Total amortization expense charged to operations for the three months ended February 28, 2018 and 2017 was $108 and $108, respectively. Total amortization expense charged to operations for the nine months ended February 28, 2018 and 2017 was ~~$108~~$324 and $324, ~~respectively, and $108 and $288 for the three and nine months ended February 29, 2016,~~ respectively. The domain name is being amortized over a period of 60 months.

Note 8 – Investment in Oasis LLCs

On December 4, 2017, the Company and Alternative Solutions, LLC (“Alternative Solutions”) entered into a Membership Interest Purchase Agreement (the “Acquisition Agreement”) for the Company to acquire the outstanding equity interests in three subsidiaries (collectively, the “Oasis LLCs”), Serenity Wellness Center LLC d/b/a/ Oasis Medical Cannabis, Serenity Wellness Growers LLC, and Serenity Wellness Products LLS, from Alternative Solutions. Pursuant to the Acquisition Agreement, the Company paid a non-refundable deposit of $250,000 upon signing, which was followed by an additional payment of $1,800,000 on February 5, 2018, for an initial 10% of each of the subsidiaries. As of February 28, 2018, the Company had a total investment of $2,050,000 in the Oasis LLCs.

The closing consideration that the Company must pay to acquire the remaining 90% of the subsidiaries, is equal to cash in the amount of $6,200,000, a $4.0 million promissory note due in December 2019, and $6,000,000 in shares of the Company’s common stock.

The number of shares shall equal $6,000,000 divided by the lower of $1.00 or the conversion price to receive one share of the Company’s common stock in its next equity offering that it commences in 2018 that exceeds $6 million, multiplied by 80%. The promissory note will be secured by a first priority security interest over the assets of each of the Oasis LLCs, including the Company’s 10% equity interest in the three subsidiaries, and the Company shall deliver to Alternative Solutions a confession of judgment that will become effective in the event of any event of default under the promissory note.

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Assuming the Company closes on the acquisition, in May 2020, Alternative Solutions will be entitled to a $1,000,000 payment from the Company, if the existing dispensary operated by an Oasis LLC has maintained an average revenue of $20,000 per day during the 2019 calendar year.

The sale, assignment, transfer, pledge or other disposition of any interest in the Oasis LLCs or Alternative Solutions is ineffective unless approved in advance by the State of Nevada and any municipality in which the three subsidiaries’ operations is licensed.

Note 89 – Accounts Payable and Accrued Liabilities

~~The Company had accounts~~Accounts payable and accrued liabilities consisted of ~~$569,959 and $431,017~~the following at February 28, ~~2017~~2018 and May 31, ~~2016, respectively, which consist of legal fees, deferred rent liability and other trade payables.~~2017.

	February 28,		May 31,
	2018		2017
Trade payables	$	575,546	$	497,213
Accrued payroll and related liabilities		40,562		34,987
Deferred rent liability		55,699		49,565
Total accounts payable and accrued liabilities	$	671,807	$	581,765

Note 910 – Related Party Transactions

As of February 28, ~~2017~~2018 and May 31, ~~2016,~~2017, the Company owed the amount of ~~$112,500~~$37,500 and ~~$250,000,~~$37,500, respectively, to Jeffrey Binder, its ~~President and~~ Chief Executive Officer, for accrued salary. For the three and nine months ended February 28, ~~2017,~~2018, unpaid accrued salary in the amount of ~~$250,000~~$37,500 and $112,500, respectively, was transferred to a convertible promissory note due to Mr. Binder (see note ~~11)~~9).

As of February 28, 2018 and May 31, 2017, the Company owed the amount of $14,584 and $0, respectively, to David Lamadrid, its President and Chief Financial Officer.

As of February 28, 2018 and May 31, 2017, the Company had accrued salary due to Alan Bonsett, a former officer of the Company prior to his October 1, 2017 separation, in the amount of $37,500 and $0, respectively.

As of February 28, ~~2017~~2018 and May 31, ~~2016,~~2017, the Company had accrued salary due to Michael Abrams, a former officer of the Company prior to his September 1, 2015 termination, in the amount of $16,250.

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As of February 28, ~~2017~~2018 and May 31, ~~2016,~~2017, the Company had related party payables in the amount of $17,930 due to officers and directors related to expenses paid on behalf of the Company. The Company imputed interest at the rate of 6% per annum on these liabilities, and recorded imputed interest expense on these liabilities in the amounts of ~~$804~~$265 and ~~$807~~$804 during the three and nine months ended February 28, ~~2017~~2018 and ~~February 29, 2016,~~2017, respectively. These interest accruals were charged to additional paid-in capital.

On April 17, 2015, prior to Alan Bonsett’s appointment as Chief Operating Officer, the Company, through CLS Labs Colorado, entered into an arrangement with PRH (the “Colorado Arrangement”) to, among other things, (i) license its proprietary technology, methods and processes to PRH in Colorado in exchange for a fee; (ii) sub-lease warehouse and office space in Denver, Colorado to PRH whereby PRH can grow, extract and process cannabis and other plant products in exchange for lease payments totaling an aggregate of $1,067,067 over a seventy-two (72) month term; (iii) build a processing facility and lease such facility, including equipment, to PRH in exchange for a monthly fee; and (iv) loan $500,000 to PRH to be used by PRH in connection with its financing of the building out, equipping, and development of a marijuana grow facility. Mr. Bonsett, as an owner of PRH, will indirectly receive the benefits of the Colorado Arrangement. PRH entered into an arrangement with a third-party grower to grow marijuana at a location that is contiguous to PRH’s leased real property. The grower obtained zoning approval, a certificate of occupancy to begin planting cannabis and operating the grow facility, and a Colorado Retail Marijuana Cultivation Facility License before commencing planting in December 2015, and the grow facility is now fully operational.

Additionally, upon Mr. Bonsett’s employment on August 1, 2015 to serve as the Company’s Chief Operating Officer, he received a one-time signing bonus of 250,000 (post Reverse-Split) shares of restricted common stock of the Company, with a fair value of $327,500, which became fully vested one year from the effective date of the agreement.

Related Party Notes Payable

The Company has convertible ~~notes payable and~~ notes payable outstanding to Jeffrey Binder, an officer and director, ~~to Frank Koretsky, a director;~~ and to Newcan Investment Partners, LLC, an entity ~~affiliated with~~that is wholly owned by Frank ~~Koretsky. See~~Koretsky, a director (see note ~~11.~~10).

Note 11 – Notes Payable

Notes Payable

~~During the nine months ended~~

On February ~~28, 2017,~~7, 2018, the Company issued a ~~$150,000 convertible~~ note payable to ~~CLS CO 2016, LLC an entity affiliated with Frank Koretsky,~~Todd Blatt in the amount of $210,000. This note accrues interest at a ~~director~~rate of ~~the Company. See note 11.~~

~~During the nine months ended~~6% per annum and is due on February ~~28, 2017 the Company incurred $580,000 in notes payable to Newcan Investment Partners LLC, an entity affiliated with Frank Koretsky, a director of the Company. See note 11.~~7, 2019. During the three months ended February 28, ~~2017, $460,000~~2018, the Company accrued interest in ~~notes~~the amount of $725 on this note.

On February 7, 2018, the Company issued a note payable ~~was converted~~ to AJG Group in the amount of $200,000. This note accrues interest at a ~~convertible promissory~~rate of 6% per annum and is due on February 7, 2019. During the three months ended February 28, 2018, the Company accrued interest in the amount of $690 on this note.

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~~Note 10 –~~

Related Party Convertible Notes Payable

On May 31, 2017, the Company entered into an Omnibus Loan Amendment Agreement (the “Omnibus Loan Amendment”) with Jeffrey I. Binder, Frank Koretsky, Newcan Investment Partners LLC and CLS CO 2016, LLC (collectively, the “Insiders”). Pursuant to the Omnibus Loan Amendment, the Company agreed with the Insiders to amend certain terms of loans the Insiders made to the Company for working capital purposes, which loans were initially demand loans, and, except for loans made in 2017, were later memorialized as convertible loans (the “Insider Loans”), in exchange for the agreement of the Insiders to convert all Insider Loans where funds were advanced prior to January 1, 2017, which totaled $2,537,750, plus $166,490 of accrued interest thereon, into an aggregate of 10,816,960 shares of the Company’s common stock at $0.25 per share, and forego the issuance of warrants to purchase the Company’s common stock upon conversion. This resulted in the issuance of an additional 7,609,910 shares compared to the original number of shares issuable upon conversion of the Insider Loans prior to the Omnibus Loan Agreement. The Company valued the shares at $0.125, which was the market price of the Company’s stock at the conversion date, and charged the amount of $951,239 to loss on modification of debt during the twelve months ended May 31, 2017. The Company entered into the Omnibus Loan Amendment in order to ease the debt burden on the Company and prevent it from defaulting on the Insider Loans.

February 28, May 31,
2017 2016
Notes payable to Jeffrey Binder, an officer and director of the Company, for advances to fund operations (the “Binder Funding Notes”). The Binder Funding Notes bear interest at a rate of 6% for loans made through November 30, 2017, and at a rate of 10% for loans made after November 30, 2016. The Binder Funding Notes have no maturity date and are due on demand. During the nine months ended February 28, 2017, Mr. Binder advanced a total of $118,000 to the Company, and the Company repaid Mr. Binder $61,000 under the Binder Funding Note; $12,750 of this amount was transferred out of the Binder Funding Notes and used to fund a new convertible note payable to Mr. Binder (See “Binder Convertible Note 3” below). During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $166 and $237, respectively, on the Binder Funding Notes.
$ 47,000 $ 2,750

Notes payable to Newcan Investment Partners, LLC (“Newcan”), an entity owned by Frank Koretsky, a director of the Company, for advances to fund operations (the “Koretsky Funding Notes”). The Koretsky Funding Notes bear interest at a rate of 6% for loans made through November 30, 2017, and at a rate of 10% for loans made after November 30, 2016. The Koretsky Funding Notes have no maturity date and are due on demand. During the nine months ended February 28, 2017, Frank Koretsky advanced $140,000 and Newcan Investment Partners, LLC advanced $580,000to the Company under the Koretsky Funding Notes; during the nine months ended February 28, 2017, $210,000 was transferred out of the Koretsky Funding Notes and used to fund a new convertible note payable to Mr. Koretsky (see “Koretsky Convertible Note 3” below) and $460,000 was transferred out of the Koretsky Funding Notes and used to fund new convertible notes payable to Newcan (see “Newcan Convertible Notes 1 and 2” below). During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $1,102 and $7,890, respectively, on the Koretsky Funding Notes.
120,000 70,000

Total – Notes Payable, Related Parties $ 167,000 $ 72,750
Current portion $ 167,000 $ -
Long term portion $ - $ 72,750
Pursuant to the Omnibus Loan Amendment, the following amendments were made to the Insider Loans: (a) the Company reduced the conversion price on the Insider Loans from between $0.75 and $1.07 per share of common stock to $0.25 per share of common stock, in those cases where the conversion price was greater than $0.25, which reduced conversion price exceeded the closing price of the common stock during the three months prior to the Omnibus Loan Amendment; (b) the Company deleted the requirement to issue warrants to purchase the Company’s common stock upon conversion of the Insider Loans; (c) the Company amended one Insider Loan to permit conversion of only the portion of the Insider Loan related to services that were provided to it prior to January 1, 2017; and (d) the Company amended the terms of the Insider Loans where funds were advanced on or after January 1, 2017, which Insider Loans were not converted into the Company’s common stock, to provide for, where not already the case, a 10% interest rate per annum, a $0.25 conversion price per share of common stock, and the deletion of the requirement that the Company issue warrants to purchase its common stock upon conversion of such Insider Loans.

On January 10, 2018, effective December 1, 2017, the Company entered into an Omnibus Amendment to Convertible Notes (the “Second Omnibus Loan Agreement”) with Jeffrey I. Binder, an officer and director of the Company, and Newcan Investment Partners LLC, an entity owned by Frank Koretsky, a director of the Company. The Second Omnibus Loan Agreement provides that the conversion price of all outstanding convertible promissory notes issued to either Mr. Binder or Newcan Investment Partners, LLC as of the date of the Agreement would be increased from $0.25 to $0.3125 per share of common stock. The remaining terms of such notes remain unchanged.

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February 28, May 31,
2017 2016
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”). The Binder Convertible Note 1 was funded with $50,000 of advances Mr. Binder made to the Company under the Binder Funding Notes. 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 become due; subsequent principal payments will become due on the first day of each July, October, January, and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “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 of this note. During the nine months ended February 28, 2017, $18,561 of this discount was charged to operations. During the three and nine months ended February 28, 2017 the Company accrued interest in the amount of $740 and $2,244, respectively, on this note. 50,000 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”). The Binder Convertible Note 2 was funded with $42,500 of advances Mr. Binder made to the Company under the Binder Funding Notes. 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 become due; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “Unit” for each $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 of this note. During the nine months ended February 28, 2017, $14,048 of this discount was charged to operations. During the three and nine months ended February 28, 2016, the Company accrued interest in the amount of $1,048 and $3,179, respectively, on this note. 42,500 42,500

Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated July 20, 2016 and due July 1, 2019 (the “Binder Convertible Note 3”). The Binder Convertible Note 3 was funded with the conversion of $250,000 of unpaid accrued salary due to Mr. Binder and $12,750 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No payments are required until July 1, 2017, at which time all accrued interest becomes due and payable. Commencing on October 1, 2017, the first of eight principal payments in the amount of $32,844 will become due; subsequent principal payments will become due on the first day of each, January, April, July and October 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). During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $6,479 and $16,120, respectively, on this note. 262,750 -

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”). The Koretsky Convertible Note 1 was funded with $895,000 of advances Mr. Koretsky made to the Company under the Koretsky Funding Notes. 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 become due; subsequent principal payments will become due on the first day of each July, October, January, and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “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 of this note. During the three and nine months ended February 28, 2017, $110,745 and $332,234, respectively, of this discount was charged to operations. During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $13,241 and $40,164, respectively, on this note. 895,000 895,000
The following tables summarize the Company’s loan balances at February 28, 2018 and May 31, 2017:

	February 28,		May 31,
	2018		2017

Notes payable to Jeffrey Binder, an officer and director of the Company, for advances to fund operations (the “Binder Funding Notes”). The Binder Funding Notes bear interest at a rate of 6% for loans made through November 30, 2016, and at a rate of 10% for loans made after November 30, 2016. The Binder Funding Notes have no maturity date and are due on demand. During the twelve months ended May 31, 2016, Mr. Binder advanced a total of $95,250 to the Company under the Binder Funding Notes; during the year ended May 31, 2016, $92,500 of this amount was transferred out of the Binder Funding Notes and used to fund two new convertible notes payable to Mr. Binder (See Binder Convertible Notes 1 and 2 below). During the twelve months ended May 31, 2016, the Company accrued interest in the amount of $1,308 on the Binder Funding Notes. In July 2016, the remaining principal balance of $2,750 in the Binder Funding Notes was transferred to a new Convertible Note payable to Mr. Binder (the “Binder Convertible Note 3”). During the twelve months ended May 31, 2017, Mr. Binder advanced a total of $145,850 to the Company under the Binder Funding Notes. Also during the year ended May 31, 2017, Mr. Binder loaned the Company an additional $49,700; which was credited to the Binder Funding Notes. Also during the year ended May 31, 2017, principal in the amount of $59,750 and accrued interest in the amount of $813 was transferred out of the Binder Funding Notes and used to fund two new convertible notes payable to Mr. Binder (See Binder Convertible Notes 3 and 4 below). Also during the year ended May 31, 2017, the Company made principal payments in the aggregate amount of $61,000 under the Binder Funding Notes. During the year ended May 31, 2017, the Company accrued interest in the amount of $1,910 on the Binder Funding Notes. Effective May 31, 2017, pursuant to the Omnibus Loan Agreement, a conversion feature was added to the Binder Funding Notes whereby principal and accrued interest is convertible into common stock of the Company at a rate of $0.25 per share. During the three months ended August 31, 2017, Mr. Binder advanced a total of $47,767 to the Company under the Binder Funding Notes. During the three months ended August 31, 2017, interest in the amount of $2,466 was accrued on the Binder Funding Notes. Also during the three months ended August 31, 2017, principal in the amount of $77,550 and accrued interest in the amount of $3,630 were transferred from the Binder Funding Notes to a new convertible note payable to Mr. Binder (the “Binder Convertible Note 5”), and principal in the amount of $47,767 was transferred from the Binder Funding Notes to a new Convertible Note payable to Mr. Binder (the “Binder Convertible Note 6”). During the three months ended November 30, 2017, Mr. Binder advanced a total of $112,862 to the Company under the Binder Funding Notes. A discount in the amount of $70,790 related to the beneficial conversion feature of the Binder Funding Notes was charged to additional paid-in capital and amortized to interest expense. During these three months ended November 30, 2017, interest in the amount of $642 was accrued on the Binder Funding Notes. Also during the three months ended November 30, 2017, principal in the amount of $27,021 and accrued interest in the amount of $122 was transferred from the Binder Funding Notes to a new convertible note payable to Mr. Binder (the “Binder Convertible Note 7”). Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share and a discount in the amount of $35,023 related to the revaluation of the beneficial conversion feature of the Binder Funding Notes was charged to additional paid-in capital and amortized to interest expense. During three months ended February 28, 2018, Mr. Binder advanced a total of $194,191 to the Company under the Binder Funding Notes. During the three months ended February 28, 2018, interest in the amount of $2,433 was accrued on the Finder Funding Notes. A discount in the amount of $194,191 related to the beneficial conversion feature of the Binder Funding Notes was charged to additional paid-in capital and amortized to interest expense. Also, during the three months ended February 28, 2018, principal in the amount of $127,860 and accrued interest in the amount of $1,437 was transferred from the Binder Funding Notes to a new convertible note payable to Mr. Binder (the “Binder Convertible Note 8”).	$	152,174	$	77,550

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	February 28, 2018		May 31, 2017

Note payable to Frank Koretsky, a director of the Company, for advances to fund operations (the “Koretsky Funding Notes”). The Koretsky Funding Notes bear interest at a rate of 6% for loans made through November 30, 2016, and at a rate of 10% for loans made after November 30, 2016. The Koretsky Funding Notes have no maturity date and are due on demand. During the twelve months ended May 31, 2017, Mr. Koretsky advanced $550,000 to the Company under the Koretsky Funding Notes. Also during the twelve months ended May 31, 2017, $210,000 of principal and $1,346 of accrued interest was transferred out of the Koretsky Funding Notes and used to fund a new convertible notes payable to Mr. Koretsky. Also during the twelve months ended May 31, 2017, principal and accrued interest in the amounts of $410,000 and $4,046, respectively, were transferred out of the Koretsky Funding Notes and contributed to the Newcan Funding Notes (see Newcan Funding Notes, below).		-		-

