Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2018

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______.

Commission file number 333-190788

Life On Earth, Inc.

(Exact name of registrant as specified in its charter)

Delaware		46-2552550
(State or other jurisdiction		(I.R.S. Employer Identification No.)
of incorporation or organization)

575 Lexington Avenue, 4 ^th Floor
New York, New York		10022
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number including area code 1(646) 844-9897

______________________________________________

(Former Name or Former Address, if changed since last report)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one)
Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS

As of the period ended in this report, August 31, 2018 the registrant had 26,648,129 shares of common stock outstanding. As October 17, 2018 the registrant had 26,750,704 shares of common stock outstanding.

Life On Earth, Inc.

Form 10-Q
TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statement of Changes in Stockholders Deficiency	4
	Condensed Consolidated Statements of Cash flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2. Managements Discussions and Analysis of Financial Condition and Results of
	Operations	26
Item 3. Quantitative and Qualitative Disclosures about Market Risk		32
Item 4. Controls and Procedures		32

PART II - OTHER INFORMATION
	Item 1. Legal Proceedings	33
	Item 2. Unregistered sales of Equity Securities and Use of Proceeds	33
	Item 3. Defaults Upon Senior Securities	33
	Item 4. Mining Safety Disclosure	33
	Item 5. Other Information	33
	Item 6. Exhibits	33

SIGNATURES		34

Life On Earth, Inc.
Condensed Consolidated Balance Sheets
ASSETS
	August 31,			May 31,
	2018			2018
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	285,324		$	189,317
Accounts receivable, net of allowance for doubtful accounts of $18,000 and $14,000 as of August 31, 2018 and May 31, 2018, respectively		290,861			181,551
Inventory		348,108			338,920
Prepaid expenses		53,125			102,243
Total current assets		977,418			812,031

Other Assets:
Equipment, net of accumulated depreciation of $39,234 and $30,937 as of August 31, 2018 and May 31, 2018, respectively		103,480			111,777
Notes receivable		38,015			47,909
Goodwill		1,970,000			785,000
Intangible assets, net of accumulated amortization of $115,547 and $80,822 as of August 31, 2018 and May 31, 2018, respectively		766,453			801,178
Security deposits		22,245			22,245

	$	3,877,611		$	2,580,140

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable and accrued expenses	$	1,675,371		$	1,815,962
Note payable - related party		2,000			2,000
Note payable		205,000			560,000
Convertible notes payable, net of unamortized deferred financing costs of $868,106 and $638,427 as of August 31, 2018 and May 31, 2018, respectively		1,032,393			809,533
Loans payable, net of unamortized financings costs of $38,763 and $67,834 as of August 31, 2018 and May 31, 2018, respectively		135,666			185,689
Lines of credit		37,443			38,898
Loan payable - stockholders		53,079			52,394
Total current liabilities		3,140,952			3,464,476

Other liabilities
Loans payable		8,863			49,479
Loan payable - stockholders		56,916			57,601

Total Liabilities		3,206,731			3,571,556

Commitments and contingencies

Stockholders' Deficiency:
Series A Preferred stock, $0.001 par value; 10,000,000 shares authorized,
1,200,000 shares issued and outstanding		1,200			1,200
Common stock, $0.001 par value; 100,000,000 shares authorized,
28,284,492 and 23,581,586 shares issued and outstanding, as of August 31, 2018 and May 31, 2018, respectively		28,284			23,582
Additional paid-in capital		8,165,489			5,255,236
Accumulated deficit		(7,524,093	)		(6,271,434	)
		670,880			(991,416	)

	$	3,877,611		$	2,580,140

The accompanying notes are an integral part of these condensed consolidated financial statements.

Life On Earth, Inc.
Condensed Consolidated Statements of Operations

	For the three months ended August 31,
	2018			2017
	(unaudited)			(unaudited)

Sales, net	$	1,354,134		$	1,036,044
Cost of goods sold		1,116,761			818,526
Gross profit		237,373			217,518

Expenses:
Salaries and benefits		189,197			128,363
Professional fees		76,651			91,731
Consultants - share based compensation		147,182			48,500
Travel		35,139			18,929
Repairs and maintenance		37,814			25,452
Rent		34,405			11,363
Depreciation and amortization		43,021			13,125
Advertising and promotion		8,002			1,333
Officers' compensation		11,156			9,493
Other		145,728			63,440
		728,295			411,729

Loss from operations		(490,922	)		(194,211	)

Other expenses
Interest and financing costs		(761,737	)		(335,033	)

Net loss	$	(1,252,659	)	$	(529,244	)

Basic and diluted loss per share	$	(0.05	)	$	(0.03	)

Basic and diluted weighted average number
of shares outstanding		25,351,437			18,925,515

The accompanying notes are an integral part of these condensed consolidated financial statements.

Life On Earth, Inc.
Consolidated Statement of Stockholders' Deficiency
For the Three Months Ended August 31, 2018
(Unaudited)
	Common Stock				Series A Preferred Stock				Additional		Accumulated			Total Stockholders
	Shares		Amount		Shares		Amount		Paid in capital		Deficit			Deficiency
Balance - June 1, 2018		23,581,586	$	23,582		1,200,000	$	1,200	$	5,255,236	$	(6,271,434	)	$	(991,416	)

Issuance of common shares for services		231,773		232						96,606					96,838
Issuance of common shares for deferred financing costs		757,500		757						519,782					520,539
Issuance of common shares for convertible debt at par value		2,077,270		2,077						935,502					937,579
Issuance of common shares for acquisition of JCG		1,636,363		1,636						636,545					638,182
Contingent consideration for additional shares related to the acquisition of JCG										721,818					721,818
Net loss												(1,252,659	)		(1,252,659	)

Balance - August 31, 2018		28,284,492	$	28,284		1,200,000	$	1,200	$	8,165,489	$	(7,524,093	)	$	670,880

The accompanying notes are an integral part of these condensed consolidated financial statements.

