Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
May 31, 2017 | Aug. 18, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | HISPANICA INTERNATIONAL DELIGHTS OF AMERICA, INC. | |
Entity Central Index Key | 1,579,010 | |
Document Type | 10-K | |
Document Period End Date | May 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --05-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 1,494,434 | |
Entity Common Stock, Shares Outstanding | 19,217,922 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | May 31, 2017 | May 31, 2016 |
Current Assets: | ||
Cash and equivalents | $ 217,598 | $ 27,241 |
Accounts receivable | 160,306 | 1,692 |
Prepaid expenses and other current assets | 14,740 | |
Inventory | 293,207 | 12,887 |
Total current assets | 671,111 | 56,560 |
Other Assets: | ||
Equipment, net of accumulated depreciation of $14,508 | 60,492 | |
Customer list, net of accumulated amortization of $35,625 | 339,375 | |
Security deposits | 5,245 | |
Total Assets | 1,076,223 | 56,560 |
Current Liabilities | ||
Line of credit | 11,413 | |
Loans payable, net of deferred financing costs of $100,322 | 278,865 | |
Note payable, net of deferred financing costs of $129,208 and $0, respectively | 229,506 | |
Note payable | 18,500 | |
Convertible notes payable, net of deferred financing costs of $246,213 and $0, for 2017 and 2016, respectively | 556,787 | 3,000 |
Accounts payable and accrued expenses | 719,193 | 28,051 |
Customer advances | 20,880 | |
Loans payable - stockholder | 10,000 | |
Total current liabilities | 1,795,764 | 80,431 |
Convertible note payable, net of capitalized financing costs of $0 and $7,735, respectively | 55,025 | |
Total Liabilities | 1,795,764 | 135,456 |
Stockholders' (Deficiency): | ||
Series A Preferred stock, $0.001 par value; 10,000,000 shares authorized, 1,200,000 and 1,000,000 shares issued and outstanding | 1,200 | 1,200 |
Common stock, $0.001 par value; 100,000,000 shares authorized, 18,717,922 and 13,040,471 shares issued and outstanding, respectively | 18,717 | 13,040 |
Additional paid in capital | 3,055,121 | 721,413 |
Accumulated deficit | (3,794,579) | (814,549) |
Total stockholders' equity (deficiency) | (719,541) | (78,896) |
Total liabilities and stockholders' equity (deficiency) | $ 1,076,223 | $ 56,560 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | May 31, 2017 | May 31, 2016 |
Accumulated Depreciation | $ 14,508 | $ 0 |
Accumulated Amortization | $ 35,625 | $ 0 |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, issued shares | 1,200,000 | 1,200,000 |
Preferred stock, outstanding shares | 1,200,000 | 1,200,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 100,000,000 | 100,000,000 |
Common stock, Issued | 18,717,922 | 13,040,471 |
Common stock, outstanding | 18,717,922 | 13,040,471 |
Notes Payable [Member] | ||
Capitalized financing costs | $ 129,208 | $ 0 |
Convertible Notes Payable [Member] | ||
Capitalized financing costs | 246,213 | 0 |
Loans Payable [Member] | ||
Capitalized financing costs | 100,322 | 0 |
Long Term Convertible Notes Payable [Member] | ||
Capitalized financing costs | $ 0 | $ 7,735 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Income Statement [Abstract] | ||
Sales, net | $ 2,458,037 | $ 193,734 |
Cost of goods sold | 1,779,678 | 215,997 |
Gross profit | 678,359 | (22,263) |
Expenses: | ||
Officers' compensation | 21,183 | 130,200 |
Salaries and benefits | 457,984 | |
Repairs and maintenance | 63,850 | |
Professional fees | 386,364 | 118,256 |
Consultancy - share based compensation | 1,023,625 | 65,825 |
Advertising and promotion | 23,818 | 5,021 |
Equipment | ||
Travel | 97,093 | 4,029 |
Rent | 67,799 | 9,697 |
Depreciation and amortization | 50,133 | |
Other | 145,776 | 9,478 |
Total expenses | 2,337,624 | 342,506 |
Loss before other income and (expenses) | (1,659,265) | (364,769) |
Other income and (expenses) | ||
Vendor settlement | 97,731 | |
Interest and financing costs | (1,418,496) | (35,438) |
Net loss | $ (2,980,030) | $ (400,207) |
Basic and diluted loss per share | $ (0.19) | $ (0.03) |
Basic and diluted weighted average number of shares outstanding | 15,877,927 | 12,723,476 |
Condensed Consolidated Statemen
Condensed Consolidated Statement of Stockholders Equity (Deficiency) - USD ($) | Common Stock [Member] | Series A Preferred Stock [Member] | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at May. 31, 2015 | 12,168,905 | 1,000,000 | |||
Beginning Balance, Amount at May. 31, 2015 | $ 12,169 | $ 1,000 | $ 450,641 | $ (414,342) | $ 49,468 |
Issuance of stock for cash, shares | 148,000 | ||||
Issuance of stock for cash, amount | $ 148 | 67,853 | 68,001 | ||
Issuance of stock for services, shares | 680,300 | 200,000 | |||
Issuance of stock services, amount | $ 680 | $ 200 | 192,145 | 193,025 | |
Issuance of common stock for repayment of note, shares | 43,266 | ||||
Issuance of common stock for repayment of note, amount | $ 43 | 10,774 | 10,817 | ||
Net loss | (400,207) | (400,207) | |||
Ending Balance, Shares at May. 31, 2016 | 13,040,471 | 1,200,000 | |||
Ending Balance, Amount at May. 31, 2016 | $ 13,040 | $ 1,200 | 721,413 | (814,549) | (78,896) |
Issuance of stock for services, shares | 1,888,941 | ||||
Issuance of stock services, amount | $ 1,889 | 1,371,737 | 1,373,626 | ||
Issuance of stock for interest, shares | 157,480 | ||||
Issuance of stock interest, amount | $ 157 | 199,843 | 200,000 | ||
Issuance of common stock for repayment of note, shares | 339,772 | ||||
Issuance of common stock for repayment of note, amount | $ 340 | 102,594 | 102,934 | ||
Discount on issuance of convertible stock | 662,826 | 662,826 | |||
Warrant Exericse, shares | 1,501,258 | ||||
Warrant Exericse, amount | $ 1,501 | (1,501) | |||
Issuance of common shares for convertible debt at par value, shares | 1,790,000 | ||||
Issuance of common shares for convertible debt at par value, amount | $ 1,790 | (1,790) | |||
Net loss | (2,980,030) | (2,980,030) | |||
Ending Balance, Shares at May. 31, 2017 | 18,717,922 | 1,200,000 | |||
Ending Balance, Amount at May. 31, 2017 | $ 18,718 | $ 1,200 | $ 3,055,121 | $ (3,794,579) | $ (719,541) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Cash Flows From Operating Activities | ||
Net loss | $ (2,980,030) | $ (400,207) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock based compensation | 1,023,625 | 193,025 |
Depreciation and amortization | 50,133 | 4,765 |
Amortization of financing costs | 1,058,358 | |
(Increase) decrease in: | ||
Accounts receivable | (158,614) | (486) |
Inventory | (280,320) | 5,992 |
Prepaid expenses | 14,740 | 260 |
Increase (decrease) in: | ||
Accounts payable and accrued expenses | 691,142 | 25,150 |
Customer advances | (20,880) | 20,880 |
Net cash (used in) operating activities | (361,672) | (150,621) |
Cash Flows From Investing Activities | ||
Equipment acquired | (75,000) | |
Customer Lists | (375,000) | |
Payment of Security Deposits | (5,245) | |
Net cash (used in) investment activities | (455,245) | |
Cash Flows From Financing Activities | ||
Proceeds from issuance of common stock | 68,001 | |
Proceeds from notes payable | 645,784 | 18,500 |
Repayment of note payable | (309,786) | |
