UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
Commission File Number:
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
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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.
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).
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 ☐ |
| | Smaller reporting company |
| Emerging growth company |
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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:
CLS HOLDINGS USA, INC.
FORM 10-Q
Quarterly Period Ended November 30, 2024
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 November 30, 2024 (Unaudited) and May 31, 2024 (Audited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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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. 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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November 30, |
May 31, |
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2024 |
2024 |
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(unaudited) |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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Accounts Receivable |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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| Property, plant and equipment, net of accumulated depreciation of $ |
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Right of use assets, operating leases |
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| Intangible assets, net of accumulated amortization of $ |
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Goodwill |
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Other assets |
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Total assets |
$ | $ | ||||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable and accrued liabilities |
$ | $ | ||||||
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Accrued interest |
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Due to related party |
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Lease liability - operating leases, current |
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Lease liability - financing leases, current |
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Taxes Payable |
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Notes payable, current |
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Notes payable - related party, current |
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Convertible notes payable, current |
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Total current liabilities |
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Noncurrent liabilities |
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Lease liability - operating leases, non-current |
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Lease liability - financing leases, non-current |
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| Notes payable, non-current, net of discount of $ |
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Notes payable - related party, non-current |
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Convertible notes payable, non-current |
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Total Liabilities |
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Commitments and contingencies |
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Stockholder's deficit |
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Additional paid-in capital |
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Common stock subscribed |
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Accumulated deficit |
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Stockholder's deficit attributable to CLS Holdings, Inc. |
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Non-controlling interest |
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Total stockholder's deficit |
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Total liabilities and stockholders' deficit |
$ | $ | ||||||
See accompanying notes to these financial statements.
CLS HOLDINGS USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the |
For the |
For the |
For the |
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Three Months Ended |
Three Months Ended |
Six Months Ended |
Six Months Ended |
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November 30, 2024 |
November 30, 2023 |
November 30, 2024 |
November 30, 2023 |
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Revenue |
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Cost of goods sold |
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Gross margin |
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Selling, general and administrative expenses |
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Total operating expenses |
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Operating income (loss) |
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Other (income) expense: |
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Interest expense, net |
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Employee retention tax credit income |
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(Gain) on settlement of debt |
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(Gain) on settlement of accounts payable |
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Total other (income) expense |
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Income (Loss) before income taxes |
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Provision for income tax |
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Net loss |
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Non-controlling interest |
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Net loss attributable to CLS Holdings, Inc. |
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Net loss per share - basic |
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Net loss per share - diluted |
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Weighted average shares outstanding - basic |
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Weighted average shares outstanding - diluted |
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See accompanying notes to these financial statements.
CLS HOLDINGS USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
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Common Stock |
Additional Paid In |
Stock |
Accumulated |
Non-controlling |
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Amount |
Value |
Capital |
Payable |
Deficit |
Interest |
Total |
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Balance, August 31, 2023 |
$ | $ | $ | $ | ( |
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Discount on convertible notes payable |
- | - | - | - | - | |||||||||||||||||||||||
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Loss for the three months ended November 30, 2023 |
- | - | - | - | ( |
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Balance, November 30, 2023 |
$ | $ | $ | $ | ( |
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Balance, May 31, 2023 |
$ | $ | $ | $ | ( |
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Discount on convertible notes payable |
- | - | - | - | - | |||||||||||||||||||||||
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Loss for the six months ended November 30, 2023 |
- | - | - | - | ( |
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Balance, November 30, 2023 |
$ | $ | $ | $ | ( |
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Balance, August 31, 2024 |
$ | $ | $ | $ | ( |
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Shares purchased from related party |
( |
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) | - | - | - | ( |
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Shares and warrants cancelled in debt settlement |
( |
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) | - | - | - | ( |
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Amortization of employee stock options |
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Loss for the three months ended November 30, 2024 |
- | - | - | - | ( |
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Balance, November 30, 2024 |
$ | $ | $ | $ | ( |
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Balance, May 31, 2024 |
$ | $ | $ | $ | ( |
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Conversion of notes payable |
- | - | - | |||||||||||||||||||||||||
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Shares purchased from related party |
( |
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) | - | - | - | ( |
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Shares and warrants cancelled in debt settlement |
( |
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) | - | - | - | ( |
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Amortization of employee stock options |
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Loss for the six months ended November 30, 2024 |
- | - | - | - | ( |
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Balance, November 30, 2024 |
$ | $ | $ | $ | ( |
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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 Six |
For the Six |
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Months Ended |
Months Ended |
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November 30, 2024 |
November 30,2023 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
$ | ( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Share-based compensation |
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Amortization of debt discounts and fees |
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Depreciation and amortization expense |
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Gain on settlement of accounts payable |
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Gain on settlement of debt |
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Bad debt expense |
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Changes in assets and liabilities: |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Inventory |
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Right of use asset |
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Accounts payable and accrued expenses |
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Accrued interest |
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Deferred tax liability |
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Operating lease liability |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Payments to purchase property, plant and equipment |
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Payment for construction security deposit |
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Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Cash received from the issuance of convertible notes payable |
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Cash received from issuance of note payable - related party |
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Principal payment on notes and cancellation of shares |
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Principal payments on convertible notes payable |
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Principal payments on notes payable |
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Principal payments on notes payable -related party |
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Proceeds of loan payable |
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Repayments of loan payable |
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Principal payments on finance leases |
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Net cash used in financing activities |
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Net (decrease) increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ | $ | ||||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Interest paid |
$ | $ | ||||||
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Income taxes paid |
$ | $ | ||||||
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NONCASH INVESTING AND FINANCING ACTIVITIES: |
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Shares issued for conversion of notes payable |
$ | $ | ||||||
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Capitalized interest |
$ | $ | ||||||
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Initial ROU asset and lease liability - operating |
$ | $ | ||||||
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Discount on convertible note payable |
$ | $ | ||||||
| Cancellation of shares held by related party | $ | $ | ||||||
See accompanying notes to these financial statements.
