CLS Holdings USA, Inc. - Quarter Report: 2023 August (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-55546
CLS HOLDINGS USA, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 45-1352286 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
516 S. 4th Street, Las Vegas Nevada, 89101
(Address of principal executive offices) (Zip Code)
(416) 992-4539
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| N/A | N/A |
|
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 such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☐ | Smaller reporting company ☒ |
| Emerging growth company ☐ |
|
If an emerging growth company, indicate by check mark 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 ☒
State the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 72,543,141 shares of $0.0001 par value common stock outstanding as of October 9, 2023.
CLS HOLDINGS USA, INC.
FORM 10-Q
Quarterly Period Ended August 31, 2023
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
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Item 1. |
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Condensed Consolidated Balance Sheets as of August 31, 2023 (Unaudited) and May 31, 2023 (audited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
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Item 3. |
37 |
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Item 4. |
37 |
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PART II. OTHER INFORMATION |
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Item 1. |
38 |
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Item 1A. |
38 |
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Item 2. |
38 |
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Item 3. |
38 |
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Item 4. |
38 |
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Item 5. |
38 |
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Item 6. |
38 |
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39 |
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EXPLANATORY NOTE
Unless otherwise noted, references in this report to “CLS Holdings USA, Inc.,” the “Company,” “we,” “our” or “us” means CLS Holdings USA, Inc. and its subsidiaries.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, the impact of the COVID-19 virus on our business, the results of our initiatives to retain our employees and strengthen our relationships with our customers and community, the effect of our initiatives to expand market share and achieve growth, the expected development of our business and joint ventures, results of operations and financial performance, liquidity, working capital and capital requirements, the effects of the additional dilution on our common stock that may occur as a result of the amendments to our convertible debentures, and anticipated future events. The continued spread of COVID-19 could have, and in some cases already has had, an adverse impact on our business, operations and financial results, including through disruptions in our cultivation and processing activities, supply chains and sales channels, and retail dispensary operations as well as a deterioration of general economic conditions including a possible national or global recession. These forward-looking statements also relate to our ability to obtain debt or equity capital on reasonable terms, or at all, to finance our operations, and to identify, finance and close potential acquisitions and joint ventures, whether our joint venture partner will make its capital contribution, our ability to comply with applicable cannabis-related regulations and obtain regulatory approvals, market acceptance of our services and product offerings, our ability to protect and commercialize our intellectual property, our ability to use net operating losses to offset certain cannabis-related tax liabilities and our ability to grow our wholesale and processing businesses and joint ventures. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology.
These forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any expected future results, levels of activity or performance expressed or implied by these forward-looking statements.
We cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these forward-looking statements, which speak only as of the date that they were made. These cautionary statements should be considered together with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, we do not intend to update any of the forward-looking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the occurrence of unanticipated events.
AVAILABLE INFORMATION
We file certain reports under the Securities Exchange Act of 1934 (the “Exchange Act”). Such filings include annual and quarterly reports. The reports we file with the Securities and Exchange Commission (“SEC”) are available on the SEC’s website at (http://www.sec.gov).
Item 1. Financial Statements.
CLS HOLDINGS USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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August 31, |
May 31, |
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2023 |
2023 |
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(unaudited) |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
$ | 1,034,680 | $ | 998,421 | ||||
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Accounts Receivable |
758,032 | 431,204 | ||||||
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Inventory |
3,051,484 | 3,012,932 | ||||||
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Prepaid expenses and other current assets |
125,148 | 148,953 | ||||||
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Total current assets |
4,969,344 | 4,591,510 | ||||||
| Property, plant and equipment, net of accumulated depreciation of $2,845,872 and $2,687,146 |
2,775,034 | 2,913,077 | ||||||
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Right of use assets, operating leases |
1,551,841 | 1,641,577 | ||||||
| Intangible assets, net of accumulated amortization of $156,656 and $588,217 |
201,337 | 209,088 | ||||||
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Goodwill |
557,896 | 557,896 | ||||||
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Other assets |
215,675 | 157,500 | ||||||
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Total assets |
$ | 10,271,127 | $ | 10,070,648 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable and accrued liabilities |
3,374,430 | $ | 2,728,572 | |||||
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Accrued interest, current |
756,820 | 634,594 | ||||||
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Loans payable |
78,537 | 471,380 | ||||||
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Lease liability - operating leases, current |
404,889 | 374,004 | ||||||
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Lease liability - financing leases, current |
90,871 | 86,887 | ||||||
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Taxes Payable |
7,229,981 | 6,752,457 | ||||||
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Notes payable |
1,754,168 | 1,439,584 | ||||||
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Convertible notes payable - current |
2,852,160 | 2,952,160 | ||||||
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Convertible notes payable. related party - current |
900,891 | 900,891 | ||||||
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Total current liabilities |
17,442,747 | 16,340,529 | ||||||
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Noncurrent liabilities |
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Lease liability - operating leases, non-current |
1,426,479 | 1,544,283 | ||||||
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Lease liability - financing leases, non-current |
175,777 | 200,280 | ||||||
| Notes payable, non-current, net of discount of $739,621 and $902,339 |
1,735,378 | 2,033,077 | ||||||
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Convertible notes payable – non-current |
2,852,159 | 2,852,159 | ||||||
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Convertible notes payable, related party – non-current |
900,892 | 900,892 | ||||||
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Total Liabilities |
24,533,432 | 23,871,220 | ||||||
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Commitments and contingencies |
- | - | ||||||
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Stockholder's deficit |
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| Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued |
- | - | ||||||
| Common stock, $0.0001 par value; 187,500,000 shares authorized at August 31, 2023 and May 31, 2023; 72,543,141 and 72,543,141 shares issued and outstanding at August 31, 2023 and May 31, 2023 |
7,255 | 7,255 | ||||||
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Additional paid-in capital |
96,147,784 | 96,147,784 | ||||||
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Common stock subscribed |
65,702 | 65,702 | ||||||
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Accumulated deficit |
(109,343,287 |
) |
(108,879,446 |
) |
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Stockholders’ deficit attributable to CLS Holdings, Inc. |
(13,122,546 |
) |
(12,658,705 |
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Non-controlling interest |
(1,139,759 |
) |
(1,141,867 |
) |
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Total stockholders’ deficit |
(14,262,305 |
) |
(13,800,572 |
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Total liabilities and stockholders' deficit |
$ | 10,271,127 | $ | 10,070,648 | ||||
See accompanying notes to these financial statements.
CLS HOLDINGS USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three |
For the Three |
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Months Ended |
Months Ended |
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August 31, 2023 |
August 31, 2022 |
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Revenue |
$ | 5,114,527 | $ | 6,044,927 | ||||
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Cost of goods sold |
2,840,601 | 3,144,417 | ||||||
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Gross margin |
2,273,926 | 2,900,510 | ||||||
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Selling, general and administrative expenses |
2,729,900 | 3,060,615 | ||||||
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Total operating expenses |
2,729,900 | 3,060,615 | ||||||
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Operating loss |
(455,974 |
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(160,105 |
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Other (income) expense: |
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Interest expense, net |
457,472 | 766,670 | ||||||
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Employee retention tax credit income |
(924,862 |
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- | |||||
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Loss on equity investment |
- | 234,430 | ||||||
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Gain on settlement of accounts payable |
(4,375 |
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- | |||||
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Gain on settlement of note receivable |
- | (348,165 |
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Total other (income) expense |
(471,765 |
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652,935 | |||||
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Income (Loss) before income taxes |
15,791 | (813,040 |
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Provision for income tax |
(477,524 |
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(519,085 |
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Net loss |
(461,733 |
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(1,332,125 |
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Non-controlling interest |
(2,108 |
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183,647 | |||||
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Net loss attributable to CLS Holdings, Inc. |
$ | (463,841 |
) |
$ | (1,148,478 |
) |
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Net loss per share - basic |
$ | (0.01 |
) |
$ | (0.04 |
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Net loss per share - diluted |
$ | (0.01 |
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$ | (0.04 |
) |
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Weighted average shares outstanding - basic |
72,543,141 | 32,052,021 | ||||||
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Weighted average shares outstanding - diluted |
72,543,141 | 32,052,021 | ||||||
See accompanying notes to these financial statements.
CLS HOLDINGS USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
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Additional |
Non- |
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Common Stock |
Paid In |
Stock |
Accumulated |
controlling |
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Amount |
Value |
Capital |
Payable |
Deficit |
interest |
Total |
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Balance, May 31, 2022 |
32,052,021 | $ | 3,206 | $ | 77,954,748 | $ | 70,092 | $ | (95,079,817 |
) |
$ | (97,211 |
) |
$ | (17,148,982 |
) |
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Net loss for the three months ended August 31, 2022 (unaudited) |
- | - | - | - | (1,148,478 |
) |
(183,647 |
) |
(1,332,125 |
) |
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Balance, August 31, 2022 |
32,052,021 | 3,206 | $ | 77,954,748 | $ | 70,092 | $ | (96,228,295 |
) |
$ | (280,858 |
) |
$ | (18,481,107 |
) |
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Balance, May 31, 2023 |
72,543,141 | $ | 7,255 | $ | 96,147,784 | $ | 65,702 | $ | (108,879,446 |
) |
$ | (1,141,867 |
) |
$ | (13,800,572 |
) |
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Net loss for the three months ended August 31, 2023 (unaudited) |
- | - | - | - | (463,841 |
) |
2,108 | (461,733 |
) |
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Balance, August 31, 2023 |
72,543,141 | $ | 7,255 | $ | 96,147,784 | $ | 65,702 | $ | (109,343,287 |
) |
$ | (1,139,759 |
) |
$ | (14,262,305 |
) |
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See accompanying notes to these financial statements.
CLS HOLDINGS USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Three |
For the Three |
|||||||
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Months Ended |
Months Ended |
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August 31, 2023 |
August 31, 2022 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
$ | (461,733 |
) |
$ | (1,332,125 |
) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Loss on equity investment |
- | 234,430 | ||||||
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Amortization of debt discounts and fees |
171,656 | 194,774 | ||||||
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Gain on settlement of note receivable |
- | (348,165 |
) |
|||||
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Gain on settlement of accounts payable |
(4,375 |
) |
- | |||||
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Depreciation and amortization expense |
166,474 | 236,935 | ||||||
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Bad debt expense |
300 | - | ||||||
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Changes in assets and liabilities: |
||||||||
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Accounts receivable |
(327,128 |
) |
(120,942 |
) |
||||
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Prepaid expenses and other current assets |
23,805 | (112,080 |
) |
|||||
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Inventory |
(38,552 |
) |
(798,707 |
) |
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Right of use asset |
89,736 | 86,749 | ||||||
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Accounts payable and accrued expenses |
650,236 | 90,406 | ||||||
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Accrued interest |
122,226 | (32,149 |
) |
|||||
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Deferred tax liability |
477,524 | 519,085 | ||||||
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Operating lease liability |
(86,919 |
) |
(79,974 |
) |
||||
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Net cash used in operating activities |
783,250 | (1,461,763 |
) |
|||||
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Payments to purchase property, plant and equipment |
(20,683 |
) |
(88,233 |
) |
||||
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Payment for construction security deposit |
(58,175 |
) |
- | |||||
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Investment in Quinn River |
- | (805,234 |
) |
|||||
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Proceeds from collection of note receivable |
- | 348,165 | ||||||
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Net cash provided by (used in) investing activities |
(78,858 |
) |
(545,302 |
) |
||||
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CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
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Proceeds from loan payable |
- | 650,115 | ||||||
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Repayments of loan payable |
(401,781 |
) |
(585,962 |
) |
||||
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Principal payments on notes payable |
(145,833 |
) |
- | |||||
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Repayments on convertible debt |
(100,000 |
) |
- | |||||
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Principal payments on finance leases |
(20,519 |
) |
(16,907 |
) |
||||
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Net cash used in financing activities |
(668,133 |
) |
47,246 | |||||
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Net decrease in cash and cash equivalents |
36,259 | (1,959,819 |
) |
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Cash and cash equivalents at beginning of period |
998,421 | 2,551,859 | ||||||
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Cash and cash equivalents at end of period |
$ | 1,034,680 | $ | 592,040 | ||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Interest paid |
$ | 163,783 | $ | 679,604 | ||||
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Income taxes paid |
$ | - | $ | - | ||||
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NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Initial ROU asset and lease liability - operating |
$ | - | $ | 46,475 | ||||
See accompanying notes to these financial statements.
CLS HOLDINGS USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2023
(Unaudited)
Note 1: Nature of Business and Significant Accounting Policies
Basis of Presentation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in US dollars. The Company has adopted a fiscal year end of May 31st.
Principals of Consolidation
The accompanying consolidated financial statements include the accounts of CLS Holdings USA, Inc.; its direct and indirect wholly owned operating subsidiaries, CLS Nevada, Inc., (“CLS Nevada”), CLS Labs, Inc. (“CLS Labs”), CLS Labs Colorado, Inc. (“CLS Colorado”), CLS Massachusetts, Inc. (“CLS Massachusetts”), and Alternative Solutions, LLC (“Alternative Solutions”); and wholly owned inactive subsidiaries CLS Labs Colorado, Inc. (“CLS Colorado”) and CLS Massachusetts, Inc. (“CLS Massachusetts”). Alternative Solutions is the sole owner of the following three entities (collectively, the “Oasis LLCs”): Serenity Wellness Center, LLC (“Serenity Wellness Center”); Serenity Wellness Products, LLC (“Serenity Wellness Products”); and Serenity Wellness Growers, LLC (“Serenity Wellness Growers”). The accompanying consolidated financial statements also include the accounts of CLS CBD in which the company owns a 95% ownership interest and a variable interest entity, Kealii Okamalu, LLC (“Kealii Okamalu”), in which the Company owns a 50% interest. All material intercompany transactions have been eliminated upon consolidation of these entities.