Proceeds of loans payable, net of financing costs | 656,276 | |
Payment of loans payable | (648,413) | |
Proceeds of convertible notes payable, net of financing costs | 665,000 | 75,000 |
Repayment of convertible notes payable | (3,000) | (27,740) |
Proceeds of line of credit | 15,000 | |
Payment of line of credit | (3,587) | |
Proceeds from loan payable - stockholder | 10,000 | |
Payment of loan payable - stockholder | (10,000) | (10,000) |
Net cash provided by financing activities | 1,007,274 | 133,761 |
Net Increase/decrease in Cash and Cash Equivalents | 190,357 | (16,860) |
Cash and Cash Equivalents - beginning | 27,241 | 44,101 |
Cash and Cash Equivalents - end | 217,598 | 27,241 |
Supplemental Disclosures of cash flow information | ||
Cash paid for: Interest | 56,691 | 8,483 |
Noncash investing and financing activities: | ||
Conversion of debt to common stock and additional paid in capital | 102,933 | $ 10,817 |
Common stock and warrants issued for financing costs | 1,012,826 | |
Payments of Loans Payable with proceeds of additional Loans Payable | 137,035 | |
Financing costs deducted from proceeds of notes payable | $ 93,000 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
May 31, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations and Basis of Presentation The accompanying consolidated financial statements include the financial statements of Hispanica International Delights of America, Inc. (“HISP”) and its wholly owned subsidiary, Energy Source Distributors Inc., (“ESD”) for 2017 and only HISP for 2016 (collectively , the “Company“). All intercompany balances and transactions have been eliminated in consolidation. HISP was incorporated in Delaware in April 2013 and acquired ESD during July 2016. The Company currently markets and sells traditional Hispanic and other beverages in New York and California. Revenue Recognition In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Provision for sales returns is estimated based on the Company's historical return experience. Revenue is presented net of returns. In March 2017, the Company discontinued an exclusive distribution agreement with a vendor. In accordance with the distribution agreement, the Company received a “Termination Payment”, as define in the amount of $97,731, which was recorded as other income during the year ended May 31, 2017. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated balance sheets and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Net Loss Per Common Share Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti -dilutive. As of May 31, 2017, warrants, related to the convertible notes payable could be converted into approximately 730,000 shares of common stock, were outstanding. Income Taxes The Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized when it is more likely than not that such tax benefits will not be realized. The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the consolidated financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and penalties, if any, related to uncertain tax positions as a component of other expense. The Company did not have any unrecognized tax benefits as of May 31, 2017, and does not expect this to change significantly over the next 12 months. Stock-Based Compensation The Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value on the issuance date. Equity instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant disincentive for non-performance. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts Receivable The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers, maintaining an allowance for potential credit losses. Uncollectible accounts are written off at the time they are deemed uncollectible. Accounts receivable is reported net of an allowance for doubtful accounts, when determined necessary. The allowance is based on management's estimate of the amount of receivables that will actually be collected. As of May 31, 2017 and May 31, 2016, an allowance for doubtful accounts was not necessary. Inventory Inventory consists of finished goods and is stated at the lower of cost (first-in, first-out) or market value. Fair Value of Financial Instruments Pursuant to ASC No. 820. "Fair Value Measurement and Disclosures," the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments. Advertising Advertising and promotion costs are expensed as incurred. Advertising and promotion expense amounted to approximately $23,800 and $5,000 for the years ended May 31, 2017 and 2016, respectively. Shipping and Handling Shipping and handling costs are included in costs of goods sold. Recent Pronouncements On February 25, 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-2, "Leases" (Topic 842), which is intended to improve financial reporting for lease transactions. This ASU will require organizations that lease assets, such as real estate and manufacturing equipment, to recognize assets and liabilities on their balance sheets for the rights to use those assets for the lease term and obligations to make lease payments created by those leases that have terms of greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. This ASU will also require disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures will include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. This ASU will be effective for public entities beginning the first quarter 2019. We do not believe that this ASU will have a material impact on our financial statements. In November 2015, the FASB issued ASU 2015-17, "Income Taxes, Balance Sheet Classifications of Deferred Taxes." This amendment simplifies the presentation of deferred taxes by requiring that all deferred tax liabilities and assets now be recorded as noncurrent. This amendment is effective for interim and annual reporting periods beginning after December 15, 2016 August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers." This amendment defers the effective date of implementation to after December 15, 2017 In July 2015, the FASB issued ASU 2015-11, "Inventory. Simplifying the Measurement of Inventory." This amendment only applies to entities that use the first-in, first-out (FIFO) or average cost methods of valuing inventory. Entities would measure inventory at the lower of cost and net realizable value. This amendment aligns measurement of inventory in GAAP with the International Financial Reporting Standards (IFRS). This amendment is effective for annual periods beginning after December 15, 2016 In April 2015, the FASB issued ASU 2015-03 , “Interest -Imputation of Interest. “ This guidance requires debt issuance costs be presented in the balance sheet as a reduction in liability rather than as an asset. This amendment is effective for interim and reporting periods beginning after December 15, 2016 with early adoption permissible. The Company has elected early adoption. On May 14, 2014, FASB and The International Accounting Standards Board (the IASB) issued a new joint revenue recognition standard that supersedes nearly all GAAP guidance on revenue recognition. The core principal of the standard is that revenue recognition should depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard is effective for the Company for the fiscal year 2017 Management does not believe that any other recently issued, but not yet effective, accounting pronouncement, if adopted, would have a material effect on the accompanying consolidated financial statements. |
