Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Nov. 30, 2019 | Jan. 14, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | MJ Harvest, Inc. | |
Entity Central Index Key | 0001789330 | |
Document Type | 10-Q | |
Document Period End Date | Nov. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --05-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Interactive Data Current | Yes | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 20,031,268 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 |
Balance Sheets
Balance Sheets - USD ($) | Nov. 30, 2019 | May 31, 2019 |
CURRENT ASSETS: | ||
Cash | $ 11,634 | $ 13,592 |
Accounts receivable | 100 | 9,191 |
Inventory | 44,295 | 56,205 |
Total current assets | 56,029 | 78,988 |
NON-CURRENT ASSETS: | ||
Machinery & equipment - net | 18,399 | 20,919 |
Deposits | 480 | |
Intangible assets, net | 148,334 | 150,000 |
Total non-current assets | 166,733 | 171,399 |
Total Assets | 222,762 | 250,387 |
CURRENT LIABILITIES: | ||
Accounts payable and other liabilities | 15,470 | 15,915 |
LONG-TERM LIABILITIES: | ||
Common stock payable | 218,500 | 127,125 |
Advances from related parties | 705,663 | 539,704 |
Total long-term liabilities | 924,163 | 666,829 |
Total Liabilities | 939,633 | 682,744 |
SHAREHOLDERS' DEFICIENCY | ||
Preferred stock, par value $0.0001, 5,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.0001 par value per share, 50,000,000 shares authorized, 20,007,739 and 18,758,739 issued and outstanding, respectively | 2,001 | 1,876 |
Additional paid in capital | 2,096,611 | 1,784,486 |
Accumulated deficit | (2,815,483) | (2,218,719) |
Total stockhoders' deficit | (716,871) | (432,357) |
Total Liabilities and Stockholders' Deficit | $ 222,762 | $ 250,387 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Nov. 30, 2019 | May 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred Stock Shares Authorized | 0.0001 | 0.0001 |
Preferred Stock Par Value | $ 5,000,000 | $ 5,000,000 |
Preferred Stock Shares Issued | 0 | 0 |
Preferred Stock Shares Outstanding | 0 | 0 |
Common Stock Shares Authorized | 0.0001 | 0.0001 |
Common Stock Par Value | $ 50,000,000 | $ 50,000,000 |
Common Stock Shares Issued | 20,007,739 | 18,758,739 |
Common Stock Shares Outstanding | 20,007,739 | 18,758,739 |
Statements of Operations
Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Income Statement [Abstract] | ||||
REVENUE | $ 67,130 | $ 17,328 | $ 88,090 | $ 35,714 |
Cost of sales | 24,626 | 4,933 | 37,070 | 11,192 |
Gross profit | 42,504 | 12,395 | 51,020 | 24,522 |
Operating expenses: | ||||
Officer and director compensation | 112,500 | 140,000 | 262,500 | 200,000 |
General and administrative | 17,076 | 22,384 | 51,932 | 24,993 |
Impairment of intangible assets | 100,000 | 100,000 | ||
Professional fees and contract services | 128,393 | 88,397 | 233,352 | 175,405 |
Total operating expenses | 357,969 | 250,781 | 647,784 | 400,398 |
NET LOSS FROM OPERATIONS | (315,465) | (238,386) | (596,764) | (375,876) |
Net income attributable to non-controlling interest | (3,995) | (5,730) | ||
NET LOSS ATTRIBUTABLE TO MJ HARVEST, INC. | $ (315,465) | $ (238,386) | $ (596,764) | $ (381,606) |
NET LOSS PER COMMON SHARE - Basic and diluted | $ (0.02) | $ (0.01) | $ (0.03) | $ (0.02) |
WEIGHTED AVERAGE NUMBER OF COMMON | 19,538,464 | 17,655,652 | 19,156,116 | 17,715,214 |
Shareholders Equity
Shareholders Equity - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at May. 31, 2018 | 17,598,739 | ||||
Beginning Balance, Value at May. 31, 2018 | $ 1,760 | $ 1,418,227 | $ (1,256,448) | $ 140,645 | $ 304,184 |
Share Based Compensation, Shares | 119,000 | ||||
Share Based Compensation, Amount | $ 12 | 29,738 | 29,750 | ||
Net loss | (139,225) | 1,735 | (137,490) | ||
Ending Balance, Shares at Aug. 31, 2018 | 17,717,739 | ||||
Ending Balance, Value at Aug. 31, 2018 | $ 1,772 | 1,447,965 | (1,395,673) | 142,380 | 196,444 |
Beginning Balance, Shares at May. 31, 2018 | 17,598,739 | ||||
Beginning Balance, Value at May. 31, 2018 | $ 1,760 | 1,418,227 | (1,256,448) | 140,645 | 304,184 |
Net loss | (381,606) | ||||
Ending Balance, Shares at Nov. 30, 2018 | 17,867,739 | ||||
Ending Balance, Value at Nov. 30, 2018 | $ 1,787 | 1,485,450 | (1,638,054) | 146,375 | (4,442) |
Beginning Balance, Shares at Aug. 31, 2018 | 17,717,739 | ||||
Beginning Balance, Value at Aug. 31, 2018 | $ 1,772 | 1,447,965 | (1,395,673) | 142,380 | 196,444 |
Share Based Compensation, Shares | 150,000 | ||||
Share Based Compensation, Amount | $ 15 | 37,485 | 37,500 | ||
Net loss | (242,381) | 3,995 | (238,386) | ||
Ending Balance, Shares at Nov. 30, 2018 | 17,867,739 | ||||
Ending Balance, Value at Nov. 30, 2018 | $ 1,787 | 1,485,450 | (1,638,054) | $ 146,375 | (4,442) |
Beginning Balance, Shares at May. 31, 2019 | 18,758,739 | ||||
