0001213900-18-000772.txt : 20180122 0001213900-18-000772.hdr.sgml : 20180122 20180122171617 ACCESSION NUMBER: 0001213900-18-000772 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 76 CONFORMED PERIOD OF REPORT: 20171130 FILED AS OF DATE: 20180122 DATE AS OF CHANGE: 20180122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Spectrum Global Solutions, Inc. CENTRAL INDEX KEY: 0001413891 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 260592672 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-53461 FILM NUMBER: 18540532 BUSINESS ADDRESS: STREET 1: 300 CROWN OAK CENTRE CITY: LONGWOOD STATE: FL ZIP: 32750 BUSINESS PHONE: (604) 560-1503 MAIL ADDRESS: STREET 1: 300 CROWN OAK CENTRE CITY: LONGWOOD STATE: FL ZIP: 32750 FORMER COMPANY: FORMER CONFORMED NAME: Mantra Venture Group Ltd. DATE OF NAME CHANGE: 20071002 10-Q 1 f10q1117_spectrumglobal.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended November 30, 2017

 

Or

 

☐  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to               

 

Commission File Number 000-53461

 

SPECTRUM GLOBAL SOLUTIONS, INC. 

(Exact name of registrant as specified in its charter)

 

British Columbia   26-0592672
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
Identification No.)
     
300 Crown Oak Centre, Longwood, Florida   32750
(Address of principal executive offices)   (Zip Code)

 

407-512-9102

(Registrant’s telephone number, including area code)

 

Mantra Venture Group Ltd.

Former FYE – May 31

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YES ☐ 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 ☐ NO

 

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

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ YES ☒ NO

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

 

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ☐ YES ☐ NO

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

443,543,290 common shares issued and outstanding as of January 22, 2018

 

 

  

 

 

  

Table of Contents

 

PART I – FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
Item 4. Controls and Procedures 29
PART II – OTHER INFORMATION 30
Item 1. Legal Proceedings 30
Item 1A. Risk Factors 30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30
Item 3. Defaults Upon Senior Securities 30
Item 4. Mine Safety Disclosures 30
Item 5. Other Information 30
Item 6. Exhibits 30
SIGNATURES 31

  

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

The unaudited interim consolidated financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars, unless otherwise noted.

 

1

 

 

SPECTRUM GLOBAL SOLUTIONS, INC.

(f/k/a Mantra Venture Group Ltd.)

 

Consolidated balance sheets as of November 30, 2017 (unaudited) and May 31, 2017 3
   
Consolidated statements of operations for the six months ended November 30, 2017 and 2016 (unaudited) 4
   
Consolidated statements of cash flows for the six months ended November 30, 2017 and 2016 (unaudited) 5
   
Notes to unaudited consolidated financial statements                                                          6

  

2

 

 

SPECTRUM GLOBAL SOLUTIONS, INC.

(f/k/a Mantra Venture Group Ltd.)

Consolidated balance sheets

(Expressed in U.S. dollars)

 

   November 30,   May 31, 
   2017   2017 
   $   $ 
   (unaudited)     
ASSETS        
Current assets        
Cash       345,102 
Accounts receivable, net   1,911,831    1,623,200 
Prepaid expenses and deposits   46,778    132,155 
Total current assets   1,958,609    2,100,457 
Property and equipment, net   40,609    96,030 
Goodwill   1,503,633    1,503,633 
Customer lists, net   844,257    892,127 
Tradenames, net   538,090    568,600 
Other assets   28,430    27,930 
Total assets   4,913,628    5,188,777 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Checks issued in excess of funds on deposit   8,212     
Accounts payable and accrued liabilities   2,551,978    2,113,355 
Due to related parties   177,529    308,008 
Loans payable   359,672    235,441 
Loans payable to related parties   148,858     
Convertible debentures (net of discount of $714,792 and $1,350,067, respectively)   1,805,208    2,139,791 
Derivative liability   1,866,786    3,760,067 
Contingent liability   1,409,411    1,409,411 
Series A preferred stock liability Authorized: 20,000,000 shares, par value $0.00001
Series A preferred stock Authorized: 8,000,000 shares, Issued and outstanding: 1,262,945 (May 31, 2017 – Nil) shares
   435,138     
Total current liabilities   8,762,792    9,966,073 
           
Stockholders’ deficit          
Common stock Authorized: 750,000,000 shares, par value $0.00001 Issued and outstanding: 274,998,800 (May 31, 2017 – 274,998,800) shares   2,754    2,754 
Additional paid-in capital   15,724,447    15,724,447 
Common stock subscribed   74,742    74,742 
Accumulated deficit   (19,555,383)   (20,518,967)
Total Spectrum Global Solutions, Inc. (f/k/a Mantra Venture Group Ltd.) stockholders’ deficit   (3,753,440)   (4,717,024)
Non-controlling interest   (95,724)   (60,272)
Total stockholders’ deficit   (3,849,164)   (4,777,296)
Total liabilities and stockholders’ deficit   4,913,628    5,188,777 

 

(The accompanying notes are an integral part of these unaudited consolidated financial statements)

 

3

 

 

SPECTRUM GLOBAL SOLUTIONS, INC.

(f/k/a Mantra Venture Group Ltd.)

Consolidated statements of operations

(Expressed in U.S. dollars)

(Unaudited)

 

   Three Months Ended
November 30,
   Three Months Ended
November 30,
   Six Months Ended
November 30,
   Six Months Ended
November 30,
 
  

2017

$

  

2016

$

  

2017

$

  

2016

$

 
                 
Revenue   2,006,933        5,122,854     
                     
Cost of goods sold   1,996,045        4,504,797     
Gross profit   10,888        618,057     
                     
Operating expenses                    
Depreciation and amortization   65,669    8,404    133,800    15,925 
General and administrative   504,886    96,390    1,063,014    132,119 
Salaries & wages   204,949    45,744    464,709    91,488 
                     
Total operating expenses   775,504    150,538    1,661,523    239,532 
                     
Loss from operations   (764,616)   (150,538)   (1,043,466)   (239,532)
                     
Other income (expense)                    
Gain (Loss) on settlement of debt   3,368,128    (19,418)   3,368,128    (19,418)
Accretion of discounts on convertible debentures   (441,011)   (151,557)   (901,254)   (318,740)
Loss on change in fair value of derivatives   (440,021)   (1,508,271)   (310,186)   (1,379,597)
Interest expense   (107,184)   (26,615)   (185,091)   (63,120)
Total other income (expense)   2,379,912    (1,705,861)   1,971,597    (1,780,875)
                     
Net income (loss) for the period   1,615,296    (1,856,399)   928,131    (2,020,407)
                     
Less: net loss attributable to the non-controlling interest   72,505    3,613    35,453    9,750 
                     
Net income (loss) attributable to Spectrum Global Solutions, Inc.   1,687,801    (1,852,786)   963,584    (2,010,657)
                     
Net income (loss) per share attributable to Spectrum Global Solutions, Inc. (f/k/a Mantra Venture Group Ltd.) common shareholders:                    
Basic   0.01    (0.02)   0.00    (0.02)
Diluted   0.00    (0.02)   0.00    (0.02)
                     
Weighted average number of shares outstanding used in the calculation of net loss attributable to Spectrum Global Solutions, Inc. (f/k/a Mantra Venture Group Ltd.) per common share:                    
Basic   274,998,800    99,869,076    274,998,800    97,483,513 
Diluted   1,229,305,428    99,869,076    1,229,593,453    97,483,513 

 

(The accompanying notes are an integral part of these unaudited consolidated financial statements)

 

4

 

 

SPECTRUM GLOBAL SOLUTIONS, INC.

(f/k/a Mantra Venture Group Ltd.)

Consolidated statements of cash flows

(Expressed in U.S. dollars)

(Unaudited)

 

   Six Months Ended
November 30,
2017
$
   Six Months Ended
November 30,
2016
$
 
Operating activities        
         
Net income (loss)   928,131    (2,020,407)
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Loss on change in fair value of derivative liability   227,421    1,206,006 
Accretion of discounts on convertible debentures   901,254    318,740 
Depreciation and amortization   133,800    15,925 
Foreign exchange loss   6,231    2,912 
Initial derivative expenses   82,766    171,102 
Interest related to cash redemption premium on convertible notes   17,500    9,875 
(Gain) loss on settlement of debt   (3,368,128)   19,418 
Changes in operating assets and liabilities:          
Amounts receivable   (288,631)   5,674 
Prepaid expenses and deposits   85,377    11,655 
Accounts payable and accrued liabilities   617,182    47,512 
Due to related parties   64,725    51,574 
Net cash used in operating activities   (592,372)   (160,014)
Financing activities          
Repayment of capital lease obligations       (4,592)
Repayment of loan payable   (160,000)    
Proceeds from notes payable   250,200    20,282 
Proceeds from loans from related parties   148,858     
Proceeds from issuance of convertible debentures       134,500 
Proceeds from issuance of common stock and subscriptions received       5,000 
Checks issued in excess of funds on deposit   8,212    3,705 
Net cash provided by financing activities   247,270    158,895 
Change in cash   (345,102)   (1,119)
Cash, beginning of period   345,102    1,119 
Cash, end of period        
Non-cash investing and financing activities:          
Common stock issued to relieve common stock subscribed       25,000 
Common stock issued to settle accounts payable and debt       108,212 
Common stock issued for conversion of notes payable       236,093 
Preferred stock issued to settle accounts payable and amounts owed related parties   374,263     
Preferred stock issued to settle derivative liabilities   2,453,667     
Preferred stock issued to settle conversion of notes payable   975,337     
Original issue discounts   27,800    24,999 
Original debt discount against derivative liability   250,200    134,500 
           
Supplemental disclosures:          
Interest paid   2,808    657 
Income taxes paid        

 

(The accompanying notes are an integral part of these unaudited consolidated financial statements)

 

5

 

 

SPECTRUM GLOBAL SOLUTIONS, INC.

Notes to the unaudited consolidated financial statements

November 30, 2017

(Expressed in U.S. dollars)

 

1. Organization and Going Concern

 

Spectrum Global Solutions, Inc. (the “Company”) (f/k/a Mantra Venture Group Ltd.) was incorporated in the State of Nevada on January 22, 2007 to acquire and commercially exploit various new energy related technologies through licenses and purchases. On December 8, 2008, the Company continued its corporate jurisdiction out of the State of Nevada and into the province of British Columbia, Canada. On April 25, 2017, the Company entered into and closed on an Asset Purchase Agreement (the “Asset Purchase Agreement”) with InterCloud Systems, Inc. (“InterCloud”). Pursuant to the terms of the Asset Purchase Agreement, the Company purchased 80.1% of the assets associated with InterCloud’s “AW Solutions” business. After the acquisition of AW Solutions, the Company provides professional, multi-service line, telecommunications infrastructure and outsource services to the wireless and wireline industry. On November 15, 2017, the Company changed its name to “Spectrum Global Solutions, Inc.”.

 

The accompanying unaudited interim consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017. In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has yet to acquire commercially exploitable energy related technology, and is unlikely to generate earnings in the immediate or foreseeable future. The recently acquired AW Solutions business has also incurred losses and experienced cash outflows from operations during its most recent fiscal years. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As of November 30, 2017, the Company has an accumulated loss of $19,555,383, and a working capital deficit of $6,804,183. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management requires additional funds over the next twelve months to fully implement its business plan. Management is currently seeking additional financing through the sale of equity and from borrowings from private lenders to cover its operating expenditures. There can be no certainty that these sources will provide the additional funds required for the next twelve months.

 

2. Significant Accounting Policies

 

  a. Basis of Presentation/Principles of Consolidation

 

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its subsidiaries, Carbon Commodity Corporation, Climate ESCO Ltd., Mantra Energy Alternatives Ltd., Mantra China Inc., Mantra China Limited, Mantra Media Corp., Mantra NextGen Power Inc., Mantra Wind Inc., AW Solutions, Inc.(from the date of acquisition, April 25, 2017), Tropical Communications, Inc. (from the date of acquisition, April 25, 2017) and AW Solutions Puerto Rico, LLC.(from the date of acquisition, April 25, 2017). All the subsidiaries are wholly-owned with the exception of Climate ESCO Ltd., which is 64.55% owned, Mantra Energy Alternatives Ltd., which is 88.21% owned and AW Solutions, Inc., Tropical Communications, Inc., and AW Solutions Puerto Rico, LLC which are all 80.1% owned. All inter-company balances and transactions have been eliminated.

  

6

 

 

  b. Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of long-lived assets, equity component of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

  c. Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

 

  d. Accounts Receivable

 

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company records unbilled receivables for services performed but not billed. At November 30, 2017, unbilled receivables totaled $44,054, and are included in accounts receivable. Management reviews a customer’s credit history before extending credit. The Company maintains an allowance for doubtful accounts for estimated losses. Estimates of uncollectible amounts are reviewed each period, and changes are recorded in the period in which they become known. Management analyzes the collectability of accounts receivable each period. This review considers the aging of account balances, historical bad debt experience, changes in customer creditworthiness, current economic trends, customer payment activity and other relevant factors. Should any of these factors change, the estimate made by management may also change. The allowance for doubtful accounts was $54,482 at November 30, 2017.

 

  e. Property and Equipment

 

Property and equipment are stated at cost. The Company depreciates the cost of property and equipment over their estimated useful lives at the following annual rates:

 

  Automotive  3-5 years straight-line basis
  Computer equipment and software  3-7 years straight-line basis
  Leasehold improvements  5 years straight-line basis
  Office equipment and furniture  5 years straight-line basis
  Research equipment  5 years straight-line basis

 

  f. Goodwill

 

Goodwill was generated through the acquisition of AW Solutions in fiscal 2017 as the total consideration paid exceeded the fair value of the net assets acquired.

 

The Company tests its goodwill for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company’s consolidated financial results.

 

The Company tests goodwill by estimating fair value using a Discounted Cash Flow (“DCF”) model. The key assumptions used in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate of a market participant’s weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment charges during the six months ended November 30, 2017.

 

  g. Intangible Assets

 

At November 30, 2017 and May 31, 2017, definite-lived intangible assets primarily consist of non-compete agreements, tradenames and customer relationships which are being amortized over their estimated useful lives ranging from 1-10 years.

 

7

 

 

The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.

 

For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.

 

  h. Long-lived Assets

 

In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

  

  i. Foreign Currency Translation

 

Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.

 

The Company’s integrated foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate the accounts of its integrated operations into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. The resulting exchange gains or losses are recognized in income.

 

  j. Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

The Company conducts business, and files federal and state income, franchise or net worth, tax returns in Canada, the United States, in various states within the United States and the Commonwealth of Puerto Rico. The Company determines its filing obligations in a jurisdiction in accordance with existing statutory and case law. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2010 to 2017. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.

 

Significant management judgment is required in determining the provision for income taxes, and in particular, any valuation allowance recorded against the Company’s deferred tax assets. Deferred tax assets are regularly reviewed for recoverability. The Company currently has significant deferred tax assets resulting from net operating loss carryforwards and deductible temporary differences, which should reduce taxable income in future periods. The realization of these assets is dependent on generating future taxable income.

 

The Company follows the guidance set forth within ASC Topic 740, “Income Taxes” (“ASC Topic 740”) which prescribes a two-step process for the financial statement recognition and measurement of income tax positions taken or expected to be taken in an income tax return. The first step evaluates an income tax position in order to determine whether it is more likely than not that the position will be sustained upon examination, based on the technical merits of the position. The second step measures the benefit to be recognized in the financial statements for those income tax positions that meet the more likely than not recognition threshold. ASC Topic 740 also provides guidance on de-recognition, classification, recognition and classification of interest and penalties, accounting in interim periods, disclosure and transition. Penalties and interest, if incurred, would be recorded as a component of current income tax expense.

 

The Company received a tax notice from the Puerto Rican government requesting payment of taxes related to 2014 in the amount of $166,084 plus penalties and interest of $87,027 for a total obligation due of $253,111. This tax assessment is included in accrued expenses at November 30, 2017.

 

8

 

 

  k. Revenue Recognition

 

The Company’s revenues are generated from infrastructure and professional services. The Company recognizes revenue on arrangements in accordance with ASC Topic 605-10, “Revenue Recognition”. The Company recognizes revenue only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability of the resulting receivable is reasonably assured.

 

The infrastructure and professional services revenues are derived from contracts to provide technical engineering services along with contracting services to commercial and governmental customers. The Company’s service contracts generally require specific tasks or services that the Company must perform under the contract. The Company recognizes revenues associated with these services upon the completion of the related task or service which is at the time the four revenue recognition criteria have been met. Direct costs incurred related to performance of the task or service are deferred and recorded as prepaid expense and are expensed when the related revenue is recognized.

 

The Company also generates revenue from service contracts with certain customers. These contracts are accounted for under the proportional performance method. Under this method, revenue is recognized in proportion to the value provided to the customer for each project as of each reporting date.

The Company records unbilled receivables for revenues earned, but not yet billed.

  

  l. Cost of Revenues

 

Cost of revenues includes all direct costs of providing services under our contracts, including costs for direct labor provided by employees, services by independent subcontractors, operation of capital equipment (excluding depreciation and amortization), direct materials, insurance claims and other direct costs.

 

  m. Research and Development Costs

 

Research and development costs are expensed as incurred.

 

  n. Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

 

  o. Loss Per Share

 

The Company computes loss per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of November 30, 2017, the Company had 954,594,653 (2016 – 352,678,654) dilutive potential shares outstanding.

 

9

 

 

  p. Comprehensive Loss

 

ASC 220, “Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of November 30, 2017 and 2016, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the consolidated financial statements.

 

  q. Recent Accounting Pronouncements

 

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which is effective for nonpublic entities for annual reporting periods, as amended, beginning after December 15, 2018. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for the Company on June 1, 2019, and early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company continues to evaluate the standard and has not yet selected a transition method.

 

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”), which is effective for nonpublic entities for annual reporting periods beginning after December 15, 2016. ASU 2015-17 simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as non-current in the statement of financial position. The Company has elected to early adopt the requirements of ASU 2015-17 and the results of such adoption are presented within these consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which is effective for nonpublic entities for annual reporting periods beginning after December 15, 2019. Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company continues to evaluate the effects of ASU 2016-02 and does not expect that the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” (“ASU 2016-08”). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-08 on its consolidated financial statements.

 

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”). The amendments in ASU 2016-10 clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-10 on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The amendments in ASU 2016-12 provide clarifying guidance in certain narrow areas and add some practical expedients. Specifically, the amendments in this update (1) clarify the objective of the collectability criterion in step 1, and provides additional clarification for when to recognize revenue for a contract that fails step 1, (2) permit an entity, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price (3) specify that the measurement date for noncash consideration is contract inception, and clarifies that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration, (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations, (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Further, accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-12 on its consolidated financial statements.

 

10

 

 

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business” (“ASU 2017-01”). The Amendments in this Update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption of this standard is permitted. The Company is currently evaluating the effects of ASU 2017-01 on its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). This standard will simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Current guidance requires that companies compute the implied fair value of goodwill under Step 2 by performing procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. This standard will require companies to perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This standard will be effective for annual periods beginning after December 15, 2020, including interim periods within that reporting period, and will be applied prospectively. Early adoption of this standard is permitted on testing dates after January 1, 2017. The Company is evaluating the effects of ASU 2017-04 on its consolidated financial statements.

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or result of operations.

 

  r. Concentrations of Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivables. The Company maintains its cash balances with high-credit-quality financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be withdrawn upon demand and therefore bear minimal risk.

 

The Company provides credit to customers on an uncollateralized basis after evaluating client creditworthiness. For the six months ended November 30, 2017, two customers accounted for 42% and 13%, respectively, of consolidated revenues for the period. In addition, amounts due from these customers represented 28% and 18%, respectively, of trade accounts receivable as of November 30, 2017.

 

The Company’s customers are primarily located within the domestic United States of America and Puerto Rico. Revenues generated within the domestic United States of America accounted for approximately 81% of consolidated revenues for the six month period ended November 30, 2017. Revenues generated from customers in Puerto Rico accounted for approximately 19% of consolidated revenues for the six month period ended November 30, 2017.

 

  s. Fair Value Measurements

 

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

 

Level 1 – quoted prices for identical instruments in active markets.

 

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and.

 

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

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Financial instruments consist principally of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, loans payable and convertible debentures. Derivative liabilities are determined based on “Level 3” inputs, which are significant and unobservable and have the lowest priority. There were no transfers into or out of “Level 3” during the six months ended November 30, 2017 and 2016. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

 

Our financial assets and liabilities carried at fair value measured on a recurring basis as of November 30, 2017 and May 31, 2017, consisted of the following:

 

     Total fair value at
November 30,
2017
$
   Quoted prices in active markets
(Level 1)
$
   Significant other observable inputs
(Level 2)
$
   Significant unobservable inputs
(Level 3)
$
 
                   
  Description:                    
  Derivative liability (1)   1,866,786          –            –    1,866,786 

 

     Total fair value at
May 31,
2017
$
   Quoted prices in active markets
(Level 1)
$
   Significant other observable inputs
(Level 2)
$
   Significant unobservable inputs
(Level 3)
$
 
                   
  Description:                    
  Derivative liability (1)   3,760,067          –             –    3,760,067 

 

  (1) The Company has estimated the fair value of these derivatives using the Monte-Carlo model and/or a Binomial Model based on various assumptions.

 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 8 for additional information.

 

  t. Derivative Liabilities

 

The Company accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads, relying first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As of November 30, 2017 and May 31, 2017, the Company had a $1,866,786 and $3,760,067 derivative liability, respectively.

 

  u. Reclassifications

 

Certain prior period amounts have been reclassified to conform to current presentation.

 

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3. Property and Equipment

 

     November 30,
2017
$
   May 31, 2017
$
 
           
  Computers and office equipment   308,649    308,649 
  Equipment   378,505    378,505 
  Research equipment   143,129    143,129 
  Software   177,073    177,073 
  Vehicles   94,356    94,356 
  Vehicles under capital lease        
             
  Total   1,101,712    1,101,712 
             
  Less: impairment   (44,419)   (44,419 
  Less: accumulated depreciation   (1,016,684)   (961,263)
             
  Equipment, Net   40,609    96,030 

 

During the six months ended November 30, 2017, the Company recorded $55,421 (2016 - $13,556) of amortization expense.

   

4. Intangible Assets

 

 

     Cost
$
   Accumulated amortization
$
   Impairment
$
   November 30,
2017
Net carrying value
$
   May 31, 2017
Net carrying value
$
 
                       
  Customer relationship and lists   901,548    57,291                –    844,257    892,127 
  Trade names   574,605    36,515        538,090    568,600 
      1,476,153    93,806        1,382,347    1,460,727 

 

During the six months ended November 30, 2017, the Company recorded $78,379 (2016 - $2,369) of amortization expense.

 

Estimated Future Amortization Expense:

 

     $ 
  For year ending May 31, 2018   78,203 
  For year ending May 31, 2019   156,405 
  For year ending May 31, 2020   156,405 
  For year ending May 31, 2021   156,405 
  For year ending May 31, 2022   156,405 
  For year ending May 31, 2023   156,405 
  For year ending May 31, 2024   156,405 
  For year ending May 31, 2025   156,405 
  For year ending May 31, 2026   155,487 

 

5. Related Party Transactions

 

  a) During the six months ended November 30, 2017, the Company incurred management fees of $12,011 (2016 - $68,616) to the former President of the Company.

