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
 

 ACT OF 1934

 

For the quarterly period ended: August 31, 2021February 28, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934
 

 ACT OF 1934

 

For the transition period from: _____________ to _____________

  

Commission File Number:  000-56250

  

MJ Harvest, Inc.

 (Exact name of registrant as specifiedspecifie

d in its charter)

  nevada 82-3400471
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)

9205 W. Russell Road, Suite 240, Las Vegas, Nevada 8913989148-1425

(Address of Principal Executive Office) (Zip Code)

(954) 519-3115

(Registrant'sRegistrant’s telephone number, including area code)

 

N/A

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

———————

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolName of each exchange on which registered.
None  

 

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 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 or a smaller reporting company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer” and "smaller“smaller reporting company"company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer☐  Accelerated filer☐ 
Non-accelerated filer☒  Smaller reporting company☒ 
Emerging growth company☒     

 

If an emerging growth company, indicate by checkmark 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 

 

The number of shares of the issuer'sissuer’s Common Stock outstanding as of October 1, 2021April 14, 2022 is 31,449,34433,068,952.

1

 

PART I—FINANCIAL INFORMATION

 

Item 1.  Financial Statements. Attached after signature page.

  

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

  

Certain statements in this Report constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a differences include, among others, uncertainties relating to general economic and business conditions; industry trends; changes in demand for our products and services; uncertainties relating to customer plans and commitments and the timing of orders received from customers; announcements or changes in our pricing policies or that of our competitors; unanticipated delays in the development, market acceptance or installation of our products and services; changes in government regulations; availability of management and other key personnel; availability, terms and deployment of capital; relationships with third-party equipment suppliers; inflation, the war in Ukraine, supply chain slowdowns, reoccurring Covid-19 outbreaks, both nationally and internationally, particularly in China, and worldwide political stability and economic growth. The words “believe,” “expect,” “anticipate,” “hope,” “intend” and “plan” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

  

Results of Operations

  

Three Months Ended August 31, 2021February 28, 2022 compared with the Three Months Ended August 31, 2020February 28, 2021

  

The narrative comparison of results of operations for the three-month periods ended August 31,February 28, 2022 and 2021, and 2020, is based on the following table.

 

Three Months Ended Three Months Ended 
A B A-B% A B A-B % 
August 31, 2021 August 31, 2020 Change February 28,
2022		  February 28,
2021		  Change  Change 
REVENUE $        74,685  $        30,829  $        43,856142% $24,343  $14,377  $9,966   69%
COST OF REVENUE           20,129            13,181              6,94853%  14,405   12,350   2,055   17%
Cost of revenue as a % of total revenue27% 43% 16%   59%  86%  -27%    
Gross Profit           54,556            17,648            36,908209%  9,938   2,027   7,911   390%
Gross profit as a % of revenue73% 57% -16%   41%  14%  27%    
OPERATING EXPENSES                 
Officer and director compensation         135,000          130,000              5,0004%  203,785   135,000   68,785   51%
General and administrative           26,354              8,819            17,535199%  48,771   23,027   25,744   112%
Professional fees and contract services           74,893            95,682          (20,789)-22%  22,445   118,231   (95,786)  -81%
Advertising and promotion         279,857                    -             279,857n.a.  28,088   –   28,088   n.a. 
Total operating expenses         516,104          234,501          281,603120%  303,089  276,258   26,831   10%
NET LOSS FROM CONTINUING OPERATIONS       (461,548)        (216,853)        (244,695)113%
OPERATING LOSS - CONTINUING OPERATIONS  (293,151)  (274,231)  (18,920)  7%

Revenues increased 142%69% in the quarter ended August 31, 2021February 28, 2022 compared with the same period in 2020.2021. The increase in the current quarter was largely due to direct sales efforts by our sales team. Management has remained focused on sales efforts for the debudder products while also working to expand our relationship with PPK Investment Group, Inc., a vertically integrated cannabis company selling the Country Cannabis Brand of products, and seeking other acquisitions. We anticipate that we will maintain a marketing focus on the debudder products in the coming periods but also expect to devote substantial attention to our efforts at growing our presence in the cannabis industry through acquisitions. We recently entered into an agreement to acquire a facility and cannabis licenses for an operation in Denver Colorado, and we expect to close on a an acquisition of a facility and licenses in California in April or May of this year. These acquisitions will have a significant effect on the direction of our future operations.

2

As a percentage of sales, cost of sales decreased between periods as a result of improved efficiencies in our fulfillment centers. In the prior period, we moved our inventory to a new California fulfillment center and the costs of the move impacted results in the three months ended February 28, 2021.

Total operating expenses increased somewhat in the current period primarily due to increased expenditures for officer and director compensation resulting from the addition of a fourth director and payment of comensation to that director. General and administrative expenses increased in the current period compared with a year earlier, primarily driven by travel expenses associated with the Company’s investment in PPK Investment Group, Inc., and other merger and acquisition work performed during the current period. Advertising and promotion also increased as a result of increased expenditures for investor awareness in the current period. These increases were partially offset by a decrease in professional fees. In the current period, costs previously categorized as professional fees were reclassified as officer and director compensation when one of our consultants accepted a position on the Board.

Net loss from continuing operations increased in 2022 compared with 2021 primarily due to increases in advertising and promotion expenses and consulting fees relating to the Company’s investor relations efforts.

Nine Months Ended February 28, 2022 compared with the Nine Months Ended February 28, 2021

The narrative comparison of results of operations for the nine-month periods ended February 28, 2022 and 2021, is based on the following table.

  Nine Months Ended 
  A  B  A-B  % 
  February 28,
2022		  February 28,
2021		  Change  Change 
REVENUE $147,395  $87,513  $59,882   68%
COST OF REVENUE  50,774   42,484   8,290   20%
Cost of revenue as a % of total revenue  34%  49%  -14%    
Gross Profit  96,621   45,029   51,592   115%
Gross profit as a % of revenue  66%  51%  -14%    
OPERATING EXPENSES                
Officer and director compensation  542,570   400,000   142,570   36%
General and administrative  113,644   59,410   54,234   91%
Professional fees and contract services  176,710   358,084   (181,374)  -51%
Advertising and promotion  375,461   –   375,461   n.a. 
Total operating expenses  1,208,385   817,494   390,891   48%
OPERATING LOSS - CONTINUING OPERATIONS  (1,111,764)  (772,465)  (339,299)  44%

Revenues increased 68% in the nine-month period ended February 28, 2022 compared with the same period in 2021. Management refocused sales efforts on the debudder products after discontinuing operations of the soils business acquired from Elevated Ag Solutions, Inc. (“Elevated”) in early October 2020. In the prior period, management had expended considerable time and effort on the soils division The soils division was discontinued in the quarter ended November 30, 2020 and is not reflected in operating results for the periods presented. (Seepresented above (see “Discontinued Operations.”Operations”). We anticipate that the marketing focus on the debudder products will continue now that the soils division has been discontinued. We also recently entered into an agreement to acquire a facility and cannabis licenses for an operation in Denver Colorado, and we expect to close on a an acquisition of a facility and licenses in California in April or May. Management believes these acquisitions will have a significant effect on the direction of our future operations.

23

 

 

Total operating expenses increased in the current period, primarily due to increased expenditures for advertising and promotion.promotion and increases in travel related to an increased focus on acquisitions. In the quarternine-month period ended August 31, 2021,February 28, 2022, we retained two consultantsa consultant to communicate with prospective funding sources, coordinate press releases, and in general assist with market awareness of the company. The cost of these programsthis program was paid partially in cash and partially in stock with an aggregate cost of $267,900.$250,250. Additional advertising expenses were incurred for trade show expenses in connection with our attendance at the MJBIZCON trade show in Las Vegas. Officer and director compensation increased slightlyand professional fees and contract services decreased in 2022 compared with 2021, primarily due to increasedthe appointment of one of our contractors as a director in the current period and the associated reclassification of his contract fees in 2021 compared with 2020.to “officer and director compensation.” General and administrative expenses increased in the current period compared towith a year earlier, primarily driven by travel expenses associated with the Company’s investment in PPK Investment Group, Inc. Professional fees and contract services decreased in 2021 compared with 2020 due to efforts by the Company to move more of the marketing efforts and target acquisition due diligence costs in-house.