CLS HOLDINGS USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2024
(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
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 8:00 AM and 12:00 AM. 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 88 external customers as of November 30, 2024. 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, Cash Equivalents, and Restricted Cash
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 $
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 bad debt expense of $
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
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| Leasehold improvements |
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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 November 30, 2024, the net carrying value of goodwill on the Company’s balance sheet remained at $
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 November 30, 2024 and 2023, the Company received an aggregate of $
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.” There was
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.
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 $
Research and Development
Research and development expenses are charged to operations as incurred. The Company incurred research and development costs of $
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:
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Premium organic medical cannabis sold wholesale to licensed retailers |
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Recreational marijuana cannabis products sold wholesale to licensed distributors and retailers |
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● |
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
|
For the Three |
For the Three |
|||||||
|
Months Ended |
Months Ended |
|||||||
|
November 30, 2024 |
November 30, 2023 |
|||||||
|
Cannabis Dispensary |
||||||||
|
Cannabis Production |
||||||||
| $ | $ | |||||||
|
For the Six |
For the Six |
|||||||
|
Months Ended |
Months Ended |
|||||||
|
November 30, 2024 |
November 30, 2023 |
|||||||
|
Cannabis Dispensary |
||||||||
|
Cannabis Production |
||||||||
| $ | $ | |||||||
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 November 30, 2024 and 2023, the Company had the following potentially dilutive instruments outstanding: at November 30, 2024, a total of
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 November 30, 2024 and 2023. For the three months ended November 30, 2024 and 2023, 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 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 $
Note 3: Accounts Receivable
Accounts receivable was $
Note 4: Inventory
|
November 30, |
May 31, |
|||||||
|
2024 |
2024 |
|||||||
|
Raw materials |
$ | $ | ||||||
|
Finished goods |
||||||||
|
Total |
$ | $ | ||||||
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 5: Prepaid Expenses and Other Current Assets
|
November 30, |
May 31, |
|||||||
|
2024 |
2024 |
|||||||
|
Prepaid license fees |
||||||||
|
Other prepaid expenses |
||||||||
|
Total |
$ | $ | ||||||
Prepaid expenses primarily of (i) annual license fees charged by the State of Nevada; (ii) insurance costs; (iii) supplies; (iv) rent; and (v) board fees.
Note 6: Property, Plant and Equipment
|
November 30, 2024 |
May 31, 2024 |
|||||||
|
Office equipment |
$ | $ | ||||||
|
Furniture and fixtures |
||||||||
|
Machinery & Equipment |
||||||||
|
Leasehold improvements |
||||||||
|
Less: accumulated depreciation |
( |
) | ( |
) | ||||
|
Property, plant, and equipment, net |
$ | $ | ||||||
The Company made payments in the amounts of $
Depreciation expense totaled $
Note 7: 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
The Company’s lease expense for the three months ended November 30, 2024 and 2023 was entirely comprised of operating leases and amounted to $
The Company’s right of use (“ROU”) asset amortization for the three months ended November 30, 2024 and 2023 was $
The Company has recorded total right of use assets of $
|
November 30, 2024 |
||||
|
Amount at inception of leases |
$ | |||
|
Amount amortized |
( |
) | ||
|
Prior Period Impairment of Quinn River Lease |
( |
) | ||
|
Balance – November 30, 2024 |
$ | |||
|
Amount at inception of leases |
$ | |||
|
Amount amortized |
( |
) | ||
|
Balance – November 30, 2024 |
$ |
|
Warehouse and offices |
$ | |||
|
Land |
||||
|
Office equipment |
||||
|
Balance – November 30, 2024 |
$ | |||
|
Lease liability |