CONCENTRATIONS
CONCENTRATIONS | 12 Months Ended |
May 31, 2017 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | Note 2 - CONCENTRATIONS Concentration of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and trade accounts receivable. The Company places its cash with high quality credit institutions. At times, balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. Cash in banks is insured by the FDIC up to $250,000 per institution, per entity. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its trade account receivable credit risk exposure is limited. Sales and Accounts Receivable During the year ended May 31, 2017, there were no concentrations of sales to customers. There was one customer with an accounts receivable balances of approximately 30% of the Company’s accounts receivable at May 31, 2017. During the year ended May 31, 2016, sales to three customers accounted for approximately 81% of the Company's net sales or approximately $156,000. There were no customers with significant accounts receivable balances at May 31, 2016. |
ACQUISITION OF ESD
ACQUISITION OF ESD | 12 Months Ended |
May 31, 2016 | |
Business Combinations [Abstract] | |
ACQUISITION OF ESD | Note 3 - ACQUISITION OF ESD AND RELATED CREDIT FACILITY Effective July 7, 2016 pursuant to our objective of rapid growth, the Company acquired all of the net assets of Energy Source Distributors, Inc. by purchasing all of the outstanding shares of common stock for $450,000. In July 2016, the Company entered into a Senior Secured Revolving Credit Facility Agreement (the “Credit Facility”) with TCA Global Credit Master Fund L.P. (“TCA”) for a total amount of $7.5 million. However, as of the execution date of the Credit Facility, only $1.6 million was allocated by TCA to the Company for working capital financing and for any other purpose permitted under the terms of the Credit Facility, see Note 7. Energy Source Distributors, Inc. (“ESD”) is Corporate Guarantor to the Credit Facility. Under the terms of the Credit Facility, the Company paid advisory fees to TCA in the amount of $350,000, through the issuance of 374,332 shares of common stock. On July 5, 2016, the Company borrowed $650,000 from the Credit Facility and used the proceeds to acquire ESD for $450,000; payoff a note payable in the amount of $32,534; $74,466 was used to pay vendors for inventory purchases and $93,000 was paid to TCA for closing fees. The credit facility has a maturity date of December 27, 2017 which may be extended for an additional six months at the lender’s discretion. The credit facility required fees and interest only payments at 12% during the first two months. Principal payments began in the third month. At the maturity date, all unpaid principal and interest is due. During the year ended May 31, 2017, the Company issued an additional 157,480 shares of common stock to satisfy a default notice in the amount of $200,000, which is reported as a component of interest and financing costs in the consolidated statements of operations. The following table presents the pro forma condensed consolidated statements of operations for the year ended May 31, 2017 Pro Forma Condensed Consolidated Statements of Operations For the year ended May 31, 2017 Pro Forma Pro Forma HISP ESD Adjustments Notes Combined Sales, net $ 142,236 $ 2,661,919 $ — $ 2,804,156 Cost of goods sold 116,667 1,933,120 — 2,049,787 Gross income 25,570 728,799 — 754,369 Selling general and administrative expenses 1,517,823 904,423 2,367 (a) 2,424,613 Net Income/(loss) before other income and expenses (1,492,254 ) (175,624 ) — (1,670,245 ) Other income and (expenses) (1,250,937 ) (69,828 ) (158,160 ) (b) (1,478,925 ) Provision for income taxes — — — — Net Income/(loss) $ (2,743,191 ) $ (245,452 ) $ (160,527 ) $ (3,149,170 ) Basic and diluted loss per share $ (0.19 ) Basic and diluted weighted average number of shares outstanding 15,877,927 For the period July 7, 2016 through May 31, 2017 ESD had sales of $2,315,800 and a loss of $205,054. For the year ended May 31, 2016 Pro Forma Pro Forma HISP ESD Adjustments Notes Combined Sales, net $ 193,734 $ 2,775,113 $ — $ 2,968,847 Cost of goods sold 215,997 2,091,010 — 2,307,007 Gross income (22,263 ) 684,103 — 661,840 Selling general and administrative expenses 342,506 555,177 52,500 (a) 950,183 Net income/(loss) before other expenses (364,769 ) 128,926 (52,500 ) (288,343 ) Other income and (expenses) (35,438 ) (1,225 ) (158,160 ) (b) (194,823 ) Net income/(loss) $ (400,207 ) $ 127,701 $ (210,660 ) $ (483,166 ) See accompanying notes to the Pro Forma Condensed Consolidated Financial Information Pro Forma Note 1. — Basis of presentation The pro forma Condensed Consolidated Statements of Operations for the years ended May 31, 2017 and 2016 effect to the ESD acquisition as if it had occurred on June 1, 2016 and June 1, 2017, respectively. Pro Forma Note 2 — Purchase price allocation Effective July 7, 2016, the Company acquired all of the outstanding stock of ESD and certain assets from ESD for total consideration of $450,000. The pro forma condensed consolidated financial information includes various assumptions, including those related to the purchase price allocation of the assets acquired from ESD based on management’s estimates. The following table shows the allocation of the purchase price to the acquired assets: Customer list $ 375,000 Equipment 75,000 Total purchase price $ 450,000 Pro Forma Note 3 — Pro Forma Adjustments (a) Reflects the depreciation and amortization of the equipment and customer list above. (b) Reflects the additional interest expense and finance costs related to the borrowing required for the acquisition of ESD. |
LOAN PAYABLE - STOCKHOLDER
LOAN PAYABLE - STOCKHOLDER | 12 Months Ended |
May 31, 2017 | |
Notes to Financial Statements | |
LOAN PAYABLE - STOCKHOLDER | Note 4 - LOANS PAYABLE – STOCKHOLDERS In April 2016, a stockholder and officer lent the Company $10,000. The loan bore interest at 18% per annum. The maturity date of the note was July 1, 2016. The loan was repaid on October 17, 2016. Interest expense on the note of $229 was recorded during the year ended May 31, 2017. |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
May 31, 2017 | |
Related Party Transactions [Abstract] | |