Life On Earth, Inc.
Condensed Consolidated Statements of Cash Flows

	For the three months ended August 31,
	2018			2017
Cash Flows From Operating Activities	(Unaudited)			(Unaudited)
Net loss	$	(1,252,659	)	$	(529,244	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Stock based compensation		147,182			48,500
Depreciation and amortization		43,021			13,125
Amortization of financing costs included in interest and financing costs		746,799			287,105
Provision for bad debts		4,000			—
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable		54,390			6,753
Inventory		62,847			(14,863	)
Prepaid expenses and other current assets		(1,227	)		—
Notes receivable		9,894			—
Increase (decrease) in:
Accounts payable and accrued expenses		(62,341	)		344,785
		(248,094	)		156,161

Cash Flows From Investing Activities
Acquisition of subsidiary, net of cash acquired		265			—
		265			—

Cash Flows From Financing Activities
Repayment of loans payable		(205,000	)		(155,095	)
Repayment of notes payable		(119,712	)		—
Proceeds from lines of credit, net of financing costs		20,162			25,088
Payment of lines of credit		(21,617	)		(13,918	)
Proceeds from loan payable - related party		—			20,000
Proceeds from convertible notes payable, net of financing costs		670,000			—
		343,833			(123,925	)

Net Increase in Cash and Cash Equivalents		96,007			32,236

Cash and Cash Equivalents - beginning		189,317			217,598

Cash and Cash Equivalents - end	$	285,324		$	249,834

Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest	$	15,853		$	—

Noncash investing and financing activities
Common stock issued for deferred financing costs	$	143,250		$	—

Common stock issued for convertible debt	$	150,000		$	—

Common stock issued for acquisition	$	638,182		$	—

Common stock issued for deferred financing costs	$	520,539		$	—

In August 2018, the Company acquired certain business net assets (See Note 3)
Cash	$	265		$	—
Accounts receivable		167,700			—
Inventory		72,035			—
Goodwill		1,185,000			—
Accounts payable		(65,000	)		—
Net assets acquired	$	1,360,000		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Life On Earth, Inc.

Notes to Condensed Consolidated Financial Statements

August 31, 2018

(Unaudited)

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Life On Earth, Inc. is an innovative brand accelerator, incubator and distribution platform focused on building and scaling concepts in the all-natural consumer products category. We focus on building brands within the alternative beverage space. We are a dynamic and innovative all-natural consumer packaged goods company focused on but not limited to the emerging beverage industry. We manufacture and distribute our brands through our distribution subsidiaries in New York and California.

The accompanying consolidated financial statements include the financial statements of Life On Earth, Inc. (“LFER”) and its wholly owned subsidiaries, Energy Source Distributors Inc., (“ESD”), Victoria’s Kitchen, LLC (“VK”), The Giant Beverage Company, Inc. (“GBC”), and The Chill Group (“JCG”).

LFER was incorporated in Delaware in April 2013 and acquired ESD in July 2016, VK in October 2017, GBC in April 2018 and JCG in August 2018. The Company currently markets and sell beverages, primarily in New York and California.

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such regulations. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim periods presented have been included. All such adjustments are of a normal recurring nature. The accompanying condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company's Form 10-K as of May 31, 2018. Interim results are not necessarily indicative of the results of a full year.

Revenue Recognition

In May 2014, the FASB issued guidance codified in ASC 606 which amends the guidance in former ASC 605, “Revenue Recognition.” The core principle of the standard is to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. The standard also requires additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The Company recognizes sales of its beverage products, based on predetermined pricing, upon delivery of the product to its customers as that is when the customer obtains control of the goods. We considered several factors in determining that control transfers to the customer upon delivery of products. These factors include that legal title transfers to the customer, we have a present right to payment, and the customer has assumed the risk and rewards of ownership at the time of delivery. Payment is typically due within 30 days. The Company has no significant history of returns or refunds of its products. For the three months ending August 31, 2018 and 2017, sales of our beverage products totaled $1,354,134 and $1,036,044, respectively. All sales were to retail customers located within the United States with the majority of sales to customers in New York and California.

Use of Estimates

The preparation of consolidated financial statements in accordance 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 August 31, 2018 and May 31, 2018, warrants and convertible notes payable could be converted into approximately 6,490,385 and 4,335,000 shares of common stock, respectively.

Income Taxes

The Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized when it is more likely than not that such tax benefits will not be realized.

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 in income tax expense. The Company did not have any unrecognized tax benefits as of August 31, 2018 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. The allowance is based on management's estimate of the uncollectible accounts receivable. As of August 31, 2018 and May 31, 2018, the allowance for doubtful accounts was $18,000 and $14,000, respectively.

Inventory

Inventory consists of finished goods and raw materials which are stated at the lower of cost (first-in, first-out) and net realizable value.

Equipment

Equipment is stated at cost. The Company provides for depreciation based on the useful lives of the assets using straight-line methods. Expenditures for maintenance, repairs, and betterments that do not materially prolong the normal useful life of an asset have been charged to operations as incurred. Upon sale or other disposition of assets, the cost and related accumulated depreciation and amortization are removed from these accounts, and the resulting gain or loss, if any, is reflected in operations.

Goodwill

Goodwill is deemed to have an indefinite life, and accordingly, is not amortized, but evaluated annually (or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable) for impairment. The most significant assumptions, which are used in this test, are estimates of future cash flows. If these assumptions differ significantly from actual results, impairment charges may be required in the future.

Advertising

Advertising and promotion costs are expensed as incurred. Advertising and promotion expense amounted to $8,002 and $1,333 for the three months ended August 31, 2018 and 2017, respectively.

Shipping and Handling

Shipping and handling costs are included in costs of goods sold.

Business combination

GAAP requires that all business combinations not involving entities or businesses under common control be accounted for under the acquisition method. The Company applies ASC 805, "Business combinations", whereby the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of operations and comprehensive income.

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity's current business model and industry comparisons. Terminal values are based on the expected life of products and forecasted life cycle and forecasted cash flows over that period. The Company's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any changes to provisional amounts identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, effective for fiscal years beginning after December 15, 2018, that attempts to establish a uniform basis for recording revenue to virtually all industries’ financial statements. The revenue standard’s core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. Additionally, the new guidance requires enhanced disclosure to help financial statement users better understand the nature, amount, timing and uncertainty of the revenue recorded. Effective June 1, 2018, the Company adopted Topic 606 using the modified retrospective method. The Company’s accounting policy for the new standard is based on a detailed review of its business and contracts. Based on the new guidance, the Company will continue to recognize revenue at the time its products are delivered, and therefore adoption of the standard did not have a material impact on its financial statements and is not expected to have a material impact in the future.

In February 2016, the FASB issued a new accounting standard on leases. The new standard, among other changes, will require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases. The lease liability will be measured at the present value of the lease payments over the lease term. The right-of-use asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The adoption currently requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest period presented. In July 2018, the FASB issued ASU 2018-11 making transition requirements less burdensome. The standard provides an option to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the Company’s financial statements. The Company is beginning its evaluation of the transition methods of the standard to determine the impact of the adoption on its financial statements.

In January 2017, the FASB issued an update to the accounting guidance to simplify the testing for goodwill impairment. The update removes the requirement to determine the implied fair value of goodwill to measure the amount of impairment loss, if any, under the second step of the current goodwill impairment test. A company will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of the goodwill. The guidance is effective prospectively for public business entities for annual reporting periods beginning after December 15, 2019. This standard is required to take effect in the Company’s first quarter (August 2020) of our fiscal year ending May 31, 2021. We do not expect the adoption of this new guidance will have a material impact on our financial statements.

