UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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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)

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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 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 April 1, 2020,December 30, 2021 is 23,715,076.

33,068,952.

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.

As used herein, the terms “Company”, “MJHI”, “we”, “us” and “our” refer to MJ Harvest, Inc., a Nevada corporation.

Results of Operations

Three Months Ended February 28,November 30, 2021 compared with the Three Months Ended February 29,November 30, 2020

The narrative comparison of results of operations for the three-month periods ended February 28,November 30, 2021 and February 29, 2020, is based on the following table.

Revenues decreased, primarily as a result ofincreased 14% in the limited focusquarter ended November 30, 2021 compared with the same period in 2020. The increase in the current quarter was largely due to direct sales efforts by our sales team. Management refocused sales efforts on the debudder product marketing effort.products after discontinuing operations of the soils business acquired from Elevated Ag Solutions, Inc. (“Elevated”) in early October 2020. In the quarter ended August 31, 2020,prior period, management had expended considerable time and effort on the soils division. The soils division which 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 and third quarters. This third quarter carryover effect is expected to lessen over time as management rebuilds the inertia of the debudder marketing focus.periods presented above (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 February 28, 2021 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 increased in the current period. No impairment expense was recognizedperiod primarily due to increased expenditures for advertising and promotion. In the three months ended November 30, 2021, we participated in the current quarter comparedMJBIZCON trade show in Las Vegas and the increase in advertising for the period is attributable to an impairment expense of $100,000 in the same period a year earlier.trade show expenses. Officer and director compensation increased due to increased director fees in 2021 compared with 2020. General and administrative expenses were consistent between the periods. Professionalprofessional fees and contract services increased in 2021 compared with 2020 due to expanded marketing efforts relating to the brand building and improving investor awareness of the Company, while also seeking to expand our business through acquisition of opportunities and the attendant due diligence costs associated with business evaluations.

Net loss from continuing operations decreased in 2021 compared with 2020, primarily due to the reductionappointment of impairmentone of intangible assets between periods.our contractors as a director in the current period and the associated reclassification of his contract fees to “Officer and director compensation.” General and administrative expenses increased in the current period compared to a year earlier, primarily driven by travel expenses associated with the Company’s investment in PPK Investment Group, Inc., and other merger and acquisition work performed during the current period.

Net loss from continuing operations increased in 2021 compared with 2020 primarily due to the increase in advertising and promotion expenses.

NineSix Months Ended February 28,November 30, 2021 compared with the NineSix Months Ended February 29,November 30, 2020

The narrative comparison of results of operations for the nine-monthsix-month periods ended February 28,November 30, 2021 and February 29, 2020, is based on the following table.

Revenues from debudder salesincreased 68% in the nine monthssix-month period ended February 28,November 30, 2021 decreased when compared towith 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 The decrease is largely attributable to the carryover impact of management’s focussoils division was discontinued in the quarter ended August 31,November 30, 2020 and is not reflected in operating results for the periods presented above (see “Discontinued Operations”). We anticipate that the marketing focus on establishing and buildingthe debudder products will continue now that the soils division acquired from Elevated, which was subsequentlyhas been discontinued. The efforts focused on the soils division diverted management’s attention from sales of the debudder products in the first fiscal quarter ended August 31, 2020, and the resulting loss of momentum impacted the second and third quarters as well.

OtherTotal operating expenses were consistent between periods, with the exception of impairment of intangible assets which decreasedincreased in the current nine-month period.

Net loss from operations decreasedperiod, primarily due to increased expenditures for advertising and promotion. In the six-month period ended November 30, 2021, we retained a consultant to communicate with prospective funding sources, coordinate press releases, and in general assist with market awareness of the nine monthscompany. The cost of 2021 comparedthis program was paid partially in cash and partially in stock with 2020. The decreasean aggregate cost of $250,250. Additional advertising expenses were incurred for trade show expenses in connection with our attendance at the loss from operations reflects an offset of increasesMJBIZCON trade show in officerLas Vegas. Officer and director compensation increased and professional fees and contract services against a decreasedecreased in impairment of intangible assets in the nine months of 2021 compared with 2020.

