003
|
500
|
(311,602
|
)
|
-
|
-
|
(311,102
|
)
|
||||||||||||||||
Imputed interest
|
-
|
-
|
716
|
-
|
-
|
716
|
||||||||||||||||||
Value of vested portion of shares to be issued to a service provider
|
-
|
-
|
-
|
37,500
|
-
|
37,500
|
||||||||||||||||||
Discount on notes payable
|
-
|
-
|
200,000
|
-
|
-
|
200,000
|
||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
(1,515,587
|
)
|
(1,515,587
|
)
|
||||||||||||||||
Balance, May 31, 2015
|
20,000,003
|
2,000
|
887,614
|
37,500
|
(1,515,587
|
)
|
(588,473
|
)
|
||||||||||||||||
Stock issued for services
|
100,000
|
10
|
89,840
|
28,200
|
-
|
118,050
|
||||||||||||||||||
Share based compensation
|
250,000
|
25
|
327,475
|
327,500
|
||||||||||||||||||||
Discount on notes from beneficial conversion feature
|
-
|
-
|
1,321,176
|
-
|
1,321,176
|
|||||||||||||||||||
Imputed interest
|
-
|
-
|
1,078
|
-
|
-
|
1,078
|
||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
(2,610,299
|
)
|
(2,610,299
|
)
|
||||||||||||||||
Balance, May 31, 2016
|
20,350,003
|
2,035
|
2,627,183
|
65,700
|
(4,125,886
|
)
|
(1,430,968
|
)
|
For the
|
For the
|
|||||||
Year Ended
|
Year Ended
|
|||||||
May 31,
|
May 31,
|
|||||||
2016
|
2015
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income (loss)
|
$
|
(2,610,299
|
)
|
$
|
(1,515,587
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Imputed interest
|
1,078
|
716
|
||||||
Change in fair value of derivative
|
(61,757
|
)
|
-
|
|||||
Interest expense - excess of discount over principal
|
11,330
|
-
|
||||||
Issuance of stock for services
|
118,050
|
-
|
||||||
Note issued as commitment
|
200,000
|
-
|
||||||
Impairment of note receivable
|
-
|
500,000
|
||||||
Stock-based compensation
|
327,500
|
37,500
|
||||||
Amortization of debt discounts
|
286,317
|
5,556
|
||||||
Depreciation and amortization expense
|
1,288
|
-
|
||||||
Changes in assets and liabilities:
|
||||||||
Deposits
|
-
|
(50,000
|
)
|
|||||
Prepaid expenses
|
25,058
|
(38,955
|
)
|
|||||
Accounts payable and accrued expenses
|
285,993
|
136,327
|
||||||
Accrued compensation
|
161,243
|
106,250
|
||||||
Due to related parties
|
(525
|
)
|
18,455
|
|||||
Accrued interest, related party
|
64,811
|
3,337
|
||||||
Accrued interest
|
38,486
|
2,630
|
||||||
Net cash used in operating activities
|
(1,151,427
|
)
|
(793,771
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Payment of cash for note receivable
|
-
|
(500,000
|
)
|
|||||
Payments to acquire equipment
|
(2,674
|
)
|
-
|
|||||
Payment for construction in progress
|
(106,726
|
)
|
-
|
|||||
Payments to acquire intangible assets
|
-
|
(2,158
|
)
|
|||||
Payments for investment in shell company
|
-
|
(295,250
|
)
|
|||||
Net cash used in investing activities
|
(109,400
|
)
|
(797,408
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from sale of common stock
|
-
|
1,000,000
|
||||||
Proceeds from related party convertible notes payable
|
767,500
|
-
|
||||||
Proceeds from related party notes payable
|
72,750
|
600,000
|
||||||
Proceeds from issuance of convertible note
|
300,000
|
200,000
|
||||||
Net cash provided by financing activities
|
1,140,250
|
1,800,000
|
||||||
Net increase in cash and cash equivalents
|
(120,577
|
)
|
208,821
|
|||||
Cash and cash equivalents at beginning of period
|
208,821
|
-
|
||||||
Cash and cash equivalents at end of period
|
$
|
88,244
|
$
|
208,821
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Interest paid
|
$
|
-
|
$
|
-
|
||||
Income taxes paid
|
$
|
-
|
$
|
-
|
||||
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Stock issued to founder for intellectual property
|
$
|
-
|
$
|
500
|
||||
Discount on notes from beneficial conversion feature and warrants
|
$
|
502,296
|
$
|
200,000
|
||||
Discount on related party notes from beneficial conversion feature and warrants
|
$
|
1,321,176
|
$
|
-
|
||||
Related party notes payable reclassified as related party convertible notes payable
|
$
|
1,367,500
|
$
|
-
|
||||
Effect of reverse merger
|
$
|
-
|
$
|
16,352
|
Twelve months ended
|
||||
May 31, 2015
|
||||
Total Revenue
|
-
|
|||
Net loss attributable to CLS Holdings USA, Inc.