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

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 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 account receivable credit risk exposure is limited.

Sales and Accounts Receivable

During the three months ended August 31, 2018, sales to five customers accounted for approximately 40% of the Company’s net sales. During the three months ended August 31, 2017, sales to three customers accounted for approximately 22% of the Company’s net sales.

Four customers accounted for approximately 14% of the Company’s accounts receivable as of August 31, 2018. One customer accounted for approximately 11% of the Company’s accounts receivable at May 31, 2018.

Note 3 – JCG ACQUISITION

To support the company’s strategic initiatives, the Company acquired JCG and the JCG brands.

Effective August 2, 2018, the Company entered into an agreement (the “JCG Agreement”) to acquire all of the outstanding stock of JCG in exchange for 1,636,363 shares of the Company’s restricted common stock valued at $0.39 per share for a total value of approximately $638,000. If these shares are trading below $0.30 after August 2, 2019, the Company will issue additional shares so that the value of the 1,636,363 shares plus these additional shares, with a floor price of $0.20, will be equal to $900,000. The JCG Agreement also provides for the issuance of 850,000 warrants for the purchase of common stock with a two-year term and an exercise price of $0.85 with a value of approximately $9,400. The JCG Agreement also provides for an additional 1,090,909 shares of restricted common stock to be issued when the gross revenues of the JCG brands reach $900,000 in a twelve-month period. The JCG Agreement also provides for additional shares of restricted common stock, with a market value of $500,000 on the date of issuance, to be issued when the gross revenues of the JCG brands reach $3,000,000 in a twelve-month period, and again when the gross revenues of the JCG brands reach $5,000,000 in a twelve-month period. The JCG Agreement also provides for the issuance of the restricted common stock and warrants to the shareholders of JCG on a pro rata basis according to their respective percentage of ownership as of August 2, 2018. The restricted common stock may not be transferred, sold, gifted, assigned, pledged, or otherwise disposed of, directly or indirectly, for a period of twelve months (the “Lock-Up Period”). After the Lock-Up Period, the maximum shares that may be sold by each restricted common stockholder during any given one-day period shall be 5% of their total holdings or no more than 20% of the average trading volume of the preceding 30 days, whichever is less. The Company has determined the value of the contingent shares and warrants, in excess of the initial 1,636,363 shares, to be approximately $722,000, for a total purchase price value of approximately $1,360,000.

The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Issuance of 1,636,363 shares of common stock with an estimated fair value of $.39 per share	$	638,182
Contingent consideration for additional shares and warrants (included in additional paid-in capital)		721,818

Total purchase consideration	$	1,360,000

Cash	$	265
Accounts receivable		167,700
Inventory		72,035
Accounts payable		(65,000	)
Goodwill		1,185,000
Net assets acquired	$	1,360,000

The goodwill acquired will be amortized over fifteen (15) years for tax purposes.

From the date of acquisition through August 31, 2018, JCG generated sales of approximately $21,000, cost of goods sold of approximately $16,000, and a net loss of approximately $17,000.

The following table presents the unaudited pro forma condensed consolidated statements of operations for the three months ended August 31, 2018:

	LFER			JCG			ProForma Adjustments		Notes	ProForma Combined
Sales, net	$	1,332,946		$	162,158		$	—		$	1,495,104
Cost of goods sold		1,100,342			96,458						1,196,800
Gross profit		232,604			65,700						298,304

Operating expenses		706,138			96,440						802,578

Net Loss before other expenses		(473,534	)		(30,740	)					(504,274	)

Other expenses		(761,737	)		—						(761,737	)

Net Loss	$	(1,235,271	)	$	(30,740	)	$	—		$	(1,266,011	)

See accompanying notes to the condensed consolidated unaudited proforma financial information.

Life On Earth, Inc.

Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information

Proforma Note 1. — Basis of presentation

The unaudited pro forma condensed consolidated financial statements are based on Life On Earth, Inc.’s (the “Company”, “LFER”) historical consolidated financial statements as adjusted to give effect to the acquisition of JCG as if it had occurred on June 1, 2018.

Proforma Note 2 —Purchase price allocation

The unaudited pro forma condensed financial information includes various assumptions, including those related to the purchase price allocation of the assets acquired and liabilities assumed from JCG based on management’s best estimates of fair value.

Note 4 – GBC ACQUISITION

To support the company’s strategic initiatives, the Company acquired GBC for its distribution capabilities in the New York metropolitan region.

Effective April 26, 2018, the Company acquired all of the outstanding stock of GBC for total consideration of $730,092, of which, $108,079 was paid in cash and $622,013 was paid by the issuance of 1,455,000 shares of the Company’s common stock at $0.4275 per share. If, after 12 months from the date of the closing, the shares are trading below twenty ($0.20) cents per share, the Company shall issue 485,000 additional shares as additional stock consideration. The company has determined the value of these contingent shares to be di minimis. In conjunction with the closing, the stockholders of GBC are subject to the provisions of a non-competition/non-solicitation/non-disclosure agreement. One of the former stockholders of GBC has been appointed as the Company’s General Manager pursuant to a 2-year employment agreement.

At April 26, 2018, the fair value of the assets acquired and liabilities assumed from GBC were as follows:

Assets:
Cash	$	118,941
Accounts receivable		36,365
Inventory		79,283
Equipment		65,925
Notes receivable		61,344
Goodwill		590,000
Customer list		507,000
	$	1,458,858
Liabilities:
Accounts payable	$	402,700
Intercompany loans		116,071
Line of credit		15,833
Loans payable		194,162
	$	728,766

Net Assets Acquired	$	730,092

The estimated useful life of the customer list is five (5) years. Amortization expense of $25,350 was recorded during the three months ended August 31, 2018. The estimated useful life of the equipment is five (5) years. Depreciation expense of $4,546 was recorded during the three months ended August 31, 2018.

The goodwill acquired will be amortized over fifteen (15) years for tax purposes.

See Note 6 for the unaudited pro forma condensed consolidated statements of operations for the three months ended August 31, 2017.

Note 5 – VK ACQUISITION

To support the Company’s strategic initiatives, the Company acquired VK and the VK brands.

Effective October 19, 2017, the Company acquired 100% of the outstanding membership interests of VK, for 312,500 restricted shares of the Company’s common stock at a price of $0.40 per share for a total consideration of $125,000.