Notes payable to Newcan Investment Partners, LLC (“Newcan”), an entity owned by Frank Koretsky, a director of the Company, for advances to fund operations (the “Newcan Funding Notes”). The Newcan Funding Notes bear interest at a rate of 10%. The Newcan Funding Notes have no maturity date and are due on demand. During the twelve months ended May 31, 2017, principal and interest in the amount of $410,000 and $4,046, respectively, were transferred from the Koretsky Funding Notes into the Newcan Funding Notes. Also during the year ended May 31, 2017, Newcan advanced $791,658 to the Company under the Newcan Funding Notes. Also during the year ended May 31, 2017, principal in the amount of $460,000 and accrued interest in the amount of $7,747, respectively, were transferred from the Newcan Finding Notes and used to fund the Newcan Convertible Notes 2 and 3 (see below); also during the year ended May 31, 2017, principal and accrued interest in the amounts of $120,000 and $2,121, respectively, were transferred out of the Newcan Funding Notes in order to fund the Newcan Convertible Note 3; see below. During the twelve months ended May 31, 2017, the Company accrued interest in the amount of $13,434 on this note. Effective May 31, 2017, pursuant to the Omnibus Loan Agreement, a conversion feature was added to the Newcan Funding Notes whereby principal and accrued interest is convertible into common stock of the Company at a rate of $0.25 per share. During the three months ended August 31, 2017, Newcan advanced $70,000 to the Company under the Newcan Funding Notes. Also during the three months ended August 31, 2017, interest in the amount of $14,964 was accrued on the Newcan Funding Notes. Also during the three months ended August 31, 2017, principal in the amount of $621,658 and accrued interest in the amount of $23,856 were transferred to a new Convertible Note payable to Newcan (the “Newcan Convertible Note 4”), and principal in the amount of $70,000 was transferred to a new Convertible Note payable to Newcan (the “Newcan Convertible Note 5”). During the three months ended November 30, 2017, Newcan advanced $45,000 to the Company under the Newcan Funding Notes. Also during the three months ended November 30, 2017, interest in the amount of $247 was accrued on the Newcan Funding Notes. A discount in the amount of $58,600 related to the beneficial conversion feature of the Binder Funding Notes was charged to additional paid-in capital and amortized to interest expense. Also, during the three months ended November 30, 2017, principal in the amount of $30,000 and accrued interest in the amount of $148 were transferred to a new Convertible Notes payable to Newcan (the “Newcan Convertible Note 6”). Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share and a discount in the amount of $6,120 related to the revaluation of the beneficial conversion feature of the Newcan Funding Notes was charged to additional paid-in capital and amortized to interest expense. During the three months ended February 28, 2018, Newcan advanced $100,000 to the Company under the Newcan Funding Notes. Also during the three months ended February 28, 2018, interest in the amount of $915 was accrued on the Newcan Funding Notes. A discount in the amount of $70,400 related to the beneficial conversion feature of the Newcan Funding Notes was charged to additional paid-in capital and amortized to interest expense. Also, during the three months ended February 28, 2018, principal in the amount of $115,000 and accrued interest in the amount of $1,014 were transferred to a new Convertible Notes payable to Newcan (the “Newcan Convertible Note 6”).		-		621,658

Total – Demand Convertible Notes Payable, Related Parties	$	152,174	$	699,208
Current portion	$	152,174	$	699,208
Long term portion	$	-	$	-

February 28, May 31,
2017 2016
Unsecured convertible note issued to Frank Koretsky, a director of the Company, dated April 11, 2016 and due April 1, 2019 (the “Koretsky Convertible Note 2”). The Koretsky Convertible Note 2 was funded with $380,000 of advances Mr. Koretsky made to the Company under the Koretsky Funding Notes. 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 become due; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “Unit” for each $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 of this note. During the three and nine months ended February 28, 2017, $41,867 and $125,602, respectively, of this discount was charged to operations. During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $9,370 and $28,422, respectively, on this note. 380,000 380,000

Unsecured convertible note issued to Frank Koretsky, a director of the Company, dated July 20, 2016 and due July 1, 2019 (the “Koretsky Convertible Note 3”). The Koretsky Convertible Note 3 was funded with $210,000 of advances Mr. Koretsky made to the Company under the Koretsky Funding Notes. This note bears interest at the rate of 10% per annum. No payments are required until July 1, 2017, at which time all accrued interest becomes due and payable. Commencing on October 1, 2017, the first of eight principal payments in the amount of $32,844 will become due; subsequent principal payments will become due on the first day of each, January, April, July and October 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). During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $5,178 and $13,728, respectively, on this note. 210,000 -

Unsecured convertible note issued to CLS CO 2016, LLC an entity affiliated with Frank Koretsky, a director of the Company, dated August 3, 2016 and due August 1, 2018 (the “CLS CO 2016 Note”). This note has a face amount of $150,000 and bears interest at the rate of 15% per annum. All interest accruing on this Note through the first anniversary of this Note shall be added to principal. Commencing on November 1, 2017, the Company shall pay the outstanding principal balance in four (4) equal quarterly installments, together with accrued interest, in arrears, 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). During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $5,548 and $12,884, respectively, on this note. 150,000 -

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February 28, May 31,
2017 2016
Unsecured convertible note issued to Newcan dated January 10,2017 and due January 2, 2020 (the “Newcan Note 1”). The Newcan Note 1 was funded with $410,000 of advances Newcan made to the Company under the Koretsky Funding Notes. This note bears interest at the rate of 10% per annum. No payments are required until January 2, 2018, at which time all accrued interest becomes due and payable. Commencing on April 1, 2018, the first of eight principal payments in the amount of $51,250 will become due; subsequent principal payments will become due on the first day of each, July, October, January, and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “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). During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $5,504 on this note.
410,000 -

Unsecured convertible note issued to Newcan Investment Partners LLC an entity affiliated with Frank Koretsky, a director of the Company, dated January 10,2017 and due January 2, 2020 (the “Newcan Note 2”). The Newcan Note 2 was funded with $50,000 of advances Newcan made to the Company under the Koretsky Funding Notes. This note bears interest at the rate of 10% per annum. No payments are required until January 2, 2018, at which time all accrued interest becomes due and payable. Commencing on April 1, 2018, the first of eight principal payments in the amount of $6,250 will become due; subsequent principal payments will become due on the first day of each July, October, January, and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “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). During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $671 on this note.
50,000 -

Total – Convertible Notes Payable, Related Parties $ 2,450,250 1,367,500
Less: Discount (623,661 ) (1,114,104 )
Convertible Notes Payable, Related Parties, Net of Discounts $ 1,826,589 253,396

Convertible Notes Payable, Related Parties, Net of Discounts, Current Portion $ 731,156 $ 22,678
Convertible Notes Payable, Related Parties, Net of Discounts, Long-term Portion
1,095,433
230,718

	February 28,		May 31,
	2018		2017

Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated March 31, 2017 (the “Binder Convertible Note 4”). The Binder Convertible Note 4 was funded with the conversion of $112,500 of unpaid accrued salary due to Mr. Binder and $47,000 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until April 1, 2018, at which time all accrued interest becomes due and payable. Commencing on July 1, 2018, the first of eight principal payments in the amount of $19,938 will become due; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “Unit” for each $0.25 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $0.25 per share. Pursuant to the Omnibus Loan Agreement, on May 31, 2017, the requirement to issue warrants upon conversion was deleted, and principal in the amount of $87,500 was converted into a total of 350,000 shares of common stock. The remaining principal balance of $72,000 will be due in eight quarterly payments in the amount of $9,000 commencing July 1, 2018; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. During the twelve months ended May 31, 2017, the Company accrued interest in the amount of $2,666 on the Binder Convertible Note 4. Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share and a discount was recorded in the amount of $29,376 related to the revaluation of the beneficial conversion feature of the Binder Convertible Note 4; $2,628 of this discount was amortized to interest expense during the three months ended February 28, 2018.. During the three and nine months ended February 28, 2018, interest in the amount of $1,775 and $5,385 was accrued on Binder Convertible Note 4, respectively.	$	72,000	$	72,000

Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated March 31, 2017 (the “Newcan Convertible Note 3”). The Newcan Convertible Note 3 was funded with the conversion of $120,000 of advances made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until April 1, 2018, at which time all accrued interest becomes due and payable. Commencing on July 1, 2018, the first of eight principal payments in the amount of $15,000 will become due; subsequent principal payments will become due on the first day of each October, January, April, and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one “Unit” for each $0.25 converted, with each Unit consisting of one (1) share of common stock and a five-year warrant to purchase (1) share of common stock at a price of $0.25 per share. During the twelve months ended May 31, 2017, the Company accrued interest in the amount of $2,005 on the Koretsky Convertible Note 4. Pursuant to the Omnibus Loan Agreement, on May 31, 2017, the requirement to issue warrants upon conversion was deleted. Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share and a discount was recorded in the amount of $48,960 related to the revaluation of the beneficial conversion feature of the Newcan Convertible Note 1; $4,379 of this discount was amortized during the three months ended February 28, 2018. During the three and nine months ended February 28, 2018, interest in the amount of $2,959 and $8,975 was accrued on Newcan Convertible Note 3, respectively.		120,000		120,000

Table of Contents

February 28, May 31,
2017 2016
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 nine months ended February 28, 2017, $82,390 of this discount was charged to operations. During the three months ended February 27, 2017, the Company repaid principal in the amount of $25,000 and interest in the amount of $6,690 on this note; during the nine months ended February 28, 2017, the Company repaid principal in the amount of $75,000 and interest in the amount of $49,265 on this note. During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $4,952 and $18,740, respectively, on this note. 125,000 200,000

Convertible Promissory Notes payable to Old Main Capital, LLC (“Old Main”) dated March 18, 2016, April 22, 2016 and May 27, 2016 as amended on October 6, 2016 and November 28, 2016, for the purchase of up to $333,333 in 10% Original Issue Discount Convertible Promissory Notes (the “10% Notes”). These notes originally bore interest at the rate of 10% per annum, which increased to 15% effective August 1, 2016. Initially, Old Main could, 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. Originally, at the earlier of October 18, 2016 or two trading days after the registration statement related to the Company’s equity line was 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 could be made, at the Company’s 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 at time of issuance.

On October 6, 2016, the 10% Notes were amended to increase the interest rate to 15% (effective August 1, 2016) and subsequently amended November 28, 2016 to convert the 10% Notes from installment notes to “balloon” notes, with all principal and accrued interest due on September 18, 2017. In exchange for amending the terms of the 10% Notes, the Company increased the outstanding principal balance by 10% to $366,666. In addition the Fixed Conversion Price was changed to a variable conversion price equal to the lesser of the prior Fixed Conversion Price or 75% of the lowest VWAP in the fifteen trading days ending on the trading day immediately prior to the conversion date. This November 28, 2016 amendment required an extinguishment analysis of the 10% Notes resulting in the gain on extinguishment of debt in the amount of $172,618 during the nine months ended February 28, 2017. The gain on extinguishment of debt was included in additional paid in capital during the nine months ended February 28, 2017. The 10% Notes were revalued as of the November 28, 2016 amendment and the Company recognized a discount of $366,666 on the value of the embedded derivative. During the three months ended February 28, 2017 Old Main converted an aggregate of $100,000 of principal, in six transactions, into 828,173 shares of common stock. . At February 28, 2017 and May 31, 2016, the amount of discount remaining on these notes was $264,276 and $326,132, respectively. During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $12,649 and $34,959, respectively, on these notes.
266,666 333,332

	February 28, 2018		May 31, 2017

Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated August 23, 2017 in the original principal amount of $115,050 (the “Binder Convertible Note 5”). The Binder Convertible Note 5 was funded with the conversion of $37,500 of unpaid accrued salary due to Mr. Binder and $77,550 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $14,381 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $46,020 on the Binder Convertible Note 5 related to the value of the beneficial conversion feature at the time of issuance; $3,824 and $4,160 of this discount was amortized during the three and six months ended November 30, 2017, respectively. During the three and six months ended November 30, 2017, interest in the amount of $2,868 and $3,121 was accrued on Binder Convertible Note 5, respectively, and $3,630 of accrued interest was transferred from the Binder Funding Notes. Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share, and the discount balance in the amount of $41,859 was charged to interest expense. A new discount was recorded in the amount of $46,940 related to the value of the repriced conversion feature of Binder Convertible Note 5; $4,199 of this discount was amortized to interest expense during the three months ended February 28, 2018. During the three and nine months ended February 28, 2018, interest in the amount of $2,837 and $5,957 was accrued on Binder Convertible Note 5, respectively.		115,050		-

Unsecured convertible note issued to Jeffrey Binder, an officer and director of the Company, dated August 23, 2017 in the original principal amount of $72,767 (the “Binder Convertible Note 6”). The Binder Convertible Note 6 was funded with the conversion of $25,000 of unpaid accrued salary due to Mr. Binder and $47,767 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $9,096 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $29,107 on the Binder Convertible Note 6 related to the value of the beneficial conversion feature at the time of issuance; $2,419 and $2,632 of this discount was amortized during the three and six months ended November 30 2017, respectively. During the three and six months ended November 30, 2017, interest in the amount of $1,814 and $1,974 was accrued on Binder Note 6, respectively. Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share, and the discount balance in the amount of $26,475 was charged to interest expense. A new discount was recorded in the amount of $29,689 related to the value of the repriced conversion feature of Binder Convertible Note 6; $2,656 of this discount was amortized to interest expense during the three months ended February 28, 2018. During the three and nine months ended February 28, 2018, interest in the amount of $1,794 and $3,768 was accrued on Binder Convertible Note 6, respectively.		72,767		-

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February 28, May 31,
2017 2016
Convertible promissory note payable to Old Main dated March 18, 2016 and amended on October 6, 2016 and November 28, 2016, and bearing interest at a rate of 8% (the “8% Note”). The 8% Note was issued for Old Main’s commitment to enter into an equity line transaction with the Company and prepare all of the related transaction documents. Originally, Old Main could, 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. Originally, at the earlier of February 3, 2017 or the effectiveness of the registration statement related to the Company’s equity line, 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 could 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 at the time of issuance.

On November 28, 2016, the 8% Note was amended converting the note from an installment note to a “balloon” note, with all principal and accrued interest due on March 18, 2017. In addition the Fixed Conversion Price was changed to a variable conversion price equal to the lesser of the prior Fixed Conversion Price or 75% of the lowest VWAP in the fifteen trading days ending on the trading day immediately prior to the conversion date. The November 28, 2016 amendment required an extinguishment analysis of the 8% Note resulting in gain on extinguishment of debt in the amount of $81,496 for the nine months ended February 28, 2017. The gain on extinguishment of debt was included in additional paid-in capital at February 28, 2017. The 8% Note was revalued as of the November 28, 2016 amendment and the Company recognized a discount of $169,476 on the value of the embedded derivative. At February 28, 2017 and May 31, 2016, the amount of discount remaining on these notes was $118,998 and $163,586, respectively. During the three and nine months ended February 28, 2017, the Company accrued interest in the amount of $3,945 and $11,967, respectively, on this note.
200,000 200,000

Total - Convertible Notes Payable $ 591,666 $ 733,332
Less: Discount (428,660 ) (587,910 )
Convertible Notes Payable, Net of Discounts $ 163,006 $ 145,422

Total - Convertible Notes Payable, Net of Discounts, Current Portion $ 147,082 $ 72,525
Total - Convertible Notes Payable, Net of Discounts, Long-term Portion $ 15,924 $ 43,312

Discounts on notes payable amortized to interest expense: $ 1,197,998 $ 286,317

	February 28, 2018		May 31, 2017

Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated August 23, 2017 in the original principal amount of $621,658 (the “Newcan Convertible Note 4”). The Newcan Convertible Note 4 was funded with the conversion of $621,658 of advances Newcan made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $69,074 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $248,663 on the Newcan Convertible Note 4 related to the value of the beneficial conversion feature at the time of issuance. Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share, and the discount balance in the amount of $226,181 was charged to interest expense. A new discount was recorded in the amount of $253,636 related to the value of the repriced conversion feature of Newcan Convertible Note 4; $22,687 of this discount was amortized to interest expense during the three months ended February 28, 2018. During the three and nine months ended February 28, 2018, interest in the amount of $15,239 and $32,190 was accrued on Newcan Convertible Note 4, respectively.		621,658		-

Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated August 23, 2017 in the original principal amount of $70,000 (the “Newcan Convertible Note 5”). The Newcan Convertible Note 5 was funded with the conversion of $70,000 of advances Newcan made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Commencing on January 2, 2019, the first of eight principal payments in the amount of $8,750 will become due; subsequent principal payments will become due on the first day of each April, July, October, and January until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $28,000 on the Newcan Convertible Note 5 related to the value of the beneficial conversion feature at the time of issuance. Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share, and the discount balance in the amount of $25,468 was charged to interest expense. A new discount was recorded in the amount of $28,560 related to the value of the repriced conversion feature of Newcan Convertible Note 5; $2,555 of this discount was amortized to interest expense during the three months ended February 28, 2018. During the three and nine months ended February 28, 2018, interest in the amount of $1,726 and $3,625 was accrued on Newcan Convertible Note 5, respectively.		70,000		-

Table of Contents

	February 28, 2018		May 31, 2017

Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated October 9, 2017 in the original amount of $30,000 (the “Newcan Convertible Note 6”). The Newcan Convertible Note 6 was funded with the conversion of $30,000 of advances Newcan made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until January 2, 2019, at which time all accrued interest becomes due and payable. Commencing on April 1, 2019, the first of eight principal payments in the amount of $3,750 will become due; subsequent principal payments will become due on the first day of each July, October, January and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $15,808 on the Newcan Convertible Note 6 related to the value of the beneficial conversion feature at the time of issuance. Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share, and the discount balance in the amount of $11,430 was charged to interest expense. A new discount was recorded in the amount of $12,240 related to the value of the repriced conversion feature of Newcan Convertible Note 6; $1,095 of this discount was amortized to interest expense during the three months ended February 28, 2018. During the three and nine months ended February 28, 2018, interest in the amount of $740 and $1,167 was accrued on Newcan Convertible Note 6, respectively.		30,000		-