|
(2,200,788
|
)
|
||
Basic net income (loss) per common share
|
(0.35
|
)
|
||
Diluted net income (loss) per common share
|
(0.35
|
)
|
||
Weighted average shares - basic
|
6,356,167
|
|||
Weighted average shares - diluted
|
6,356,167
|
May 31,
|
May 31,
|
|||||||
2016
|
2015
|
|||||||
Prepaid legal fee
|
$
|
6,742
|
$
|
3,466
|
||||
Prepaid consulting fees
|
-
|
28,334
|
||||||
Total prepaid expenses
|
$
|
6,742
|
$
|
31,800
|
May 31
|
May 31
|
|||||||
2016
|
2015
|
|||||||
Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated January 12, 2016 and due January 1, 2019 (the “Binder Convertible Note 1”). During the year ended May 31, 2016, Mr. Binder made advances to the Company in the aggregate amount of $92,500 (see Binder Funding Notes); $50,000 of this amount was used to fund the Binder Convertible Note 1. This note bears interest at the rate of 6% per annum. No payments are required until January 1, 2017, at which time all accrued interest becomes due and payable. Commencing on April 1, 2017, the first of eight principal payments in the amount of $6,250 will be due; subsequent principal payments will due on the first day of each July, October, January, and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one "Unit" for each $0.75 converted, with each Unit consisting of one (1) share of common stock and a three-year warrant to purchase (1) share of common stock at a price of $1.00 per share (post Reverse-Split). The Company recognized a discount of $50,000 on the value of the beneficial conversion feature at the time of issuance. During the twelve months ended May 31, 2016, $9,599 of this discount was charged to operations. During the twelve months ended May 31, 2016 the Company accrued interest in the amount of $1,151 on this note.
|
50,000
|
-
|
||||||
Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated April 8, 2016 and due April 1, 2019 (the “Binder Convertible Note 2”). During the year ended May 31, 2016, Mr. Binder made advances to the Company in the aggregate amount of $95,250 (see Binder Funding Notes); $42,500 of this amount was used to fund the Binder Convertible Note 2. This note bears interest at the rate of 6% per annum through February 29, 2016 and 10% per annum thereafter. No payments are required until April 1, 2017, at which time all accrued interest becomes due and payable. Commencing on July 1, 2017, the first of eight principal payments in the amount of $5,313 will be due; subsequent principal payments will due on the first day of each October, January, April, and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one "Unit" for each $1.07 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $1.07 per share (post Reverse-Split). The Company recognized a discount of $37,840 on the value of the beneficial conversion feature at the time of issuance. During the twelve months ended May 31, 2016, $7,263 of this discount was charged to operations. During the twelve months ended May 31, 2016, the Company accrued interest in the amount of $773 on this note.
|
42,500
|
-
|
||||||
Unsecured convertible note issued to Frank Koretsky, a director of the Company, dated January 12, 2016 and due January 1, 2019 (the “Koretsky Convertible Note 1”). During the years ended May 31, 2016 and 2015, Mr. Koretsky made advances to the Company in the amounts of $745,000 and $600,000, respectively (a total of $1,345,000) pursuant to note payable agreements (see Koretsky Funding Note 1). During the year ended May 31, 2016, $895,000 of this amount was used to fund the Koretsky Convertible Note 1. This note bears interest at the rate of 6% per annum. No payments are required until January 1, 2017, at which time all accrued interest becomes due and payable. Commencing on April 1, 2017, the first of eight principal payments in the amount of $111,875 will be due; subsequent principal payments will due on the first day of each July, October, January, and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one "Unit" for each $0.75 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $1.00 per share (post Reverse-Split). The Company recognized a discount of $895,000 on the value of the beneficial conversion feature at the time of issuance. During the twelve months ended May 31, 2016, $171,822 of this discount was charged to operations. During the twelve months ended May 31, 2016 the Company accrued interest in the amount of $20,597 on this note.