 

Net loss from continuing operations increased in 20212022 compared with 20202021 primarily due to the increase in advertising and promotion expenses.

 

Non-Operating Expenses.

 

In the three monthsand nine-month periods ended August 31, 2021,February 28, 2022, the Company incurred $478,646$34,134 and $645,592, respectively, in interest and finance expense relating to notes payable from a funding transaction on March 22, 2021. ThisThe nine-month amount included $450,000$550,000 in discount on notes payable. The Company had no comparable outstanding debt in the three and nine-month periods ended February 28, 2021. The notes payable were due on March 22, 2022, subsequently extended to March 29, 2022, and paid in full with accrued interest on March 29, 2022. The source of funds for the repayment of the notes was from a new senior lender. The company expects to enter into a senor convertible debt agreement with the new senior lender in our fiscal fourth quarter.

 

Discontinued Operations.

 

AfterIn the prior year, after operating the soils division for the threefirst four months of the year ended AugustMay 31, 2020,2021, management undertook an in-depth assessment of the businessElevated Ag Solutions, Inc. (“Elevated”) and concluded that the soils division was not as represented at the time of the acquisition in January 2020, was not likely to ever operate profitably without significant revisions to operating methods and changes in personnel and was likely to create significant business questions and concerns should it be continued. Accordingly, management elected to discontinue the business acquired from Elevated. Upon discontinuation of the Elevated business, the Company entered into a settlement and unwinding agreement with Elevated and returned all assets acquired in the transaction to Elevated. CommonDuring the nine months ended February 28, 2021, the common stock issued in the acquisition, aggregating 1,300,000 shares out of 1,400,000 shares originally issued, were cancelled, and the Company paid a $10,000 walk-away fee. In the aggregate, the Company recognized a loss from discontinued operations of $10,000.

 

Operating results for the three-monththree and nine-month periods ended February 28, 2021 from the discontinued operations are reflected in the following table.

 

  Three Month Period
Ended February 28,
2021		  Nine-Month Period
Ended February 28,
2021		 
Revenue $–  $75,217 
Cost of revenue  –   (66,243) 
Amortization  –   (13,125) 
Gross profit  –   (4,151)
Loss on discontinued operations  –   10,000 
  $–  $(14,151)

OPERATING RESULTS Three Months Three Months
  Ended Ended
  August 31, 2021 August 31, 2020
Revenue $—    $75,217 
Cost of revenue  —     66,243 
Amortization  —     13,125 
Gross profit  —     (4,151)
Loss on discontinued operations  —     10,000 
  $—    $(14,151)

4

Liquidity and Capital Resources

 

Cash flow used in operating activities for the three-monthnine-month period ended August 31, 2021February 28, 2022 was $164,942$329,212 compared to $90,811with $175,329 in the comparable period 2020.in 2021. During the period, our total cash decreased by $100,942.$115,712. Cash to fund the negative cash flow from operations was derived primarily from proceeds of advances from related parties totaling $134,000.$213,500.

  

The Company continues to make progress in growing sales of its existing product line, but the business is not yet sufficient to support our current operating structure. Our current ratio, which reflects our ability to pay our current debts,working capital is 0.09,negative $1,237,969, based on current assets of $90,243$122,238 and current liabilities of $1,077,072.$1,360,207. We continue to seek out potential acquisition candidates and distributorships and hope to see continuing growth in sales in the coming periods. The Company is currently reliant on funding through advances from related parties, but we have no binding agreements or commitments for such funding and no assurances can be given that such funding will continue to be available in future periods.

3

  

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  We incurred net losses from continuing operations of $461,548$327,285 and $216,853$1,757,356 for the three-monththree and nine-month periods ended August 31, 2021 and 2020,February 28, 2022, respectively, and had an accumulated deficit of $10,038,451$10,855,613 as of August 31, 2021.February 28, 2022. In addition, we have notes payable aggregating $900,000 plus accrued interest that will beare due on March 22, 2022.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  The Company may seek to raise money for working capital purposes through a public offering of its equity capital or through a private placement of equity capital or convertible debt.  It will be important for the Company to succeed in its efforts to raise capital in this manner to further its business plan in an aggressive manner.  Raising additional capital may cause dilution to current shareholders.

  

COVID-19

 

In March 2020,We are now in the third year of the COVID-19 was declared apandemic. While the impact of the pandemic by the World Health Organizationis lessening, new COVID variants are causing continued concern and the Centers for Disease Control and Prevention. Its rapid spread around the world and throughout the United States prompted many countries, including the United States, to institute restrictions on travel, public gatherings and certain business operations. These restrictions significantly disrupted economic activity in the United States and Worldwide.pandemic is not over. To date, the disruption from COVID-19 did not materially impact the Company’s financial statements. However, if the severity of the economic disruptions increase as the duration of the COVID-19 pandemic continues, the negative financial impact due to reduced demand could be significantly greater in future periods than in the first quarter.third fiscal quarter ended February 28, 2022.

 

The effects of the continued outbreak of COVID-19 and related government responses could alsomay include extended disruptions to supply chains and capital markets, reduced labor availability and a prolonged reduction in economic activity.activity in our industry. These effects could have a variety of adverse impacts to the Company, including our abilityan inability to adequately staff and operate our facilities. To date, there have been no material adverse impacts to the Company’s operations due to COVID-19.

 

In addition, theThe economic disruptions caused by COVID-19 could also adversely impact the impairment risks for certain long-lived assets, equity method investments and goodwill. Management evaluated these impairment considerations and determined that no such impairments occurred through the date of this report.

Off Balance Sheet Arrangements

  

None



Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

Not required.

5

 

Item 4. Controls and Procedures.

  

Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures

 

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective as it was determined that there were material weaknesses affecting our disclosure controls and procedures.

 

4

Management of the Company believes that these material weaknesses are due primarily to the small size of the company’s accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As the Company grows, management expects to increase the number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes during the quarter ended August 31, 2021February 28, 2022 in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.reporting.

PART II – OTHER INFORMATION

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

  

During the three months ended August 31, 2021,February 28, 2022, the Company issued 6,147,222281,506 shares of common stock without registration under the Securities Act. Of these, 175,00063,710 shares valued at $80,250($25,510) were issued to a contractor for investor relations services. An additional 5,972,222two contractors and 217,796 shares valued at $1,791,666($103,785) were issued to acquire an additional 15% interest in PPK Investment Group, Inc., bringing the Company’s total ownership of PPK to 25%.four officers and directors for services. All of the above shares were issued in exempt transactions under Section 4(a)(2) of the Securities Act since the recipients of the shares were persons closely associated with the Company and the issuance of the shares did not involve any public offering.

  

56

 

Item 6.  Exhibits. 

  

The following documents are included as exhibits to this report:

  

(a) Exhibits

  

    
Exhibit NumberSEC Reference Number Title of Document
31.131 Section 302 Certification of Principal Executive Officer
31.231 Section 302 Certification of Principal Financial Officer
32.132 Section 1350 Certification of Principal Executive Officer
32.232 Section 1350 Certification of Principal Financial Officer
101.INS  XBRL Instance Document
101.SCH  XBRL Taxonomy Extension Schema
101.CAL  XBRL Taxonomy Extension Calculation Linkbase
101.DEF  XBRL Taxonomy Extension Definition Linkbase
101.LAB  XBRL Taxonomy Extension Label Linkbase
101.PRE  XBRL Taxonomy Extension Presentation Linkbase
    
XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement, prospectus or other document to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.   
Exhibit
Number		SEC
Reference
Number		 Title of Document
31.131 Section 302 Certification of Principal Executive Officer
31.231 Section 302 Certification of Principal Financial Officer
32.132 Section 1350 Certification of Principal Executive Officer
32.232 Section 1350 Certification of Principal Financial Officer
101.INS  XBRL Instance Document
101.SCH  XBRL Taxonomy Extension Schema
101.CAL  XBRL Taxonomy Extension Calculation Linkbase
101.DEF  XBRL Taxonomy Extension Definition Linkbase
101.LAB  XBRL Taxonomy Extension Label Linkbase
101.PRE  XBRL Taxonomy Extension Presentation Linkbase
    
XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement, prospectus or other document to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.   

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.

 

 MJ Harvest, Inc.
  