Beginning Balance, Value at May. 31, 2019 | $ 1,876 | 1,784,486 | (2,218,719) | (432,357) | |
Share issued for common stock payable, Shares | 353,000 | ||||
Share issued for common stock payable, Value | $ 35 | 88,215 | 88,250 | ||
Net loss | (281,299) | (281,299) | |||
Ending Balance, Shares at Aug. 31, 2019 | 19,111,739 | ||||
Ending Balance, Value at Aug. 31, 2019 | $ 1,911 | 1,872,701 | (2,500,018) | (625,406) | |
Beginning Balance, Shares at May. 31, 2019 | 18,758,739 | ||||
Beginning Balance, Value at May. 31, 2019 | $ 1,876 | 1,784,486 | (2,218,719) | (432,357) | |
Net loss | (596,764) | ||||
Ending Balance, Shares at Nov. 30, 2019 | 20,007,739 | ||||
Ending Balance, Value at Nov. 30, 2019 | $ 2,001 | 2,096,611 | (2,815,483) | (716,871) | |
Beginning Balance, Shares at Aug. 31, 2019 | 19,111,739 | ||||
Beginning Balance, Value at Aug. 31, 2019 | $ 1,911 | 1,872,701 | (2,500,018) | (625,406) | |
Share Based Compensation, Shares | 740,500 | ||||
Share Based Compensation, Amount | $ 75 | 185,050 | 185,125 | ||
Share issued for common stock payable, Shares | 155,500 | ||||
Share issued for common stock payable, Value | $ 15 | 38,860 | 38,875 | ||
Net loss | (315,465) | (315,465) | |||
Ending Balance, Shares at Nov. 30, 2019 | 20,007,739 | ||||
Ending Balance, Value at Nov. 30, 2019 | $ 2,001 | $ 2,096,611 | $ (2,815,483) | $ (716,871) |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 6 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES : | ||
Net loss | $ (596,764) | $ (375,876) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 4,186 | 1,670 |
Share-based Compensation | 185,125 | 67,250 |
Common stock payable for compensation | 118,500 | 149,750 |
Impairment of intangible assets | 100,000 | |
Changes in operating assets and liabilities | ||
Accounts receivable | 9,091 | (35,714) |
Deposits | 480 | |
Inventory | 11,910 | (29,790) |
Accounts payable and other current liabilities | (445) | (3,113) |
NET CASH (USED IN) OPERATING ACTIVITIES | (167,917) | (225,823) |
CASH FLOWS FROM INVESTING ACTIVITIES : | ||
Purchases of machinery and equipment | (19,209) | |
NET CASH (USED IN) INVESTING ACTIVITIES | (19,209) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from advances by related parties | 165,959 | 253,000 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 165,959 | 253,000 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | (1,958) | 7,968 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 13,592 | 3,277 |
CASH AND CASH EQUIVALENTS END OF YEAR | 11,634 | 11,245 |
Non-cash financing and investing activities: | ||
Shares issued for common stock payable | 127,125 | |
Shares payable for intangible assets | $ 100,000 |
NATURE OF BUSINESS AND SIGNIFIC
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Nov. 30, 2019 | |
Accounting Policies [Abstract] | |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company develops, acquires, and distributes agricultural and horticultural tools and implements for sale primarily to growers and operators in the hemp and cannabis space. In 2017, the Company acquired a 51% interest in G4 Products LLC, which owns the intellectual property for a manual debudder product line marketed under the Original 420 Brand as the Debudder Bucket Lid and Edge. The Company also organized AgroExports LLC to serve as the international distribution arm for sales of agricultural and horticultural tools and implements, and created www.procannagro.com for online sales of its products. In September 2018, the Company filed a Notification of Change with FINRA and OTC Markets to obtain approval of a name change to MJ Harvest, Inc. and a change of trading symbol to MJHI. Following approval of the change by FINRA and OTC Markets, the Company filed amended and restated articles of incorporation with the State of Nevada to reflect the name change with an effective date of September 18, 2018. On December 7, 2018, the Company acquired the remaining 51% of G4 Products LLC, making it a wholly owned subsidiary. On April 10, 2019, the Company formed AgroExports.CA ULC (“Agro Canada”), a wholly owned Canadian subsidiary in order to facilitate online payments in the Canadian Market. Sales in Canada are currently serviced through a fulfillment center in Toronto. 