2020, primarily due to the appointment of one of our contractors as a director in the current period and the associated reclassification of his contract fees to “Officer and director compensation.” General and administrative expenses increased in the 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 decreased in 2021 compared with 2020 due to efforts by the Company to move more of the marketing efforts and target acquisition due diligence costs in-house.

Net loss from continuing operations increased in 2021 compared with 2020 primarily due to the increase in advertising and promotion expenses.

Non-Operating Expenses.

In the three and six-month periods ended Novmeber 30, 2021, the Company incurred $132,812 and $611,458, respectively, in interest and finance expense relating to notes payable from a funding transaction on March 22, 2021. The six month amount included $550,000 in discount on notes payable. The Company had no comparable outstanding debt in the three and six-month periods ended November 30, 2020.

Discontinued Operations.

AfterIn the prior year, after operating the soils division for first four months of the three monthsyear ended AugustMay 31, 2020,2021, management undertook an in-depth assessment of the businessElevated Ag Solutions, Inc. (“Elevated”) and concluded that the soils division was not as represented at the time of the acquisition in January 2020, was not likely to ever operate profitably without significant revisions to operating methods and changes in personnel and was likely to create significant business questions and concerns should it be continued. Accordingly, management elected to discontinue the business acquired from Elevated. Upon discontinuation of the Elevated business, the Company entered into a settlement and unwinding agreement with Elevated and returned all assets acquired in the transaction to Elevated. CommonDuring the six months ended November 30, 2020, the 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 recorded once the final installment of the walk-away fee is paid. The final payment was made on March 5, 2021. In the aggregate, the Company recognized a loss from discontinued operations of $10,000 in the nine-month period ended February 28, 2021.$10,000.

Operating results for the three and nine-monthsix-month periods ended November 30, 2020 from the discontinued operations are reflected in the following table.

Liquidity and Capital Resources

Cash flow used in operating activities for the nine-monthsix-month period ended February 28,November 30, 2021 was $175,329$252,786 compared with $231,220to $153,329 in the comparable period 2020. During the period, our total cash decreased by $31,329.$99,286. Cash to fund the negative cash flow from operations was derived primarily from proceeds of advances from related parties totaling $144,000.$153,500.

Our historic operations haveThe Company continues to make progress in growing sales of its existing product line, but the business is not beenyet sufficient to support the existing infrastructure, muchour current operating structure. Our current working capital is negative $1,159,061, based on current assets of which is required in order to maintain public company status. Subsequent to February, 28, 2021, we entered into a debt funding transaction$68,226 and made a loan to an operating cannabis company as described in more detail below. The debt funding transaction and the loan are steps in the targeted acquisitioncurrent liabilities of the operating company doing business as Country Cannabis, and we expect that the eventual acquisition of Country Cannabis will improve our ability to support the infrastructure costs of maintaining our public company status.$1,227,287. We also continue to seek out potential acquisition candidates with a focus on acquiring additional operating companies 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 heavily dependentreliant 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.

We have maintained active operations as a manufacturer and distributor of the debudder product line since 2018. We do not consider the Company to be a shell company as that term is defined in the Securities Act of 1933, as amended.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  We incurred net losses from continuing operations of $786,616$489,877 and $799,981$1,430,071 for the nine-monththree and six-month periods ended February 28,November 30, 2021, and 2019, respectively, and had an accumulated deficit of $4,969,010$10,528,328 as of February 28,November 30, 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.