 

  b) During the six months ended November 30, 2017, the Company incurred management fees of $0 (2016 - $22,872) to the spouse of the former President of the Company.

  

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  c) As of November 30, 2017, the Company owes a total of $195,204 (May 31, 2017 - $241,327) to the former President of the Company and his spouse, and a company controlled by the former President of the Company which is non-interest bearing, unsecured, and due on demand.

 

  d) As of November 30, 2017, the Company owes $18,141 (May 31, 2017 - $17,305) to a former officer and a former director of the Company, which is non-interest bearing, unsecured, and due on demand.

 

  e) As of November 30, 2017, the Company owes $51,849 (May 31, 2017 - $49,376) to Intercloud, which is non-interest bearing, unsecured, and due on demand.

 

  f) As of November 30, 2017, pursuant to the acquisition AW Solutions, the Company owes a contingent liability of $1,409,411 to Intercloud.

  

  g) On November 30, 2017, the Company received $18,858 pursuant to a promissory note issued to the Chief Executive Officer of the Company. The note issued is unsecured, due on November 30, 2018 and bears interest at a rate of 8% per annum.

 

  h) On November 30, 2017, the Company received $130,000 pursuant to a promissory note issued to the President of the Company. The note issued is unsecured, due on November 30, 2018 and bears interest at a rate of 8% per annum.

 

  i) On November 16, 2017, the Company issued 251,885 shares of Series A Preferred Stock with a fair value of $86,785 to settle $195,204 of amounts owed to the former President of the Company.  The Company recognized a gain on settlement of debt of $108,419.

  

6. Loans Payable

 

  (a) As of November 30, 2017, the amount of $49,109 (Cdn$63,300) (May 31, 2017 - $46,846 (Cdn$63,300)) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

 

  (b) As of November 30, 2017, the amount of $17,500 (May 31, 2017 - $17,500) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

  

  (c) As of November 30, 2017, the amounts of $7,500 and $28,705 (Cdn$37,000) (May 31, 2017 - $7,500 and $27,382 (Cdn$37,000)) are owed to a non-related party which are non-interest bearing, unsecured, and due on demand.

 

  (d) As of November 30, 2017, the amount of $4,490 (May 31, 2017 - $4,490) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

 

  (e) During the year ended May 31, 2017, the amounts of $14,016 (Cdn$18,066) (May 31, 2017 - $13,370 (Cdn$18,066) was advanced by a non-related party. The amount owing is non-interest bearing, unsecured, and due on demand.

 

  (f) In March 2012, the Company received $50,000 for the subscription of 10,000,000 shares of the Company’s common stock. During the year ended May 31, 2013, the Company and the subscriber agreed that the shares would not be issued and that the subscription would be returned. The subscription has been reclassified as a non-interest bearing demand loan until the funds are refunded to the subscriber.

 

  (g) On August 4, 2015, the Company borrowed $50,000 pursuant to a promissory note. The note was due on September 4, 2015. The note bears interest at 120% per annum prior September 4, 2015, and at 180% per annum after September 4, 2015. The holder of the note was also granted the rights to buy 100,000 shares of the Company’s common stock at a price of $0.15 per share until August 4, 2017. During the year ended May 31, 2016, the Company repaid the $50,000 note and $1,200 of accrued interest remains owing.

 

The rights issued with the note qualified for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the warrants of $9,755 resulted in a discount to the note payable of $9,755. During the year ended May 31, 2016, the Company recorded accretion of $9,755.

 

  (h) As of November 30, 2017 and May 31, 2017, the amounts of $15,000 and $43,352 (Cdn$55,878) was owed to non-related parties.  These advances are non-interest bearing, unsecured, and due on demand.

 

14

 

 

  (i) On April 12, 2017, received $12,000 pursuant to a promissory note. The note issued is unsecured, due on demand and bears interest at a rate of 10% per annum.

 

  (j) On June 27, 2017, received $250,200 net of a $27,800 Original Issue Discount pursuant to a $278,000 promissory note. The note issued is unsecured, due on demand and bears interest at a rate of 12% per annum. The Company also issued a warrant with a term of three years to purchase up to 50,000,000 shares of common stock of the Company at an exercise price of $0.005 per share. The fair value of the warrants of $332,966 resulted in a discount to the note payable of $250,200 and the recognition of a loss on derivatives of $82,766. During the six months ended November 30, 2017, the Company repaid $160,000 of the loan and recorded accretion of $278,000, increasing the carrying value of the note to $118,000.

  

7. Convertible Debentures

 

  (a) In October 2008, the Company issued three convertible debentures for total proceeds of $250,000 which bear interest at 10% per annum, are unsecured, and due one year from date of issuance. The unpaid amount of principal and accrued interest can be converted at any time at the holder’s option into 625,000 shares of the Company’s common stock at a price of $0.40 per share. The Company also issued 250,000 detachable, non-transferable share purchase warrants. Each share purchase warrant entitles the holder to purchase one additional share of the Company’s common stock for a period of two years from the date of issuance at an exercise price of $0.50 per share.

 

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company determined that the convertible debentures contained no embedded beneficial conversion feature as the convertible debentures were issued with a conversion price higher than the fair market value of the Company’s common shares at the time of issuance.

 

In accordance with ASC 470-20, the Company allocated the proceeds of issuance between the convertible debt and the detachable share purchase warrants based on their relative fair values. Accordingly, the Company recognized the fair value of the share purchase warrants of $45,930 as additional paid-in capital and an equivalent discount against the convertible debentures. The Company had recorded accretion expense of $45,930, increasing the carrying value of the convertible debentures to $250,000.

 

On January 19, 2012, the Company entered into a settlement agreement with one of the debenture holders to settle a $50,000 convertible debenture and $122,535 in accounts payable and accrued interest with the debt holder. Pursuant to the agreement, the debt holder agreed to reduce the debt to Cdn$100,000 on the condition that the Company pays the amount of Cdn$2,500 per month for 40 months, beginning March 1, 2012 and continuing on the first day of each month thereafter.

 

On July 18, 2012, the Company entered into a settlement agreement with the $150,000 debenture holder. Pursuant to the settlement agreement, the lender agreed to extend the due date until April 11, 2013 and the Company agreed to pay $43,890 of accrued interest within five days of the agreement (paid), pay the accruing interest on a monthly basis (paid), and pay a $10,000 premium in addition to the $150,000 principal outstanding on April 11, 2013. On April 29, 2013, the Company entered into an amended settlement agreement whereby the lender agreed to extend the due date to September 15, 2013 and the Company agreed to pay $6,836 of interest for the period from April 1 to September 15, 2013 upon execution of the agreement (paid) and granted the lender 100,000 stock options exercisable at $0.12 per share for a period of two years.

 

On November 15, 2013, the Company entered into a second settlement agreement amendment. Pursuant to the second amendment, on November 15, 2013, the Company agreed to pay interest of $4,438 (paid) and commencing February 1, 2014, the Company would make monthly payments of $10,000 on the outstanding principal and interest. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

The Company evaluated the modifications and determined that the creditor did not grant a concession. In addition, as the present value of the amended future cash flows had a difference of less than 10% of the cash flows of the original debt, it was determined that the original and new debt instruments are not substantially different. As a result, the modification was not treated as an extinguishment of the debt and no gain or loss was recognized because the fair value of the old debt and new debt remained the same. The Company recorded the fair value of $12,901 for the stock options as additional paid-in capital and a discount. During the year ended May 31, 2014, the Company repaid $40,000 of the debenture. As of May 31, 2014 the Company had accreted $12,901 of the discount bring the carrying value of the convertible debenture to $114,661. During the year ended May 31, 2015, the Company repaid $54,808 decreasing the carrying value to $59,853. During the year ended May 31, 2017, the Company recorded an additional fee of $21,266 increasing the carrying value to $81,119. On November 16, 2017, the debenture and $15,423 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

At November 30, 2017, the other remaining debenture of $50,000 remained outstanding and past due.

 

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  (b) On August 19, 2013, the Company issued a convertible debenture for total proceeds of $10,000, which bears interest at 10% per annum, is unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $10,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $10,000. As of November 30, 2017, the carrying value of the convertible promissory note was $10,000 and the note remained outstanding and in default.

  

  (c) On December 27, 2013, the Company issued a convertible debenture for total proceeds of $5,000, which bear interest at 10% per annum, is unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion features of $5,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value was be accreted over the term of the convertible debenture up to its face value of $5,000. As of November 30, 2017, the carrying value of the convertible promissory note was $5,000 and the note remained outstanding and in default.

 

  (d) On February 4, 2014, the Company issued a convertible debenture for total proceeds of $15,000, which bears interest at 10% per annum, is unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $15,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $15,000. As of November 30, 2017, the carrying value of the convertible promissory note was $15,000 and the note remained outstanding and in default.

  

  (e) On June 1, 2015, the Company issued a convertible note in the principal amount of $100,000 due on demand on or after December 1, 2015. The note has a cash redemption premium of 130% of the principal amount in the first 90 days following the execution date, of 135% for days 90-120 following the execution date, and 140% after the 120th day. After 140 days cash redemption is only available upon approval by the holder. The note bears interest at 12% per annum and is convertible into common shares of the Company at the lower of a 42% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 42% discount to the lowest trading price during the previous 20 trading days before the date the note was executed. In no event shall the conversion price be lower than $0.00001. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

On October 5, 2016, the holder of the convertible debentures entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement. At May 31, 2017, $45,000 of the note had been assigned to the third party.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $310,266 resulted in a discount to the note payable of $100,000 and the recognition of a loss on derivatives of $210,266. During the year ended May 31, 2016, the Company issued 6,303,475 shares of common stock upon the conversion of $45,000 of principal. During the year ended May 31, 2016, the Company recorded accretion of $100,000 and recorded the cash redemption premium of $26,250 increasing the carrying value of the note to $81,250.

 

During the year months ended May 31, 2017, the Company issued 18,440,200 shares of common stock upon the conversion of $90,000 of principal. During the year ended May 31, 2017, the Company recorded a default fee of $51,820 increasing the carrying value of the note to $43,070. On November 16, 2017, the debenture and $13,644 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

  (f) On September 8, 2015, the Company issued a convertible note in the principal amount of $326,087. During the year ended May 31, 2016, the Company received the initial tranches of $280,000 net of a $26,087 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

16

 

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $479,626 resulted in a discount to the note payable of $280,000 and the recognition of a loss on derivatives of $204,626. During the year ended May 31, 2016, the Company recorded accretion of $120,175 and recorded a default fee of $76,522 increasing the carrying value of the note to $190,696.

 

During the year ended May 31, 2017, the Company recorded accretion of $185,913 increasing the carrying value of the note to $382,608. On November 16, 2017, the debenture and $79,881 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

  (g) On December 4, 2015, the Company issued a convertible note in the principal amount of $105,000 as an inducement to the holder of the convertible notes described in Note 7(g), to enter into an agreement to sell and assign the remaining outstanding principal to a third party. The note included a $10,000 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 52% discount to the lowest trading price during the previous 30 trading days to the date of conversion; or a 52% discount to the lowest trading price during the previous 30 trading days before the date the note was executed. On October 5, 2016, the holder of the convertible debentures entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $216,108 resulted in a discount to the note payable of $95,000 and the recognition of a loss on derivatives of $111,108. During the year ended May 31, 2016, the Company recorded accretion of $82,560 and recorded a default of fee of $26,250 increasing the carrying value of the note to $48,690.

 

During the year ended May 31, 2017, the recorded accretion of $82,560 increasing the carrying value of the note to $131,250. On November 16, 2017, the debenture and $24,464 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

  (h) On March 10, 2016, the Company issued a convertible note in the principal amount of up to $166,666. During the year ended May 31, 2016, the Company received initial tranches of $65,000 net of a $16,666 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $218,785 resulted in a discount to the note payable of $81,666 and the recognition of a loss on derivatives of $158,785. During the year ended May 31, 2016, the Company recorded accretion of $20,015, and recorded a default fee of $20,417 increasing the carrying value of the note to $40,432.

 

On April 7, 2017, the Company entered into an amendment to the convertible note which allowed for the additional funding under the note of $40,000 with an original discount of $4,444. During the year ended May 31, 2017, the Company received additional tranches of $123,339. The initial fair value of the conversion feature of $245,571 resulted in a discount to the note payable of $127,783 and the recognition of a loss on derivatives of $117,788. During the year ended May 31, 2017, the Company recorded accretion of $133,721, and recorded a default fee of $31,946 increasing the carrying value of the note to $206,098. During the period from June 1, 2017 to November 16, 2017, the Company recorded accretion of $43,692. On November 16, 2017, the debenture and $33,359 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

  (i) On October 11, 2016, the Company issued a convertible note in the principal amount of up to $249,999. The Company received initial tranches of $42,500 net of a $24,999 original issue discount and $2,500 of financing fees. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $121,902 resulted in a discount to the note payable of $45,000 and the recognition of a loss on derivatives of $76,902. During the year ended May 31, 2017, the Company recorded accretion of $26,953 increasing the carrying value of the note to $26,953. During the period from June 1, 2017 to November 16, 2017, the Company recorded accretion of $43,046 and a default fee of $17,500. On November 16, 2017, the debenture and $12,288 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

17

 

 

  (j) On April 27, 2017, the Company issued a convertible promissory note in the aggregate principal amount of $2,000,000. The interest on the outstanding principal due under the Unsecured Note accrues at a rate of 8% per annum. All principal and accrued interest under the Unsecured Note is due one year following the issue date of the Unsecured Note, and is convertible into shares of common stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the date of conversion.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $1,174,000 resulted in a discount to the note payable of $943,299. During the year ended May 31, 2017, the Company recorded accretion of $77,465 increasing the carrying value of the note to $1,134,166. During the six month period ended November 30, 2017, the Company recorded accretion of $418,071 increasing the carrying value of the note to $1,552,237.

 

  (k) On April 28, 2017, the Company entered into and closed on a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Lender”), pursuant to which the Company issued to the Lender a senior secured convertible promissory note in the aggregate principal amount of $440,000 (the “Secured Note”) for an aggregate purchase price of $400,000, and a warrant with a term of three years to purchase up to 27,500,000 shares of common stock of the Company at an exercise price of $0.0255 per share. The interest on the outstanding principal due under the Secured Note accrues at a rate of 8% per annum. All principal and accrued interest under the Secured Note is due on April 27, 2018 and is convertible into shares of the Company’s Common Stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the conversion, subject to adjustment upon the occurrence of certain events.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $1,744,661 and the fair value of the warrants of $425,918 resulted in a discount to the note payable of $400,000 and the recognition of a loss on derivatives of $1,770,579. During the year ended May 31, 2017, the Company recorded accretion of $54,526, increasing the carrying value of the note to $54,526. During the six month period ended November 30, 2017, the Company recorded accretion of $118,446 increasing the carrying value of the note to $172,971.

 

8. Derivative Liabilities

 

The embedded conversion option of the convertible debenture described in Note 7(f) contains a conversion feature that qualifies for embedded derivative classification. The fair value of the liability will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.

 

Upon the issuance of the convertible note payable described in Note 7(f), the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the convertible note described in Notes 7(f) to 7(m). The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

 

During the year ended May 31, 2017, the Company reclassified 350,000 options exercisable at $0.03 until March 16, 2017 with a fair value of $2,350, 2,000,000 warrants exercisable at $0.03 until August 29, 2018 with a fair value of $13,745, 533,333 warrants exercisable at $0.80 with a fair value of $Nil, 4,075,000 warrants exercisable at $0.37 with a fair value of $16,978 and a $59,853 note convertible at $0.40 with a fair value of $41 that qualified for treatment as derivative liabilities.

 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities.

 

     November 30,
2017
   May 31,
2017
 
           
  Balance at the beginning of year  $3,760,067   $978,245 
  Original discount limited to proceeds of notes   250,200    1,746,783 
  Fair value of derivative liabilities in excess of notes proceeds received   82,766    1,965,269 
  Reclassification of instruments previously classified as equity   -    32,934 
  Derivative liability settled through the issuance of preferred stock   (2,453,667)   - 
  Conversion of derivative liability   -    (195,595)
  Change in fair value of embedded conversion option   227,421    (767,569)
  Balance at the end of the year  $1,866,786   $3,760,067 

 

18

 

 

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using Monte-Carlo model or a Binomial Model based on various assumptions. 

 

Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

 

     Expected
Volatility
  Risk-free
Interest Rate
  Expected
Dividend Yield
   Expected Life
(in years)
                
  At issuance  134-213%  0.07-0.74%   0%  0.50-2.00
  At May 31, 2017  215-346%  0.84-1.44%   0%  0.96-2.91
  At November 30, 2017  106-277%  1.44-1.78%   0%  0.40-2.41

 

9. Common Stock

 

  On November 15, 2017, the Company revised its authorized share capital to increase the number of authorized common shares from 275,000,000 common shares with a par value of $0.00001, to 750,000,000 common shares with a par value of $0.00001.

 

  (a) As of November 30, 2017 and May 31, 2016, the Company’s subsidiary, Mantra Energy Alternatives Ltd., had received subscriptions for 67,000 shares of common stock at Cdn$1.00 per share for proceeds of $66,277 (Cdn$67,000), which is included in common stock subscribed, net of the non-controlling interest portion of $7,231.

 

  (b) As of November 30, 2017 and May 31, 2016, the Company’s subsidiary, Climate ESCO Ltd., had received subscriptions for 210,000 shares of common stock at $0.10 per share for proceeds of $21,000, which is included in common stock subscribed, net of the non-controlling interest portion of $7,384.

 

10. Preferred Stock

 

On November 15, 2017, the Company created one series of the 20,000,000 preferred shares it is authorized to issue, consisting of 8,000,000 shares, to be designated as Series A Preferred Shares. The principal terms of the Series A Preferred Shares are as follows:

 

Voting rights – The Series A Preferred Shares do not have voting rights.

 

Dividend rights – The holders of the Series A Preferred Shares shall not be entitled to receive any dividends. However, no dividends (other than those payable solely in Common Stock) shall be paid on the Common Stock or any class or series of capital stock ranking junior, as to dividends, to the Series A Preferred during any fiscal year of the Corporation until there shall have been paid or declared and set apart during that fiscal year for the holders of the Series A Preferred a dividend in an amount per share equal to (i) the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock times (ii) the amount per share of the dividend to be paid on the Common Stock.

 

Conversion rights – The holders of the Series A Preferred Shares have the right to convert each Class A Preferred Share and all accrued and unpaid dividends thereon shall be convertible at the option of the holder thereof, at any time after the issuance of such share into fully paid and nonassessable shares of Common Stock of the Corporation. The number of shares of Common Stock into which each share of the Series A Preferred Shares may be converted shall be determined by dividing the sum of the Stated Value of the Series A Preferred Shares ($0.25 per share) being converted and any accrued and unpaid dividends by the Conversion Price in effect at the time of the conversion. The Series A Preferred Shares may be converted at an initial conversion price of 75% of the lowest VWAP during the ten (10) trading day period immediately preceding the date a conversion notice is delivered.

 

Liquidation rights - Upon the occurrence of any liquidation, each holder of Series A Preferred Shares then outstanding shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made in respect of the Common Stock, or other series of preferred stock then in existence that is outstanding and junior to the Series A Preferred Shares upon liquidation, an amount per share of Series A Preferred Shares equal to the amount that would be receivable if the Series A Preferred Shares had been converted into Common Stock immediately prior to such liquidation distribution, plus, accrued and unpaid dividends.

 

In accordance with ASC 480 Distinguishing Liabilities from Equity, the Company has classified the following Series A Preferred Shares as a liability.

 

a)On November 16, 2017, the Company issued 251,885 shares of Series A Preferred Stock with a fair value of $86,785 to settle $195,204 of amounts owed to the former President of the Company. The Company recognized a gain on settlement of debt of $108,419.

 

b)On November 16, 2017, the Company issued 1,011,060 shares of Series A Preferred Stock with a fair value of $348,354 to settle convertible notes with a carrying value of $975,337, $179,059 of accrued interest and $2,453,667 of associated derivative liabilities. The Company recognized a gain on settlement of debt of $3,259,709.

 

19

 

 

11. Share Purchase Warrants

 

The following table summarizes the continuity of share purchase warrants:

 

     Number of
warrants
   Weighted average exercise price
$
 
           
  Balance, May 31, 2016   7,025,000    0.34 
  Issued   27,833,333    0.03 
  Expired   (650,000)   0.04 
  Balance, May 31, 2017   34,208,333    0.08 
  Issued   50,000,000    0.005 
  Expired   (633,333)   0.70 
  Balance, November 30, 2017   83,575,000    0.03 

 

As of November 30, 2017, the following share purchase warrants were outstanding:

 

  Number of warrants   Exercise
price
$
   Expiry date
           
   1,000,000    0.03   April 15, 2018
   666,667    0.03   May 4, 2018
   4,075,000    0.37   April 10, 2019
   333,334    0.03   August 29, 2018
   27,500,000    0.03   April 28, 2020
   50,000,000    0.005   June 27, 2020
             
   83,575,000         

 

12.

Stock Options

 

The following table summarizes the continuity of the Company’s stock options:

 

     Number
of options
   Weighted
average
exercise price
$
   Weighted average remaining contractual life (years)   Aggregate
intrinsic
value
$
 
                   
  Outstanding, May 31, 2016   1,500,000    0.16           
  Expired   (1,150,000)   0.20           
  Outstanding, May 31, 2017 and November 30, 2017   350,000    0.03    0.46     
  Exercisable, May 31, 2017 and November 30, 2017   350,000    0.03    0.46     

 

Additional information regarding stock options as of November 30, 2017 is as follows:

 

  Number of
options
  Exercise
price
$
  Expiry date
         
   350,000    0.03   May 17, 2018
   350,000         

 

20

 

 

13. Commitments and Contingencies

  

  (a) On May 23, 2012, a former employee of the Company delivered a Notice of Application seeking judgment against the Company for approximately $55,000. The hearing of that Application took place on July 31, 2012, at which time the former employee obtained judgment in the approximate amount of $55,000. The Company did not defend the amount of the judgment and the amount is included in accounts payable, but claims a complete set-off on the basis that the former employee retains 1,000,000 shares of common stock of the Company as security for payment of the outstanding consulting fees owed to him. On November 30, 2012, the Company commenced a separate action against the former employee seeking a return of the 1,000,000 shares of common stock and a stay of execution of the judgment. That application is pending and has not yet been heard or determined by the court. The payment of the judgment claim of approximately $55,000 is dependent upon whether the former employee will first return the 1,000,000 shares of common stock noted above. The probable outcome of the Company’s claim for the return of the shares cannot yet be determined as the Company has not received a response from the former employee in over a year.

 

  (b) On November 15, 2013, the Company entered into a second settlement agreement with the $150,000 debenture holder described in Note 10(a). Pursuant to the second amendment, on November 15, 2013, the Company agreed to make monthly payments of $10,000 on the outstanding principal and interest. Payments were made until December 2014, but have not been made after. The plaintiff was seeking relief of amounts owed along with 10% interest per annum, from the date of judgments. All amounts are recorded in these financial statements. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

  (c) On September 3, 2015, a former prospective employee of the Company delivered a Notice of Claim seeking judgment against the Company for approximately $11,400. During the year ended May 31, 2017 the prospective employee received a judgement which is recorded in these financial statements.