Unsecured convertible note issued to Jeffery Binder, an officer and director of the Company, dated October 9, 2017 in the original principal amount of $39,521 (the “Binder Convertible Note 7”). The Binder Convertible Note 7 was funded with the conversion of $12,500 of unpaid accrued salary due to Mr. Binder and $27,021 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until January 2, 2019, at which time all accrued interest becomes due and payable. Commencing April 1, 2019, the first of eight principal payments in the amount of $4,940 will become due, subsequent payments will become due on the first day of each July, October, January and April until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.25 converted. The Company recognized a discount of $12,000 on the Binder Convertible Note 7 related to the value of the beneficial conversion feature at the time of issuance. Effective December 1, 2017, pursuant to the Second Omnibus Loan Amendment, the conversion price was increased from $0.25 per share to $0.3125 per share, and the discount balance in the amount of $15,058 was charged to interest expense. A new discount was recorded in the amount of $16,125 related to the value of the repriced conversion feature of Binder Convertible Note 7; $1,442 of this discount was amortized to interest expense during the three months ended February 28, 2018. During the three and nine months ended February 28, 2018, interest in the amount of $974 and $1,538 was accrued on Binder Convertible Note 7, respectively.		39,521		-

Table of Contents

	February 28, 2018			May 31, 2017

Unsecured convertible note issued to Newcan, an entity owned by Frank Koretsky, a director of the Company, dated, January 5, 2018 in the original amount of $115,000 (the “Newcan Convertible Note 7”). The Newcan Convertible Note 7 was funded with the conversion of $115,000 of advances Newcan made to the Company under the Newcan Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until April 1, 2019, at which time all of the accrued interest becomes due and payable. Commencing on July 1, 2019, the first of eight principal payments in the amount of $14,375 will become due; subsequent principal payments will become due on the first day of each October, January, April and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.3125 converted. The Company recognized a discount of $115,000 on the Newcan Convertible Note 7 related to the value of the beneficial conversion feature at the time of issuance. During the three months ended February 28, 2018, the Company amortized $5,254 of this discount to interest expense. During the three and nine months ended February 28, 2018, interest in the amount of $1,701 was accrued on the Newcan Convertible Note 7.		115,000			-

Unsecured convertible note issued to Jeffery Binder, an officer and director of the Company, dated January 5, 2018 in the original principal amount of $165,360 (the “Binder Convertible Note 8”). The Binder Convertible Note 8 was funded with the conversion of $37,500 of unpaid accrued salary due to Mr. Binder and $127,860 of advances Mr. Binder made to the Company under the Binder Funding Notes. This note bears interest at the rate of 10% per annum. No interest payments are required until April 1, 2019, at which time all accrued interest becomes due and payable. Commencing July 1, 2019, the first of eight principal payments in the amount of $20,670 will become due; subsequent payments will become due on the first day of each October, January, April and July until paid in full. This note and accrued interest under the note may be converted, in whole or in part, into one share of common stock for each $0.3125 converted. The Company recognized a discount of $165,360 on the Binder Convertible Note 8 related to the value of the beneficial conversion feature at the time of issuance. During the three months ended February 28, 2018, the Company amortized $7,555 of this discount to interest expense. During the three and nine months ended February 28, 2018, interest in the amount of $2,446 and $2,446 was accrued on Binder Convertible Note 8, respectively.		165,360			-

Convertible promissory note payable to David Lamadrid (the “Lamadrid Note”) dated February 20, 2018 in the principal amount of $31,250 and bearing interest at a rate of 8% per annum. The Lamadrid Note is due eighteen months from the date of issue. Mr. Lamadrid may, at his option, convert all or a portion of the Lamadrid Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.3125 per share. The Lamadrid Note also contains a reset feature, whereby, absent certain exceptions, if the Company issues equity securities at an effective price less than $0.3125 per share of common stock, the conversion price of the Lamadrid Note will be reset to such lower price. The Company recognized a discount of $31,250 on the Lamadrid Note related to the beneficial conversion feature at the time of issuance. During the three months ended February 28, 2018, $458 of this discount was charged to operations. During the three months ended February 28, 2018, the Company accrued interest in the amount of $55 on this note.		31,250			-

Total – Convertible Notes Payable, Related Parties	$	1,452,606		$	192,000
Less: Discount		(722,229	)		-
Convertible Notes Payable, Related Parties, Net of Discounts	$	730,377		$	192,000

Convertible Notes Payable, Related Parties, Net of Discounts, Current Portion	$	114,803		$	-
Convertible Notes Payable, Related Parties, Net of Discounts, Long-term Portion		615,574			192,000

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	February 28, 2018		May 31, 2017

Convertible promissory note issued to an unaffiliated third party due April 29, 2018 (the “April 2015 Note”). During the twelve months ended May 31, 2015, the lender loaned the Company the amount of $200,000 pursuant to this note. The April 2015 Note bears interest at a rate of 15% per annum. On the first anniversary of this note, the all then accrued interest became due. Thereafter, the Company is required to make eight equal payments of principal together with accrued interest, quarterly in arrears, commencing on July 1, 2016 until paid in full. The note and any accrued unpaid interest is convertible into common stock of the Company. For each dollar converted, the note holder shall receive two shares of common stock and one three-year warrant to purchase 1.33 shares of common stock at $0.75 per share. The Company recognized a discount of $200,000 on the April 2015 Note related to the value of the beneficial conversion feature at the time of issuance. During the twelve months ended May 31, 2016, $66,667 of this discount was charged to operations. During the twelve months ended May 31, 2016, the Company accrued interest in the amount of $30,082 on this note. During the year ended May 31, 2017, the Company repaid principal in the amount of $100,000 and interest in the amount of $53,837 on this note. Also during the year ended May 31, 2017, the Company charged $100,545 of the discount to operations, and accrued interest in the amount of $22,440 on the April 2015 Note. On September 20, 2017, the Company entered into an Exchange Agreement, whereby it agreed to exchange the April 2015 Note for 1,500,000 shares of its common stock. The holder of the April 2015 Note had previously sold it for $105,219, which represented the balance due by the Company, to StarForce Media, Inc., an entity that is not affiliated with the Company. The Company recognized a loss on this exchange in the amount of $404,082, which was charged to operations during the three months ended November 30, 2017. The Company also expensed the remaining discount in the amount of $18,155 to interest expense during the three months ended November 30, 2017. During the three and nine months ended February 28, 2018 the Company accrued interest in the amount of $ 0 and $4,603, respectively, on the April 2015 Note.	$	-	$	100,000

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	February 28, 2018		May 31, 2017

Convertible promissory note payable to Old Main Capital, LLC (“Old Main”) dated March 18, 2016 and bearing interest at a rate of 8% (the “8% Note”). The 8% Note was issued for Old Main’s commitment to enter into an equity line transaction with the Company and prepare all of the related transaction documents. Old Main may, at its option, convert all or a portion of the note and accrued but unpaid interest into shares of common stock at a conversion price of $1.07 per share (post Reverse-Split) (the “8% Fixed Conversion Price”). The 8% Fixed Conversion Price is subject to adjustment if, at any time while this note is outstanding, the Company should issue any equity security with an effective price per share that is lower than the 8% Fixed Conversion Price (the “8% Base Conversion Price”), other than certain exempt issuances. In such an instance, the 8% Fixed Conversion Price will be lowered to match the 8% Base Conversion Price. The shares underlying the 8% Note are subject to a registration rights agreement. At the earlier of September 18, 2016 or two trading days after this registration statement becomes effective, the Company must begin to redeem 1/6th of the face amount of the note and any accrued but unpaid interest on a monthly basis. Such amortization payment may be made, at its option, in cash or, subject to certain conditions, in common stock pursuant to a conversion rate equal to the lower of (a) $1.07 (post Reverse-Split) or (b) 75% of the lowest daily volume weighted average price of the common stock in the twenty consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date. The Company recognized a discount of $172,108 on the value of the embedded derivative. On November 28, 2016, the 8% Note was amended converting the note from an installment note to a “balloon” note, with all principal and accrued interest due on March 18, 2017. In addition, the Fixed Conversion Price was changed to a variable conversion price equal to the lesser of the prior Fixed Conversion Price or 75% of the lowest VWAP in the fifteen trading days ending on the trading day immediately prior to the conversion date. The November 28, 2016 amendment required an extinguishment analysis of the 8% Note resulting in gain on extinguishment of debt in the amount of $81,496 for the nine months ended February 28, 2017. The gain on extinguishment of debt was included in additional paid-in capital at February 28, 2017. The 8% Note was revalued as of the November 28, 2016 amendment and the Company recognized a discount of $169,476 on the value of the embedded derivative. At February 28, 2017 and May 31, 2016, the amount of discount remaining on these notes was $118,998 and $163,586, respectively. On March 27, 2017, the Company entered into a further amendment to the 8% Note, whereby the Company agreed to increase the outstanding amount due under the 8% Note as of March 18, 2017 by 5%, or $10,000. In exchange for doing so, Old Main agreed to extend the maturity of the 8% Note until July 1, 2017 and to suspend conversions under the 8% Note until July 1, 2017. Also during the year ended May 31, 2017, the Company accrued interest in the amount of $17,207 on the 8% Note. On July 6, 2017, the 8% Note was further amended, whereby the maturity date was extended to July 15, 2017 and the outstanding balance was increased by $15,750. On August 23, 2017, the 8% Note was amended again to extend the maturity date to September 15, 2017. On September 23, 2017, but effective on September 15, 2017, the 8% note was further orally amended, and the outstanding balance was increased by $96,862. The Company recognized the modification of this note as an extinguishment of debt and recognized a gain on the extinguishment of $144,851. The Company also recognized a discount on the modified note of $300,435, which was fully charged to operations during the three months ended November 30, 2017. On September 25, 2017, but effective September 15, 2017, the Company entered into an Exchange Agreement, whereby it agreed to exchange the 8% Note for 4,500,000 shares of its common stock. Old Main, the original holder of the 8% Note, had previously sold it for $382,496. The balance due by the Company under the 8% Note at the time it was sold was $322,612. The Company recognized a loss on this exchange in the amount of $1,113,883, which was charged to operations during the nine months ended February 28, 2018. During the three and nine months ended February 28, 2018, the Company accrued interest in the amount of $0 and $5,587, respectively, on the 8% Note, and $30,411 of the discount was amortized to interest expense during the nine months ended February 28, 2018.		-		210,000

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	February 28, 2018			May 31, 2017

Senior Convertible promissory note payable to FirstFire Global Opportunities Fund, LLC (the “FirstFire Note”) dated November 15, 2017 and bearing interest at a rate of 5% per annum. The lender loaned the Company $330,000 and the FirstFire Note has an original issue discount of $33,000. The FirstFire Note is due seven months from the date of issue. FirstFire may, at its option, convert all or a portion of the FirstFire Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.40 per share (the “FirstFire Fixed Conversion Price”) for the first 180 calendar days after the issue date. After the 180^th day, the conversion price shall equal the lower of (i) the FirstFire Fixed Conversion Price, or (ii) 75% multiplied by the lowest traded price of the common stock during twenty (20) consecutive trading day period immediately preceding the trading day that the Company received a notice of conversion. During the three months ended February 28, 2018, a dilutive issuance occurred. As a result, the FirstFire Fixed Conversion Price was reduced to $0.3125 per share. The Company recognized a discount of $363,000 on the FirstFire Note related to the beneficial conversion feature at the time of issuance. During the three and nine months ended February 28, 2018, $86,362 and $116,445, respectively, of this discount was charged to operations. During the three and nine months ended February 28, 2018, the Company accrued interest in the amount of $4,475 and $5,221 on this note, respectively.		363,000			-

Convertible promissory note payable to Darling Capital, LLC (the “Darling Note”) dated February 5, 2018 and bearing interest at a rate of 8% per annum. The lender loaned the Company $500,000 and the Darling Note has an original issue discount of $50,000. The Darling Note is due eighteen months from the date of issue. Darling may, at its option, convert all or a portion of the Darling Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.3125 per share. The Darling Note also contains a reset feature, whereby, absent certain exceptions, if the Company issues equity securities at an effective price less than $0.3125 per share of common stock, the conversion price of the Darling Note will be reset to such lower price. The Company recognized a discount of $550,000 on the Darling Note related to the beneficial conversion feature at the time of issuance. During the three months ended February 28, 2018, $23,168 of this discount was charged to operations. During the three months ended February 28, 2018, the Company accrued interest in the amount of $2,773 on this note.		550,000			-

Convertible promissory note payable to Efrat Investments, LLC (the “Efrat Note”) dated February 12, 2018 and bearing interest at a rate of 8% per annum. The lender loaned the Company $50,000 and the Efrat Note has an original issue discount of $5,000. The Efrat Note is due eighteen months from the date of issue. Efrat may, at its option, convert all or a portion of the Efrat Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.3125 per share. The Efrat Note also contains a reset feature, whereby, absent certain exceptions, if the Company issues equity securities at an effective price less than $0.3125 per share of common stock, the conversion price of the Efrat Note will be reset to such lower price. The Company recognized a discount of $55,000 on the Efrat Note related to the beneficial conversion feature at the time of issuance. During the three months ended February 28, 2018, $1,612 of this discount was charged to operations. During the three months ended February 28, 2018, the Company accrued interest in the amount of $193 on this note.		55,000			-



Total - Convertible Notes Payable	$	968,000		$	310,000
Less: Discount		(826,775	)		(57,644	)
Convertible Notes Payable, Net of Discounts	$	141,225		$	252,356

Total - Convertible Notes Payable, Net of Discounts, Current Portion	$	141,225		$	252,356
Total - Convertible Notes Payable, Net of Discounts, Long-term Portion	$	-		$	-

Discounts on notes payable amortized to interest expense – 3 months ended February 28, 2018:

818,254

308,606

Discounts on notes payable amortized to interest expense – 9 months ended February 28, 2018:

1,391,110

1,197,998

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Beneficial Conversion Features

The ~~10% Notes and the~~ 8% Note, ~~(collectively, the “2016 Convertible Notes”)~~FirstFire Note, Darling Note, Efrat Note, and Lamadrid Note contain conversion features that create derivative liabilities. The pricing model the Company ~~used~~uses for determining fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative component of the ~~2016 Convertible Notes~~8% Note was valued at ~~November 28, 2016,~~issuance, at conversion, at restructure, and at each period end. See note 11.

Certain of the Company’s other convertible notes payable contain beneficial conversion features that are not derivatives, but which require valuation in order to determine the discount to the related convertible note payable. The value of these conversion features is calculated using the intrinsic value method, whereby the amount of the discount is calculated as the difference between the conversion price and the market price of the underlying common stock at the date of issuance multiplied by the ~~second amendment to the 2016 Convertible Notes, and at period end. The following assumptions and key inputs were used for the valuation~~number of ~~the derivative liability related to the 2016 Convertible Notes at November 28, 2016 and February 28, 2017:~~shares issuable.

~~Assumption~~
~~Expected dividends:~~			0	%
~~Expected volatility:~~			~~93-168.3~~	%
~~Expected term (years):~~	~~0.55-0.80 years~~
~~Risk free interest rate:~~			~~0.60-0.62~~
~~Stock price~~		$	~~0.17-0.59~~

Note 1112 – Stockholders’ Equity

The Company’s authorized capital stock consists of 250,000,000 shares of common stock, par value $0.0001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share. The Company had ~~21,178,176~~43,186,944 and ~~20,350,003~~32,852,944 shares ~~(post Reverse Split)~~ of common stock issued and outstanding as of February 28, ~~2017~~2018 and May 31, ~~2016,~~2017, respectively.

On December 10, 2014, the Company effected a reverse stock split of the Company’s issued and outstanding common stock at a ratio of 1-for-0.625, wherein 0.625 shares of common stock were issued in exchange for each share of the Company’s common stock owned by the Company’s stockholders on December 1, 2014, the record date for the reverse stock split. As a result of the reverse stock split, 11,250,000 shares (post Reverse-Split) of common stock were outstanding as of December 10, 2014. The reverse stock split did not affect the number of authorized shares of the Company’s common stock. All share and per share information contained in the financial statements has been retroactively adjusted to reflect the reverse stock split.

The Company recorded imputed interest of $265 and $265 during the three months ended February 28, 2018 and 2017 on related party payables due to a director and officer of the Company. The Company recorded imputed interest of $804 and ~~$807~~$804 during the nine months ended February 28, ~~2017~~2018 and ~~February 29, 2016~~2017 on related party payables due to a director and officer of the Company.

On November 28, 2016 the Company amended the 2016 Convertible Notes which was accounted for as the extinguishment and reissuance of the debt. As a result, the Company recorded a gain on the extinguishment of debt in the amount of $254,114, which was included in additional paid-in capital at February 28, 2017.

During the three months ended February 28, 2017, Old Main, holder of convertible promissory notes, converted an aggregate of $100,000 of principal, in six transactions, into 828,173 shares of common stock. As a result of the conversions, the Company charged the amount $222,574 to additional paid-in capital. ~~(see Note 11).~~

On August 1, 2015, the Company and Alan Bonsett entered into a five-year employment agreement. Pursuant to the agreement, Mr. Bonsett commenced serving as the Company’s Chief Operating Officer on August 15, 2015. Mr. Bonsett received a one-time signing bonus of 250,000 (post Reverse Split) shares of restricted common stock of the Company, which became fully vested one year from the effective date of the agreement. The Company valued the shares at $327,500 based on the stock price at August 3, 2015 and is amortizing them over the term of the employment agreement. During the nine months ended February 29, 2016, ~~the Company recognized $327,500 in share based compensation.~~

Stock Issued for Services

On ~~August 28, 2015,~~July 13, 2017, the Company issued ~~60,000~~24,000 shares of common stock ~~valued at $45,000,~~ to a consultant in exchange for ~~services. Of these~~a $6,000 accrued liability for services previously provided. This resulted in a gain on the settlement of accounts payable in the amount of $3,480.

Stock Issued for Note Exchange

On September 20, 2017, the Company entered into an Exchange Agreement, whereby it agreed to exchange the April 2015 Note for 1,500,000 shares ~~50,000,~~of its common stock valued at ~~$37,500,~~$510,000. The holder of the April 2015 Note had previously sold it for $105,219, which represented the balance due by the Company, to StarForce Media, Inc., an entity that is not affiliated with the Company. The Company recognized a loss on this exchange in the amount of $404,082, which was charged to operations during the nine months ended February 28, 2018.