At October 19, 2017, the fair value of the assets acquired and liabilities assumed from VK were as follows:

Cash	$	1,355
Accounts receivable		13,024
Inventory and work in process		40,564
Accounts payable		(16,343	)
Notes payable		(108,600	)
Goodwill		195,000
Net assets acquired	$	125,000

The goodwill acquired will be amortized over fifteen (15) years for tax purposes.

See Note 6 for the unaudited pro forma condensed consolidated statements of operations for the three months ended August 31, 2017.

Note 6 – UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Life On Earth, Inc.
Unaudited ProForma Condensed Consolidated Financial Information
for the three months ended August 31, 2017
	LFER			VK			GBC			ProForma Adjustments				ProForma Combined

Sales, net	$	1,036,044		$	45,274		$	779,279		$	—			$	1,860,597
Cost of goods sold		818,526			30,140			695,720			—				1,544,386
Gross profit		217,518			15,134			83,559			—				316,211

Operating expenses		411,729			8,188			95,423			15,175		a		530,515

Net loss before other expenses		(194,211	)		6,946			(11,864	)		(15,175	)			(214,304	)

Other expenses, net		(335,033	)		(1,443	)		(4,597	)		—				(341,073	)

Net loss	$	(529,244	)	$	5,503		$	(16,461	)	$	(15,175	)		$	(555,377	)

See accompanying notes to the condensed consolidated unaudited proforma financial information.

Life On Earth, Inc.

Notes to the Unaudited ProForma Condensed Consolidated Financial Information

ProForma Note 1. — Basis of presentation

ProForma Note 2 —Purchase price allocation

The unaudited pro forma condensed financial information includes various assumptions, including those related to the purchase price allocation of the assets acquired from VK and GBC based on management’s best estimates of fair value.

Proforma Note 3 — Pro Forma adjustment

The pro forma adjustments are based on our estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed consolidated financial information:

(a) Reflects the depreciation related to the acquired property and equipment and the amortization of the intangible assets acquired.

Proforma Note 4 — Commitments

In connection with the acquisition of GBC, the Company assumed a lease for approximately 5,250 square feet of office and warehouse space located in Staten Island, New York at a base rent of $8,500 per month. The lease terminates on April 26, 2023, in addition, the Company entered into an employment agreement, beginning April 26, 2018, with a general manager for a period of two years at a cost of $75,000, per year.

Note 7 - GOODWILL

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired from JCG, VK and GBC as disclosed in Notes 3, 4 and 5. The changes in the carrying amount of goodwill for the three months ended August, 2018 and for the year ended May 31, 2018 were as follows:

	Three months ended August 31, 2018		Year ended May 31, 2018
Balance at beginning of the period/year	$	785,000	$	—
Acquisition of GBC (Note 4)		—		590,000
Acquisition of VK (Note 5)		—		195,000
Acquisition of JCG (Note 3)		1,185,000		—

Balance at the end of the period/year	$	1,970,000	$	785,000

Goodwill resulting from the business acquisitions completed in the three months ended August 31, 2018 and in the year ended May 31, 2018 have been allocated to the financial records of the acquired entity. For the three months ended August 31, 2018 and for the year ended May 31, 2018, the Company did not recognize goodwill impairment. As of August 31, 2018 and May 31, 2018, there had not been any accumulated goodwill impairment recognized. The goodwill acquired will be amortized over fifteen (15) years for tax purposes.

Note 8 – INTANGIBLE ASSETS

Intangible assets as of August 31, 2018 and May 31, 2018 are summarized as follows:

	August 31, 2018		May 31, 2018
Intangible assets:
Intangible assets to be amortized:
Business relationships and customer lists	$	882,000	$	882,000

Less: accumulated amortization:
Intangible assets to be amortized:
Business relationships and customer lists		115,547		80,822

Net book value at the end of the period/year	$	766,453	$	801,178

The Company’s intangible assets are tested for impairment if impairment indicators arise. The Company amortizes its intangible assets using the straight-line method over a period ranging from 5-10 years.

Amortization expense for the three months ended August 31, 2018 and 2017 was approximately $34,245 and $9,375, respectively.

The annual estimated amortization expense for intangible assets for the five succeeding years is as follows:

For the twelve months ended August 31,
2019	$	138,900
2020		138,900
2021		138,900
2022		138,900
2023		105,083
Thereafter		105,770
	$	766,453

Note 9 - LOANS PAYABLE – STOCKHOLDERS

In connection with the acquisition of GBC, the Company entered into a loan agreement with the former owners of GBC in the amount of $109,995. The former owners of GBC became stockholders of the Company when the acquisition of GBC was completed. The loan bears interest at 7% per annum, requires monthly payments of principal and interest totaling $4,925, and matures in April 2020, at which time all unpaid principal and interest is due. The loan is secured by all of the assets of GBC. At August 31, 2018 and May 31, 2018 the outstanding balance of the loan was $109,995.

As of August 31, 2018, future principal payments of the loan were approximately as follows:

For the twelve months ended August 31,
2019	$	53,079
2020		56,916
	$	109,995

Note 10 – NOTES PAYABLE – RELATED PARTY

In June 2017, the Company issued a demand note in the amount of $20,000 to a related party. The note is unsecured, bears interest at 15% and matured October 2017. During October 2017, the Company repaid $18,000 of the note. During the three months ended August 31, 2018, the Company recorded interest expense of $1,761. At August 31, 2018 and May 31, 2018, the unpaid principal balance of the loan was $2,000. As of August 31, 2018 the unpaid principal balance no longer continues to accrue interest and the lender has not demanded payment.

Note 11 – NOTES PAYABLE

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. 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 had a maturity date of December 27, 2017. 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 was due. The advisory fees and closing fees totaling $443,000 were recognized as deferred financing costs. In June 2018, the Company and TCA mutually agreed to settle the debt for a total amount of $560,000, of which $410,000 is to be paid in cash in 6 equal monthly installments of $68,333 beginning in June 2018 and $150,000 to be paid with shares of the Company’s common stock. As of August 31, 2018 and May 31, 2018, the outstanding balance was $205,000 and $560,000, respectively.

As of August 31, 2018, future principal payments of the note payable were approximately as follows:

For the twelve months ending August 31,

2019	$	205,000

Note 12 – CONVERTIBLE 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 has issued an aggregate of 1,790,000 shares of its common stock to the Holders, during March 2017. 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 1,790,000 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.

On September 20, 2017 and upon maturity, the Company repaid one Convertible Note Holder the principal amount of $440,000 and, accrued and unpaid interest in the amount of $21,156. In addition, the Company purchased 1,100,000 shares of treasury stock from the Holder for $63,844 and subsequently the shares were cancelled.

On November 6, 2017 and upon maturity, the Company repaid two Convertible Note Holders the aggregate principal amount of $165,000 and, accrued and unpaid interest in the amount of $8,747.

