UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

MJ Harvest, Inc.

 (Exact name of registrant as specified in its charter)

9205 W. Russell Road, Suite 240, Las Vegas, Nevada89139

(Address of Principal Executive Office) (Zip Code)

(954)519-3115

(Registrant'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:

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 accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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's Common Stock outstanding as of January 14,October 1, 2021 is 22,087,731.31,449,344.

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements. Attached after signature page.

Item 2.  Management'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; and worldwide political stability and economic growth. The words “believe,” “expect,” “anticipate,” “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 November 30, 2020August 31, 2021 compared with the Three Months Ended November 30, 2019August 31, 2020

The narrative comparison of results of operations for the three-month periods ended November 30,August 31, 2021 and 2020, and 2019 is based on the following table.

Revenues decreased, primarily as a result of the limited focus on the debudder product marketing effort. Inincreased 142% in the quarter ended August 31, 2020,2021 compared the same period in 2020. 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 whichThe soils division was acquired at the end of our last fiscal year (the “Elevated Acquisition”). We experienced unanticipated difficulties in obtaining adequate and timely sales and product purchase records from the field operator, and these difficulties diverted management attention from the debudder product marketing effort. The lack of attention to marketingdiscontinued in the first quarter wasended November 30, 2020 and is not reflected in operating results for the decrease in sales in the second quarter.periods presented. (See “Discontinued Operations.”) We anticipate that the marketing focus on the debudder products will increasecontinue now that the soils division has been discontinued.

The three-month period ended November 30, 2020 does not include any revenues or cost of sales from the Elevated Acquisition. The soils division created out of the Elevated Acquisition was discontinued during the three months ended November 30, 2020.

Total operating expenses decreasedincreased in the current period. No impairment expenseperiod, primarily due to increased expenditures for advertising and promotion. In the quarter ended August 31, 2021, we retained two consultants to communicate with prospective funding sources, coordinate press releases, and in general assist with market awareness of the company. The cost of these programs was recognizedpaid partially in the current quarter compared tocash and partially in stock with an impairment expenseaggregate cost of $100,000 in the same period a year earlier.$267,900. Officer and director compensation increased slightly due to increased director fees in 20202021 compared to 2019.with 2020. General and administrative expenses were consistent betweenincreased in the periods.current period compared to a year earlier, primarily driven by travel expenses associated with the Company’s investment in PPK Investment Group, Inc. Professional fees and contract services increaseddecreased in 20202021 compared to 2019with 2020 due to expandedefforts by the Company to move more of the marketing efforts relating to the brand building efforts and improving investor awareness of the Company.target acquisition due diligence costs in-house.

Net loss from continuing operations decreasedincreased in 20202021 compared 2019with 2020 primarily due to the reduction of impairment of intangible assets between periods.increase in advertising and promotion expenses.

Six Months Ended November 30, 2020 compared withNon-Operating Expenses.

In the Six Months Ended November 30, 2019

The narrative comparison of results of operations for the six-month periods ended November 30, 2020 and 2019 is based on the following table.

Revenues from debudder sales decreased, primarily due to the carryover impact of management’s focus in the quarterthree months ended August 31, 20202021, the Company incurred $478,646 in interest expense relating to notes payable from a funding transaction on establishing and building the soils division acquired from Elevated, which was subsequently discontinued. The efforts focusedMarch 22, 2021. This amount included $450,000 in discount on the soils division diverted management’s attention from sales of the debudder products.notes payable.

Other operating expenses were consistent between periods, with the exception of impairment of intangible assets which decreased in the current six-month period.

Net loss from operations decreased in 2020 compared 2019. The biggest driver in this improvement was from the reduction in impairment of intangible assets.

Discontinued Operations.