$ | |||
|
Less: current portion |
( |
) | ||
|
Lease liability, non-current |
$ |
|
Twelve months ended November 30, 2025 |
$ | |||
|
Twelve months ended November 30, 2026 |
||||
|
Twelve months ended November 30, 2027 |
||||
|
Twelve months ended November 30, 2028 |
||||
|
Twelve months ended November 30, 2029 |
||||
|
Thereafter |
||||
|
Total |
$ | |||
|
Less: Present value discount |
( |
) | ||
|
Lease liability |
$ |
Note 8: Intangible Assets
|
November 30, 2024 |
||||||||||||||||
|
Accumulated |
||||||||||||||||
|
Gross |
Amortization |
Impairment |
Net |
|||||||||||||
|
License & Customer Relations |
$ | $ | ( |
) | ||||||||||||
|
Tradenames - Trademarks |
( |
) | ||||||||||||||
|
Domain Names |
( |
) | ||||||||||||||
|
Total |
$ | $ | ( |
) | $ | |||||||||||
|
May 31, 2024 |
||||||||||||||||
|
Accumulated |
||||||||||||||||
|
Gross |
Amortization |
Impairment |
Net |
|||||||||||||
|
License & Customer Relations |
( |
) | ||||||||||||||
|
Tradenames - Trademarks |
( |
) | ||||||||||||||
|
Domain Names |
( |
) | ||||||||||||||
|
Total |
$ | $ | ( |
) | $ | $ | ||||||||||
Total amortization expense charged to operations for the three months ended November 30, 2024 and 2023 was $
|
2025 |
$ | |||
|
2026 |
||||
|
2027 |
||||
| $ |
Note 9: Goodwill
Goodwill in the amount of $
Goodwill Impairment Test
The Company assessed its intangible assets as of May 31, 2024 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 May 31, 2024. As a result, no impairment was recorded. At November 30, 2024 and May 31, 2024, the net amount of goodwill on the Company’s balance sheet was $
Note 10: Other Assets
|
November 30, |
May 31, |
|||||||
|
2024 |
2024 |
|||||||
|
Security deposits |
||||||||
| $ | $ | |||||||
Note 11: Accounts Payable and Accrued Liabilities
|
November 30, 2024 |
May 31, 2024 |
|||||||
|
Trade accounts payable |
$ | $ | ||||||
|
Accrued payroll and payroll taxes |
||||||||
|
Accrued liabilities |
||||||||
|
Total |
$ | $ | ||||||
Note 12: Due to Related Party
On November 1, 2024, the Company acquired and cancelled
Note 13: Notes Payable
| November 30, 2024 | May 31, 2024 | |||||||
| Debenture 2 Debenture in the principal amount of $
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.
On December 31, 2023, the Debenture 2 was amended as follows: The original issue discount in the amount of $
During the three and six months ended November 30, 2024, the Company amortized discounts on the Debenture 2 in the aggregate amount of $ | ||||||||
| November 30, 2024 | May 31, 2024 | |||||||
| Debenture 6 Debenture in the principal amount of $
On May 31, 2023, the Debenture 6 was amended as follows: (1) the maturity date was extended to
On December 31, 2023, the Debenture 6 was amended as follows: The original issue discount in the amount of $375,000 was reduced to $
During the three months and six ended November 30, 2024, the Company amortized discounts in the amount of $ | ||||||||
| Promissory Note 6 (“PN 6”) PN6 in the principal amount of $ | ||||||||
| Notes Payable | $ | $ | ||||||
| Less: Discount | ( | ) | ||||||
| Notes Payable, Net of Discount | $ | $ | ||||||
|
November 30, 2024 |
May 31, 2024 |
|||||||
|
Total Notes Payable, Current Portion |
$ | $ | ||||||
|
Total Notes Payable, Long-term Portion, net of discount |
$ | $ | ||||||
Note 14: Convertible Notes Payable
| November 30, 2024 | May 31, 2024 | |||||||
| US Convertible Debenture 2 (Navy Capital Green Fund) Convertible debenture in the principal amount of $
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 $
On April 15, 2021, the U.S. Convertible Debenture 2 was amended as follows:
On September 15, 2022, the U.S. Convertible Debenture 2 was amended as follows:
On December 29, 2023, the U.S. Convertible Debenture 2 was amended as follows: | $ | |||||||
| November 30, 2024 | May 31, 2024 | |||||||
| Canaccord Debentures Convertible debentures payable in the aggregate principal amount of $
On March 31, 2021, the Canaccord Debentures were amended as follows:
On September 15, 2022, the Canaccord Debentures were further amended as follows:
On December 28, 2023, the Canaccord Debentures were amended as follows:
On January 4, 2024, debenture holders exercised Put Rights with regard to the Canaccord Debentures with a principal amount of $
On December 27, 2024, the Company executed a Supplemental Indenture to amend that certain debenture indenture by and between the Company and Odyssey Trust Company, as Trustee, dated as of December 12, 2018, as supplemented March 31, 2021, as supplemented September 15, 2022, and as supplemented December 28, 2023, in order to amended the terms of its outstanding $ | ||||||||