On  March 22, 2021, the Company, as the borrower, entered into agreements with AJB Capital Investments LLC and SDT Holdings LLC for the sale 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.COVID-19

The Notes provide 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 Company also agreed to pay a commitment fee of $750,000 payable by issuance of 1,200,000 shares of restricted common stock and 3,000,000 warrants that are exercisable at $0.38 per share with a three-year term expiring on March 21, 2024. The Notes bear interest at the rate of 12% if paid on or before September 21, 2021. MJHI has the right to extend the Notes for an additional six months at an interest rate of 15%, in which case the Notes would be due March 21, 2022. The Notes are secured by all assets of the Company.

In addition, the notes require a financing fee of $54,000 which is payable in installments of $9,000 each month with the first payment due on April 1, 2021.

In the event of default, the remaining principal amount of the Notes plus all accrued interest and other fees due under the terms of the Notes may be converted at the sole election of the Note holders into restricted common stock of the Company at a 90% of the market price for the Company’s shares at the time of conversion.

On March 24, 2021, the Company, as lender, finalized a convertible note agreement with PPK Investment Group, Inc. (“PPK”) in the amount of $620,000. The convertible note bears interest at 6% per annum and is due on September 1, 2021. The conversion feature of the Note provides that the Company may convert the Note to acquire a 6.2% interest in PPK if allowed by Oklahoma State laws governing ownership of cannabis licenses. If converted, the interest accrued from the loan date of March 24, 2021 through the date of conversion will be forgiven.

Upon conversion, the Company will also have the right to acquire an additional 3.8% interest in PPK (10% in total) for payment of $380,000 by issuance of restricted common stock of the Company priced at $0.25 per share or 1,520,000 shares.

In the event of conversion of the Convertible Note into an investment in PPK, a Securities Purchase Agreement signed concurrently with the Convertible Note will also become effective. The Securities Purchase Agreement gives the Company the right to increase its investment up to a 100% ownership interest in PPK, provided such increased ownership is in compliance with Oklahoma State cannabis licensing requirements. The acquisition price would be paid on the same terms as the initial acquisition of the 10% interest, 62% in cash and 38% in shares of the Company’s common stock with the stock priced at $0.25 per share. Total value of 100% acquisition of PPK is $10,000,000.

The Securities Purchase Agreement, if activated by conversion of the convertible note, includes an earnout which could result in payment of additional consideration to PPK if the valuation at the end of a look back period is greater than $10,000,000. For purposes of the earnout, the valuation will be based on three times earnings before interest, taxes, depreciation, and amortization (EBITDA).

The Securities Purchase Agreement, if activated by conversion of the convertible note, also contains the agreement with Ralph Clinton Pyatt III (“Clinton Pyatt”), President of PPK, to continue his role as Chief Executive Officer and President of the Country Cannabis business for a period of at least three years. The Company also has an option to acquire the real estate that PPK utilizes in its operations. The real estate is currently under lease to PPK by an affiliated Company owned by Clinton Pyatt.

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.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 current period.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.

TheIn addition, the economic disruptions caused by COVID-19 maycould 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 February 28,November 30, 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 February 28,November 30, 2021, the board of directors authorized issuance of an aggregate of 367,345Company issued 1,338,102 shares of unregistered common stock without registration under the Securities Act. Of these, 200,000 shares valued at $90,000 were issued to a contractor for investor relations services. An additional 566,037 shares valued at $300,000 were issued to acquire an 10% interests in WDSY LLC and Blip Holdings LLC, which own and market the Weedsy and BLVK Brands, respectively. An additional 69,245 shares ($23,571) were issued to two contractors and 102,800 shares ($35,000) were issued to three non-related parties (267,346 shares)officers and three related parties that were officers and/or directors (99,999 shares).for services. The Company also issued 400,000 shares against stock compensation payable for patent obligations incurred in 2019. All of the above shares were issued for common stock payable at December 1, 2020 (167,345 shares) and for services rendered to the Company in the period (200,000 shares).  The shares to be issued are valued at the closing price 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 totransactions under Section 4(a)(2) of the Securities 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:  April 19, 2021  

MJ Harvest, Inc.

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