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, 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 presentation of the interim financial statements have been included. Operating results for the three and six-month periods ended November 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2020. For further information refer to the financial statements and footnotes thereto in the Form S-1 filed with the SEC on October 2, 2019. The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries AgroExports LLC (“Agro”), G4 Products LLC (“G4”), and AgroExports.CA ULC. G4 was a 51% owned subsidiary in 2018 and the Statements of Operations for the three and six-month periods ended November 30, 2018 include the net loss of the non-controlling interest in G4, represented by the non-controlling interest’s proportionate share of its ownership in G4. All intercompany transactions have been eliminated. Going Concern The Company has an accumulated deficit of $2,815,483 which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon 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. In the year ended May 31, 2018, the Company acquired a 51% interest in G4, a controlled subsidiary that owned certain intangible assets and in the year ended May 31, 2019, the Company acquired the remaining 49% of G4 and thereby became the sole owner of the intangible assets. The intangible assets serve as a building block for the Company’s efforts to grow revenues. In the year ended 2019, the Company began generating operating revenue but the level of revenue from the current product line is expected to not be sufficient to support profitable operations in the fiscal year ending May 31, 2020. Additional acquisitions and business opportunities are under consideration but the Company has not reached agreement with any acquisition candidates or business opportunities. Management intends to finance operating costs over the next twelve months with advances from directors and/or a private placement or public offering of common stock. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. 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 Leases: February 2016, No. 2016 02 842 December 15, 2018, Nonemployee compensation: 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. Fair Value Measurements GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 Level 2 Level 3 Financial Instruments The carrying amounts of cash and advances from related parties reported on the balance sheets approximate their fair value as of November 30, 2019 and May 31, 2019. Cash and cash equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less when acquired to be cash equivalents. Revenue Recognition Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company recognizes revenue from the sale of products and services in accordance with ASC 606,” Revenue Recognition · identify the contract with a customer; · identify the performance obligations in the contract; · determine the transaction price; · allocate the transaction price to performance obligations in the contract; and · recognize revenue as the performance obligation is satisfied. 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. 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 are stated at the lower of cost or net realizable value, 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. Machinery & Equipment Machinery and equipment consists of molds used in the manufacturing process and are recorded at cost. Maintenance, repairs, and minor replacements are expensed as incurred. Gains or losses on disposition or retirement of property and equipment are recognized in operating expenses. Depreciation is computed using the straight-line method over the estimated useful lives of the molds which is five years. Accounting for Acquisitions We recognize and measure identifiable assets acquired and liabilities assumed in acquired entities in accordance with ASC 805, Business Combinations Intangible Assets We account for intangible assets in accordance with ASC 350 “Intangibles-Goodwill and Other” Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense is included as a component of cost of product revenue. For the three and six months ended November 30, 2019, the Company has recognized $1,666 in amortization expense for its intangible assets. The Company’s intangible assets consist primarily of two patents which issued on October 8, 2019. The Patents expire on October 8, 2034 and the Company is amortizing these intangible assets over 180 months commencing in October 2019. Income taxes The Company utilizes the liability method of accounting for income taxes which requires that deferred tax assets and liabilities be recorded to reflect the future tax consequences of temporary differences between the book and tax basis of various assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Additionally, deferred tax assets are evaluated, and a valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. There can be no assurance that the Company’s future operations will produce sufficient earnings so that the deferred tax asset can be fully utilized. The Company currently maintains a full valuation allowance against net deferred tax assets. 