| November 30, 2024 | May 31, 2024 | |||||||
| US Convertible Debenture 1 (Navy Capital Green Co-Invest Fund) Convertible debenture in the principal amount of $
On April 15, 2021, the U.S. Convertible Debenture 1 was amended as follows:
On September 15, 2022, the U.S. Convertible Debenture 1 was further amended as follows:
On December 29, 2023, the U.S. Convertible Debenture 1 was amended as follows: (i) the conversion price of the debentures was reduced to $ | ||||||||
| Total Convertible Notes Payable | $ | $ | ||||||
|
November 30, 2024 |
May 31, 2024 |
|||||||
|
Total – Convertible Notes Payable, Current Portion |
$ | $ | ||||||
|
Total – Convertible Notes Payable, Long-term Portion |
$ | $ | ||||||
Note 15: Notes Payable – Related Party
| November 30, 2024 | May 31, 2024 | |||||||
| Promissory Note 1 (“APN1”) PN1 Debenture in the principal amount of $ | $ | $ | ||||||
| Promissory Note 2 (“PN2”) PN2 in the principal amount of $ | ||||||||
| Promissory Note 3 (“PN3”) PN3 in the principal amount of $ | ||||||||
| Promissory Note 4 (“PN4”) PN4 in the principal amount of $ | ||||||||
| Promissory Note 5 (“PN5”) PN5 in the principal amount of $ | ||||||||
| Promissory Note 7 (“PN7”) PN7 in the principal amount of $ | ||||||||
| Promissory Note 8 (“PN8”) PN8 in the principal amount of $ | ||||||||
| November 30, 2024 | May 31, 2024 | |||||||
| Promissory Note 9 (“PN9”) PN9 in the principal amount of $ | ||||||||
| Promissory Note 10 (“PN10”) PN10 in the principal amount of $ | ||||||||
| Total | $ | $ | ||||||
|
November 30, 2024 |
May 31, 2024 |
|||||||
|
Total Notes Payable – Related Party, Current Portion |
$ | $ | ||||||
|
Total Notes Payable – Related Party, Long Term Portion |
$ | $ | ||||||
For the twelve months ended November 30,
|
2025 |
$ | |||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
Total |
$ |
Note 16: Lease Liabilities - Financing Leases
| November 30, 2024 | May 31, 2024 | |||||||
| Financing lease obligation under a lease agreement for extraction equipment dated March 14, 2022 in the original amount of $ | $ | $ | ||||||
| Financing lease obligation under an agreement for equipment dated June 20, 2022 in the original amount of $ | $ | |||||||
| Total | $ | $ | ||||||
| Current portion | $ | $ | ||||||
| Long-term maturities | ||||||||
| Total | $ | $ | ||||||
For the period ended November 30,
|
2025 |
$ | |||
|
2026 |
||||
|
Total |
$ |
Note 17: Stockholders’ Equity
The Company’s authorized capital stock consists of
Common stock transactions for the six months ended November 30, 2024
On August 30, 2024, the Company issued
On September 10, 2024, the Company settled three notes payable in the aggregate principal amount of $
On November 1, 2024, the Company acquired and cancelled
Common stock transactions for the six months ended November 30, 2023
None.
Warrants
Warrants for the six months ended November 30, 2024:
| 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 | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
|
Number of Shares |
Weighted Average Exercise Price |
|||||||
|
Warrants outstanding at May 31, 2023 |
$ | |||||||
|
Granted |
$ | |||||||
|
Exercised |
$ | |||||||
|
Cancelled / Expired |
( |
) | $ | |||||
|
Warrants outstanding at May 31, 2024 |
$ | |||||||
|
Granted |
||||||||
|
Exercised |
$ | |||||||
|
Cancelled / Expired |
( |
) | $ | |||||
|
Warrants outstanding at November 30, 2024 |
$ | |||||||
Stock Options
Stock options for the six months ended November 30, 2024
During the six months ended November 30, 2024,
| Range of exercise Prices | Number of options Outstanding | Weighted average remaining contractual life (years) | Weighted average exercise price of outstanding Options | Number of Options Exercisable | Weighted average exercise price of exercisable Option | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
|
Number of Shares |
Weighted Average Exercise Price |
|||||||
|
Options outstanding at May 31, 2024 |
$ | |||||||
|
Granted |
$ | |||||||
|
Exercised |
$ | |||||||
|
Cancelled / Expired |
( |
) | $ | |||||
|
Options outstanding at November 30, 2024 |
$ | |||||||
| November 30, | ||||
| 2024 | ||||
| Volatility | % | |||
| Dividends | $ | |||
| Risk-free interest rates | % | |||
| Expected term (years) | ||||
Stock options for the three months ended November 30, 2023
None.