On September 25, 2017, the Company entered into an Exchange Agreement, whereby it agreed to exchange the 8% Note for 4,500,000 shares of its common stock valued at $1,844,035. The Company recognized a loss on this exchange in the amount of $989,032, which was charged to operations during the nine months ended February 28, 2018.

Stock Issued with Note

On November 15, 2017, the Company issued 250,000 shares of restricted Common Stock, valued at $95,000, as a commitment fee to a convertible note holder.

Stock Issued in Offering

On December 7, 2017, the Company commenced a private offering of its securities, the terms of which were ~~included in stock payable as~~amended on January 17, 2018 (the “WestPark Offering”). The Company offered for sale a minimum of ~~May 31, 2015. The shares were valued based on the closing market~~800,000 units and a maximum of 4,000,000 units at a price of ~~the~~$1.25 per unit. Each unit consisted of four shares of common stock ~~on the grant date.~~and one warrant to purchase common stock at $0.75 per share.

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On ~~July 22, 2015, pursuant to a consulting agreement,~~February 7, 2018, the Company ~~agreed to issue 5,000~~received gross proceeds of $1,087,500 from the WestPark Offering, of which $146,975 were expenses, resulting in net proceeds of $940,525, from the sale of units. This resulted in the issuance of 3,480,000 shares of common stock ~~valued~~and 870,000 warrants to purchase common stock at ~~$5,750, to~~ a ~~consulting firm in exchange for investor relations consulting services.~~ price of $0.75.

On ~~August 17, 2015, the consulting agreement was amended, whereby~~February 21, 2018, the Company ~~agreed to issue 5,000~~received additional gross proceeds of $100,000 from the WestPark Offering, of which $28,100 were expenses, resulting in net proceeds of $71,900, from the sale of units. This resulted in the issuance of 320,000 shares of common stock ~~valued~~and 80,000 warrants to purchase common stock at ~~$6,650.~~ a price of $0.75.

On ~~August 26, 2015,~~February 28, 2018, the Company ~~extended~~received additional gross proceeds of $81,250 from the ~~consulting agreement and agreed to issue~~WestPark Offering, of which $12,148 were expenses, resulting in net proceeds of $69,102, from the ~~consultant an additional 10,000~~sale of units. This resulted in the issuance of 260,000 shares of common stock ~~valued~~and 65,000 warrants to purchase common stock at ~~$12,700. On October 9, 2015,~~a price of $0.75. At February 28, 2018, the net proceeds of this sale had not yet been received by the Company, ~~extended~~and the ~~consulting agreement and agreed to issue the consultant an additional 10,000 shares~~amount of $69,102 is recorded as common stock valued at $11,700. On December 15, 2015, the Company extended the consulting agreement and agreed to issue the consultant an additional 10,000 shares of common stock, valued at $8,000. All shares were valued basedsubscriptions receivable on the ~~closing market price~~Company’s balance sheet.

Warrants

On November 15, 2017, in connection with the Company’s sale of ~~the common stock on the grant date. During the year ended May 31, 2016,~~a convertible debenture, the Company issued ~~40,000 shares to this consultant, valued at $32,750.~~

~~As of February 28, 2017, the Company had 70,000 shares of~~FirstFire Global Opportunities Fund, LLC (“FirstFire”) a three-year common stock ~~payable valued at $65,700 due~~purchase warrant to ~~two third party consultants included in stock payable on the accompanying balance sheets. The parties are in discussions regarding whether any~~purchase 350,000 shares of the Company’s common stock ~~have been earned~~at an initial exercise price of $0.75 per share. These warrants were valued at $123,950 and ~~it is uncertain whether any shares will be issued.~~were charged to operations during the nine months ended February 28, 2018.

On February 9, 2018, in connection with the Company’s sale of a convertible debenture, the Company issued Darling Capital (“Darling”) a three-year common stock purchase warrant to purchase 400,000 shares of the Company’s common stock at an initial exercise price of $0.75 per share. These warrants were valued at $313,128 and were charged to operations during the nine months ended February 28, 2018.

On February 16, 2018, in connection with the Company’s sale of a convertible debenture, the Company issued Efrat Investments (“Efrat”) a three-year common stock purchase warrant to purchase 40,000 shares of the Company’s common stock at an initial exercise price of $0.75 per share. These warrants were valued at $32,076 and were charged to operations during the nine months ended February 28, 2018.

On February 26, 2018, in connection with the Company’s sale of a convertible debenture, the Company issued David Lamadrid a three-year common stock purchase warrant to purchase 25,000 shares of the Company’s common stock at an initial exercise price of $0.75 per share. These warrants were valued at $18,974 and were charged to operations during the nine months ended February 28, 2018.

On February 7, 2018, the Company issued three-year common stock purchase warrants to purchase an aggregate of 870,000 shares of the Company’s common stock at an exercise price of $0.75 per share, to investors in the WestPark Offering.

On February 21, 2018, the Company issued three-year common stock purchase warrants to purchase an aggregate of 80,000 shares of the Company’s common stock at an exercise price of $0.75 per share, to investors in the WestPark Offering.

On February 28, 2018, the Company issued three-year common stock purchase warrants to purchase an aggregate of 65,000 shares of the Company’s common stock at an exercise price of $0.75 per share, to investors in the WestPark Offering.

As of February 28, 2018, the Company was obligated to issue a five-year warrant to purchase 152,250 of the Company’s units at an exercise price of $1.25 per unit to WestPark Capital, Inc., the placement agent for the WestPark Offering. Each unit consists of four shares of common stock and one warrant to purchase a share of common stock for $0.75 per share. This warrant is part of the placement agent’s compensation pursuant to the placement agent agreement. This warrant was valued at $610,414, which amount was charged to operations during the nine months ended February 28, 2018.

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The following table summarizes the significant terms of warrants outstanding at February 28, 2018. These warrants were granted as part of financing agreements:

				Weighted		Weighted				Weighted
				average		average				average
Range of		Number of		remaining		exercise				exercise
exercise		warrants		contractual		price of		Number of		price of
Prices		Outstanding		life (years)		outstanding Warrants		warrants Exercisable		exercisable Warrants
$	0.75		1,480,000		2.99	$	0.75		1,480,000	$	0.75

			1,480,000		2.99	$	0.75		1,480,000	$	0.75

Transactions involving warrants are summarized as follows:

	Number of Shares		Weighted Average Exercise Price
Warrants outstanding at May 31, 2017		-	$	-
Granted		1,480,000	$	0.75
Exercised		-	$	-
Cancelled / Expired		-	$	-
Warrants outstanding at February 28, 2018		1,480,000	$	0.75

Note 1213 – Fair Value of Financial Instruments

~~In March 2016, the~~The Company ~~entered into~~has issued convertible ~~note agreements~~notes containing beneficial conversion features to Old Main, Darling, Efrat, David Lamadrid and FirstFire. The Old Main 8% Note was satisfied during the three months ended November 30, 2017, along with the derivative liability associated with the Old ~~Main.~~Main 8% Note. See note 11. One of the features is a ratchet reset provision which, in general, reduces the conversion price should the Company issue equity with an effective price per share that is lower than the stated conversion price in the ~~note agreement (see note 11).~~note. The Company accounts for the fair value of the conversion feature in accordance with ASC 815- Accounting for Derivatives and Hedging and Emerging Issues Task Force (“EITF”) 07-05- Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-05”). The Company carries the embedded derivative on its balance sheet at fair value and accounts for any unrealized change in fair value as a component of its results of operations.

The following summarizes the Company’s derivative financial liabilities that are recorded at fair value on a recurring basis at February 28, ~~2017~~2018 and May 31, ~~2016.~~2017.

	February 28, 2018
	Level 1		Level 2		Level 3		Total
Liabilities
Derivative liabilities	$	-	$	-	$	974,175	$	974,175

	February 28, 2017								May 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities
Derivative liabilities	$	-	$	-	$	167,372	$	167,372	$	-	$	-	$	95,276	$	95,276

May 31, 2016
Level 1 Level 2 Level 3 Total
Liabilities
Derivative liabilities $ - $ - $ 418,537 $ 418,537

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The estimated fair values of the Company’s derivative liabilities are as follows:

Derivative
Liability
Liabilities Measured at Fair Value

Balance as of May 31, 2016 $ 418,537

Issuances 518,720

Conversions/Redemptions (122,657 )

Extinguishment of debt – related party (254,114 )

Revaluation gain (393,114 )

Balance as of February 28, 2017 $ 167,372

	Derivative
	Liability
Liabilities Measured at Fair Value

Balance as of May 31, 2017	$	95,276

Issuances		3,091,039

Conversions/Redemptions		(2,238,003	)

Revaluation loss		25,863

Balance as of February 28, 2018	$	974,175

During the three months ended February 28, 2017, Old Main, holder of the 2016 Convertible Notes, converted an aggregate of $100,000 of principal, in six transactions, into 828,173 shares of common stock. As a result the Company charged $122,657 of derivative liability to additional paid-in capital (see Note 10).

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Note 1314 – Commitment and Contingencies

~~The Company, through~~In connection with the Colorado Arrangement, on April 17, 2015, pursuant to an Industrial Lease Agreement (the “Lease”), CLS Labs Colorado ~~leases 42,392~~leased 14,392 square feet of warehouse and office space (the “Leased ~~Space”~~Real Property”) in a building ~~located on 1.92 acres~~ in Denver, ~~Colorado. CLS Labs~~ Colorado ~~subleases the Leased Space to Picture Rock Holdings, LLC as part of an arrangement whereby Picture Rock Holdings, LLC and its affiliate will conduct~~where certain intended activities, including growing, extraction, conversion, assembly and packaging of cannabis and other plant materials, asare permitted by and in compliance with state, city and local laws, rules, ordinances and regulations. ~~Total expense for~~The Lease has an initial term of seventy-two (72) months and provides CLS Labs Colorado with two options to extend the term of the lease ~~was $139,827~~by up to an aggregate of ten (10) additional years. In August 2017, as a result of the Company’s decision to suspend its proposed operations in Colorado, CLS Labs Colorado asked its landlord to be relieved from its obligations under the Lease, but the parties have not yet reached an agreement on how to proceed.

In August 2017, the Company’s Colorado subsidiary received a demand letter from its Colorado landlord requesting the forfeiture of the $50,000 security deposit, $10,000 in expenses, $15,699 in remaining rent due under the lease agreement and ~~$163,024 for~~$30,000 to buy out the ~~nine months ended~~remaining amounts due under the lease. These expenses, which are a liability of the Company’s Colorado subsidiary, have been accrued on the balance sheet as of February 28, ~~2017 and February 29, 2016.~~2018.

Employment Agreements

CLS Labs and Jeffrey Binder entered into a five-year employment agreement effective October 1, 2014. Under the agreement, Mr. Binder serves as CLS Labs’ Chairman, President and Chief Executive Officer and is entitled to receive an annual salary of $150,000. Under the agreement, Mr. Binder is also entitled to receive a performance bonus equal to 2% of CLS Labs’ annual EBITDA, up to a maximum annual cash compensation of $1 million (including his base salary), and annual stock options, exercisable at the fair market value of CLS Labs’ common stock on the date of grant, in an amount equal to 2% of its annual EBITDA up to $42.5 million and 4% of its annual EBITDA in excess of $42.5 million. On April 28, 2015, CLS Labs and the Company entered into an addendum to Mr. Binder’s employment agreement whereby Mr. Binder agreed that following the merger of CLS Labs and a subsidiary of the Company, in addition to his obligations to CLS Labs, he would serve the Company and its subsidiaries in such roles as the Company may request. In exchange, the Company agreed to assume the obligations of CLS Labs to grant Mr. Binder annual stock options, as referenced above. Mr. Binder continues to receive an annual salary of $150,000 from CLS Labs for serving as its Chairman, President and Chief Executive Officer. My Binder has deferred all of the salary payable to him under his employment agreement through ~~February 28,~~November 30, 2017. On July 20, 2016, ~~and~~ March 31, 2017, August 23, 2017, October 9, 2017, and January 5, 2018 the Company issued Mr. Binder convertible notes in exchange for $250,000, $112,500, $62,500, $39,521, and ~~$112,500,~~$37,500 respectively, in deferred salary, among other amounts owed to Mr. Binder by the Company. As of February 28, ~~2017~~2018 and May 31, ~~2016,~~2017, the Company had accrued compensation due to Mr. Binder in the amount of ~~$112,500~~37,500 and ~~$250,000.~~$37,500.

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Effective August 1, 2015, the Company and Alan Bonsett entered into a five-year employment agreement. Pursuant to the agreement, Mr. Bonsett commenced serving as the Company’s Chief Operating Officer on August 15, 2015. Under the agreement, Mr. Bonsett is entitled to receive an annual salary of $150,000. Further, he is entitled to receive a performance bonus equal to 2% of the Company’s annual EBITDA, up to a maximum annual cash compensation of $1 million (including his base salary), and annual stock options, exercisable at the fair market value of the Company’s common stock on the date of grant, in an amount equal to 2% of its annual EBITDA up to $42.5 million and 4% of its annual EBITDA in excess of $42.5 million. Additionally, Mr. Bonsett received a one-time signing bonus of 250,000 (post Reverse-Split) shares of restricted common stock of the Company, valued at $327,500, which became fully vested one year from the effective date of the agreement. Mr. Bonsett, as an owner of ~~PRH,~~Picture Rock Holdings, LLC (“PRH”), will indirectly receive the benefits of the Colorado Arrangement as discussed in Note ~~10.~~12. The business to be operated by PRH pursuant to the Colorado Arrangement has not yet produced revenues. Mr. Bonsett agreed to defer his salary effective July 1, 2017; at February 28, 2018, the Company had accrued compensation due to Mr. Bonsett in the amount of $37,500. On October 1, 2017, the Company and Mr. Alan Bonsett, the Company’s Chief Operating Officer, mutually agreed to end his employment with the Company. Mr. Bonsett may provide consulting services to the Company in the future on an as needed basis.

Effective November 30, 2017, the Company and Mr. Lamadrid entered into a one-year employment agreement. Pursuant to the agreement, Mr. Lamadrid commenced serving as the Company’s President and Chief Financial Officer on December 1, 2017. Under the agreement, Mr. Lamadrid is entitled to receive an annual salary of $175,000. Further, he is entitled to receive a performance bonus equal to 2% of the Company’s annual EBITDA, and annual restricted stock awards of the Company’s common stock in an amount equal to 3% of its annual EBITDA. Additionally, Mr. Lamadrid is entitled to a one-time signing bonus of 500,000 shares of restricted common stock of the Company, which shall become fully vested one year from the effective date of the agreement.

At February 28, ~~2017~~2018 and May 31, ~~2016,~~2017, the Company had accrued salary due to Michael Abrams, a former officer of the Company, prior to his September 1, 2015 termination, in the amount of ~~$16,250 in accrued compensation on the accompanying consolidated balance sheets.~~$16,250.

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Note 1415 – Subsequent Events

On April 2, 2018, the Company and Alternative Solutions entered into a Third Amendment to the Membership Interest Purchase Agreement (the “Third Amendment”) and extended the date upon which the Company is to pay the “Oasis Note” by approximately one (1) year to December 31, 2019. The Third Amendment also provides that the time period to determine average daily net revenue for the “Bonus Purchase Price”, is amended to be the calendar year ending December 31, 2019 with the payment due thereunder extended to May 30, 2020.

~~During~~On April 2, 2018, the Company and Alternative Solutions also entered into a Fourth Amendment to the Membership Interest Purchase Agreement (the “Fourth Amendment”) and extended the date upon which the Company is to pay the “Closing Consideration,” to May 21, 2018.

The Closing Consideration that the Company must pay to acquire the remaining 90% of the Oasis LLCs, is equal to cash in the amount of $6,200,000, a $4.0 million promissory note due in December 2019 (the “Oasis Note”), and $6,000,000 in shares (the “Purchase Price Shares”) of the Company’s common stock (collectively, the “Closing Consideration”).

The number of Purchase Price Shares shall equal $6,000,000 divided by the lower of $1.00 or the conversion price to receive one share of the Company’s common stock in its next equity offering that commences in 2018, multiplied by 80%. The Oasis Note will be secured by a first priority security interest over the assets of each of the Oasis LLCs and Alternative Solutions, including the Company’s 10% equity interest in the Oasis LLCs, and the Company shall deliver to Alternative Solutions a confession of judgment that will become effective in the event of any event of default under the Oasis Note.

Oasis currently owes certain amounts to a consultant known as 4Front Advisors, LLC. If the Company makes any payments to this company post-closing, generally speaking, the Company will be entitled to deduct the present value of such payments from the principal amount due under the Oasis Note.

Assuming the Company closes on the Acquisition Agreement, in May 2020, Alternative Solutions will be entitled to a $1,000,000 payment from the Company (the “Bonus Purchase Price”) if the existing dispensary operated by an Oasis LLC has maintained an average revenue of $20,000 per day during the 2019 calendar year.

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In connection with the Oasis Acquisition, the Company plans to employ Mr. Ben Sillitoe as its COO. The Company plans to issue him 500,000 shares of restricted common stock pursuant to his proposed employment agreement. Upon the Company’s payment of the closing consideration, it will also be obligated to issue 500,000 shares of its restricted common stock to each of David Lamadrid, its President and Chief Financial Officer, and J.P. Barton, for introducing the Company to Alternative Solutions.

The closing of the Acquisition Agreement is subject to a number of conditions, including the Company’s ability to raise the $8,000,000 in cash required to close the transaction. As a result, there can be no assurance that the Company will be able to close the Oasis Acquisition.

On March ~~2017, Old Main,~~2, 2018, the Company entered into a consulting agreement with Starcity Capital, LLC to assist in its investor relations for a period of three months. Pursuant to the terms of the consulting agreement, the Company issued 117,000 shares of common stock and issued a three-year warrant to purchase up to 412,500 share of common stock at an exercise price of $0.75 per share. The stock and warrants vest over the term of the agreement.

On March 12, 2018, the Company received conversion notices for the related party notes payable to CLS CO 2016, LLC, Newcan and Jeffery Binder. Frank Koretsky, the holder of ~~convertible promissory notes,~~the CLS CO 2016, LLC note, converted ~~an aggregate~~accrued interest in the amount of ~~$37,500 of principal, in two transactions,~~$9,308 into ~~857,808~~29,786 shares of common stock.