 

  (d) On March 14, 2016, the Company entered into a consulting agreement. Pursuant to the agreement, the Company will pay the consultant $10,000 per month ($20,000 paid) and issue 550,000 shares per month for a period of three months. At November 30, 2017, the Company had not issued the shares to the consultant due to non-performance.

  

  (e) On September 10, 2016, the Company entered into a debt settlement agreement to settle $7,500 of amounts owed for services in exchange for 2,000,000 common shares. The Company has not yet issued the shares. The Company will record the debt settlement upon the issuance of shares.

 

  (f) On August 22, 2016, the Company entered into a consulting agreement for the provision of consulting services until November 22, 2016. Pursuant to the agreement the Company will pay the consultant $5,000 per month and issue 2,000,000 shares of common stock to the consultant. On December 7, 2016, the Company entered into a settlement agreement. Pursuant to the agreement, the Company agreed to issue the consultant 1,000,000 common shares in exchange for fully releasing and discharging the Company of any and all further obligations.

 

  (g) The Company leases certain of its properties under leases that expire on various dates through 2019. Some of these agreements include escalation clauses and provide for renewal options ranging from one to five years.

 

  (h) Rent expense incurred under the Company’s operating leases amounted to $149,174 during the six months ended November 30, 2017.

 

  (i) The future minimum obligation during each year through 2019 under the leases with non-cancelable terms in excess of one year is as follows:

 

     Future
     Minimum
     Lease
  Years Ending May 31,  Payments
  2018  $58,855 
  2019   29,841 
  2020   6,854 
  Total  $95,550 

 

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14. Segment Disclosures

 

During the six months ended November 30, 2016, the Company operated in one operating segment in one geographical area.

 

During the six months ended November 30, 2017, the Company had two operating segments including:

 

  AW Solutions which is in the business of the provision of professional, multi-service line, telecommunications infrastructure and outsource services to the wireless and wireline industry and,

 

  Mantra Energy Alternatives (MEA) which consists of the rest of the Company’s operations.

 

Factors used to identify the Company’s reportable segments include the organizational structure of the Company and the financial information available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance. The Company’s operating segments have been broken out based on similar economic and other qualitative criteria. The Company operates the MEA reporting segment in one geographical area, Canada and the AW Solutions operating segment in two geographical areas, the United States and Puerto Rico.

 

Financial statement information by operating segment for six months ended November 30, 2017 is presented below:

 

     Mantra Ventures
$
  AW Solutions
$
  Total
$
            
  Net Sales       5,122,854    5,122,854 
  Operating (loss) income   (876,659)   (166,807)   (1,043,466)
  Interest expense   182,283    2,808    185,091 
  Depreciation and amortization   -    133,800    133,800 
  Total Assets as of November 30, 2017   5,733    4,908,099    4,903,832 

 

Geographic information for the six months ended and as of November 30, 2017 is presented below:

 

     Revenues
$
   Long-Lived
Assets
$
 
           
  Puerto Rico   984,561    7,627 
  United States   4,138,293    2,947,392 
  Consolidated Total   5,122,854    2,955,019 

 

22

 

 

15. Net Income (Loss) Per Share

 

     Three Months  Three Months  Six Months  Six Months
     Ended  Ended  Ended  Ended
     November 30,  November 30,  November 30,  November 30,
     2017  2016  2017  2016
     $  $  $  $
               
  Numerator:                    
  Net income   1,687,801    (1,852,786)   963,584    (2,010,657)
  Convertible note interest   48,934    -    97,867    - 
  Adjusted diluted net income   1,736,735    (1,852,786)   1,061,451    (2,010,657)
                       
  Denominator:                    
  Weighted average shares outstanding used in computing net income per share:                    
  Basic   274,998,800    99,869,076    274,998,800    97,483,513 
  Effect of dilutive stock options and convertible notes payable   850,061,840        850,349,865     
  Effect of preferred shares   104,244,788        104,244,788     
  Diluted   1,229,305,428    99,869,076    1,229,593,453    97,483,513 
                       
  Net income per share applicable to common stockholders:                    
  Basic   0.01    (0.02)   0.00    (0.02)
  Diluted   0.00    (0.02)   0.00    (0.02)

 

16.

Subsequent Events

 

  (a)

On December 15, 2017, the Company issued 11,800,000 shares of common stock upon the conversion of $33,000 of principal and interest of $2,640 pursuant to a convertible promissory note due April 27, 2018.

     
  (b) On December 28, 2017, the Company’s Board of Directors approved an issuance of 136,148,490 shares of common stock to employees, directors or consultants for compensation and services rendered. Issuances approved thereunder had the following conditions: 1) Issue’s have to be employed or associated with the company for a minimum of 12 continuous months; 2) issuances will vest after 12 months; and 3) at the Company’s option, issuances may be converted to preferred shares; 4) voting rights shall not be affected by vesting and voting will be on an issued basis; and 5) if within 12 month period Issue’s leave or are no longer associated with the Company, issuances shall be returned to the Company.
     
  (c) On January 3, 2018, the Company issued 20,516,000 shares of common stock upon the conversion of $67,702.80 of principal pursuant to a convertible promissory note due April 25, 2018.

 

23

 

 

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

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plan”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our unaudited consolidated financial statements are stated in United States dollars ($) and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

 

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to “$”refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock.

 

Unless specifically set forth to the contrary, when used in this report the terms “we”, “our”, the “Company” and similar terms refer to Spectrum Global Solutions, Inc., a British Columbia, Canada corporation, and its consolidated subsidiaries.

 

The information that appears on our website at www.SpectrumGlobalSolutions.com is not part of this report.

 

Description of Business

 

We were incorporated in Nevada on January 22, 2007. On December 8, 2008 we continued our corporate jurisdiction out of the State of Nevada and into the Province of British Columbia, Canada. Our principal offices are located at 300 Crown Oak Centre, Longwood, Florida 32750. Our telephone number is (407) 512-9102. On January 2, 2018, we changed our fiscal year end to December 31.

 

We are a leading provider of services and solutions in the telecommunications sector and research developer of alternative energy alternatives in the energy sector. The telecommunications sector provides services and solutions throughout the United States, Guam, Canada and the Caribbean. Our energy sector services are related to research and development of alternative energy technologies.

 

Our telecommunications division, which was acquired on April 25, 2017, is supported by its subsidiaries: AW Solutions, Inc., AW Solutions Puerto Rico, LLC and Tropical Communications, Inc. (collectively known as “AW Solutions”). AW Solutions provides a broad range of professional services and solutions to top tier communication carriers and Fortune 1000 enterprise customers. The telecommunication division offers carriers, service providers and enterprise customers professional contracting services, to include: infrastructure audits; site acquisition; architectural, structural and civil design and analysis; construction management; construction; installation; warehousing and logistics; maintenance services, that support the build-out and upgrade and operation of some of the most advanced networks, small cell, Wi-Fi, fiber and distributed antenna system (DAS) networks. We believe the expansion and migration of these next-generation networks, our long term relationships supported by multiyear Master Service Agreements (MSA) and multi-year service contracts with major wireless, commercial wireline and wireless operators, DAS operators, tower companies, original equipment manufacturers (OEM’s) and prime contractor/project management organization provides us a significant opportunity as a long term leading and well respected industry leader in this marketplace.

 

24

 

 

Through our subsidiary in the energy division, Mantra Energy Alternatives Ltd. (“MEA”) has developed cutting edge “green” technologies that can mitigate and reduce the carbon footprint of generators and consumers of fossil fuels, MEA mission and strategy of development and research efforts to acquire and commercially exploit various new energy related technologies through licenses and purchases. These energy technologies and services are to enable the sustainable consumption, production and management of resources on a residential, commercial and industrial scales on a national and international level. The company also provides marketing and graphic design services to help companies optimize their environmental awareness presence through the eyes of government, industry and the general public.

 

Overview

 

Due to the acquisition of AW Solutions on April 25, 2017 and our inability to obtain further funding to develop mixed-reactant fuel cell (“MRFC”) technology, we intend to revisit our pursuit of this line of business and may consider the sale, restructuring or disposition of the energy business unit to focus on pursuing the telecommunication line of business. We have not made any decision on the future of our energy businesses at this time.

 

Our partially owned subsidiary MEA has itself undertaken financing activities to raise money for research and development by issuing common shares. MEA and the Company have sought funding to develop a prototype unit for the MRFC technology but to date has been unsuccessful. We also have a number of inactive subsidiaries, which we may engage in various businesses in the future but have no current plans to do so at this time. Since the inception as an energy technology research and development company in 2007, we have incurred operational losses and we have completed several rounds of financing to fund our operations. We have paused development in moving these technologies toward commercial applications until further funding is received.

 

Telecommunications Services and Solutions

 

Through the acquisition of AW Solutions on April 25, 2017, we have expanded our business into the telecommunications industry, expanded our customer base and geographic reach. Our company is comprised of the following:

 

AW Solutions. - AW Solutions, Inc., a Florida corporation (April 17, 2006), AW Solutions Puerto Rico, LLC, Puerto Rico corporation (March, 14, 2011) and Tropical Communications, Inc., a Florida corporation (May 9, 1984), (Collectively known as, “AW Solutions”). We are professional, multi-service line, telecommunications infrastructure companies that provide outsourced services to the wireless and wireline industry.

 

We are a leading provider of professional services and infrastructure solutions to both the telecommunications industry, utility entities and enterprises sectors. Our engineering, design, construction, installation, maintenance service offerings supported by our professional teams to support the build-out, maintenance, upgrade and operation of some of the most advanced fiber optic, Ethernet, copper, wireless, wireline, utility and enterprise networks. Our breadth of comprehensive services enables our customers to selectively augment existing services or to outsource entire projects or operational functions. We divide our service offering into Infrastructure and Professional Services.

 

We offer a full array of operations, construction, project and program management professional required to facilitate the full turn-key completion of networks from the design and planning phase, engineer evaluation and sign off, regulatory, installation, commissioning and maintain various types of Wi- Fi and wide-area networks, DAS networks, and small cell distribution networks for incumbent local exchange carriers (ILECs), telecommunications original equipment manufacturers (OEMs), cable broadband multiple system operators (MSOs) and enterprise customers. Our services and teams support the deployment of new networks and technologies, as well as expand and maintain existing networks. We also design, install and maintain hardware solutions for the leading OEMs that support voice, data and optical networks. Our consulting and professional solutions to the service-provider and enterprise market in support of all facets of telecommunications and next-generation networks, including project management, network implementation, network installation, network upgrades, rebuilds, maintenance and consulting services. Our global certified professional services organization offers consulting, design, engineering, integration, implementation and ongoing support of all solutions offered by our company. We believe our ability to respond rapidly is a differentiating factor for national and international-based customers needing a broad range of our services and solutions.

 

Energy Services and Solutions

 

Mantra Energy Alternatives Ltd. – MEA is a British Columbia, Canada corporation, which was incorporated in Nevada on January 22, 2007. On December 8, 2008, we made a jurisdiction change from the State of Nevada into the Province of British Columbia, Canada. We focus our business strategy in the energy sector in the ongoing research and development to commercialize alternative energy technologies and services to the residential, commercial and industrial marketplace. Continued focus and desire is to refine the technologies and exploratory efforts into strategic relationships, joint ventures, partnerships with third parties to assist in commercialization. MEA has successfully acquired and owns a process for the electro-reduction of carbon dioxide (“ERC”) and has secured world licenses for a mixed-reaction fuel cell (“MRFC”) which supports commercial applications.

 

25

 

 

We do not have any sales for energy services and solutions and our activities have been primarily research and development. In the past, we have either contracted out our development work to various laboratories or carried out research and development on these technologies in our own laboratory in Vancouver, BC. These activities have included: experimentation to improve the process performance; process and economic modeling to optimize the costs of a commercial system; design and simulation of pilot systems for technology demonstration and validation; business development activities such as the establishment of strategic and technology development partners; and the design and fabrication of laboratory prototypes, among others.

 

We have engaged in the research and development of alternative energy technologies and services primarily in ERC and MRFC through our subsidiary, MEA.

 

Results of Operations for the Six Month Periods Ended November 30, 2017 and November 30 2016

 

Revenues

 

Our operating results for the six month periods ended November 30, 2017 and November 30, 2016 are summarized as follows:

 

 

   Six Months Ended November 30,
2017
   Six Months Ended November 30,
2016
   Difference 
Revenue  $5,122,854   $-     $5,122,854 
Operating expenses  $1,661,523   $239,532   $1,421,991 
Other income (expense)  $1,971,597   $(1,780,875)  $3,752,472 
Net income (loss)  $963,584   $(2,010,657)  $2,974,241 

 

Revenue generated during the six months ended November 30, 2017, was $5,122,854 compared to (Nil) revenues during the same period ended November 30, 2016. During this period ended November 30, 2017, all of our revenues and a significant portion of our expenses were generated by our acquired telecommunications division (AW Solutions, Inc.; AW Solutions Puerto Rico, LLC; Tropical Communications, Inc.) on April 25, 2017.

 

Expenses

 

During the six months ended November 30, 2017, our operating expenses were $1,661,523 compared to operating expenses of $239,532 for the six month period ended November 30, 2016. The increase on operating expense is a result of the acquisition of the telecommunication division on April 25, 2017, which consisting of AW Solutions, Inc., AW Solutions Puerto Rico LLC, and Tropical Communications, Inc. These expenses include general and administrative costs, all of our corporate costs, as well as costs from our subsidiaries management personnel and administrative overhead. These costs primarily consist of employee compensation and related expenses, including legal, consulting and professional fees, information technology, provisions for recoveries of bad debt and other costs not directly related to performance of our services under customer contracts. We expect these expenses to continue to generally increase as we expand our operations, but expect that such expenses as a percentage of revenue will decrease if we succeed in increasing revenues.

 

General and administrative costs were $1,063,014 for the six months ended November 30, 2017 compared to $148,044 for the six months ended November 30, 2016. Salaries and wages were $464,709 for the six months ended November 30, 2017 compared to $91,488 for the six months ended November 30, 2016. Depreciation and amortization costs were $133,800 for the six months ended November 30, 2017 compared to $15,925 for the six months ended November 30, 2016.

 

Other Income (Expense)

 

For the six months ended November 30, 2017, we had other income of $1,971,597 compared to a net loss of $1,780,875 the same period in 2016. The increase was primarily due a gain on settlement of debt of $3,368,128 and a decrease in loss from the change in fair value of conversion features of $1,069,411 which was offset by an increase in accretion of discounts on convertible debentures of $582,514.

 

Net Income (Loss)

 

For the six months ended November 30, 2017, we incurred a net income of $963,584, compared to a net loss of $2,010,657 for the same period in 2016.

 

26

 

 

Results of Operations for the Three Month Periods Ended November 30, 2017 and November 30, 2016

 

Revenues

 

Our operating results for the three month periods ended November 30, 2017 and November 30, 2016 are summarized as follows:

 

   Three Months Ended November 30,
2017
   Three Months Ended November 30,
2016
   Difference 
Revenue  $2,006,933   $-     $2,006,933 
Operating expenses  $775,504   $150,538   $624,966 
Other income (expense)  $2,379,912   $(1,705,861)  $4,085,773 
Net income (loss)  $1,615,296   $(1,852,786)  $3,468,082 

 

Revenue generated during the three months ended November 30, 2017 was $2,006,933 compared to (Nil) revenues during the same period ended November 30, 2016. During this period ended November 30, 2017, all of our revenues and a significant portion of our expenses were generated by our acquired telecommunications division (AW Solutions, Inc.; AW Solutions Puerto Rico, LLC; Tropical Communications, Inc.) on April 25, 2017.

 

Expenses

 

During the three months ended November 30, 2017, our operating expenses were $775,504 compared to operating expenses of $150,538 for the three month period ended November 30, 2016. The increase on operating expense is a result of the acquisition of the telecommunication division on April 25, 2017, which consisting of AW Solutions, Inc., AW Solutions Puerto Rico LLC, and Tropical Communications, Inc. These expenses include general and administrative costs, all of our corporate costs, as well as costs from our subsidiaries management personnel and administrative overhead. These costs primarily consist of employee compensation and related expenses, including legal, consulting and professional fees, information technology, provisions for recoveries of bad debt and other costs not directly related to performance of our services under customer contracts. We expect these expenses to continue to generally increase as we expand our operations, but expect that such expenses as a percentage of revenue will decrease if we succeed in increasing revenues.

 

General and administrative costs were $504,886 for the three months ended November 30, 2017, compared to $96,390 for the three months ended November 30, 2016. Salaries and wages were $204,949 for the three months ended November 30, 2017, compared to $45,744 for the three months ended November 30, 2016. Depreciation and amortization costs were $65,669 for the three months ended November 30, 2017, compared to $8,404 for the three months ended November 30, 2016.

 

Other Income (Expense)

 

For the three months ended November 30, 2017, we had other income of $2,379,912 compared to other expenses of $1,705,861 the same period in 2016. The increase was primarily due a gain on settlement of debt of $3,368,128 and a decrease in loss from the change in fair value of conversion features of $1,068,250 which was offset by an increase in accretion of discounts on convertible debentures of $289,454.

 

Net Income (Loss)

 

For the three months ended November 30, 2017, we incurred a net income of $1,687,801, compared to a net loss of $1,852,786 for the same period in 2016.

 

Liquidity and Capital Resources

 

As of November 30, 2017, our total current assets were $1,958,609 and our total current liabilities were $8,762,792, resulting in a working capital deficit of $6,804,183 compared to a working capital deficit of $7,865,616 as of May 31, 2017.

 

We suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard, we have historically raised additional capital through equity offerings and loan transactions.

 

27

 

 

Cash Flows

 

  

Six Months

Ended

November 30,
2017

 

Six Months

Ended

November 30,
2016

Statement of Operations Data:      
       
Net Cash Used In Operating Activities  $(592,372)  $(160,014)
Net Cash Used In Investing Activities  $-   $- 
Net Cash Provided by Financing Activities  $247,270   $158,895 
Change In Cash  $(345,102)  $(1,119)

 

The decrease in cash that we experienced in the period ended November 30, 2017, compared to the decrease during the period ended November 30, 2016, is primarily due to the acquisition of AW Solutions and its subsidiaries and increased funding requirements for ongoing operating activities. During the period ended November 30, 2017, the repayment of loans payable of $160,000 was made, and proceeds were received from a note payable of $250,200, which created the cash balance as noted above. We expect that our cash position will increase, due to operating profits in the telecommunication division. Over the coming months and year, subject to raising additional funds, we plan to primarily concentrate on our telecommunications business and associated projects.

 

In order to improve our liquidity, we intend to pursue additional equity financing from private placement sales of our equity securities or shareholders loans. There is no assurance that we will be successful in completing any further private placement financing. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

 

As of November 30, 2017, we had cash of $Nil compared to $Nil as of November 30, 2016. Our cash balance at the beginning of this year was $345,102.

 

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 are material to stockholders.

 

Inflation

 

The effect of inflation on our revenue and operating results has not been significant.

 

28

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures.

 

Evaluation of disclosure controls and procedures

 

Our management, with the participation of our chief executive officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Based on management’s evaluation, our chief executive officer concluded that, as a result of the material weaknesses described below, as of November 30, 2017, our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

 

  a) Due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. The areas where we have a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the consolidated financial statements will not be prevented or detected on a timely basis;

 

  b) We do not have a functioning audit committee. As a result, there is ineffective independent oversight in the establishment and monitoring of required internal controls and procedures; and

 

  c) We do not have any formally adopted internal controls surrounding its cash and financial reporting procedures.

 

We are committed to improving our financial organization. In addition, we will look to increase our personnel resources and technical accounting expertise within the accounting function to resolve non-routine or complex accounting matters. In addition, as funds are available, we will take the following action to enhance our internal controls: Hiring additional knowledgeable personnel with technical accounting expertise to further support our current accounting personnel, which management estimates will cost approximately $200,000 per annum. Our operations are relatively small, but with the acquisition of AW Solutions (April 2017) we expect that both our technical and accounting expertise will be improved, however our overall financial requirements will only increase. We continue to have net cash losses each quarter, we do not anticipate being able to hire additional internal personnel until such time as our operations are profitable on a cash basis or until our operations are large enough to justify the hiring of additional accounting personnel. We currently engage an outside accounting firm to assist us in the preparation of our consolidated financial statements this past year and will plan to evaluate our internal capabilities as we integrate the business segments with AW Solutions to address the sufficient number of internal accounting personnel to achieve compliance. As necessary, we will engage consultants in the future in order to ensure proper accounting for our consolidated financial statements.

 

Due to the fact that our internal accounting staff consists solely of a Chief Executive Officer, who functions as our Principal Accounting Officer, additional personnel will also ensure the proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support us if personnel turn over issues within the department occur. We believe this will greatly decrease any control and procedure issues we may encounter in the future. 

 

Changes in internal control over financial reporting.

 

There were no changes in our internal control over financial reporting that occurred during the quarter ended November 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

29

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. There been no material developments with respect to the information previously reported under Part I, Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017.

 

Item 1A. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

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

 

Since the beginning of the six month period ended November 30, 2017, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in an annual report on Form 10-K, in a quarterly report on Form 10-Q or in a current report on Form 8-K.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits 

                

Exhibit #   Exhibit Description
     
31.1   Certification of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certifications of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101 SCH   XBRL Taxonomy Extension Schema Document
     
101 CAL   XBRL Taxonomy Calculation Linkbase Document
     
101 LAB   XBRL Taxonomy Labels Linkbase Document
     
101 PRE   XBRL Taxonomy Presentation Linkbase Document
     
101 DEF   XBRL Taxonomy Extension Definition Linkbase Document

 

30

 

 

SIGNATURES

 

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

 

  SPECTRUM GLOBAL SOLUTIONS, INC.
     
Date: January 22, 2018 By: /s/ Roger M. Ponder
    Roger M. Ponder
    Chief Executive Officer and Principal Financial Officer

 

 

31

 

 

EX-31.1 2 f10q1117ex31-1_spectrum.htm CERTIFICATION

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Roger Ponder, certify that:

 

1. I have reviewed this Annual Report on Form 10-Q of Spectrum Global Solutions, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: January 22, 2018

 

/s/ Roger Ponder  
Roger Ponder  
Chief Executive Officer and Director  
(Principal Executive Officer,  
Principal Financial Officer and
Principal Accounting Officer)
 
EX-32.1 3 f10q1117ex32-1_spectrum.htm CERTIFICATION

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Roger M. Ponder , hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  1. the Annual Report on Form 10-Q of Spectrum Global Solutions, Inc. for the period ended November 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Spectrum Global Solutions, Inc.