|
895,000
|
-
|
||||||
Unsecured convertible note issued to Frank Koretsky, a director of the Company, dated April 8, 2016 and due April 1, 2019 (the “Koretsky Convertible Note 2”). During the years ended May 31, 2016 and 2015, Mr. Koretsky made advances to the Company in the amounts of $745,000 and $600,000, respectively (a total of $1,345,000), pursuant to note payable agreements (see Koretsky Funding Notes). During the year ended May 31, 2016, $380,000 of this amount was used to fund the Koretsky Convertible Note 2. This note bears interest at the rate of 6% per annum through February 29, 2016 and 10% per annum thereafter. No payments are required until April 1, 2017, at which time all accrued interest becomes due and payable. Commencing on July 1, 2017, the first of eight principal payments in the amount of $47,500 will be due; subsequent principal payments will due on the first day of each October, January, April, and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one "Unit" for each $1.07 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $1.07 per share (post Reverse-Split). The Company recognized a discount of $338,336 on the value of the beneficial conversion feature at the time of issuance. During the twelve months ended May 31, 2016, $64,939 of this discount was charged to operations. During the twelve months ended May 31, 2016, the Company accrued interest in the amount of $7,100 on this note.
|
380,000
|
-
|
||||||
Total – Convertible Notes Payable, Related Parties
|
$
|
1,367,500
|
-
|
|||||
Less: Discount
|
(1,114,104
|
)
|
-
|
|||||
Convertible Notes Payable, Related Parties, Net of Discounts
|
$
|
253,396
|
-
|
|||||
Convertible Notes Payable, Related Parties, Net of Discounts, Current Portion
|
$
|
22,678
|
$
|
-
|
||||
Convertible Notes Payable, Related Parties, Net of Discounts, Long-term Portion
|
230,718
|
-
|
May 31
|
May 31
|
|||||||
2016
|
2015
|
|||||||
Convertible promissory note issued to an unaffiliated third party due April 29, 2018 (the “April 2015 Note”). During the twelve months ended May 31, 2015, the lender loaned the Company the amount of $200,000 pursuant to this note. The April 2015 Note bears interest at a rate of 15% per annum. On the first anniversary of this note, the all then accrued interest became due. Thereafter, the Company is required to make eight equal payments of principal together with accrued interest, quarterly in arrears, commencing on July 1, 2016 until paid in full. The note and any accrued unpaid interest is convertible into common stock of the Company. For each dollar converted, the note holder shall receive two shares of common stock and one three-year warrant to purchase 1.33 shares (post Reverse-Split) of common stock at $0.75 per share (post Reverse-Split). The Company recognized a discount of $200,000 on the April 2015 Note related to the value of the beneficial conversion feature at the time of issuance. During the twelve months ended May 31, 2016 and 2015, $66,667 and $222,222 of this discount, respectively, was charged to operations. During the twelve months ended May 31, 2016 and 2015, the Company accrued interest in the amount of $30,082 and $2,630, respectively, on this note.
|
200,000
|
200,000
|
||||||
Convertible Promissory Note payable to Old Main Capital, LLC (“Old Main”) dated March 18, 2016, for the purchase of up to $555,555 in 10% Original Issue Discount Convertible Promissory Notes (the “10% Notes”). During the year ended May 31, 2016, Old Main loaned the Company the amount of $333,332 pursuant to these notes. These notes bear interest at the rate of 10% per annum. Old Main may, at its option, convert all or a portion of the notes and accrued but unpaid interest into shares of common stock at a conversion price of $0.80 per share (post Reverse-Split) (the “Fixed Conversion Price”). The Fixed Conversion Price is subject to adjustment if, at any time while this note is outstanding, the Company should issue any equity security with an effective price per share that is lower than the Fixed Conversion Price (the “Base Conversion Price”), other than certain exempt issuances. In such an instance, the Fixed Conversion Price will be lowered to match the Base Conversion Price. The shares underlying the 10% Notes are subject to a registration rights agreement. At the earlier of September 18, 2016 or two trading days after the registration statement is declared effective, the Company must begin to redeem 1/24th of the face amount of the notes and any accrued but unpaid interest on a bi-weekly basis. Such amortization payments may be made, at our option, in cash or, subject to certain conditions, in common stock pursuant to a conversion rate equal to the lower of (a) $0.80 or (b) 75% of the lowest daily volume weighted average price of the common stock in the twenty consecutive trading days immediately prior to the conversion date. The Company recognized a discount of $330,188 on the 10% Notes related to the value of the original issue discount and embedded derivative. During the twelve months ended May 31, 2016, $4,056 of this discount was charged to operations. During the twelve months ended May 31, 2016, the Company accrued interest in the amount of $5,160 on this note.