After operating the soils division for the three months ended August 31, 2020, management undertook an in-depth assessment of the business and concluded that the soils division was not as represented at the time of the acquisition, 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. Common stock issued in the acquisition, aggregating 1,300,000 shares out of 1,400,000 shares originally issued, will bewere cancelled, and the Company agreed to paypaid a $10,000 walk-away fee. The $10,000 walk-away fee is payable in five installments of $2,000 each with the final payment due in early March, 2021. Cancellation of the shares will be registered once the final installment of the walk-away fee is paid. In the aggregate, the Company recognized a loss from discontinued operations of $10,000 in the three and six-month periods ended November 30, 2020.$10,000.

Operating results for the three and six-monththree-month periods from the discontinued operations are reflected in the following table.

Liquidity and Capital Resources

Cash flow used in operating activities for the six-monththree-month period ended November 30, 2020August 31, 2021 was $153,329$164,942 compared to $167,917$90,811 in the comparable period 2019.2020. During the period, our total cash decreased by $27,329.$100,942. Cash to fund the negative cash flow from operations was derived primarily from proceeds of advances from related parties totaling $126,000.$134,000.

Our current operations areThe Company continues to make progress in growing sales of its existing product line, but the business is not yet sufficient to support the existing infrastructure, muchour current operating structure. Our current ratio, which reflects our ability to pay our current debts, is 0.09, based on current assets of which is required in order to maintain public company status.$90,243 and current liabilities of $1,077,072. We continue to seek out potential acquisition candidates with a focus on acquiring an operating company with scale sufficientand distributorships and hope to support all aspects ofsee continuing growth in sales in the company’s operations, including the public company infrastructure.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.

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 operations of $512,385$461,548 and $596,764$216,853 for the six-monththree-month periods ended November 30,August 31, 2021 and 2020, and 2019, respectively, and had an accumulated deficit of $4,694,779$10,038,451 as of November 30, 2020.August 31, 2021. In addition, we have notes payable aggregating $900,000 that will be 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, 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. To date, the disruption hasdid not materially impactedimpact 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.

The effects of the continued outbreak of COVID-19 and related government responses could also 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 our facilities. To date, there have been no material adverse impacts to the Registrants’Company’s operations due to COVID-19.

In addition, the 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.

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.

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 November 30, 2020August 31, 2021 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.

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

We are not a party to any material legal proceedings, and, to the best of our knowledge, no such legal proceedings have been threatened against us.

Item 1A.  Risk Factors

Not required.

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

During the three months ended November 30, 2020,August 31, 2021, the board of directors authorized issuance of an aggregate of 454,857Company issued 6,147,222 shares of unregistered common stock without registration under the Securities Act. Of these, 175,000 shares valued at $80,250 were issued to four non-related parties (279,857 shares) and three related parties thata contractor for investor relations services. An additional 5,972,222 shares valued at $1,791,666 were officers and/or directors (175,000 shares)issued to acquire an additional 15% interest in PPK Investment Group, Inc., bringing the Company’s total ownership of PPK to 25%.  TheAll of the above shares were issued for common stock payable at August 31, 2020 (296,857 shares) and for services rendered to the Company in the period (158,000 shares).  The shares to be issued are valued at the closing priceexempt transactions under Section 4(a)(2) of the common stock in the OTCQB market on the date the shares became issuable.  The shares, when issued were exempt from the registration requirements of Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of the Act since the recipients of the shares arewere persons closely associated with the Company and the issuance of the shares willdid not involve any public offering.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

None.

Item 6.  Exhibits. 

The following documents are included as exhibits to this report:

(a) Exhibits

SIGNATURES

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:  January 19, 2021

MJ Harvest, Inc.

Contents

MJ HARVEST, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

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

MJ HARVEST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

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

 MJ HARVEST, INC.

 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ( DEFICIT)

 (unaudited)

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

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

MJ HARVEST, INC.  