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, potentially dilutive common stock equivalents, if any, are not considered, as their effect would be anti-dilutive. During the periods ended November 30, 2019 and 2018, the Company had no common stock equivalents outstanding. Share-Based Payments The fair value of common shares is determined by the management by considering a number of objective and subjective factors including data from other comparable companies, sales of common shares to unrelated third parties, the fair value of services provided for shares, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, among other factors. The fair value of the underlying common shares will be determined by management until such time as the shares are listed on an established stock exchange, national market system or other quotation system and the trading volume is sufficient to support a determination that an active market exists. The Company recognizes the fair value of goods or services received in share-based payment transactions based upon the fair value of the goods or services received when the fair value of the goods and services is a more reliable measurement of fair value than the equity instruments issued. |
ACQUISITIONS OF G4
ACQUISITIONS OF G4 | 6 Months Ended |
Nov. 30, 2019 | |
Notes to Financial Statements | |
ACQUISITIONS OF G4 | NOTE 2 –ACQUISITIONS OF G4 On November 17, 2017, the Company acquired a controlling 51% interest in G4 Products, LLC (“G4”), a newly formed Nevada limited liability company that owned a provisional patent on a device used in stripping buds from plants (the Product) from Original Ventures, Inc. (“Original Ventures”). On December 7, 2018, the Company acquired the remaining 49% interest in G4 from Original Ventures. At the time of the second acquisition of the interest in G4, the assets of G4 consisted primarily of a provisional U.S. Patent application and certain other international patent applications. Two of the patents were approved and issued on October 8, 2019. The acquisition agreement for the initial purchase of 51% of G4 and for the follow-on acquisition of the remaining 49% interest in G4 included certain earnout provisions that are described in Note 4 – Commitments and Contingencies. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Nov. 30, 2019 | |
Notes to Financial Statements | |
RELATED PARTY TRANSACTIONS | NOTE 3 – RELATED PARTY TRANSACTIONS At November 30, 2019, and May 31, 2019, the Company had advances from related parties totaling $705,663 and $539,704, 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: · As of November 30, 2019 and May 31, 2019, the Company owed Mr. Jerry Cornwell, a director, $15,696. · As of November 30, 2019 and May 31, 2019, the Company owed David Tobias, a majority shareholder and director, $75,553. · As of November 30, 2019 and May 31, 2019, Patrick Bilton, a director and the Company’s Chief Executive Officer, was owed $566,959 and $401,000, respectively, for advances to the Company for operating capital and an additional $47,455 at November 30, 2019 and May 31, 2019, for expenses paid on behalf of the Company. Collectively, Mr. Bilton is owed $614,414 and $448,455, respectively, as of November 30, 2019 and May 31, 2019. The Company also owed Mr. Cornwell $818 for expenses he paid on behalf of the Company in prior periods. This amount is classified as an account payable at November 30, 2019, and May 31, 2019. At November 30, 2019 and May 31, 2019, the Company had common stock payable totaling $218,500 and $127,125, respectively. Of these amounts, $90,000 and $75,000, respectively, were payable to related parties. These amounts consisted of the following: · The Company had common stock payable to Mr. Cornwell of $5,000 and -0- at November 30, 2019 and May 31, 2019, respectively, for services as a director. · The Company also had common stock payable to Mr. Tobias of $5,000 and -0- at November 30, 2019 and May 31, 2019, respectively, for services as a director. · The Company also had common stock payable to Mr. Bilton of $65,000 and $60,000 at November 30, 2019 and May 31, 2019, respectively, for services as an officer and director. · As of November 30, 2019 and May 31, 2019, the Company had common stock payable to Nexit, Inc, an entity solely owned by Brad Herr, Chief Financial Officer, of $15,000 and $15,000, respectively, for services as an officer of the Company. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Nov. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 4 – COMMITMENTS AND CONTINGENCIES The agreement for the acquisition of G4 from Original Ventures includes earn-out provisions that provide for Original Ventures to “earn-out” additional compensation dependent upon product sales. As of November 30, 2019, and May 31, 2019, no earnout compensation was owed by G4 to Original Ventures. The earn-out provision is applicable to sales of G4’s products for calendar years 2018-2020. The earn-out compensation due Original Ventures is based upon a calculation of sales of G4’s products less the Company’s original investment in G4. If any earnout is due to Original Ventures based on sales in calendar years 2019 and 2020, the earnout will be paid in common stock of the Company in accordance with the agreement. In addition, an earn-out compensation payment of $100,000, payable in shares of the Company’s common stock, became due to Original Ventures upon the issuance of the non-provisional patent to G4, which occurred on October 8, 2019. This amount is accrued as of November 30, 2019 and is classified as common stock payable. The $100,000 was capitalized as intangible assets at the time of the accrual and immediately impaired based on the impairment analysis performed in the fiscal year ended May 31, 2019. |
SHARE CAPITAL
SHARE CAPITAL | 6 Months Ended |
Nov. 30, 2019 | |
Compensation Related Costs [Abstract] | |
SHARE CAPITAL | NOTE 5 – SHARE CAPITAL The authorized capital of the Company consists of 50,000,000 common shares with a par value of $0.0001 per share, and 5,000,000 preferred shares with a par value of $0.0001 per share. As of November 30, 2019 and May 31, 2018, there were 20,007,739 and 18,758,739, respectively, of shares of common stock outstanding and there were no preferred shares issued and outstanding. In the three and six-month periods ended November 30, 2019, shares of common stock were issued to related and non-related parties for services performed. The following table breaks out the issuances by type of transaction and by related and unrelated parties: Three months ended Six months ended Issued to: November 30, 2019 November 30, 2019 Related parties Shares Amount Shares Amount Patrick Bilton 366,667 $ 91,666 540,000 $ 135,000 Brad Herr 80,000 20,000 120,000 30,000 Jerry Cornwell 46,666 11,667 60,000 15,000 David Tobias 46,666 11,667 60,000 15,000 Unrelated parties 356,001 89,000 469,000 117,250 Total issued 896,000 $ 224,000 1,249,000 $ 312,250 Common stock Payable The Company had an aggregate of $218,500 of common stock payable as of November 30, 2019. Of this amount, $100,000 relates to amounts due to Original Ventures, Inc upon issuance of patents, and $118,500 was for services rendered in the current period. This will result in the issuance of 874,000 shares of common stock during the year ending May 31, 2020. Of the total, $90,000 was payable to related parties. See Note 3. In the three and six-month periods ended November 30, 2018 shares of common stock were issued to related and non-related parties for services performed in the year ended May 31, 2019. The following table breaks out the issuances by related and unrelated parties: Three months ended Six months ended Issued to: November 30, 2019 November 30, 2019 Related parties Patrick Bilton 366,667 $ 91,666 540,000 $ 135,000 Brad Herr 80,000 20,000 120,000 30,000 Jerry Cornwell 46,666 11,667 60,000 15,000 David Tobias 46,666 11,667 60,000 15,000 Unrelated parties 356,001 89,000 469,000 117,250 Total issued 896,000 $ 224,000 1,249,000 $ 312,250 Common stock Payable The Company also had an aggregate of $127,125 of common stock payable as of May 31, 2019 that resulted in the issuance of 508,500 shares of common stock in the six months ended November 30, 2019. Of the total, $75,000 (300,000 shares) were issued to related parties. See Note 3. Shares issued to non-related parties in the three and six-month periods ended November 30, 2019 and 2018 were issued to non-employee contractors for services rendered during the periods. Share based compensation expense is recognized on non-employee awards on the date granted and based upon management’s estimate of fair value of the securities issued. The Company estimated the fair value of the common stock to be $0.25 per share at the times of issuance. The Company believes that no active market for the Company’s securities currently exists and estimates the fair value of its common stock based upon the most recent cash sales of shares. |
NON-CONTROLLING INTEREST
NON-CONTROLLING INTEREST | 6 Months Ended |
Nov. 30, 2019 | |
Noncontrolling Interest [Abstract] | |
NON-CONTROLLING INTEREST | NOTE 6 – NON-CONTROLLING INTEREST In the year ended May 31, 2018, the Company acquired a 51% interest in G4 Products LLC. The Company recognized the 49% non-controlling interest in the ownership of G4 as of the date of the acquisition. The non-controlling interest was reduced by $27,492 during the year ended May 31, 2018 representing its share of the losses incurred that were attributable to the minority interest. In December 2018, the Company acquired the remaining 49% interest in G4 for aggregate consideration of $70,000 (see Note 2). During the year ended May 31, 2019, the non-controlling interest earned $5,730 of net income prior to the Company’s acquisition of the remaining 49%. As a result of the acquisition, the Company now owns 100% of G4. The non-controlling interest equity balance of $146,375 less the consideration paid was eliminated through additional paid-in capital as a result. |