|
333,332
|
-
|
||||||
Convertible promissory note payable to Old Main dated March 18, 2016 and bearing interest at a rate of 8% (the “8% Convertible Note”). The 8% Convertible Note was issued for Old Main’s commitment to enter into an equity line transaction with the Company and prepare all of the related transaction documents. Old Main may, at its option, convert all or a portion of the note and accrued but unpaid interest into shares of common stock at a conversion price of $1.07 per share (post Reverse-Split) (the “8% Fixed Conversion Price”). The 8% Fixed Conversion Price is subject to adjustment if, at any time while this note is outstanding, the Company should issue any equity security with an effective price per share that is lower than the 8% Fixed Conversion Price (the “8% Base Conversion Price”), other than certain exempt issuances. In such an instance, the 8% Fixed Conversion Price will be lowered to match the 8% Base Conversion Price. The shares underlying the 8% Note are subject to a registration rights agreement. At the earlier of September 18, 2016 or two trading days after this registration statement becomes effective, the Company must begin to redeem 1/6th of the face amount of the note and any accrued but unpaid interest on a monthly basis. Such amortization payment may be made, at its option, in cash or, subject to certain conditions, in common stock pursuant to a conversion rate equal to the lower of (a) $1.07 (post Reverse-Split) or (b) 75% of the lowest daily volume weighted average price of the common stock in the twenty consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date. The Company recognized a discount of $172,108 on the value of the embedded derivative. During the twelve months ended May 31, 2016, $8,522 of this discount was charged to operations. During the twelve months ended May 31, 2016, the Company accrued interest in the amount of $3,244 on this note.
|
200,000
|
-
|
||||||
Total - Convertible Notes Payable
|
$
|
733,332
|
$
|
200,000
|
||||
Less: Discount
|
(587,910
|
)
|
(194,444
|
)
|
||||
Convertible Notes Payable, Net of Discounts
|
$
|
145,422
|
$
|
5,556
|
||||
Total - Convertible Notes Payable, Net of Discounts, Current Portion
|
$
|
72,525
|
$
|
-
|
||||
Total - Convertible Notes Payable, Net of Discounts, Long-term Portion
|
$
|
43,312
|
$
|
5,556
|
||||
Discounts on notes payable amortized to interest expense:
|
$
|
286,317
|
$
|
5,556
|
May 31,
|
||||||||
2016
|
2015
|
|||||||
Volatility
|
89% to 107
|
%
|
214
|
%
|
||||
Dividends
|
-
|
-
|
||||||
Risk-free interest rates
|
0.91
|
%
|
0.84% to 1.18
|
%
|
||||
Term (years)
|
3
|
3
|
May 31,
|
May 31,
|
|||||||
2016
|
2015
|
|||||||
Federal and state statutory rate
|
34
|
%
|
34
|
%
|
||||
Net operating loss carry forwards
|
787,513
|
500,417
|
||||||
Valuation allowance for deferred tax assets
|
(787,513
|
)
|
(500,417
|
)
|
||||
Net deferred tax assets
|
-
|
-
|
For the 12 months ended May 31,
|
||||
2017
|
177,845
|
|||
2018
|
177,845
|
|||
2019
|
177,845
|
|||
2020
|
177,845
|
|||
2021
|
148,202
|
|||
Thereafter
|
-
|
|||
Total
|
859,582
|
May 31, 2016
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Liabilities
|
||||||||||||||||
Derivative liabilities
|
$
|
-
|
$
|
-
|
$
|
418,537
|
$
|
418,537
|
May 31, 2015
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Liabilities
|
||||||||||||||||
Derivative liabilities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Derivative
|
||||
Liability
|
||||
Liabilities Measured at Fair Value
|
||||
Balance as of May 31, 2015
|
$
|
-
|
||
Issuances
|
480,294
|
|||
Revaluation gain
|
61,757
|
|||
Balance as of May 31, 2016
|
$
|
$ 418,537
|
● | We do not have an independent board of directors or audit committee or adequate segregation of duties; |
● | We do not have an independent body to oversee our internal controls over financial reporting and lack segregation of duties due to our limited resources. |
Name
|
Age
|
Title
|
Term Expires
|
||||
Jeffrey Binder
|
69
|
Chairman, President, Chief Executive Officer and Director
|
2017
|
||||
Frank Koretsky
|
53
|
Director
|
2016
|
||||
Alan Bonsett
|
42
|
Chief Operating Officer
|
--
|
Name and
Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||||||||||||
Larry Adelt,
|
2016