NOTES PAYABLE | Note 5 - NOTES PAYABLE During the quarter ended November 30, 2016, the Company entered into Convertible Promissory Note Agreements (The “Convertible Notes”) with Seven (7) individuals (“Holders”) pursuant to which they purchased the Company’s unsecured fixed price convertible promissory notes in the aggregate principal amount of $803,000. The Convertible Notes carry interest at the rate of 5% per annum and mature at various dates through November 7, 2017. The Convertible Notes were issued with a 10% original issue discount. As additional consideration for the purchase of the Convertible Notes, the Company will issue an aggregate of 1,730,000 of its common stock to the Holders. During March 2017, the Company issued 1,790,000 shares of its common stock to the Holders. Pursuant to the convertible notes, the Company issued Common Stock Purchase Warrants (The “Warrants“). The Warrants allow the Holders to purchase up to an aggregate of 730,000 shares of the Company’s Common Stock at an exercise price of $0.85 per share until September 30, 2021. Also, under the terms of the Convertible Notes, the Company and the Holders entered into a registration rights agreement covering the 1,730,000 shares issued. Pursuant to the terms of the registration rights agreement, the Company has filed a registration statement with the U.S. Securities and Exchange Commission covering up to an aggregate of 6,033,131 shares of the Company’s common stock. The registration became effective on March 29, 2017. In September 2014, the Company issued a convertible note for the principal amount of $6,000. The note had an original due date of December 31, 2014. In January 2015, the holder signed an amendment that made the note and accrued interest payable on demand. Interest accrued at 10% per annum. The holder had the option of converting the note in whole or in part into the Company's common stock at the rate of $0.25 per share at any time prior to redemption. In October 2015, the Company repaid $3,000 of principal and $651 of interest. In October 2016, the Company repaid the remaining principal of $3,000 and $636 of interest. In September 2015, the Company issued a convertible note payable (the “Note”) for the principal amount of $87,500, including an original issue discount ("OID") of $7,500 and loan costs of $5,000. The Note is reported net of unamortized OID and loan costs and bears interest at 10%. The note requires payment of unpaid principal and accrued interest upon maturity in August 2017. Unamortized OID and loan costs totaled $7,735 at May 31, 2016. There is a prepayment premium of 125% of the loan balance being paid prior to the maturity date. Upon an event of default as described in the Note, the Company would incur penalties and fees and the annual interest rate would increase to 22%. Under the terms of the Note, the Note holder has the right, until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into shares of fully paid and non-assessable common stock, $0.001 par value per shares of the Company (the “Lender Conversion Shares”), as per the following conversion formula: The number of Lender Conversion Shares equals the amount being converted (the "Conversion Amount") divided by the Conversion Price (the “Lender Conversion Price”). The Lender Conversion Price is defined in the Note as being $3.00 per share, however, in the event the market capitalization falls below $20,000,000.00 at any time, then in such event (a) the Lender Conversion Price for all lender conversions occurring after the first date of such occurrence shall equal the lower of the Lender Conversion Price and the market price as of any applicable date of conversion. Subject to certain conditions, a conversion factor of 70% shall apply to the Lender Conversion Price, subject to the following adjustments: (i) if at any me the average of the three (3) lowest closing bid prices in the twenty (20) trading days immediately preceding any date of measurement is below $1.00, then in such event the then-current conversion factor shall be reduced by 10% for all future conversions; (ii) if at any time after the effective date of the Note, the Lender Conversion Shares are not eligible, then the then-current conversion factor will automatically be reduced by 5%, for all future conversions; and, (iii) in addition to the default effect, as defined, if any major default occurs, as defined, after the effective date of the Note, the conversion factor shall automatically be reduced for all future conversions by an additional 5% for each of the first three (3) major defaults that occur Under the terms of the Note, on June 17, 2016, the note holder elected to convert $12,500 of the outstanding principal and accrued interest balance into 18,315 shares of our common stock at a conversion price of $0.6825 per share. Under the terms of the Note, on July 25, 2016, the note holder elected to convert $15,000 of the outstanding principal and accrued interest balance into 52,053 shares of our common stock at a conversion price of $0.288167 per share. Under the terms of the Note, on September 13, 2016, the note holder elected to convert $20,000 of the outstanding principal and accrued interest balance into 69,404 shares of our common stock at a conversion price of $0.2882 per share. On September 21, 2016, the Note was assigned to a new lender. As part of the assignment, the Company incurred early payment premiums and other fees of $ 25,521. The new note holder paid the note balance to the previous holder and simultaneously converted the full outstanding principal of the note, $56,000, including accrued interest balance of $359, into 200,000 shares of our common stock at a conversion price of $0.28 per share. In March 2016, the Company borrowed $18,500 from an unrelated third party. The loan bears interest at 22% per annum. During the three months ended August 31, 2016 the Company incurred late payment penalties and other fees of approximately $13,304. The outstanding balance including penalties, fees, and accrued interest was repaid in July 2016. In July 2016, the Company entered into an agreement (“Future Sales Proceeds Purchase Agreement”) In July 2016, the Company entered into a Future Sales Proceeds Purchase Agreement with Merchant Cash and Capital, LLC d/b/a Bizfi (the “Buyer”). Under the terms of the agreement, the Company received $167,450 of cash proceeds from the Buyer in exchange for a loan payable in the amount of $214,200 secured by future sales proceeds. In January 2017, the Company entered into a second Future Sales Proceeds Purchase Agreement with the Buyer. Under the terms of the second agreement, the Future Sales Proceeds Purchase Agreement entered into in July 2016 was paid in full and the Company received $128,920 of cash proceeds from the Buyer and in exchange for a loan payable in the amount of $281,400 secured by future sales proceeds The difference between the aggregate of the Future Sales Proceeds Purchase Agreement pay-off and the cash received and the cash to be paid from both future sales proceeds of $131,400 has been recognized as deferred financing costs and is being amortized over the repayment period. This amount has been reflected as a direct reduction of the loan payable in the accompanying consolidated balance sheets. As of May 31, 2017, unamortized financing costs related to this loan were approximately $46,000. The Company is obligated to make payments equal to 10% of future receipts estimated to be approximately 126 payments of $1,340 to the Buyer each business day until the full amount of the future sales proceeds is repaid. In July 2016, the Company entered into an agreement (“Purchase and Sale Agreement”) with ESBF California LLC (“ESBF”). Under the terms of the agreement, the Company received $197,370 of cash proceeds from ESBF in exchange for a loan payable in the amount of $266,000 secured by