During the three and six months ended November 30, 2024, the Company charged $
The aggregate intrinsic value of options outstanding and exercisable at November 30, 2024 and 2023 was $
Note 18: Gain on Settlement of Debt
On August 28, 2024, the Company raised $
On September 10, 2024, the Company utilized the proceeds of PN9 to settle three notes payable in the aggregate principal amount of $
| November 30, | ||||
| 2024 | ||||
| Volatility | % | |||
| Dividends | $ | |||
| Risk-free interest rates | % | |||
| Expected term (years) | ||||
Note 19: Related Party Transactions
As of November 30, 2024 and May 31, 2024, 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 $
During the three months ended November 30, 2024, the Company made payments of $
The Company’s CEO has waived his board fees for the period.
On November 1, 2024, the Company acquired and cancelled
On August 28, 2024 the Company issued PN9, a note payable to a related party, in the principal amount of $
On October 15, 2024 the Company issued PN10, a note payable to a related party, in the principal amount of $
At November 30, 2024, there are
Note 20: Income Taxes
The following table summarizes the Company’s income tax accrued for the three months ended November 30, 2024 and 2023:
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.
|
Three Months Ended November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Revenue |
$ | $ | ||||||
|
Directly attributable costs |
( |
) | ( |
) | ||||
|
Deferred |
||||||||
|
Tax rate |
% | % | ||||||
|
Tax expense |
$ | $ | ||||||
|
Six Months Ended November 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Revenue |
$ | $ | ||||||
|
Directly attributable costs |
( |
) | ( |
) | ||||
|
Deferred |
||||||||
|
Tax rate |
% | % | ||||||
|
Tax expense |
$ | $ | ||||||
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.
During the three months ended November 30, 2024, the Company received a notification from the Internal Revenue Service (“IRS”) that the Company has been assessed the amount of $
Note 21: 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.
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 |
|
|
|
|
|
| ● | A lease that commenced January 2018 for |
|
|
|
|
|
| ● | A lease that commenced in February 2019 for |
|
|
|
|
|
| ● | A lease that commenced in January 2016 for |
|
|
|
|
|
| ● | A lease that commenced in October 2023 for |
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
In August 2017, the Company’s Colorado subsidiary received a demand letter from its Colorado landlord requesting the forfeiture of the $
Note 22: Subsequent Events
Termination of Chief Operating Officer
On December 17, 2024, the Company terminated the employment of Joseph Ramalho, its Chief Operating Officer.
Amendments to Convertible Debentures
On December 27, 2024, the Company executed a Supplemental Indenture to amend that certain debenture indenture by and between the Company and Odyssey Trust Company, as Trustee, dated as of December 12, 2018, as supplemented March 31, 2021, as supplemented September 15, 2022, and as supplemented December 28, 2023 (collectively, the “Debenture Indenture”), in order to amended the terms of its outstanding $
Secured Promissory Notes
On January 7, 2025, the Company entered into four secured promissory notes in the aggregate amount of $
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 engaged in attempting to find a buyer for the patent who may be able to use it in another state or another application.
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 November 30, 2024 and 2023
The table below sets forth our selected expenses as a percentage of revenue for the applicable periods:
|
Three Months Ended |
Three Months Ended |
|||||||
|
November 30, 2024 |
November 30, 2023 |
|||||||
|
Revenue |
100 | % | 100 | % | ||||
|
Cost of Goods Sold |
57 | % | 58 | % | ||||
|
Gross Margin |
43 | % | 42 | % | ||||
|
Selling, General, and Administrative Expenses |
50 | % | 50 | % | ||||
|
Interest expense |
7 | % | 8 | % | ||||
|
Provision for Income Tax |
11 | % | 8 | % | ||||
The table below sets forth certain statistical and financial highlights for the applicable periods:
|
Three Months Ended |
Three Months Ended |
|||||||
|
November 30, 2024 |
November 30, 2023 |
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|
Number of Customers Served (Dispensary) |
57,152 | 68,586 | ||||||
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Revenue |
$ | 4,161,270 | $ | 5,197,214 | ||||
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Gross Profit |
$ | 1,772,025 | $ | 2,171,619 | ||||
|
Selling, General, and Administrative Expenses |
$ | 2,095,099 | $ | 2,606,918 | ||||
Revenues
We had revenue of $4,161,270 during the three months ended November 30, 2024, a decrease of $1,035,944, or 10%, compared to revenue of $5,197,214 during the three months ended November 30, 2023. Our cannabis dispensary accounted for $2,706,856, or 65%, of our revenue for the three months ended November 30, 2024, a decrease of $397,208, or 13%, compared to $3,104,064 during the three months ended November 30, 2023. Dispensary revenue decreased during the second quarter of fiscal year 2025 because our average sales per day decreased from $34,111 during the first quarter of fiscal year 2024 to $29,746 during the first quarter of fiscal year 2025. Our cannabis production accounted for $1,454,414, or 35%, of our revenue for the three months ended November 30, 2024, a decrease of $638,736 or 31%, compared to $2,093,150 for the three months ended November 30, 2023.
Cost of Goods Sold
Our cost of goods sold for the three months ended November 30, 2024 was $2,389,2445, a decrease of $720,055, or 12%, compared to cost of goods sold of $3,025,595 for the three months ended November 30, 2023. The decrease in cost of goods sold for the three months ended November 30, 2024 was primarily due to a decrease in sales. Cost of goods sold was 57.4% of sales during the three months ended November 30, 2024 resulting in a gross margin of 42.6%. Cost of goods sold was 58.2% of sales during the three months ended November 30, 2023 resulting in a gross margin of 41.8%. Cost of goods sold during the second quarter of the 2025 fiscal year primarily consisted of product cost of $1,842,336, labor and overhead of $460,250, supplies and materials of $83,659, and licenses and fees of $3,000. Cost of goods sold during the second quarter of the 2024 fiscal year primarily consisted of product cost of $2,478,302, labor and overhead of $417,254, supplies and materials of $124,474, and licenses and fees of $8,475.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, or SG&A, decreased by $511,819, or approximately 10%, to $2,095,099 during the three months ended November 30, 2024, compared to $2,606,918 for the three months ended November 30, 2023. The decrease in SG&A expenses for the three months ended November 30, 2024 was primarily due to our across-the-board cost-cutting efforts.
SG&A expense during the three months ended November 30, 2024 was primarily attributable to an aggregate of $1,579,192 in costs associated with operating the Oasis LLCs, a decrease of $625,926 compared to $2,205,118 during the three months ended November 30, 2023. The major components of the decrease were as follows: professional fees of $40,053 compared to $186,144; office and facilities expenses of $444,946 compared to $525,014; payroll and related costs of $1,102,732 compared to $1,170,765; sales and marketing costs of $96,709 compared to $103,048; travel of $63,274 compared to $131,426; insurance costs of $69,563 compared to $122,069; and taxes & licenses of $133,036 compared to $181,457. The amount of SG&A expenses allocated to cost of sales during the period also increased from $328,172 to $444,885, further reducing the net amount of SG&A expenses. There were no categories of SG&A expenses within the Oasis LLCs that increased during the period compared to the prior year.
Finally, SG&A increased by $114,108 during the three months ended November 30, 2024 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 $401,800 from $515,908 during the three months ended November 30, 2023. The major component of this increase compared to the second quarter of fiscal 2025 was an increase professional fees in the amount of $95,732 related to our refinancing efforts.
Interest Expense, Net
Our interest expense was $295,715 for the three months ended November 30, 2024, a decrease of $115,126, or 13%, compared to $410,841 for the three months ended November 30, 2023. The decrease consisted primarily of a decrease in the amount of $128,498 related to interest on our notes and debentures due to decreased principal balances. This decrease was partially offset by an increase in the amortization of discounts on our notes payable in the amount of $20,741.
Employee Retention Tax Credit
During the three months ended November 30, 2023, the Company received the amount of $50,103 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 current period.
Gain on settlement of debt
During the three months ended November 30, 2023, we recorded a gain on settlement of debt in the amount of $949,793 related to the payment of notes payable in the principal amount of $2,868,282 for a cash payment in the amount of $2,600,000. In addition, the noteholders returned for cancellation a total of 15,488,901 shares of the Company’s common stock and warrants to purchase 6,177,216 shares of the Company’s common stock. The cancelled shares were valued at the closing price of the Company’s common stock on the date of the cancellation, or $0.044 per share for a total value of $677,374. There was no comparable transaction in the prior period.
Provision for Income Taxes
We recorded a provision for income taxes in the amount of $468,778 during the three months ended November 30, 2024 compared to $456,040 during the three months ended November 30, 2023, an increase of $12,738 pr 1%. 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 November 30, 2024 was $87,671 compared to a net loss of $1,302,180 for the three months ended November 30, 2023, a decrease of $1,214,601, or 69%.
Non-Controlling Interest
During the three months ended November 30, 2024 and 2023, the income (loss) associated with the non-controlling interest in Kealii Okamalu was ($0) and ($92), 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 November 30, 2024 was $87,671 compared to a net loss of $1,302,272 for the three months ended November 30, 2023, a decrease of $1,214,601 or 48%.