IMPAIRMENT OF INTANGIBLE ASSETS
IMPAIRMENT OF INTANGIBLE ASSETS | 6 Months Ended |
Nov. 30, 2019 | |
Notes to Financial Statements | |
IMPAIRMENT OF INTANGIBLE ASSETS | NOTE 7 – IMPAIRMENT OF INTANGIBLE ASSETS For the year ended May 31, 2019, the Company performed a year-end impairment analysis of the carrying value of its intangible assets. The analysis was triggered by the acquisition of the non-controlling interest during the year ended May 31, 2019 and the lower than expected revenues generated from sales of its products during the year. The analysis included an evaluation of expected future revenues and earnings from the intangible assets and determined that a reasonable value for the intangible assets was $150,000 at May 31, 2019, and as a result the Company recorded an impairment loss of $178,137 for the year ended May 31, 2019. During the three months ended November 30, 2019, the Company acquired an additional $100,000 of intangible assets as a result of an earnout due upon issuance of patents. The patents were issued on October 8, 2019 and represent the same intangible assets that were impaired at May 31, 2019. As a result, management determined that a further impairment equivalent to the earnout due on issuance of the patents ($100,000) was warranted. Upon issuance of the patents, the Company also began amortizing the patents over the 15-year life of the patents. As of November 30, 2019, the carrying value of intangible assets is $148,334. Based on future earning potential from the intangible assets, the length of time remaining on the patents, and the historical sales of the product to date, management believes that the current recorded value of the intangible assets totaling $148,334 is recoverable. The Company will continue to evaluate the intangible assets for additional impairments as appropriate in future periods. |
REVENUE
REVENUE | 6 Months Ended |
Nov. 30, 2019 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
REVENUE | NOTE 8 – REVENUE The Company’s product revenue is currently generated exclusively though sales of its debudder products. The Company’s customers, to which trade credit terms are extended, consist of foreign and domestic companies. For the three and six-month periods ended November 30, 2019, domestic sales were $65,430 and $86,390, respectively, and international sales were $1,700 and $1,700, respectively. International sales accounted for 3% and 2% of total sales in the three and six-month periods ended November 30, 2019, respectively. For the three and six-month periods ended November 30, 2018, domestic sales were $17,328 and $35,714, respectively, and no sales were made to international customers. Shipments to one customer during the three and six-month periods ended November 30, 2019 totaled $30,226 and $45,013, respectively, or 45% and 51%, respectively, of sales in those periods. As of November 30, 2019, there were no accounts receivable from this customer. In the three and six-month periods ended November 30, 2018, all sales of $17,328 and $35,714, respectively, were through one distributor in domestic markets. When the Company acquired the remainder of G4 in December 2018, the Company ended the distributor relationship with this distributor and began servicing all domestic sales, including sales to distributors, internally. |
NATURE OF BUSINESS AND SIGNIF_2
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Nov. 30, 2019 | |
Accounting Policies [Abstract] | |
Nature of Business | Nature of Business The Company develops, acquires, and distributes agricultural and horticultural tools and implements for sale primarily to growers and operators in the hemp and cannabis space. In 2017, the Company acquired a 51% interest in G4 Products LLC, which owns the intellectual property for a manual debudder product line marketed under the Original 420 Brand as the Debudder Bucket Lid and Edge. The Company also organized AgroExports LLC to serve as the international distribution arm for sales of agricultural and horticultural tools and implements, and created www.procannagro.com for online sales of its products. In September 2018, the Company filed a Notification of Change with FINRA and OTC Markets to obtain approval of a name change to MJ Harvest, Inc. and a change of trading symbol to MJHI. Following approval of the change by FINRA and OTC Markets, the Company filed amended and restated articles of incorporation with the State of Nevada to reflect the name change with an effective date of September 18, 2018. On December 7, 2018, the Company acquired the remaining 51% of G4 Products LLC, making it a wholly owned subsidiary. On April 10, 2019, the Company formed AgroExports.CA ULC (“Agro Canada”), a wholly owned Canadian subsidiary in order to facilitate online payments in the Canadian Market. Sales in Canada are currently serviced through a fulfillment center in Toronto. |