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

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

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. In 2017, theThe Company acquired a 51% interest inowns 100% of G4 Products LLC, (“G4”) which owns the intellectual property for a patented manual debudder product line marketed under the Original 420 Brand as the Debudder Bucket Lid and Edge. The Company organizedalso owns 100% of AgroExports LLC (“Agro”) to servewhich serves as the domestic and international distribution arm for sales of agricultural and horticultural tools and implements, and createdimplements. The Company operates its sales portal website, www.procannagro.com, for online sales.sales of its products.

In September 2018, the Company changed its name to MJ Harvest, Inc. The articles of incorporation with the State of Nevada were amended and restated to reflect the name change with an effective date of September 18, 2018.

On December 7, 2018, the Company acquired the remaining 49% of G4, 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 from sales in Canada. Sales in Canada are currently serviced through a fulfillment center in Toronto.

On April 8, 2020,In the year ending May 31, 2021, the Company finalized an acquisition from Elevated Ag Solutions,expanded its focus to include a minority investment interest in PPK Investment Group, Inc. (“Elevated”PPK”) of several domain names,, a non-compete agreement,vertically integrated cannabis company in Oklahoma that operates as a grower, harvester, processor, manufacturer and customer relationships and began selling a broad range of products, including soils and soil enhancements, through www.weedfarmsupply.com. The Company operated the business through the enddistributor of the first quarter, but dueCountry Cannabis Brand of cannabis products. The investment in PPK represents a shift in focus from an agricultural implements-based business to unforeseen difficulties in obtaining adequate transaction details, and lack of performance of the web site, the Company entered into an agreement to unwind the acquisition. No sales were generated from this acquisition in the quarter ended November 30, 2020. See Note 3 – Intangible Assets.a broader cannabis industry focus.

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 of 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 periodsthree-month period ended November 30, 2020August 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2021.2022.

For further information refer to the financial statements and footnotes thereto in the Company’s audited financial statements for the year ended May 31, 20202021 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, and Agro Canada. All subsidiaries were wholly owned in the periods presented. All intercompany transactions have been eliminated.

Going Concern

The Company has an accumulated deficit as of $4,694,779 which, among otherAugust 31, 2021 of $10,038,451 10,038,451 as of August 31, 2021. In addition, we have notes payable aggregating $900,000 that will be due on March 22, 2022.  These factors raisesraise substantial doubt about the Company'sCompany’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.

The intangible assets owned by G4, consisting of patents and other intangible assets relating to the Debudder Products, serve as a building block for the Company’s efforts to grow revenues. In the six months ended November 30, 2020, the Company generated operating revenue from the Debudder Products but the level of revenue from the current product line has not been sufficient to support profitable operations to date.

Additional acquisitions and business opportunities are also 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 advancescash flows from directors and/or aoperations, private placement or public offering of common stock.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.

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 2018,2020, the FinancialFASB issued 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 Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.Convertible Instruments and Contracts in an Entity’s Own Equity. The update modifiesis to address issues identified as a result of the disclosure requirementscomplexity associated with applying generally accepted accounting principles for recurringcertain financial instruments with characteristics of liabilities and nonrecurring fair value measurements, primarily those surrounding Level 3 fair value measurements and transfers between Level 1 and Level 2.equity. The new standardupdate is effective for fiscal years beginning after December 15, 2019,2021, including interim periods within that reporting period. Adoptionthose fiscal years and with early adoption permitted. Management is evaluating the impact of this update as of June 1, 2020 did not have a material impact on the Company’s consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Clarifying the Interaction Between Topic 808 and Topic 606 Revenue from Contracts with Customers, which clarifies when transactions between participants in a collaborative arrangement are within the scope of Topic 606. Adoption of this update as of June 1, 2020 did not have a material impact 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 recognizes revenue from the sale of products and services in accordance with Accounting Standards Codification (“ASC”) 606,” Revenue Recognition.” At November 30, 2020, the Company operates as one reportable segment.

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, soand 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.