 

Dated: January 22, 2018

 

/s/ Roger Ponder  
Roger Ponder  
Chief Executive Officer and Director  
(Principal Executive Officer,  
Principal Financial Officer and
Principal Accounting Officer)
 
Spectrum Global Solutions, Inc.  
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(the &#8220;Company&#8221;) (f/k/a Mantra Venture Group Ltd.) was incorporated in the State of Nevada on January 22, 2007 to acquire and commercially exploit various new energy related technologies through licenses and purchases. On December 8, 2008, the Company continued its corporate jurisdiction out of the State of Nevada and into the province of British Columbia, Canada. On April 25, 2017, the Company entered into and closed on an Asset Purchase Agreement (the &#8220;Asset Purchase Agreement&#8221;) with InterCloud Systems, Inc. (&#8220;InterCloud&#8221;). Pursuant to the terms of the Asset Purchase Agreement, the Company purchased 80.1% of the assets associated with InterCloud&#8217;s &#8220;AW Solutions&#8221; business. After the acquisition of AW Solutions, the Company provides professional, multi-service line, telecommunications infrastructure and outsource services to the wireless and wireline industry. On November 15, 2017, the Company changed its name to &#8220;Spectrum Global Solutions, Inc.&#8221;.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px 0px 0px 0.25in; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px 0px 0px 0.25in; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">The accompanying unaudited interim consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company&#8217;s Annual Report on Form 10-K for the fiscal year ended May 31, 2017. In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company&#8217;s financial position and the results of its operations and its cash flows for the periods shown.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px 0px 0px 0.25in; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px 0px 0px 0.25in; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px 0px 0px 0.25in; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px 0px 0px 0.25in; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has yet to acquire commercially exploitable energy related technology, and is unlikely to generate earnings in the immediate or foreseeable future. The recently acquired AW Solutions business has also incurred losses and experienced cash outflows from operations during its most recent fiscal years. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As of November 30, 2017, the Company has an accumulated loss of $19,555,383, and a working capital deficit of $6,804,183. These factors raise substantial doubt regarding the Company&#8217;s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px 0px 0px 0.25in; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px 0px 0px 0.25in; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">Management requires additional funds over the next twelve months to fully implement its business plan. Management is currently seeking additional financing through the sale of equity and from borrowings from private lenders to cover its operating expenditures. 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Specifically, the amendments in this update (1) clarify the objective of the collectability criterion in step 1, and provides additional clarification for when to recognize revenue for a contract that fails step 1, (2) permit an entity, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price (3) specify that the measurement date for noncash consideration is contract inception, and clarifies that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration, (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations, (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Further, accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The guidance is effective for the Company beginning June 1, 2019. 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This standard will be effective for annual periods beginning after December 15, 2020, including interim periods within that reporting period, and will be applied prospectively. Early adoption of this standard is permitted on testing dates after January 1, 2017. 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The Company maintains its cash balances with high-credit-quality financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. 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For the six months ended November 30, 2017, two customers accounted for 42% and 13%, respectively, of consolidated revenues for the period. 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ASU 2015-17 simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as non-current in the statement of financial position. 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The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. 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Specifically, the amendments in this update (1) clarify the objective of the collectability criterion in step 1, and provides additional clarification for when to recognize revenue for a contract that fails step 1, (2) permit an entity, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price (3) specify that the measurement date for noncash consideration is contract inception, and clarifies that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration, (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations, (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Further, accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The guidance is effective for the Company beginning June 1, 2019. 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The Company agreed to pay $43,890 of accrued interest within five days of the agreement (paid), pay the accruing interest on a monthly basis (paid), and pay a $10,000 premium in addition to the $150,000 principal outstanding on April 11, 2013. The note has a cash redemption premium of 130% of the principal amount in the first 90 days following the execution date, of 135% for days 90-120 following the execution date, and 140% after the 120th day. After 140 days cash redemption is only available upon approval by the holder. 1) Issue's have to be employed or associated with the company for a minimum of 12 continuous months; 2) issuances will vest after 12 months; and 3) at the Company's option, issuances may be converted to preferred shares; 4) voting rights shall not be affected by vesting and voting will be on an issued basis; and 5) if within 12 month period Issue's leave or are no longer associated with the Company, issuances shall be returned to the Company. 26250 76522 6836 4438 100000 350000 350000 0.12 10000 12901 12901 In addition, as the present value of the amended future cash flows had a difference of less than 10% of the cash flows of the original debt, it was determined that the original and new debt instruments are not substantially different. As a result, the modification was not treated as an extinguishment of the debt and no gain or loss was recognized because the fair value of the old debt and new debt remained the same. 21266 81119 50000 P2Y0M0D 2000000 2000000 1000000 100000 326087 326087 105000 166666 249999 2000000 440000 45000 59853 33000 67702.80 479626 280000 310266 204626 111108 158785 76902 1770579 210266 117788 45000 90000 The note bears interest at 12% per annum and is convertible into common shares of the Company at the lower of a 42% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 42% discount to the lowest trading price during the previous 20 trading days before the date the note was executed. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed. <div>The note bears interest at 10% per annum and is convertible into common shares of the Company at a 52% discount to the lowest trading price during the previous 30 trading days to the date of conversion; or a 52% discount to the lowest trading price during the previous 30 trading days before the date the note was executed.</div> <div>The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.</div> <div>The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.</div> All principal and accrued interest under the Unsecured Note is due one year following the issue date of the Unsecured Note, and is convertible into shares of common stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the date of conversion. <p>The interest on the outstanding principal due under the Secured Note accrues at a rate of 8% per annum. All principal and accrued interest under the Secured Note is due on April 27, 2018 and is convertible into shares of the Company&#8217;s Common Stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the conversion, subject to adjustment upon the occurrence of certain events.</p> 95000 81666 45000 943299 127783 123339 The Company received initial tranches of $42,500 net of a $24,999 original issue discount and $2,500 of financing fees. 48690 40432 131250 1134166 26953 206098 54526 1552237 172971 26250 20417 31946 17500 27500000 P3Y 400000 1746783 250200 1965269 82766 32934 -2453667 -195595 -767569 227421 3.46 2.15 2.77 1.06 2.13 1.34 0.0144 0.0084 0.0178 0.0144 0.0074 0.0007 0.00 0.00 0.00 P2Y10M28D P11M15D P2Y4M28D P0Y4M24D P2Y P6M 350000 2350 0.03 2017-03-16 2000000 533333 4075000 0.03 0.80 0.37 13745 16978 2018-08-29 41 66277 67000 21000 66277 67000 21000 67000 210000 67000 210000 7231 7384 7231 7384 The number of shares of Common Stock into which each share of the Series A Preferred Shares may be converted shall be determined by dividing the sum of the Stated Value of the Series A Preferred Shares ($0.25 per share) being converted and any accrued and unpaid dividends by the Conversion Price in effect at the time of the conversion. The Series A Preferred Shares may be converted at an initial conversion price of 75% of the lowest VWAP during the ten (10) trading day period immediately preceding the date a conversion notice is delivered. 179059 7025000 34208333 83575000 1000000 666667 4075000 333334 27500000 50000000 27833333 50000000 -650000 -633333 0.34 0.08 0.03 0.03 0.03 0.37 0.03 0.03 0.005 0.03 0.005 0.04 0.70 1500000 350000 350000 350000 1150000 0.16 0.03 0.03 0.03 0.20 0.03 0.03 P0Y5M16D P0Y5M16D 58855 29841 6854 95550 The Company leases certain of its properties under leases that expire on various dates through 2019. Some of these agreements include escalation clauses and provide for renewal options ranging from one to five years. 149174 55000 55000 11400 7500 The Company commenced a separate action against the former employee seeking a return of the 1,000,000 shares of common stock and a stay of execution of the judgment. That application is pending and has not yet been heard or determined by the court. The payment of the judgment claim of approximately $55,000 is dependent upon whether the former employee will first return the 1,000,000 shares of common stock noted above. The probable outcome of the Company's claim for the return of the shares cannot yet be determined. Payments were made until December 2014, but have not been made after. The plaintiff was seeking relief of amounts owed along with 10% interest per annum, from the date of judgments. All amounts are recorded in these financial statements. The Company will pay the consultant $10,000 per month ($20,000 paid) and issue 550,000 shares per month for a period of three months. At November 30, 2017, the Company had not issued the shares to the consultant due to non-performance. Consulting agreement for the provision of consulting services until November 22, 2016. 5000 1000000 2955019 2947392 7627 1 2 48934 97867 -1852786 -2010657 1736735 1061451 850061840 850349865 104244788 104244788 The Company has estimated the fair value of these derivatives using the Monte-Carlo model and/or a Binomial Model based on various assumptions. 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Document and Entity Information - shares
6 Months Ended
Nov. 30, 2017
Jan. 22, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name Spectrum Global Solutions, Inc.  
Entity Central Index Key 0001413891  
Trading Symbol sgsif  
Amendment Flag false  
Current Fiscal Year End Date --05-31  
Document Type 10-Q  
Document Period End Date Nov. 30, 2017  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q2  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   443,543,290
XML 11 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
Consolidated Balance Sheets - USD ($)
Nov. 30, 2017
May 31, 2017
Current assets    
Cash $ 345,102
Accounts receivable, net 1,911,831 1,623,200
Prepaid expenses and deposits 46,778 132,155
Total current assets 1,958,609 2,100,457
Property and equipment, net 40,609 96,030
Goodwill 1,503,633 1,503,633
Customer lists, net 844,257 892,127
Tradenames, net 538,090 568,600
Other assets 28,430 27,930
Total assets 4,913,628 5,188,777
Current liabilities    
Checks issued in excess of funds on deposit 8,212
Accounts payable and accrued liabilities 2,551,978 2,113,355
Due to related parties 177,529 308,008
Loans payable 359,672 235,441
Loans payable to related parties 148,858
Convertible debentures (net of discount of $714,792 and $1,350,067, respectively) 1,805,208 2,139,791
Derivative liability 1,866,786 3,760,067
Contingent liability 1,409,411 1,409,411
Series A preferred stock liability Authorized: 20,000,000 shares, par value $0.00001 Series A preferred stock Authorized: 8,000,000 shares, Issued and outstanding: 1,262,945 (May 31, 2017 - Nil) shares 435,138
Total current liabilities 8,762,792 9,966,073
Stockholders' deficit    
Common stock Authorized: 750,000,000 shares, par value $0.00001 Issued and outstanding: 274,998,800 (May 31, 2017 - 274,998,800) shares 2,754 2,754
Additional paid-in capital 15,724,447 15,724,447
Common stock subscribed 74,742 74,742
Accumulated deficit (19,555,383) (20,518,967)
Total Spectrum Global Solutions, Inc. (f/k/a Mantra Venture Group Ltd.) stockholders' deficit (3,753,440) (4,717,024)
Non-controlling interest (95,724) (60,272)
Total stockholders' deficit (3,849,164) (4,777,296)
Total liabilities and stockholders' deficit $ 4,913,628 $ 5,188,777
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Consolidated Balance Sheets (Parenthetical) - USD ($)
Nov. 30, 2017
May 31, 2017
Statement of Financial Position [Abstract]    
Convertible debentures, net of discount $ 714,792 $ 1,350,067
Series A Preferred stock liability shares authorized 20,000,000 20,000,000
Series A Preferred stock, par value $ 0.00001 $ 0.00001
Series A Preferred stock, shares authorized 8,000,000 8,000,000
Series A Preferred stock, shares issued 1,262,945
Series A Preferred stock, shares outstanding 1,262,945
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 750,000,000 750,000,000
Common stock, shares issued 274,998,800 274,998,800
Common stock, shares outstanding 274,998,800 274,998,800
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Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 30, 2016
Income Statement [Abstract]        
Revenue $ 2,006,933 $ 5,122,854
Cost of goods sold 1,996,045 4,504,797
Gross profit 10,888 618,057
Operating expenses        
Depreciation and amortization 65,669 8,404 133,800 15,925
General and administrative 504,886 96,390 1,063,014 132,119
Salaries & wages 204,949 45,744 464,709 91,488
Total operating expenses 775,504 150,538 1,661,523 239,532
Loss from operations (764,616) (150,538) (1,043,466) (239,532)
Other income (expense)        
Gain (Loss) on settlement of debt 3,368,128 (19,418) 3,368,128 (19,418)
Accretion of discounts on convertible debentures (441,011) (151,557) (901,254) (318,740)
Loss on change in fair value of derivatives (440,021) (1,508,271) (310,186) (1,379,597)
Interest expense (107,184) (26,615) (185,091) (63,120)
Total other income (expense) 2,379,912 (1,705,861) 1,971,597 (1,780,875)
Net income (loss) for the period 1,615,296 (1,856,399) 928,131 (2,020,407)
Less: net loss attributable to the non-controlling interest 72,505 3,613 35,453 9,750
Net income (loss) attributable to Spectrum Global Solutions, Inc. $ 1,687,801 $ (1,852,786) $ 963,584 $ (2,010,657)
Net income (loss) per share attributable to Spectrum Global Solutions, Inc. (f/k/a Mantra Venture Group Ltd.) common shareholders:        
Basic $ 0.01 $ (0.02) $ 0.00 $ (0.02)
Diluted $ 0.00 $ (0.02) $ 0.00 $ (0.02)
Weighted average number of shares outstanding used in the calculation of net loss attributable to Spectrum Global Solutions, Inc. (f/k/a Mantra Venture Group Ltd.) per common share:        
Basic 274,998,800 99,869,076 274,998,800 97,483,513
Diluted 1,229,305,428 99,869,076 1,229,593,453 97,483,513
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Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Nov. 30, 2017
Nov. 30, 2016
Operating activities    
Net income (loss) $ 928,131 $ (2,020,407)
Adjustments to reconcile net income (loss) to net cash used in operating activities:    
Loss on change in fair value of derivative liability 227,421 1,206,006
Accretion of discounts on convertible debentures 901,254 318,740
Depreciation and amortization 133,800 15,925
Foreign exchange loss 6,231 2,912
Initial derivative expenses 82,766 171,102
Interest related to cash redemption premium on convertible notes 17,500 9,875
(Gain) loss on settlement of debt (3,368,128) 19,418
Changes in operating assets and liabilities:    
Amounts receivable (288,631) 5,674
Prepaid expenses and deposits 85,377 11,655
Accounts payable and accrued liabilities 617,182 47,512
Due to related parties 64,725 51,574
Net cash used in operating activities (592,372) (160,014)
Financing activities    
Repayment of capital lease obligations (4,592)
Repayment of loan payable (160,000)
Proceeds from notes payable 250,200 20,282
Proceeds from loans from related parties 148,858
Proceeds from issuance of convertible debentures 134,500
Proceeds from issuance of common stock and subscriptions received 5,000
Checks issued in excess of funds on deposit 8,212 3,705
Net cash provided by financing activities 247,270 158,895
Change in cash (345,102) (1,119)
Cash, beginning of period 345,102 1,119
Cash, end of period
Non-cash investing and financing activities:    
Common stock issued to relieve common stock subscribed 25,000
Common stock issued to settle accounts payable and debt 108,212
Common stock issued for conversion of notes payable 236,093
Preferred stock issued to settle accounts payable and amounts owed related parties 374,263
Preferred stock issued to settle derivative liabilities 2,453,667
Preferred stock issued to settle conversion of notes payable 975,337
Original issue discounts 27,800 24,999
Original debt discount against derivative liability 250,200 134,500
Supplemental disclosures:    
Interest paid 2,808 657
Income taxes paid
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Organization and Going Concern
6 Months Ended
Nov. 30, 2017
Organization and Going Concern [Abstract]  
Organization and Going Concern
1.Organization and Going Concern

 

Spectrum Global Solutions, Inc. (the “Company”) (f/k/a Mantra Venture Group Ltd.) was incorporated in the State of Nevada on January 22, 2007 to acquire and commercially exploit various new energy related technologies through licenses and purchases. On December 8, 2008, the Company continued its corporate jurisdiction out of the State of Nevada and into the province of British Columbia, Canada. On April 25, 2017, the Company entered into and closed on an Asset Purchase Agreement (the “Asset Purchase Agreement”) with InterCloud Systems, Inc. (“InterCloud”). Pursuant to the terms of the Asset Purchase Agreement, the Company purchased 80.1% of the assets associated with InterCloud’s “AW Solutions” business. After the acquisition of AW Solutions, the Company provides professional, multi-service line, telecommunications infrastructure and outsource services to the wireless and wireline industry. On November 15, 2017, the Company changed its name to “Spectrum Global Solutions, Inc.”.

 

The accompanying unaudited interim consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017. In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has yet to acquire commercially exploitable energy related technology, and is unlikely to generate earnings in the immediate or foreseeable future. The recently acquired AW Solutions business has also incurred losses and experienced cash outflows from operations during its most recent fiscal years. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As of November 30, 2017, the Company has an accumulated loss of $19,555,383, and a working capital deficit of $6,804,183. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management requires additional funds over the next twelve months to fully implement its business plan. Management is currently seeking additional financing through the sale of equity and from borrowings from private lenders to cover its operating expenditures. There can be no certainty that these sources will provide the additional funds required for the next twelve months.

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Significant Accounting Policies
6 Months Ended
Nov. 30, 2017
Significant Accounting Policies [Abstract]  
Significant Accounting Policies
2.Significant Accounting Policies

 

 a.Basis of Presentation/Principles of Consolidation

 

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its subsidiaries, Carbon Commodity Corporation, Climate ESCO Ltd., Mantra Energy Alternatives Ltd., Mantra China Inc., Mantra China Limited, Mantra Media Corp., Mantra NextGen Power Inc., Mantra Wind Inc., AW Solutions, Inc.(from the date of acquisition, April 25, 2017), Tropical Communications, Inc. (from the date of acquisition, April 25, 2017) and AW Solutions Puerto Rico, LLC.(from the date of acquisition, April 25, 2017). All the subsidiaries are wholly-owned with the exception of Climate ESCO Ltd., which is 64.55% owned, Mantra Energy Alternatives Ltd., which is 88.21% owned and AW Solutions, Inc., Tropical Communications, Inc., and AW Solutions Puerto Rico, LLC which are all 80.1% owned. All inter-company balances and transactions have been eliminated.

  

 b.Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of long-lived assets, equity component of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

 c.Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

 

 d.Accounts Receivable

 

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company records unbilled receivables for services performed but not billed. At November 30, 2017, unbilled receivables totaled $44,054, and are included in accounts receivable. Management reviews a customer’s credit history before extending credit. The Company maintains an allowance for doubtful accounts for estimated losses. Estimates of uncollectible amounts are reviewed each period, and changes are recorded in the period in which they become known. Management analyzes the collectability of accounts receivable each period. This review considers the aging of account balances, historical bad debt experience, changes in customer creditworthiness, current economic trends, customer payment activity and other relevant factors. Should any of these factors change, the estimate made by management may also change. The allowance for doubtful accounts was $54,482 at November 30, 2017.

 

 e.Property and Equipment

 

Property and equipment are stated at cost. The Company depreciates the cost of property and equipment over their estimated useful lives at the following annual rates:

 

 Automotive 3-5 years straight-line basis
 Computer equipment and software 3-7 years straight-line basis
 Leasehold improvements 5 years straight-line basis
 Office equipment and furniture 5 years straight-line basis
 Research equipment 5 years straight-line basis

 

 f.Goodwill

 

Goodwill was generated through the acquisition of AW Solutions in fiscal 2017 as the total consideration paid exceeded the fair value of the net assets acquired.

 

The Company tests its goodwill for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company’s consolidated financial results.

 

The Company tests goodwill by estimating fair value using a Discounted Cash Flow (“DCF”) model. The key assumptions used in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate of a market participant’s weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment charges during the six months ended November 30, 2017.

 

 g.Intangible Assets

 

At November 30, 2017 and May 31, 2017, definite-lived intangible assets primarily consist of non-compete agreements, tradenames and customer relationships which are being amortized over their estimated useful lives ranging from 1-10 years.

 

The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.

 

For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.

 

 h.Long-lived Assets

 

In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

  

 i.Foreign Currency Translation

 

Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.

 

The Company’s integrated foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate the accounts of its integrated operations into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. The resulting exchange gains or losses are recognized in income.

 

 j.Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

The Company conducts business, and files federal and state income, franchise or net worth, tax returns in Canada, the United States, in various states within the United States and the Commonwealth of Puerto Rico. The Company determines its filing obligations in a jurisdiction in accordance with existing statutory and case law. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2010 to 2017. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.

 

Significant management judgment is required in determining the provision for income taxes, and in particular, any valuation allowance recorded against the Company’s deferred tax assets. Deferred tax assets are regularly reviewed for recoverability. The Company currently has significant deferred tax assets resulting from net operating loss carryforwards and deductible temporary differences, which should reduce taxable income in future periods. The realization of these assets is dependent on generating future taxable income.

 

The Company follows the guidance set forth within ASC Topic 740, “Income Taxes” (“ASC Topic 740”) which prescribes a two-step process for the financial statement recognition and measurement of income tax positions taken or expected to be taken in an income tax return. The first step evaluates an income tax position in order to determine whether it is more likely than not that the position will be sustained upon examination, based on the technical merits of the position. The second step measures the benefit to be recognized in the financial statements for those income tax positions that meet the more likely than not recognition threshold. ASC Topic 740 also provides guidance on de-recognition, classification, recognition and classification of interest and penalties, accounting in interim periods, disclosure and transition. Penalties and interest, if incurred, would be recorded as a component of current income tax expense.

 

The Company received a tax notice from the Puerto Rican government requesting payment of taxes related to 2014 in the amount of $166,084 plus penalties and interest of $87,027 for a total obligation due of $253,111. This tax assessment is included in accrued expenses at November 30, 2017.

 

 k.Revenue Recognition

 

The Company’s revenues are generated from infrastructure and professional services. The Company recognizes revenue on arrangements in accordance with ASC Topic 605-10, “Revenue Recognition”. The Company recognizes revenue only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability of the resulting receivable is reasonably assured.

 

The infrastructure and professional services revenues are derived from contracts to provide technical engineering services along with contracting services to commercial and governmental customers. The Company’s service contracts generally require specific tasks or services that the Company must perform under the contract. The Company recognizes revenues associated with these services upon the completion of the related task or service which is at the time the four revenue recognition criteria have been met. Direct costs incurred related to performance of the task or service are deferred and recorded as prepaid expense and are expensed when the related revenue is recognized.

 

The Company also generates revenue from service contracts with certain customers. These contracts are accounted for under the proportional performance method. Under this method, revenue is recognized in proportion to the value provided to the customer for each project as of each reporting date.

The Company records unbilled receivables for revenues earned, but not yet billed.

  

 l.Cost of Revenues

 

Cost of revenues includes all direct costs of providing services under our contracts, including costs for direct labor provided by employees, services by independent subcontractors, operation of capital equipment (excluding depreciation and amortization), direct materials, insurance claims and other direct costs.

 

 m.Research and Development Costs

 

Research and development costs are expensed as incurred.

 

 n.Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

 

 o.Loss Per Share

 

The Company computes loss per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of November 30, 2017, the Company had 954,594,653 (2016 – 352,678,654) dilutive potential shares outstanding.

 

 p.Comprehensive Loss

 

ASC 220, “Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of November 30, 2017 and 2016, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the consolidated financial statements.

 

 q.Recent Accounting Pronouncements

 

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which is effective for nonpublic entities for annual reporting periods, as amended, beginning after December 15, 2018. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for the Company on June 1, 2019, and early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company continues to evaluate the standard and has not yet selected a transition method.

 

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”), which is effective for nonpublic entities for annual reporting periods beginning after December 15, 2016. ASU 2015-17 simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as non-current in the statement of financial position. The Company has elected to early adopt the requirements of ASU 2015-17 and the results of such adoption are presented within these consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which is effective for nonpublic entities for annual reporting periods beginning after December 15, 2019. Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company continues to evaluate the effects of ASU 2016-02 and does not expect that the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” (“ASU 2016-08”). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-08 on its consolidated financial statements.