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||
Former President and Chief Executive Officer(1)
|
2015
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||
Jeffrey Binder,
|
2016
|
150,000
|
—
|
—
|
—
|
—
|
—
|
150,000
|
||||||||||||||||||||||
Chairman, President and Chief Executive Officer(2)
|
2015
|
100,000
|
—
|
—
|
—
|
—
|
—
|
100,000
|
||||||||||||||||||||||
Alan Bonsett | 2016 |
118,750
|
—
|
— |
—
|
—
|
327,500
|
446,250
|
||||||||||||||||||||||
Chief Operating Officer(3)
|
2015
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
1 | Mr. Adelt resigned as an officer and director of the Company on November 12, 2014 following the sale of all of his shares of common stock in the Company to CLS Labs. On the same date, Jeffrey Binder was appointed Chairman, President and Chief Executive Officer of the Company. |
2 | Mr. Binder was appointed Chairman, President and Chief Executive Officer of the Company on November 12, 2014. Although Mr. Binder’s employment agreement provides for an annual salary of $150,000 per annum; to date, he has deferred all compensation from the Company, including the referenced salary. At present, Mr. Binder also serves as our Chief Financial Officer. |
3 | Mr. Bonsett and the Company entered into an employment agreement effective August 1, 2015 and he was appointed Chief Operating Officer of the Company effective August 15, 2015. |
Name
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
Value or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
|
|||||||||||||||||||||||||||
Larry Adelt, Former, President and CEO(1)
|
--
|
--
|
--
|
--
|
N/A
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||||||||
Jeffrey Binder, Chairman, President and CEO
|
--
|
--
|
--
|
--
|
N/A
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||||||||
Alan Bonsett, COO(2)
|
--
|
--
|
--
|
--
|
N/A
|
250,000
|
$
|
327,500
|
--
|
--
|
1 | Mr. Adelt resigned as an officer and director of the Company on November 12, 2014. |
Name and Address of Beneficial Owner(1)
|
Amount and Nature of
Beneficial Ownership(2)
|
Percentage of Class
|
|||||||
Jeffrey I. Binder
|
5,698,893
|
(3)
|
27.1
|
%
|
|||||
Raymond Keller
|
5,000,000
|
24.6
|
%
|
||||||
Frank Koretsky
|
8,489,470
|
(4)
|
35.6
|
%
|
|||||
Marc Douglas
|
1,096,094
|
5.4
|
%
|
||||||
Charles DeAngelo
|
1,096,094
|
5.4
|
%
|
||||||
Alan Bonsett
|
250,000
|
1.2
|
%
|
||||||
All directors and executive officers as a group (3 persons) (5)
|
14,438,363
|
58.8
|
%
|
1 | Except as otherwise indicated, to our knowledge, the persons named in this table have sole voting, investment and dispositive power with respect to all shares of common stock listed. |
2 | Reflects the extinguishment of the 6,250,000 shares of common stock owned by CLS Labs and the issuance of 15,000,000 shares of common stock to the stockholders of CLS Labs in connection with the Merger and the issuance of 250,000 shares of common stock to Alan Bonsett pursuant to his employment agreement. Excludes any impact of stock options expected to be issued in connection with employment agreements for Mr. Binder and Mr. Bonsett. |
3 | Includes 349,447 shares of common stock issuable upon conversion of convertible notes held by Mr. Binder that are presently convertible and 349,447 shares of common stock issuable upon the exercise of warrants underlying such notes, which warrants will be exercisable upon conversion of the notes, but excludes shares issuable upon conversion of interest accrued under such notes. |
4 | Includes 1,744,735 shares of common stock issuable upon conversion of convertible notes held by Mr. Koretsky that are presently convertible and 1,744,435 shares of common stock issuable upon the exercise of warrants underlying such notes, which warrants will be exercisable upon conversion of the notes, but excludes shares issuable upon conversion of interest accrued under such notes. |
5 | Includes 2,094,182 shares of common stock that are issuable upon conversion of convertible notes that are presently convertible and 2,094,182 shares of common stock issuable upon the exercise of warrants underlying such notes, which warrants will be exercisable upon conversion of the notes, but excludes shares issuable upon conversion of interest accrued under such notes. |
Exhibit No.