During November 2017, the Company and the remaining four Convertible Note Holders agreed to extend the maturity date of their respective Convertible Notes to September 30, 2018.

In July 2018, the Company and one Convertible Note Holder agreed to convert the outstanding principal balance of $110,000 and related accrued interest of $10,648 into 804,557 shares of the Company’s common stock. As of August 31, 2018 and May 31, 2018, the outstanding balance was $88,000 and $110,000, respectively.

In November 2017, the Company borrowed $20,000 from a related party. The note matured in May 2018, bore interest at 7% per annum and was convertible into common stock of the Company at a fixed price of $0.15 per share. As additional consideration for the issuance of the convertible note, the Company issued 40,000 shares of the Company’s common stock on March 1, 2018. As a result of this transaction the Company recorded a deferred finance cost of $20,000, all of which was amortized during the year ended May 31, 2018. In June 2018, the note was converted into 133,333 shares of the Company’s common stock.

On September 25, 2017, the Company entered into a note purchase agreement (“NPA”), pursuant to which the Company issued a 7% secured promissory note (“SPN”) in the principal amount of $650,000 (the “650K Note”), which matures on March 25, 2019. As additional consideration for the issuance of the SPN, the Company issued 1,500,000 restricted shares of the Company’s common stock at $0.20 per share, which was recorded as a deferred finance cost. The deferred finance cost is being amortized over the life of the SPN.

On November 3, 2017, the NPA was amended and an additional 7% SPN was issued to the purchaser in the principal amount of $175,000 (the “$175K Note”), which matures on May 3, 2019. As additional consideration for the issuance of the $175K Note, the Company issued 800,000 restricted shares of the Company’s common stock at $0.42 per share, which was recorded as a deferred finance cost. The deferred finance cost is being amortized over the life of the SPN.

Both SPN’s are secured by a continuing security interest in substantially all assets of the Company. Under the terms of the NPA, the Company was required to pay a consulting fee of $65,000 to the purchaser. In November 2017, the purchaser agreed to and accepted from the Company, 433,333 shares of the Company’s common stock, which shares were issued at $0.40 per share, in lieu of payment of the consulting fee, which was recorded by the Company as a deferred finance cost. The deferred finance cost is being amortized over the life of the SPN’s.

On January 26, 2018, the Company entered into a NPA, pursuant to which the Company issued a Note in the amount of $125,000 (the “Note Purchase”). The Note bears interest at 7% per annum and matures on January 26, 2019. In connection with the NPA, the Company and the Purchaser also entered into a Side Letter, pursuant to which, as additional consideration for the NPA, the Company agreed to (i) pay to the Purchaser, the first $125,000 in cash proceeds received by the Company in connection with a NPA from third parties unaffiliated with the Purchaser (the “Cash Payment”) shall be used to reduce the amount due to the Purchaser under the $175K Note , and (ii), with certain exceptions, not issue any shares of common stock or other securities convertible into shares of common stock unless and until the Cash Payment has been made in full. As of August 31, 2018 and May 31, 2018, the outstanding balance was $125,000.

As further consideration for the Note Purchase, the Company entered into an agreement to amend certain SPN’s (the “Note Amendment”), pursuant to which the $175K Note and the $650K Note (together, the “Old Notes”) were amended to provide the Purchaser with the ability to convert the principal amount of such Old Notes, together with accrued interest thereon, into shares of the Company’s common stock (the “Conversion Shares”). Pursuant to the Note Amendment, the conversion price shall be equal to $0.30, subject to adjustments as set forth in the Note Amendment, and the number of Conversion Shares issuable upon conversion of the Old Notes shall be equal to the outstanding principal amount and accrued but unpaid interest due under the terms of the Old Notes to be converted, divided by the Conversion Price. As of August 31, 2018 and May 31, 2018, the outstanding balance was $737,500 and $825,000, respectively.

In July 2018, the Company (i) issued 500,000 common shares to note holder at a conversion price of $0.175 per share, to cancel $87,500 of principal amount due by the Company regarding the $175K Note; (ii) issued 300,000 shares at $0.175 per share to the note holder representing 100,000 shares per month penalty for the 3 month period from February 2018 through April 2018; (iii) paid the note holder an aggregate of $19,250 representing 4 months of accrued interest due by the Company from January 2018 through April 30, 2018 regarding the $650K and the $175K Notes; and, (iv) shall issue 196,677 shares to the note holder representing the remainder of interest due through December 31, 2018, representing $4,302 per month due on the total principal amount due of $737,500. As a result of these transactions, the Company recorded finance costs of $151,250 and $143,250, during the three months ended August 31, 2018 and for the year ended May 31, 2018, respectively.

The Company recorded an aggregate deferred finance costs on the Old Notes and the Note Purchase of $950,000, of which $174,490 and $392,535 was amortized during the three months ended August 31, 2018 and for the year ended May 31, 2018, respectively.

Accrued and unpaid interest expense on the NPA of $15,859 was recorded by the Company during the three months ended August 31, 2018, and is reported as accounts payable and accrued expenses.

In connection with the acquisition of VK, the Company assumed a promissory note in the amount of $108,600. The note accrued interest at an annual rate of 6.5% and matured on March 31, 2018. During the year ended May 31, 2018, the Company recorded interest expense of $1,883. In December 2017, the Company made a principal payment of $5,000. On January 26, 2018, the Company entered into a Note Exchange Agreement (the “NEA”) with the owner of the promissory note assumed from VK, pursuant to which the owner agreed to cancel the promissory note in exchange for a new secured convertible promissory note (the “Note”) in the aggregate principal amount equal to $103,000, the outstanding balance. On February 14, 2018, the owner of the promissory note elected to convert the Note into 343,333 shares of the Company’s common stock.

In February 2018, the company offered a note purchase agreement, in the aggregate amount of up to $700,000 (the “Note Offering”).

Notes issued under the Note Offering shall mature one year from the date of issuance (the “Maturity Date”), shall accrue interest at the simple rate of 7% per annum, and are convertible, at the holder’s option, prior to the Maturity Date into that number of shares of the Company’s common stock, equal to the lower of (i) $0.30 per share of common stock, or (ii) that number of shares of common stock equal to the average closing price of the Company’s common stock as reported on the OTC Markets for the preceding 30 trading days prior to the date of conversion, multiplied by 0.65 (the “Conversion Price”); provided, however, in the event the Conversion Price is calculated based on (ii) above, the Conversion Price shall not be lower than $0.20 per share of common stock. All amounts due under the terms of the Notes shall be secured by a continuing security interest in substantially all of the assets of the Company.

In March 2018, the Company issued secured convertible promissory notes to four (4) investors under the terms of the Note Offering in the aggregate amount of $220,000. As a result of these transactions the Company recorded deferred finance costs in the aggregate amount of $76,117, of which $19,004 and $16,674 was amortized during the three months ended August 31, 2018 and for the year ended May 31, 2018, respectively. During the three months ended August 31, 2018, the Company recorded interest expense of $3,850. As of August 31, 2018, the outstanding balance was $220,000.

In May 2018, the Company offered a NPA, in the aggregate amount of up to $500,000 (the “2nd Note Offering”) and, as of August 31, 2018, issued secured convertible promissory notes to nineteen (19) investors under the terms of the 2nd Note Offering in the aggregate amount of $730,000.

Notes issued under the 2 ^nd Note Offering shall mature one year from the date of issuance (the “Maturity Date”), shall accrue interest at the simple rate of 7% per annum, and are convertible, at the holder’s option, prior to the Maturity Date into that number of shares of the Company’s common stock, equal to the lower of (i) $0.30 per share of common stock, or (ii) that number of shares of common stock equal to the average closing price of the Company’s common stock as reported on the OTC Markets for the preceding 30 trading days prior to the date of conversion, multiplied by 0.65 (the “Conversion Price”); provided, however, in the event the Conversion Price is calculated based on (ii) above, the Conversion Price shall not be lower than $0.20 per share of common stock. All amounts due under the terms of the Notes shall be secured by a continuing security interest in substantially all of the assets of the Company. As additional consideration for the issuance of the notes issued under the 2 ^nd Note Offering, the Company issued one (1) restricted share of the Company’s common stock to each note holder for each $1 invested, which was recorded as deferred finance cost.

As a result of this transaction, the Company recorded deferred finance costs in the aggregate amount of $513,776, of which, $89,009 and $539 was amortized during the three months ended August 31, 2018 and during the year ended May 31, 2018, respectively. As of August 31, 2018, the outstanding balance was $730,000.

As of August 31, 2018, future principal payments of the convertible notes payable were approximately as follows:

For the twelve months ending August 31,

2019	$	1,900,500

Note 13 – LOANS PAYABLE

In July 2016, the Company entered into an agreement (the “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 and agreed to repay 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. In January 2018, the Company entered into a third Purchase and Sale Agreement with ESBF. Under the terms of the third agreement, the Purchase and Sale Agreement entered into in March 2017 was paid in full in the amount of $24,180 and the Company received approximately $170,000 of cash proceeds from the Buyer in exchange for a loan payable in the amount of $272,000 secured by future sales proceeds. In addition, the Company paid a management fee of $6,000 to complete this transaction. The difference between the aggregate of the Purchase and Sale Agreement pay-off, the management fee and the cash received and the cash to be paid from future sales proceeds of $272,000 was recognized as financing costs which has been capitalized and is being amortized over the repayment period. This amount has been reflected as a direct reduction of the loan payable in the accompanying condensed consolidated balance sheets. During the three months ended August 31, 2018, the Company made payments aggregating $77,714. The Company is obligated to make payments equal to 15% of future receipts estimated to be approximately 63 payments of $1,177 to ESBF each business day until the full amount of the future sales proceeds is repaid. The Company recognized amortization expense of $21,025 for the three months ended August 31, 2018. As of August 31, 2018 and May 31, 2018, the outstanding balance was $74,260 and $151,974, respectively.

In April 2018, the Company entered into an agreement (“Purchase and Sale Agreement”) with Premium Business Services LLC (“PBS”). Under the terms of the agreement, the Company received $60,000 of cash proceeds from PBS in exchange for a loan payable in the amount of $81,000, secured by future sales proceeds. The difference between the aggregate of the Purchase and Sale Agreement pay-off and the cash to be paid from future sales proceeds of $81,000 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. During the three months ended August 31, 2018, the Company has made payments aggregating $27,857. The Company is obligated to make approximately 99 payments of $429 to PBS each business day until the full amount of the future sales proceeds is repaid. The Company recognized amortization expense of $8,047 for the three months ended August 31, 2018. As of August 31, 2018 and May 31, 2018, the outstanding balance was $42,429 and $70,286, respectively.

In connection with the acquisition of GBC, the Company acquired a loan payable with the US Small Business Administration in the amount of $135,812. In April 2018, the Company repaid $60,000 in accordance with the acquisition. The loan bears interest at prime plus 2.75% per annum, matures on December 31, 2020, and is guaranteed by both of the former owners of GBC. Minimum monthly payments of principal and interest amount to $4,383. The loan balance at August 31, 2018 and May 31, 2018 was $57,321 and $68,560, respectively.

In connection with the acquisition of GBC, the Company acquired a bank loan with a balance due of $12,182 for a delivery vehicle. The loan matures in April 2020 and bears interest at 7% per annum. The monthly payments are $578. As of August 31, 2018 and May 31, 2018, the outstanding balance of the auto loan is $9,282 and $12,182, respectively.

As of August 31, 2018, future principal payments of loans payable were approximately as follows:

For the twelve months ending August 31,

2019	$	174,000
2020		9,000

	$	183,000

Note 14 – LINES OF CREDIT

In connection with the acquisition of GBC, the Company acquired a $15,833 credit line with a small business lender which has no expiration date and bears interest at 10.25%. The facility is guaranteed by one of the former stockholders of GBC. At August 31, 2018 and May 31, 2018, the outstanding balance was $13,468 and $16,044, respectively.

In April 2017, the Company entered into a credit line with a small business lender that allows the Company to borrow up to $35,000 and bears interest at 94% per annum. The facility requires weekly payments of principal and interest. At August 31, 2018 and May 31, 2018, the outstanding balance was $23,975 and $22,854, respectively.

On September 26, 2017, the Company entered into a revolving credit note (the “Revolver”), providing for borrowings of up to $750,000 at an annual interest rate of 7%. Amounts due under the terms of the Revolver are convertible, at the option of the holder, into shares of the Company’s common stock equal to the principal and accrued interest due on the date of conversion divided by $1.50. As of August 31, 2018 and May 31, 2018, the Company has not made any borrowings from the Revolver.

As of August 31, 2018, the future principal payments of our lines of credit were as follows:

For the twelve months ending August 31,

2019	$	37,443

Note 15 - COMMITMENTS AND CONTINGENCIES

In connection with the acquisition of ESD, the Company assumed a lease for approximately 13,000 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 connection with the acquisition of GBC, the Company assumed a lease for approximately 5,250 square feet of office and warehouse space located in Staten Island, New York at a base rent of $8,500 per month. The lease provides for annual increases of 2.5% over a period of six years and terminates on April 26, 2023. In addition, the Company entered into an employment agreement with a stockholder, beginning April 26, 2018, for a period of two years at a cost of $75,000, per year.

Rent expense for the three months ended August 31, 2018 and 2017 totaled $34,405 and $11,363, respectively.

Note 16 - INCOME TAXES

The deferred tax asset consists of the following:

	August 31, 2018			May 31, 2018
Net operating loss carryforward	$	1,579,000		$	1,235,000
Stock based compensation		475,000			449,000
Valuation allowance		(2,054,000	)		(1,684,000	)
Deferred tax asset, net	$	—		$	—

For the three months ended August 31, 2018 and for the year ended May 31, 2018, the valuation allowance increased by approximately $370,000 and $661,000, respectively.

On December 22, 2017, the enactment date, the Tax Cuts and Jobs Act ("Act") was signed into law. The Act enduringly reduces the top corporate tax rate from 35 percent to a flat 21 percent beginning January 1, 2018 and eliminates the corporate Alternative Minimum Tax. The Company has adjusted its deferred tax calculations to reflect this reduction in its tax rate.

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:

	August 31, 2018			May 31, 2018
Federal Rate		21	%		21	%
State Rate		6	%		6	%
Valuation Allowance		-27	%		-27	%
Effective income tax rate		0	%		0	%

As of August 31, 2018, the Company has net operating loss carryforwards of approximately $7,600,000 to reduce future federal and state taxable income.

The Company currently has no federal or state tax examinations in progress, nor has it had any federal or state examinations since its inception. All of the Company's tax years are subject to federal and state tax examinations.

Note 17 - RELATED PARTY TRANSACTIONS

The Company had leased office space on a month to month basis from the Company's Chief Operating Officer and stockholder for $750 per month. The lease terminated in March 2018.

Note 18 - GOING CONCERN

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 $7,524,000 and has a working capital deficiency of approximately $2,164,000 as of August 31, 2018. Management believes these conditions raise substantial doubt about the Company's ability to continue as a going concern for the twelve months following the date condensed consolidated financial statements are issued. Management intends to finance operations over the next twelve months through borrowings from related parties, existing lenders, and others.

Note 19 - SUBSEQUENT EVENTS

Subsequent to August 31, 2018, the Company issued 102,575 shares of its common stock, valued at approximately $40,000, for financing and services.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements rather than historical facts that involve risks and uncertainties. You can identify these statements by the use of forward- looking words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Such forward-looking statements discuss our current expectations of future results of operations or financial condition. However, there may be events in the future that we are unable to accurately predict or control and there may be risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements, which could have a material adverse effect on our business, operating results and financial condition. The forward-looking statements included herein are only made as of the date of the filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

BASIS OF PRESENTATION

The unaudited financial statements of Life On Earth, Inc. (“LFER,” the “Company,” “our” or “we”), should be read in conjunction with the notes thereto. In the opinion of management, the unaudited financial statements presented herein reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation. Interim results are not necessarily indicative of results to be expected for the entire year.

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America, which require that management make estimates and assumptions that affect reported amounts. Actual results could differ from these estimates.

COMPANY OVERVIEW

Life On Earth, Inc. is an innovative brand accelerator, incubator and distribution platform focused on building and scaling concepts in the all-natural consumer products category. Our mission is to bring our strategic focus and long-term forward looking vision to consumers in the health, wellness and active lifestyle spaces through superior branding, product quality, targeted acquisitions and retail experience in the functional beverage category.

Our objective is to grow as rapidly as possible (both organically and via strategic alliances and acquisitions) using the public capital markets for access to capital. The companies and assets sought by us will be those that already have market penetration in the following segments: (1) Sales (2) Marketing (3) Distribution and (4) Manufacturing;

Our management team has over 30 years of combined experience in the food and beverage industry. In July 2016, we acquired the company’s first Direct Store Delivery (“DSD”) in an all cash purchase. Since then, we have also acquired the Victoria’s Kitchen brand and The Giant Beverage Company, giving LFER bi-coastal distribution coverage. LFER has now engaged with a management advisor that is providing direct hands on, management advice, strategic planning, exploring the build out of a Digital Marketing Platform to address the explosion in Online, Social and Mobile marketing and other assistance similar to services seen in more advanced companies.

Corporate Overview

Life On Earth, Inc. (formerly Hispanica International Delights of America, Inc.) was incorporated in April 2013.

In October 2013, we signed a distribution agreement with Gran Nevada Beverage, Inc. (“Gran Nevada”), an entity related through common management and ownership. The agreement provides us with the right to sell and distribute Gran Nevada's beverages in the United States with purchase prices at the then applicable wholesale prices charged to Gran Nevada's distributors. The agreement is for an initial term of five years with automatic renewals of successive five year terms unless terminated. We initiated sales and distribution operations in March 2014.

In July, 2016, we entered into a Stock Purchase and Sale Agreement to acquire all of the issued and outstanding common stock of Energy Sources Distributors, Inc. (“ESD”) from its three founding shareholders. ESD provides wholesale distribution of specialty beverage products from its headquarters in Gilroy, California. The total purchase price for the acquisition was $450,000 in cash. We retained one of the selling founders as General Manager for a term of twelve (12) months pursuant to an employment agreement to manage operations at the ESD facility in Gilroy, California. ESD is now a wholly-owned subsidiary of the Company. The acquisition of ESD in July 2016 allowed LFER to expand distribution on the West Coast.

In August 2018, the Company acquired The Just Chill Group, LLC (“JCG”). In October 2017, LFER acquired Victoria’s Kitchen, LLC ("VK"). On April 26 ^th , 2018, LFER acquired The Giant Beverage Company Inc. (“Giant” or “GBC”). Giant is a Direct Store Delivery (DSD) business that covers the five boroughs of New York City under an eight route distribution system. The company services over 600 accounts in the five boroughs . Giant services mainly independent retailers but is expanding to service authorized chain accounts. The acquisitions of JCG in August 2018, GBC in April 2018, VK in October 2017 and ESD in July 2016 has allowed us to expand product offering and distribution.

Sales and Distribution

The Company currently markets and sells mainstream functional beverage products through its Direct Store Delivery (DSD) platforms of ESD and Giant subsidiaries as well as through other distributors including KeHe and UNFI as well as independent distributors. The Company also sells it Victoria’s Kitchen brands direct to consumers via Amazon online. Brands sought by LFER primarily engaged in the business of developing, manufacturing, marketing and selling unique, premium, all natural nonalcoholic functional beverages that are targeted towards LFER active lifestyle consumers.

Production

LFER uses third party vendors to outsource and purchase raw materials as well as contract manufactures (co-packers) its products. These co-packers are independently owned and operated and function as a third party manufacturing partner in order fulfill the inventory needs of LFER’s brands. These co-packers are located in different geographic locations throughout the United States and currently the Company uses two co-packers.