~~On March 27, 2017,~~Jeffery Binder converted notes with an aggregate principal amount of $464,698 and accrued interest in the ~~Company entered~~amount of $507,756 into Amendment #3 to the Convertible Promissory Notes issued on March 18, April 22 and May 27, 2016 (the “Third Amendment”) to further amend the 2016 Convertible Notes in certain respects. In the Third Amendment, the Company agreed to (i) prepay all amounts due under the 10% Notes on or before April 1, 2017, which amount was agreed to be $372,669.95 (the “Settlement Amount”), and (ii) to increase the outstanding amount due under the 8% Note as1,624,819 shares of March 18, 2017 by 5%. In exchange for doing so, Old Main agreed to extend the maturity of the 8% Note until July 1, 2017 and to suspend conversions under the 8% Note until July 1, 2017. If we fail to pay the Settlement Amount on or before April 1, 2017, Old Main has the right to declare the Third Amendment null and void.

On ~~March 31, 2017, the Company issued convertible promissory notes to~~common stock. Newcan, ~~Investment Partners LLC,~~ an entity owned by ~~Frank~~Mr. Koretsky, ~~a director~~converted notes with an aggregate principal amount of ~~the company,~~$956,658 and accrued interest in the amount of ~~$120,000,~~$3,375,220 into 3,375,220 shares of common stock. Frank Koretsky also converted accrued interest on notes issued to him in the amount of $46,626 into 149,203 shares of common stock.

On March 30, 2018, the Company conducted its final closing of the WestPark Offering. At such closing, the Company sold 441,563 units (1,413,000 shares of common stock and three-year common stock purchase warrants to purchase 353,250 shares of common stock) for gross proceeds of $441,563. These shares were not yet issued as of April 3, 2018.

On March 30, 2018, the Company issued a five-year warrants to purchase 205,238 units at an exercise price of $1.25 per unit to the placement agent of the WestPark Offering. Each unit consists of four shares of common stock and a warrant to purchase one share of common stock for $0.75 per share.

On April 6, 2018, the Company issued a convertible promissory note to Jeffrey Binder, an officer and director of the Company, in the amount of ~~$159,500~~$37,500.00 (the ~~“Notes”~~“Binder Convertible Note 8”), ~~to finalize the terms of repayment~~ with respect to ~~certain loans made to the Company by Newcan Investment Partners LLC and Mr. Binder between January 1, 2017 and February 27, 2017, and~~ certain compensation payable to Mr. Binder as of February 28, ~~2017.~~2018. The ~~Notes, which otherwise contain identical terms, are~~Note is unsecured and ~~bear~~bears interest at the rate of 10% per annum. No payments are required until April 1, ~~2018,~~2019, at which time all accrued interest becomes due and payable. Principal will be paid in eight equal quarterly installments, together with interest accrued thereon, beginning on July 1, ~~2018.~~2019. The ~~Notes~~Binder Convertible Note 8 may be prepaid by the Company with no penalty at any time upon thirty days written notice.

~~The holder of each Note~~ Mr. Binder may, at any time prior to payment or prepayment in full, convert all principal and accrued interest thereunder, in whole or in part, into securities of the Company. For each ~~$0.25~~$0.3125 converted, ~~the holder~~Mr. Binder will receive one share of the Company’s common ~~stock and a five-year warrant to purchase one share of the Company’s common stock at a price of $0.25 per share.~~stock.

We evaluated subsequent events after the balance sheet date through the date the financial statements were issued. We did not identify any additional material events or transactions occurring during this subsequent event reporting period that required further recognition or disclosure in these financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW AND OUTLOOK

We were incorporated on March 31, 2011 as Adelt Design, Inc. to manufacture and market carpet binding art. Production and marketing of carpet binding art never commenced. On November 20, 2014, we adopted amended and restated articles of incorporation, thereby changing our name to CLS Holdings USA, Inc. Effective December 10, 2014, we effected a reverse stock split of our issued and outstanding common stock at a ratio of 1-for-0.625 (the “Reverse Split”), wherein 0.625 shares of our common stock were issued in exchange for each share of common stock issued and outstanding.

On April 29, 2015, the Company, CLS Labs and the Merger Sub consummated the merger, whereby the Merger Sub merged with and into CLS Labs, with CLS Labs remaining as the surviving entity. As a result of the merger, we acquired the business of CLS Labs and abandoned our previous business. As such, only the financial statements of CLS Labs are included in this annual report.

CLS Labs was originally incorporated in the state of Nevada on May 1, 2014 under the name RJF Labs, Inc. before changing its name to CLS Labs, Inc. on October 24, 2014. It was formed to commercialize a proprietary method of extracting cannabinoids from cannabis plants and converting the resulting cannabinoid extracts into concentrates such as oils, waxes, edibles and shatter. These concentrates may be ingested in a number of ways, including through vaporization via electronic cigarettes (“e-cigarettes”), and used for a variety of pharmaceutical and other purposes. Testing in conjunction with two Colorado growers of this extraction method and conversion process has revealed that it produces a cleaner, higher quality product and a significantly higher yield than the cannabinoid extraction processes currently existing in the marketplace.

On April 17, 2015, CLS Labs took its first step toward commercializing its proprietary methods and processes by entering into the Colorado Arrangement through its wholly owned subsidiary, CLS Labs Colorado, with certain Colorado entities, including PRH. ~~CLS Labs had~~Recently, we suspended our plans to proceed with the Colorado Arrangement due to regulatory delays and have not ~~otherwise~~yet determined when we will pursue it again. Instead, we plan to pursue other revenue producing opportunities, including the Acquisition Agreement with Alternative Solutions, as described below, in other states through the acquisition of cannabis and other complementary companies. We recently received a Notice of Allowance from the U.S. Patent and Trademark Office with respect to our patent application for our proprietary extraction and conversion methodology. We have not yet commercialized ~~its~~our proprietary process ~~prior to the merger~~ and ~~has~~have not earned any revenues.

We intend to monetize our extraction and conversion method and generate ~~revenue~~revenues through (i) the licensing of our patent pending proprietary methods and processes to others, ~~as in the Colorado Arrangement,~~ (ii) the processing of cannabis for others, and (iii) the purchase of cannabis and the processing and sale of cannabis-related products. We plan to accomplish this through the acquisition of companies, the creation of joint ventures, through licensing agreements, and through fee-for-service arrangements with growers and dispensaries of cannabis products. We believe that we can establish a position as one of the premier cannabinoid extraction and processing companies in the industry. Assuming we do so, we then intend to explore the creation of our own brand of concentrates for consumer use, which we would sell wholesale to cannabis dispensaries. We believe that we can create a “gold standard” national brand by standardizing the testing, compliance and labeling of our products in an industry currently comprised of small, local businesses with erratic and unreliable product quality, testing practices and labeling. We also plan to offer consulting services through ~~a consulting subsidiary, CLS~~Cannabis Life Sciences Consulting, LLC, which will generate revenue by providing consulting services to cannabis-related businesses, including growers, dispensaries and laboratories, and driving business to our processing facilities.

With our planned acquisition of Oasis Cannabis pursuant to the Acquisition Agreement, as described below, our mission has shifted to becoming a fully licensed integrated cannabis producer and retailer in Nevada and other western states. Our strategy and business model will be similar to Canopy Growth (WEED.TO), Aurora Cannabis (ACB.TO) and GB Sciences (GBLX). CLS stands for “Cannabis Life Sciences,” in recognition of our patent pending proprietary method of extracting various cannabinoids from the marijuana plant and converting them into products with a higher level of quality and consistency. Our business model includes licensing operations, processing operations, processing facilities, sale of products, brand creation and consulting services.

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On January 4, 2018, the Attorney General of the United States issued new written guidance concerning the enforcement of federal laws relating to marijuana. The Attorney General’s memorandum stated that previous DOJ guidance specific to marijuana enforcement, including the memorandum issued by former Deputy Attorney General James Cole on August 29, 2013 (as amended on February 14, 2014, the “Cole Memo”) is unnecessary and is rescinded, effective immediately. The Cole Memo told federal prosecutors that in states that had legalized marijuana, they should use their prosecutorial discretion to focus not on businesses that comply with state regulations, but on illicit enterprises that create harms like selling drugs to children, operating with criminal gangs, and selling across state lines. In addition, since 2014, the federal budget has prohibited the DOJ from using federal funds to prosecute medical cannabis businesses pursuant to a budget rider, which must be renewed annually and is presently set to expire on January 19, 2018. The Attorney General has now advised that it will be left to the discretion of the local US attorneys in the various districts to decide how and when to enforce the federal marijuana laws. As a result of the Attorney General’s recent guidance, it is unclear whether and how US attorneys in states with medical and/or recreational marijuana laws will enforce federal laws relating to the prohibition of the possession, ownership or sale of marijuana, among other things. It is also unclear whether any states will challenge the Attorney General’s new pronouncement in the applicable courts. However, as a result of the Attorney General’s new guidance, some banks, clearing brokers and other businesses may cease or limit how they do business with companies in the marijuana business to avoid a possible violation of federal law. It is also possible that some US attorneys may begin enforcing federal laws to prevent marijuana businesses that are otherwise validly operating under state laws, from conducting business. Thus, regardless of whether the Attorney General’s new pronouncement is enforced or found to be lawful, it could have a material adverse impact on the marijuana industry, including our business.

We had a net loss of ~~$2,120,900~~$2,501,058 and $5,592,341 for the three and nine months ended February 28, ~~2017,~~2018, resulting in an accumulated deficit as of February 28, ~~2017~~2018 of ~~$6,246,786.~~$14,583,951. These conditions raise substantial doubt about our ability to continue as a going concern.

Results of Operations for the Three Months Ended February 28, ~~2017~~2018 and ~~February 29, 2016~~2017

Revenues

The Company had no revenues during the three months periods ended February 28, ~~2017~~2018 and February ~~29, 2016.~~28, 2017.

General and administrative expenses

General and administrative expenses ~~decreased $262,119~~increased $693,843, or approximately ~~65%~~4481%, to ~~$144,204~~$838,047 during the three months ended February 28, ~~2017,~~2018, compared to ~~$406,323~~$144,204 for the three months ended February ~~29, 2016.~~28, 2017. General and administrative expenses consisted primarily of general office expenses, travel costs, rent expense, compensation costs, bank charges and payroll expenses. The ~~decrease~~increase was primarily due to $610,414 incurred with the ~~reduction~~value of the warrants issued to placement agent for the private offering and $55,000 in ~~noncash~~stock compensation ~~travel and advertising expenses.~~awarded to an officer on the Company. We expect general and administrative expenses to increase in future periods as we implement our business plan and commence operations.

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Professional fees

Professional fees ~~decreased $243,951,~~increased $277,057, or approximately ~~71%~~277%, to ~~$99,867~~$376,924 during the three months ended February 28, ~~2017~~2018 compared to ~~$343,818 for the three months ended February 29, 2016. This decrease was due primarily in the reduction of legal and investor relations fees~~$99,867 for the three months ended February 28, ~~2017~~2017. This increase was due primarily to the greater legal and investor relations fees relating to our convertible debt and equity offerings during the three months ended February 28, 2018 compared to the prior period. We expect professional fees to increase in future periods as our business grows.

Interest expense

Interest expense for the three months ended February 28, ~~2017~~2018 was ~~$381,149,~~$1,434,314, an increase of ~~$274,550~~$1,053,165, or 276%, compared to ~~$106,599~~$381,149 for the three months ended February ~~29, 2016.~~28, 2017. Interest expense increased primarily due to ~~an increase~~$477,195 of interest expense associated with the discount and warrants issued with the Darling Note; $50,035 of interest expense associated with the discount and warrants issued with the Efrat Note; and $24,827 of interest expense associated with the discount and warrants issued with the Lamadrid Note. During the three months ended February 28, 2018, we increased the conversion price of some of the related party convertible notes, which resulted in additional amortization expense of $346,472 during the nine months ended February 28, 2018. During the three months ended February 28, 2018, we also had amortization of ~~the discount on convertible debt, which was $308,606 during the current period compared to $81,116 for the prior year.~~deferred financing costs of $19,450.

Change in fair value of derivative liability

During the three months ended February 28, 2017, Old Main, a holder of convertible promissory notes, converted an aggregate of $100,000 in principal, in six transactions, into 828,173 shares of commons stock. As a result, weWe revalued the derivative liability related to ~~these~~our convertible notes ~~and~~ at February 28, ~~2017.~~2018 at $974,175. This revaluation resulted in a gain of $148,227, a decrease of $96,621 compared to a gain of $244,848 ~~which we included in results of operations for~~during the three months ended February 28, 2017.

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Net loss

For the reasons above, we had a net loss for the three months ended February 28, ~~2017~~2018 of ~~$380,372,~~$2,501,058, which is ~~a decrease~~an increase of ~~$476,368,~~$2,120,686, or approximately ~~56%~~558%, compared to a net loss of ~~$856,740~~$380,372 during the three months ended February ~~29, 2016.~~28, 2017.

Results of Operations for the Nine Months Ended February 28, ~~2017~~2018 and ~~February 29, 2016~~2017

Revenues

The Company had no revenues during the nine months periods ended February 28, ~~2017~~2018 and February ~~29, 2016.~~28, 2017.

General and administrative expenses

General and administrative expenses ~~decreased $435,655,~~increased $654,397, or approximately ~~47%~~136%, to ~~$482,071~~$1,136,468 during the nine months ended February 28, ~~2017,~~2018, compared to ~~$917,726~~$482,071 for the nine months ended February ~~29, 2016.~~28, 2017. General and administrative expenses consisted primarily of general office expenses, travel costs, rent expense, compensation costs, bank charges and payroll expenses. The ~~decrease~~increase was primarily due to $610,414 incurred with the ~~reduction~~value of the warrants issued to placement agent for the private offering and $55,000 in ~~noncash~~stock compensation ~~travel and advertising expenses.~~awarded to an officer on the Company. We expect general and administrative expenses to increase in future periods as we implement our business plan and commence operations.

Professional fees

Professional fees ~~decreased $164,322,~~increased $91,988, or approximately ~~21%~~15%, to ~~$603,098~~$695,086 during the nine months ended February 28, ~~2017~~2018 compared to ~~$767,420 for the nine months ended February 29, 2016. This decrease was due primarily to the reduction of legal and investor relations fees~~$603,098 for the nine months ended February 28, ~~2017~~2017. This increase was due primarily due primarily to the greater legal and investor relations fees relating to our convertible debt and equity securities offerings during the nine months ended February 28, 2018 compared to the prior period. We expect professional fees to increase in future periods as our business grows.

Interest expense

Interest expense for the nine months ended February 28, ~~2017~~2018 was ~~$1,395,511,~~$2,316,145, an increase of ~~$1,218,047~~$920,634, or 66%, compared to ~~$177,464~~$1,395,511 for the nine months ended February ~~29, 2016.~~28, 2017. Interest expense increased primarily due to an increase in amortization of the discount on convertible debt, which was ~~$1,197,998~~$1,391,110 during the current period compared to ~~$114,489~~$752,195 for the comparable period of the prior year. Interest expense also increased due to $477,195 of interest expense associated with the discount and warrants issued with the Darling Note; $50,035 of interest expense associated with the discount and warrants issued with the Efrat Note; and $24,827 of interest expense associated with the discount and warrants issued with the Lamadrid Note. During the nine months ended February 28, 2018, we increased the conversion price of some of the related party convertible notes, which resulted in additional amortization expense of $346,472 during the nine months ended February 28, 2018. During the nine months ended February 28, 2018, we also had amortization of deferred financing costs of $22,569.

Change in fair value of derivative liability

We revalued the derivative liability related to our Convertibles Notes at February 28, 2018 at $974,175. This revaluation resulted in a loss of $25,863, a decrease in the amount of $418,977 compared to a gain of $393,114 during the nine months ended February 28, 2017.

Gain on settlement of debt

~~Table~~During the nine months ended February 28, 2018, we recognized a gain on the settlement of ~~Contents~~accounts payable in the amount of $3,480 because we repaid an account using our common stock. There was no comparable transaction during the nine months ended February 28, 2017.

Loss on modification of debt

During the nine months ended February 28, 2018, we recognized a loss on the modification of debt in the amount of $29,145. This loss related to the amendment of the 8% Note. On November 28, 2016, we entered into an amendment with Old Main regarding the 10% Notes. In exchange for amending the terms of the 10% Notes, we ~~agreed to increase~~increased the outstanding principal balance by 10%, resulting in a loss on the modification of 10% Notes of $33,334, which we included in results of operation for the nine months ended February 28, 2017.

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~~Change in fair value of derivative liability~~Loss on note exchange

AsDuring the nine months ended February 28, 2018, we recognized a ~~result~~loss on the exchange of debt in the amount of $404,532. This loss related to the exchange of the ~~November 28, 2016 amendment to~~April 2015 Note for our 2016 Convertible Notes and the conversion of $100,000 in aggregate principal on the 2016 Convertible Notes, we revalued the derivative liability related to our 2016 Convertible Notes at February 28, 2017 at $167,372. This revaluation resulted incommon stock. There was not a ~~gain of $393,114, which we included in results of operations for~~similar transaction during the nine months ended February 28, 2017.

Loss on extinguishment of debt

During the nine months ended February 28, 2018, we recognized a loss on the extinguishment of debt in the amount of $989,032. This loss is related to the exchange of the 8% Note for our common stock. There was no comparable transaction during the nine months ended February 28, 2017.

Net loss

For the reasons above, we had a net loss for the nine months ended February 28, ~~2017~~2018 of ~~$2,120,900,~~$5,592,341 which is an increase ~~in loss~~ of ~~$258,290,~~$3,471,441, or approximately ~~14%~~164%, compared to a net loss of ~~$1,862,610~~$2,120,900 during the nine months ended February ~~29, 2016.~~28, 2017.

Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital at February 28, ~~2017~~2018 compared to May 31, ~~2016.~~2017.