|
Description
|
|
2.1
|
Agreement and Plan of Merger dated April 28, 2015 by and among CLS Holdings USA, Inc., CLS Merger, Inc., and CLS Labs, Inc. (incorporated by reference from Exhibit 2.1 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
3.1
|
Articles of Incorporation of Adelt Design, Inc. (incorporated by reference from Exhibit 3.1 in the Company’s Registration Statement filed with the SEC on June 3, 2011).
|
|
3.2
|
Amended and Restated Articles of Incorporation of CLS Holdings USA, Inc. (incorporated by reference from Exhibit 1.1 in the Company’s Current Report on Form 8-K filed with the SEC on November 26, 2014).
|
|
3.3
|
Bylaws of Adelt Design, Inc. (incorporated by reference from Exhibit 3.3 in the Company’s Registration Statement filed with the SEC on June 3, 2011).
|
|
3.4
|
Amended and Restated Bylaws of CLS Holdings USA, Inc. (incorporated by reference from Exhibit 1.2 in the Company’s Current Report on Form 8-K filed with the SEC on November 26, 2014).
|
|
4.1
|
Form of Stock Certificate (incorporated by reference from Exhibit 4.1 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
10.1
|
Employment Agreement dated October 1, 2014 between CLS Labs, Inc. and Jeffrey Binder (incorporated by reference from Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015) (1).
|
|
10.2
|
Addendum to Employment Agreement dated April 28, 2015 between CLS Labs, Inc., CLS Holdings USA, Inc. and Jeffrey Binder (incorporated by reference from Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015) (1).
|
|
10.3
|
Employment Agreement dated October 1, 2014 between CLS Labs, Inc. and Michael Abrams (incorporated by reference from Exhibit 10.3 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015) (1).
|
|
10.4
|
Addendum to Employment Agreement dated April 28, 2015 between CLS Labs, Inc., CLS Holdings USA, Inc. and Michael Abrams (incorporated by reference from Exhibit 10.4 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015) (1).
|
|
10.5
|
Lease dated April 17, 2015 between Casimir-Quince, LLC, and CLS Labs Colorado, Inc. (incorporated by reference from Exhibit 10.5 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
10.6
|
Sublease Agreement dated April 17, 2015 between CLS Labs Colorado, Inc. and Picture Rock Holdings, LLC. (incorporated by reference from Exhibit 10.6 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
10.7
|
Licensing Agreement dated April 17, 2015 between CLS Labs Colorado, Inc. and Picture Rock Holdings, LLC. (incorporated by reference from Exhibit 10.7 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
10.8
|
Equipment Lease dated April 17, 2015 between CLS Labs Colorado, Inc. and Picture Rock Holdings, LLC. (incorporated by reference from Exhibit 10.8 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
10.9
|
Restricted Stock Grant Agreement dated April 28, 2015 between CLS Holdings USA, Inc. and Michael Abrams (incorporated by referene from Exhibit 10.9 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015)(1)
|
10.10
|
Subscription for Property Agreement dated July 16, 2014 between CLS Labs, Inc. and Raymond Keller (incorporated by reference from Exhibit 2.1 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
10.11
|
Promissory Note dated April 17, 2015 between CLS Labs Colorado, Inc. and Picture Rock Holdings, LLC (incorporated by reference from Exhibit 10.11 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
10.12
|
Confidentiality, Non-Compete and Proprietary Rights Agreement dated July 16, 2014 between CLS Labs, Inc. and Raymond Keller (incorporated by reference from Exhibit 2.1 in the Company’s Current Report on Form 8-K filed with the SEC on April 30, 2015).