Basis of Presentation and Consolidation | 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, 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 presentation of the interim financial statements have been included. Operating results for the three and six-month periods ended November 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2020. For further information refer to the financial statements and footnotes thereto in the Form S-1 filed with the SEC on October 2, 2019. The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries AgroExports LLC (“Agro”), G4 Products LLC (“G4”), and AgroExports.CA ULC. G4 was a 51% owned subsidiary in 2018 and the Statements of Operations for the three and six-month periods ended November 30, 2018 include the net loss of the non-controlling interest in G4, represented by the non-controlling interest’s proportionate share of its ownership in G4. All intercompany transactions have been eliminated. |
Going Concern | Going Concern The Company has an accumulated deficit of $2,815,483 which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon 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. In the year ended May 31, 2018, the Company acquired a 51% interest in G4, a controlled subsidiary that owned certain intangible assets and in the year ended May 31, 2019, the Company acquired the remaining 49% of G4 and thereby became the sole owner of the intangible assets. The intangible assets serve as a building block for the Company’s efforts to grow revenues. In the year ended 2019, the Company began generating operating revenue but the level of revenue from the current product line is expected to not be sufficient to support profitable operations in the fiscal year ending May 31, 2020. Additional acquisitions and business opportunities are under consideration but the Company has not reached agreement with any acquisition candidates or business opportunities. Management intends to finance operating costs over the next twelve months with advances from directors and/or a private placement or public offering of common stock. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. |
Use of Estimates | 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 | Reclassifications Certain prior period amounts have been reclassified to conform with the current period presentation. |
New Accounting Standards | New Accounting Standards Leases: February 2016, No. 2016 02 842 December 15, 2018, Nonemployee compensation: 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. |
Fair Value Measurements | Fair Value Measurements GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 Level 2 Level 3 |
Financial Instruments | Financial Instruments The carrying amounts of cash and advances from related parties reported on the balance sheets approximate their fair value as of November 30, 2019 and May 31, 2019. |
Cash and cash equivalents | Cash and cash equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less when acquired to be cash equivalents. |
Revenue Recognition | Revenue Recognition Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company recognizes revenue from the sale of products and services in accordance with ASC 606,” Revenue Recognition · identify the contract with a customer; · identify the performance obligations in the contract; · determine the transaction price; · allocate the transaction price to performance obligations in the contract; and · recognize revenue as the performance obligation is satisfied. 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. 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 Inventory consists of purchased products and are stated at the lower of cost or net realizable value, 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. |
Machinery & Equipment | Machinery & Equipment Machinery and equipment consists of molds used in the manufacturing process and are recorded at cost. Maintenance, repairs, and minor replacements are expensed as incurred. Gains or losses on disposition or retirement of property and equipment are recognized in operating expenses. Depreciation is computed using the straight-line method over the estimated useful lives of the molds which is five years. |
Accounting for Acquisitions | Accounting for Acquisitions We recognize and measure identifiable assets acquired and liabilities assumed in acquired entities in accordance with ASC 805, Business Combinations |