	February 28, 2017			May 31, 2016			February 28, 2018			May 31, 2017
Current Assets	$	28,731		$	94,986		$	58,762		$	79,720
Current Liabilities	$	2,185,957		$	1,339,444		$	2,794,538		$	1,826,478
Working Capital (Deficit)	$	(2,157,226	)	$	(1,244,458	)	$	(2,735,776	)	$	(1,746,758	)

At February 28, ~~2017~~2018 and May 31, ~~2016,~~2017, we had a working capital deficit of ~~$2,157,226~~$2,735,776 and ~~$1,244,458,~~$1,746,758, respectively. This working capital deficit occurred primarily because we have not yet commenced earning revenues. We ~~anticipate that we will~~plan to commence earning revenues upon the closing on our pending Acquisition Agreement with Alternative Solutions, which we believe will close in ~~the next three months.~~approximately May l, 2018, assuming certain conditions are satisfied, as described below. During the nine months ended February 28, ~~2017,~~2018, we obtained loans from our officers, directors and entities affiliated with Frank Koretsky, one of our directors, to cover operating ~~expenses~~expenses. We also obtained a loan from FirstFire to pay the initial deposit due under the Acquisition Agreement. We obtained the funds for the second $1.8 million deposit from the proceeds of the Darling Capital loan and ~~expenses related to~~from the ~~Colorado Arrangement.~~net proceeds from the first closing of the WestPark Offering. This working capital deficit will likely ~~continue to~~ increase until we begin earning revenues but should not be viewed as an indicator of our future performance once we commence earning revenues. We have operated at a loss since inception.

Cash flows used in operating activities was $909,072 during the nine months ended February 28, 2018 compared to $899,291 during the nine months ended February 28, 2017, ~~compared to $871,924 during the nine months ended February 29, 2016. This increase is primarily due to the~~an increase in the amount of ~~amortization of debt discount associated with our convertible notes~~$9,781. This increase is due primarily to an increase in accounts payable and accrued expenses at February 28, 2018 in the amount of ~~$1,197,998,~~$800,196 compared to the ~~increase in the change in fair value of the derivative liability associated with the 2016 Convertible Notes by $393,114, and the loss on modification of the 10% Notes in the amount of $33,334.~~prior period.

Cash flows used in investing activities ~~used~~was $2,050,000 during the nine months ended February 28, 2018 compared to $35,013 during the nine months ended February 28, ~~2017 compared to $44,477~~2017. The amounts used during the nine months ended February ~~29, 2016. During~~28, 2018 were the initial $250,000 and $1,800,000 deposits made pursuant to the terms of the Acquisition Agreement. The amounts used during the nine months ended February 28, 2017 ~~we used these funds toward~~related to construction ofin progress at our Colorado ~~facility.~~ processing facility, which has been put on hold.

Cash flows ~~from~~provided by financing activities provided $2,903,495 during the nine months ended February 28, 2018 compared to $852,000 during the nine months ended February 28, ~~2017 compared to $737,750 during the nine months ended February 29, 2016.~~2017. The increase in cash flows from financing activities during the nine months ended February 28, ~~2017,~~2018, was primarily due to our ~~need~~sale of the convertible notes to ~~borrow additional funds from our officers, directors~~Darling, Efrat and ~~entities affiliated with one~~David Lamadrid and the sale of our ~~directors, because we had not yet commenced earning revenue.~~

~~On April 29, 2015, we issued a convertible promissory note (the “April 2015 Note”) to an unaffiliated individual~~equity securities in the amount of $200,000. Interest accrues on the April 2015 Note at a rate of 15% per annum. On the first anniversary of the April 2015 Note, all then-accrued interest was due thereunder. Thereafter, principal together with accrued interest is due in eight (8) equal quarterly payments, in arrears, commencing on July 1, 2016. All outstanding principal and any accumulated unpaid interest thereon shall be due and payable on the third anniversary of note. At the holder’s election, at any time prior to payment or prepayment of the April 2015 Note in full, all principal and accrued interest under the April 2015 Note may be converted in whole, but not in part, into our securities. For each dollar converted, the holder shall receive two shares of common stock and a three-year warrant to purchase 1.33 shares of common stock at $0.75 per share. DuringWestPark Offering.

Cash flows provided by financing activities provided $2,903,495 during the nine months ended February 28, ~~2017 we repaid $75,000 in principal and $49,265 in interest under this note. At~~2018 compared to $852,000 during the nine months ended February 28, ~~2017, we owed $127,187~~2017. The increase in ~~principal~~cash flows from financing activities during the nine months ended February 28, 2018, was primarily due to the net proceeds from the WestPark offering and ~~accrued interest under~~additional convertible notes issued during the ~~April 2015 Note.~~nine months ended February 28, 2018.

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Old Main Agreements

On March 18, 2016, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Old Main, whereby Old Main agreed to purchase an aggregate of up to $500,000 in subscription amount corresponding to an aggregate of up to $555,555 in principal amount of 10% Original Issuance Discount Convertible Promissory Notes (the “10% Notes”) due, subject to the terms therein, in installments as set forth below. The purchase was originally to occur, at our option, in up to five tranches, with the first tranche of $200,000 being purchased on March 18, 2016; t~~he second tranche of $50,000 being purchased on the first Friday, which is a trading day after~~ the date (the “Filing Date”) that a registration statement (the “Registration Statement”) registering shares of common stock of the Company issuable upon conversion or repayment of the 10% Notes, is filed with the SEC; the third tranche of $50,000 being purchased ~~on the first Friday, which is a trading day at least three (3) trading days after the~~ Company receives initial comments from the SEC on the Registration Statement, or the date that we are notified by the SEC that the Registration Statement will not be reviewed; and the fourth and fifth tranches of $100,000 each being purchased after the date that the Registration Statement was declared effective by the SEC (the “SEC Effective Date”). On October 6, 2016, we amended the Purchase Agreement and related documents (the “First Amendment”) to reduce the aggregate principal amount under the 10% Notes from $555,555 to $333,333, all $300,000 in subscription amount of which has been funded and used by us for general working capital purposes. We also increased the interest rate of the 10% Notes from 10% to 15% effective August 1, 2016. Finally, pursuant to the First Amendment, we agreed with Old Main that we would not register the resale of the shares underlying the 2016 Convertible Notes, as defined below, pursuant to the Registration Statement but would utilize the Registration Statement solely to register the resale of shares of common stock sold by us to Old Main pursuant to the equity line agreement, as described below.

As a result of the First Amendment, effective September 1, 2016, we deferred the commencement of amortization payments on the 10% Notes by 30 days. As amended, at the earlier of October 18, 2016 or two (2) trading days after the SEC Effective Date, we must begin to redeem 1/24th of the face amount of the 10% Notes and any accrued but unpaid interest on a bi-weekly basis. Such amortization payment may be made, at our option, in cash or, subject to certain conditions, in our common stock pursuant to a conversion rate equal to the lower of (a) $0.80 (the “Fixed Conversion Price”) or (b) 75% of the lowest daily volume weighted average price of the common stock of (the “VWAP”) in the 20 consecutive trading days immediately prior to the applicable conversion date. At any time after the issue date of the Notes, the holder may convert the 10% Notes into shares of our common stock at the holder’s option. The conversion price will be the Fixed Conversion Price. Subject to certain exclusions, if we sell or issues its common stock or certain common stock equivalents at an effective price per share that is lower than the Fixed Conversion Price, the conversion price will be reduced to equal to such lower price.

On November 28, 2016, we entered into a Second Amendment to the 10% Notes issued on March 18, April 22 and May 27, 2016 (the “Second Amendment”) to amend the Agreements, as amended by the First Amendment, in certain respects. Pursuant to the Second Amendment, among other things, the 10% Notes were converted from installment notes to “balloon” notes, with all principal and interest on the 10% Notes due on September 18, 2017 and the outstanding principal balances of the 10% Notes were increased by 10%; the Fixed Conversion Prices associated with the 10% Notes were changed to variable conversion prices equal to the lesser of the prior Fixed Conversion Price or 75% of the lowest VWAP in the fifteen trading days ending on the trading day immediately prior to the conversion date; our ability to repay the Notes with our common stock was deleted except pursuant to a voluntary conversion by Old Main; and Old Main was prohibited from selling, per trading day, an amount of our common stock in excess of the greater of $5,000 or 25% of the average number of shares of common stock sold per day for the five trading days preceding the day of sale multiplied by the average daily VWAP during the immediately preceding 5-trading day period.

On March 27, 2017, we entered into Amendment #3 to the Convertible Promissory Notes issued on March 18, April 22 and May 27, 2016 (the “Third Amendment”) to further amend the Agreements, as amended by the First Amendment and Second Amendment, in certain respects. In the Third Amendment, we agreed, among other things, to prepay all amounts due under the 10% Notes on or before April 1, 2017, which amount was agreed to be $372,669.95 (the “Settlement Amount”). If we fail to pay the Settlement Amount on or before April 1, 2017, Old Main has the right to declare the Third Amendment null and void.

~~During the three months ended February 28, 2017, Old Main converted an aggregate of $100,000 in principal of the 10% Notes, in six transactions, into 828,173 share of common stock.~~

~~On March 18, 2016, we also~~ issued Old Main an 8% Convertible Promissory Note (the “8% Note”) in the principal amount of $200,000 for Old Main’s commitment to enter into an equity line transaction with us and prepare all of the related transaction documents. The 8% Note bears interest at the rate of 8% per annum. ~~As a result of~~On October 6, 2016, we amended the ~~First Amendment, we also deferred~~8% Note, among other documents (the “First Amendment”) to defer the commencement of amortization payments on the 8% Note so that they ~~now commence~~commenced at the earlier of February 3, 2017 or on the ~~SEC Effective Date.~~date the registration statement with respect to the underlying shares had been declared effective by the SEC. On such date, we ~~must~~were required to begin to redeem 1/6th of the face amount of the 8% Note and any accrued but unpaid interest on a monthly basis. Such amortization payment ~~may~~could be made, at ~~the~~our option, ~~of the Company,~~ in cash or, subject to certain conditions, in our common stock ~~of the Company~~ pursuant to a conversion rate equal to the lower of (a) $1.07 (the “8% Note Fixed Conversion Price”) or (b) 75% of the lowest VWAP in the twenty (20) consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date. Subject to certain exclusions, if we ~~sell~~had sold or ~~issue~~issued our common stock or certain common stock equivalents at an effective price per share that iswas lower than the 8% Note Fixed Conversion Price, the conversion price ~~will be~~would have been reduced to equal to such lower price.

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On November 28, 2016, we entered into a Second Amendment to the 8% Note issued on March 18 (the “Second Amendment”) to amend the ~~Agreements,~~8% Note, among other documents, as amended by the First Amendment, in certain respects. Pursuant to the Second Amendment, among other things, the 8% ~~Notes were~~Note was converted from an installment ~~notes~~note to a “balloon” ~~notes,~~note, with all principal and interest on the 8% ~~Notes~~Note due on March 18, 2017; the Fixed Conversion ~~Prices~~Price associated with the 8% ~~Notes were~~Note was changed to a variable conversion ~~prices~~price equal to the lesser of the prior Fixed Conversion Price or 75% of the lowest VWAP in the fifteen trading days ending on the trading day immediately prior to the conversion date; our ability to repay the ~~Notes~~8% Note with our common stock was deleted except pursuant to a voluntary conversion by Old Main; and Old Main was prohibited from selling, per trading day, an amount of our common stock in excess of the greater of $5,000 or 25% of the average number of shares of common stock sold per day for the five trading days preceding the day of sale multiplied by the average daily VWAP during the immediately preceding 5-trading day period.

On March 27, 2017, we entered into the ~~Third Amendment,~~third amendment to the 8% Note, which, among other things, increased the outstanding amount due under the 8% Note as of March 18, 2017 by 5%. In exchange for doing so, Old Main agreed to extend the maturity of the 8% Note until July 1, 2017 and to suspend conversions under the 8% Note until July 1, 2017. If

On July 6, 2017, we ~~fail~~entered into the fourth amendment to ~~pay~~ the ~~Settlement Amount~~8% Note (the “Fourth Amendment”) to further amend the terms of the 8% Note. Pursuant to the Fourth Amendment, the maturity date of the 8% Note was extended to July 15, 2017 and the outstanding balance of the 8% Note as of June 30, 2017 was increased by multiplying it by 1.075. The Fourth Amendment was effective on ~~or before April 1,~~June 30, 2017.

On August 23, 2017, ~~Old Main has~~we entered into the ~~right~~fifth amendment to ~~declare~~ the ~~Third~~8% Note (the “Fifth Amendment”) to further amend the terms of the 8% Note. Pursuant to the Fifth Amendment, ~~null~~the maturity date of the 8% Note was extended to September 15, 2017 and ~~void.~~the outstanding balance remained unchanged. The Fifth Amendment was effective on July 15, 2017.

On September 25, 2017, but effective as of September 15, 2017, we entered into an Exchange Agreement, whereby we agreed to exchange the 8% Note for 4,500,000 shares of our common stock. Pursuant to an oral agreement with the original holder of the 8% Note, principal due under the 8% note was increased by $96,862 to a total of $322,612 prior to the date on which the exchange of the 8% Note for common stock occurred.

On April 18, 2016, we also entered into an equity line agreement with Old Main whereby we may issue and sell to Old Main, at our option from time to time, up to $4,000,000 of our common stock at a purchase price equal to 80% of the lowest VWAP of the common stock during a five day “Valuation Period.”

On October 6, 2016, we entered into an amendment ofto the ~~Equity Purchase~~equity line Agreement to amend the new ~~Commitment Period,~~commitment period, which is 24 months from the date of this amendment. Second, the ~~Equity Purchase Agreement~~equity line agreement was amended to prohibit us from delivering a subsequent ~~Put Notice~~put notice from the beginning of any “Valuation Period” until the fourth ~~Trading Day~~trading day immediately following the closing associated with the prior ~~Put Notice.~~put notice. Third, the beneficial ownership limitation was amended to increase the ~~Beneficial Ownership Limitation~~beneficial ownership limitation to 9.99% and to remove the ability of ~~the Investor~~Old Main to increase or decrease the ~~Beneficial Ownership Limitation.~~beneficial ownership limitation.

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FirstFire Note

On November 15, 2017, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with FirstFire Global Opportunities Fund, LLC (“FirstFire”), whereby FirstFire agreed to purchase a 5% Senior Convertible Promissory Note in the aggregate principal amount of $363,000 (the “FirstFire Note”) from us due, subject to the terms therein, due seven (7) months from the date of issuance, for a purchase price of $330,000.

The FirstFire Note bears interest at the rate of 5% per annum. Any past due accrued and unpaid interest to be paid under the FirstFire Note bears interest at the lesser of 15% per annum or the maximum rate permitted by applicable law. At any time prior to the 180th day following the date of issuance, we may prepay all or any portion of the principal amount of the FirstFire Note and any accrued and unpaid interest by paying the following amounts: (i) within the initial 90 days after the date of issuance: 115% multiplied by the principal amount then due plus accrued interest; and (ii) from the 91st day through the 180th day after the date of issuance: 125% multiplied by the principal amount then due plus accrued interest.

The FirstFire Note is convertible at any time into shares of our common stock, at the option of the holder, at an initial conversion rate equal $0.40 per share of common stock (the “Fixed Conversion Price”). Any time on or after the 180th day after the issuance of the FirstFire Note, the conversion price shall equal the lower of (a) the Fixed Conversion Price or (b) 75% of the lowest traded price of our common stock in the 20 consecutive trading days immediately prior to the day that we receive the applicable conversion notice. Subject to certain exclusions, if we sell or issue our common stock or certain common stock equivalents at an effective price per share that is lower than the then applicable conversion price, the conversion price will be reduced to be equal to such lower price. In the event of any event of default under the FirstFire Note, the outstanding principal amount of the FirstFire Note plus accrued but unpaid interest, multiplied by 150%, shall become immediately due and payable in common stock and/or cash, at the election of the holder.

On the closing date, we also issued FirstFire a three year common stock purchase warrant to purchase 350,000 shares of our common stock at an initial exercise price of $0.75 per share and agreed to issue FirstFire promptly following the closing date 250,000 shares of our restricted common stock as a commitment fee to enter into the Purchase Agreement and prepare all of the related transaction documents.

During ~~July~~the three months ended February 28, 2018, an event occurred that triggered the reduction of the FirstFire Fixed Conversion Price from $0.40 per share to $0.3125 per share.

Darling Capital Note

On February 5, 2018, we entered into a Securities Purchase Agreement with Darling Capital LLC, (“Darling”), whereby Darling agreed to purchase a 8% Convertible Promissory Note in the aggregate principal amount of $550,000 (the “Darling Note”) from us due, subject to the terms therein, eighteen (18) months from the date of issuance, for a purchase price of $500,000.

Darling may, at its option, convert all or a portion of the Darling Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.3125 per share. The Darling Note also contains a reset feature, whereby, absent certain exceptions, if the Company issues equity securities at an effective price less than $0.3125 per share of common stock, the conversion price of the Darling Note will be reset to such lower price.

On the closing date, we also issued Darling a three-year common stock purchase warrant to purchase 400,000 shares of our common stock at an initial exercise price of $0.75 per share.

Efrat Investments Note

On February 16, 2018, we entered into a Securities Purchase Agreement with Efrat Investments LLC, (“Efrat”), whereby Efrat agreed to purchase a 8% Convertible Promissory Note in the aggregate principal amount of $55,000 (the “Efrat Note”) from us due, subject to the terms therein, eighteen (18) months from the date of issuance, for a purchase price of $50,000.

Efrat may, at its option, convert all or a portion of the Efrat Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.3125 per share. The Efrat Note also contains a reset feature, whereby, absent certain exceptions, if the Company issues equity securities at an effective price less than $0.3125 per share of common stock, the conversion price of the Efrat Note will be reset to such lower price.

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On the closing date, we also issued Efrat a three-year common stock purchase warrant to purchase 40,000 shares of our common stock at an initial exercise price of $0.75 per share.

David Lamadrid Note

On February 26, 2018, we entered into a Securities Purchase Agreement with David Lamadrid, (“Lamadrid”), whereby Mr. Lamadrid agreed to purchase a 8% Convertible Promissory Note in the aggregate principal amount of $31,250 (the “Lamadrid Note”) from us due, subject to the terms therein, eighteen (18) months from the date of issuance.

Mr. Lamadrid may, at his option, convert all or a portion of the Lamadrid Note and accrued but unpaid interest into shares of common stock at a conversion price of $0.3125 per share. The Lamadrid Note also contains a reset feature, whereby, absent certain exceptions, if the Company issues equity securities at an effective price less than $0.3125 per share of common stock, the conversion price of the Lamadrid Note will be reset to such lower price.

On the closing date, we also issued Mr. Lamadrid a three-year common stock purchase warrant to purchase 25,000 shares of our common stock at an initial exercise price of $0.75 per share.