Date:  OctoberApril 19, 20212022By: /s/ Patrick Bilton
 

Patrick Bilton, CEO

  

Date:  OctoberApril 19, 20212022By:  /s/ Brad E. Herr
 Brad E. Herr, Chief Financial Officer

 

67

 

MJ Harvest, Inc.

 

  

Contents

 

  

Page

FINANCIAL STATEMENTS – (Unaudited)–(Unaudited):

ConsolidatedCondensed consolidated balance sheets

2

 

 

ConsolidatedCondensed consolidated statements of operations

3

 

 

ConsolidatedCondensed consolidated statements of changes in stockholders’ deficitequity (deficit)

4

 

 

ConsolidatedCondensed consolidated statements of cash flows

5

 

 

Notes to the condensed consolidated financial statements

6 - 1618

MJ HARVEST, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

         
     
  August 31, May 31,
  2021 2021
ASSETS
CURRENT ASSETS:        
Cash and cash equivalents $22,377  $123,319 
Accounts receivable  38,050   —   
Vendor deposits  11,467   —   
Inventory  18,349   28,159 
Total current assets  90,243   151,478 
         
Investment in PPK  2,791,666   1,000,000 
Fixed assets, net  9,579   10,839 
Finite-lived intangible assets, net  122,084   125,834 
Indefinite-lived intangible assets, net  6,000   6,000 
Total Assets $3,019,572  $1,294,151 
         
 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
CURRENT LIABILITIES:        
Accounts payable and other current liabilities $269,312  $181,594 
Customer deposits  7,760   —   
Notes payable , net of discount  800,000   350,000 
 Total current liabilities  1,077,072   531,594 
         
LONG-TERM LIABILITIES:        
Common stock payable  214,221   100,000 
Advances from related parties  1,451,982   1,317,982 
Total long-term liabilities  1,666,203   1,417,982 
Total Liabilities  2,743,275   1,949,576 
         
COMMITMENTS AND CONTINGENCIES (Note 4 and  6)        
         
STOCKHOLDERS’ EQUITY (DEFICIT):        
Preferred stock, par value $0.0001, 5,000,000 shares authorized, 0 shares issued and outstanding  —     —   
Common stock, $0.0001 par value per share, 100,000,000 shares authorized, 31,449,344 and 25,302,122 issued and outstanding, respectively  3,145   2,530 
Additional paid-in capital  10,311,603   8,440,302 
Accumulated deficit  (10,038,451)  (9,098,257)
Total stockholders’ equity (deficit)  276,297   (655,425)
Total Liabilities and Stockholders’ Equity (Deficit) $3,019,572  $1,294,151 

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

FS-2

MJ HARVEST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

         
  Three months ended
  August 31,
2021		 August 31,
2020
     
REVENUE $74,685  $30,829 
COST OF REVENUE  20,129   13,181 
Gross profit  54,556   17,648 
         
OPERATING EXPENSES:        
Officer and director compensation  135,000   130,000 
General and administrative  26,354   8,819 
Professional fees and contract services  74,893   95,682 
Advertising and promotion  279,857   —   
Total operating expenses  516,104   234,501 
         
NET LOSS FROM CONTINUING OPERATIONS  (461,548)  (216,853)
         
NON-OPERATING EXPENSES        
Interest expense  478,646   —   
         
LOSS FROM DISCONTINUED OPERATIONS        
Operating loss from discontinued operations  —     (4,151)
Loss on discontinued operations  —     (10,000)
Total loss from discontinued operations  —     (14,151)
         
NET LOSS $(940,194) $(231,004)
         
NET LOSS PER COMMON SHARE - Basic and diluted $(0.04) $(0.01)
         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - Basic and diluted  26,359,821   22,892,874 

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

FS-3

 MJ HARVEST, INC.

 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ( DEFICIT)

 (unaudited)

 FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2021 AND 2020 

                     
      Additional    
  Common Stock Paid-In Accumulated  
  Shares Amount Capital Deficit Total
           
 BALANCES, May 31, 2020  22,892,874  $2,289  $3,763,374  $(4,182,394) $(416,731)
                    
Net loss for the three months ended August 31, 2020  —     —     —     (231,004)  (231,004)
 BALANCES, August 31, 2020  22,892,874  $2,289  $3,763,374  $(4,413,398) $(647,735)
                     
                     
 BALANCES, May 31, 2021  25,302,122  $2,530  $8,440,302  $(9,098,257) $(655,425)
 Stock issued for services  175,000   18   80,232   —     80,250 
 Stock issued for investment in PPK  5,972,222   597   1,791,069   —     1,791,666 
                     
Net loss for the three months ended August 31, 2021  —     —     —     (940,194)  (940,194)
 BALANCES, August 31, 2021  31,449,344  $3,145  $10,311,603  $(10,038,451) $276,297 

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

FS-4

MJ HARVEST, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Condensed Consolidated Balance Sheets
(unaudited)

 

 

         
  Three months ended
  August 31,
2021		 August 31,
2020
CASH FLOWS FROM OPERATING ACTIVITIES        
Net loss $(940,194) $(231,004)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  5,010   18,135 
Share based compensation issued and to be issued  194,471   129,571 
Amortization of note payable discount  450,000   —   
Compensation expense included in advances from related parties  70,000     
Changes in operating assets and liabilities:        
Accounts receivable  (38,050)  (4,924)
Vendor deposits  (11,467)  20,000 
Inventory  9,810   4,370 
Accounts payable and other current liabilities  87,718   (26,959)
Customer deposits  7,760     
NET CASH (USED IN) OPERATING ACTIVITIES  (164,942)  (90,811)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Proceeds from advances by related parties  64,000   66,000 
NET CASH PROVIDED BY FINANCING ACTIVITIES  64,000   66,000 
         
NET CHANGE IN CASH AND CASH EQUIVALENTS  (100,942)  (24,811)
         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  123,319   32,343 
         
CASH AND CASH EQUIVALENTS END OF PERIOD $22,377  $7,532 
         
Non-cash financing and investing activities:        
Shares issued for investment in PPK $1,791,666  $—   
     
  February 28, May 31,
ASSETS 2022 2021
CURRENT ASSETS:        
Cash and cash equivalents $7,607  $123,319 
Accounts receivable  13,232   – 
Inventory  91,399   28,159 
Deposits  10,000   – 
Total current assets  122,238   151,478 
         
NON-CURRENT ASSETS:        
Investments in equity securities, at cost  3,091,666   1,000,000 
Fixed assets, net  7,059   10,839 
Finite-lived intangible assets, net  114,584   125,834 
Indefinite-lived intangible assets, net  6,000   6,000 
Total non-current assets  3,219,309   1,142,673 
Total Assets $3,341,547  $1,294,151 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
CURRENT LIABILITIES:        
Accounts payable and other current liabilities $195,829  $103,815 
Accounts payable to related party  264,378   77,779 
Notes payable, net of discount  900,000   350,000 
Total Current Liabilities  1,360,207   531,594 
         
LONG-TERM LIABILITIES:        
Common stock payable  102,857   100,000 
Advances from related parties  1,741,482   1,317,982 
Total long-term liabilities  1,844,339   1,417,982 
Total Liabilities  3,204,546   1,949,576 
         
Commitments and Contingencies ( Notes 4 and 5)        
         
STOCKHOLDERS’ EQUITY (DEFICIT):        
Preferred stock, par value $0.0001, 5,000,000 shares authorized, 0 shares issued and outstanding  –   – 
Common stock, $0.0001 par value per share, 100,000,000 shares authorized, 33,068,952 and 25,302,122 issued and outstanding, respectively  3,307   2,530 
Additional paid-in capital  10,989,307   8,440,302 
Accumulated deficit  (10,855,613)  (9,098,257)
Total stockholders’ equity (deficit)  137,001   (655,425)
Total Liabilities and Stockholders’ Equity (Deficit) $3,341,547  $1,294,151 

 

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

FS-2

MJ HARVEST, INC

Condensed Consolidated Statements of Operations
(unaudited)

                 
 Three months ended Nine months ended
  February 28, February 28, February 28, February 28,
  2022 2021 2022 2021
         
REVENUE $24,343  $14,377  $147,395  $87,513 
COST OF REVENUE  14,405   12,350   50,774   42,484 
Gross profit  9,938   2,027   96,621   45,029 
                 