future sales proceeds. In March 2017, the Company entered into a second Purchase and Sale Agreement with ESBF. Under the terms of the second agreement, the Purchase and Sale Agreement entered into in July 2016 was paid in full and the Company received $131,370 of cash proceeds from ESBF in exchange for a loan payable in the amount of $266,000 secured by future sales proceeds. The difference between the aggregate of the Purchase Rights Purchase and Sale Agreement pay-off and the cash received and the cash to be paid from future sales proceeds of $146,923 was recognized as capitalized financing costs and is being amortized over the repayment period. This amount has been reflected as a direct reduction of the loan payable in the accompanying consolidated balance sheets. As of May 31, 2017, unamortized financing costs related to this loan were approximately $54,000. The Company is obligated to make payments equal to 15% of future receipts estimated to be approximately 183 payments of $1,152 to ESBF each business day until the full amount of the future sales proceeds is repaid. |
LINE OF CREDIT
LINE OF CREDIT | 12 Months Ended |
May 31, 2017 | |
Debt Disclosure [Abstract] | |
LINE OF CREDIT | Note 6 – LINE OF CREDIT In April 2017, the Company borrowed $15,000 against a credit line facility which the company entered into with Celtic Bank. The facility allows the Company to borrow up to $35,000. Under the terms of the credit line facility, the Company is obligated to repay the loan with interest in 6 average monthly payments of $2,963. At May 31, 2017, the outstanding balance was $11,413. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
May 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Note 7 - COMMITMENTS AND CONTINGENCIES The Company currently leases its office on a month to month basis from the Company's Chief Operating Officer and stockholder for $750 per month. In connection with the acquisition of ESD, the Company assumed a lease for approximately 12,000 square feet of warehouse space located in Gilroy, California at a base rent of $5,248 per month. The lease terminates on June 30, 2021. In addition, the Company entered into an employment agreement with a general manager for a period of one year at a cost of $58,000. The employment agreement expired in July 2017. Future minimum annual lease payments are approximately as follows For the years ending May 31, 2018 $ 63,000 2019 63,000 2020 63,000 2021 5,000 $ 194,000 Rent expense for the years ended May 31, 2017 and 2016 totaled $67,799 and $9,697, respectively. As of May 31, 2017, the Company is a defendant in a lawsuit with TCA for claims of approximately $950,000 plus interest, and other fees. The Company has filed counter claims against TCA. As of May 31, 2017, unpaid principal and interest related to the TCA Credit Facility totaled approximately $365,000. Advisory fees totaling $350,000 were recorded as deferred financing costs and $200,000 in interest and financing costs were recognized as a result of a default notice. The ultimate outcome of these actions cannot be determined. In management’s opinion, settlement of these actions will not have a material adverse effect on the Company’s liquidity or results of operations. On October 30, 2015, the Company entered into an agreement to acquire a 20% minority equity interest in Just Buns, Inc. in exchange for 20,000 shares to the Company’s common stock. The Company also entered into an exclusive distribution agreement with Just Buns, Inc. to distribute their proprietary Ensaimades sold under the name “Swirly Buns”. As of the date of this filing the Company was unable to finalize these transactions and is no longer pursuing the acquisition or distribution agreement. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
May 31, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Note 8 - INCOME TAXES The deferred tax asset consists of the following: May 31, 2017 May 31, 2016 Net operating loss carryforward $ 1,516,000 $ 326,000 Valuation allowance (1,516,000 ) (326,000 ) Deferred tax asset, net $ — $ — For the years ended May 31, 2017 and 2016, the valuation allowance increased by approximately $1,200,000 and $160,000, respectively. The deferred tax asset differs from the amount computed by applying the statutory federal and state income tax rates to the loss before income taxes. The sources and tax effects of the differences are as follows: Effective Income Tax Rate Reconciliation 2017 2016 Federal Rate 34 % 34 % State Rate 6 % 6 % Valuation Allowance (40 %) (40 %) Effective income tax rate 0 % 0 % As of May 31, 2017, the Company has net operating loss carryforwards of approximately $3,820,000 to reduce future federal and state taxable income through 2037. The Company currently has no federal or state tax examinations in progress, nor has it had any federal or state examinations since its inception. All of the Company's tax years are subject to federal and state tax examinations. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
May 31, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Note 9 - RELATED PARTY TRANSACTIONS The Company purchases inventory from a supplier related through common ownership and management. The Chief Executive Officer and chairman of the Company is the supplier's President. In addition, the Chief Financial Officer and Director of the Company has a minority interest in the supplier. The amount of inventory purchased from the supplier during the years ended May 31, 2017 and May 31, 2016 was approximately $0 and $204,000, respectively. As of May 31, 2017 and May 31, 2016, inventory prepayments to this supplier of $-0- and $14,740, respectively, were reported as prepaid expenses in the accompanying consolidated balance sheets. During the year ended May 31, 2017 the Company paid product development consulting fees to this supplier of $7,000. The Company rents office space from its Chief Operations Officer at $750 per month. Included in accounts payable and accrued expenses is $18,000 representing 24 months of rent due. |
BASIS OF REPORTING
BASIS OF REPORTING | 12 Months Ended |
May 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
BASIS OF REPORTING | Note 10 - BASIS OF REPORTING The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from inception of approximately $3,795,000, has a working capital deficiency of approximately $1,125,000 and a net capital deficiency of approximately $720,000, which raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon management's plans to raise additional capital from the sale of stock and receive additional loans from related parties. The accompanying condensed consolidated financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
May 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 11 - SUBSEQUENT EVENTS Subsequent to May 31, 2017, the Company issued 500,000 shares of its common stock for services. |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
May 31, 2017 | |
Accounting Policies [Abstract] | |