 

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”). The amendments in ASU 2016-10 clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-10 on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The amendments in ASU 2016-12 provide clarifying guidance in certain narrow areas and add some practical expedients. Specifically, the amendments in this update (1) clarify the objective of the collectability criterion in step 1, and provides additional clarification for when to recognize revenue for a contract that fails step 1, (2) permit an entity, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price (3) specify that the measurement date for noncash consideration is contract inception, and clarifies that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration, (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations, (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Further, accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-12 on its consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business” (“ASU 2017-01”). The Amendments in this Update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption of this standard is permitted. The Company is currently evaluating the effects of ASU 2017-01 on its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). This standard will simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Current guidance requires that companies compute the implied fair value of goodwill under Step 2 by performing procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. This standard will require companies to perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This standard will be effective for annual periods beginning after December 15, 2020, including interim periods within that reporting period, and will be applied prospectively. Early adoption of this standard is permitted on testing dates after January 1, 2017. The Company is evaluating the effects of ASU 2017-04 on its consolidated financial statements.

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or result of operations.

 

 r.Concentrations of Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivables. The Company maintains its cash balances with high-credit-quality financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be withdrawn upon demand and therefore bear minimal risk.

 

The Company provides credit to customers on an uncollateralized basis after evaluating client creditworthiness. For the six months ended November 30, 2017, two customers accounted for 42% and 13%, respectively, of consolidated revenues for the period. In addition, amounts due from these customers represented 28% and 18%, respectively, of trade accounts receivable as of November 30, 2017.

 

The Company’s customers are primarily located within the domestic United States of America and Puerto Rico. Revenues generated within the domestic United States of America accounted for approximately 81% of consolidated revenues for the six month period ended November 30, 2017. Revenues generated from customers in Puerto Rico accounted for approximately 19% of consolidated revenues for the six month period ended November 30, 2017.

 

 s.Fair Value Measurements

 

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

 

Level 1 – quoted prices for identical instruments in active markets.

 

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and.

 

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Financial instruments consist principally of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, loans payable and convertible debentures. Derivative liabilities are determined based on “Level 3” inputs, which are significant and unobservable and have the lowest priority. There were no transfers into or out of “Level 3” during the six months ended November 30, 2017 and 2016. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

 

Our financial assets and liabilities carried at fair value measured on a recurring basis as of November 30, 2017 and May 31, 2017, consisted of the following:

 

   Total fair value at 
November 30,
2017 
$
  Quoted prices in active markets 
(Level 1) 
$
  Significant other observable inputs 
(Level 2) 
$
  Significant unobservable inputs 
(Level 3) 
$
 
              
 Description:                
 Derivative liability (1)  1,866,786         –           –   1,866,786 

 

   Total fair value at 
May 31, 
2017 
$
  Quoted prices in active markets 
(Level 1) 
$
  Significant other observable inputs 
(Level 2) 
$
  Significant unobservable inputs 
(Level 3) 
$
 
              
 Description:                
 Derivative liability (1)  3,760,067         –            –   3,760,067 

 

 (1)The Company has estimated the fair value of these derivatives using the Monte-Carlo model and/or a Binomial Model based on various assumptions.

 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 8 for additional information.

 

 t.Derivative Liabilities

 

The Company accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads, relying first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As of November 30, 2017 and May 31, 2017, the Company had a $1,866,786 and $3,760,067 derivative liability, respectively.

 

 u.Reclassifications

 

Certain prior period amounts have been reclassified to conform to current presentation.

XML 17 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment
6 Months Ended
Nov. 30, 2017
Property and Equipment [Abstract]  
Property and Equipment
3.Property and Equipment

 

   November 30, 
2017 
$
  May 31, 2017 
$
 
        
 Computers and office equipment  308,649   308,649 
 Equipment  378,505   378,505 
 Research equipment  143,129   143,129 
 Software  177,073   177,073 
 Vehicles  94,356   94,356 
 Vehicles under capital lease      
          
 Total  1,101,712   1,101,712 
          
 Less: impairment  (44,419)  (44,419 
 Less: accumulated depreciation  (1,016,684)  (961,263)
          
 Equipment, Net  40,609   96,030 

 

During the six months ended November 30, 2017, the Company recorded $55,421 (2016 - $13,556) of amortization expense.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
Intangible Assets
6 Months Ended
Nov. 30, 2017
Intangible Assets [Abstract]  
Intangible Assets
4.Intangible Assets

 

 

   Cost 
$
  Accumulated amortization 
$
  Impairment 
$
  November 30, 
2017 
Net carrying value 
$
  May 31, 2017 
Net carrying value 
$
 
                 
 Customer relationship and lists  901,548   57,291               –   844,257   892,127 
 Trade names  574,605   36,515      538,090   568,600 
    1,476,153   93,806      1,382,347   1,460,727 

 

During the six months ended November 30, 2017, the Company recorded $78,379 (2016 - $2,369) of amortization expense.

 

Estimated Future Amortization Expense:

 

   $ 
 For year ending May 31, 2018  78,203 
 For year ending May 31, 2019  156,405 
 For year ending May 31, 2020  156,405 
 For year ending May 31, 2021  156,405 
 For year ending May 31, 2022  156,405 
 For year ending May 31, 2023  156,405 
 For year ending May 31, 2024  156,405 
 For year ending May 31, 2025  156,405 
 For year ending May 31, 2026  155,487 
XML 19 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions
6 Months Ended
Nov. 30, 2017
Related Party Transactions [Abstract]  
Related Party Transactions
5.Related Party Transactions

 

 a)During the six months ended November 30, 2017, the Company incurred management fees of $12,011 (2016 - $68,616) to the former President of the Company.

 

 b)During the six months ended November 30, 2017, the Company incurred management fees of $0 (2016 - $22,872) to the spouse of the former President of the Company.

  

 c)As of November 30, 2017, the Company owes a total of $195,204 (May 31, 2017 - $241,327) to the former President of the Company and his spouse, and a company controlled by the former President of the Company which is non-interest bearing, unsecured, and due on demand.

 

 d)As of November 30, 2017, the Company owes $18,141 (May 31, 2017 - $17,305) to a former officer and a former director of the Company, which is non-interest bearing, unsecured, and due on demand.

 

 e)As of November 30, 2017, the Company owes $51,849 (May 31, 2017 - $49,376) to Intercloud, which is non-interest bearing, unsecured, and due on demand.

 

 f)As of November 30, 2017, pursuant to the acquisition AW Solutions, the Company owes a contingent liability of $1,409,411 to Intercloud.

  

 g)On November 30, 2017, the Company received $18,858 pursuant to a promissory note issued to the Chief Executive Officer of the Company. The note issued is unsecured, due on November 30, 2018 and bears interest at a rate of 8% per annum.

 

 h)On November 30, 2017, the Company received $130,000 pursuant to a promissory note issued to the President of the Company. The note issued is unsecured, due on November 30, 2018 and bears interest at a rate of 8% per annum.

 

 i)On November 16, 2017, the Company issued 251,885 shares of Series A Preferred Stock with a fair value of $86,785 to settle $195,204 of amounts owed to the former President of the Company.  The Company recognized a gain on settlement of debt of $108,419.
XML 20 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
Loans Payable
6 Months Ended
Nov. 30, 2017
Loans Payable/Convertible Debentures [Abstract]  
Loans Payable
6.Loans Payable

 

 (a)As of November 30, 2017, the amount of $49,109 (Cdn$63,300) (May 31, 2017 - $46,846 (Cdn$63,300)) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

 

 (b)As of November 30, 2017, the amount of $17,500 (May 31, 2017 - $17,500) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

  

 (c)As of November 30, 2017, the amounts of $7,500 and $28,705 (Cdn$37,000) (May 31, 2017 - $7,500 and $27,382 (Cdn$37,000)) are owed to a non-related party which are non-interest bearing, unsecured, and due on demand.

 

 (d)As of November 30, 2017, the amount of $4,490 (May 31, 2017 - $4,490) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

 

 (e)During the year ended May 31, 2017, the amounts of $14,016 (Cdn$18,066) (May 31, 2017 - $13,370 (Cdn$18,066) was advanced by a non-related party. The amount owing is non-interest bearing, unsecured, and due on demand.

 

 (f)In March 2012, the Company received $50,000 for the subscription of 10,000,000 shares of the Company’s common stock. During the year ended May 31, 2013, the Company and the subscriber agreed that the shares would not be issued and that the subscription would be returned. The subscription has been reclassified as a non-interest bearing demand loan until the funds are refunded to the subscriber.

 

 (g)On August 4, 2015, the Company borrowed $50,000 pursuant to a promissory note. The note was due on September 4, 2015. The note bears interest at 120% per annum prior September 4, 2015, and at 180% per annum after September 4, 2015. The holder of the note was also granted the rights to buy 100,000 shares of the Company’s common stock at a price of $0.15 per share until August 4, 2017. During the year ended May 31, 2016, the Company repaid the $50,000 note and $1,200 of accrued interest remains owing.

 

The rights issued with the note qualified for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the warrants of $9,755 resulted in a discount to the note payable of $9,755. During the year ended May 31, 2016, the Company recorded accretion of $9,755.

 

 (h)As of November 30, 2017 and May 31, 2017, the amounts of $15,000 and $43,352 (Cdn$55,878) was owed to non-related parties.  These advances are non-interest bearing, unsecured, and due on demand.

 

 (i)On April 12, 2017, received $12,000 pursuant to a promissory note. The note issued is unsecured, due on demand and bears interest at a rate of 10% per annum.

 

 (j)On June 27, 2017, received $250,200 net of a $27,800 Original Issue Discount pursuant to a $278,000 promissory note. The note issued is unsecured, due on demand and bears interest at a rate of 12% per annum. The Company also issued a warrant with a term of three years to purchase up to 50,000,000 shares of common stock of the Company at an exercise price of $0.005 per share. The fair value of the warrants of $332,966 resulted in a discount to the note payable of $250,200 and the recognition of a loss on derivatives of $82,766. During the six months ended November 30, 2017, the Company repaid $160,000 of the loan and recorded accretion of $278,000, increasing the carrying value of the note to $118,000.
XML 21 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Debentures
6 Months Ended
Nov. 30, 2017
Loans Payable/Convertible Debentures [Abstract]  
Convertible Debentures
7.Convertible Debentures

 

 (a)In October 2008, the Company issued three convertible debentures for total proceeds of $250,000 which bear interest at 10% per annum, are unsecured, and due one year from date of issuance. The unpaid amount of principal and accrued interest can be converted at any time at the holder’s option into 625,000 shares of the Company’s common stock at a price of $0.40 per share. The Company also issued 250,000 detachable, non-transferable share purchase warrants. Each share purchase warrant entitles the holder to purchase one additional share of the Company’s common stock for a period of two years from the date of issuance at an exercise price of $0.50 per share.

 

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company determined that the convertible debentures contained no embedded beneficial conversion feature as the convertible debentures were issued with a conversion price higher than the fair market value of the Company’s common shares at the time of issuance.

 

In accordance with ASC 470-20, the Company allocated the proceeds of issuance between the convertible debt and the detachable share purchase warrants based on their relative fair values. Accordingly, the Company recognized the fair value of the share purchase warrants of $45,930 as additional paid-in capital and an equivalent discount against the convertible debentures. The Company had recorded accretion expense of $45,930, increasing the carrying value of the convertible debentures to $250,000.

 

On January 19, 2012, the Company entered into a settlement agreement with one of the debenture holders to settle a $50,000 convertible debenture and $122,535 in accounts payable and accrued interest with the debt holder. Pursuant to the agreement, the debt holder agreed to reduce the debt to Cdn$100,000 on the condition that the Company pays the amount of Cdn$2,500 per month for 40 months, beginning March 1, 2012 and continuing on the first day of each month thereafter.

 

On July 18, 2012, the Company entered into a settlement agreement with the $150,000 debenture holder. Pursuant to the settlement agreement, the lender agreed to extend the due date until April 11, 2013 and the Company agreed to pay $43,890 of accrued interest within five days of the agreement (paid), pay the accruing interest on a monthly basis (paid), and pay a $10,000 premium in addition to the $150,000 principal outstanding on April 11, 2013. On April 29, 2013, the Company entered into an amended settlement agreement whereby the lender agreed to extend the due date to September 15, 2013 and the Company agreed to pay $6,836 of interest for the period from April 1 to September 15, 2013 upon execution of the agreement (paid) and granted the lender 100,000 stock options exercisable at $0.12 per share for a period of two years.

 

On November 15, 2013, the Company entered into a second settlement agreement amendment. Pursuant to the second amendment, on November 15, 2013, the Company agreed to pay interest of $4,438 (paid) and commencing February 1, 2014, the Company would make monthly payments of $10,000 on the outstanding principal and interest. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

The Company evaluated the modifications and determined that the creditor did not grant a concession. In addition, as the present value of the amended future cash flows had a difference of less than 10% of the cash flows of the original debt, it was determined that the original and new debt instruments are not substantially different. As a result, the modification was not treated as an extinguishment of the debt and no gain or loss was recognized because the fair value of the old debt and new debt remained the same. The Company recorded the fair value of $12,901 for the stock options as additional paid-in capital and a discount. During the year ended May 31, 2014, the Company repaid $40,000 of the debenture. As of May 31, 2014 the Company had accreted $12,901 of the discount bring the carrying value of the convertible debenture to $114,661. During the year ended May 31, 2015, the Company repaid $54,808 decreasing the carrying value to $59,853. During the year ended May 31, 2017, the Company recorded an additional fee of $21,266 increasing the carrying value to $81,119. On November 16, 2017, the debenture and $15,423 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

At November 30, 2017, the other remaining debenture of $50,000 remained outstanding and past due.

 

 (b)On August 19, 2013, the Company issued a convertible debenture for total proceeds of $10,000, which bears interest at 10% per annum, is unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $10,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $10,000. As of November 30, 2017, the carrying value of the convertible promissory note was $10,000 and the note remained outstanding and in default.

  

 (c)On December 27, 2013, the Company issued a convertible debenture for total proceeds of $5,000, which bear interest at 10% per annum, is unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion features of $5,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value was be accreted over the term of the convertible debenture up to its face value of $5,000. As of November 30, 2017, the carrying value of the convertible promissory note was $5,000 and the note remained outstanding and in default.

 

 (d)On February 4, 2014, the Company issued a convertible debenture for total proceeds of $15,000, which bears interest at 10% per annum, is unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $15,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $15,000. As of November 30, 2017, the carrying value of the convertible promissory note was $15,000 and the note remained outstanding and in default.

  

 (e)On June 1, 2015, the Company issued a convertible note in the principal amount of $100,000 due on demand on or after December 1, 2015. The note has a cash redemption premium of 130% of the principal amount in the first 90 days following the execution date, of 135% for days 90-120 following the execution date, and 140% after the 120th day. After 140 days cash redemption is only available upon approval by the holder. The note bears interest at 12% per annum and is convertible into common shares of the Company at the lower of a 42% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 42% discount to the lowest trading price during the previous 20 trading days before the date the note was executed. In no event shall the conversion price be lower than $0.00001. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

On October 5, 2016, the holder of the convertible debentures entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement. At May 31, 2017, $45,000 of the note had been assigned to the third party.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $310,266 resulted in a discount to the note payable of $100,000 and the recognition of a loss on derivatives of $210,266. During the year ended May 31, 2016, the Company issued 6,303,475 shares of common stock upon the conversion of $45,000 of principal. During the year ended May 31, 2016, the Company recorded accretion of $100,000 and recorded the cash redemption premium of $26,250 increasing the carrying value of the note to $81,250.

 

During the year months ended May 31, 2017, the Company issued 18,440,200 shares of common stock upon the conversion of $90,000 of principal. During the year ended May 31, 2017, the Company recorded a default fee of $51,820 increasing the carrying value of the note to $43,070. On November 16, 2017, the debenture and $13,644 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

 (f)On September 8, 2015, the Company issued a convertible note in the principal amount of $326,087. During the year ended May 31, 2016, the Company received the initial tranches of $280,000 net of a $26,087 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $479,626 resulted in a discount to the note payable of $280,000 and the recognition of a loss on derivatives of $204,626. During the year ended May 31, 2016, the Company recorded accretion of $120,175 and recorded a default fee of $76,522 increasing the carrying value of the note to $190,696.

 

During the year ended May 31, 2017, the Company recorded accretion of $185,913 increasing the carrying value of the note to $382,608. On November 16, 2017, the debenture and $79,881 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

 (g)On December 4, 2015, the Company issued a convertible note in the principal amount of $105,000 as an inducement to the holder of the convertible notes described in Note 7(g), to enter into an agreement to sell and assign the remaining outstanding principal to a third party. The note included a $10,000 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 52% discount to the lowest trading price during the previous 30 trading days to the date of conversion; or a 52% discount to the lowest trading price during the previous 30 trading days before the date the note was executed. On October 5, 2016, the holder of the convertible debentures entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $216,108 resulted in a discount to the note payable of $95,000 and the recognition of a loss on derivatives of $111,108. During the year ended May 31, 2016, the Company recorded accretion of $82,560 and recorded a default of fee of $26,250 increasing the carrying value of the note to $48,690.

 

During the year ended May 31, 2017, the recorded accretion of $82,560 increasing the carrying value of the note to $131,250. On November 16, 2017, the debenture and $24,464 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

 (h)On March 10, 2016, the Company issued a convertible note in the principal amount of up to $166,666. During the year ended May 31, 2016, the Company received initial tranches of $65,000 net of a $16,666 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $218,785 resulted in a discount to the note payable of $81,666 and the recognition of a loss on derivatives of $158,785. During the year ended May 31, 2016, the Company recorded accretion of $20,015, and recorded a default fee of $20,417 increasing the carrying value of the note to $40,432.

 

On April 7, 2017, the Company entered into an amendment to the convertible note which allowed for the additional funding under the note of $40,000 with an original discount of $4,444. During the year ended May 31, 2017, the Company received additional tranches of $123,339. The initial fair value of the conversion feature of $245,571 resulted in a discount to the note payable of $127,783 and the recognition of a loss on derivatives of $117,788. During the year ended May 31, 2017, the Company recorded accretion of $133,721, and recorded a default fee of $31,946 increasing the carrying value of the note to $206,098. During the period from June 1, 2017 to November 16, 2017, the Company recorded accretion of $43,692. On November 16, 2017, the debenture and $33,359 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

 (i)On October 11, 2016, the Company issued a convertible note in the principal amount of up to $249,999. The Company received initial tranches of $42,500 net of a $24,999 original issue discount and $2,500 of financing fees. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $121,902 resulted in a discount to the note payable of $45,000 and the recognition of a loss on derivatives of $76,902. During the year ended May 31, 2017, the Company recorded accretion of $26,953 increasing the carrying value of the note to $26,953. During the period from June 1, 2017 to November 16, 2017, the Company recorded accretion of $43,046 and a default fee of $17,500. On November 16, 2017, the debenture and $12,288 of accrued interest was converted into Series A Preferred Stock as described in Note 10(b).

 

 (j)On April 27, 2017, the Company issued a convertible promissory note in the aggregate principal amount of $2,000,000. The interest on the outstanding principal due under the Unsecured Note accrues at a rate of 8% per annum. All principal and accrued interest under the Unsecured Note is due one year following the issue date of the Unsecured Note, and is convertible into shares of common stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the date of conversion.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $1,174,000 resulted in a discount to the note payable of $943,299. During the year ended May 31, 2017, the Company recorded accretion of $77,465 increasing the carrying value of the note to $1,134,166. During the six month period ended November 30, 2017, the Company recorded accretion of $418,071 increasing the carrying value of the note to $1,552,237.

 

 (k)On April 28, 2017, the Company entered into and closed on a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Lender”), pursuant to which the Company issued to the Lender a senior secured convertible promissory note in the aggregate principal amount of $440,000 (the “Secured Note”) for an aggregate purchase price of $400,000, and a warrant with a term of three years to purchase up to 27,500,000 shares of common stock of the Company at an exercise price of $0.0255 per share. The interest on the outstanding principal due under the Secured Note accrues at a rate of 8% per annum. All principal and accrued interest under the Secured Note is due on April 27, 2018 and is convertible into shares of the Company’s Common Stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the conversion, subject to adjustment upon the occurrence of certain events.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $1,744,661 and the fair value of the warrants of $425,918 resulted in a discount to the note payable of $400,000 and the recognition of a loss on derivatives of $1,770,579. During the year ended May 31, 2017, the Company recorded accretion of $54,526, increasing the carrying value of the note to $54,526. During the six month period ended November 30, 2017, the Company recorded accretion of $118,446 increasing the carrying value of the note to $172,971.

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Derivative Liabilities
6 Months Ended
Nov. 30, 2017
Derivative Liabilities [Abstract]  
Derivative Liabilities
8.Derivative Liabilities

 

The embedded conversion option of the convertible debenture described in Note 7(f) contains a conversion feature that qualifies for embedded derivative classification. The fair value of the liability will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.

 

Upon the issuance of the convertible note payable described in Note 7(f), the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the convertible note described in Notes 7(f) to 7(m). The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

 

During the year ended May 31, 2017, the Company reclassified 350,000 options exercisable at $0.03 until March 16, 2017 with a fair value of $2,350, 2,000,000 warrants exercisable at $0.03 until August 29, 2018 with a fair value of $13,745, 533,333 warrants exercisable at $0.80 with a fair value of $Nil, 4,075,000 warrants exercisable at $0.37 with a fair value of $16,978 and a $59,853 note convertible at $0.40 with a fair value of $41 that qualified for treatment as derivative liabilities.

 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities.

 

   November 30,
2017
  May 31,
2017
 
        
 Balance at the beginning of year $3,760,067  $978,245 
 Original discount limited to proceeds of notes  250,200   1,746,783 
 Fair value of derivative liabilities in excess of notes proceeds received  82,766   1,965,269 
 Reclassification of instruments previously classified as equity  -   32,934 
 Derivative liability settled through the issuance of preferred stock  (2,453,667)  - 
 Conversion of derivative liability  -   (195,595)
 Change in fair value of embedded conversion option  227,421   (767,569)
 Balance at the end of the year $1,866,786  $3,760,067 

 

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using Monte-Carlo model or a Binomial Model based on various assumptions. 

 

Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

 

   Expected
Volatility
 Risk-free
Interest Rate
 Expected
Dividend Yield
  Expected Life
(in years)
           
 At issuance 134-213% 0.07-0.74%  0% 0.50-2.00
 At May 31, 2017 215-346% 0.84-1.44%  0% 0.96-2.91
 At November 30, 2017 106-277% 1.44-1.78%  0% 0.40-2.41
XML 23 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Common Stock
6 Months Ended
Nov. 30, 2017
Common Stock/Preferred Stock [Abstract]  
Common Stock
9.Common Stock

 

 On November 15, 2017, the Company revised its authorized share capital to increase the number of authorized common shares from 275,000,000 common shares with a par value of $0.00001, to 750,000,000 common shares with a par value of $0.00001.

 

 (a)As of November 30, 2017 and May 31, 2016, the Company’s subsidiary, Mantra Energy Alternatives Ltd., had received subscriptions for 67,000 shares of common stock at Cdn$1.00 per share for proceeds of $66,277 (Cdn$67,000), which is included in common stock subscribed, net of the non-controlling interest portion of $7,231.