OPERATING EXPENSES:                
Officer and director compensation  203,785   135,000   542,570   400,000 
General and administrative  48,771   23,027   113,644   59,410 
Professional fees and contract services  22,445   118,231   176,710   358,084 
Advertising and promotion  28,088   –   375,461   – 
Total operating expenses  303,089   276,258   1,208,385   817,494 
                 
OPERATING LOSS FROM CONTINUING OPERATIONS(293,151)  (274,231) (1,111,764)  (772,465)
                 
NON-OPERATING EXPENSES                
Interest and financing expense  34,134   –   645,592   – 
                 
NET LOSS FROM CONTINUING OPERATIONS  (327,285)  (274,231)  (1,757,356)  (772,465)
LOSS FROM DISCONTINUED OPERATIONS                
Operating loss on discontinued operations  –   –   –   (4,151)
Loss on discontinued operations  –   –   –   (10,000)
NET LOSS FROM DISCONTINUED OPERATIONS  –   –   –   (14,151)
                 
NET LOSS $(327,285) $(274,231) $(1,757,356) $(786,616)
                 
NET LOSS PER COMMON SHARE - BASIC AND DILUTED                
From continuing operations $(0.01) $(0.01) $(0.06) $(0.03)
From discontinued operations  NA   NA   NA   – 
Total $(0.01) $(0.01) $(0.06) $(0.03)
                 
WEIGHTED AVERAGE NUMBER OF COMMON                
SHARES OUTSTANDING - Basic and diluted  33,063,494   23,245,546   30,454,015   23,077,816 

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

FS-3

MJ HARVEST, INC 

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(unaudited)

FOR THE THREE AND NINE MONTH PERIODS ENDED FEBRUARY 28, 2022 AND 2021

                         
             
      Additional Common    
  Common Stock Paid-In Stock Subject to Accumulated  
Three Month Shares Amount Capital Cancellation Deficit Total
BALANCES, November 30, 2020  23,347,731  $2,335  $3,885,859  $–  $(4,694,779) $(806,585)
Shares issued for services  200,000   20   59,980   –   –   60,000 
Shares issued for common stock payable  167,345   17   58,554   –   –   58,571 
Shares subject to cancellation due to discontinued operations  –   –   –   (336,875)  –   (336,875)
Net loss  –   –   –   –   (274,231)  (274,231)
BALANCES, February 28, 2021  23,715,076   2,372   4,004,393   (336,875)  (4,969,010)  (1,299,120)
                         
BALANCES, November 30, 2021  32,787,446   3,279   10,860,040   –   (10,528,328)  334,991 
Shares issued for services  26,200   3   10,507   –   –   10,510 
Shares issued for common stock payable  255,296   25   118,760   –   –   118,875 
Net loss  –   –   –   –   (327,285)  (327,285)
BALANCES, February 28, 2022  33,068,952   3,307   10,989,307   –   (10,855,613)  137,001 
                         
Nine Month                        
BALANCES, May 31, 2020  22,892,874   2,289   3,763,374   –   (4,182,394)  (416,731)
Shares issued for services  822,202   83   241,019   –   –   241,102 
Shares subject to cancellation due to discontinued operations  –   –   –   (336,875)  –   (336,875)
Net loss  –   –   –   –   (786,616)  (786,616)
BALANCES, February 28, 2021  23,715,076   2,372   4,004,393   (336,875)  (4,969,010)  (1,299,120)
                         
BALANCES May 31, 2021  25,302,122   2,530   8,440,302   –   (9,098,257)  (655,425)
Shares issued for common stock payable  400,000   40   99,960   –   –   100,000 
Shares issued for services  828,571   83   358,033   –   –   358,116 
Shares issued for investments  6,538,259   654   2,091,012   –   –   2,091,666 
Net loss  –   –   –   –   (1,757,356)  (1,757,356)
BALANCES, February 28, 2022  33,068,952  $3,307  $10,989,307  $–  $(10,855,613) $137,001 

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

FS-4

MJ HARVEST, INC. 

Condensed Consolidated Statements of Cash Flows
(unaudited)

         
 Nine months ended
  February 28, February 28,
  2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES        
Net loss $(1,757,356) $(786,616)
Adjustments to reconcile net loss to net cash        
used in operating activities:        
Depreciation and amortization  15,030   28,155 
Share based compensation  358,116   241,102 
Advances from related party for services  210,000   210,000 
Common stock payable for compensation  102,857   58,571 
Amortization of note payable discount  550,000   – 
Changes in operating assets and liabilities:        
Accounts receivable  (13,232)  14,716 
Vendor deposits  (10,000)  20,000 
Inventory  (63,240)  4,634 
Payable for discontinued operations  –   2,000 
Accounts payable and other current liabilities  92,014   32,109 
Accounts payable to related parties  186,599   – 
NET CASH (USED IN) OPERATING ACTIVITIES  (329,212)  (175,329)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Proceeds from advances by related parties  213,500   144,000 
NET CASH PROVIDED BY FINANCING ACTIVITIES  213,500   144,000 
         
NET CHANGE IN CASH AND CASH EQUIVALENTS  (115,712)  (31,329)
         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  123,319   32,343 
         
CASH AND CASH EQUIVALENTS END OF PERIOD $7,607  $1,014 
         
Non-cash financing and investing activities:        
Shares issued for common stock payable $100,000  $– 
Shares issued for investments $2,091,666  $– 
Shares to be cancelled on discontinued operations (Note 9) $–  $336,875 

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

FS-5

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

MJ Harvest, Inc. (the “Company”), develops, acquires, and distributes agricultural and horticultural tools and implements for sale primarily to growers and operators in the hemp and cannabis retail industry. The Company owns 100% of G4 Products LLC, (“G4”) which owns intellectual property for a patented manual debudder product line marketed under the Original 420 Brand as the Debudder Bucket Lid and Edge. The Company also owns 100% of AgroExports LLC (“Agro”) which serves as the domestic and international distribution arm for sales of agricultural and horticultural tools and implements. The Company operates itsa sales portal website, www.procannagro.com, for online sales of its products.

 

In 2019, the Company formed AgroExports.CA ULC (“Agro Canada”), a wholly owned Canadian subsidiary in order to facilitate online payments from sales in Canada. Sales in Canada are currently serviced through a fulfillment center in Toronto.

 

In the year ending May 31, 2021, the Company expanded its focus to include a minority investment interest in PPK Investment Group, Inc. (“PPK”), a vertically integrated cannabis company in Oklahoma that operates as a grower, harvester, processor, manufacturer and distributor of the Country Cannabis Brand of cannabis products. The investment in PPK represents a shift in focus from an agricultural implements-based business to a broader cannabis industry focus. The Company has continued to expand its cannabis focus in the current year with new investments in WDSY LLC and BLIP Holdings LLC, owners of the Weedsy and BLVK brands, respectively.

In the quarter ending February 28, 2022, the Company began operations in Colorado under a wholly-owned Colorado corporation, Country Cannabis, Inc. (“CCCO”). CCCO is in the process of acquiring cannabis licenses for the manufacture and distribution of products containing THC and/or THC derivatives. Pending transfer of the licenses, the Company is operating the Colorado facility pursuant to a license agreement with the current owner of the facility.

 

Basis of Presentation and Consolidation

 

The Company’s fiscal year-end is May 31. The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, accordingly,information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentationstatement of the interim financial statements have been included. Operating results for the three-month periodthree and nine-month periods ended August 31, 2021February 28, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2022.

 

For further information refer to the financial statements and footnotes thereto in the Company’s audited financial statements for the year ended May 31, 2021 in the Form 10-K as filed with the Securities and Exchange Commission.

The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries Agro, G4, Agro Canada, and Agro Canada.CCCO. All subsidiaries were wholly owned in the periods presented. All intercompany transactions have been eliminated.

FS-6

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

Going Concern

The Company has an accumulated deficit as of August 31, 2021February 28, 2022 of $10,038,451 $10,038,451 10,855,613as and negative working capital of August 31, 2021. In addition, we have$1,237,969. Included in current liabilities are notes payable aggregating $900,000 that will be due onwhich were paid in March 22, 2022. See Subsequent events note 11. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

 

Additional acquisitions and business opportunities are under consideration, but the Company has not reached agreement with any other acquisition candidates or business opportunities. Management intends to finance operating costs over the next twelve months with cash flows from operations, private placement or public offering of common stock or debt instruments, and when necessary, advances from directors and officers. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.