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 areis stated at the lower of cost or net realizable value,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. Inventory consists of our debudder products

Investments

Equity securities are generally measured at fair value. Unrealized gains and losses for equity securities are included in 5-gallon bucket lid and edge models. The soils business has been discontinued andearnings. If an equity security does not have a readily determinable fair value, the Company does not maintainmay 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, inventoryif so, records an impairment loss. Upon sale of any soil products.an equity security, the realized gain or loss is recognized in earnings.

Intangible Assets

Intangible assets are accounted for in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). Intangible asset amounts representare initially recognized at the acquisition date fair values of identifiable intangible assets acquired. The Company’s finite-lived intangible assets consist of patents, a non-compete agreement, and customer relationships. The Company’s indefinite-lived intangible assets consist of acquired domain names.

Finite-lived intangible assets are amortized over their useful lives, which are currently ten years for patents, two years for the non-compete agreement, and ten years for customer relationships.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 life 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.

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 periodsthree months ended November 30, 2020 and MayAugust 31, 2021, the Company had 3,000,000 warrants outstanding which were anti-dilutive due to the net loss recognized in the period. In the three months ended August 31, 2020, 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 November 30, 2020August 31, 2021 and May 31, 2020:2021:

Depreciation expense for the threethree-months ended August 31, 2021 and six-months ended November 30, 2020 was $1,260and 2019 were $1,260 and $2,520, respectively and for the three and six-month periods ended November 30, 2019 were $1,260 and $2,520,$1,260, respectively.

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 was theare five domain names acquired in the Elevated transaction. Both acquisitions are described below. At November 30, 2020August 31, 2021 and May 31, 2020,2021, intangibles assets are:

Amortization expense for the threethree-months ended August 31, 2021 and six-months ended November 30, 2020 was $3,750$3,750 and $20,625,$16,875, respectively. The patents are amortized over their useful lives of ten years. The intangible non-compete agreement and customer relationships were being amortized over their estimated useful livesAmortization of two years and ten years, respectively, commencing June 1, 2020.intangibles is expected to be $15,000 for each of the next five years.

AfterOn May 28, 2021, the Company acquired the assets from Elevated,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.

NOTE 4 – INVESTMENT IN PPK INVESTMENT GROUP, INC.

On March 24, 2021, the Company, operatedas lender, closed a soils division forloan to PPK Investment Group, Inc. (“PPK”) in the quarter ended August 31, 2020. During that period,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 noted unanticipated difficultiesconverted the Note on May 19, 2021 into a 6.2% interest in obtaining accurate transaction dataPPK. 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 a timely basis, and management also estimatedthe closing price of the Company’s shares of $0.64. The Company determined that the business was not properly positioned to become profitable within a reasonable time frame. Accordingly, management elected to discontinue operationsfair value of the soils division during3.8% interest on the three months ended November 30, 2020. 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 Company entered into negotiations with the seller of the assets (Elevated),PPK Agreement includes a put option allowing PPK to unwind the acquisition and return the acquired assets to the seller. On October 30, 2020, a settlement agreement was signed that provided for a return of all acquired assets to Elevated, cancellation of employment and non-compete agreements, return of 1,300,000put shares of the Company’s common stock paidreceived as part of the Company’s investment in PPK, back to Elevatedthe Company at $0.25 per share. The put option protects PPK against a drop in the acquisition, and an agreementmarket 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 to pay $10,000 to Elevated in $2,000 per month installments over five months.any calendar quarter. The cancellation of the common stock issued by the Company will become final upon payment of the full $10,000 which will occur on or before March 5, 2021. For purposes of these financial statements, the Company has recorded the return of the assets, a balance payable of $10,000 net of a $2,000 payment made in November, 2020, and has recorded the cancellation of the shares of stock. If the Company fails to make the payment of $10,000, both parties would be free to pursue other remedies.