Nature of Business
CLS Holdings USA, Inc. (the “Company”) was originally incorporated as Adelt Design, Inc. (“Adelt”) on March 31, 2011 to manufacture and market carpet binding art. Production and marketing of carpet binding art never commenced.
We currently operate a retail marijuana dispensary within walking distance to the Las Vegas Strip and a small-scale cultivation facility, as well as a product manufacturing facility and a wholesale distribution operation in North Las Vegas. The vertically integrated business model drives strong margins to the bottom line on a portion of sales at the dispensary.
Our retail dispensary is a single location operation in Nevada and occupies over 5,000 square feet. This location, which is easily accessible by tourists, is currently open 19.5 hours per day for walk-in service. Curbside and in store express pick up is available between the hours of 8:00am and 12:00am. Oasis dispensary also delivers cannabis to residents between the hours of 8:00 AM and 10:00 PM. The central location provides logistical convenience for delivery to all parts of the Las Vegas valley.
Our wholesale operations, which occupies approximately 10,000 square feet of a 22,000 square foot warehouse, began sales to third parties in August 2017 and completed construction and received a certificate of occupancy for its state-of-the-art extraction facility in December of 2019. We have made sales to over 85 external customers as of August 31, 2023. Our existing product line includes vaporizers, tinctures, ethanol produced THC distillate, and live and cured hydrocarbon concentrates. At present, the City Trees cultivation facility only grows breeding stock to preserve valuable genetics and does not offer its crops for sale or processing. As a result, all raw materials for manufacturing are sourced from third parties.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification
Certain reclassifications, not affecting previously reported net income or cash flows, have been made to the previously issued financial statements to conform to the current period presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash and cash equivalents of $1,034,680 and $998,421 as of August 31, 2023 and May 31, 2023, respectively. The increase in cash and cash equivalents is a function of cash generated by operations.
Allowance for Doubtful Accounts
The Company generates the majority of its revenues and corresponding accounts receivable from the sale of cannabis, and cannabis related products. The Company evaluates the collectability of its accounts receivable considering a combination of factors. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations to it, the Company records a specific reserve for bad debts against amounts due in order to reduce the net recognized receivable to the amount it reasonably believes will be collected. For all other customers, the Company recognizes reserves for bad debts based on past write-off experience and the length of time the receivables are past due. The Company had $300 and $0 of bad debt expense during the three months ended August 31, 2023 and 2022, respectively.
Inventory
Inventories are stated at the lower of cost or market. Cost is determined using a perpetual inventory system whereby costs are determined by acquisition costs of individual items included in inventory. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable values. Our cannabis products consist of prepackaged purchased goods ready for resale, along with produced tinctures and extracts developed under our production license.
Property, Plant and Equipment
Property and equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value. Property, plant, and equipment are depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based upon the following life expectancy:
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Years |
|
|
|
Office equipment |
|
|
3 to 5 |
|
|
Furniture & fixtures |
|
|
3 to 7 |
|
|
Machinery & equipment |
|
|
3 to 10 |
|
|
Leasehold improvements |
|
Term of lease |
|
|
Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation are eliminated and any resulting gain or loss is reflected in operations.
Long-Lived Assets
The Company reviews its property and equipment and any identifiable intangibles including goodwill for impairment on an annual basis utilizing the guidance set forth in the Statement of Financial Accounting Standards Board ASC 350 “Intangibles – Goodwill and Other” and ASC 360 “Property, Plant, and Equipment.” At August 31, 2023, the net carrying value of goodwill on the Company’s balance sheet remained at $557,896.
Employee Retention Tax Credit
Under the provisions of the extension of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company was eligible for a refundable employee retention tax credit (the “ERTC”), subject to certain criteria. As ERTCs are not within the scope of ASC 740, Income Taxes, the Company has chosen to account for the ERTCs by analogizing to the International Standard IAS 20, Accounting/or Government Grants and Disclosure of Government Assistance (“IAS 20”). In accordance with IAS 20, an entity recognizes government grants only when there is reasonable assurance that the entity will comply with the conditions attached to them and the grants will be received. During the three months ended August 31, 2023, the Company received an aggregate of $924,862, which was accounted for as other income on the Company’s condensed consolidated statement of operations.
Comprehensive Income
ASC 220-10-15 “Reporting Comprehensive Income,” establishes standards for reporting and displaying of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220-10-15 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company does not have any items of comprehensive income in any of the periods presented.
Non-Controlling Interests
The Company reports “non-controlling interest in subsidiary” as a component of equity, separate from parent’s equity, on the Consolidated Balance Sheets. In addition, the Company’s Consolidated Statements of Operations includes “net income (loss) attributable to non-controlling interest.” During the three months ended August 31, 2023 and 2022, the Company reported a non-controlling interest in the amount of ($2,108) and $183,647, respectively, representing 50% of the (income) loss incurred by its partially owned subsidiary, Kealii Okamalu.
Variable Interest Entities
The Company’s consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and variable interest entities (“VIE”), where the Company is the primary beneficiary under the provisions of ASC 810, Consolidation (“ASC 810”). A VIE must be consolidated by its primary beneficiary when, along with its affiliates and agents, the primary beneficiary has both: (i) the power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The Company reconsiders whether an entity is still a VIE only upon certain triggering events and continually assesses its consolidated VIEs to determine if it continues to be the primary beneficiary. See Note 3.
Concentrations of Credit Risk
The Company maintains its cash in bank deposit accounts and other accounts, the balances of which at times may be uninsured or exceed federally insured limits. From time to time, some of the Company’s funds are also held by escrow agents; these funds may not be federally insured. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts.
Advertising and Marketing Costs
All costs associated with advertising and promoting products are expensed as incurred. Total recognized advertising and marketing expenses were $126,311 and $222,893 for the three months ended August 31, 2023 and 2022, respectively.
Research and Development
Research and development expenses are charged to operations as incurred. The Company incurred research and development costs of $1,465 and $0 for the three months ended August 31, 2023 and 2022, respectively.
Fair Value of Financial Instruments
Pursuant to Accounting Standards Codification (“ASC”) No. 825–- Financial Instruments, the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The carrying amounts of the Company’s cash and cash equivalents, notes receivable, convertible notes payable, accounts payable and accrued expenses, none of which is held for trading, approximate their estimated fair values due to the short-term maturities of those financial instruments.
A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:
Level 1–- Quoted prices in active markets for identical assets or liabilities.
Level 2–- Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.
Level 3–- Significant unobservable inputs that cannot be corroborated by market data.
Revenue Recognition
Revenue from the sale of cannabis products is recognized by Oasis at the point of sale, at which time payment is received, the product is delivered, and the Company’s performance obligation has been met. Management estimates an allowance for sales returns.
The Company also recognizes revenue from Serenity Wellness Products LLC and Serenity Wellness Growers LLC, d/b/a City Trees (“City Trees”). City Trees recognizes revenue from the sale of the following cannabis products and services to licensed dispensaries, cultivators and distributors within the State of Nevada:
|
|
● |
Premium organic medical cannabis sold wholesale to licensed retailers |
|
|
|
|
|
|
● |
Recreational marijuana cannabis products sold wholesale to licensed distributors and retailers |
|
|
|
|
|
|
● |
Extraction products such as oils and waxes derived from in-house cannabis production |
|
|
|
|
|
|
● |
Processing and extraction services for licensed medical cannabis cultivators in Nevada |
|
|
|
|
|
|
● |
High quality cannabis strains in the form of vegetative cuttings for sale to licensed medical cannabis cultivators in Nevada |
Effective June 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from commercial sales of products and licensing agreements by applying the following steps: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to each performance obligation in the contract; and (5) recognizing revenue when each performance obligation is satisfied.
Disaggregation of Revenue
The following table represents a disaggregation of revenue for the three months ended August 31, 2023 and 2022:
|
For the Three |
For the Three |
|||||||
|
Months Ended |
Months Ended |
|||||||
|
August 31, 2023 |
August 31, 2022 |
|||||||
|
Cannabis Dispensary |
3,308,542 | 3,888,557 | ||||||
|
Cannabis Production |
1,805,985 | 2,156,370 | ||||||
| $ | 5,114,527 | $ | 6,044,927 | |||||
Basic and Diluted Earnings or Loss Per Share
Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options and warrants to purchase common stock, and convertible debt. Basic and diluted net loss per share are computed based on the weighted average number of shares of common stock outstanding during the period. At August 31, 2023 and 2022, the Company had the following potentially dilutive instruments outstanding: at August 31, 2023, a total of 41,715,637 shares (21,181,449 issuable upon the exercise of warrants, 20,516,688 issuable upon the conversion of convertible notes payable and accrued interest, and 17,500 in stock to be issued); and at August 31, 2022, a total of 18,439,925 shares (1,729,924 issuable upon the exercise of warrants, 256,550 issuable upon the exercise of unit warrants, 16,423,451 issuable upon the conversion of convertible notes payable and accrued interest, and 30,000 in stock to be issued).
The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculations.
A net loss causes all outstanding stock options and warrants to be anti-dilutive. As a result, the basic and dilutive losses per common share are the same for the three months ended August 31, 2023 and 2022. For the three months ended August 31, 2023 and 2022, the Company excluded from the calculation of fully diluted earnings per share the following instruments which were anti-dilutive: shares issuable pursuant to the conversion of notes payable and accrued interest, shares issuable pursuant to the exercise of warrants, and shares of common stock issuable.
Income Taxes
The Company accounts for income taxes under the asset and liability method in accordance with ASC 740. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred tax assets and liabilities are classified as current and non-current based on their characteristics. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS has issued a clarification allowing the deduction of certain expenses, the bulk of operating costs and general administrative costs are generally not permitted to be deducted. The operations of certain of the Company’s subsidiaries are subject to Section 280E. This results in permanent differences between ordinary and necessary business expenses deemed non-deductible under IRC Section 280E. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income or loss.
Commitments and Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims brought to such legal counsel’s attention as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
Recent Accounting Pronouncements
There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Note 2: Going Concern
As shown in the accompanying financial statements, the Company has incurred net losses from operations resulting in an accumulated deficit of $109,343,287 as of August 31, 2023. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with revenues from operations. The Company has reported positive cash generated from operating activities for the last three quarters, including the three months ended August 31, 2023.
Note 3: Joint Venture
On October 20, 2021, the Company entered into a management services agreement (the “Quinn River Joint Venture Agreement”) through its 50% owned subsidiary, Kealii Okamalu, with CSI Health MCD LLC (“CSI”) and a commission established by the authority of the Tribal Council of the Fort McDermitt Paiute and Shoshone Tribe (“Tribe”). The purpose of the Quinn River Joint Venture Agreement was to establish a business (the “Quinn River Joint Venture”) to grow, cultivate, process, and sell cannabis and related products. The Quinn River Joint Venture Agreement had an initial term of 10 years plus a 10-year renewal option from the date the first cannabis crop produced is harvested and sold. Pursuant to the Quinn River Joint Venture Agreement, Kealii Okamalu leased approximately 5-10 acres of the Tribe’s land located along the Quinn River at a cost of $3,500 per quarter and managed the design, finance and construction of a cannabis cultivation facility on such tribal lands (“the Cultivation Facility”). Kealii Okamalu managed the ongoing operations of the Cultivation Facility and related business, including, but not limited to, cultivation of cannabis crops, personnel staffing, product packaging, testing, marketing and sales. Packaged products were branded as “Quinn River Farms.” The Company provided 10,000 square feet of warehouse space at its Las Vegas facility and had preferred vendor status including the right to purchase cannabis flower and the business’s cannabis trim at favorable prices. Kealii Okamalu was required to contribute $6 million towards the construction of the Cultivation Facility and the working capital for the Quinn River Joint Venture. This amount was to be repaid from the portion of the net profits of the Quinn River Joint Venture otherwise payable to CSI and the Tribe at the rate of $750,000 per quarter for eight quarters. Kealii Okamalu was to receive one-third of the net profits of the Quinn River Joint Venture after being repaid its initial contribution.
The Company is the manager of and holds a 50% ownership interest in Kealii Okamalu. Kealii Okamalu is a VIE which the Company consolidates. The Quinn River Joint Venture is not a legal entity but rather a business operated by Kealii Okamalu. The Company uses the equity method of accounting to record one-third of the profit or loss generated by the Quinn River Joint Venture, which accrues to Kealii Okamalu. Since the Company is a 50% owner of Kealii Okamalu, 50% of the profit or loss of Kealii Okamalu is recorded as minority interest in the Company’s statement of operations.
During the year ended May 31, 2022, Kealii Okamalu made cash investments in the aggregate amount of $581,714 in the Quinn River Joint Venture. The Company also purchased $949,939 of fixed assets for use by the Quinn River Joint Venture which are on the balance sheet of Kealii Okamalu. During the year ended May 31, 2022, the Quinn River Joint Venture recorded a loss in the amount of $336,416. One-third of this amount, or $112,139, was charged to the financial statements of Kealii Okamalu and recorded as a loss on equity investment in the Company’s financial statements for the year ended May 31, 2022, reducing the Company’s equity investment in the Quinn River Joint Venture from $581,714 to $469,575 at May 31, 2022.