FS-6

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Share based compensation, impairment of long-lived assets, amortization of intangible assets, and income taxes are subject to estimates. Actual results could differ from those estimates.

 

Reclassifications

 

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

 

New Accounting Standards

 

In August 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and with early adoption permitted. Management is evaluating the impact of this update on the Company’s consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

Revenue Recognition

 

The Company generates revenue based on sales of products and revenue is recognized when the Company satisfies its performance obligation by shipping products to our customers. Our products consist of agricultural tools and implements, soils, and soil additives used primarily in growing and harvesting hemp and marijuana. Shipments terms are FOB origination, and revenue is recognized when the product is delivered to the shipper by our fulfillment centers or, in the case of drop shipments of distributed products, when the products are shipped from the manufacturer. At the time the products are delivered to the shipper, no other performance obligations remain. Revenue is recognized in an amount that reflects the consideration that is received in exchange for the products shipped.

FS-7

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The Company accounts for shipping and handling activities as a fulfillment cost and include fees received for shipping and handling as part of the transaction price. Provision for sales incentives, discounts, and returns and allowances, if applicable, are accounted for as reductions of revenue in the period the related sales are recorded. Sales incentives, discounts and returns and allowances were not material in the periods presented in the accompanying consolidated financial statements. The Company had no warranty costs associated with the sales of its products in the periods presented in the accompanying consolidated statements of operations and no provision for warranty expenses has been included.

 

Inventory

 

Inventory consists of purchased products and is stated at the lower of cost or market, with cost being determined using the average cost method. Allowances for obsolete inventory are recognized when the inventory is determined to be unsalable through the normal course of business.

 

Investments

Investments

Equity securities are generally measured at fair value. Unrealized gains and losses for equity securities are included in earnings. If an equity security does not have a readily determinable fair value, the Company may elect to measure the security at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer. At the end of each reporting period, the Company reassesses whether an equity security without a readily determinable fair value qualifies to be measured at cost minus impairment, considers whether impairment indicators exist to evaluate whether the investment is impaired and, if so, records an impairment loss. Upon sale of an equity security, the realized gain or loss is recognized in earnings.

 

Intangible Assets

 

Intangible asset amounts are initially recognized at the acquisition date at the fair values of the intangible assets acquired.

 

Finite-lived intangible assets are amortized over their useful lives. The carrying amounts of finite-lived intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that the Company may be unable to recover the asset’s carrying amount.

 

When there is no foreseeable limit on the period of time over which an intangible asset is expected to contribute to the cash flows of the Company, an intangible asset is determined to have an indefinite life. Indefinite lifeIndefinite-lived intangible assets are not amortized but tested for impairment annually or more frequently when indicators of impairment exist.

 

Determination of acquisition date fair values and intangible asset impairment tests require judgment. Significant judgments required to estimate the fair value of intangible assets include determining the appropriate valuation method, identifying market prices for similar type items, estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates.

FS-8

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

FS-7

 

Net Earnings (Loss) Per Share

 

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutive. During the three monthsand nine month periods ended August 31, 2021,February 28, 2022, the Company had 3,000,000 warrants outstanding which were anti-dilutive due to the net loss recognized in the period. In the three monthsand nine-month periods ended August 31, 2020,February 28, 2021, the Company had no common stock equivalents outstanding.

Share-Based Payments

 

All transactions in which goods or services are received for the issuance of shares of the Company’s common stock are accounted for based on the fair value of the common stock issued and recognized when the board of directors authorizes the issuance.

NOTE 2 – FIXED ASSETS

Fixed assets consisted of the following at August 31, 2021February 28, 2022 and May 31, 2021:

 

 Schedule of fixed assets August 31, May 31,
Property & Equipment 2021 2021
Equipment - production molds $25,109  $25,109 
Less: Accumulated amortization  (15,530)  (14,270)
Net Equipment $9,579  $10,839 

 Schedule of fixed assets      
  February 28,  May 31, 
Equipment 2022  2021 
Equipment - production molds $25,109  $25,109 
Less: Accumulated amortization  (18,050)  (14,270)
Net Equipment $7,059  $10,839 

Depreciation expense for the three-monthsthree and nine-month periods ended August 31,February 28, 2022 were $ 1,260 and $3,780, respectively. Depreciation expense for the three and nine-month periods ended February 28, 2021 and 2020 waswere $1,260 and $1,2603,780, respectively.

FS-9

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 3 - INTANGIBLE ASSETS

 

The Company’s intangible assets consist of both finite and indefinite lived assets. Finite-lived assets include patent rights acquired in the acquisition of G4, a non-compete agreement, and customer relationships acquired in the Elevated transaction. The Company’s sole indefinite lived asset are five domain names acquired in the Elevated transaction. Both acquisitions are described below. At August 31, 2021February 28, 2022 and May 31, 2021, intangibles assets are:

Schedule of intangible assets        
Intangibles 2021 2021
Finite lived intangibles        
Patents $250,000  $250,000 
Less: Impairment of patents  (100,000)  (100,000)
   150,000   150,000 
Less: accumulated amortization  (27,916)  (24,166)
Patents, net  122,084   125,834 
         
Non-compete agreement  —     157,000 
Less: impairment of non-compete  —     (107,000)
   —     50,000 
Less: accumulated amortization  —     (6,900)
Less: adjustment for discontinued operations  —     (43,100)
Non-compete agreement, net  —     —   
         
Customer relationships  —     826,000 
Less: Impairment of relationships  —     (551,000)
   —     275,000 
Less: accumulated amortization  —     (6,225)
Less: adjustment for discontinued operations  —     (268,775)
Customer relationships, net  —     —   
Total finite lived intangibles  122,084   125,834 
         
Indefinite lived intangibles        
Domain names  6,000   31,000 
Less: adjustment for discontinued operations  —     (25,000)
Total domain names  6,000   6,000 
Total intangibles $128,084  $131,834 

 

 Schedule of intangible assets    
  February 28, May 31,
Intangibles 2022 2021
Finite lived intangibles        
Patents $250,000  $250,000 
Less: impairment of patents  (100,000)  (100,000)
   150,000   150,000 
Less: accumulated amortization  (35,416)  (24,166)
Patents, net  114,584   125,834 
         
Non-compete agreement  –   157,000 
Less: impairment of non-compete  –   (107,000)
   –   50,000 
Less: accumulated amortization  –   (6,900)
Less: adjustment for discontinued operations  –   (43,100)
Non-compete agreement, net  –   – 
         
Customer relationships  –   826,000 
Less: impairment of relationships  –   (551,000)
   –   275,000 
Less: accumulated amortization  –   (6,225)
Less: adjustment for discontinued operations  –   (268,775)
Customer relationships, net  –   – 
Total finite lived intangibles  114,584   125,834 
         
Indefinite lived intangibles        
Domain names  6,000   31,000 
Less: adjustment for discontinued operations  –   (25,000)
Total domain names  6,000   6,000 
Total intangibles $120,584  $131,834 

FS-8

Amortization expense for the three-monthsthree and nine-month periods ended August 31, 2021 and 2020 wasFebruary 28, 2022 were $3,750 and $16,87511,250, respectively and for the three and nine-month periods ended February 28, 2021, were $3,750 and $24,375, respectively. The patents are amortized over their useful lives of ten years. Amortization of intangibles is expected to be $15,000 for each of the next five years.

 

On May 28, 2021, the Company acquired the domain name, MJHI.com for $6,000. The new domain name matches the Company’s stock symbol and is likely to be easier for customers and other stakeholders to remember. The domain name is an indefinite lived intangible asset and will not be amortized.

FS-10

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

NOTE 4 – INVESTMENT IN INVESTMENTS

At February 28, 2022 and May 31, 2021, investments are:

 Schedule of investments      
  February 28  May 31, 
Investments 2022  2021 
PPK Investment Group, Inc. $2,791,666  $1,000,000 
WDSY, LLC  200,000   — 
BLIP Holdings, LLC  100,000   — 
Total investments $3,091,666  $1,000,000 

PPK INVESTMENT GROUP, INC.