Competition

LFER is functional beverage company. What sets us apart in the industry, is our consolidated corporate structure that handles all aspects of sales, marketing and proprietary distribution from a centralized location. The LFER platform is built for accelerating emerging growth brands in the United States by leveraging sales, supply chain, and distribution relationships. At LFER, we are forward-thinking. We have identified ways to build out distribution channels that are more flexible and responsive to today’s needs. Our innovations have given rise to distribution channels, which provide robust capabilities embedded in an extended enterprise.

We realize that by sharing resources and capabilities in novel ways with new products in new situations, we can take advantage of profit-making opportunities that individual companies could not exploit alone. Our creation of a more flexible and responsive distribution system is not only a concept; we have applied the practice through implementation with our own functional beverage brands.

The Consumers Packaged Goods market is highly competitive especially in the beverage category. Competitors in our market compete for brand recognition, ingredient sourcing, qualified personnel, distribution and product shelf space. As a developing company, a majority of our competitors are more established and better capitalized. The packaged beverage market is generally dominated by the largest beverage providers. Many of our competitors enjoy significant brand recognition and consumer confidence and can readily secure shelf space and media attention for their products. Many of our competitors also have existing relationships with the same distribution channels and retailers through which we sell our products. We intend to compete in the market by offering consumers affordable products that taste better and possess a longer shelf life than most products in the market.

Emerging Growth Company

The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Stamps Act of 2012 (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of the SEC on 404(b) of the Sarbanes-Oxley Act, and exemptions from the requirements of Sections 14A(a) and (b) of the Securities Exchange Act of 1934 to hold a nonbinding advisory vote of shareholders on executive compensation and any golden parachute payments not previously approved.

The Company has elected to use the extended transition period for complying with new or revised accounting standards under Sec on 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

We will remain an “emerging growth company: until the earliest of (1) the last day of the fiscal year during which our revenues exceed $1 billion, (2) the date on which we issue more than $1 billion non-convertible debt in a three year period, (3) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, or (4) when the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

To the extent that we continue to qualify as a “smaller reporting company”, as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including (1) not being required to comply with the auditor attestation requirements of the SEC on 404(b) of the Sarbanes-Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirements to provide only two years of audited financial statements, instead of three years.

Our principal executive offices are located at 575 Lexington Avenue, 4th Floor, New York NY 10022 and our telephone number is (646) 844-9897.

GOING CONCERN QUALIFICATION

Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern. The Company has incurred net losses from inception of approximately $7,524,000, has limited revenues and requires additional financing in order to finance its business activities on an ongoing basis. The Company’s future capital requirements will depend on numerous factors including, but not limited to, continued progress in finding business opportunities.

At August 31, 2018, we had cash on hand of approximately $285,000 and an accumulated deficit of approximately $7,524,000. See “Liquidity and Capital Resources.”

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. The amounts of assets and liabilities reported in our balance sheet and the amounts of revenues and expenses reported for each of our fiscal periods, are affected by estimates and assumptions which are used for, but not limited to, the accounting for allowance for doubtful accounts, goodwill and intangible asset impairments, restructurings, inventory and income taxes. Actual results could differ from these estimates.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Inflation

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

LIQUIDITY AND CAPITAL RESOURCES

In March 2018, the Company received $220,000 under the terms of the Note Offering. In May 2018 the Company received $60,000 and during the three months ended August 31, 2018, the Company received $670,000 under the terms of the 2 ^nd Note Offering.

In September 2017, the Company received $650,000; in November 2017, the Company received $175,000, and, in January 2018, the Company received $125,000, under the terms of Secured Promissory Notes.

CASH FLOW

Our primary sources of liquidity have been cash from sales of shares, the issuance of convertible promissory notes and line of credit. We plan on continuing to raise capital and borrow funds to finance current operations and future growth.

WORKING CAPITAL

As of August 31, 2018 the Company had total current assets of approximately $977,000 and total current liabilities of approximately $3,141,000 resulting in negative working capital of approximately $2,164,000.

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED AUGUST 31, 2018 AND AUGUST 21, 2017.

Sales

The acquisitions of VK in October 2017, GBC in April 2018 and JCG in August 2018 has allowed us to expand brand offerings and our distribution reach. Sales increased during the three months ended August 31, 2018 by approximately $318,000 to a total amount of $1,354,000 as compared to $1,036,000 for the three months ended August 31, 2017.

For the three months ended August 31, 2018 as compared to the three months ended August 31, 2017, sales increased in our newly acquired GBC, VK and JCG channels by approximately $838,000, $13,000 and $21,000 respectively whereas sales in our LFER and ESD channels decreased by $261,000 and $293,000, respectively.

Gross Profit

Gross profit during the three months ended August 31, 2018 decreased to 18% as compared to 21% for the three months ended August 31, 2017, which resulted primarily from a decrease in sales prices at GBC.

Operating Expenses

Operating expenses increased by approximately $317,000 during the three months ended August 31, 2018 as compared to the three months ended August 31, 2017, mainly due to increases in salaries of approximately $61,000, increases in travel costs of approximately $16,000, increases in consultancy fees of approximately $99,000, increases in other SG&A costs of approximately $82,000, increases in rents of approximately $23,000, increases in repairs and maintenance of approximately $12,000, increases in advertising and promotions of approximately $7,000 and increases in depreciation and amortization of approximately $30,000, offset in part by decreases in professional fees of approximately $15,000. We expect our operating costs to increase as we continue to acquire operating companies.

Other Expense

During the three months ended August 31, 2018, the Company recorded interest and finance costs of approximately $762,000, as compared to $335,000 during the three months ended August 31, 2017. Interest and financing costs primarily result from the amortization of deferred financing cost balances that were incurred by the Company to finance operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure the information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of August 31, 2018, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

The determination that our disclosure controls and procedures were not effective as of August 31, 2018, is a result of inadequate staffing and supervision within the accounting operations of our Company. The Company plans to expand its accounting operations as the business of the Company expands.

MANAGEMENT’S QUARTERLY REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have been no changes in our internal controls over financial reporting during the quarter ended February 28, 2018 that have materially affected or are reasonably likely to materially affect our internal controls.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Previously reported in our Form 10-K for the fiscal year ending May 31, 2018 filed on September 7, 2018 and in Note 11 to our financial statements contained herein.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINING SAFETY DISCLOSURE

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Number	Description
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS *	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of the registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

SIGNATURES

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

	Life On Earth, Inc

Date: October 22, 2018	By:	/s/ Fernando Oswaldo Leonzo
		Fernando Oswaldo Leonzo
		Chief Executive Officer, and Chairman of the Board
		(Principal Executive Officer)