Nature of Operations and Basis of Presentation | Nature of Operations and Basis of Presentation The accompanying consolidated financial statements include the financial statements of Hispanica International Delights of America, Inc. (“HISP”) and its wholly owned subsidiary, Energy Source Distributors Inc., (“ESD”) for 2017 and only HISP for 2016 (collectively , the “Company“). All intercompany balances and transactions have been eliminated in consolidation. HISP was incorporated in Delaware in April 2013 and acquired ESD during July 2016. The Company currently markets and sells traditional Hispanic and other beverages in New York and California. |
Revenue Recognition | Revenue Recognition In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Provision for sales returns is estimated based on the Company's historical return experience. Revenue is presented net of returns. In March 2017, the Company discontinued an exclusive distribution agreement with a vendor. In accordance with the distribution agreement, the Company received a “Termination Payment”, as define in the amount of $97,731, which was recorded as other income during the year ended May 31, 2017. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated balance sheets and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
Net Loss Per Common Share | Net Loss Per Common Share Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti -dilutive. As of May 31, 2017, warrants, related to the convertible notes payable could be converted into approximately 730,000 shares of common stock, were outstanding. |
Income Taxes | Income Taxes The Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized when it is more likely than not that such tax benefits will not be realized. The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the consolidated financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and penalties, if any, related to uncertain tax positions as a component of other expense. The Company did not have any unrecognized tax benefits as of May 31, 2017, and does not expect this to change significantly over the next 12 months. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value on the issuance date. Equity instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant disincentive for non-performance. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Accounts Receivable | Accounts Receivable The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers, maintaining an allowance for potential credit losses. Uncollectible accounts are written off at the time they are deemed uncollectible. Accounts receivable is reported net of an allowance for doubtful accounts, when determined necessary. The allowance is based on management's estimate of the amount of receivables that will actually be collected. As of May 31, 2017 and May 31, 2016, an allowance for doubtful accounts was not necessary. |
Inventory | Inventory Inventory consists of finished goods and is stated at the lower of cost (first-in, first-out) or market value. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Pursuant to ASC No. 820. "Fair Value Measurement and Disclosures," the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments. |
Advertising | Advertising Advertising and promotion costs are expensed as incurred. Advertising and promotion expense amounted to approximately $23,800 and $5,000 for the years ended May 31, 2017 and 2016, respectively. |
Shipping and Handling | Shipping and Handling Shipping and handling costs are included in costs of goods sold. |
Recent Pronouncements | Recent Pronouncements On February 25, 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-2, "Leases" (Topic 842), which is intended to improve financial reporting for lease transactions. This ASU will require organizations that lease assets, such as real estate and manufacturing equipment, to recognize assets and liabilities on their balance sheets for the rights to use those assets for the lease term and obligations to make lease payments created by those leases that have terms of greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. This ASU will also require disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures will include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. This ASU will be effective for public entities beginning the first quarter 2019. We do not believe that this ASU will have a material impact on our financial statements. In November 2015, the FASB issued ASU 2015-17, "Income Taxes, Balance Sheet Classifications of Deferred Taxes." This amendment simplifies the presentation of deferred taxes by requiring that all deferred tax liabilities and assets now be recorded as noncurrent. This amendment is effective for interim and annual reporting periods beginning after December 15, 2016 August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers." This amendment defers the effective date of implementation to after December 15, 2017 In July 2015, the FASB issued ASU 2015-11, "Inventory. Simplifying the Measurement of Inventory." This amendment only applies to entities that use the first-in, first-out (FIFO) or average cost methods of valuing inventory. Entities would measure inventory at the lower of cost and net realizable value. This amendment aligns measurement of inventory in GAAP with the International Financial Reporting Standards (IFRS). This amendment is effective for annual periods beginning after December 15, 2016 In April 2015, the FASB issued ASU 2015-03 , “Interest -Imputation of Interest. “ This guidance requires debt issuance costs be presented in the balance sheet as a reduction in liability rather than as an asset. This amendment is effective for interim and reporting periods beginning after December 15, 2016 with early adoption permissible. The Company has elected early adoption. On May 14, 2014, FASB and The International Accounting Standards Board (the IASB) issued a new joint revenue recognition standard that supersedes nearly all GAAP guidance on revenue recognition. The core principal of the standard is that revenue recognition should depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard is effective for the Company for the fiscal year 2017 Management does not believe that any other recently issued, but not yet effective, accounting pronouncement, if adopted, would have a material effect on the accompanying consolidated financial statements. |
ACQUISITION OF ESD (Tables)
ACQUISITION OF ESD (Tables) | 12 Months Ended |
May 31, 2017 | |
Business Combinations [Abstract] | |
Proforma Acquisition | Unaudited Pro Forma Condensed Consolidated Statements of Operations For the year ended May 31, 2017 Pro Forma Pro Forma HISP ESD Adjustments Notes Combined Sales, net $ 142,236 $ 2,661,919 $ — $ 2,804,156 Cost of goods sold 116,667 1,933,120 — 2,049,787 Gross income 25,570 728,799 — 754,369 Selling general and administrative expenses 1,517,823 904,423 2,367 (a) 2,424,613 Net Income/(loss) before other income and expenses (1,492,254 ) (175,624 ) — (1,670,245 ) Other income and (expenses) (1,250,937 ) (69,828 ) (158,160 ) (b) (1,478,925 ) Provision for income taxes — — — — Net Income/(loss) $ (2,743,191 ) $ (245,452 ) $ (160,527 ) $ (3,149,170 ) Basic and diluted loss per share $ (0.19 ) Basic and diluted weighted average number of shares outstanding 15,877,927 For the year ended May 31, 2016 Pro Forma Pro Forma HISP ESD Adjustments Notes Combined Sales, net $ 193,734 $ 2,775,113 $ — $ 2,968,847 Cost of goods sold 215,997 2,091,010 — 2,307,007 Gross income (22,263 ) 684,103 — 661,840 Selling general and administrative expenses 342,506 555,177 52,500 (a) 950,183 Net income/(loss) before other expenses (364,769 ) 128,926 (52,500 ) (288,343 ) Other income and (expenses) (35,438 ) (1,225 ) (158,160 ) (b) (194,823 ) Net income/(loss) $ (400,207 ) $ 127,701 $ (210,660 ) $ (483,166 ) See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Information |