Intangible Assets | Intangible Assets We account for intangible assets in accordance with ASC 350 “Intangibles-Goodwill and Other” Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense is included as a component of cost of product revenue. For the three and six months ended November 30, 2019, the Company has recognized $1,666 in amortization expense for its intangible assets. The Company’s intangible assets consist primarily of two patents which issued on October 8, 2019. The Patents expire on October 8, 2034 and the Company is amortizing these intangible assets over 180 months commencing in October 2019. |
Income Taxes | Income taxes The Company utilizes the liability method of accounting for income taxes which requires that deferred tax assets and liabilities be recorded to reflect the future tax consequences of temporary differences between the book and tax basis of various assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Additionally, deferred tax assets are evaluated, and a valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. There can be no assurance that the Company’s future operations will produce sufficient earnings so that the deferred tax asset can be fully utilized. The Company currently maintains a full valuation allowance against net deferred tax assets. |
Net Earnings (Loss) Per Share | 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, potentially dilutive common stock equivalents, if any, are not considered, as their effect would be anti-dilutive. During the periods ended November 30, 2019 and 2018, the Company had no common stock equivalents outstanding. |
Share-Based Payments | Share-Based Payments The fair value of common shares is determined by the management by considering a number of objective and subjective factors including data from other comparable companies, sales of common shares to unrelated third parties, the fair value of services provided for shares, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, among other factors. The fair value of the underlying common shares will be determined by management until such time as the shares are listed on an established stock exchange, national market system or other quotation system and the trading volume is sufficient to support a determination that an active market exists. The Company recognizes the fair value of goods or services received in share-based payment transactions based upon the fair value of the goods or services received when the fair value of the goods and services is a more reliable measurement of fair value than the equity instruments issued. |
SHARE CAPITAL (Tables)
SHARE CAPITAL (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Share Capital | |
Schedule of common stock issued | Three months ended Six months ended Issued to: November 30, 2019 November 30, 2019 Related parties Shares Amount Shares Amount Patrick Bilton 366,667 $ 91,666 540,000 $ 135,000 Brad Herr 80,000 20,000 120,000 30,000 Jerry Cornwell 46,666 11,667 60,000 15,000 David Tobias 46,666 11,667 60,000 15,000 Unrelated parties 356,001 89,000 469,000 117,250 Total issued 896,000 $ 224,000 1,249,000 $ 312,250 Three months ended Six months ended Issued to: November 30, 2018 November 30, 2018 Related parties Shares Amount Shares Amount Brad Herr — $ — 60,000 $ 15,000 Unrelated parties 150,000 37,500 209,000 52,250 Total issued 150,000 $ 37,500 269,000 $ 67,250 |
NATURE OF BUSINESS AND SIGNIF_3
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | Nov. 30, 2019 | May 31, 2019 |
Nature Of Business And Significant Accounting Policies | ||
Accumulated Deficit | $ (2,815,483) | $ (2,218,719) |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Nov. 30, 2019 | May 31, 2019 |
Related Party Transactions | ||
Advances from related parties | $ 705,663 | $ 539,704 |
SHARE CAPITAL (Details)
SHARE CAPITAL (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Nov. 30, 2019 | Nov. 30, 2018 | Aug. 31, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Share Based Compensation, Amount | $ 185,125 | $ 37,500 | $ 29,750 | ||
Patrick Bilton | |||||
Share Based Compensation, Shares | 366,667 | 540,000 | |||
Share Based Compensation, Amount | $ 91,666 | $ 135,000 | |||
Brad Herr | |||||
Share Based Compensation, Shares | 80,000 | 120,000 | 60,000 | ||
Share Based Compensation, Amount | $ 20,000 | $ 30,000 | $ 15,000 | ||
Jerry Cornwell | |||||
Share Based Compensation, Shares | 46,666 | 60,000 | |||
Share Based Compensation, Amount | $ 11,667 | $ 15,000 | |||
David Tobias | |||||
Share Based Compensation, Shares | 46,666 | 60,000 | |||
Share Based Compensation, Amount | $ 11,667 | $ 15,000 | |||
Unrelated parties | |||||
Share Based Compensation, Shares | 356,001 | 150,000 | 469,000 | 209,000 | |
Share Based Compensation, Amount | $ 89,000 | $ 37,500 | $ 117,250 | $ 52,250 | |
Total Issued | |||||
Share Based Compensation, Shares | 896,000 | 150,000 | 1,249,000 | 269,000 | |
Share Based Compensation, Amount | $ 224,000 | $ 37,500 | $ 312,250 | $ 67,250 |