Koretsky and Affiliate Notes

Between August 11, 2015 and May 31, 2017, we borrowed an aggregate of $1,657,000 from Frank Koretsky, a director of the Company, and $150,000 from CLS CO 2016, LLC and $465,000 from Newcan Investment Partners, LLC, two entities that are affiliated with Mr. Koretsky. These loans were unsecured, accrued interest between 6% and 15% per year, were due either on demand or within three years after the date of the applicable note, and, in some cases, were convertible into shares of our common stock and warrants at rates between $.25 and 1.07 per share. Effective on May 31, 2017, we ~~issued convertible promissory notes~~entered into the Omnibus Loan Amendment Agreement, whereby the portion of these loans that was advanced prior to December 31, 2017 was converted into our common stock, together with accrued interest on these loans. As a result of these conversions, Mr. Koretsky, CLS CO 2016 and Newcan converted an aggregate of $1,485,000, $150,000, and $460,000 in ~~favor~~principal, and $130,069, 49,247 and $7,747 in accrued interest, into an aggregate of 6,460,276, 636,988 and 1,870,988 shares of common stock at $.25 per share. Pursuant to the Omnibus Loan Amendment Agreement, the conversion rate on all of the loans made by Mr. Koretsky, CO CLS 2016, and Newcan was reduced, if applicable, to $.25 per share and Mr. Koretsky and his affiliates gave up the right to receive warrants upon conversion. Thus, each of Mr. Koretsky, CLS CO 2016 and ~~Mr. Binder. These notes represent deferred salary~~Newcan received 4,560,849, 488,159 and 1,433,841 shares of ~~$250,000 due~~common stock in excess of what they would have received had they converted their loans into common stock prior to ~~Mr. Binder and prior advances in~~ the ~~amount~~effective date of ~~$12,750 from Mr. Binder, and $210,000 in advances from Mr.~~the Omnibus Loan Amendment Agreement.

Effective March 31, 2017, $120,000 of the Koretsky ~~being reclassified as convertible notes payable. These notes are~~Funding Notes was exchanged for Newcan Convertible Note 1. This note is unsecured and ~~bear~~bears interest at the rate of 10% per annum. No payments are required until ~~July~~April 1, ~~2017,~~2018, at which time all accrued interest becomes due and payable. Principal will be ~~paid~~payable in eight equal quarterly installments, together with accrued interest, beginning on ~~October~~July 1, ~~2017.~~2018. At ~~the note holder’s~~Newcan’s election, at any time prior to payment or prepayment of the loans in full, all principal and accrued interest under the loans may be converted, in whole or in part, into our securities. Upon such an election, the holder will receive 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~~the rate of ~~$1.07 per share.~~one share for each $0.25 converted.

~~On August 3, 2016, we borrowed $150,000~~After excluding the loans from Mr. Koretsky, CLS CO 2016 and Newcan that were converted into our common stock effective as of May 31, 2017, there was a balance of $120,000 in loans that remained outstanding as of December 31, 2016. This amount consisted of the $120,000 principal balance of the Koretsky Funding Loans (which were exchanged for Newcan Convertible Note 1 on March 31, 2017). Prior to May 31, 2017, Newcan advanced an ~~entity affiliated with Mr. Koretsky. This note is~~additional $621,658 of unsecured book entry loans. During the three months ended August 31, 2017, $621,658 was transferred out of the Newcan Funding Notes and ~~bears~~used to fund Newcan Convertible Note 4. In addition, during the three months ended August 31, 2017, Newcan loaned the Company an additional $70,000 under the Newcan Funding Notes; this amount was transferred out of the Newcan Funding Notes and used to fund Newcan Convertible Note 5. These loans bear interest at the rate of ~~15%~~10% per ~~annum. All~~annum and are convertible into our common stock at the rate of one share for each $0.25 converted. No payments are required until October 1, 2018, at which time all accrued interest ~~accruing during the first year will be added to principal. Commencing on November 1, 2017, principal~~becomes due and payable. Principal will be payable in ~~four~~eight equal quarterly installments, together with accrued ~~interest.~~interest, beginning on January 2, 2019. At ~~the note holder’s~~Newcan’s election, at any time prior to payment or prepayment of the ~~loan~~Newcan Convertible Note 4 or 5 in full, all principal and accrued interest under the ~~loan~~Newcan Convertible Note 4 or 5 may be converted, in whole or in part, into our securities. Upon such an election, the holder will receive 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~~the rate of ~~$1.07 per share.~~one share for each $0.25 converted.

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On ~~January 10,~~October 9, 2017, ~~the Company issued convertible promissory notes to~~ Newcan ~~Investment Partners LLC, an entity owned solely by Frank Koretsky, who is a director~~exchanged $30,000 in principal of ~~the Company,~~Newcan Funding Notes (advanced in ~~the amount of $410,000 and $50,000 and bear~~September 2017) for Newcan Convertible Note 6. This note bears interest at the rate of 10% per ~~annum thereafter.~~annum. No payments are required until January 2, ~~2018,~~2019, at which time all accrued interest becomes due and payable. Commencing on April 1, ~~2018,~~2019, the first of eight principal payments will ~~be payable~~become due; subsequent principal payments will become due on the first day of each July, October, January and April until paid in ~~eight equal quarterly installments, together with accrued interest. At the~~full. This note ~~holder’s election, at any time prior to payment or prepayment of the loan in full, all principal~~ and accrued interest ~~under the loan~~thereunder may be converted, in whole or in part, into ~~our securities. Upon such an election, the holder will receive~~ 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.~~for each $0.25 converted.

On Ma~~rch 31,2017,~~January 5, 2018, we issued a convertible promissory ~~notes~~note to Newcan ~~Investment Partners LLC, an entity owned by Frank Koretsky, a director of the company,~~ in the amount of $120,000 (the “Koretsky Note”), and to Jeffrey Binder, an officer and director of the Company, in the amount of $159,500 (the “Binder Note” and, together with the Koretsky Note, the “Notes”),$115,000 to finalize the terms of repayment with respect to certain loans made to us by Newcan between October 13, 2017 and December 27, 2017 (the “Newcan Convertible Note 7). This note is unsecured and bears interest at the rate of 10% per annum. No payments are required until April 1, 2019, at which time all accrued interest becomes due and payable. Principal will be paid in eight equal quarterly installments, together with interest accrued thereon, beginning on July 1, 2019. The note may be prepaid by us with no penalty at any time upon thirty days written notice.

On January 10, 2018, effective December 1, 2017, we entered into the Second Omnibus Loan Agreement with Newcan, an entity owned by Frank Koretsky, a director of the Company, and Mr. Binder. The Second Omnibus Loan Agreement provides that the conversion price of all outstanding convertible promissory notes issued to Newcan as of the date of the agreement would be increased from $0.25 to $0.3125 per share of common stock. The remaining terms of such notes remain unchanged.

Binder Notes

Between June 1, 2015 and May 31, 2017, we borrowed an aggregate of $251,800 from Jeffrey Binder, a director and officer of the Company. These loans were unsecured, accrued interest between 6% and 10% per year, were due either on demand or within three years after the date of the applicable note, and, in some cases, were convertible into shares of our common stock and warrants at rates between $.25 and 1.07 per share. Effective on May 31, 2017, we entered into the Omnibus Loan Amendment Agreement, whereby the portion of these loans that was advanced prior to May 31, 2017 was converted into our common stock, together with accrued interest on these loans. As a result of these conversions, Mr. Binder converted an aggregate of $442,750 in principal and $19,427 in accrued interest, into an aggregate of 1,848,708 shares of common stock at $.25 per share. Pursuant to the Omnibus Loan Amendment Agreement, the conversion rate on all of the loans made by ~~Newcan Investment Partners LLC~~Mr. Binder was reduced, if applicable, to $.25 per share and Mr. Binder ~~between January 1,~~gave up the right to receive warrants upon conversion. Thus, Mr. Binder received 1,127,061 shares of common stock in excess of what he would have received had he converted his loans into common stock prior to the effective date of the Omnibus Loan Amendment Agreement.

Effective March 31, 2017, $47,000 of the Binder Funding Notes and ~~February 27, 2017, and certain compensation payable~~$25,000 of accrued salary due to Mr. Binder ~~as of February 28, 2017. The Notes, which otherwise contain identical terms, are~~were exchanged for Binder Convertible Note 4. This note is unsecured and ~~bear~~bears interest at the rate of 10% per annum. No payments are required until April 1, 2018, at which time all accrued interest becomes due and payable. Principal will be payable in eight equal quarterly installments, together with accrued interest, beginning on July 1, 2018. At Mr. Binder’s election, at any time prior to payment or prepayment of the loans in full, all principal and accrued interest under the loans may be converted, in whole or in part, into our common stock at the rate of one share for each $0.25 converted.

All of Mr. Binder’s loans that were outstanding as of December 31, 2016 were converted to common stock effective May 31, 2017, including all of his accrued deferred salary as of December 31, 2016. As of May 31, 2017, there was a balance of $149,550 in loans from Mr. Binder that remained outstanding. This amount consisted of the $72,000 principal balance of Binder Convertible Note 4, which related to advances made and salary accrued after January 1, 2017, and an additional $77,550 of unsecured, book entry loans. During the three months ended August 31, 2017, Mr. Binder advanced a total of $47,767 to the Company under the Binder Funding Notes. Also during the three months ended August 31, 2017, principal in the amount of $77,550, accrued salary due to Mr. Binder in the amount of $37,500, and accrued interest in the amount of $2,246 were transferred from the Binder Funding Notes to fund Binder Convertible Note 5, and principal in the amount of $47,767, accrued salary due to Mr. Binder in the amount of $25,000, and accrued interest in the amount of $1,384 were transferred from the Binder Funding Notes to fund Binder Convertible Note 6. The Binder Convertible Notes 5 and 6 are unsecured and bear interest at the rate of 10% per annum. No payments are required until October 1, 2018, at which time all accrued interest becomes due and payable. Principal will be payable in eight equal quarterly installments, together with accrued interest, beginning on January 2, 2019. At Mr. Binder’s election, at any time prior to payment or prepayment of the Binder Convertible Note 5 or 6 in full, all principal and accrued interest under the Binder Convertible Note 5 or 6 may be converted, in whole or in part, into our common stock at the rate of one share for each $0.25 converted.

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On October 9, 2017, Mr. Binder, an officer and director of the Company, exchanged $39,521 in principal of Binder Funding Notes (advanced in September and October 2017) for Binder Convertible Note 7. This amount included $12,500 of accrued but unpaid salary due by the Company to Mr. Binder. This note bears interest at the rate of 10% per annum. No payments are required until January 2, 2019, at which time all accrued interest becomes due and payable. Commencing on April 1, 2019, the first of eight principal payments will become due; subsequent principal payments will become due on the first day of each July, October, January and April until paid in full. This note and accrued interest thereunder may be converted, in whole or in part, into one share of common stock for each $0.25 converted.

On January 5, 2018, we issued a convertible promissory note to Mr. Binder in the amount of $165,360 to finalize the terms of repayment with respect to certain loans made to us by Mr. Binder between November 6, 2017 and December 27, 2017, and certain compensation payable to Mr. Binder as of November 30, 2017 (the “Binder Convertible Note 8). This note is unsecured and bears interest at the rate of 10% per annum. No payments are required until April 1, 2019, at which time all accrued interest becomes due and payable. Principal will be paid in eight equal quarterly installments, together with interest accrued thereon, beginning on July 1, ~~2018.~~2019. The ~~Notes~~note may be prepaid by ~~the Company~~us with no penalty at any time upon thirty days written notice.

On January 10, 2018, effective December 1, 2017, we entered into the Second Omnibus Loan Agreement with Jeffrey I. Binder, an officer and director of the Company and Newcan. The Second Omnibus Loan Agreement provides that the conversion price of all outstanding convertible promissory notes issued to Mr. Binder as of the date of the agreement would be increased from $0.25 to $0.3125 per share of common stock. The remaining terms of such notes remain unchanged.

~~Table~~On April 6, 2018, we issued Binder Convertible Note 8, in the amount of ~~Contents~~

$37,500.00, to Mr. Binder with respect to certain compensation payable to Mr. Binder as of February 28, 2018. Binder Convertible Note 8 is unsecured and bears interest at the rate of 10% per annum. No payments are required until April 1, 2019, at which time all accrued interest becomes due and payable. Principal will be paid in eight equal quarterly installments, together with interest accrued thereon, beginning on July 1, 2019. The ~~holder of each Note~~note may be prepaid by us with no penalty at any time upon thirty days written notice. Mr. Binder may, at any time prior to payment or prepayment in full, convert all principal and accrued interest thereunder, in whole or in part, into ~~securities of the Company.~~our securities. For each ~~$.25~~$0.3125 converted, ~~the holder~~Mr. Binder will receive one share of the Company’s common stock.

Omnibus Loan Amendment Agreement and Second Omnibus Loan Amendment

On May 31, 2017, we entered into an Omnibus Loan Amendment Agreement (the “Omnibus Loan Amendment”) with Jeffrey I. Binder, Frank Koretsky, Newcan Investment Partners LLC and CLS CO 2016, LLC (collectively, the “Insiders”). Pursuant to the Omnibus Loan Amendment, we agreed with the Insiders to amend certain terms of loans the Insiders made to us for working capital purposes, which loans were initially demand loans, and, except for certain loans made in 2017, were later memorialized as convertible loans (the “Insider Loans”), in exchange for the agreement of the Insiders to convert all Insider Loans where funds were advanced prior to January 1, 2017, which total $2,537,750, plus $166,490 of accrued interest thereon, into an aggregate of 10,816,960 shares of our common stock, and forego the issuance of warrants to purchase our common stock upon conversion. This resulted in the issuance of an additional 7,609,910 shares compared to the original number of shares issuable upon conversion of the Insider Loans prior to the Omnibus Loan Agreement. We valued the shares at $0.125, which was the market price of our stock at the conversion date, and charged the amount of $951,239 to loss on modification of debt during the twelve months ended May 31, 2017.

We entered into the Omnibus Loan Amendment in order to ease the debt burden on us and prevent us from defaulting on the Insider Loans. Pursuant to the Omnibus Loan Amendment, the following amendments were made to the Insider Loans: (a) we reduced the conversion price on the Insider Loans from between $0.75 and $1.07 per share of common stock to $0.25 per share of common stock, in those cases where the conversion price was greater than $0.25, which reduced conversion price exceeds the closing price of the common stock during the last three months; (b) we deleted the requirement to issue warrants to purchase our common stock upon conversion of the Insider Loans; (c) we amended one Insider Loan to permit conversion of only the portion of the Insider Loan related to services that were provided to us prior to January 1, 2017; and (d) we amended the terms of the Insider Loans where funds were advanced on or after January 1, 2017, which Insider Loans were not converted into our common stock, to provide for, where not already the case, a ~~five-year~~10% interest rate per annum, a $0.25 conversion price per share of common stock, and the deletion of the requirement that we issue warrants to purchase our common stock upon conversion of such Insider Loans.

On January 10, 2018, effective December 1, 2017, we entered into the Second Omnibus Loan Agreement with Jeffrey I. Binder, an officer and director of the Company, and Newcan, an entity owned by Frank Koretsky, a director of the Company. The Second Omnibus Loan Agreement provides that the conversion price of all outstanding convertible promissory notes issued to either Mr. Binder or Newcan as of the date of the Agreement would be increased from $0.25 to $0.3125 per share of common stock. The remaining terms of such notes remain unchanged.

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During February and March 2018, we held four closings of the WestPark Offering, whereby we sold units for $1.25 per unit. Each unit consisted of four shares of common stock and one warrant to purchase one share of ~~the Company’s~~our common stock atfor $0.75 per share. We sold a ~~price~~total of ~~$.25 per share.~~

1,368,250 units in the WestPark Offering for aggregate gross proceeds of $1,710,313, and aggregate net proceeds of $1,460,918 after deduction of placement agent commissions, a non-accountable expense allowance and expenses associated with the offering.

Over the next twelve months we will require significant additional capital to cover our projected cash flow deficits due to ~~the Colorado Arrangement and related agreements, the repayment of the April 2015 Note,~~ payments on the ~~2016 Convertible Notes, payments on the loans~~loan from ~~Jeffrey Binder and Frank Koretsky,~~FirstFire, the implementation of our business plan, including the acquisition of Oasis Cannabis, and the development ofother alternative revenue sources. Additionally, we anticipate that we will devote resources to research and development related to the refinement of our patent pending proprietary methods and processes and development of new products. We estimate research and development costs of between $50,000 and $100,000 during the next 12 months. Finally, during the next 18-24 months, we plan to construct and open two to three processing facilities for use either by a licensee or by us directly. We anticipate that the build out and opening of each processing facility will require between $1,000,000 and $3,000,000 in capital, with additional capital required for liquidity to cover personnel, equipment, and other operating expenses with respect to each opened facility.

We currently have two employees, Jeffrey Binder, who serves as our Chairman ~~President~~ and Chief Executive ~~Officer;~~Officer, and ~~Alan Bonsett,~~David Lamadrid, who serves as our President and Chief ~~Operating~~Financial Officer. In an effort to assist us conserve cash, Mr. Binder converted all his accrued salary due to him through February 28, ~~2017~~2018 into a convertible promissory ~~note and a promissory note.~~notes. Mr. ~~Binder has deferred all of his salary to date for~~Bonsett, our former Chief Operating Officer, left the ~~fiscal year ending May 31,~~Company effective October 1, 2017.

We do not currently have the capital necessary to meet our liquidity needs, fund our capital requirements or implement our business plan. We intend to fund our cash flow and capital requirements during the next year from the proceeds of the ~~Equity Line,~~equity line, the sale of our debt and equity securities, by obtaining additional loans and with cash generated ~~through~~from the operations ~~in connection with the Colorado Arrangement.~~of companies we may acquire, such as Oasis Cannabis. There can be no assurance that we will be able to meet our needs, however, as we have not yet received any commitments for the purchase of our equity securities or for additional ~~loans. Further,~~loans and although we have entered into a definitive agreement to acquire Oasis Cannabis, as described below, the closing of such agreement is subject to numerous conditions, including our ability to raise the required cash. Because we do not ~~yet~~ know ~~when our processing facility in Colorado will become operational, and accordingly,~~ when we will ~~commence receiving revenues under the Licensing Agreement and Equipment lease from PRH. We have been advised that the solutions to be used~~re-visit commencing operations in our proprietary conversion process are not included in Colorado’s list of designated solutions that may be used for cannabis extraction. We have advised the state that the solutions will be used in the conversion, not the extraction, process. The matter has been referred to the Colorado, attorney general’s office for consideration. We cannot complete the construction of our processing facility until this matter is resolved. Based on our internal review, similar requirements relating to either extraction or processing do not exist in other relevant states. Assuming this issue is resolved favorably to us, we would anticipate completion of our Colorado processing facility and the commencement of operations by PRH within six months after such resolution, and we would anticipate the receipt of revenues from PRH between 30 and 90 days after it commences operations. As a result of these uncertainties, there can be no assurance that PRH will ever generate sufficient cash to repay the $500,000 loan from CLS Labs Colorado or to meet PRH’s obligations under the Licensing Agreement or Equipment Lease. Further, due to the delays we encountered with the construction of our Colorado processing facility, we have placed our proposed Colorado operations on hold and will pursue revenue producing opportunities in other states. We anticipate that we ~~will~~may incur operating losses during the next twelve ~~months.~~months unless we close on the Oasis Acquisition.