Preliminary allocation of the purchase price | Intangible assets $ 375,000 Property, plant and equipment 75,000 Liabilities assumed Total purchase price $ 450,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
May 31, 2017 | |
Commitments And Contingencies Tables | |
Future minimum annual lease payments | For the years ending May 31, 2018 $ 63,000 2019 63,000 2020 63,000 2021 5,000 $ 194,000 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
May 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Deferred Tax Asset | May 31, 2017 May 31, 2016 Net operating loss carryforward $ 1,516,000 $ 326,000 Valuation allowance (1,516,000 ) (326,000 ) Deferred tax asset, net $ — $ — |
Statutory Rate | Effective Income Tax Rate Reconciliation 2017 2016 Federal Rate 34 % 34 % State Rate 6 % 6 % Valuation Allowance (40 %) (40 %) Effective income tax rate 0 % 0 % |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Accounting Policies [Abstract] | ||
Other income | $ 97,731 | |
Common stock equivalents, outstanding | 730,000 | |
Advertising and promotion expense | $ 23,800 | $ 5,000 |
CONCENTRATIONS (Details Narrati
CONCENTRATIONS (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Concentration Risk [Line Items] | ||
Federal Deposit Insurance Corporation ("FDIC") | $ 250,000 | |
Sales [Member] | ||
Concentration Risk [Line Items] | ||
Customers | 6 | 3 |
Concentration Risk, Percentage | 28.00% | 81.00% |
Net Sales | $ 695,000 | $ 156,000 |
Accounts Receivable [Member] | ||
Concentration Risk [Line Items] | ||
Customers | 5 | |
Concentration Risk, Percentage | 30.00% |
ACQUISITION OF ESD (Details)
ACQUISITION OF ESD (Details) - USD ($) | 1 Months Ended | 9 Months Ended | |
Jul. 31, 2016 | Feb. 28, 2017 | Jul. 05, 2016 | |
Credit line available | $ 7,500,000 | ||
Credit line allocated for use | 1,600,000 | $ 650,000 | |
Advisory Fee | $ 350,000 | ||
Shares issued for advisory fees | 374,332 | ||
Interest rate | 12.00% | ||
Shares issued for debt | 157,480 | ||
Debt amount satisfied | $ 200,000 | ||
ESD [Member] | |||
Credit line allocated for use | 450,000 | ||
GHS Secured Loan [Member] | |||
Credit line allocated for use | 32,534 | ||
Vendors [Member] | |||
Credit line allocated for use | 74,466 | ||
TCA Closing Fees [Member] | |||
Credit line allocated for use | $ 93,000 |
ACQUISITION OF ESD - Proforma A
ACQUISITION OF ESD - Proforma Acquisition (Details)(Details) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
HISP [Member] | ||
Sales, net | $ 142,236 | $ 193,734 |
Cost of goods sold | 116,667 | 215,997 |
Gross income | 25,570 | (22,263) |
Selling general and administrative expenses | 1,517,823 | 342,506 |
Net Income/(loss) before other income and expenses | (1,492,254) | (364,769) |
Other income and (expenses) | (1,250,937) | (35,438) |
Provision for taxes | ||
Net Income/(loss) | $ (2,743,191) | (400,207) |
Basic and diluted loss per share | ||
Basic and diluted weighted average number of shares outstanding | ||
ESD [Member] | ||
Sales, net | $ 2,661,919 | 2,775,113 |
Cost of goods sold | 1,933,120 | 2,091,010 |
Gross income | 871,106 | 684,103 |
Selling general and administrative expenses | 904,423 | 555,177 |
Net Income/(loss) before other income and expenses | (175,624) | 128,926 |
Other income and (expenses) | (69,828) | (1,225) |
Provision for taxes | ||
Net Income/(loss) | $ (245,452) | 127,701 |
Basic and diluted loss per share | ||
Basic and diluted weighted average number of shares outstanding | ||
Proforma Adjustments [Member] | ||
Sales, net | ||
Cost of goods sold | ||
Gross income | ||
Selling general and administrative expenses | 2,367 | 52,500 |
Net Income/(loss) before other income and expenses | (52,500) | |
Other income and (expenses) | (158,160) | (158,160) |
Provision for taxes | ||
Net Income/(loss) | $ (160,527) | (210,660) |
Basic and diluted loss per share | ||
Basic and diluted weighted average number of shares outstanding | ||
Proforma Combined [Member] | ||
Sales, net | $ 2,804,156 | 2,968,847 |
Cost of goods sold | 2,049,787 | 2,307,007 |
Gross income | 754,369 | 661,840 |
Selling general and administrative expenses | 2,424,613 | 950,183 |
Net Income/(loss) before other income and expenses | (1,670,245) | (288,343) |
Other income and (expenses) | (1,478,925) | (194,823) |
Provision for taxes | ||
Net Income/(loss) | $ (3,149,170) | $ (483,166) |
Basic and diluted loss per share | $ (0.19) | |
Basic and diluted weighted average number of shares outstanding | 15,877,927 |
ACQUISITION OF ESD - Purchase P
ACQUISITION OF ESD - Purchase Price (Details Narrative) | 12 Months Ended |
May 31, 2017USD ($) | |
Business Combinations [Abstract] | |
Total purchase price | $ 450,000 |
Property, plant and equipment | 75,000 |
Liabilities assumed | |
Intangible asset | 375,000 |
Amortization expense | 35,625 |
Depreciation expense | $ 14,508 |
LOANS PAYABLE - STOCKHOLDER (De
LOANS PAYABLE - STOCKHOLDER (Details Narrative) - Loan Payable - Stockholder #3 [Member] | 12 Months Ended |
May 31, 2017USD ($) | |
Debt Instrument [Line Items] | |
Date of Transaction | Apr. 1, 2016 |
Maturity date of loan | Jul. 1, 2016 |
Proceed from note | $ 10,000 |
Interest rate | 18.00% |
Accrued and unpaid interest | $ 229 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | Sep. 21, 2016 | Sep. 13, 2016 | Jul. 25, 2016 | Jun. 17, 2016 | Mar. 31, 2017 | Jul. 31, 2016 | Mar. 30, 2017 | May 31, 2017 | May 31, 2016 |
Debt Instrument [Line Items] | |||||||||
Proceeds from notes payable | $ 645,784 | $ 18,500 | |||||||
Issuance of common stock for repayment of note, amount | $ 102,934 | 10,817 | |||||||
Convertible Notes [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Issue date | Jun. 30, 2016 | ||||||||
Maturity date of loan | Nov. 7, 2017 | ||||||||
Convertible debt | $ 803,000 | ||||||||
Interest rate | 5.00% | ||||||||
Original issue discount, percentage | 10.00% | ||||||||
Issuance of common stock for repayment of note, shares | 1,790,000 | 1,730,000 | |||||||
Warrants | 730,000 | ||||||||
Warrant price per share | $ 0.85 | ||||||||
Shares authorized | 6,033,131 | ||||||||
Convertible Note[Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Issue date | Sep. 1, 2014 | ||||||||
Maturity date of loan | Dec. 31, 2014 | ||||||||
Convertible debt | $ 6,000 | ||||||||
Interest rate | 10.00% | ||||||||
Principal payment on loans | $ 3,000 | 3,000 | |||||||
Interest payment on loans | $ 636 | $ 636 | |||||||
Conversion rate per share | $ 0.25 | ||||||||
Note [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
New Lender | New Lender | ||||||||
Issue date | Sep. 1, 2015 | ||||||||
Convertible debt | $ 56,000 | $ 87,500 | |||||||
Original issue discount | 7,500 | ||||||||
Capitalized financing costs | 7,735 | ||||||||
Loan costs | $ 5,000 | ||||||||
Maturity date of loan | 23 months after inception | ||||||||
Prepayment premium | 125.00% | 125.00% | |||||||
Prepayment amount | $ 25,521 | ||||||||
Interest rate | 22.00% | ||||||||
Late payment and penalties | $ 7,836 | ||||||||
Accrued and unpaid interest | $ 359 | ||||||||
Issuance of common stock for repayment of note, amount | $ 20,000 | $ 15,000 | $ 12,500 | ||||||
Issuance of common stock for repayment of note, shares | 200,000 | 69,404 | 52,053 | 18,315 | |||||
Conversion rate per share | $ 0.28 | $ 0.2882 | $ 0.288167 | $ 0.6825 | $ 3 | ||||
Loan Unrelated Party [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Issue date | Mar. 1, 2016 | ||||||||
Maturity date of loan | Jul. 31, 2016 | ||||||||
Convertible debt | $ 18,500 | ||||||||
Proceeds from notes payable | $ 18,500 | ||||||||
Interest rate | 22.00% | ||||||||
Late payment and penalties | $ 13,304 | ||||||||
Future Sales Proceeds Purchase Agreement [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Issue date | Jul. 15, 2016 | ||||||||
Convertible debt | $ 214,200 | ||||||||
Proceeds from notes payable | $ 167,450 | ||||||||
Second Future Sales Proceeds Purchase Agreement [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Issue date | Jul. 15, 2016 | ||||||||
Convertible debt | $ 281,400 | ||||||||
Proceeds from notes payable | 128,920 | ||||||||
Capitalized financing costs | 76,650 | ||||||||
Unamortized financing costs | 46,000 | ||||||||
Periodic loan payment | $ 1,340 | ||||||||
Number of payments | 126 | ||||||||
Purchase Rights Purchase and Sale Agreement [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Issue date | Jul. 15, 2016 | Mar. 30, 2017 | |||||||
Convertible debt | $ 266,000 | $ 266,000 | |||||||
Proceeds from notes payable | 197,370 | 131,370 | |||||||
Capitalized financing costs | 146,923 | ||||||||
Unamortized financing costs | 54,000 | ||||||||
Periodic loan payment | $ 1,512 | $ 1,512 | |||||||
Number of payments | 231 | 183 |
NOTES PAYABLE (Details Narrat29
NOTES PAYABLE (Details Narrative) (Parenthetical) | 12 Months Ended |
May 31, 2017 | |
Note [Member] | |
Loan terms | Under the terms of the Note, the Note holder has the right, until the outstanding balance has been paid in full, to convert all or any part of the outstanding balance into shares of fully paid and non-assessable common stock, $0.001 par value per shares of the Company (the Lender Conversion Shares), as per the following conversion formula: The number of Lender Conversion Shares equals the amount being converted (the "Conversion Amount") divided by the Lender Conversion Price. The Lender Conversion Price is defined in the Note as being $3.00 per share, however, in the event the Market Capitalization falls below $20,000,000.00 at any time, then in such event (a) the Lender Conversion Price for all Lender Conversions occurring after the first date of such occurrence shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion. Subject to certain conditions, a Conversion Factor of 70%, shall apply to the Lender Conversion Price, subject to the following adjustments: (i) If at any time the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding any date of measurement is below $1.00, then in such event the then-current Conversion Factor shall be reduced by 10% for all future conversions; (ii) if at any time after the effective date of the Note, the Conversion Shares are not DTC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for all future conversions; and, (iii) in addition to the Default Effect, as defined, if any Major Default occurs, as defined, after the effective date of the Note, the Conversion Factor shall automatically be reduced for all future conversions by an additional 5% for each of the first three (3) Major Defaults that occur. |
Future Sales Proceeds Purchase Agreement [Member] | |
Loan terms | The Company is obligated to make payments equal to 10% of future receipts. |
Purchase Rights Purchase and Sale Agreement [Member] | |
Loan terms | The Company is obligated to make payments equal to 15% of future receipts |
LINE OF CREDIT (Details Narrati
LINE OF CREDIT (Details Narrative) - USD ($) | 12 Months Ended | |||
May 31, 2017 | Jul. 31, 2016 | Jul. 05, 2016 | May 31, 2016 | |
Credit Line facility capacity | $ 1,600,000 | $ 650,000 | ||
Line of credit | $ 11,413 | |||
Line of Credit [Member] | ||||
Credit Line facility | 15,000 | |||
Credit Line facility capacity | $ 35,000 | |||
Number of payments | 6 | |||
Monthly amount | $ 2,963 |
COMMITMENTS AND CONTINGENCIES31
COMMITMENTS AND CONTINGENCIES (Details Narrative 1) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent Expense, monthly | $ 750 | |
Rental Obligation | 5,248 | |
Employment agreement | 58,000 | |
Rent expense. paid | $ 67,799 | $ 9,697 |
COMMITMENTS AND CONTINGENCIES32
COMMITMENTS AND CONTINGENCIES (Details Narrative 2) | 12 Months Ended |
May 31, 2017USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Description | HISP has initiated a lawsuit against TCA Global Credit Master Fund, LP (“TCA”) |
Alleged Damages | $ 950,000 |
Unpaid amount | 365,000 |
Advisory fees | 350,000 |
Deferred Financing costs | $ 200,000 |
COMMITMENTS AND CONTINGENCIES33
COMMITMENTS AND CONTINGENCIES (Details Narrative 3) | 1 Months Ended |
Oct. 30, 2015shares | |
Commitments and Contingencies Disclosure [Abstract] | |
Equity interest | 20.00% |
Shares issued for investment | 20,000 |
COMMITMENTS AND CONTINGENCIES34
COMMITMENTS AND CONTINGENCIES (Details) | May 31, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 63,000 |
2,019 | 63,000 |
2,020 | 63,000 |
2,021 | 5,000 |
Future minimum annual lease payments | $ 194,000 |
INCOME TAXES - Tax Benefit (Det
INCOME TAXES - Tax Benefit (Details) - USD ($) | May 31, 2017 | May 31, 2016 |
Deferred tax asset | ||
Net operating loss carryforward | $ 1,516,000 | $ 326,000 |
Valuation Allowance | (1,516,000) | (326,000) |
Deferred tax asset, net |
INCOME TAXES - Statutory Rate (
INCOME TAXES - Statutory Rate (Details) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Effective Income Tax Rate Reconciliation | ||
Federal Rate | 34.00% | 34.00% |
State Rate | 6.00% | 6.00% |
Valuation allowance | (40.00%) | (40.00%) |
Effective income tax rate | 0.00% | 0.00% |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carry forward | $ 3,820,000 | |
Valuation allowance | $ 1,200,000 | $ 160,000 |
Expiration date | May 31, 2037 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Related Party Transactions [Abstract] | ||
Purchases from related party | $ 0 | $ 204,000 |
Prepayments to this supplier | 0 | $ 14,740 |
Consulting fees | 7,000 | |
Rent per month | 750 | |
Accrued rent | $ 18,000 |
BASIS OF REPORTING (Details)
BASIS OF REPORTING (Details) | 50 Months Ended |
May 31, 2017USD ($) | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Net loss | $ 3,795,000 |
working capital deficiency | 1,125,000 |
net capital deficiency | $ 720,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | 2 Months Ended |
Apr. 18, 2017shares | |
Subsequent Events [Abstract] | |
Common stock for services, shares | 500,000 |