 

On March 24, 2021, the Company, as lender, closed a loan to PPK Investment Group, Inc. (“PPK”) in the form of a convertible note (“Note”) in the amount of $620,000. The convertible note bore interest at 6% per annum and was due on September 1, 2021. In accordance with its terms, the Company converted the Note on May 19, 2021 into a 6.2% interest in PPK. Upon conversion, the interest accrued of $5,707 through the date of conversion was forgiven.

 

Upon conversion, a Securities Purchase Agreement dated March 24, 2021 (the “PPK Agreement”) became effective and the Company acquired an additional 3.8% interest in PPK (10% in total) for payment of $380,000 by issuance of 1,520,000 shares of restricted common stock of the Company. The fair value of shares was $972,800 based on the closing price of the Company’s shares of $0.64. The Company determined that the fair value of the 3.8% interest on the conversion date was $380,000 which was the negotiated price between the two parties. Thus, the Company recorded an impairment expense of $592,800 on the conversion date.

 

The PPK Agreement includes a put option allowing PPK to put shares of the Company’s common stock received as part of the Company’s investment in PPK, back to the Company at $0.25 per share. The put option protects PPK against a drop in the market price of the Company’s common stock below $0.25 per share. The put option may be exercised after six months from the date of the investment on May 19, 2021. Not more than 5% of the total shares held by PPK can be put back to the Company in any calendar quarter. The put option had no value at August 31, 2021February 28, 2022 and May 31, 2021 as the Company’s common stock was trading above $0.25 on both dates. The put option continues so long as PPK holds shares of MJHI that date.it received as part of MJHI’s investment in PPK.

 

The PPK Agreement gives the Company the right to increase its investment up to a 100% ownership interest in PPK, provided such increased ownership is in compliance with Oklahoma State cannabis licensing requirements. Terms of purchase for increased ownership of PPK will be similar to those as the initial acquisition with a combination of cash and shares of the Company’s common stock.

 

On August 26, 2021, the Company acquired an additional 15% interest in PPK (25% ownership in total) pursuant to a Securities Purchase Agreement with an effective date of May 19, 2021 through issuance of 5,972,222 shares of restricted common stock valued at $1,791,666 based on the closing price of the Company’s common stock on the of $0.30$0.30 per share as of August 16, 2021, the date fixed by agreement for pricing the issuance of the shares. The additional 15% acquisition under the Securities Purchase Agreement called for payment of $930,000 in cash and 570,000$570,000 in stock, but by supplemental agreement, PPK agreed to accept payment for 15% in the form of all common stock of the Company The Company’s shares were issued directly to Consensus Holdings, Inc., an Arizona corporation, in connection with the acquisition by PPK of a commercial kitchen operation in Tulsa Oklahoma.Company.

FS-11

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

The Company, pursuant to the PPK Agreement, is also obligated to pay an earnout to PPK as follows:

·•The Company is required to pay additional consideration to PPK for an earnout in the event the PPK business valuation at the end of a pre-determined look back period is greater than $10,000,000. For purposes of the earnout, the valuation will be based on three times earnings before interest, taxes, depreciation, and amortization (EBITDA). If EBITDA exceeds $3,333,333 in the twelve months immediately preceding the look back date of March 31, 2023, additional consideration will be owed to PPK under the earnout in an amount sufficient to equal the earnout valuation less $10,000,000 times the percentage of PPK then owned by the Company. Such additional consideration will be paid 62% in cash and 38% in shares of the Company’s common stock. No liability has been accrued for this potential obligation as the Company has assessed the probability of an obligation being incurred to be remote as of February 28, 2022.

·•The Company also agreed to employentered into an employment agreement with Ralph Clinton Pyatt III (“Clinton Pyatt”), President of PPK, to continue his role as Chief Executive Officer and President of PPK business for a period of at least three yearsyear term effective May 22, 2022.2021.

 

The Company would havealso has an option to acquire the real estate that PPK utilizes in its operations. The real estate is currently under lease to PPK by an affiliated company owned by Clinton Pyatt, the President of PPK.

WDSY and BLIP

FS-9On October 8, 2021, the Company entered into two brand development agreements with WDSY, LLC (“WDSY”) and Blip Holdings, LLC (“BLIP”) for expansion of the “WEEDSY” and “BLVK” brands, respectively, into Oklahoma and South Dakota. Under the agreements, PPK will manufacture and distribute these brands in Oklahoma and South Dakota and will pay the respective companies 10% royalties on all net sales of the branded products in those territories.

On October 8, 2021, the Company acquired a 10% interest in WDSY in exchange for 377,358 shares of the Company’s common stock and a 10% interest in BLIP in exchange for 188,679 shares of the Company’s common stock. The shares to be issued were valued at the closing price of the common stock, $0.53 per share, on October 8, 2021. Additional shares may be due to WDSY and BLIP based on lookback valuations of both companies. The lookback valuations will be based on trailing twelve months sales for WDSY and trailing three-month sales for BLIP on the second anniversary of each agreement, or sooner if the agreements are terminated before the second anniversaries. At February 28, 2022, management has assessed the probability of a potential liability due under the lookback valuation provisions of WDSY and BLIP to be low and no stock payable was due. No liability has been accrued for this potential obligation as the Company has assessed the probability of an obligation being incurred to be remote as of February 28, 2022.

The Company evaluated its investment in PPK, WDSY and BLIP as of February 28, 2022 and identified no indicators of possible impairment on their carrying values.

NOTE 5 – NOTES PAYABLE

 

On March 22, 2021, the Company entered into agreements with AJB Capital Investments LLC (“AJB”) and SDT Holdings LLC (“SDT”) for the purchase of an aggregate of $900,000 in Promissory Notes (the “Notes”), $300,000 from AJB and $600,000 for SDT. The terms of the Notes are the same except for the dollar amounts and fees which are double for SDT compared to AJB. The terms of the Notes are described below in the aggregate.

 

The Notes provided for an original issue discount of 10% or $90,000, payment of legal fees of $22,500, and payment of $10,500 for due diligence fees, resulting in net proceeds to the Company of $777,000. The Notes bearbore interest at the rate of 12% if paid on or beforefor the period from March 22, 2021 through September 21, 2021.22, 2021 and bore interest at the rate of 15% from September 23, 2021 through March 22, 2022. On September 20, 2021, the Company extended the Notes for an additional six months at an interest rate of 15%.months. The Notes are now due March 21, 2022. The Notes are secured by all assets of the Company.

FS-12

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

Interest on the notes is payable in monthly installments of $9,000$11,250 ($9,000 for the first six months of the term) on the first of each month with the first payment due on April 1, 2021. An aggregate of $36,300$33,750 and $20,700$ 81,800 in interest was incurred and paidrecognized as an expense on the notes in the three monthsand nine-month periods ended August 31, 2021 and the year ended May 31, 2021. The notes provide that the full amount of interest on the notes for the initial six-month term will be payable even if the notes are paid off prior to expirationFebruary 28, 2022. At February 28, 2022, $11,250 of the initial term.accrued interest was outstanding and was paid in March 2022.

 

In March 2021, the Company also paid a financing fee of $3,683,000 by issuance of 1,200,000 shares of its restricted common stock and 3,000,000 warrants to purchase shares that are exercisable at $0.38 per share with a three-year term expiring on March 21, 2024. The financing fee shares were valued at $1,800,000 based on the closing price of the Company’s common stock on the date of the borrowing. The warrants were valued at $1,883,000 using the Black-ScholesBlack- Scholes method based on a current stock price of $1.50 per share on the warrant issuance date, exercise price of $0.38, an expected term of three years, stock volatility of 334.5% and a discount rate of 0.32%.32%. One half of the warrants were redeemable for an aggregate payment of $1.00 if the notes payable were paid in full by September 21, 2021. The Company extended the notes on September 22,20, 2021 for six months and the redemption provision has now expired.

 

In the aggregate, financing fees and original issue discount totaled $3,806,000 which is greater than the note payable balance of $900,000. As a result, theFinancing fees of $2,906,000 was recognized as expense on March 22, 2021. The Company recorded a full discount of $900,000 against the balance of the note payable and is amortizing the discount over the term of the note. During the yearthree and nine-month periods ended May 31, 2021 and the three months ended August 31, 2021,February 28, 2022, the Company recognized $350,000$-0- and $450,000$550,000 respectively, inof amortization expense leaving an unamortized discount balance of $100,000 as of August 31, 2021. This balance will be amortized in September 2021. The remaining amount of the financing fees of $2,906,000 was recognized as expense for the year ended May 31, 2021.interest and finance expense.

 

In an event of default, the remaining principal amount of the notes plus all accrued interest and any other fees then due may be converted at the sole election of the note holders into shares of the Company’s common stock.

FS-13

MJ HARVEST, INC.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Agreement with Borders Consulting LLC. (unaudited)On June 9, 2021, the Company entered into an agreement with Borders Consulting LLC (“Borders”), an unrelated third-party vendor, to provide consulting services in connection with corporate finance relations, introductions to funding sources, and to enhance the Company’s visibility in the financial markets. The agreement was for a three-month term at compensation of $50,000 per month payable in cash plus common stock aggregating 250,000 shares. The Company paid the first two months of the contract through cash payments of $70,000 and issuance of 175,000 shares of stock but has not paid the third month. At this time, the Company does not intend to make payment of the third month of the contract due to disagreement with the manner in which the services were being performed, and what the Company believes were improper communications by Borders with certain investors in the Company. Borders has threatened to sue the Company for the third month compensation but as of October 19, 2021, no suit has been commenced. The Company intends to contest any suit when and if filed and believes that counterclaims for damages incurred by the Company are supported by the facts. Total compensation amounting to $105,650 for the third month of the agreement is reflected in accounts payable ($50,000) and stock payable (150,000 shares valued at $55,650) as of August 31, 2021.

 

NOTE 76 – RELATED PARTY TRANSACTIONS

At August 31, 2021February 28, 2022 and May 31 2021, the Company had advances from and costs of services provided by related parties totaling $1,451,982$1,741,482 and $1,317,982, respectively. These amounts are classified as long-term liabilities as it is anticipated they will be settled with shares of the Company’s common stock. These amounts consisted of the following:

 

 Schedule of related party transactions Related Party Advances at Additions During the Three Months Ended August 31, 2021 Related Party Advances at
  May 31, 2021 Advances Services August 31, 2021
Related Parties                
Patrick Bilton, CEO and Director                
Cash Advances $928,414  $64,000  $—    $992,414 
Payable for services  280,000       70,000   350,000 
  David Tobias, Director  80,553   —     —     80,553 
  Jerry Cornwell, Director  29,015   —     —     29,015 
Total for related parties $1,317,982  $64,000  $70,000  $1,451,982 

FS-10

Schedule of related party transactions                        
  

Related Party

Advances at

  

Additions During the Six

Months Ended November

30, 2021

  

Additions During the

Three Months Ended

February 28, 2022

  

Related Party

Advances at

 
  May 31, 2021  Advances  Services  Advances  Services  February 28, 2022 
Related Parties                        
Patrick Bilton, CEO and Director                        
Cash Advances $928,414  $151,500  $–  $60,000  $–  $1,139,914 
Payable for services  280,000       140,000   –   70,000   490,000 
David Tobias, Director  80,553   2,000   –   –   –   82,553 
Jerry Cornwell, Director  29,015   –   –   –   –   29,015 
Total for related parties $1,317,982  $153,500  $140,000  $60,000  $70,000  $1,741,482 

 

  Related Party Advances at Additions During the Three Months Ended August 31, 2020 Related Party Advances at
  May 31, 2020 Advances Services August 31, 2020
Related Parties                
  Patrick Bilton, CEO and Director $726,414  $65,000  $—    $791,414 
  David Tobias, Director  80,553   —     —     80,553 
  Jerry Cornwell, Director  23,015   1,000   —     24,015 
Total for related parties $829,982  $66,000  $—    $895,982 

  

Related Party

Advances at

  

Additions During the Six

Months Ended November

30, 2020

  

Additions During the

Three Months Ended

February 28, 2021

  

Related Party

Advances at

 
  May 31, 2020  Advances  Services  Advances  Services  February 28, 2021 
Related Parties                        
Patrick Bilton, CEO and Director                        
Cash Advances $726,414  $120,000  $–  $18,000  $-  $864,414 
Payable for services  –   –   140,000   –   70,000  $210,000 
David Tobias, Director  80,553   –   –   –   –   80,553 
Jerry Cornwell, Director  23,015   6,000   –   –   –   29,015 
Total for related parties $829,982  $126,000  $140,000  $18,000  $70,000  $1,183,982 

TheNexit, Inc., a company solely owned by Brad Herr, the Company’s Chief Financial Officer, Brad Herr, was owed $109,420 $183,010and $77,779 at August 31, 2021February 28, 2022 and May 31, 2021, respectively, for services. These amounts are included in accounts payable.payable to related party. The Company also owed PPK $81,368 and $-0- respectively at February 28, 2022 and 2021, for start-up payments on the Colorado operations.

FS-14

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


NOTE 87 – SHARE CAPITAL

 

In the three-month periodthree and nine-month periods ended August 31,February 28, 2022 and 2021, shares were issued for stock payable, services and investmentinvestments in the amounts set forth in the following table. The Company had an aggregate of $214,221 of common stock payable as of August 31, 2021 which is comprised of the following:

 

Schedule of common stock issued                
Three Months Ended August 31, 2021 Shares issued for Services & Other Shares issuable for Services & Other
  Shares Value Shares Value
Related Parties                
David Tobias, Director  —    $—     29,377  $10,000 
Jerry Cornwell, Director  —     —     29,377   10,000 
Brad Herr, CFO  —     —     44,066   15,000 
Total for related parties  —     —     102,820   35,000 
Unrelated Parties                
Services  175,000   80,250   219,245   79,221 
Patent issuance          400,000   100,000 
Investment in PPK  5,972,222   1,791,666   —     —   
Aggregate Totals May 31, 2021  6,147,222  $1,871,916   722,065  $214,221 

Three Months

Schedule of common stock issued                    
     Value of Shares Issued for: 
Three Months Ended February 28, 2022 Total Shares Issued  Stock
Payable		  Services  Investment
and Other		  Total Value 
Related Parties                    
David Tobias, Director  25,000  $10,000  $–  $–  $10,000 
Jerry Cornwell, Director  25,000   10,000   –   –   10,000 
Brad Herr, CFO  37,500   15,000   –   –   15,000 
Randy Lanier, Director  130,296   68,785   –   –   68,785 
Total for related parties  217,796   103,785   –   –   103,785 
Unrelated Parties  63,710   15,000   10,510   –   25,510 
Aggregate Totals February 28, 2022  281,506  $118,785  $10,510  $–  $129,295 
Three Months Ended February 28, 2021                    
Related Parties                    
David Tobias, Director  28,571  $10,000  $–  $–  $10,000 
Jerry Cornwell, Director  28,571   10,000   –   –   10,000 
Brad Herr, CFO  42,857   15,000   –   –   15,000 
Randy Lanier, Director  –   –   –   –   – 
Total for related parties  99,999   35,000   –   –   35,000 
Unrelated Parties  267,346   23,571   60,000   –   83,571 
Aggregate Totals February 28, 2021  367,345  $58,571  $60,000  $–  $118,571 

Nine Months

     Value of Shares Issued for: 

Nine Months Ended

February 28, 2022

 

Total Shares

Issued

  

Stock

Payable

  Services  

Investment

and Other

  Total Value 
Related Parties                    
David Tobias, Director  54,377  $–  $20,000  $–  $20,000 
Jerry Cornwell, Director  54,377   –   20,000   –   20,000 
Brad Herr, CFO  81,566   –   30,000   –   30,000 
Randy Lanier, Director  155,475   –   77,356   –   77,356 
Total for related parties  345,795   –   147,356   –   147,356 
Unrelated Parties  7,421,035   100,000   210,760   2,091,666   2,402,426 
Aggregate Totals February 28, 2022  7,766,830  $100,000  $358,116  $2,091,666  $2,549,782 
Nine Months Ended February 28, 2021                    
Related Parties                    
David Tobias, Director  78,571  $–  $20,000  $–  $20,000 
Jerry Cornwell, Director  78,571   –   20,000   –   20,000 
Brad Herr, CFO  117,857   –   30,000   –   30,000 
Randy Lanier, Director  –   –   –   –   – 
Total for related parties  274,999   –   70,000   –   70,000 
Unrelated Parties  547,203   –   171,102   –   171,102 
Totals  822,202  $–  $241,102  $–  $241,102 

FS-15

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

TheIn addition to the above share issuances for the periods presented, the Company had an aggregate of $229,571 of commonthe following stock payable as of Augustobligations in the periods ended February 28, 2022 and May 31, 2020 which is comprised of the following:2021.