Oasis Cannabis Transaction

On December 4, 2017, CLS Holdings USA, Inc. (the “Company,” “CLS” or “we”) and Alternative Solutions, LLC (“Alternative Solutions”) entered into a Membership Interest Purchase Agreement (the “Acquisition Agreement”) for CLS to acquire (the “Oasis Acquisition”) the outstanding equity interests in three subsidiaries of Alternative Solutions (collectively, the “Oasis LLCs”). Pursuant to the Acquisition Agreement, CLS paid a non-refundable deposit of $250,000 upon signing, which was to be followed by an additional payment of $1,800,000 within 45 days (75 days if an extension fee of $200,000 is paid by CLS) for an initial 10% of each of the Oasis LLCs.

On January 16, 2018, CLS and Alternative Solutions entered into a First Amendment to the Membership Interest Purchase Agreement (the “First Amendment”) and extended the date upon which the $1,800,000 is to be paid to January 29, 2018 at 5:00 p.m. PST.

On January 25, 2018, CLS and Alternative Solutions entered into a Second Amendment to the Membership Interest Purchase Agreement (the “Second Amendment”) and further extended the date upon which the $1,800,000 is to be paid to February 5, 2018 at 5:00 p.m. PST.

On April 2, 2018, CLS and Alternative Solutions entered into a Third Amendment to the Membership Interest Purchase Agreement (the “Third Amendment”) and extended the date upon which CLS is to pay the “Oasis Note” by approximately one (1) year to December 31, 2019. The Third Amendment also provides that the time period to determine average daily net revenue for the “Bonus Purchase Price”, is amended to be the calendar year ending December 31, 2019 with the payment due thereunder extended to May 30, 2020.

On April 2, 2018, CLS and Alternative Solutions also entered into a Fourth Amendment to the Membership Interest Purchase Agreement (the “Fourth Amendment”) and extended the date upon which CLS is to pay the “Closing Consideration,” to May 21, 2018.

The Closing Consideration that we must pay to acquire the remaining 90% of the Oasis LLCs, is equal to cash in the amount of $6,200,000, a $4.0 million promissory note due in December 2019 (the “Oasis Note”), and $6,000,000 in shares (the “Purchase Price Shares”) of our common stock (collectively, the “Closing Consideration”).

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The number of Purchase Price Shares shall equal $6,000,000 divided by the lower of $1.00 or the conversion price to receive one share of our common stock in our next equity offering that commences in 2018, multiplied by 80%. The Oasis Note will be secured by a first priority security interest over the assets of each of the Oasis LLCs and Alternative Solutions, including our 10% equity interest in the Oasis LLCs, and CLS shall deliver to Alternative Solutions a confession of judgment that will become effective in the event of any event of default under the Oasis Note.

Oasis currently owes certain amounts to a consultant known as 4Front Advisors, LLC. If we make any payments to this company post-closing, generally speaking, we will be entitled to deduct the present value of such payments from the principal amount due under the Oasis Note.

Assuming we close on the Acquisition Agreement, in May 2020, Alternative Solutions will be entitled to a $1,000,000 payment from us (the “Bonus Purchase Price”) if the existing dispensary operated by an Oasis LLC has maintained an average revenue of $20,000 per day during the 2019 calendar year.

The sale, assignment, transfer, pledge or other disposition of any interest in the Oasis LLCs or Alternative Solutions is ineffective unless approved in advance by the state of Nevada and any municipality in which the Oasis LLC’s operation is licensed.

In connection with the Oasis Acquisition, we plan to employ Mr. Ben Sillitoe as our COO. We plan to issue him 500,000 shares of restricted common stock pursuant to his proposed employment agreement. Upon our payment of the closing consideration, we will also become obligated to issue 500,000 shares of our restricted common stock to each of David Lamadrid, our President and Chief Financial Officer, and J.P. Barton, for introducing us to Alternative Solutions.

The closing of the Acquisition Agreement is subject to a number of conditions, including our ability to raise the $8,000,000 in cash required to close the transaction. As a result, there can be no assurance that we will be able to close the Oasis Acquisition.

Going concern

Our financial statements were prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We have incurred continuous losses from operations since inception, have an accumulated deficit of ~~$6,246,786~~$14,583,951 and had a working capital deficit of ~~$2,157,226~~$2,735,776 at February 28, ~~2017.~~2018. In addition, we do not currently have the cash resources to meet our operating commitments during the next twelve months. Our ability to continue as a going concern must be considered in light of the problems, expenses, and complications frequently encountered by developmental stage companies.

Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs, to borrow capital and to sell equity to support ~~the opening of~~our plans to acquire operating businesses, open processing facilities and to finance ongoing operations. There can be no assurance, however, that we will be successful in our efforts to raise additional debt or equity capital and/or that cash generated by our future operations will be adequate to meet our needs. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time.

Off-Balance Sheet Arrangements

We do not have any 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 are material to investors.

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Critical Accounting Estimates

Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accounting estimates that are the most important to the presentation of our results of operations and financial condition, and which require the greatest use of judgment by management, are designated as our critical accounting estimates. We have the following critical accounting estimates:

·	Estimates and assumptions used in the valuation of derivative ~~liability:~~liabilities: Management utilizes a lattice model to estimate the fair value of derivative liabilities. The model includes subjective assumptions that can materially affect the fair value estimates.

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Recently Issued Accounting Standards

Accounting standards promulgated by the Financial Accounting Standards Board (“FASB”) are subject to change. Changes in such standards may have an impact on our future financial statements. The following are a summary of recent accounting developments.

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The update requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases. The update also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. Accounting by lessors will remain largely unchanged. This update is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. Adoption will require a modified retrospective approach beginning with the earliest period presented. We are currently evaluating the potential impact of the update on our financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), to reduce the complexity of certain aspects of the accounting for employee share-based payment transactions. ASU 2016-09 involves changes in several aspects of the accounting for share-based payment transactions, including the accounting for the income tax consequences of share-based awards. For public companies, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In August 2016, the ~~FASB~~Financial Accounting Standards Board (the “FASB”) issued ASU 2016-15, Statement of Cash Flows (Topic 230). The update addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update will be effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Early adoption is permitted. We are currently evaluating the potential impact of the update on our financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU becomes effective for us on January 1, 2020. The amendments in this ASU will be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed.

In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU requires that an entity account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU becomes effective for us on January 1, 2018, and will be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in any interim period. We are currently assessing the impact that this standard will have on any awards that are modified once this standard is adopted.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosure ~~About~~about Market Risk.

This item is not applicable as we are currently considered a smaller reporting company.

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Item 4. Controls and Procedures.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit pursuant to the requirements of the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, among other things, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

Jeffrey Binder, our Chief Executive Officer, ~~has~~and David Lamadrid, our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on ~~the~~their evaluation, Mr. Binder and Mr. Lamadrid concluded that our disclosure controls and procedures are not effective in timely alerting ~~him~~them to material information relating to us that is required to be included in our periodic SEC filings and ensuring that information required to be disclosed by us in the reports we file or submit under the Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, ~~or person performing similar functions,~~ as appropriate to allow timely decisions regarding required disclosure, for the following reasons:

We do not have an independent board of directors or audit committee or adequate segregation of duties; and

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.

We plan to rectify these weaknesses by implementing an independent board of directors and hiring additional accounting personnel once we have additional resources to do so.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material pending legal proceedings to which the Company is a party or of which any of its property is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

Item 1A. Risk Factors.

This item is not applicable as we are currently considered a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~None.~~On February 7, 21 and 28, the Company effected closings of its private securities offering conducted by WestPark Capital, Inc., as placement agent, whereby it sold an aggregate of $1,268,750 in units to a total of 15 investors in a private offering exempt from registration under Rule 506(c) of Regulation D, promulgated under the Securities Act of 1933, as amended. Each unit consisted of four shares of the Company’s common stock and one warrant to purchase one share of common stock for $0.75. The price per unit was $1.25. The net proceeds to the Company, after deducting the placement agent’s commissions, the non-accountable expense allowance and actual expenses, was $1,081,528. The offering was exempt pursuant to Rule 506(c) because it was a private offering in which only verified accredited investors were permitted to purchase units.

Item 3. Defaults ~~Upon~~upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

31.2	Certification by the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

32.1	Certification by the Chief Executive Officer ~~and~~pursuant to Section 906 of the Sarbanes-Oxley Act

32.2	Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Taxonomy Extension Calculation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

101.LAB	XBRL Taxonomy Extension Label Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

3143

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SIGNATURES

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

	CLS HOLDINGS USA, INC.

Date: April ~~12, 2017~~ 16, 2018	By:	/s/ Jeffrey I. Binder
		Jeffrey I. Binder
		Chairman ~~President~~ and Chief Executive Officer (Principal Executive ~~Officer~~Officer)


Date: April 16, 2018	By:	/s/ David Lamadrid
		David Lamadrid
		President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Nevada	45-1352286
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Large ~~accelerated~~Accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒
~~(Do not check if a smaller reporting company)~~ Emerging growth company ☐

	February 28,			May 31,
	2017			2016			February 28,			May 31,
	(Unaudited)						2018			2017
ASSETS							(unaudited)
Current assets
Cash and cash equivalents	$	5,940		$	88,244		$	22,733		$	78,310
Prepaid expenses		22,791			6,742			12,598			1,410
Other current assets								23,431			-
Total current assets		28,731			94,986			58,762			79,720

Investment								2,050,000			-
Security deposit		50,000			50,000			-			50,000
Property, plant and equipment, net of accumulated depreciation of $1,561 and $892		1,113			1,782
Construction in progress		141,739			106,726
Intangible assets, net of accumulated amortization of $720 and $396		1,438			1,762
Property, plant and equipment, net of accumulated depreciation of $2,453 and $1,784								221			890
Intangible assets, net of accumulated amortization of $1,152 and $828								1,006			1,330

Total assets	$	223,021		$	255,256		$	2,109,989		$	131,940

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	569,959		$	431,017		$	671,807		$	581,765
Accrued compensation, related party		128,750			267,493			108,834			53,750
Notes Payable								410,000			-
Due to related party		17,930			17,930			17,930			17,930
Accrued interest		57,518			41,116			9,602			20,171
Accrued interest, related party		199,190			68,148			193,988			106,022
Notes payable, related parties		167,000			-			152,174			699,208
Convertible notes payable, net of discount of $419,584 and $227,475		147,082			72,525
Convertible notes payable, related party, net of discount of $285,470 and $95,477		731,156			22,678
Convertible notes payable, net of discount of $826,775 and $57,644								141,225			252,356
Convertible notes payable, related party, net of discount of $98,382 and $0								114,803			-
Derivative liability		167,372			418,537			974,175			95,276

Total current liabilities		2,185,957			1,339,444			2,794,538			1,826,478

Noncurrent liabilities
Convertible notes payable, net of discount of $9,078 and $390,021		15,924			43,312
Convertible notes payable, related parties, net of discount of $338,191 and $1,018,657		1,095,433			230,718
Notes payable, related parties		-			72,750
Convertible notes payable, related parties, net of discount of $623,847 and $0								615,574			192,000

Total Liabilities		3,297,314			1,686,224			3,410,112			2,018,478

Commitments and contingencies		-			-			-			-

Stockholder’s equity
Common stock, $0.0001 par value; 250,000,000 shares authorized; 21,178,176 and 20,350,003 shares issued and outstanding at February 28, 2017 and May 31, 2016, respectively		2,118			2,035
Common stock, $0.0001 par value; 250,000,000 shares authorized; 43,186,944 and 32,852,944 shares issued and outstanding at February 28, 2018 and May 31, 2017, respectively								4,319			3,286
Preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued		-			-			-			-
Additional paid-in capital		3,104,675			2,627,183			13,224,661			7,032,836
Stock payable		65,700			65,700
Common stock subscriptions receivable								(69,102	)		-
Common stock subscribed								123,950			68,950
Accumulated deficit		(6,246,786	)		(4,125,886	)		(14,583,951	)		(8,991,610	)
Total stockholder’s equity (deficit)		(3,074,293	)		(1,430,968	)		(1,300,123	)		(1,886,538	)

Total liabilities and stockholders’ equity (deficit)	$	223,021		$	255,256		$	2,109,989		$	131,940

	For the Three			For the Three			For the Nine			For the Nine
	Months Ended			Months Ended			Months Ended			Months Ended			For the Three			For the Thee			For the Nine			For the Nine
	February 28,			February 29,			February 28,			February 29,			Months Ended			Months Ended			Months Ended			Months Ended
	2017			2016			2017			2016			February 28, 2018			February 28, 2017			February 28, 2018			February 28, 2017

Revenue	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Cost of goods sold		-			-			-			-			-			-			-			-
Gross margin		-			-			-			-			-			-			-			-

Selling, general and administrative expenses		144,204			406,323			482,071			917,726			838,047			144,204			1,136,468			482,071
Professional fees		99,867			343,818			603,098			767,420			376,924			99,867			695,086			603,098
Total operating expenses		244,071			750,141			1,085,169			1,685,146			1,214,971			244,071			1,831,554			1,085,169

Operating loss		(244,071	)		(750,141	)		(1,085,169	)		(1,685,146	)		(1,214,971	)		(244,071	)		(1,831,554	)		(1,085,169	)

Other (income) expense:
Interest expense		381,149			106,599			1,395,511			177,464			1,434,314			381,149			2,316,145			1,395,511
Gain on settlement of debt														-			-			(3,480	)		-
Loss on modification of debt		-			-			33,334			-			-			-			29,145			33,334
Loss on note exchange														-			-			404,082			-
Loss on extinguishment of debt														-			-			989,032			-
Change in fair value of derivative		(244,848	)		-			(393,114	)		-			(148,227	)		(244,848	)		25,863			(393,114	)
Total other expense		136,301			106,599			1,035,731			177,464			1,286,087			136,301			3,760,787			1,035,731
		-
Income (Loss) before income taxes		(380,372	)		(856,740	)		(2,120,900	)		(1,862,610	)		(2,501,058	)		(380,372	)		(5,592,341	)		(2,120,900	)

Income tax expense		-			-			-			-			-			-			-			-

Net income (loss)	$	(380,372	)	$	(856,740	)	$	(2,120,900	)	$	(1,862,610	)	$	(2,501,058	)	$	(380,372	)	$	(5,592,341	)	$	(2,120,900	)

Net income (loss) per share - basic	$	(0.02	)	$	(0.04	)	$	(0.10	)	$	(0.09	)	$	(0.06	)	$	(0.02	)	$	(0.16	)	$	(0.10	)

Net income (loss) per share - diluted	$	(0.02	)	$	(0.04	)	$	(0.10	)	$	(0.09	)	$	(0.06	)	$	(0.02	)	$	(0.16	)	$	(0.10	)

Weighted average shares outstanding - basic		20,465,360			20,182,640			20,388,033			20,081,901			39,126,944			20,465,360			35,654,299			20,388,033

Weighted average shares outstanding - diluted		20,465,360			20,182,640			20,388,033			20,081,901			39,126,944			20,465,360			35,654,299			20,388,033

	For the Nine			For the Nine
	Months Ended			Months Ended
	February 28,			February 29,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,120,900	)	$	(1,862,610	)
Adjustments to reconcile net loss to net cash used in operating activities:
Imputed interest		804			807
Change in fair value of derivative		(393,114	)		-
Loss on modification of debt		33,334			-
Issuance of stock for services		-			115,050
Stock-based compensation		-			327,500
Amortization of debt discounts		1,197,998			114,489
Depreciation and amortization expense		993			957
Changes in assets and liabilities:
Prepaid expenses		(16,049	)		17,638
Accounts payable and accrued expenses		137,699			198,464
Deferred liabilities		-			47,888
Accrued compensation, related party		112,500			106,250
Due to related parties		-			(525	)
Accrued interest, related party		131,042			39,647
Accrued interest		16,402			22,521

Net cash used in operating activities		(899,291	)		(871,924	)

CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire equipment		-			(2,674	)
Payment for construction in progress		(35,013	)		(41,803	)

Net cash used in investing activities		(35,013	)		(44,477	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party convertible notes payable		150,000			345,000
Proceeds from related party notes payable		838,000			392,750
Repayments of related party notes payable		(61,000	)		-
Repayments of convertible notes payable		(75,000	)		-

Net cash provided by financing activities		852,000			737,750

Net increase in cash and cash equivalents		(82,304	)		(178,651	)

Cash and cash equivalents at beginning of period		88,244			208,821

Cash and cash equivalents at end of period	$	5,940		$	30,170

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	49,265		$	-
Income taxes paid	$	-		$	-

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Convertible note issued for unpaid accrued salary	$	250,000		$	-
Related party notes payable reclassified as related party convertible notes payable	$	222,750		$	-
Discount on convertible notes payable due to derivatives	$	518,720		$	945,000
Extinguishment of debt – related party	$	254,114		$	-
Common stock issued for conversion of notes payable	$	222,657		$	-
Transfer principle from related party notes payable to related party convertible notes payable	$	-		$	945,000

		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Consolidated Balance Sheets as of February 28, ~~2017~~2018 (Unaudited) and May 31, ~~2016~~2017	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months ended February 28, ~~2017~~2018 and ~~February 29, 2016~~2017 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months ended February 28, ~~2017~~2018 and ~~February 29, 2016~~2017 (Unaudited)	6
	Notes to the Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2330
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3041
Item 4.	Controls and Procedures	3042

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3143
Item 1A.	Risk Factors	3143
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3143
Item 3.	Defaults Upon Senior Securities	3143
Item 4.	Mine Safety Disclosures	3143
Item 5.	Other Information	3143
Item 6.	Exhibits	3143

SIGNATURES		3244

	May 31, 2016
	Level 1		Level 2		Level 3		Total
Liabilities
Derivative liabilities	$	-	$	-	$	418,537	$	418,537