During the year ended May 31, 2023, Kealii Okamalu made cash investments in the aggregate amount of $304,145 in the Quinn River Joint Venture. During the year ended May 31, 2023, the Quinn River Joint Venture recorded a loss in the amount of $536,022. One-third of this amount, or $178,674, was charged to the financial statements of Kealii Okamalu and recorded as a loss on equity investment in the Company’s financial statements for the year ended May 31, 2023. The Company additional cash investments, less the loss on the joint venture for the year ended May 31, 2023 resulted in a net increase in the Company’s equity investment in the Quinn River Joint Venture from $496,575 to $595,046 at May 31, 2023. There was no additional investment made in the Quinn River Joint Venture during the three months ended August 31, 2023.
The Company’s partner in Kealii Okamalu LLC has defaulted on the LLC Operating Agreement and the Quinn River Joint Venture Agreement by failing to make any of its required $3 million capital contribution. As a result of the default by the Company’s partner in Kealii Okamalu LLC, the Tribal Council has formally terminated the Quinn River Joint Venture Agreement. Prior to the termination, the Company removed all of its assets from the tribal land and all of the assets owned by Kealii Okamalu. Although the Company and the Tribal Council have worked over the last few months to explore a new 50/50 partnership with the Tribe, the Company has elected not to continue to pursue an agreement since the economic benefits of doing so are negligible, at best, in the current market. The Company does not believe it is likely to recover its investment in Kealii Okamalu and has recorded an impairment charge in the amount of $1,590,742 against the following assets during the year ended May 31, 2023:
|
Deposits and prepaid expenses |
$ | 33,000 | ||
|
Fixed assets |
756,808 | |||
|
Right of use assets |
205,888 | |||
|
Equity investment in Quinn River |
595,046 | |||
|
Total impairment |
$ | 1,590,742 |
Following the impairment charge the net book value of the Company’s investment in Kealii Okamalu and the Quinn River Joint Venture at August 31, 2023 is $0.
Note 4: Accounts Receivable
Accounts receivable was $758,032 and $431,204 at August 31, 2023 and May 31, 2023, respectively. The Company had bad debt expense of $300 and $0 during the three months ended August 31, 2023 and 2022. No allowance for doubtful accounts was necessary during the three months ended August 31, 2023 and 2022.
Note 5: Inventory
Inventory, consisting of material, overhead, labor, and manufacturing overhead, is stated at the lower of cost (first-in, first-out) or market, and consists of the following:
|
August 31, |
May 31, |
|||||||
|
2023 |
2023 |
|||||||
|
Raw materials |
$ | 299,306 | $ | 399,728 | ||||
|
Finished goods |
2,752,178 | 2,613,204 | ||||||
|
Total |
$ | 3,051,484 | $ | 3,012,932 | ||||
Raw materials consist of cannabis plants and the materials that are used in our production process prior to being tested and packaged for consumption. Finished goods consist of pre-packaged materials previously purchased from other licensed cultivators and our manufactured edibles and extracts.
Note 6: Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at August 31, 2023 and May 31, 2023:
|
August 31, |
May 31, |
|||||||
|
2023 |
2023 |
|||||||
|
Prepaid expenses |
125,148 | 147,953 | ||||||
|
Employee receivable |
- | 1,000 | ||||||
|
Total |
$ | 125,148 | $ | 148,953 | ||||
Prepaid expenses consist primarily of annual license fees charged by the State of Nevada; these fees are paid in advance and amortized over the one-year term of the licenses.
Note 7: Note Receivable
On October 31, 2018, the Company loaned $5,000,000 to In Good Health, Inc. (“IGH”) in connection with an option to purchase transaction (the “IGH Option”).
By letter dated February 26, 2020, the Company informed IGH that as a result of its breaches of the IGH Option, which remained uncured, an event of default had occurred under the IGH Note. The Company advised IGH that it was electing to cause the IGH Note to bear interest at the default rate of 15% per annum effective February 26, 2020 and to accelerate all amounts due under the Note. This dispute, including whether IGH breached the IGH Option and whether CLS was entitled to collect default interest, was in litigation.
On June 14, 2021, the parties to the IGH lawsuit entered into a confidential settlement agreement to resolve the action and the IGH Settlement Note. Pursuant to the IGH Settlement Note, IGH paid the Company $3,000,000, $500,000 of which was paid on or before June 21, 2021. A second payment of $500,000 was paid on or before July 12, 2021. The remaining $2,000,000 and accrued interest was paid in 12 equal monthly installments beginning on August 12, 2021, pursuant to the terms of the promissory note. During the year ended May 31, 2022, the Company received $2,740,820 under the IGH Settlement Note, which included $2,666,670 in principal and $74,150 in accrued interest. During the three months ended August 31, 2022, the Company received $348,165 under the IGH Settlement Note, which included $333,333 in principal and $14,832 in accrued interest. As of May 31, 2023, the IGH Settlement Note had been repaid in full. The Company records amounts paid under the IGH Settlement Note as gains when payments are received. The Company recorded the amount of $348,165 as a gain on settlement of note receivable during the three months ended August 31, 2022.
Note 8: Property, Plant and Equipment
Property, plant and equipment consisted of the following at August 31, 2023 and May 31, 2023:
|
August 31, 2023 |
May 31, 2023 |
|||||||
|
Office equipment |
$ | 151,026 | $ | 148,243 | ||||
|
Furniture and fixtures |
148,358 | 148,358 | ||||||
|
Machinery & Equipment |
2,410,358 | 2,392,458 | ||||||
|
Leasehold improvements |
2,911,164 | 2,911,164 | ||||||
|
Less: accumulated depreciation |
(2,845,872 |
) |
(2,687,146 |
) |
||||
|
Property, plant, and equipment, net |
$ | 2,775,034 | $ | 2,913,077 | ||||
The Company made payments in the amounts of $20,683 and $88,233 for property and equipment during the three months ended August 31, 2023 and 2022, respectively.
Depreciation expense totaled $158,723 and $208,190 for the three months ended August 31, 2023 and 2022, respectively.
Note 9: Right of Use Assets and Liabilities – Operating Leases
The Company has operating leases for offices and warehouses. The Company’s leases have remaining lease terms of 1 year to 10.5 years, some of which include options to extend.
The Company’s lease expense for the three months ended August 31, 2023 and 2022 was entirely comprised of operating leases and amounted to $123,408 and $124,388, respectively. The Company’s right of use (“ROU”) asset amortization for the three months ended August 31, 2023 and 2022 was $89,736 and $86,749, respectively.
The Company has recorded total right of use assets of $4,159,621 and liabilities in the amount of $4,116,221 through August 31, 2023.
Right of use assets – operating leases are summarized below:
|
August 31, 2023 |
||||
|
Amount at inception of leases |
$ | 4,159,621 | ||
|
Amount amortized |
(2,401,892 |
) |
||
|
Prior Period Impairment of Quinn River Lease |
(205,888 |
) |
||
|
Balance – August 31, 2023 |
$ | 1,551,841 | ||
Operating lease liabilities are summarized below:
|
Amount at inception of leases |
$ | 4,116,221 | ||
|
Amount amortized |
(2,284,853 |
) |
||
|
Balance – August 31, 2023 |
$ | 1,831,368 |
|
Warehouse and offices |
$ | 1,619,629 | ||
|
Land |
205,888 | |||
|
Office equipment |
5,851 | |||
|
Balance – August 31, 2023 |
$ | 1,831,368 | ||
|
Lease liability |
$ | 1,831,368 | ||
|
Less: current portion |
(404,889 |
) |
||
|
Lease liability, non-current |
$ | 1,426,479 |
Maturity analysis under these lease agreements is as follows:
|
Twelve months ended August 31, 2024 |
$ | 529,435 | ||
|
Twelve months ended August 31, 2025 |
519,444 | |||
|
Twelve months ended August 31, 2026 |
376,797 | |||
|
Twelve months ended August 31, 2027 |
227,999 | |||
|
Twelve months ended August 31, 2028 |
233,362 | |||
|
Thereafter |
461,229 | |||
|
Total |
$ | 2,348,266 | ||
|
Less: Present value discount |
(516,898 |
) |
||
|
Lease liability |
$ | 1,831,368 |
Note 10: Intangible Assets
Intangible assets consisted of the following at August 31, 2023 and May 31, 2023:
|
August 31, 2023 |
||||||||||||||||
|
Accumulated |
||||||||||||||||
|
Gross |
Amortization |
Impairment |
Net |
|||||||||||||
|
License & Customer Relations |
$ | 110,000 | $ | (28,417 |
) |
- | $ | 81,583 | ||||||||
|
Tradenames - Trademarks |
222,000 | (114,700 |
) |
- | 107,300 | |||||||||||
|
Domain Names |
25,993 | (13,539 |
) |
- | 12,454 | |||||||||||
|
Total |
$ | 357,993 | $ | (156,656 |
) |
- | $ | 201,337 | ||||||||
|
May 31, 2023 |
||||||||||||||||
|
Accumulated |
||||||||||||||||
|
Gross |
Amortization |
Impairment |
Net |
|||||||||||||
|
Intellectual Property |
$ | 319,600 | $ | (157,137 |
) |
$ | (162,463 |
) |
$ | - | ||||||
|
License & Customer Relations |
990,000 | (243,375 |
) |
(663,667 |
) |
82,958 | ||||||||||
|
Tradenames - Trademarks |
301,000 | (147,992 |
) |
(40,158 |
) |
112,850 | ||||||||||
|
Non-compete Agreements |
27,000 | (27,000 |
) |
- | - | |||||||||||
|
Domain Names |
25,993 | (12,713 |
) |
- | 13,280 | |||||||||||
|
Total |
$ | 1,663,593 | $ | (588,217 |
) |
$ | (866,288 |
) |
$ | 209,088 | ||||||
Total amortization expense charged to operations for the three months ended August 31, 2023 and 2022 was $7,751 and $28,745, respectively.
|
Amount to be amortized during the twelve months ended August 31, |
||||
|
2024 |
$ | 31,036 | ||
|
2025 |
31,036 | |||
|
2026 |
31,036 | |||
|
2027 |
30,146 | |||
|
2028 |
24,000 | |||
|
Thereafter |
54,083 | |||
| $ | 201,337 |
Note 11: Goodwill
Goodwill in the amount of $557,896 is carried on the Company’s balance sheet at August 31, 2023 and May 31, 2023 in connection with the acquisition of Alternative Solutions on June 27, 2018.
Goodwill Impairment Test
The Company assessed its intangible assets as of May 31, 2022 and 2021 for purposes of determining if an impairment existed as set forth in ASC 350 – Intangibles – Goodwill and Other and ASC 360 – Property Plant and Equipment. Pursuant to ASC 360, the Company determined that the fair value of its intangible assets exceeded the carrying value of goodwill at August 31, 2023 and May 31, 2023. As a result, no impairment was recorded. At August 31, 2023 and May 31, 2023, the net amount of goodwill on the Company’s balance sheet was $557,896.
Note 12: Other Assets
Other assets included the following as of August 31, 2023 and May 31, 2023:
|
August 31, |
May 31, |
|||||||
|
2023 |
2023 |
|||||||
|
Construction deposit |
$ | 58,175 | $ | - | ||||
|
Security deposits |
157,500 | 157,500 | ||||||
| $ | 215,675 | $ | 157,500 | |||||
During the three months ended August 31, 2023, the Company paid a deposit in the amount of $58,175 for design and architectural work on construction planned for its Las Vegas lounge.
Note 13: Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at August 31, 2023 and May 31, 2023:
|
August 31, 2023 |
May 31, 2023 |
|||||||
|
Trade accounts payable |
$ | 2,555,625 | $ | 1,793,585 | ||||
|
Accrued payroll and payroll taxes |
390,935 | 311,505 | ||||||
|
Accrued liabilities |
427,870 | 623,482 | ||||||
|
Total |
$ | 3,374,430 | $ | 2,728,572 | ||||
Note 14: Loans Payable
2022 Financing Agreement CBR
Effective September 30, 2022, the Company entered into a Business Loan and Security Agreement with CBR Capital LLC to borrow $900,000 (the “CBR Loan”). The CBR Loan is repayable in 48 weekly installments in the amount of $13,312.50 for weeks 1-8 and $29,287.50 for weeks 9-48. CBR Capital LLC has stated that it is aware of the Canaccord Debentures and the U.S. Convertible Debentures and will agree to subordinate the CBR security interest to these debenture holders.
During the year ended May 31, 2023, the Company received cash proceeds in the amount of $873,000 from the loan agreement. During the year ended May 31, 2023, the Company made payments in the amount of $838,688. Of these payments $506,014 was principal and $332,674 was interest for the year ended May 31, 2023. At the inception of the loan, the Company recorded a discount in the amount of $27,000 related to prepaid fees. During the year ended May 31, 2023, the Company amortized $18,563 of these fees to interest expense, the balance of the discount remaining at May 31, 2023 is $8,438. During the three months ended August 31, 2023, the Company made payments of principal and interest in the amount of $336,611 and $44,125, respectively, on the CBR Loan. Also during the three months ended August 31, 2023, the Company amortized $7,312 of prepaid fees to interest expense. At August 31, 2023 and May 31, 2023, the balance due under the CBR Loan was $56,250 and $385,550 net of discount, respectively.
2022 Financing Agreement TVT
Effective October 21, 2022, we entered into a Purchase and Sale of Future Receipts Agreement with TVT Business Funding LLC to borrow $200,000 (the “TVT Loan”). The TVT Loan is repayable in 48 weekly installments in the amount of $5,916.67.
During the year ended May 31, 2023, the Company received cash proceeds in the amount of $194,000 from the TVT Loan. During the year ended May 31, 2023, the Company made payments in the amount of $183,417. Of these payments $112,045 was principal and $71,372 was interest for the year ended May 31, 2023. At the inception of the loan, the Company recorded a discount in the amount of $6,000 related to prepaid fees. During the year ended May 31, 2023, the Company amortized $3,875 of these fees to interest expense, the balance of the discount remaining at May 31, 2023 is $2,125. During the three months ended August 31, 2023, the Company made principal and interest payments in the amount of $65,170 and $11,416, respectively, on the TVT Loan. Also during the three months ended August 31, 2023, the Company amortized $1,626 of prepaid fees to interest expense. At August 31, 2023 and May 31, 2023, the balance due under the TVT Loan was $22,287 and $85,830 net of discount, respectively.
Note 15: Convertible Notes Payable
|
August 31, 2023 |
May 31, 2023 |
|||||||
| Convertible debenture in the principal amount of $1,000,000 (the “U.S. Convertible Debenture 2”) dated October 31, 2018, which bears interest, payable quarterly, at a rate of 8% per annum, with interest during the first eighteen months following issuance being payable by increasing the then-outstanding principal amount of the U.S. Convertible Debenture 2. The U.S. Convertible Debenture 2 was to mature on a date that was three years following issuance. The U.S. Convertible Debenture 2 was convertible into Convertible Debenture Units at a conversion price of $3.20 per Convertible Debenture Unit. Each Convertible Debenture Unit consisted of (i) one share of the Company’s common stock, and (ii) one-half of one warrant, with each warrant exercisable for three years to purchase a share of common stock at a price of $4.40. On July 26, 2019, U.S. Convertible Debenture 2 was amended such that, should the Company issue or sell common stock or equity securities convertible into common stock at a price less than the conversion price of the U.S. convertible Debenture 2, the conversion price of U.S. Convertible Debenture 2 would be reduced to such issuance price, and the exercise price of the warrant issuable in connection with U.S. Convertible Debenture 2 would be exercisable at a price equal to 137.5% of the adjusted conversion price at the time of conversion. The U.S. Convertible Debenture 2 has other features, such as mandatory conversion in the event the common stock trades at a particular price over a specified period of time and required redemption in the event of a “Change in Control” of the Company. The U.S. Convertible Debenture 2 is an unsecured obligation of the Company and ranks pari passu in right of payment of principal and interest with all other unsecured obligations of the Company. The Company recorded a discount in the amount of $813,724 on the U.S. Convertible Debenture 2. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $9,009 and $22,522 on the U.S. Convertible Debenture 2, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $0 and $22,522, respectively. On April 15, 2021, the U.S. Convertible Debenture 2 was amended as follows: (i) the conversion price of the debentures was reduced to $1.20 per unit; and (ii) the maturity date was extended from October 31, 2021 to October 31, 2022. This amendment was accounted for as an extinguishment of debt, and the Company recorded a loss in the amount of $509,700 during the year ended May 31, 2021. On September 15, 2022, the U.S. Convertible Debenture 2 was further amended as follows: (i) the conversion price of debentures with a principal amount of $675,668 was reduced to $0.285 per unit, and these debentures along with accrued interest in the amount of $11,261 were converted to 2,410,279 shares of common stock and warrants to purchase 1,205,140 shares of common stock; (ii) the conversion price of the remaining debentures with a principal amount of $450,446 was reduced to $0.40 per share; (iii) the maturity date of 50% of the remaining debentures with a principal amount of $225,223 was extended to December 31, 2023, and the maturity date of 50% of the remaining debentures with a principal amount of $225,223 was extended to December 31, 2024; and (iv) the conversion price of the warrants issuable upon conversion of the debentures was reduced to $0.40. The value of the warrants will be determined when the issuance becomes probable, which the Company believes is unlikely to occur until the conversion price of the debentures is below the market price of the Company’s common stock. This amendment was accounted for as an extinguishment of debt, and a loss in the amount of $422,331 was recorded on this transaction. The fair values of the warrants and conversion options included in the calculation of the loss on extinguishment of debt were $223,515 and $198,816, respectively. |
450,446 | 450,446 | ||||||
|
August 31, 2023 |
May 31, 2023 |
|||||||
| Convertible debenture in the principal amount of $532,000 (the “U.S. Convertible Debenture 4”) dated October 25, 2018, which bears interest, payable quarterly, at a rate of 8% per annum, with interest during the first eighteen months following issuance being payable by increasing the then-outstanding principal amount of the U.S. Convertible Debenture 4. The U.S. Convertible Debenture 4 was to mature on a date that was three years following issuance. The U.S. Convertible Debenture 4 was convertible into Convertible Debenture Units at a conversion price of $3.20 per Convertible Debenture Unit. Each Convertible Debenture Unit consisted of (i) one share of the Company’s common stock, and (ii) one-half of one warrant, with each warrant exercisable for three years to purchase a share of common stock at a price of $4.40. The value of the warrants will be recorded when the issuance becomes probable. On July 26, 2019, U.S. Convertible Debenture 4 was amended such that, should the Company issue or sell common stock or equity securities convertible into common stock at a price less than the conversion price of the U.S. Convertible Debenture 4, the conversion price of U.S. Convertible Debenture 4 would be reduced to such issuance price, and the exercise price of the warrant issuable in connection with U.S. Convertible Debenture 4 would be exercisable at a price equal to 137.5% of the adjusted conversion price at the time of conversion. The U.S. Convertible Debenture 4 has other features, such as mandatory conversion in the event the common stock trades at a particular price over a specified period of time and required redemption in the event of a “Change in Control” of the Company. The U.S. Convertible Debenture 4 is an unsecured obligation of the Company and ranks pari passu in right of payment of principal and interest with all other unsecured obligations of the Company. The Company recorded a discount in the amount of $416,653 on the U.S. Convertible Debenture 4. During the years ended May 31, 2023 and 2022, the Company accrued interest in the amounts of $41,900 and $47,928 on the U.S. Convertible Debenture 4, respectively. During the years ended May 31, 2023 and 2022, the Company made interest payments in The amounts of $23,964 and $47,928, respectively. On April 19, 2021, the U.S. Convertible Debenture 4 was amended as follows: (i) the conversion price of the debenture was reduced to $1.20 per unit; and (ii) the maturity date was extended from October 25, 2021 to October 25, 2022. This amendment was accounted for as an extinguishment of debt, and the Company recorded a loss in the amount of $271,164 during the year ended May 31, 2021. On October 25, 2022, the Company received a notice of demand from the lender, placing the U.S. Convertible Debt 4 into default status. On November 1, 2022, the Company entered into a forbearance agreement with the lender (the “Forbearance Agreement”) with the following terms: (i) the Company will pay the lender the amount of $150,000 on November 2, 2022, and an additional $50,000 each month for the following nine months, or a total of $600,000; (ii) the default interest rate of 12% will be applied on the existing principal balances until paid in full; (iii) lender shall forbear from taking any further action based upon the existing default. As a result of this agreement, the Company capitalized $3,283 of accrued interest. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amount of $0 and $11,982, respectively, on the U.S. Convertible Debenture 4. The Company recognized a gain in the amount of $2,384 on this transaction during the year ended May 31, 2023. During the three months ended August 31, 2023, the Company made payments in the aggregate amount of $100,000, pursuant to Forbearance Agreement. |
- | 100,000 | ||||||
|
August 31, 2023 |
May 31, 2023 |
|||||||
| Convertible debentures payable in the aggregate principal amount of $12,012,000 (the “Canaccord Debentures”) dated December 12, 2018, which bear interest, payable quarterly, at a rate of 8% per annum, with interest during the first eighteen months following issuance being payable by increasing the then-outstanding principal amount of the Canaccord Debentures. The Canaccord Debentures were to mature on a date that was three years following issuance. The Canaccord Debentures were convertible into Convertible Debenture Units at a conversion price of $3.20 per Convertible Debenture Unit. Each Convertible Debenture Unit consisted of (i) one share of the Company’s common stock, and (ii) one-half of one warrant, with each warrant exercisable for three years to purchase a share of common stock at a price of $4.40. The Canaccord Debentures have other features, such as mandatory conversion in the event the common stock trades at a particular price over a specified period of time and required redemption in the event of a “Change in Control” of the Company. The Canaccord Debentures are unsecured obligations of the Company and rank pari passu in right of payment of principal and interest with all other unsecured obligations of the Company. During the three months ended November 30, 2019, in two separate transactions, principal in the aggregate amount of $25,857 was converted into an aggregate of 8,081 shares of the Company’s common stock, and warrants to purchase 4,040 shares of common stock. There were no gains or losses recorded on these conversions because they were done in accordance with the terms of the original agreement. No discount was recorded for the fair value of the warrants issued. Because the market price of the Company’s common stock was less than the conversion price on the date of issuance of the Canaccord Debentures, a discount was not recorded on the Canaccord Debentures. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $105,077 and $264,383 on the Canaccord Debentures, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $0 and $264,383, respectively. On March 31, 2021, the Canaccord Debentures were amended as follows: (i) the conversion price of the debentures was reduced to $1.20 per unit; (ii) the maturity date was extended from December 12, 2021 to December 12, 2022; (iii) the mandatory conversion threshold was reduced from a daily volume weighted average trading price of greater than $4.80 per share to $2.40 per share for the preceding ten consecutive trading days; and (iv) the exercise price of the warrants issuable upon conversion was reduced from $4.40 to $1.60 and the expiration of the warrants extended until March 31, 2024. This amendment was accounted for as an extinguishment of debt, and the Company recorded a loss in the amount of $3,286,012 during the year ended May 31, 2021. During the year ended May 31, 2022, principal In the aggregate amount of $281,000 was converted into an aggregate of 234,167 shares of the Company’s common stock, and warrants to purchase 117,084 shares of common stock. There were no gains or losses recorded on these conversions because they were done in accordance with the terms of the original agreement. On September 15, 2022, the Canaccord Debentures were further amended as follows: (i) the conversion price of debentures with a principal amount of $7,965,278 was reduced to $0.285 per unit, and these debentures along with accrued interest in the amount of $132,755 were converted to 28,414,149 shares of common stock and warrants to purchase 14,207,075 shares of common stock; (ii) the conversion price of the remaining debentures with a principal amount of $52,53,873 was reduced to $0.40 per share; (iii) the maturity date of 50% of the remaining debentures with a principal amount of $2,626,936.50 was extended to December 31, 2023, and the maturity date of 50% of the remaining debentures with a principal amount of $2,626,936.50 was extended to December 31, 2024; and (iv) the conversion price of the warrants issuable upon conversion of the debentures was reduced to $0.40. The value of the warrants will be determined when the issuance becomes probable, which the Company believes is unlikely to occur until the conversion price of the debentures is below the market price of the Company’s common stock. This amendment was accounted for as an extinguishment of debt, and a loss in the amount of $4,547,660 was recorded on this transaction. The fair values of the warrants and conversion options included in the calculation of the loss on extinguishment of debt were $2,623,852 and $1,923,808, respectively. |
5,253,873 | 5,253,873 | ||||||
|
Convertible Notes Payable |
$ | 5,704,319 | $ | 5,804,319 | ||||
|
August 31, 2023 |
May 31, 2023 |
|||||||
|
Total – Convertible Notes Payable, Net of Discounts, Current Portion |
$ | 2,852,160 | $ | 2,952,160 | ||||
|
Total – Convertible Notes Payable, Net of Discounts, Long-term Portion |
$ | 2,852,159 | $ | 2,852,159 | ||||
Note 16: Convertible Notes Payable – Related Party
|
August 31, 2023 |
May 31, 2023 |
|||||||
| Convertible debenture in the principal amount of $4,000,000 to a related party (the “U.S. Convertible Debenture 1”) dated October 31, 2018, which bears interest, payable quarterly, at a rate of 8% per annum, with interest during the first eighteen months following issuance being payable by increasing the then-outstanding principal amount of the U.S. Convertible Debenture 1. The U.S. Convertible Debenture 1 was to mature on a date that was three years following issuance. The U.S. Convertible Debenture 1 was convertible into units (the “Convertible Debenture Units”) at a conversion price of $3.20 per Convertible Debenture Unit. Each Convertible Debenture Unit consisted of (i) one share of the Company’s common stock, and (ii) one-half of one warrant, with each warrant exercisable for three years to purchase a share of common stock at a price of $4.40. On July 26, 2019, U.S. Convertible Debenture 1 was amended such that, should the Company issue or sell common stock or equity securities convertible into common stock at a price less than the conversion price of the U.S. Convertible Debenture 1, the conversion price of U.S. Convertible Debenture 1 would be reduced to such issuance price, and the exercise price of the warrant Issuable in connection with U.S. Convertible Debenture 1 would be exercisable at a price equal to 137.5% of the adjusted conversion price at the time of conversion. The U.S. Convertible Debenture 1 has other features, such as mandatory conversion in the event the common stock trades at a particular price over a specified period of time and required redemption in the event of a “Change in Control” of the Company. The U.S. Convertible Debenture 1 is an unsecured obligation of the Company and ranks pari passu in right of payment of principal and interest with all other unsecured obligations of the Company. The Company recorded a discount in the amount of $3,254,896 on the U.S. Convertible Debenture 1. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $36,036 and $90,089 on the U.S. Convertible Debenture 1, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $0 and $90,089, respectively. On April 15, 2021, the U.S. Convertible Debenture 1 was amended as follows: (i) the conversion price of the debenture was reduced to $1.20 per unit; and (ii) the maturity date was extended from October 31, 2021 to October 31, 2022. This amendment was accounted for as an extinguishment of debt, and the Company recorded a loss in the amount of $2,038,803 during the year ended May 31, 2021 in connection with the amendment. On September 15, 2022, the U.S. Convertible Debenture 1 was further amended as follows: (i) the conversion price of debentures with a principal amount of $2,702,674 was reduced to $0.285 per unit, and these debentures along with accrued interest in the amount of $45,044 were converted to 9,641,118 shares of common stock and warrants to purchase 4,820,560 shares of common stock; (ii) the conversion price of the remaining debentures with a principal amount of $1,801,783 was reduced to $0.40 per share; (iii) the maturity date of 50% of the remaining debentures with a principal amount of $900,891.50 was extended to December 31, 2023, and the maturity date of 50% of the remaining debentures with a principal amount of $900,891.50 was extended to December 31, 2024; and (iv) the conversion price of the warrants issuable upon conversion of the debentures was reduced to $0.40. The value of the warrants will be determined when the issuance becomes probable, which the Company believes is unlikely to occur until the conversion price of the debentures is below the market price of the Company’s common stock. This amendment was accounted for as an extinguishment of debt, and a loss in the amount of $1,689,368 was recorded on this transaction. The fair values of the warrants and conversion options included in the calculation of the loss on extinguishment of debt were $894,090 and $795,278, respectively. |
$ | 1,801,783 | $ | 1,801,783 | ||||
|
August 31, 2023 |
May 31, 2023 |
|||||||
|
Total – Convertible Notes Payable - Related Party, Current Portion |
$ | 900,891 | $ | 900,891 | ||||
|
Total – Convertible Notes Payable – Related Party, Long-term Portion |
$ | 900,892 | $ | 900,892 | ||||
Note 17: Notes Payable
|
August 31, 2023 |
May 31, 2023 |
|||||||
| Debenture in the principal amount of $250,000 (the “Debenture 1”) dated December 1, 2021, which bears interest, payable quarterly commencing six months after issuance, at a rate of 15% per annum. Principal on Debenture 1 is due in two equal installments 18 months after issuance and at maturity on July 10, 2024. With the Debenture, the purchaser received warrants to purchase 75,758 shares of common stock at an exercise price of $1.65 per share of common stock. The Company shall make additional quarterly payments under Debenture 1 beginning 90 days after the end of its first fiscal quarter after January 10, 2025, and for the next five years, on an annual basis, equal to the greater of (a) 15% of the original principal amount, or (b) the purchaser’s pro rata portion of 5% of the distributions the Company receives as a result of the Quinn River Joint Venture during the prior fiscal year. The Company recorded a discount in the amount of $17,223 on Debenture 1. During the three months ended August 31, 2023 and 2022, $1,275 and $1,667 of this discount was charged to operations, respectively. The Company recorded an original issue discount in the amount of $187,500 on Debenture 1. During the three months ended August 31, 2023 and 2022, $13,876 and $18,145 of this original issue discount was charged to operations, respectively. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $9,375 and $9,375 on Debenture 1, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $9,375 and $22,917, respectively. On May 31, 2023, the Debenture 1 was amended as follows: (1) the maturity date was extended to October 31, 2024; (2) the first payment of principal and interest on June 30, 2023, followed by quarterly payment of principal and interest on September 30, 2023, beginning October 31, 2023, the Company is required to pay the note holder principal and interest monthly through the maturity date. |
$ | 250,000 | $ | 250,000 | ||||
| Debenture in the principal amount of $250,000 (the “Debenture 2”) dated December 21, 2021, which bears interest, payable quarterly commencing six months after issuance, at a rate of 15% per annum. Principal on Debenture 2 is due in two equal installments 18 months after issuance and at maturity on July 10, 2024. With the Debenture, the purchaser received warrants to purchase 75,758 shares of common stock at an exercise price of $1.65 per share of common stock. The Company shall make additional quarterly payments under Debenture 2 beginning 90 days after the end of its first fiscal quarter after January 10, 2025, and for the next five years, on an annual basis, equal to the greater of (a) 15% of the original principal amount, or (b) the purchaser’s pro rata portion of 5% of the distributions the Company receives as a result of the Quinn River Joint Venture during the prior fiscal year. The Company recorded a discount in the amount of $10,428 on Debenture 2. During the three months ended August 31, 2023 and 2022, $1,009 and $1,009 of this discount was charged to operations, respectively. The Company recorded an original issue discount in the amount of $187,500 on Debenture 2. During the three months ended August 31, 2023, $18,145 and $18,145 of this original issue discount was charged to operations, respectively. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $6,224 and $9,375 on Debenture 2, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $12,370 and $20,833, respectively. During the three months ended August 31, 2023 and 2022, the Company made principal payments in the amount of $145,833 and $0 on Debenture 2, respectively. On May 31, 2023, the Debenture 2 was amended as follows: (1) the first payment of principal and interest on June 30, 2023, followed by quarterly payment of principal and interest on September 30, 2023, beginning October 31, 2023, the Company is required to pay the note holder principal and Interest monthly through the maturity date. |
104,167 | 250,000 | ||||||
|
August 31, 2023 |
May 31, 2023 |
|||||||
| Debenture in the principal amount of $500,000 (the “Debenture 3”) dated December 21, 2021, which bears interest, payable quarterly commencing six months after issuance, at a rate of 15% per annum. Principal on Debenture 3 is due in two equal installments 18 months after issuance and at maturity on July 10, 2024. With the Debenture, the purchaser received warrants to purchase 151,516 shares of common stock at an exercise price of $1.65 per share of common stock. The Company shall make additional quarterly payments under Debenture 3 beginning 90 days after the end of its first fiscal quarter after January 10, 2025, and for the next five years, on an annual basis, equal to the greater of (a) 15% of the original principal amount, or (b) the purchaser’s pro rata portion of 5% of the distributions the Company receives as a result of the Quinn River Joint Venture during the prior fiscal year. The Company recorded a discount in the amount of $19,335 on Debenture 3. During the three months ended August 31, 2023 and 2022, $1,541 and $1,871 of this discount was charged to operations, respectively. The Company recorded an original issue discount in the amount of $375,000 on Debenture 3. During the three months ended August 31, 2023 and 2022, $29,886 and $36,290 of this original issue discount was charged to operations, respectively. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $18,750 and $18,750 on Debenture 3, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $18,750 and $41,458, respectively. On May 31, 2023, the Debenture 3 was amended as follows: (1) the maturity date was extended to October 31, 2024; (2) the first payment of principal and interest on June 30, 2023, followed by quarterly payment of principal and interest on September 30, 2023, beginning October 31, 2023, the Company is required to pay the note holder principal and interest monthly through the maturity date. |
500,000 | 500,000 | ||||||
| Debenture in the principal amount of $500,000 (the “Debenture 4”) dated January 4, 2022, which bears interest, payable quarterly commencing six months after issuance, at a rate of 15% per annum. Principal on Debenture 4 is due in two equal installments 18 months after issuance and at maturity on July 10, 2024. With the Debenture, the purchaser received warrants to purchase 151,516 shares of common stock at an exercise price of $1.65 per share of common stock. The Company shall make additional quarterly payments under Debenture 4 beginning 90 days after the end of its first fiscal quarter after January 10, 2025, and for the next five years, on an annual basis, equal to the greater of (a) 15% of the original principal amount, or (b) the purchaser’s pro rata portion of 5% of the distributions the Company receives as a result of the Quinn River Joint Venture during the prior fiscal year. The Company recorded a discount in the amount of $17,154 on Debenture 4. During the three months ended August 31, 2023 and 2022, $1,413 and $1,715 of this discount was charged to operations, respectively. The Company recorded an original issue discount in the amount of $375,000 on Debenture 4. During the three months ended August 31, 2023 and 2022, $30,882 and $37,500 of this original issue discount was charged to operations, respectively. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $18,750 and $18,750 on Debenture 4, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $18,750 and $38,750, respectively. On May 31, 2023, the Debenture 4 was amended as follows: (1) the maturity date was extended to October 31, 2024; (2) the first payment of principal and interest on June 30, 2023, followed by quarterly payment of principal and interest on September 30, 2023, beginning October 31, 2023, the Company is required to pay the note holder principal and interest monthly through the maturity date. |
500,000 | 500,000 | ||||||
| Debenture in the principal amount of $500,000 (the “Debenture 5”) dated January 4, 2022, which bears interest, payable quarterly commencing six months after issuance, at a rate of 15% per annum. Principal on Debenture 5 is due in two equal installments 18 months after issuance and at maturity on July 10, 2024. With the Debenture, the purchaser received warrants to purchase 151,516 shares of common stock at an exercise price of $1.65 per share of common stock. The Company shall make additional quarterly payments under Debenture 5 beginning 90 days after the end of its first fiscal quarter after January 10, 2025, and for the next five years, on an annual basis, equal to the greater of (a) 15% of the original principal amount, or (b) the purchaser’s pro rata portion of 5% of the distributions the Company receives as a result of the Quinn River Joint Venture during the prior fiscal year. The Company recorded a discount in the amount of $17,154 on Debenture 5. During the three months ended August 31, 2023 and 2022, $1,413 and $1,715 of this discount was charged to operations, respectively. The Company recorded an original issue discount in the amount of $375,000 on Debenture 5. During the three months ended August 31, 2023 and 2022, $30,882 and $37,500 of this original issue discount was charged to operations, respectively. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $18,750 and $18,750 on Debenture 5, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $18,750 and $38,750, respectively. On May 31, 2023, the Debenture 5 was amended as follows: (1) the maturity date was extended to October 31, 2024; (2) the first payment of principal and interest on June 30, 2023, followed by quarterly payment of principal and interest on September 30, 2023, beginning October 31, 2023, the Company is required to pay the note holder principal and interest monthly through the maturity date. |
500,000 | 500,000 | ||||||
|
August 31, 2023 |
May 31, 2023 |
|||||||
| Debenture in the principal amount of $500,000 (the “Debenture 6”) dated January 4, 2022, which bears interest, payable quarterly commencing six months after issuance, at a rate of 15% per annum. Principal on Debenture 6 is due in two equal installments 18 months after issuance and at maturity on July 10, 2024. With the Debenture, the purchaser received warrants to purchase 151,516 shares of common stock at an exercise price of $1.65 per share of common stock. The Company shall make additional quarterly payments under Debenture 6 beginning 90 days after the end of its first fiscal quarter after January 10, 2025, and for the next five years, on an annual basis, equal to the greater of (a) 15% of the original principal amount, or (b) the purchaser’s pro rata portion of 5% of the distributions the Company receives as a result of the Quinn River Joint Venture during the prior fiscal year. The Company recorded a discount in the amount of $17,154 on Debenture 6. During the three months ended August 31, 2023 and 2022, $1,413 and $1,715 of this discount was charged to operations, respectively. The Company recorded an original issue discount in the amount of $375,000 on Debenture 6. During the three months ended August 31, 2023 and 2022, $30,882 and $37,500 of this original issue discount was charged to operations, respectively. During the three months ended August 31, 2023 and 2022, the Company accrued interest in the amounts of $18,750 and $18,750 on Debenture 6, respectively. During the three months ended August 31, 2023 and 2022, the Company made interest payments in the amounts of $18,750 and $38,750, respectively. On May 31, 2023, the Debenture 6 was amended as follows: (1) the maturity date was extended to October 31, 2024; (2) the first payment of principal and interest on June 30, 2023, followed by quarterly payment of principal and interest on September 30, 2023, beginning October 31, 2023, the Company is required to pay the note holder principal and interest monthly through the maturity date. |
500,000 | 500,000 | ||||||
|
Total |
2,354,167 | 2,500,000 | ||||||
|
Original Issue Discount |
1,875,000 | 1,875,000 | ||||||
|
Notes Payable, Gross |
4,229,167 | 4,375,000 | ||||||
|
Less: Discount |
(739,621 |
) |
(902,339 |
) |
||||
|
Notes Payable, Net of Discount |
3,489,546 | 3,472,661 | ||||||
|
August 31, 2023 |
May 31, 2023 |
|||||||
|
Total – Notes Payable, Net of Discounts, Current Portion |
$ | 1,754,168 | $ | 1,439,584 | ||||
|
Total – Convertible Notes Payable, Net of Discounts |
$ | 1,735,378 | $ | 2,033,077 | ||||
During the three months ended August 31, 2023 and 2022, the Company amortized discounts to interest expense in the amount of $162,718 and $194,774, respectively.
Aggregate maturities of notes payable and convertible notes payable, and convertible notes payable – related parties as of August 31, 2023 are as follows (not including unamortized debt discounts in the amount of $739,621):
For the twelve months ended August 31,
|
2024 |
$ | 5,507,219 | ||
|
2025 |
4,615,550 | |||
|
2026 |
375,000 | |||
|
2027 |
375,000 | |||
|
2028 |
375,000 | |||
|
Thereafter |
487,500 | |||
|
Total |
$ | 11,735,269 |
Note 18: Lease Liabilities - Financing Leases
|
August 31, 2023 |
May 31, 2023 |
|||||||
| Financing lease obligation under a lease agreement for extraction equipment dated March 14, 2022 in the original amount of $359,900 payable in forty-eight monthly installments of $10,173 including interest at the rate of 15.89%. During the three months ended August 31, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $19,791 and $10,728, respectively. During the three months ended August 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $16,907 and $13,612, respectively. |
$ | 257,389 | $ | 277,180 | ||||
| Financing lease obligation under an agreement for equipment dated June 20, 2022 in the original amount of $12,400 payable in forty-eight monthly installments of $350 including interest at a rate of 15.78%. During the three months ended August 31, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $728 and $244, respectively. During the three months ended August 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $728 and $320, respectively. |
$ | 9,259 | 9,987 | |||||
|
Total |
$ | 266,648 | $ | 287,167 | ||||
|
Current portion |
$ | 90,871 | $ | 86,887 | ||||
|
Long-term maturities |
175,777 | 200,280 | ||||||
|
Total |
$ | 266,648 | $ | 287,167 | ||||
Aggregate maturities of lease liabilities – financing leases as of August 31, 2023 are as follows:
For the period ended August 31,
|
2024 |
$ | 90,871 | ||
|
2025 |
106,146 | |||
|
2026 |
69,631 | |||
|
2027 |
- | |||
|
2028 |
- | |||
|
Thereafter |
- | |||
|
Total |
$ | 266,648 |
Note 19: Stockholders’ Equity
The Company’s authorized capital stock consists of 187,500,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.
On September 15, 2022, the Company effected a reverse stock split of its issued and outstanding common stock (“the “Reverse Split”) at a ratio of 1-for-4, whereby four shares of the Company’s common stock issued and outstanding were exchanged for one share. The number of shares of common stock issued and outstanding immediately before the Reverse Split was 290,070,272; the number of shares outstanding immediately after the reverse split was 72,517,570, a decrease of 217,552,702 shares. All share and per-share information in these financial statements have been adjusted to reflect the effects of the Reverse Split. As a result of the split, an additional 576 shares were issued due to rounding.
Common stock transactions for the three months ended August 31, 2023
None.
Common stock transactions for the three months ended August 31, 2022
None.
The following table summarizes the significant terms of warrants outstanding at August 31, 2023. This table does not include the unit warrants. See Unit Warrants section below.
|
Range of exercise Prices |
|
|
Number of warrants Outstanding |
|
|
Weighted average remaining contractual life (years) |
|
|
Weighted average exercise price of outstanding Warrants |
|
|
Number of warrants Exercisable |
|
|
Weighted average exercise price of exercisable Warrants |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.40 |
|
|
|
20,232,775 |
|
|
|
2.04 |
|
|
$ |
0.40 |
|
|
|
20,232,775 |
|
|
$ |
0.40 |
|
|
$ |
1.60 |
|
|
|
191,094 |
|
|
|
2.04 |
|
|
$ |
1.60 |
|
|
|
191,094 |
|
|
$ |
1.60 |
|
|
$ |
1.65 |
|
|
|
757,580 |
|
|
|
1.33 |
|
|
$ |
1.65 |
|
|
|
757,580 |
|
|
$ |
1.65 |
|
|
|
|
|
|
|
21,181,449 |
|
|
|
2.02 |
|
|
$ |
0.46 |
|
|
|
21,181,449 |
|
|
$ |
0.46 |
|
Transactions involving warrants are summarized as follows. This table does not include the unit warrants. See Unit Warrants section below.
|
Number of Shares |
Weighted Average Exercise Price |
|||||||
|
Warrants outstanding at May 31, 2022 |
1,729,924 | $ | 1.98 | |||||
|
Granted |
20,232,775 | $ | 0.40 | |||||
|
Exercised |
- | $ | - | |||||
|
Cancelled / Expired |
(781,250 |
) |
$ | 0.60 | ||||
|
Warrants outstanding at May 31, 2023 |
21,181,449 | $ | 0.46 | |||||
|
Granted |
- | $ | - | |||||
|
Exercised |
- | $ | - | |||||
|
Cancelled / Expired |
- | $ | - | |||||
|
Warrants outstanding at August 31, 2023 |
21,181,449 | $ | 0.46 | |||||
Unit Warrants
In February and March 2018, in connection with the Westpark offering, the Company issued five-year warrants to purchase 51,310 of the Company’s units at an exercise price of $5.00 per unit. Each unit consists of four shares of common stock and one warrant to purchase a share of common stock for $3.00. These warrants expired in March of 2023.
Because the unit warrants are exercisable for Common Stock and warrants, they are not included in the warrant tables above.
Note 20: Related Party Transactions
As of August 31, 2023 and May 31, 2023, the Company had accrued salary due to Michael Abrams, a former officer of the Company prior to his September 1, 2015 termination, in the amount of $16,250.
During the three months ended August 31, 2023, the Company made payments of $5,000 to each of its three directors for their participation on the Board, for a total of $15,000.
During three months ended August 31, 2023, the Company’s Board of Directors authorized a bonus for its Chief Executive Officer in the amount of $50,000; $25,000 of this amount was paid during the three months ended August 31, 2023, and $25,000 was accrued at August 31, 2023.
During the three months ended August 31, 2023, the Company accrued interest in the amount of $42,042 on a convertible note payable to Navy Capital Green Co-Invest Fund, LLC, an entity that holds greater than 10% of the Company’s common stock outstanding. At August 31, 2023, the principal balance of the convertible note payable to Navy Capital Green Co-Invest Fund, LLC, was $1,801,783.
Note 21: Income Taxes
The following table summarizes the Company’s income tax accrued for the three and months ended August 31, 2023 and 2022:
The Company accounts for income taxes under FASB ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.
The components of the income tax provision include:
|
Three Months Ended August 31, |
||||||||
|
2023 |
2022 |
|||||||
|
Revenue |
$ | 5,114,527 | $ | 6,044,927 | ||||
|
Directly attributable costs |
(2,840,601 |
) |
(3,573,094 |
) |
||||
|
Deferred |
2,273,926 | 2,471,833 | ||||||
|
Tax rate |
21 |
% |
21 |
% |
||||
|
Tax expense |
$ | 477,524 | $ | 519,085 | ||||
Note: Change in uncertain tax position with all tax expense recorded in current year due to change in estimate. No prior year net operating loss was considered.
Due to the accrual of taxes related to Section 280E of the Internal Revenue Code, as amended, the Company has an uncertain tax accrual that is currently being expensed as a change in estimate. The Company has net operating losses that it believes are available to it to offset this expense; however, there can be no assurance under current interpretations of tax laws for cannabis companies that the Company will be allowed to use these net operating losses to offset Section 280E tax expenses.
Note 22: Commitments and Contingencies
Legal Matters
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of filing of this report, there were no pending or threatened lawsuits.
Integrity Global Security
On October 20, 2022, Integrity Global Security Inc. (“IGS”) filed a Complaint in the Eighth Judicial District Court, Case No. A-22-860152-C, against Serenity alleging Breach of Contract and Breach of Covenant of Good Faith and Fair Dealing. In its Complaint, IGS alleged that Serenity owes IGS the amount of $48,890 for unpaid invoices related to security services performed at Oasis Cannabis Dispensary and City Trees’ locations in Clark County, Nevada. The Company has accrued the amount of $27,314 in connection with this liability of August 31, 2023.
In response to IGS’s Complaint, Serenity filed an Answer on December 8, 2022, and a Countercomplaint against IGS asserting claims for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, Negligence, Respondent Superior, Intentional Interference with Prospective Economic Advantage and Negligent Hiring, Training, and Supervision for actions related to a violent attack by an IGS employee against a Serenity employee. Serenity amended its Counterclaim on January 20, 2023, to include more information related to Serenity’s damages sustained as a result of IGS’s actions.
IGS filed a Motion to Dismiss Serenity’s Counterclaims on February 10, 2023, which Serenity opposed. However, on May 4, 2023, the morning of the Motion to Dismiss oral argument, IGS’s counsel advised Serenity’s counsel and the Court that IGS was voluntarily withdrawing its Motion to Dismiss. The Court granted IGS’s voluntary withdrawal of the Motion to Dismiss and IGS subsequently filed an Answer to Serenity’s Counterclaim on May 18, 2023.
Shortly thereafter the parties’ counsel attended an Early Case Conference on May 18, 2023, and the parties began exchanging information related to relevant witnesses, documents, and computations of damages. IGS served Serenity with Interrogatories, Requests for Admissions, and Requests for Production of Documents on or about July 20, 2023, while Serenity served IGS with their own Interrogatories and Requests for Production of Documents on or about August 11, 2023. Before any of the parties answered the propounded discovery requests served by the other party, the parties agreed to attend a Judicial Settlement Conference with the Eighth Judicial District Court. Accordingly, the parties entered into a Stipulation to Stay Discovery Pending a Judicial Settlement Conference, which was granted and entered by the Eighth Judicial District Court on September 20, 2023.
The parties are awaiting available dates from the Eighth Judicial District Court for the Judicial Settlement Conference. Until the parties attend the Judicial Settlement Conference, this matter is stayed.
Lease Arrangements
The Company leases several facilities for office, warehouse, and retail space. Currently lease commitments are as follows:
|
| ● | A lease that commenced in February 2019 for 1,400 square feet of office space located at 1718 Industrial Road, Las Vegas, NV 89102, for a term of eighteen months, and for rent of $1,785 per month. In June 2020, this lease was extended to August 31, 2022, with the monthly rent increasing to $1,867 until September 2021, after which time it will be subject to annual increases of 3%. The lease was extended again on April 1, 2022, effective September 1, 2022 until August 31, 2024. The monthly rent increased on September 1, 2022 to $2,084. |
|
|
|
|
|
| ● | A lease that commenced January 2018 for 1,000 square feet of storefront space plus 5,900 square feet of warehouse space located at 1800 Industrial Road, Suites 102, 160, and 180, Las Vegas, NV 89102, for a term of five years and for initial base rent of $7,500 per month, with annual increases of 3%. In February 2020, this lease was extended to February 28, 2030 and the monthly rent was increased by $600. At August 31, 2023, the monthly rent on this lease was $10,385. |
|
| ● | A lease that commenced in February 2019 for 2,504 square feet of office space located at 1800 Industrial Road, Suite 100, Las Vegas, NV 89102 for a term of eighteen months and for initial rent of $3,210 per month, with annual increases of 4%. In February 2020, this lease was extended to February 28, 2030, and the lease was modified to include annual rent increases of 3%. At August 31, 2023, the monthly rent on this lease was $3,649. |
|
|
|
|
|
| ● | A lease that commenced in January 2016 for 22,000 square feet of warehouse space located at 203 E. Mayflower Avenue, North Las Vegas, NV 89030 for a term of five years and initial rent of $11,000 per month, which amount increased to $29,000 per month on January 1, 2020. In June 2020, this lease was extended to February 28, 2026, and the monthly rent was amended as follows: $25,000 for the months of April, May, and June 2020; $22,500 for the months of March 2021 through February 2022; $23,175 for the months of March 2022 through February 2023; 23,870 for the months of March 2023 through February 2024; $24,586 for the months of March 2024 through February 2025; and $25,323 for the months of March 2025 through February 2026. |
|
|
|
|
|
| ● | A lease that commenced on May 17, 2022 for approximately 20 acres of land for purposes of developing a cultivation facility along the Quinn River in Nevada at a cost of $3,500 per quarter beginning on or before May 31, 2022 (the “Quinn River Land Lease”). As of May 31, 2023 the lease was terminated and will not be renewed by the parties. |
In connection with the Company’s planned Colorado operations, on April 17, 2015, pursuant to an Industrial Lease Agreement (the “Lease”), CLS Labs Colorado leased 14,392 square feet of warehouse and office space (the “Leased Real Property”) in a building in Denver, Colorado where certain intended activities, including growing, extraction, conversion, assembly and packaging of cannabis and other plant materials, are permitted by and in compliance with state, city and local laws, rules, ordinances and regulations. The Lease had an initial term of seventy-two (72) months and provided CLS Labs Colorado with two options to extend the term of the lease by up to an aggregate of ten (10) additional years. In August 2017, as a result of the Company’s decision to suspend its proposed operations in Colorado, CLS Labs Colorado asked its landlord to be relieved from its obligations under the Lease, but the parties have not yet reached an agreement on how to proceed.
In August 2017, the Company’s Colorado subsidiary received a demand letter from its Colorado landlord requesting the forfeiture of the $50,000 security deposit, $10,000 in expenses, $15,699 in remaining rent due under the lease agreement and $30,000 to buy out the remaining amounts due under the lease. These expenses, which are a liability of the Company’s Colorado subsidiary, have been accrued on the balance sheet as of August 31, 2023.
Note 23: Subsequent Events
The Company has evaluated events through the date of the financial statements and has determined that there were no additional material subsequent events.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
History
We were incorporated on March 31, 2011 as Adelt Design, Inc. to manufacture and market carpet binding art. Production and marketing of carpet binding art never commenced. On November 20, 2014, we adopted amended and restated articles of incorporation, thereby changing our name to CLS Holdings USA, Inc. On April 29, 2015, we entered into a merger agreement with CLS Labs and a newly-formed, wholly owned subsidiary of the Company (the “Merger Sub”) and effected the Merger (the “Merger”). Upon the consummation of the Merger, the separate existence of the Merger Sub ceased and CLS Labs, the surviving corporation in the Merger, became a wholly owned subsidiary of the Company, with the Company acquiring the stock of CLS Labs. As a result of the Merger, we acquired the business of CLS Labs and abandoned our previous business.
CLS Labs was originally incorporated in the state of Nevada on May 1, 2014 under the name RJF Labs, Inc. before changing its name to CLS Labs, Inc. on October 24, 2014. It was formed to commercialize a proprietary method of extracting cannabinoids from cannabis plants and converting the resulting cannabinoid extracts into concentrates such as oils, waxes, edibles and shatter.
We have been issued a U.S. patent with respect to our proprietary method of extracting cannabinoids from cannabis plants and converting the resulting cannabinoid extracts into concentrates such as oils, waxes, edibles and shatter. We have not commercialized our proprietary process and due to the current Nevada State laws governing these types of extraction methods, we do not intend to commercialize the proprietary process in the future. CLSH is actively engaged in attempting to find a buyer for the patent who may be able to use it in another state or another application.
The Quinn River Joint Venture Agreement
On December 4, 2017, we entered into the Acquisition Agreement with Alternative Solutions to acquire the outstanding equity interests in the Oasis LLCs. Pursuant to the Acquisition Agreement, as amended, we paid a non-refundable deposit of $250,000 upon signing, which was followed by an additional payment of $1,800,000 on February 5, 2018, for an initial 10% of Alternative Solutions and each of the subsidiaries. At the closing of our purchase of the remaining 90% of the ownership interests in Alternative Solutions and the Oasis LLCs, which occurred on June 27, 2018, we paid the following consideration: $5,995,543 in cash, a $4.0 million promissory note due in December 2019, and $6,000,000 in shares of our common stock. At that time, we applied for regulatory approval to own an interest in the Oasis LLCs, which approval the CCB Granted on June 21, 2018. Just prior to closing, the parties agreed that we would instead acquire all of the membership interests in Alternative Solutions, the parent of the Oasis LLCs, from its members, and the membership interests in the Oasis LLCs owned by members other than Alternative Solutions. The CCB granted final regulatory approval for us to own our interest in the Oasis LLCs through Alternative Solutions under the final structure of the transaction on April 26, 2022.
On October 20, 2021, we entered into a management services agreement (the “Quinn River Joint Venture Agreement”) through our 50% owned subsidiary, Kealii Okamalu LLC, with CSI Health MCD LLC (“CSI”) and a commission established by the authority of the Tribal Council of the Fort McDermitt Paiute and Shoshone Tribe (“Tribe”). The purpose of the Quinn River Joint Venture Agreement was to establish a business (the “Quinn River Joint Venture”) to grow, cultivate, process, and sell cannabis and related products. The Quinn River Joint Venture Agreement had an initial term of 10 years plus a 10-year renewal option from the date the first cannabis crop was harvested and sold. Pursuant to the Quinn River Joint Venture Agreement, Kealii Okamalu LLC was expected to eventually lease approximately 20-30 acres of the Tribe’s land located along the Quinn River at a cost of $3,500 per quarter and manage the design, finance and construction of a cannabis cultivation facility on such tribal lands (the “JV Cultivation Facility”). In 2022 and 2023 Kealii Okamalu LLC managed the ongoing operations of the JV Cultivation Facility and related business, including, but not limited to, cultivation of cannabis crops, personnel staffing, product packaging, testing, marketing and sales. Packaged products were branded as “Quinn River Farms.” We provided 10,000 square feet of warehouse space at our Las Vegas facility, and the Quinn River Joint Venture granted us preferred vendor status including the right to purchase cannabis flower and the Quinn River Joint Venture’s cannabis trim at favorable prices. Kealii Okamalu LLC was expected to contribute $6 million towards the construction of the JV Cultivation Facility and the working capital for the Quinn River Joint Venture. This amount was to be repaid from the portion of the net profits of the Quinn River Joint Venture otherwise payable to CSI and the Tribe at the rate of $750,000 per quarter for eight quarters. Kealii Okamalu LLC was to receive one-third of the net profits of the Quinn River Joint Venture. We were the manager of and held a 50% ownership interest in Kealii Okamalu LLC. Kealii Okamalu LLC is a variable interest entity which we consolidate. The Quinn River Joint Venture was not a legal entity but rather a business operated by Kealii Okamalu LLC. The Quinn River Joint Venture completed its first harvest during the year ended May 31, 2023, from which the Company purchased inventory in the amount of $952,124.
As of the year ended May 31, 2023, the Company’s 50% partner in Kealii Okamalu LLC had defaulted on its obligations under both the Kealii Okamalu LLC Operating Agreement and the Quinn River Joint Venture Agreement by failing to make any of its required capital contribution of $3 million. As a result of the partner’s breach, the Quinn River Joint Venture Agreement was officially terminated in July of 2023. Kealii Okamalu LLC is no longer an active operating entity, and the Company has entered into negotiations directly with the Tribal Council to restructure the Quinn River Joint Venture Agreement. As of the filing of this Form 10-K, no new agreement with the Tribal Council has been reached and no new agreement appears to be imminent. The Company does not believe it is likely to recover its investment in Kealii Okamalu LLC and has made an impairment charge in the amount of $1,590,742 against these assets during the year ended May 31, 2023.
Current Business and Outlook
We generate revenues through: (i) our retail dispensary (Oasis), and (ii) our City Trees cultivation and processing of cannabis and wholesale of cannabis-related products for Oasis and third-parties. We continue to explore opportunities for growth through the acquisition of companies, the creation of joint ventures, licensing agreements, and fee-for-service arrangements with growers and dispensaries of cannabis products. We believe that we can ultimately establish a position as one of the premier cannabinoid extraction and processing companies in the industry. We have created our own brand of concentrates for consumer use, which we sell wholesale to cannabis dispensaries. We are attempting to create a “gold standard” national brand by standardizing the testing, compliance and labeling of our products in an industry currently comprised of small, local businesses with erratic and unreliable product quality, testing practices and labeling.
Finally, we intend to grow through select acquisitions in secondary and tertiary markets, targeting newly regulated states that we believe offer a competitive advantage. Our goal at this time is to become a successful regional cannabis company.
Results of Operations for the Three Months Ended August 31, 2023 and 2022
The table below sets forth our select expenses as a percentage of revenue for the applicable periods:
|
Three Months Ended |
Three Months Ended |
|||||||
|
August 31, 2023 |
August 31, 2022 |
|||||||
|
Revenue |
100 |
% |
100 |
% |
||||
|
Cost of Goods Sold |
56 |
% |
52 |
% |
||||
|
Gross Margin |
44 |
% |
48 |
% |
||||
|
Selling, General, and Administrative Expenses |
53 |
% |
51 |
% |
||||
|
Gain on Settlement of Notes Receivable |
- |
% |
(6 |
)% |
||||
|
Interest expense |
9 |
% |
13 |
% |
||||
|
Provision for Income Tax |
9 |
% |
9 |
% |
||||
The table below sets forth certain statistical and financial highlights for the applicable periods:
|
Three Months Ended |
Three Months Ended |
|||||||
|
August 31, 2023 |
August 31, 2022 |
|||||||
|
Number of Customers Served (Dispensary) |
71,566 | 82,944 | ||||||
|
Revenue |
$ | 5,114,527 | $ | 6,044,927 | ||||
|
Gross Profit |
$ | 2,273,926 | $ | 2,900,510 | ||||
|
Selling, General, and Administrative Expenses |
$ | 2,729,900 | $ | 3,060,615 | ||||
Revenues
We had revenue of $5,114,527 during the three months ended August 31, 2023, a decrease of $930,400, or 15%, compared to revenue of $6,044,927 during the three months ended August 31, 2022. Our cannabis dispensary accounted for $3,308,542, or 65%, of our revenue for the three months ended August 31, 2023, a decrease of $580,015, or 15%, compared to $3,888,557 during the three months ended August 31, 2022. Dispensary revenue decreased during the first quarter of fiscal year 2024 because our average sales per day decreased from $42,267 during the first quarter of fiscal year 2023 to $35,962 during the first quarter of fiscal year 2024. Our cannabis production accounted for $1,805,985, or 35%, of our revenue for the three months ended August 31, 2023, a decrease of $350,385 or 16%, compared to $2,156,370 for the three months ended August 31, 2022. The decrease in production revenues for the first quarter of fiscal year 2024 was primarily due to the fact that the overall cannabis market in Nevada has seen a decrease in wholesale pricing, coupled with a slowdown in nonessential expenditures that comes with inflation and an uncertain economy.
Cost of Goods Sold
Our cost of goods sold for the three months ended August 31, 2023 was $2,840,601, a decrease of $303,816, or 10%, compared to cost of goods sold of $3,144,417 for the three months ended August 31, 2022. The decrease in cost of goods sold for the three months ended August 31, 2023 was due primarily due to a decrease in sales. Cost of goods sold was 55.5% of sales during the three months ended August 31, 2023 resulting in a gross margin of 44.5%. Cost of goods sold was 52.0% of sales during the three months ended August 31, 2022 resulting in a gross margin of 48.0%. Cost of goods sold during the first quarter of the 2024 fiscal year primarily consisted of product cost of $2,400,010, labor and overhead of $331,127, supplies and materials of $100,989, and licenses and fees of $8,475. Cost of goods sold during the first quarter of the 2023 fiscal year primarily consisted of product cost of $2,636,259, labor and overhead of $339,948, supplies and materials of $151,507, and licenses and fees of $16,703..
Selling, General and Administrative Expenses
Selling, general and administrative expenses, or SG&A, decreased by $330,715, or approximately 11%, to $2,729,900 during the three months ended August 31, 2023, compared to $3,060,615 for the three months ended August 31, 2022. The decrease in SG&A expenses for the three months ended August 31, 2023 was primarily due to the Company’s efforts to reduce payroll, legal and office related costs, and sales and marketing expenses.
SG&A expense during the three months ended August 31, 2023 was primarily attributable to an aggregate of $2,205,880 in costs associated with operating the Oasis LLCs, a decrease of $339,262 compared to $2,545,142 during the three months ended August 31, 2022. The major components of the decrease were as follows: payroll and related costs of $1,171,719 compared to $1,413,836; lease, facilities, and office costs of $508,158 compared to $700,454; sales and marketing costs of $115,461 compared to $214,897; and depreciation and amortization of $113,039 compared to $161,556. The reductions in costs were primarily the result of our cost cutting efforts. The decrease in SG&A expense for the first quarter was partially offset by an increase in professional fees of $230,872 compared to $150,232 and a decrease in the absorption of costs into cost of goods sold and inventory in the amount of $159,926.
Finally, SG&A increased by $8,547 during the three months ended August 31, 2023 as a result of an increase in the expenses associated with the ongoing implementation of other aspects of our business plan and our general corporate overhead to $524,021 from $515,474 during the three months ended August 31, 2022. The major components of this increase compared to the first quarter of fiscal 2023 was an increase in payroll and related costs to $191,479 during the current period from $115,623 during the comparable period of the prior year.
Interest Expense, Net
Our interest expense was $457,472 for the three months ended August 31, 2023, a decrease of $309,198, or 40%, compared to $766,670 for the three months ended August 31, 2022. The decrease in interest expense was primarily due to a decrease in interest related to our convertible debentures in connection with the conversion of $11,343,619 of principal to equity on September 15, 2022. Interest expense also decreased by $21,318 due to a decrease in the amortization of discounts on our notes payable. These decreases were partially offset by an increase in interest on our short-term financing in the amount of $55,603.
Employee Retention Tax Credit
During the three months ended August 31, 2023, the Company received the amount of $924,862 Under the provisions of the extension of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). This amount was recorded as other income. There was no comparable transaction in the prior period.
Loss on Equity Investment
During the three months ended August 31, 2022, we had a loss on equity investment in the amount of $234,430. The Company, through its 50% owned subsidiary Kealii Okamalu, owned a one-third interest in the Quinn River Joint Venture. There was no comparable transaction in the current period.
Gain on settlement of accounts payable
During the three months ended August 31, 2023, we settled an outstanding vendor account in the amount of $8,375 for a cash payment of $4,000 representing a gain in the amount of $4,375. There was no comparable transaction in the prior period.
Gain on Settlement of Note Receivable
During the three months ended August 31, 2022, we recorded a gain on the settlement of the IGH Settlement Note in the amount $348,165. This gain on the settlement arose after IGH notified us on February 27, 2021, that it did not plan to make further payments in accordance with the terms of the IGH Note on the theory that the Break-Up Fee excused such additional payments. We vehemently disagreed and litigation ensued. On June 14, 2021, the parties to the IGH lawsuit entered into a confidential settlement agreement to resolve the action and executed the $3,000,000 IGH Settlement Note. Pursuant to the IGH Settlement Note, IGH paid us $1,000,000 on or before July 21, 2021. The remaining $2,000,000 and accrued interest was paid in 12 equal monthly installments, and the final installment was paid in July 2022. There was no comparable transaction in the current period.
Provision for Income Taxes
We recorded a provision for income taxes in the amount of $477,624 during the three months ended August 31, 2023 compared to $519,085 during the three months ended August 31, 2022. Although we have net operating losses that we believe are available to us to offset this entire tax liability, which arises under Section 280E of the Code because we are a cannabis company, as a conservative measure, we have accrued this liability.
Net Loss
For the reasons above, our net loss for the three months ended August 31, 2023 was $461,733 compared to a net loss of $1,332,125 for the three months ended August 31, 2022, a decrease of $870,392, or 65%.
Non-Controlling Interest
During the three months ended August 31, 2023 and 2022, the (income) loss associated with the non-controlling interest in Kealii Okamalu was ($2,108) and $183,647, respectively. This amount is comprised of the third-party portion of the operating loss of the Quinn River Joint Venture and our loss on equity investment.
Net Loss Attributable to CLS Holdings USA, Inc.
Our net loss attributable to CLS Holdings USA, Inc. for the three months ended August 31, 2023 was $463,841 compared to a net loss of $1,148,478 for the three months ended August 31, 2022, a decrease of $684,637 or 60%.
Non-GAAP Measures
EBITDA and Adjusted EBITDA are non-GAAP financial performance measures and should not be considered as alternatives to net income(loss) or any other measure derived in accordance with GAAP. These non-GAAP measure have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our financial results as reported in accordance with GAAP. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. As required by the rules of the SEC, we provide below a reconciliation of these non-GAAP financial measures contained herein to the most directly comparable measure under GAAP. Management believes that EBITDA provides relevant and useful information, which is widely used by analysts, investors and competitors in our industry as well as by our management. Management also believes that adjusting EBITDA for the effects of non-recurring transactions may provide insight into the nature of the core business. By providing these non-GAAP profitability measure, management intends to provide investors with a meaningful, consistent comparison of our profitability measures for the periods presented.
|
Three Months Ended August 31, 2023 |
Three Months Ended August 31, 2022 |
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|
Net Loss attributable to CLS Holdings, Inc. |
$ | (463,841 |
) |
$ | (1,148,478 |
) |
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Add: |
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Interest expense, net |
457,472 | 766,670 | ||||||
|
Provision for taxes |
477,524 | 519,085 | ||||||
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Depreciation and amortization |
166,474 | 236,935 | ||||||
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EBITDA (1) |
$ | 637,629 | $ | 374,212 | ||||
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Less non-recurring gains and losses: |
||||||||
|
Gain on settlement of accounts payable |
$ | (4,375 |
) |
$ | - | |||
|
Gain on settlement of notes receivable |
- | (348,165 |
) |
|||||
|
Employee retention tax credit |
(924,862 |
) |
- | |||||
|
Loss on equity investment |
- | 234,430 | ||||||
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Adjusted EBITDA (2) |
$ | (291,608 |
) |
$ | 260,477 | |||
|
|
(1) |
Net loss plus interest, taxes, depreciation, and amortization. |
|
|
(2) |
EBITDA adjusted for non-recurring gains, losses, and impairments. |
Liquidity and Capital Resources
The following table summarizes our total current assets, liabilities and working capital at August 31, 2023 and May 31, 2023:
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August 31, |
May 31, |
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|
2023 |
2023 |
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Current Assets |
$ | 4,969,344 | $ | 4,591,510 | ||||
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Current Liabilities |
$ | 17,442,747 | $ | 16,340,529 | ||||
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Working Capital (Deficit) |
$ | (12,473,403 |
) |
$ | (11,749,019 |
) |
||
At August 31, 2023, we had a working capital deficit of $12,473,403, a decline in our working capital position of $724,384 compared to the working capital deficit of $11,749,019 we had at May 31, 2023. Our working capital decreased primarily due to an increase in accounts payable and accrued liabilities in the amount of $645,858, and a shift of notes payable from long term to current classification I the amount of $314,584. Our working capital was negatively impacted by an increase in our accrued potential tax liability in the amount of $477,524 as a result of the calculation of our tax liability under 280E, which can change based on the deductibility of applicable expenses and is not necessarily tied to operating income. Our potential tax liability under Section 280E was $7,229,981 at August 31, 2023, representing 41% of total current liabilities.
We have a 50% ownership of Kealii Okamalu which in turn has a 1/3 interest in the Quinn River Joint Venture. We recently completed the first harvest of the Quinn River Joint Venture and have been selling the products derived from that initial harvest since October of 2022. We received inventory with a value of $952,125 from this initial crop. As of the year ended May 31, 2023, the Company’s 50% partner in Kealii Okamalu LLC had defaulted on its obligations under both the Kealii Okamalu LLC Operating Agreement and the Quinn River Joint Venture Agreement by failing to make any of its required capital contribution of $3 million. As a result of the partner’s breach, the Quinn River Joint Venture Agreement was officially terminated in July of 2023. Kealii Okamalu LLC is no longer an active operating entity, and the Company has entered into negotiations directly with the Tribal Council to restructure the Quinn River Joint Venture Agreement. As of the filing of this 10-Q, no new agreement with the Tribal Council has been reached and no new agreement appears to be imminent. The company does not believe it is likely to recover its investment in Kealii Okamalu LLC and has made an impairment charge in the amount of $1,590,742 against these assets during the year ended May 31, 2023. There was no comparable transaction in the prior period.
In September 2022, we successfully refinanced all but one of the U.S. Convertible Debentures and all of the Canaccord Debentures so that 60% of them were converted into equity and the balance of them mature in equal portions in December 2023 and December 2024.
Although our revenues are expected to grow as we expand our operations, we only achieved net income for the first time during our first quarter of fiscal 2022 and we have experienced net losses since such time. Due to our cost control efforts, we have generated positive cash flow from operating activities in the amounts of $783,250, $788,724, and $802,729 for the three months ended August 31, 2023, May 31, 2023, and February 28, 2023 and May 31, 2023. As a result of this improved operational performance and our debt we believe we will have funds sufficient to sustain our operations at their current level, or if we require additional cash, we expect to obtain the necessary funds through short-term financing agreements; however, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in the cannabis business. To address these risks, we must, among other things, seek growth opportunities through investments and acquisitions in our industry, successfully execute our business strategy and successfully navigate business environment in which we currently operate as well as any changes that may arise in the cannabis regulatory environment. We cannot assure that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition and results of operations.
Cash flows provided by operating activities were $783,250 during the three months ended August 31, 2023, an improvement of $2,245,013, or approximately 154%, compared to ($1,461,763) during the three months ended August 31, 2022. In deriving cash flows used in operating activities from the net losses for the three months ended August 31, 2023 and 2022, certain non-cash items were deducted from or added back to the net loss for each such period. These amounts were $334,055 and $317,974 for the three months ended August 31, 2023 and 2022, respectively. For the three months ended August 31, 2023, the most significant items added back to net income were $171,656 of amortization of debt discounts and fees, and $166,474 of depreciation and amortization. For the three months ended August 31, 2022, this included adding back the depreciation and amortization in the amount of $236,935, the loss on equity investment of $234,430, and amortization of debt discounts and fees of $194,774; these items were partially offset by the deduction of the gain on settlement of note receivable in the amount of $348,165.
Finally, our cash provided by operating activities was affected by changes in the components of working capital. The amounts of the components of working capital fluctuate for a variety of reasons, including management’s expectation of required inventory levels; the amount of accrued interest, both receivable and payable; the amount of prepaid expenses; the amount of accrued compensation and other accrued liabilities; our accounts payable and accounts receivable balances; and the capitalization of right of use assets and liabilities associated with operating leases. The overall net change in the components of working capital resulted in an increase in cash from operating activities in the amount of $910,928 during the three months ended August 31, 2023, compared to a decrease in cash from operating activities of $447,612 during three months ended August 31, 2022. The more significant changes for the three months ended August 31, 2023 which were added back to the net loss in deriving cash generated by in operating activities were the increase in accounts payable and accrued liabilities of $650,236, an increase in accrual for taxes in the amount of $468,667, and an increase in accrued interest of $122,226. These increases were partially offset by a reduction in the amount of $327,128 due to accounts receivable. The more significant changes for the three months ended August 31, 2022 which were added back to the net loss in deriving cash generated by operating activities were the deferred tax liability of $519,085, offset by reductions in the amount of $798,707 related to inventory, $120,942 of accounts receivable, and $112,080 of prepaid expenses and other current assets,
Cash flows used by investing activities were $78,858 for the three months ended August 31, 2023, a decrease in cash used of $466,444 or 86%, compared to cash used in investing activities of $545,302 during the three months ended August 31, 2022. This decrease was primarily due to a decrease in payments for our investment in the Quinn River Joint Venture in the amount of $805,234 and a decrease in payments to acquire property, plant and equipment in the amount of $67,550. The decrease was partially offset by our receipt of principal payments on the IGH Settlement Note in the amount of $348,165 during the three months ended August 31, 2022 compared to $0 during the three months ended August 31, 2023; and payments for construction security deposits in the amount of $58,175 during the three months ended August 31, 2023, compared to $0 in the three months ended August 31, 2022.
Cash flows used by financing activities were $668,133 for the three months ended August 31, 2023, an increase in cash used in the amount of $715,379, or 1,514%, compared to cash provided by financing activities of $47,246 during the three months ended August 31, 2022. This increase in cash used in financing activities was primarily due to the payment of loans payable in the amount of $401,781, the payment of notes payable in the amount of $145,833, the payment of convertible debt in the amount of $100,000, and the payment of financing leases in the amount of $20,519. These payments represent our continued effort to reduce our debt from internal cash flow.
Third Party Debt and Related Party Debt
The table below summarizes the status of our third-party debt, excluding our short term receivables-based debt facility and reflects whether such debt remains outstanding, has been repaid, or has been converted into or exchanged for our common stock:
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Name of Note |
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Original Principal Amount |
|
Outstanding |
|
Payment Details |
|
|
U.S. Convertible Debentures 1 – Related Party |
|
$ |
1,801,783 |
|
Outstanding |
|
Half due on December 31, 2023 and half due on December 31, 2024 |
|
U.S. Convertible Debentures 2 |
$ |
450,446 |
Outstanding |
|
Half due on December 31, 2023 and half due on December 31, 2024 |
||
|
|
|
|
|
|
|
|
|
|
Canaccord Debentures |
|
$ |
5,253,873 |
|
Outstanding |
|
Half due December 31, 2023 and half due December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
Debentures 1,2,3,4,5 and 6* |
|
$ |
2,500,000 |
|
Outstanding |
|
Due July 10, 2024 |
|
|
|
|
|
|
|
|
|
|
2022 Financing Agreement |
|
$ |
78,537 |
|
Outstanding |
|
Due September 2023 |
* The terms of the 6 Debentures provide for additional payments in the aggregate amount of not less than $375,000 per year beginning in 2025, for five years.
We have generated positive cash flow from operating activities in the amounts of $783,250, $788,724, and $802,729 for the three months ended August 31, 2023, May 31, 2023, and February 28, 2023 and May 31, 2023. We believe that we will have sufficient capital to satisfy our obligations through the use of internally generated cash, the sale of debt and or equity, and the conversion of debt to equity, though there can be no assurance that this will be the case.
Going Concern
Our financial statements were prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. With the exception of the first quarter of fiscal 2022, we have incurred losses from operations since inception, and have an accumulated deficit of $109,343,287 as of August 31, 2023, compared to $108,879,446 as of May 31, 2023. We had a working capital deficit of $12,473,403 as of August 31, 2023, compared to a working capital deficit of $11,749,019 as of May 31, 2023. The report of our independent auditors for the year ended May 31, 2023 contained a going concern qualification.
Our ability to continue as a going concern must be considered in light of the problems, expenses, and complications frequently encountered by early-stage companies.
Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs and finance our ongoing operations. There can be no assurance that cash generated by our future operations will be adequate to meet our needs.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Estimates
Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accounting estimates that are the most important to the presentation of our results of operations and financial condition, and which require the greatest use of judgment by management, are designated as our critical accounting estimates. We have the following critical accounting estimates:
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● |
Estimates and assumptions regarding the deductibility of expenses for purposes of Section 280E of the Internal Revenue Code: Management evaluates the expenses of its manufacturing and retail operations and makes certain judgments regarding the deductibility of various expenses under Section 280E of the Internal Revenue Code based on its interpretation of this regulation and its subjective assumptions about the categorization of these expenses. |
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Estimates and assumptions used in the valuation of derivative liabilities: Management utilizes a lattice model to estimate the fair value of derivative liabilities. The model includes subjective assumptions that can materially affect the fair value estimates. |
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● |
Estimates and assumptions used in the valuation of intangible assets. In order to value our intangible assets, management prepares multi-year projections of revenue, costs of goods sold, gross margin, operating expenses, taxes and after tax margins relating to the operations associated with the intangible assets being valued. These projections are based on the estimates of management at the time they are prepared and include subjective assumptions regarding industry growth and other matters. |
Recently Issued Accounting Standards
Accounting standards promulgated by the Financial Accounting Standards Board (the “FASB”) are subject to change. Changes in such standards may have an impact on our future financial statements. The following are a summary of recent accounting developments.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU became effective for us on January 1, 2020. The amendments in this ASU were applied on a prospective basis. During the year ended May 31, 2020, the Company recorded an impairment of goodwill in the amount of $25,185,003 pursuant to ASU No. 2017-04.
In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU requires that an entity account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU became effective for us on January 1, 2018 and is applied to an award modified on or after the adoption date. Adoption of ASU 2017-09 did not have a material effect on the Company’s financial statements.
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception.
These amendments do not have an accounting effect. For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
This item is not applicable as we are currently considered a smaller reporting company.
Item 4. Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit pursuant to the requirements of the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, among other things, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Andrew Glashow, our Chief Executive Officer, and Principal Financial and Accounting Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. The Company believes it now has an adequate number of trained personnel to resolve any segregation of duties deficiencies. Based on the evaluation, Mr. Glashow concluded that our disclosure controls and procedures are not effective in timely alerting him to material information relating to us that is required to be included in our periodic SEC filings and ensuring that information required to be disclosed by us in the reports we file or submit under the Act is accumulated and communicated to our management, including our Chief Financial Officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure, for the following reasons:
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● |
We do not have adequate segregation of duties; |
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● |
We do not have an independent body to oversee our internal controls over financial reporting and lack segregation of duties due to our limited resources. |
We plan to rectify these weaknesses by hiring additional accounting personnel once we have additional resources to do so.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
The Effects of Climate Change Could Adversely Affect the Quantity and Quality of Our Crops and the Cost and Availability of Energy to Our Dispensary Operations.
The effect of climate change is causing an increase in the cost of electricity to operate our dispensary operation and if temperatures remain high, could result in rationing of electricity, which could necessitate a reduction in operating hours at our dispensary.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
Item 6. Exhibits.
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31.1 |
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32.1 |
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101.INS |
Inline XBRL Instance Document |
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101.SCH |
Inline XBRL Taxonomy Extension Schema |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase |
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101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
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101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase |
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104 |
Cover Page Interactive Data File (formatted as Inline XBRL) |
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.
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CLS HOLDINGS USA, INC. |
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Date: October 12, 2023 |
By: |
/s/ Andrew Glashow |
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Andrew Glashow President and Chief Executive Officer |
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(Principal Executive, Financial and Accounting Officer) |
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