 

  Three months ended August 31, 2020
  Shares Issuable at August 31, 2020
  Issuances Related to Prior Period Activity Current Period Services Total
  Shares Value Shares Value Shares Value
Related Parties                        
  Patrick Bilton  —    $—     350,000  $70,000   350,000  $70,000 
  David Tobias  —     —     50,000   10,000   50,000   10,000 
  Jerry Cornwell  —     —     50,000   10,000   50,000   10,000 
  Brad Herr  —     —     75,000   15,000   75,000   15,000 
Total for related parties  —    $—     525,000  $105,000   525,000  $105,000 
                         
Unrelated Parties  400,000  $100,000   122,857  $24,571   522,857  $124,571 
                         
Aggregate Totals  400,000  $100,000   647,857  $129,571   1,047,857  $229,571 

FS-11

Schedule Of Stock Payable Obligation        
  February 28,  May 31, 
  2022  2021 
Related Parties        
David Tobias, Director $10,000  $- 
Jerry Cornwell, Director  10,000   - 
Brad Herr, CFO  15,000   - 
Randy Lanier, Director  52,857   - 
Total for related parties  87,857   - 
Unrelated Parties  15,000   100,000 
Aggregate Totals February 28, 2022 $102,857  $100,000 

NOTE 98 – REVENUE FROM CONTINUING OPERATIONS

 

The Company product revenue is generated though sales of its debudder products produced by third parties and distributed by the Company. The Company’s customers, to which trade credit terms are extended, consist almost exclusively of domestic companies. The following table sets out product sales for the three-monthsthree and nine-month periods ended August 31,February 28, 2022 and 2021, and 2020, along with customer concentration information for each period.

 

 Schedule of revenues Three months ended August 31,
  2021 2020
Debudder product revenues $74,685  $30,829 
Customer concentrations        
Debudder sales        
Customer A $14,680  $14,400 
Customer B  4,800   14,030 
Customer C  42,320   —   
Totals $71,400  $28,430 
% of total revenues  83%  92%

Schedule of revenues        
  Three months ended February 28, 
  2022  2021 
Debudder product revenues $24,343  $14,377 
Customer concentrations        
Debudder sales        
Customer A $–  $13,675 
Customer D  22,230   – 
Totals $22,230  $13,675 
% of total revenues  91%  95%

  Nine months ended February 28, 
  2022  2021 
Debudder product revenues $147,395  $87,513 
Customer concentrations        
Debudder sales        
Customer A $37,900  $13,675 
Customer B  23,760   – 
Customer C  14,680   34,285 
Customer D  64,550   26,130 
Totals $140,890  $74,090 
% of total revenues  96%  85%

FS-16

MJ HARVEST, INC. 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

All sales were domestic except forinternational sales of $16894 and $55023,946 in the three-monthsthree and nine-month periods ended August 31,February 28, 2022, respectively. All sales were domestic except international sales of $91 and $4,112 in the three and nine-month periods ended February 28, 2021, and 2020, respectively, which were international.respectively.

 

As of AugustFebruary 28, 2022 and May 31, 2021, and 2020, there were $47,65013,232 and $nil 24,1400, respectively, of accounts receivable from the one of the Company’s primary customers.

 

NOTE 109 – DISCONTINUED OPERATIONS

 

In the year ended May 31, 2021, the Company unwound its acquisition of assets from Elevated Ag Solutions, Inc. As a result of the unwinding, the net income (loss) from the Elevated business segment is included in Discontinued Operations in the statements of operations for all periods presented. As a result of the unwinding in the year ended May 31, 2021, the Company reversed the acquisition of intangible assets, cancelled 1,300,000 out of the 1,400,000 shares of common stock that were issued in the acquisition, and paid a $10,000 walk-away fee to the prior owners.

 

Discontinued operations operating results for the three monthsand nine-month periods ended August 31,February 28, 2021 and 2020 are reflected in the following table.tables. There were no operating results from discontinued operations to report in the three and nine-month periods ended February 28, 2022.

  

OPERATING RESULTS        
 Three Months Ended Three Months Ended
Schedule of discontinued operations        
 August 31, 2021 August 31, 2020 

Three Month Period
Ended February 28,
2021

 Nine-Month Period
Ended February 28,
2021
Revenue $—    $75,217  $–  $75,217 
Cost of revenue $—     66,243   –   66,243 
Amortization $—     13,125   –   13,125 
Gross profit  —     (4,151)  –   (4,151)
Loss on discontinued operations  —     10,000   –   10,000 
 $—    $(14,151)
Net Loss From Discontinued Operations $–  $(14,151)

 

NOTE 1110 – IMPACT OF COVID-19

 

In March 2020, COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention. Its rapid spread around the world and throughout the United States prompted many countries, including the United States, to institute restrictions on travel, public gatherings and certain business operations. These restrictions significantly disrupted economic activity in the United States and Worldwide. As of August 31,November 30, 2021 and through the date of filing of this Form 10-K,10-Q, the disruption did not materially impact the Company’s financial statements.

 

The effects of the continued outbreak of COVID-19 and related government responses could include extended disruptions to supply chains and capital markets, reduced labor availability and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts to the Company, including our ability to operate. As of August 31, 2021February 28, 2022 there were no material adverse impacts to the Company’s operations due to COVID-19.

 FS-17

MJ HARVEST, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

The economic disruptions caused by COVID-19 could also adversely impact the impairment risks for certain long-lived assets. Management evaluated these impairment considerations and determined that no such impairments occurred as of May 31, 2021.2021 or through the date of filing this Form 10-Q.

NOTE 1211 –SUBSEQUENT EVENTS

 

After August 31, 2021,In April 2022, the Company issued 219,24537,258 shares of common stock valued at $15,000 to one non-related partiesparty and 102,820218,226 shares of common stock valued at $87,857 to officers and directors for stock payable at August 31, 2021February 28, 2022 relating to services rendered in the quarter ended August 31, 2021.February 28, 2022. The shares were issued authorized for issuancevalued based on October 15, 2021.

The Desert Hot Springs management agreement which was noted as a subsequent event in the financial statements for the year ended May 31, 2021, was abandoned in the September 2021 after the Company was unable to reach agreement with the owner of the property for a transaction on acceptable terms. The Company is no longer moving forward with the Desert Hot Springs transaction.

On October 8, 2021, the Company entered into to two brand development agreements with WDSY, LLC (“WDSY”) and Blip Holdings, LLC (“BLIP”) for expansion of the “WEEDSY” and “BLVK” brands into Oklahoma and South Dakota. Under the agreements, PPK will manufacture and distribute these brands in Oklahoma and South Dakota and will pay the respective companies 10% royalties on all sales of the branded products in those territories. The Company has acquired a 10% interests WDSY in exchange for 377,358 sharesclosing price of the Company’s common stock and a 10% interest in BLIP in exchange for 188,679on the OTCQB Market on dates the shares of the Company’s common stock. The shareswere authorized to be issued were valued at the closing price of the common stock, $0.53 per share, on October 8, 2021. Additional shares may be due to WDSY and BLIP based on lookback valuations of both companies. The lookback valuations will be based on trailing twelve months sales for WDSY and trailing three-month sales for BLIP on the second anniversary of each agreement, or sooner if the agreements are terminated before the second anniversaries.issued.

 

FS-12

On March 29, 2022, the Company paid off notes payable in the amount of $900,000 plus accrued interest then owing in the amount of $22,145. The notes payable are now satisfied in full. Funds for the payment of the notes payable were derived from a new senior debt financing in the amount of $971,000.

 

In April 2022, the Company issued 250,000 shares of common stock with an aggregate value of $100,000 to two new Board members as consideration for acceptance of their board positions.

 FS-18