 

 (b)As of November 30, 2017 and May 31, 2016, the Company’s subsidiary, Climate ESCO Ltd., had received subscriptions for 210,000 shares of common stock at $0.10 per share for proceeds of $21,000, which is included in common stock subscribed, net of the non-controlling interest portion of $7,384.
XML 24 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
Preferred Stock
6 Months Ended
Nov. 30, 2017
Common Stock/Preferred Stock [Abstract]  
Preferred Stock
10.Preferred Stock

 

On November 15, 2017, the Company created one series of the 20,000,000 preferred shares it is authorized to issue, consisting of 8,000,000 shares, to be designated as Series A Preferred Shares. The principal terms of the Series A Preferred Shares are as follows:

 

Voting rights – The Series A Preferred Shares do not have voting rights.

 

Dividend rights – The holders of the Series A Preferred Shares shall not be entitled to receive any dividends. However, no dividends (other than those payable solely in Common Stock) shall be paid on the Common Stock or any class or series of capital stock ranking junior, as to dividends, to the Series A Preferred during any fiscal year of the Corporation until there shall have been paid or declared and set apart during that fiscal year for the holders of the Series A Preferred a dividend in an amount per share equal to (i) the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock times (ii) the amount per share of the dividend to be paid on the Common Stock.

 

Conversion rights – The holders of the Series A Preferred Shares have the right to convert each Class A Preferred Share and all accrued and unpaid dividends thereon shall be convertible at the option of the holder thereof, at any time after the issuance of such share into fully paid and nonassessable shares of Common Stock of the Corporation. The number of shares of Common Stock into which each share of the Series A Preferred Shares may be converted shall be determined by dividing the sum of the Stated Value of the Series A Preferred Shares ($0.25 per share) being converted and any accrued and unpaid dividends by the Conversion Price in effect at the time of the conversion. The Series A Preferred Shares may be converted at an initial conversion price of 75% of the lowest VWAP during the ten (10) trading day period immediately preceding the date a conversion notice is delivered.

 

Liquidation rights - Upon the occurrence of any liquidation, each holder of Series A Preferred Shares then outstanding shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made in respect of the Common Stock, or other series of preferred stock then in existence that is outstanding and junior to the Series A Preferred Shares upon liquidation, an amount per share of Series A Preferred Shares equal to the amount that would be receivable if the Series A Preferred Shares had been converted into Common Stock immediately prior to such liquidation distribution, plus, accrued and unpaid dividends.

 

In accordance with ASC 480 Distinguishing Liabilities from Equity, the Company has classified the following Series A Preferred Shares as a liability.

 

a)On November 16, 2017, the Company issued 251,885 shares of Series A Preferred Stock with a fair value of $86,785 to settle $195,204 of amounts owed to the former President of the Company. The Company recognized a gain on settlement of debt of $108,419.

 

b)On November 16, 2017, the Company issued 1,011,060 shares of Series A Preferred Stock with a fair value of $348,354 to settle convertible notes with a carrying value of $975,337, $179,059 of accrued interest and $2,453,667 of associated derivative liabilities. The Company recognized a gain on settlement of debt of $3,259,709.
XML 25 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Share Purchase Warrants
6 Months Ended
Nov. 30, 2017
Share Purchase Warrants [Abstract]  
Share Purchase Warrants
11.Share Purchase Warrants

 

The following table summarizes the continuity of share purchase warrants:

 

   Number of 
warrants
  Weighted average exercise price 
$
 
        
 Balance, May 31, 2016  7,025,000   0.34 
 Issued  27,833,333   0.03 
 Expired  (650,000)  0.04 
 Balance, May 31, 2017  34,208,333   0.08 
 Issued  50,000,000   0.005 
 Expired  (633,333)  0.70 
 Balance, November 30, 2017  83,575,000   0.03 

 

As of November 30, 2017, the following share purchase warrants were outstanding:

 

 Number of warrants  Exercise 
price 
$
  Expiry date
        
  1,000,000   0.03  April 15, 2018
  666,667   0.03  May 4, 2018
  4,075,000   0.37  April 10, 2019
  333,334   0.03  August 29, 2018
  27,500,000   0.03  April 28, 2020
  50,000,000   0.005  June 27, 2020
          
  83,575,000       
XML 26 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options
6 Months Ended
Nov. 30, 2017
Stock Options [Abstract]  
Stock Options

12.

Stock Options

 

The following table summarizes the continuity of the Company’s stock options:

 

      Number
of options
    Weighted
average
exercise price
$
    Weighted average remaining contractual life (years)     Aggregate 
intrinsic 
value 
$
 
                           
  Outstanding, May 31, 2016     1,500,000       0.16                  
  Expired     (1,150,000 )     0.20                  
  Outstanding, May 31, 2017 and November 30, 2017     350,000       0.03       0.46        
  Exercisable, May 31, 2017 and November 30, 2017     350,000       0.03       0.46        

 

Additional information regarding stock options as of November 30, 2017 is as follows:

 


  Number of 
options
  Exercise 
price 
$
  Expiry date
           
    350,000       0.03     May 17, 2018
    350,000
XML 27 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies
6 Months Ended
Nov. 30, 2017
Commitments and Contingencies [Abstract]  
Commitments and Contingencies
13.Commitments and Contingencies

  

 (a)On May 23, 2012, a former employee of the Company delivered a Notice of Application seeking judgment against the Company for approximately $55,000. The hearing of that Application took place on July 31, 2012, at which time the former employee obtained judgment in the approximate amount of $55,000. The Company did not defend the amount of the judgment and the amount is included in accounts payable, but claims a complete set-off on the basis that the former employee retains 1,000,000 shares of common stock of the Company as security for payment of the outstanding consulting fees owed to him. On November 30, 2012, the Company commenced a separate action against the former employee seeking a return of the 1,000,000 shares of common stock and a stay of execution of the judgment. That application is pending and has not yet been heard or determined by the court. The payment of the judgment claim of approximately $55,000 is dependent upon whether the former employee will first return the 1,000,000 shares of common stock noted above. The probable outcome of the Company’s claim for the return of the shares cannot yet be determined as the Company has not received a response from the former employee in over a year.

 

 (b)On November 15, 2013, the Company entered into a second settlement agreement with the $150,000 debenture holder described in Note 10(a). Pursuant to the second amendment, on November 15, 2013, the Company agreed to make monthly payments of $10,000 on the outstanding principal and interest. Payments were made until December 2014, but have not been made after. The plaintiff was seeking relief of amounts owed along with 10% interest per annum, from the date of judgments. All amounts are recorded in these financial statements. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

 (c)On September 3, 2015, a former prospective employee of the Company delivered a Notice of Claim seeking judgment against the Company for approximately $11,400. During the year ended May 31, 2017 the prospective employee received a judgement which is recorded in these financial statements.

 

 (d)On March 14, 2016, the Company entered into a consulting agreement. Pursuant to the agreement, the Company will pay the consultant $10,000 per month ($20,000 paid) and issue 550,000 shares per month for a period of three months. At November 30, 2017, the Company had not issued the shares to the consultant due to non-performance.

  

 (e)On September 10, 2016, the Company entered into a debt settlement agreement to settle $7,500 of amounts owed for services in exchange for 2,000,000 common shares. The Company has not yet issued the shares. The Company will record the debt settlement upon the issuance of shares.

 

 (f)On August 22, 2016, the Company entered into a consulting agreement for the provision of consulting services until November 22, 2016. Pursuant to the agreement the Company will pay the consultant $5,000 per month and issue 2,000,000 shares of common stock to the consultant. On December 7, 2016, the Company entered into a settlement agreement. Pursuant to the agreement, the Company agreed to issue the consultant 1,000,000 common shares in exchange for fully releasing and discharging the Company of any and all further obligations.

 

 (g)The Company leases certain of its properties under leases that expire on various dates through 2019. Some of these agreements include escalation clauses and provide for renewal options ranging from one to five years.

 

 (h)Rent expense incurred under the Company’s operating leases amounted to $149,174 during the six months ended November 30, 2017.

 

 (i)The future minimum obligation during each year through 2019 under the leases with non-cancelable terms in excess of one year is as follows:

 

   Future
   Minimum
   Lease
 Years Ending May 31, Payments
 2018 $58,855 
 2019  29,841 
 2020  6,854 
 Total $95,550 
XML 28 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Disclosures
6 Months Ended
Nov. 30, 2017
Segment Disclosures [Abstract]  
Segment Disclosures
14. Segment Disclosures

 

During the six months ended November 30, 2016, the Company operated in one operating segment in one geographical area.

 

During the six months ended November 30, 2017, the Company had two operating segments including:

 

  AW Solutions which is in the business of the provision of professional, multi-service line, telecommunications infrastructure and outsource services to the wireless and wireline industry and,

 

  Mantra Energy Alternatives (MEA) which consists of the rest of the Company’s operations.

 

Factors used to identify the Company’s reportable segments include the organizational structure of the Company and the financial information available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance. The Company’s operating segments have been broken out based on similar economic and other qualitative criteria. The Company operates the MEA reporting segment in one geographical area, Canada and the AW Solutions operating segment in two geographical areas, the United States and Puerto Rico.

 

Financial statement information by operating segment for six months ended November 30, 2017 is presented below:

 

      Mantra Ventures 
$
  AW Solutions 
$
  Total 
$
               
  Net Sales           5,122,854       5,122,854  
  Operating (loss) income     (876,659 )     (166,807 )     (1,043,466 )
  Interest expense     182,283       2,808       185,091  
  Depreciation and amortization     -       133,800       133,800  
  Total Assets as of November 30, 2017     5,733       4,908,099       4,903,832  

 

Geographic information for the six months ended and as of November 30, 2017 is presented below:

 

      Revenues 
$
    Long-Lived 
Assets 
$
 
               
  Puerto Rico     984,561       7,627  
  United States     4,138,293       2,947,392  
  Consolidated Total     5,122,854       2,955,019  
XML 29 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Net Income (Loss) Per Share
6 Months Ended
Nov. 30, 2017
Net Income (Loss) Per Share [Abstract]  
Net Income (Loss) Per Share
15. Net Income (Loss) Per Share

 

      Three Months   Three Months   Six Months   Six Months
      Ended   Ended   Ended   Ended
      November 30,   November 30,   November 30,   November 30,
      2017   2016   2017   2016
      $   $   $   $
                   
  Numerator:                                
  Net income     1,687,801       (1,852,786 )     963,584       (2,010,657 )
  Convertible note interest     48,934       -       97,867       -  
  Adjusted diluted net income     1,736,735       (1,852,786 )     1,061,451       (2,010,657 )
                                   
  Denominator:                                
  Weighted average shares outstanding used in computing net income per share:                                
  Basic     274,998,800       99,869,076       274,998,800       97,483,513  
  Effect of dilutive stock options and convertible notes payable     850,061,840             850,349,865        
  Effect of preferred shares     104,244,788             104,244,788        
  Diluted     1,229,305,428       99,869,076       1,229,593,453       97,483,513  
                                   
  Net income per share applicable to common stockholders:                                
  Basic     0.01       (0.02 )     0.00       (0.02 )
  Diluted     0.00       (0.02 )     0.00       (0.02 )
XML 30 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events
6 Months Ended
Nov. 30, 2017
Subsequent Events [Abstract]  
Subsequent Events
16.

Subsequent Events

 

  (a)

On December 15, 2017, the Company issued 11,800,000 shares of common stock upon the conversion of $33,000 of principal and interest of $2,640 pursuant to a convertible promissory note due April 27, 2018.

     
  (b) On December 28, 2017, the Company’s Board of Directors approved an issuance of 136,148,490 shares of common stock to employees, directors or consultants for compensation and services rendered. Issuances approved thereunder had the following conditions: 1) Issue’s have to be employed or associated with the company for a minimum of 12 continuous months; 2) issuances will vest after 12 months; and 3) at the Company’s option, issuances may be converted to preferred shares; 4) voting rights shall not be affected by vesting and voting will be on an issued basis; and 5) if within 12 month period Issue’s leave or are no longer associated with the Company, issuances shall be returned to the Company.
     
  (c) On January 3, 2018, the Company issued 20,516,000 shares of common stock upon the conversion of $67,702.80 of principal pursuant to a convertible promissory note due April 25, 2018.
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies (Policies)
6 Months Ended
Nov. 30, 2017
Significant Accounting Policies [Abstract]  
Basis of Presentation/Principles of Consolidation
 a.Basis of Presentation/Principles of Consolidation

 

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its subsidiaries, Carbon Commodity Corporation, Climate ESCO Ltd., Mantra Energy Alternatives Ltd., Mantra China Inc., Mantra China Limited, Mantra Media Corp., Mantra NextGen Power Inc., Mantra Wind Inc., AW Solutions, Inc.(from the date of acquisition, April 25, 2017), Tropical Communications, Inc. (from the date of acquisition, April 25, 2017) and AW Solutions Puerto Rico, LLC.(from the date of acquisition, April 25, 2017). All the subsidiaries are wholly-owned with the exception of Climate ESCO Ltd., which is 64.55% owned, Mantra Energy Alternatives Ltd., which is 88.21% owned and AW Solutions, Inc., Tropical Communications, Inc., and AW Solutions Puerto Rico, LLC which are all 80.1% owned. All inter-company balances and transactions have been eliminated.

Use of Estimates
 b.Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of long-lived assets, equity component of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Cash and Cash Equivalents
 c.Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

Accounts Receivable
 d.Accounts Receivable

 

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company records unbilled receivables for services performed but not billed. At November 30, 2017, unbilled receivables totaled $44,054, and are included in accounts receivable. Management reviews a customer’s credit history before extending credit. The Company maintains an allowance for doubtful accounts for estimated losses. Estimates of uncollectible amounts are reviewed each period, and changes are recorded in the period in which they become known. Management analyzes the collectability of accounts receivable each period. This review considers the aging of account balances, historical bad debt experience, changes in customer creditworthiness, current economic trends, customer payment activity and other relevant factors. Should any of these factors change, the estimate made by management may also change. The allowance for doubtful accounts was $54,482 at November 30, 2017.

Property and Equipment
 e.Property and Equipment

 

Property and equipment are stated at cost. The Company depreciates the cost of property and equipment over their estimated useful lives at the following annual rates:

 

 Automotive 3-5 years straight-line basis
 Computer equipment and software 3-7 years straight-line basis
 Leasehold improvements 5 years straight-line basis
 Office equipment and furniture 5 years straight-line basis
 Research equipment 5 years straight-line basis
Goodwill
 f.Goodwill

 

Goodwill was generated through the acquisition of AW Solutions in fiscal 2017 as the total consideration paid exceeded the fair value of the net assets acquired.

 

The Company tests its goodwill for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company’s consolidated financial results.

 

The Company tests goodwill by estimating fair value using a Discounted Cash Flow (“DCF”) model. The key assumptions used in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate of a market participant’s weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment charges during the six months ended November 30, 2017.

Intangible Assets
 g.Intangible Assets

 

At November 30, 2017 and May 31, 2017, definite-lived intangible assets primarily consist of non-compete agreements, tradenames and customer relationships which are being amortized over their estimated useful lives ranging from 1-10 years.

 

The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.

 

For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.

Long-lived Assets
 h.Long-lived Assets

 

In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Foreign Currency Translation
 i.Foreign Currency Translation

 

Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.

 

The Company’s integrated foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate the accounts of its integrated operations into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. The resulting exchange gains or losses are recognized in income.

Income Taxes
 j.Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

The Company conducts business, and files federal and state income, franchise or net worth, tax returns in Canada, the United States, in various states within the United States and the Commonwealth of Puerto Rico. The Company determines its filing obligations in a jurisdiction in accordance with existing statutory and case law. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2010 to 2017. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.

 

Significant management judgment is required in determining the provision for income taxes, and in particular, any valuation allowance recorded against the Company’s deferred tax assets. Deferred tax assets are regularly reviewed for recoverability. The Company currently has significant deferred tax assets resulting from net operating loss carryforwards and deductible temporary differences, which should reduce taxable income in future periods. The realization of these assets is dependent on generating future taxable income.

 

The Company follows the guidance set forth within ASC Topic 740, “Income Taxes” (“ASC Topic 740”) which prescribes a two-step process for the financial statement recognition and measurement of income tax positions taken or expected to be taken in an income tax return. The first step evaluates an income tax position in order to determine whether it is more likely than not that the position will be sustained upon examination, based on the technical merits of the position. The second step measures the benefit to be recognized in the financial statements for those income tax positions that meet the more likely than not recognition threshold. ASC Topic 740 also provides guidance on de-recognition, classification, recognition and classification of interest and penalties, accounting in interim periods, disclosure and transition. Penalties and interest, if incurred, would be recorded as a component of current income tax expense.

 

The Company received a tax notice from the Puerto Rican government requesting payment of taxes related to 2014 in the amount of $166,084 plus penalties and interest of $87,027 for a total obligation due of $253,111. This tax assessment is included in accrued expenses at November 30, 2017.

Revenue Recognition
 k.Revenue Recognition

 

The Company’s revenues are generated from infrastructure and professional services. The Company recognizes revenue on arrangements in accordance with ASC Topic 605-10, “Revenue Recognition”. The Company recognizes revenue only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability of the resulting receivable is reasonably assured.

 

The infrastructure and professional services revenues are derived from contracts to provide technical engineering services along with contracting services to commercial and governmental customers. The Company’s service contracts generally require specific tasks or services that the Company must perform under the contract. The Company recognizes revenues associated with these services upon the completion of the related task or service which is at the time the four revenue recognition criteria have been met. Direct costs incurred related to performance of the task or service are deferred and recorded as prepaid expense and are expensed when the related revenue is recognized.

 

The Company also generates revenue from service contracts with certain customers. These contracts are accounted for under the proportional performance method. Under this method, revenue is recognized in proportion to the value provided to the customer for each project as of each reporting date.

The Company records unbilled receivables for revenues earned, but not yet billed.

Cost of Revenues
 l.Cost of Revenues

 

Cost of revenues includes all direct costs of providing services under our contracts, including costs for direct labor provided by employees, services by independent subcontractors, operation of capital equipment (excluding depreciation and amortization), direct materials, insurance claims and other direct costs.

Research and Development Costs
 m.Research and Development Costs

 

Research and development costs are expensed as incurred.

Stock-based Compensation
 n.Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

Loss Per Share
 o.Loss Per Share

 

The Company computes loss per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of November 30, 2017, the Company had 954,594,653 (2016 – 352,678,654) dilutive potential shares outstanding.

Comprehensive Loss
 p.Comprehensive Loss

 

ASC 220, “Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of November 30, 2017 and 2016, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the consolidated financial statements.

Recent Accounting Pronouncements
 q.Recent Accounting Pronouncements

 

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which is effective for nonpublic entities for annual reporting periods, as amended, beginning after December 15, 2018. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for the Company on June 1, 2019, and early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company continues to evaluate the standard and has not yet selected a transition method.

 

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”), which is effective for nonpublic entities for annual reporting periods beginning after December 15, 2016. ASU 2015-17 simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as non-current in the statement of financial position. The Company has elected to early adopt the requirements of ASU 2015-17 and the results of such adoption are presented within these consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which is effective for nonpublic entities for annual reporting periods beginning after December 15, 2019. Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company continues to evaluate the effects of ASU 2016-02 and does not expect that the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” (“ASU 2016-08”). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-08 on its consolidated financial statements.

 

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”). The amendments in ASU 2016-10 clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-10 on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The amendments in ASU 2016-12 provide clarifying guidance in certain narrow areas and add some practical expedients. Specifically, the amendments in this update (1) clarify the objective of the collectability criterion in step 1, and provides additional clarification for when to recognize revenue for a contract that fails step 1, (2) permit an entity, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price (3) specify that the measurement date for noncash consideration is contract inception, and clarifies that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration, (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations, (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Further, accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-12 on its consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business” (“ASU 2017-01”). The Amendments in this Update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption of this standard is permitted. The Company is currently evaluating the effects of ASU 2017-01 on its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). This standard will simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Current guidance requires that companies compute the implied fair value of goodwill under Step 2 by performing procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. This standard will require companies to perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This standard will be effective for annual periods beginning after December 15, 2020, including interim periods within that reporting period, and will be applied prospectively. Early adoption of this standard is permitted on testing dates after January 1, 2017. The Company is evaluating the effects of ASU 2017-04 on its consolidated financial statements.

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or result of operations.

Concentrations of Risk
 r.Concentrations of Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivables. The Company maintains its cash balances with high-credit-quality financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be withdrawn upon demand and therefore bear minimal risk.

 

The Company provides credit to customers on an uncollateralized basis after evaluating client creditworthiness. For the six months ended November 30, 2017, two customers accounted for 42% and 13%, respectively, of consolidated revenues for the period. In addition, amounts due from these customers represented 28% and 18%, respectively, of trade accounts receivable as of November 30, 2017.

 

The Company’s customers are primarily located within the domestic United States of America and Puerto Rico. Revenues generated within the domestic United States of America accounted for approximately 81% of consolidated revenues for the six month period ended November 30, 2017. Revenues generated from customers in Puerto Rico accounted for approximately 19% of consolidated revenues for the six month period ended November 30, 2017.

Fair Value Measurements
 s.Fair Value Measurements

 

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

 

Level 1 – quoted prices for identical instruments in active markets.

 

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and.

 

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Financial instruments consist principally of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, loans payable and convertible debentures. Derivative liabilities are determined based on “Level 3” inputs, which are significant and unobservable and have the lowest priority. There were no transfers into or out of “Level 3” during the six months ended November 30, 2017 and 2016. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

 

Our financial assets and liabilities carried at fair value measured on a recurring basis as of November 30, 2017 and May 31, 2017, consisted of the following:

 

   Total fair value at 
November 30,
2017 
$
  Quoted prices in active markets 
(Level 1) 
$
  Significant other observable inputs 
(Level 2) 
$
  Significant unobservable inputs 
(Level 3) 
$
 
              
 Description:                
 Derivative liability (1)  1,866,786         –           –   1,866,786 

 

   Total fair value at 
May 31, 
2017 
$
  Quoted prices in active markets 
(Level 1) 
$
  Significant other observable inputs 
(Level 2) 
$
  Significant unobservable inputs 
(Level 3) 
$
 
              
 Description:                
 Derivative liability (1)  3,760,067         –            –   3,760,067 

 

 (1)The Company has estimated the fair value of these derivatives using the Monte-Carlo model and/or a Binomial Model based on various assumptions.

 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 8 for additional information.

Derivative Liabilities
 t.Derivative Liabilities

 

The Company accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads, relying first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As of November 30, 2017 and May 31, 2017, the Company had a $1,866,786 and $3,760,067 derivative liability, respectively.

Reclassifications
 u.Reclassifications

 

Certain prior period amounts have been reclassified to conform to current presentation.