Results of Elevated operations for the three and six-month periods ended November 30, 2020 are shown as discontinued operations on the consolidated statement of operations. The results from discontinued operations are as follows:

NOTE 4 – RELATED PARTY TRANSACTIONS

At November 30, 2020put option had no value at August 31, 2021 and May 31, 2020,2021 as the Company’s common stock was trading above $0.25 on that date.

The PPK Agreement gives the Company had advances from related parties totaling $1,095,982 and $829,982 respectively. These amounts are classified as long-term liabilities as itthe right to increase its investment up to a 100% ownership interest in PPK, provided such increased ownership is anticipated theyin compliance with Oklahoma State cannabis licensing requirements. Terms of purchase for increased ownership of PPK will be settledsimilar to those as the initial acquisition with a combination of cash and shares of the Company’s common stock. During

On August 26, 2021, the threeCompany 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 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 six-month periods ended November 30, 2020,570,000 in stock, but by supplemental agreement, PPK agreed to accept payment for 15% in the related party transactions includedform of all common stock of the following: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.

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

The Company would have 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.

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 bear interest at the rate of 12% if paid on or before September 21, 2021. On September 20, 2021, the Company extended the Notes for an additional six months at an interest rate of 15%. The Notes are now due March 21, 2022. The Notes are secured by all assets of the Company.

Interest on the notes is payable in monthly installments of $9,000 on the first of each month with the first payment due on April 1, 2021. An aggregate of $36,300 and $20,700 in interest was incurred and paid on the notes in the three months 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 expiration of the initial term.

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-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%. 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, 2021 for six months and the redemption provision has now expired.

In 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, 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 year ended May 31, 2021 and the three months ended August 31, 2021, the Company recognized $350,000 and $450,000 respectively, in 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.

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.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Agreement with Borders Consulting LLC. 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 7 – RELATED PARTY TRANSACTIONS

NOTE 5 – COMMITMENTS AND CONTINGENCIES

The agreement for the acquisition of G4 during the year endedAt August 31, 2021 and May 31, 2019, included earn-out provisions that provide for2021, the seller to “earn-out” additional compensation dependent upon product sales. The earn-out provisionsCompany had advances from and costs of services provided by related parties totaling $1,451,982 and $1,317,982 respectively. These amounts are applicable to sales of G4’s products for calendar years 2018-2020. The earn-out compensation dueclassified as long-term liabilities as it is based upon a calculation of sales of G4’s products less the Company’s original investment in G4. To date, no earn out compensation has been earned by the prior owner of G4. In order for earnout compensation to be due in calendar year 2020, total sales of the debudder products would need to exceed $344,000. Total sales of debudder products from January 1, 2020 through November 30, 2020 were approximately $107,000 and are not expected to exceed $175,000 for the calendar year. If any earnout is due based on sales in calendar year 2020, the earnoutanticipated they will be paid in common stock of the Company in accordancesettled with the agreement.

The G4 acquisition agreement also contained provisions for additional consideration of $100,000, payable in shares of the Company’s common stock, when the related patent become issued. On October 8, 2019 the patents were issued by the USPTO to G4 and the Company recorded $100,000 as stock payable. The amount was also added to intangible assets – patents (see Note 3). The Company expects to issue shares to satisfy the stock payable balance during the year ending May 31, 2021.

In connection with the acquisitionstock. These amounts consisted of the domain names, non-compete and customer relationships referred to as the Elevated acquisition, the Company agreed to certain contingent value shares and certain earnout shares. These agreements were cancelled when the Company and Elevated agreed to unwind the transaction as described in Note 3.following:

NOTE 68 – SHARE CAPITAL

In the threethree-month period ended August 31, 2021, shares were issued for services and six-month periods ended November 30, 2020 and 2019,investment in the Company issued shares of stock for various purposes as describedamounts set forth in the following tables. In addition, thetable. The Company had obligations to issue sharesan aggregate of $214,221 of common stock atpayable as of August 31, 2021 which is comprised of the end of each period as reflected in the following tables.following: