MJ HARVEST, INC. 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
The narrative comparison of results of operations for the three-month periods
ended
Three Months Ended
A B A-B %
November 30, November 30,
2021 2020 Change Change
REVENUE $ 48,367 $ 42,307 $ 6,060 14 %
COST OF REVENUE 16,240 16,953 (713 ) -4 %
Cost of revenue as a % of total
revenue 34 % 40 % -6 %
Gross Profit 32,127 25,354 6,773 27 %
Gross profit as a % of revenue 66 % 60 % 6 % OPERATING EXPENSES Officer and director compensation 203,785 135,000 68,785 51 % General and administrative 38,519 17,564 20,955 119 % Professional fees and contract services 79,372 144,171 (64,799 ) -45 % Advertising and promotion 67,516 - 67,516 n.a. Total operating expenses 389,192 296,735 92,457 31 % OPERATING LOSS - CONTINUING OPERATIONS (357,065 ) (271,381 ) (85,684 ) 32 %
Revenues increased 14% in the quarter endedNovember 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 products after discontinuing operations of the soils business acquired fromElevated Ag Solutions, Inc. ("Elevated") in earlyOctober 2020 . In the prior period, management had expended considerable time and effort on the soils division. The soils division was discontinued in the quarter endedNovember 30, 2020 and is not reflected in operating results for the periods presented above (see "Discontinued Operations"). We anticipate that the marketing focus on the debudder products will continue now that the soils division has been discontinued. 2 Total operating expenses increased in the current period primarily due to increased expenditures for advertising and promotion. In the three months endedNovember 30, 2021 , we participated in the MJBIZCON trade show inLas Vegas and the increase in advertising for the period is attributable to trade show expenses. Officer and director compensation increased and professional fees and contract services decreased in 2021 compared with 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 inPPK 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.
Six Months Ended
The narrative comparison of results of operations for the six-month periods
ended
Six Months Ended
A B A-B %
November 30, November 30,
2021 2020 Change Change
REVENUE $ 123,052 $ 73,136 $ 49,916 68 %
COST OF REVENUE 36,369 30,134 6,235 21 %
Cost of revenue as a % of total
revenue 30 % 41 % -11 %
Gross Profit 86,683 43,002 43,681 102 %
Gross profit as a % of revenue 70 % 59 % -11 % OPERATING EXPENSES Officer and director compensation 347,359 265,000 82,359 31 % General and administrative 64,873 36,383 28,490 78 % Professional fees and contract services 145,691 239,853 (94,162 ) -39 % Advertising and promotion 347,373 - 347,373 n.a. Total operating expenses 905,296 541,236 364,060 67 % OPERATING LOSS - CONTINUING OPERATIONS (818,613 ) (498,234 ) (320,379 ) 64 % Revenues increased 68% in the six-month period endedNovember 30, 2021 compared with the same period in 2020. Management refocused sales efforts on the debudder products after discontinuing operations of the soils business acquired fromElevated Ag Solutions, Inc. ("Elevated") in earlyOctober 2020 . In the prior period, management had expended considerable time and effort on the soils division The soils division was discontinued in the quarter endedNovember 30, 2020 and is not reflected in operating results for the periods presented above (see "Discontinued Operations"). We anticipate that the marketing focus on the debudder products will continue now that the soils division has been discontinued. Total operating expenses increased in the current period, primarily due to increased expenditures for advertising and promotion. In the six-month period endedNovember 30, 2021 , we retained a consultant to communicate with prospective funding sources, coordinate press releases, and in general assist with market awareness of the company. The cost of this program was paid partially in cash and partially in stock with an aggregate cost of$250,250 . Additional advertising expenses were incurred for trade show expenses in connection with our attendance at the MJBIZCON trade show inLas Vegas . Officer and director compensation increased and professional fees and contract services decreased in 2021 compared with 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 inPPK 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. 3
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 onMarch 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 endedNovember 30, 2020 . Discontinued Operations.
In the prior year, after operating the soils division for first four months of the year endedMay 31, 2021 , management undertook an in-depth assessment ofElevated Ag Solutions, Inc. ("Elevated") and concluded that the soils division was not as represented at the time of the acquisition inJanuary 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. During the six months endedNovember 30, 2020 , the common stock issued in the acquisition, aggregating 1,300,000 shares out of 1,400,000 shares originally issued, were cancelled, and the Company paid a$10,000 walk-away fee. In the aggregate, the Company recognized a loss from discontinued operations of$10,000 .
Operating results for the three and six-month periods ended
Three Month Period Three and Six-Month
Ended November 30, Periods Ended November
2020 30, 2020
Revenue $ - $ 75,217
Cost of revenue - 66,243
Amortization - 13,125
Gross profit - (4,151 )Loss on discontinued operations (10,000 )
(10,000 )
$ (10,000 ) $ (14,151 ) Liquidity and Capital Resources
Cash flow used in operating activities for the six-month period endedNovember 30, 2021 was$252,786 compared to$153,329 in the comparable period 2020. During the period, our total cash decreased by$99,286 . Cash to fund the negative cash flow from operations was derived primarily from proceeds of advances from related parties totaling$153,500 . The Company continues to make progress in growing sales of its existing product line, but the business is not yet sufficient to support our current operating structure. Our current working capital is negative$1,159,061 , based on current assets of$68,226 and current liabilities of$1,227,287 . We continue to seek out potential acquisition candidates and distributorships and hope to see continuing growth in sales in the coming periods. The Company is currently reliant on funding through advances from related parties, but we have no binding agreements or commitments for such funding and no assurances can be given that such funding will continue to be available in future periods. 4 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$489,877 and$1,430,071 for the three and six-month periods endedNovember 30, 2021 , respectively, and had an accumulated deficit of$10,528,328 as ofNovember 30, 2021 . In addition, we have notes payable aggregating$900,000 that will be due onMarch 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 InMarch 2020 , COVID-19 was declared a pandemic by theWorld Health Organization and theCenters for Disease Control and Prevention . Its rapid spread around the world and throughoutthe United States prompted many countries, includingthe United States , to institute restrictions on travel, public gatherings and certain business operations. These restrictions significantly disrupted economic activity inthe United States and Worldwide. To date, the disruption did not materially impact the Company's financial statements. However, if the severity of the economic disruptions increase as the duration of the COVID-19 pandemic continues, the negative financial impact due to reduced demand could be significantly greater in future periods than in the first quarter. 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 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
© Edgar Online, source