Results of Operations for the Six Months Ended November 30, 2024 and 2023
The table below sets forth our selected expenses as a percentage of revenue for the applicable periods:
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Six Months Ended |
Six Months Ended |
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November 30, 2024 |
November 30, 2023 |
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Revenue |
100 | % | 100 | % | ||||
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Cost of Goods Sold |
57 | % | 58 | % | ||||
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Gross Margin |
43 | % | 42 | % | ||||
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Selling, General, and Administrative Expenses |
48 | % | 50 | % | ||||
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Interest expense |
5 | % | 8 | % | ||||
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Provision for Income Tax |
11 | % | 8 | % | ||||
The table below sets forth certain statistical and financial highlights for the applicable periods:
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Six Months Ended |
Six Months Ended |
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November 30, 2024 |
November 30, 2023 |
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Number of Customers Served (Dispensary) |
123,409 | 140,152 | ||||||
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Revenue |
$ | 8,966,435 | $ | 10,311,741 | ||||
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Gross Profit |
$ | 3,820,294 | $ | 4,445,545 | ||||
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Selling, General, and Administrative Expenses |
$ | 4,279,932 | $ | 5,336,818 | ||||
Revenues
We had revenue of $8,966,435 during the six months ended November 30, 2024, a decrease of $1,345,306, or 13%, compared to revenue of $10,311,741 during the six months ended November 30, 2023. Our cannabis dispensary accounted for $5,773,932, or 64%, of our revenue for the six months ended November 30, 2024, a decrease of $638,674, or 10%, compared to $6,412,606 during the six months ended November 30, 2023. Dispensary revenue decreased during the second quarter of fiscal year 2025 because our average sales per day decreased from $35,042 during the second quarter of fiscal year 2024 to $31,552 during the second quarter of fiscal year 2025. Our cannabis production accounted for $3,192,503, or 35%, of our revenue for the six months ended November 30, 2024, a decrease of $706,632 or 18%, compared to $3,899,135 for the six months ended November 30, 2023.
Cost of Goods Sold
Our cost of goods sold for the six months ended November 30, 2024 was $5,146,141, a decrease of $720,055, or 12%, compared to cost of goods sold of $5,866,196 for the six months ended November 30, 2023. The decrease in cost of goods sold for the six months ended November 30, 2024 was primarily due to a decrease in sales. Cost of goods sold was 57.4% of sales during the six months ended November 30, 2024 resulting in a gross margin of 42.6%. Cost of goods sold was 56.9% of sales during the six months ended November 30, 2023 resulting in a gross margin of 43.1%. Cost of goods sold during the second quarter of the 2025 fiscal year primarily consisted of product cost of $4,054,387, labor and overhead of $911,484, supplies and materials of $172,612, and licenses and fees of $7,658. Cost of goods sold during the second quarter of the 2024 fiscal year primarily consisted of product cost of $2,478,302, labor and overhead of $417,254, supplies and materials of $124,474, and licenses and fees of $8,475.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, or SG&A, decreased by $1,056,886, or approximately 20%, to $4,279,932 during the six months ended November 30, 2024, compared to $5,336,818 for the six months ended November 30, 2023. The decrease in SG&A expenses for the six months ended November 30, 2024 was primarily due to our across-the-board cost-cutting efforts.
SG&A expense during the six months ended November 30, 2024 was primarily attributable to an aggregate of $3,280,715 in costs associated with operating the Oasis LLCs, a decrease of $1,130,283 compared to $4,410,998 during the six months ended November 30, 2023. The major components of the decrease were as follows: professional fees of $82,553 compared to $417,016; office and facilities expenses of $898,094 compared to $1,075,350; payroll and related costs of $2,215,895 compared to $2,342,484; sales and marketing costs of $173,165 compared to $218,509; travel of $153,320 compared to $231,796; insurance costs of $153,909 compared to $219,736; and taxes & licenses of $292,618 compared to $369,043. The amount of SG&A expenses allocated to cost of sales during the period also increased from $691,098 to $848,143, further reducing the net amount of SG&A expenses. There were no categories of SG&A expenses within the Oasis LLCs that increased during the period compared to the prior year.
Finally, SG&A increased by $73,397 during the six months ended November 30, 2024 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 $999,218 from $925,821 during the six months ended November 30, 2023. The major component of this increase compared to the second quarter of fiscal 2025 was an increase professional fees in the amount of $129,394 related to our refinancing efforts.
Interest Expense, Net
Our interest expense was $455,118 for the six months ended November 30, 2024, a decrease of $413,195, or 48%, compared to $868,313 for the six months ended November 30, 2023. The decrease consisted primarily of a decrease in the amount of $205,794 related to interest on our notes and debentures due to decreased principal balances; a decrease of $68,513 in interest in short-term financing; and a decrease of $131,680 in amortization of the discount on notes payable.
Employee Retention Tax Credit
During the six months ended November 30, 2024, the Company received the amount of $50,103 under the provisions of the extension of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) compared to $934,862 during the prior period, a decrease of $874,759 or 95%.
Gain on settlement of debt
During the six months ended November 30, 2024, we recorded a gain on settlement of debt in the amount of $949,793 related to the payment of notes payable in the principal amount of $2,868,282 for a cash payment in the amount of $2,600,000. In addition, the noteholders returned for cancellation a total of 15,488,901 shares of the Company’s common stock and warrants to purchase 6,177,216 shares of the Company’s common stock. The cancelled shares were valued at the closing price of the Company’s common stock on the date of the cancellation, or $0.044 per share for a total value of $677,374. There was no comparable transaction in the prior period.
Gain on settlement of accounts payable
During the six months ended November 30, 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 current period.