XML 32 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies (Tables)
6 Months Ended
Nov. 30, 2017
Significant Accounting Policies [Abstract]  
Schedule of property and equipment estimated useful lives
 Automotive 3-5 years straight-line basis
 Computer equipment and software 3-7 years straight-line basis
 Leasehold improvements 5 years straight-line basis
 Office equipment and furniture 5 years straight-line basis
 Research equipment 5 years straight-line basis
Schedule of financial assets and liabilities fair value measured on a recurring basis
   Total fair value at 
November 30,
2017 
$
  Quoted prices in active markets 
(Level 1) 
$
  Significant other observable inputs 
(Level 2) 
$
  Significant unobservable inputs 
(Level 3) 
$
 
              
 Description:                
 Derivative liability (1)  1,866,786         –           –   1,866,786 

 

   Total fair value at 
May 31, 
2017 
$
  Quoted prices in active markets 
(Level 1) 
$
  Significant other observable inputs 
(Level 2) 
$
  Significant unobservable inputs 
(Level 3) 
$
 
              
 Description:                
 Derivative liability (1)  3,760,067         –            –   3,760,067 

 

 (1)The Company has estimated the fair value of these derivatives using the Monte-Carlo model and/or a Binomial Model based on various assumptions.
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment (Tables)
6 Months Ended
Nov. 30, 2017
Property and Equipment [Abstract]  
Summary of property and equipment
   November 30, 
2017 
$
  May 31, 2017 
$
 
        
 Computers and office equipment  308,649   308,649 
 Equipment  378,505   378,505 
 Research equipment  143,129   143,129 
 Software  177,073   177,073 
 Vehicles  94,356   94,356 
 Vehicles under capital lease      
          
 Total  1,101,712   1,101,712 
          
 Less: impairment  (44,419)  (44,419 
 Less: accumulated depreciation  (1,016,684)  (961,263)
          
 Equipment, Net  40,609   96,030 
XML 34 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
Intangible Assets (Tables)
6 Months Ended
Nov. 30, 2017
Intangible Assets [Abstract]  
Schedule of intangible assets
   Cost 
$
  Accumulated amortization 
$
  Impairment 
$
  November 30, 
2017 
Net carrying value 
$
  May 31, 2017 
Net carrying value 
$
 
                 
 Customer relationship and lists  901,548   57,291               –   844,257   892,127 
 Trade names  574,605   36,515      538,090   568,600 
    1,476,153   93,806      1,382,347   1,460,727 
Schedule of estimated future amortization expense
   $ 
 For year ending May 31, 2018  78,203 
 For year ending May 31, 2019  156,405 
 For year ending May 31, 2020  156,405 
 For year ending May 31, 2021  156,405 
 For year ending May 31, 2022  156,405 
 For year ending May 31, 2023  156,405 
 For year ending May 31, 2024  156,405 
 For year ending May 31, 2025  156,405 
 For year ending May 31, 2026  155,487 
XML 35 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
Derivative Liabilities (Tables)
6 Months Ended
Nov. 30, 2017
Derivative Liabilities [Abstract]  
Summary of changes in the fair value of the Company's Level 3 financial liabilities
   November 30,
2017
  May 31,
2017
 
        
 Balance at the beginning of year $3,760,067  $978,245 
 Original discount limited to proceeds of notes  250,200   1,746,783 
 Fair value of derivative liabilities in excess of notes proceeds received  82,766   1,965,269 
 Reclassification of instruments previously classified as equity  -   32,934 
 Derivative liability settled through the issuance of preferred stock  (2,453,667)  - 
 Conversion of derivative liability  -   (195,595)
 Change in fair value of embedded conversion option  227,421   (767,569)
 Balance at the end of the year $1,866,786  $3,760,067
Schedule of assumptions used in the calculations
   Expected
Volatility
 Risk-free
Interest Rate
 Expected
Dividend Yield
  Expected Life
(in years)
           
 At issuance 134-213% 0.07-0.74%  0% 0.50-2.00
 At May 31, 2017 215-346% 0.84-1.44%  0% 0.96-2.91
 At November 30, 2017 106-277% 1.44-1.78%  0% 0.40-2.41
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Share Purchase Warrants (Tables)
6 Months Ended
Nov. 30, 2017
Share Purchase Warrants [Abstract]  
Summary of share purchase warrants

   Number of 
warrants
  Weighted average exercise price 
$
 
        
 Balance, May 31, 2016  7,025,000   0.34 
 Issued  27,833,333   0.03 
 Expired  (650,000)  0.04 
 Balance, May 31, 2017  34,208,333   0.08 
 Issued  50,000,000   0.005 
 Expired  (633,333)  0.70 
 Balance, November 30, 2017  83,575,000   0.03 
Summary of share purchase warrants outstanding

 Number of warrants  Exercise 
price 
$
  Expiry date
        
  1,000,000   0.03  April 15, 2018
  666,667   0.03  May 4, 2018
  4,075,000   0.37  April 10, 2019
  333,334   0.03  August 29, 2018
  27,500,000   0.03  April 28, 2020
  50,000,000   0.005  June 27, 2020
          
  83,575,000       
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options (Tables)
6 Months Ended
Nov. 30, 2017
Stock Options [Abstract]  
Schedule of stock options

   Number
of options
  Weighted
average
exercise price
$
  Weighted average remaining contractual life (years)  Aggregate 
intrinsic 
value 
$
 
              
 Outstanding, May 31, 2016  1,500,000   0.16         
 Expired  (1,150,000)  0.20         
 Outstanding, May 31, 2017 and November 30, 2017  350,000   0.03   0.46    
 Exercisable, May 31, 2017 and November 30, 2017  350,000   0.03   0.46    
Schedule of additional information regarding stock options

 

 Number of 
options
 Exercise 
price 
$
 Expiry date
      
  350,000   0.03  May 17, 2018
  350,000       
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Tables)
6 Months Ended
Nov. 30, 2017
Commitments and Contingencies [Abstract]  
Schedule of future minimum obligation leases with non-cancelable terms

   Future
   Minimum
   Lease
 Years Ending May 31, Payments
 2018 $58,855 
 2019  29,841 
 2020  6,854 
 Total $95,550 
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Disclosures (Tables)
6 Months Ended
Nov. 30, 2017
Segment Disclosures [Abstract]  
Schedule of information by operating segment

   Mantra Ventures 
$
 AW Solutions 
$
 Total 
$
        
 Net Sales     5,122,854   5,122,854 
 Operating (loss) income  (876,659)  (166,807)  (1,043,466)
 Interest expense  182,283   2,808   185,091 
 Depreciation and amortization  -   133,800   133,800 
 Total Assets as of November 30, 2017  5,733   4,908,099   4,903,832 
Schedule of geographic information

   Revenues 
$
  Long-Lived 
Assets 
$
 
        
 Puerto Rico  984,561   7,627 
 United States  4,138,293   2,947,392 
 Consolidated Total  5,122,854   2,955,019 
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
Net Income (Loss) Per Share (Tables)
6 Months Ended
Nov. 30, 2017
Net Income (Loss) Per Share [Abstract]  
Schedule of net income (loss) per share
      Three Months   Three Months   Six Months   Six Months
      Ended   Ended   Ended   Ended
      November 30,   November 30,   November 30,   November 30,
      2017   2016   2017   2016
      $   $   $   $
                   
  Numerator:                                
  Net income     1,687,801       (1,852,786 )     963,584       (2,010,657 )
  Convertible note interest     48,934       -       97,867       -  
  Adjusted diluted net income     1,736,735       (1,852,786 )     1,061,451       (2,010,657 )
                                   
  Denominator:                                
  Weighted average shares outstanding used in computing net income per share:                                
  Basic     274,998,800       99,869,076       274,998,800       97,483,513  
  Effect of dilutive stock options and convertible notes payable     850,061,840             850,349,865        
  Effect of preferred shares     104,244,788             104,244,788        
  Diluted     1,229,305,428       99,869,076       1,229,593,453       97,483,513  
                                   
  Net income per share applicable to common stockholders:                                
  Basic     0.01       (0.02 )     0.00       (0.02 )
  Diluted     0.00       (0.02 )     0.00       (0.02 )
XML 41 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
Organization and Going Concern (Details) - USD ($)
Nov. 30, 2017
May 31, 2017
Apr. 25, 2017
Organization and Going Concern (Textual)      
Accumulated loss $ (19,555,383) $ (20,518,967)  
Working capital deficit $ 6,804,183    
Asset Purchase Agreement [Member] | InterCloud [Member]      
Organization and Going Concern (Textual)      
Business acquisition, percentage     80.10%
XML 42 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies (Details)
6 Months Ended
Nov. 30, 2017
Automotive [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Property, plant and equipment, useful life 3 years
Automotive [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Property, plant and equipment, useful life 5 years
Computer equipment and software [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Property, plant and equipment, useful life 3 years
Computer equipment and software [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Property, plant and equipment, useful life 7 years
Leasehold improvements [Member]  
Property, Plant and Equipment [Line Items]  
Property, plant and equipment, useful life 5 years
Office equipment and furniture [Member]  
Property, Plant and Equipment [Line Items]  
Property, plant and equipment, useful life 5 years
Research equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property, plant and equipment, useful life 5 years
XML 43 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies (Details 1) - USD ($)
Nov. 30, 2017
May 31, 2017
May 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Derivative liability $ 1,866,786 [1] $ 3,760,067 $ 978,245
Quoted prices in active markets (Level 1)      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Derivative liability [1]  
Significant other observable inputs (Level 2)      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Derivative liability [1]  
Significant unobservable inputs (Level 3)      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Derivative liability $ 1,866,786 $ 3,760,067 $ 978,245
[1] The Company has estimated the fair value of these derivatives using the Monte-Carlo model and/or a Binomial Model based on various assumptions.
XML 44 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
Significant Accounting Policies (Details Textual)
6 Months Ended 12 Months Ended
Nov. 30, 2017
USD ($)
Segments
shares
Nov. 30, 2016
shares
May 31, 2017
USD ($)
Apr. 25, 2017
May 31, 2016
USD ($)
Significant Accounting Policies (Textual)          
Unbilled receivables $ 44,054        
Allowance for doubtful accounts 54,482        
Impairment loss related on patents        
Total tax obligation due 253,111        
Penalties on tax payable to Puerto Rican government 166,084        
Interest on taxes payable to Puerto Rican government $ 87,027        
Dilutive potential shares outstanding | shares 954,594,653 352,678,654      
Number of customer | Segments 2        
Derivative liability $ 1,866,786 [1]   $ 3,760,067   $ 978,245
Minimum [Member]          
Significant Accounting Policies (Textual)          
Definite-lived intangible assets useful lives 1 year   1 year    
Maximum [Member]          
Significant Accounting Policies (Textual)          
Definite-lived intangible assets useful lives 10 years   10 years    
Revenue [Member] | Puerto Rico [Member]          
Significant Accounting Policies (Textual)          
Customers risk, percentage 19.00%        
Revenue [Member] | United States [Member]          
Significant Accounting Policies (Textual)          
Customers risk, percentage 81.00%        
Revenue [Member] | Customer one [Member]          
Significant Accounting Policies (Textual)          
Customers risk, percentage 42.00%        
Revenue [Member] | Customer two [Member]          
Significant Accounting Policies (Textual)          
Customers risk, percentage 13.00%        
Trade accounts receivable [Member] | Customer one [Member]          
Significant Accounting Policies (Textual)          
Customers risk, percentage 28.00%        
Trade accounts receivable [Member] | Customer two [Member]          
Significant Accounting Policies (Textual)          
Customers risk, percentage 18.00%        
Climate ESCO Ltd, [Member]          
Significant Accounting Policies (Textual)          
Ownership percentage       64.55%  
Mantra Energy Alternatives Ltd. [Member]          
Significant Accounting Policies (Textual)          
Ownership percentage       88.21%  
Tropical Communications, Inc [Member]          
Significant Accounting Policies (Textual)          
Ownership percentage       80.10%  
AW Solutions, Puerto Rico, LLC [Member]          
Significant Accounting Policies (Textual)          
Ownership percentage       80.10%  
Aw Solutions Inc [Member]          
Significant Accounting Policies (Textual)          
Ownership percentage       88.21%  
[1] The Company has estimated the fair value of these derivatives using the Monte-Carlo model and/or a Binomial Model based on various assumptions.
XML 45 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment (Details) - USD ($)
Nov. 30, 2017
May 31, 2017
Property, Plant and Equipment [Line Items]    
Total $ 1,101,712 $ 1,101,712
Less: impairment (44,419) (44,419)
Less: accumulated depreciation (1,016,684) (961,263)
Equipment, Net 40,609 96,030
Computers and office equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total 308,649 308,649
Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total 378,505 378,505
Research equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total 143,129 143,129
Software [Member]    
Property, Plant and Equipment [Line Items]    
Total 177,073 177,073
Vehicles [Member]    
Property, Plant and Equipment [Line Items]    
Total 94,356 94,356
Vehicles under capital lease [Member]    
Property, Plant and Equipment [Line Items]    
Total
XML 46 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment (Details Textual) - USD ($)
6 Months Ended
Nov. 30, 2017
Nov. 30, 2016
Property and Equipment (Textual)    
Amortization expense $ 55,421 $ 13,556
XML 47 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
Intangible Assets (Details) - USD ($)
6 Months Ended
Nov. 30, 2017
May 31, 2017
Finite-Lived Intangible Assets [Line Items]    
Cost $ 1,476,153  
Accumulated amortization 93,806  
Impairment  
Net carrying value 1,382,347 $ 1,460,727
Customer relationship and lists [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 901,548  
Accumulated amortization 57,291  
Impairment  
Net carrying value 844,257 892,127
Trade names [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 574,605  
Accumulated amortization 36,515  
Impairment  
Net carrying value $ 538,090 $ 568,600
XML 48 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
Intangible Assets (Details 1)
Nov. 30, 2017
USD ($)
Intangible Assets [Abstract]  
For year ending May 31, 2018 $ 78,203
For year ending May 31, 2019 156,405
For year ending May 31, 2020 156,405
For year ending May 31, 2021 156,405
For year ending May 31, 2022 156,405
For year ending May 31, 2023 156,405
For year ending May 31, 2024 156,405
For year ending May 31, 2025 156,405
For year ending May 31, 2026 $ 155,487
XML 49 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
Intangible Assets (Details Textual) - USD ($)
6 Months Ended
Nov. 30, 2017
Nov. 30, 2016
Intangible Assets (Textual)    
Amortization expense $ 78,379 $ 2,369
XML 50 R41.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions (Details) - USD ($)
3 Months Ended 6 Months Ended
Nov. 16, 2017
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 30, 2016
May 31, 2017
Apr. 28, 2017
Related Party Transactions (Textual)              
Due to related parties   $ 177,529   $ 177,529   $ 308,008  
Contingent liability   1,409,411   1,409,411   1,409,411  
Promissory note issued           2,000,000 $ 440,000
Gain on settlement of debt   3,368,128 $ (19,418) 3,368,128 $ (19,418)    
Series A Preferred Stock [Member]              
Related Party Transactions (Textual)              
Due to related parties $ 975,337            
Series A Preferred Stock, shares 1,011,060            
Series A Preferred Stock, value $ 348,354            
Gain on settlement of debt 3,259,709            
Former President [Member]              
Related Party Transactions (Textual)              
Management fees       12,011 68,616    
Promissory note issued   130,000   $ 130,000      
Due date       Nov. 30, 2018      
Interest rate       8.00%      
Former President [Member] | Series A Preferred Stock [Member]              
Related Party Transactions (Textual)              
Due to related parties $ 195,204            
Series A Preferred Stock, shares 251,885            
Series A Preferred Stock, value $ 86,785            
Gain on settlement of debt $ 108,419            
Former President Spouse [Member]              
Related Party Transactions (Textual)              
Management fees       $ 0 $ 22,872    
Former President and President Spouse [Member]              
Related Party Transactions (Textual)              
Due to related parties   195,204   195,204   241,327  
Former Officer and Director [Member]              
Related Party Transactions (Textual)              
Due to related parties   18,141   18,141   17,305  
Intercloud [Member]              
Related Party Transactions (Textual)              
Due to related parties   51,849   51,849   $ 49,376  
Contingent liability   1,409,411   1,409,411      
Chief Executive Officer [Member]              
Related Party Transactions (Textual)              
Promissory note issued   $ 18,858   $ 18,858      
Due date       Nov. 30, 2018      
Interest rate       8.00%      
XML 51 R42.htm IDEA: XBRL DOCUMENT v3.8.0.1
Loans Payable (Details)
1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Aug. 04, 2017
$ / shares
shares
Apr. 12, 2017
USD ($)
Aug. 04, 2015
USD ($)
Jun. 27, 2017
USD ($)
$ / shares
shares
Nov. 30, 2017
USD ($)
Nov. 30, 2016
USD ($)
Nov. 30, 2017
USD ($)
Nov. 30, 2016
USD ($)
May 31, 2016
USD ($)
Nov. 30, 2017
CAD
May 31, 2017
USD ($)
May 31, 2017
CAD
Sep. 04, 2015
Mar. 31, 2012
USD ($)
shares
Loans Payable (Textual)                            
Common stock subscribed         $ 74,742   $ 74,742       $ 74,742     $ 50,000
Common stock share subscriptions | shares                           10,000,000
Notes payable             250,200 $ 20,282            
Accretion expense         441,011 $ 151,557 901,254 318,740            
Loss on derivatives         (440,021) $ (1,508,271) (310,186) (1,379,597)            
Original issue discounts             27,800 $ 24,999            
Derivatives and Hedging [Member]                            
Loans Payable (Textual)                            
Initial fair value of warrants             9,755              
Notes payable             9,755              
Accretion expense                 $ 9,755          
Loans Payable [Member]                            
Loans Payable (Textual)                            
Owed to a non-related party         49,109   49,109     CAD 63,300 46,846 CAD 63,300    
Loans Payable One [Member]                            
Loans Payable (Textual)                            
Owed to a non-related party         17,500   17,500       17,500      
Loans Payable Two [Member]                            
Loans Payable (Textual)                            
Owed to a non-related party         7,500   7,500       7,500      
Loans Payable Three [Member]                            
Loans Payable (Textual)                            
Owed to a non-related party         28,705   28,705     37,000 27,382 37,000    
Loans Payable Four [Member]                            
Loans Payable (Textual)                            
Owed to a non-related party         4,490   4,490       4,490      
Loans Payable Five [Member]                            
Loans Payable (Textual)                            
Owed to a non-related party         14,016   14,016     CAD 18,066 13,370 18,066    
Loans Payable Six [Member]                            
Loans Payable (Textual)                            
Owed to a non-related party         15,000   15,000       $ 43,352 CAD 55,878    
Promissory Note [Member]                            
Loans Payable (Textual)                            
Promissory note   $ 12,000 $ 50,000                      
Accrued interest                 1,200          
Repaid notes             160,000   $ 50,000          
Common stock at a price | $ / shares $ 0.15     $ 0.005                    
Due date     Sep. 04, 2015                      
Initial fair value of warrants       $ 332,966                    
Notes payable       $ 250,200                    
Accretion expense             278,000              
Shares of Company's common stock | shares 100,000     50,000,000                    
Loans bears interest rate   10.00%   12.00%                    
Loss on derivatives       $ 82,766                    
Warrant term       3 years                    
Increasing carrying value         $ 118,000   $ 118,000              
Original issue discounts       $ 278,000                    
Promissory Note [Member] | Maximum [Member]                            
Loans Payable (Textual)                            
Interest rate                         180.00%  
Promissory Note [Member] | Minimum [Member]                            
Loans Payable (Textual)                            
Interest rate                         120.00%  
XML 52 R43.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Debentures (Details Textual) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Nov. 16, 2017
Jul. 18, 2012
Oct. 31, 2008
Nov. 15, 2013
Apr. 29, 2013
Jan. 19, 2012
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 30, 2016
May 31, 2017
May 31, 2015
May 31, 2014
Apr. 11, 2013
Convertible Debentures (Textual)                            
Proceeds from issuance of convertible debentures                 $ 134,500        
Accretion expense             $ 441,011 $ 151,557 $ 901,254 $ 318,740        
Stock options granted             350,000   350,000   350,000      
Additional fee                     $ 21,266      
Increasing the carrying value                     $ 81,119      
Other remaining debenture value                 $ 50,000          
Convertible Debentures [Member]                            
Convertible Debentures (Textual)                            
Proceeds from issuance of convertible debentures     $ 250,000                      
Convertible debentures bear interest rate     10.00%                      
Common stock, shares converted     625,000                      
Common stock, conversion price     $ 0.40                      
Purchase of warrants     250,000                      
Warrant, description     Each share purchase warrant entitles the holder to purchase one additional share of the Company's common stock for a period of two years from the date of issuance at an exercise price of $0.50 per share.                      
Additional paid-in capital convertible debentures     $ 45,930                      
Accretion expense     45,930                      
Convertible debentures carrying value     $ 250,000 $ 150,000               $ 59,853 $ 114,661  
Debenture holders to settle convertible debenture   $ 150,000       $ 50,000           $ 54,808 40,000 $ 150,000
Accounts payable and accrued interest           $ 122,535                
Debt instrument, description   The Company agreed to pay $43,890 of accrued interest within five days of the agreement (paid), pay the accruing interest on a monthly basis (paid), and pay a $10,000 premium in addition to the $150,000 principal outstanding on April 11, 2013.       Pursuant to the agreement, the debt holder agreed to reduce the debt to Cdn$100,000 on the condition that the Company pays the amount of Cdn$2,500 per month for 40 months, beginning March 1, 2012 and continuing on the first day of each month thereafter.                
Debt instrument, periodic payment, interest       4,438 $ 6,836                  
Stock options granted         100,000                  
Stock options exercisable         $ 0.12                  
Debt instrument, periodic payment       10,000                    
Stock options fair value       $ 12,901                    
Accretion of discounts on convertible debt                         $ 12,901  
Due date         Sep. 15, 2013                  
Present value of amended future cash flows, description       In addition, as the present value of the amended future cash flows had a difference of less than 10% of the cash flows of the original debt, it was determined that the original and new debt instruments are not substantially different. As a result, the modification was not treated as an extinguishment of the debt and no gain or loss was recognized because the fair value of the old debt and new debt remained the same.                    
Stock options period of years         2 years                  
Accrued interest $ 15,423                          
XML 53 R44.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Debentures (Details Textual 1) - USD ($)
6 Months Ended
Feb. 04, 2014
Dec. 27, 2013
Aug. 19, 2013
Nov. 30, 2017
Nov. 30, 2016
May 31, 2017
Apr. 28, 2017
Convertible Debentures (Textual)              
Proceeds from issuance of convertible debentures       $ 134,500    
Debt instrument, face amount           $ 2,000,000 $ 440,000
Convertible Debentures One [Member]              
Convertible Debentures (Textual)              
Proceeds from issuance of convertible debentures     $ 10,000        
Debt instrument, interest rate     10.00%        
Common stock, conversion price     $ 0.04        
Additional paid-in capital convertible debentures     $ 10,000        
Carrying value of convertible promissory note       10,000      
Debt instrument, face amount     $ 10,000        
Due date of issuance     2 years        
Convertible Debentures Two [Member]              
Convertible Debentures (Textual)              
Proceeds from issuance of convertible debentures   $ 5,000          
Debt instrument, interest rate   10.00%          
Common stock, conversion price   $ 0.04          
Additional paid-in capital convertible debentures   $ 5,000          
Carrying value of convertible promissory note       5,000      
Debt instrument, face amount   $ 5,000          
Due date of issuance   2 years          
Convertible Debentures Four [Member]              
Convertible Debentures (Textual)              
Proceeds from issuance of convertible debentures $ 15,000            
Debt instrument, interest rate 10.00%            
Common stock, conversion price $ 0.04            
Additional paid-in capital convertible debentures $ 15,000            
Carrying value of convertible promissory note       $ 15,000      
Debt instrument, face amount $ 15,000            
Due date of issuance 2 years            
XML 54 R45.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Debentures (Details Textual 2) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Nov. 16, 2017
Sep. 08, 2015
Jun. 01, 2015
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 30, 2016
May 31, 2017
May 31, 2016
Apr. 28, 2017
Oct. 11, 2016
Convertible Debentures (Textual)                      
Fair value of conversion feature                  
Convertible debentures, net of discount       $ 714,792   $ 714,792   1,350,067     $ 24,999
Accretion expense       $ 441,011 $ 151,557 $ 901,254 $ 318,740        
Debt instrument, face amount               2,000,000   $ 440,000  
Convertible Debentures Six [Member]                      
Convertible Debentures (Textual)                      
Convertible note principal amount     $ 100,000         45,000      
Due date     Dec. 01, 2015                
Common stock, conversion price     $ 0.00001                
Fair value of conversion feature               310,266      
Loss on derivatives               210,266      
Convertible debentures, net of discount               $ 100,000      
Common stock, shares converted               18,440,200 6,303,475    
Conversion of stock, amount converted               $ 90,000 $ 45,000    
Accretion expense               51,820 100,000    
Debt instrument, premium                 26,250    
Debt instrument, description     The note has a cash redemption premium of 130% of the principal amount in the first 90 days following the execution date, of 135% for days 90-120 following the execution date, and 140% after the 120th day. After 140 days cash redemption is only available upon approval by the holder.                
Debt instrument, interest rate terms, description     The note bears interest at 12% per annum and is convertible into common shares of the Company at the lower of a 42% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 42% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.                
Convertible debentures carrying value               43,070 81,250    
Accrued interest $ 13,644                    
Convertible Debentures Seven [Member]                      
Convertible Debentures (Textual)                      
Convertible note principal amount   $ 326,087                  
Fair value of conversion feature   479,626             280,000    
Loss on derivatives   204,626                  
Convertible debentures, net of discount   $ 280,000             26,087    
Accretion expense               185,913 120,175    
Debt instrument, premium                 76,522    
Debt instrument, interest rate terms, description   The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.                  
Convertible debentures carrying value               $ 382,608 $ 190,696    
Accrued interest $ 79,881                    
XML 55 R46.htm IDEA: XBRL DOCUMENT v3.8.0.1
Convertible Debentures (Details Textual 3) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Nov. 16, 2017
Apr. 28, 2017
Apr. 07, 2017
Oct. 11, 2016
Mar. 10, 2016
Dec. 04, 2015
Apr. 27, 2017
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 16, 2017
Nov. 30, 2016
May 31, 2017
May 31, 2016
Sep. 08, 2015
Convertible Debentures (Textual)                              
Accretion expense               $ 441,011 $ 151,557 $ 901,254   $ 318,740      
Convertible debentures, net of discount       $ 24,999       $ 714,792   714,792     $ 1,350,067    
Convertible Debentures Eight [Member]                              
Convertible Debentures (Textual)                              
Convertible note principal amount           $ 105,000                 $ 326,087
Debt instrument, interest rate terms, description          
The note bears interest at 10% per annum and is convertible into common shares of the Company at a 52% discount to the lowest trading price during the previous 30 trading days to the date of conversion; or a 52% discount to the lowest trading price during the previous 30 trading days before the date the note was executed.
                 
Accretion expense                         82,560 $ 82,560  
Loss on derivatives           $ 111,108                  
Convertible debentures carrying value           216,108                  
Convertible debentures, net of discount           10,000               26,087  
Notes payable           $ 95,000                  
Notes of carrying value                         131,250 48,690  
Debt instrument, fee amount                           26,250  
Accrued interest $ 24,464                            
Convertible Debentures Nine [Member]                              
Convertible Debentures (Textual)                              
Convertible note principal amount         $ 166,666                    
Debt instrument, interest rate terms, description        
The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.
                   
Accretion expense                           20,015  
Loss on derivatives         $ 158,785                    
Convertible debentures carrying value         218,785                    
Convertible debentures, net of discount                           16,666  
Notes payable         $ 81,666                    
Notes of carrying value                           40,432  
Debt instrument, fee amount                           20,417  
Convertible Debentures Nine [Member] | Additional Tranches [Member]                              
Convertible Debentures (Textual)                              
Accretion expense 43,692                       133,721    
Loss on derivatives                         117,788    
Convertible debentures carrying value                         245,571    
Additional paid-in capital convertible debentures     $ 40,000                        
Convertible debentures, net of discount     $ 4,444                        
Notes payable                         127,783    
Received additional tranches                         123,339    
Notes of carrying value                         206,098    
Debt instrument, fee amount                         31,946    
Accrued interest 33,359                            
Convertible Debentures Ten [Member]                              
Convertible Debentures (Textual)                              
Convertible note principal amount       $ 249,999                      
Debt instrument, interest rate terms, description      
The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.
                     
Accretion expense                     $ 43,046   26,953    
Loss on derivatives       $ 76,902                      
Convertible debentures carrying value       121,902                      
Convertible debentures, net of discount       42,500                      
Notes payable       $ 45,000                      
Financing fees, description       The Company received initial tranches of $42,500 net of a $24,999 original issue discount and $2,500 of financing fees.                      
Notes of carrying value                         26,953    
Debt instrument, fee amount 17,500                   $ 17,500        
Accrued interest $ 12,288                            
Convertible Debentures Eleven [Member]                              
Convertible Debentures (Textual)                              
Convertible note principal amount             $ 2,000,000                
Debt instrument, interest rate terms, description             All principal and accrued interest under the Unsecured Note is due one year following the issue date of the Unsecured Note, and is convertible into shares of common stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the date of conversion.                
Accretion expense                   418,071     77,465    
Convertible debentures carrying value             $ 1,174,000                
Convertible debentures, net of discount                           $ 65,000  
Notes payable             $ 943,299                
Notes of carrying value                   1,552,237     1,134,166    
Convertible Debentures Twelve [Member]                              
Convertible Debentures (Textual)                              
Convertible note principal amount   $ 440,000                          
Debt instrument, interest rate terms, description  

The interest on the outstanding principal due under the Secured Note accrues at a rate of 8% per annum. All principal and accrued interest under the Secured Note is due on April 27, 2018 and is convertible into shares of the Company’s Common Stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the conversion, subject to adjustment upon the occurrence of certain events.

                         
Accretion expense                   118,446     54,526    
Loss on derivatives   $ 1,770,579                          
Convertible debentures carrying value   1,744,661                          
Additional paid-in capital convertible debentures   $ 425,918                          
Notes of carrying value                   $ 172,971     $ 54,526    
Warrants to purchase of common stock   27,500,000                          
Term of warrants   3 years                          
Aggregate purchase price of common stock   $ 400,000                          
Exercise price   $ 0.0255                          
XML 56 R47.htm IDEA: XBRL DOCUMENT v3.8.0.1
Derivative Liabilities (Details) - USD ($)
6 Months Ended 12 Months Ended
Nov. 30, 2017
May 31, 2017
Derivative [Line Items]    
Balance at the beginning of year $ 3,760,067 $ 978,245
Balance at the end of the year 1,866,786 [1] 3,760,067
Level 3 [Member]    
Derivative [Line Items]    
Balance at the beginning of year 3,760,067 978,245
Original discount limited to proceeds of notes 250,200 1,746,783
Fair value of derivative liabilities in excess of notes proceeds received 82,766 1,965,269
Reclassification of instruments previously classified as equity 32,934
Derivative liability settled through the issuance of preferred stock (2,453,667)
Conversion of derivative liability (195,595)
Change in fair value of embedded conversion option 227,421 (767,569)
Balance at the end of the year $ 1,866,786 $ 3,760,067
[1] The Company has estimated the fair value of these derivatives using the Monte-Carlo model and/or a Binomial Model based on various assumptions.
XML 57 R48.htm IDEA: XBRL DOCUMENT v3.8.0.1
Derivative Liabilities (Details 1)
6 Months Ended 12 Months Ended
Nov. 30, 2017
May 31, 2017
Derivative [Line Items]    
Expected Dividend Yield 0.00% 0.00%
Maximum [Member]    
Derivative [Line Items]    
Expected Volatility 277.00% 346.00%
Risk-free Interest Rate 1.78% 1.44%
Expected Life (in years) 2 years 4 months 28 days 2 years 10 months 28 days
Minimum [Member]    
Derivative [Line Items]    
Expected Volatility 106.00% 215.00%
Risk-free Interest Rate 1.44% 0.84%
Expected Life (in years) 4 months 24 days 11 months 15 days
At issuance [Member]    
Derivative [Line Items]    
Expected Dividend Yield 0.00%  
At issuance [Member] | Maximum [Member]    
Derivative [Line Items]    
Expected Volatility 213.00%  
Risk-free Interest Rate 0.74%  
Expected Life (in years) 2 years  
At issuance [Member] | Minimum [Member]    
Derivative [Line Items]    
Expected Volatility 134.00%  
Risk-free Interest Rate 0.07%  
Expected Life (in years) 6 months  
XML 58 R49.htm IDEA: XBRL DOCUMENT v3.8.0.1
Derivative Liabilities (Details Textual)
12 Months Ended
May 31, 2017
USD ($)
$ / shares
shares
Convertible Notes [Member]  
Derivative Liabilities (Textual)  
Convertible notes amount $ 59,853
Common stock, conversion price | $ / shares $ 0.40
Fair value of convertible notes $ 41
Warrants [Member]  
Derivative Liabilities (Textual)  
Warrants exercisable | shares 2,000,000
Warrants exercise price | $ / shares $ 0.03
Fair value of warrant $ 13,745
Warrants exercisable date Aug. 29, 2018
Options [Member]  
Derivative Liabilities (Textual)  
Options exercisable | shares 350,000
Fair value of options $ 2,350
Options exercise price | $ / shares $ 0.03
Options exercisable date Mar. 16, 2017
Warrants One [Member]  
Derivative Liabilities (Textual)  
Warrants exercisable | shares 533,333
Warrants exercise price | $ / shares $ 0.80
Fair value of warrant
Warrants Two [Member]  
Derivative Liabilities (Textual)  
Warrants exercisable | shares 4,075,000
Warrants exercise price | $ / shares $ 0.37
Fair value of warrant $ 16,978
XML 59 R50.htm IDEA: XBRL DOCUMENT v3.8.0.1
Common Stock (Details)
6 Months Ended 12 Months Ended
Nov. 30, 2017
USD ($)
$ / shares
shares
May 31, 2016
USD ($)
$ / shares
shares
Nov. 30, 2017
CAD
CAD / shares
shares
Nov. 15, 2017
$ / shares
shares
May 31, 2017
$ / shares
shares
May 31, 2016
CAD
CAD / shares
shares
Common Stock (Textual)            
Common stock price | $ / shares $ 0.00001       $ 0.00001  
Common stock, shares authorized 750,000,000   750,000,000   750,000,000  
Common Stock [Member] | Maximum [Member]            
Common Stock (Textual)            
Common stock price | $ / shares       $ 0.00001    
Common stock, shares authorized       750,000,000    
Common Stock [Member] | Minimum [Member]            
Common Stock (Textual)            
Common stock price | $ / shares       $ 0.00001    
Common stock, shares authorized       275,000,000    
Common Stock [Member] | Mantra Energy Alternatives Ltd. [Member]            
Common Stock (Textual)            
Proceeds from common stock subscriptions $ 66,277 $ 66,277 CAD 67,000     CAD 67,000
Common stock, shares subscribed 67,000 67,000 67,000     67,000
Common stock price | CAD / shares     CAD 1.00     CAD 1.00
Net of non-controlling interest | $ $ 7,231 $ 7,231        
Common Stock [Member] | Climate ESCO Ltd. [Member]            
Common Stock (Textual)            
Proceeds from common stock subscriptions | $ $ 21,000 $ 21,000        
Common stock, shares subscribed 210,000 210,000 210,000     210,000
Common stock price | $ / shares $ 0.10 $ 0.10        
Net of non-controlling interest | $ $ 7,384 $ 7,384        
XML 60 R51.htm IDEA: XBRL DOCUMENT v3.8.0.1
Preferred Stock (Details) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Nov. 16, 2017
Nov. 15, 2017
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 30, 2016
May 31, 2017
Preferred Stock (Textual)              
Series A Preferred stock, shares authorized     8,000,000   8,000,000   8,000,000
Series A Preferred stock, shares issued     1,262,945   1,262,945  
Due to related parties     $ 177,529   $ 177,529   $ 308,008
Gain on settlement of debt     $ 3,368,128 $ (19,418) 3,368,128 $ (19,418)  
Associated derivative liabilities         $ 2,453,667  
Series A Preferred Stock [Member]              
Preferred Stock (Textual)              
Series A Preferred stock, shares authorized   20,000,000          
Series A Preferred stock, shares issued   8,000,000          
Conversion rights, description   The number of shares of Common Stock into which each share of the Series A Preferred Shares may be converted shall be determined by dividing the sum of the Stated Value of the Series A Preferred Shares ($0.25 per share) being converted and any accrued and unpaid dividends by the Conversion Price in effect at the time of the conversion. The Series A Preferred Shares may be converted at an initial conversion price of 75% of the lowest VWAP during the ten (10) trading day period immediately preceding the date a conversion notice is delivered.          
Series A Preferred Stock, shares 1,011,060            
Series A Preferred Stock, value $ 348,354            
Due to related parties 975,337            
Gain on settlement of debt 3,259,709            
Accrued interest 179,059            
Associated derivative liabilities $ 2,453,667            
Series A Preferred Stock [Member] | Former President [Member]              
Preferred Stock (Textual)              
Series A Preferred Stock, shares 251,885            
Series A Preferred Stock, value $ 86,785            
Due to related parties 195,204            
Gain on settlement of debt $ 108,419            
XML 61 R52.htm IDEA: XBRL DOCUMENT v3.8.0.1
Share Purchase Warrants (Details) - $ / shares
6 Months Ended 12 Months Ended
Nov. 30, 2017
May 31, 2017
Share Purchase Warrants [Abstract]    
Number of warrants, Beginning Balance 34,208,333 7,025,000
Number of warrants, Issued 50,000,000 27,833,333
Number of warrants, Expired (633,333) (650,000)
Number of warrants, Ending Balance 83,575,000 34,208,333
Weighted average exercise price, Beginning Balance $ 0.08 $ 0.34
Weighted average exercise price, Issued 0.005 0.03
Weighted average exercise price, Expired 0.70 0.04
Weighted average exercise price, Ending Balance $ 0.03 $ 0.08
XML 62 R53.htm IDEA: XBRL DOCUMENT v3.8.0.1
Share Purchase Warrants (Details 1) - $ / shares
Nov. 30, 2017
May 31, 2017
May 31, 2016
Class of Warrant or Right [Line Items]      
Number of warrants 83,575,000 34,208,333 7,025,000
Exercise price $ 0.03 $ 0.08 $ 0.34
Expiry date April 15, 2018 [Member]      
Class of Warrant or Right [Line Items]      
Number of warrants 1,000,000    
Exercise price $ 0.03    
Expiry date May 4, 2018 [Member]      
Class of Warrant or Right [Line Items]      
Number of warrants 666,667    
Exercise price $ 0.03    
Expiry date April 10, 2019 [Member]      
Class of Warrant or Right [Line Items]      
Number of warrants 4,075,000    
Exercise price $ 0.37    
Expiry date August 29, 2018 [Member]      
Class of Warrant or Right [Line Items]      
Number of warrants 333,334    
Exercise price $ 0.03    
Expiry date April 28, 2020 [Member]      
Class of Warrant or Right [Line Items]      
Number of warrants 27,500,000    
Exercise price $ 0.03    
Expiry date June 27, 2020 [Member]      
Class of Warrant or Right [Line Items]      
Number of warrants 50,000,000    
Exercise price $ 0.005    
XML 63 R54.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options (Details) - USD ($)
6 Months Ended 12 Months Ended
Nov. 30, 2017
May 31, 2017
Stock Options [Abstract]    
Number of options Outstanding, Beginning 350,000 1,500,000
Number of options, Expired   (1,150,000)
Number of options Outstanding, Ending 350,000 350,000
Number of options, Exercisable 350,000 350,000
Weighted average exercise price, Outstanding $ 0.03 $ 0.16
Weighted average exercise price, Expired   0.20
Weighted average exercise price Outstanding, Ending 0.03 0.03
Weighted average exercise price, Exercisable $ 0.03 $ 0.03
Weighted average remaining contractual life (years), Ending 5 months 16 days  
Weighted average remaining contractual life (years), Exercisable 5 months 16 days  
Aggregate intrinsic value Outstanding, Ending  
Aggregate intrinsic value, Exercisable  
XML 64 R55.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options (Details 1) - $ / shares
Nov. 30, 2017
May 31, 2017
May 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]      
Number of options 350,000 350,000 1,500,000
Exercise price $ 0.03 $ 0.03 $ 0.16
Expiry date: May 17, 2018 [Member]      
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]      
Number of options 350,000    
Exercise price $ 0.03    
XML 65 R56.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Details)
May 31, 2017
USD ($)
Commitments and Contingencies [Abstract]  
2018 $ 58,855
2019 29,841
2020 6,854
Total $ 95,550
XML 66 R57.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Details Textual) - USD ($)
1 Months Ended 6 Months Ended
Dec. 07, 2016
Sep. 10, 2016
Aug. 22, 2016
Mar. 14, 2016
Sep. 03, 2015
May 23, 2012
Nov. 15, 2013
Nov. 30, 2012
Jul. 31, 2012
Nov. 30, 2017
May 31, 2015
May 31, 2014
Oct. 31, 2008
Commitments and Contingencies (Textual)                          
Lease term, description                   The Company leases certain of its properties under leases that expire on various dates through 2019. Some of these agreements include escalation clauses and provide for renewal options ranging from one to five years.      
Lease expense                   $ 149,174      
Settlement amount         $ 11,400 $ 55,000     $ 55,000        
Settlement agreement terms, description               The Company commenced a separate action against the former employee seeking a return of the 1,000,000 shares of common stock and a stay of execution of the judgment. That application is pending and has not yet been heard or determined by the court. The payment of the judgment claim of approximately $55,000 is dependent upon whether the former employee will first return the 1,000,000 shares of common stock noted above. The probable outcome of the Company's claim for the return of the shares cannot yet be determined.          
Employee retains, shares                 1,000,000        
Settlement Agreement [Member]                          
Commitments and Contingencies (Textual)                          
Settlement amount   $ 7,500                      
Stock issued in exchange of services, shares   2,000,000                      
Consulting Agreement [Member]                          
Commitments and Contingencies (Textual)                          
Consulting agreement description     Consulting agreement for the provision of consulting services until November 22, 2016. The Company will pay the consultant $10,000 per month ($20,000 paid) and issue 550,000 shares per month for a period of three months. At November 30, 2017, the Company had not issued the shares to the consultant due to non-performance.                  
Consulting agreement periodic payment     $ 5,000                    
Stock issued in exchange of services, shares 1,000,000   2,000,000                    
Convertible Debentures [Member]                          
Commitments and Contingencies (Textual)                          
Settlement agreement terms, description             Payments were made until December 2014, but have not been made after. The plaintiff was seeking relief of amounts owed along with 10% interest per annum, from the date of judgments. All amounts are recorded in these financial statements.            
Convertible debentures carrying value             $ 150,000       $ 59,853 $ 114,661 $ 250,000
Debt instrument, periodic payment             $ 10,000            
XML 67 R58.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Disclosures (Details) - USD ($)
3 Months Ended 6 Months Ended
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 30, 2016
May 31, 2017
Segment Reporting Information [Line Items]          
Net Sales $ 2,006,933 $ 5,122,854  
Operating (loss) income (764,616) (150,538) (1,043,466) (239,532)  
Interest expense 107,184 26,615 185,091 63,120  
Depreciation and amortization 65,669 $ 8,404 133,800 $ 15,925  
Total Assets as of November 30, 2017 4,913,628   4,913,628   $ 5,188,777
Mantra Ventures [Member]          
Segment Reporting Information [Line Items]          
Net Sales        
Operating (loss) income     (876,659)    
Interest expense     182,283    
Depreciation and amortization        
Total Assets as of November 30, 2017 5,733   5,733    
AW Solutions [Member]          
Segment Reporting Information [Line Items]          
Net Sales     5,122,854    
Operating (loss) income     (166,807)    
Interest expense     2,808    
Depreciation and amortization     133,800    
Total Assets as of November 30, 2017 $ 4,908,099   $ 4,908,099    
XML 68 R59.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Disclosures (Details 1) - USD ($)
3 Months Ended 6 Months Ended
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 30, 2016
Segment Reporting Information [Line Items]        
Revenues, Consolidated Total $ 2,006,933 $ 5,122,854
Long-Lived Assets, Consolidated Total     2,955,019  
Puerto Rico [Member]        
Segment Reporting Information [Line Items]        
Revenues, Consolidated Total     984,561  
Long-Lived Assets, Consolidated Total     7,627  
United States [Member]        
Segment Reporting Information [Line Items]        
Revenues, Consolidated Total     4,138,293  
Long-Lived Assets, Consolidated Total     $ 2,947,392  
XML 69 R60.htm IDEA: XBRL DOCUMENT v3.8.0.1
Segment Disclosures (Details Textual) - Segments
6 Months Ended
Nov. 30, 2017
Nov. 30, 2016
Segment Disclosures (Textual)    
Number of operating segments 2 1
XML 70 R61.htm IDEA: XBRL DOCUMENT v3.8.0.1
Net Income (Loss) Per Share (Details) - USD ($)
3 Months Ended 6 Months Ended
Nov. 30, 2017
Nov. 30, 2016
Nov. 30, 2017
Nov. 30, 2016
Numerator:        
Net income $ 1,687,801 $ (1,852,786) $ 963,584 $ (2,010,657)
Convertible note interest 48,934 97,867
Adjusted diluted net income $ 1,736,735 $ (1,852,786) $ 1,061,451 $ (2,010,657)
Weighted average shares outstanding used in computing net income per share:        
Basic 274,998,800 99,869,076 274,998,800 97,483,513
Effect of dilutive stock options and convertible notes payable 850,061,840 850,349,865
Effect of preferred shares 104,244,788 104,244,788
Diluted 1,229,305,428 99,869,076 1,229,593,453 97,483,513
Net income per share applicable to common stockholders:        
Basic $ 0.01 $ (0.02) $ 0.00 $ (0.02)
Diluted $ 0.00 $ (0.02) $ 0.00 $ (0.02)
XML 71 R62.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events (Details) - Subsequent Event [Member] - USD ($)
Jan. 03, 2018
Dec. 28, 2017
Dec. 15, 2017
Susequent Events (Textual)      
Common stock, shares converted 20,516,000   11,800,000
Convertible note principal amount $ 67,702.80   $ 33,000
Due date Apr. 25, 2018   Apr. 27, 2018
Interest     $ 2,640
Board of Directors Chairman [Member]      
Susequent Events (Textual)      
Common stock, shares converted   136,148,490  
Debt Instrument, Description   1) Issue's have to be employed or associated with the company for a minimum of 12 continuous months; 2) issuances will vest after 12 months; and 3) at the Company's option, issuances may be converted to preferred shares; 4) voting rights shall not be affected by vesting and voting will be on an issued basis; and 5) if within 12 month period Issue's leave or are no longer associated with the Company, issuances shall be returned to the Company.  
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