|
|
10.13
|
Employment Agreement dated August 18, 2015 between CLS Holdings USA, Inc. and Alan Bonsett (incorporated by reference from Exhibit 10.1 on the Company’s Current Report on Form 8-K filed with the SEC on August 20, 2015) (1).
|
|
10.14
|
Loan Agreement dated April 29, 2015 (incorporated by reference from Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on May 5, 2015).
|
|
10.15
|
Form of Indemnification Agreement (incorporated by reference from Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on December 22, 2105).
|
|
10.16
|
||
10.17
|
||
10.18
|
10% Original Issue Discount Convertible Promissory Note dated March 18, 2016, in favor of Old Main Capital, LLC (incorporated by reference from Exhibit 4.1 in the Company’s Current Report on Form 8-K filed with the SEC on March 24, 2016).
|
|
10.19
|
8% Convertible Promissory Note dated March 18, 2016 in favor of Old Main Capital, LLC (incorporated by reference from Exhibit 4.2 in the Company’s Current Report on Form 8-K filed with the SEC on March 24, 2016).
|
|
10.20
|
Securities Purchase Agreement dated March 18, 2016 between the Company and Old Main Capital, LLC (incorporated by reference from Exhibit 10.20 in Amendment No. 1 to the Company’s Registration Statement No. 333-210851 filed with the SEC on June 2, 2016).
|
|
10.21
|
Registration Rights Agreement dated March 18, 2016 between the Company and Old Main Capital, LLC (incorporated by reference from Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on March 24, 2016).
|
|
10.22
|
Convertible Promissory Note dated April 11, 2016, in favor of Frank Koretsky (incorporated by reference from Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on April 14, 2016).
|
|
10.23
|
Convertible Promissory Note dated April 11, 2016, in favor of Jeffrey Binder (incorporated by reference from Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on April 14, 2016).
|
|
10.24
|
Equity Purchase Agreement dated April 18, 2016 between the Company and Old Main Capital, LLC (incorporated by reference from Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on April 20, 2016).
|
|
10.25
|
Convertible Promissory Note dated July 20, 2016, in favor of Frank Koretsky (incorporated by reference from Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on July 28, 2016).
|
|
10.26
|
Convertible Promissory Note dated July 20, 2016, in favor of Jeffrey Binder (incorporated by reference from Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on July 28, 2016).
|
21.1
|
||
31.1
|
||
31.2
|
||
32.1
|
||
101.INS
|
XBRL Instance Document*
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document*
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document*
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document*
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document*
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document*
|
CLS HOLDINGS USA, INC.
|
|||
Date:
August 25, 2016
|
By:
|
/s/ Jeffrey I. Binder
|
|
Jeffrey I. Binder
|
|||
Chairman, President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
|
Name and Signature
|
Title
|
Date
|
||
/s/ Jeffrey I. Binder
|
Chairman, President, Chief Executive Officer and Director (Principal Executive Officer and Principal Financial Officer)
|
August 25, 2016
|
||
Jeffrey I. Binder
|
||||
/s/ Frank Koretsky
|
Director
|
August 25, 2016
|
||
Frank Koretsky
|
||||
$895,000.00
|
January 12, 2016
|
$50,000.00
|
January 12, 2016
|
|
|
|
|
Date:
August 25, 2016
|
|
/s/ Jeffrey I. Binder
|
|
|
|
Jeffrey I. Binder
Chairman, President and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date:
August 25, 2016
|
|
/s/ Jeffrey I. Binder
|
|
|
|
Jeffrey I. Binder
Chairman, President and Chief Executive Officer
(Principal Financial Officer)
|
|
|
|
|
|
Date:
August 25, 2016
|
|
/s/ Jeffrey I. Binder
|
|
|
|
Jeffrey I. Binder
Chairman, President and Chief Executive Officer
|
|
|
|
(Principal Executive Officer and Principal Financial Officer)
|
|