Provision for Income Taxes
We recorded a provision for income taxes in the amount of $993,674 during the six months ended November 30, 2024 compared to $933,564 during the six months ended November 30, 2023, an increase of $60,110 or 6%. 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 six months ended November 30, 2024 was $908,534 compared to a net loss of $1,763,913 for the six months ended November 30, 2023, a decrease of $857,579, or 49%.
Non-Controlling Interest
During the six months ended November 30, 2024 and 2023, the income (loss) associated with the non-controlling interest in Kealii Okamalu was ($0) and ($2,200), 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 six months ended November 30, 2024 was $908,534 compared to a net loss of $1,766,113 for the six months ended November 30, 2023, a decrease of $857,579 or 49%.
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.
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Three Months Ended November 30, 2024 |
Three Months Ended November 30, 2023 |
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Net Loss attributable to CLS Holdings, Inc. |
$ | (87,671 | ) | $ | (1,302,272 | ) | ||
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Add: |
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Interest expense, net |
295,715 | 410,841 | ||||||
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Provision for taxes |
468,778 | 456,040 | ||||||
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Depreciation and amortization |
122,043 | 165,874 | ||||||
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EBITDA (1) |
$ | 798,865 | $ | 269,517 | ||||
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Less non-recurring gains and losses: |
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Gain on settlement of debt |
$ | (949,793 | ) | $ | - | |||
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Employee retention tax credit |
(50,103 | ) | - | |||||
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Adjusted EBITDA (2) |
$ | (201,031 | ) | $ | 269,517 | |||
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Six Months Ended November 30, 2024 |
Six Months Ended November 30, 2023 |
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|
Net Loss attributable to CLS Holdings, Inc. |
$ | (908,834 | ) | $ | (1,766,113 | ) | ||
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Add: |
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Interest expense, net |
455,118 | 868,313 | ||||||
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Provision for taxes |
993,674 | 933,564 | ||||||
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Depreciation and amortization |
256,530 | 332,748 | ||||||
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EBITDA (1) |
$ | 796,788 | $ | 368,512 | ||||
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Less non-recurring gains and losses: |
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|
Gain on settlement of debt |
$ | (949,793 | ) | $ | - | |||
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Gain on settlement of accounts payable |
- | (4,375 | ) | |||||
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Employee retention tax credit |
(50,103 | ) | (924,862 | ) | ||||
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Adjusted EBITDA (2) |
$ | (203,108 | ) | $ | (560,725 | ) | ||
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(1) |
Net loss plus interest, taxes, depreciation, and amortization. |
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(2) |
EBITDA adjusted for non-recurring gains, losses, and impairments. |
Liquidity and Capital Resources
Since our inception we have funded our operations and capital spending primarily through the issuance of debt and common stock. At November 30, 2024, we had cash of $592,584 and a working capital deficit of $13,116,227; at January 8, 2025, we had cash of $1,864,918. We generated cash flow from operating activities of $468,336 for the six months ended November 30, 2024, compared to $1,004,631 for the six months ended November 30, 2023. As of November 30, 2024, we had an accumulated deficit of $114,275,584. The Company’s auditors have included a going concern qualification in their audit report for the years ended May 31, 2024 and 2023.
During the past two years, we have been involved in a focused effort to reduce our debt burden through a combination of settlements, restructurings, principal payments, and conversions of debt to common stock. The following table illustrates the results of these efforts:
Principal balance of debt:
|
November 30, 2024 |
August 31, 2024 |
May 31, 2024 |
May 31, 2023 |
May 31, 2022 |
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|
Convertible notes payable including related party |
$ | 1,661,326 | $ | 3,985,481 | $ | 4,001,431 | $ | 7,606,102 | $ | 19,448,821 | ||||||||||
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Current portion |
$ | 126,043 | $ | 375,025 | $ | 302,005 | $ | 3,853,051 | $ | 9,448,821 | ||||||||||
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Notes Payable and Debentures |
$ | 163,600 | $ | 704,830 | $ | 741,052 | $ | 3,472,661 | $ | 4,375,000 | ||||||||||
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Current portion |
$ | 128,898 | $ | 125,107 | $ | 139,345 | $ | 1,439,584 | $ | - | ||||||||||
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Notes Payable, Related Party |
$ | 2,180,484 | $ | 2,254,750 | $ | 2,067,023 | $ | - | $ | - | ||||||||||
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Current portion |
$ | 1,514,362 | $ | 1,415,392 | $ | 988,472 | $ | - | $ | - | ||||||||||
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Total |
$ | 4,005,410 | $ | 6,945,061 | $ | 6,809,506 | $ | 11,981,102 | $ | 23,823,821 | ||||||||||
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Current portion |
$ | 1,769,303 | $ | 1,915,524 | $ | 1,429,822 | $ | 5,292,635 | $ | 19,448,821 | ||||||||||
We intend to continue these efforts to further reduce our debt burden in the coming year. During the six months ended November 30, 2024, we raised $2,600,000 from the issuance of a note payable to a related party; $2,200,000 of this amount was converted to 56,847,545 shares of common stock during the period, and $400,000 remains on the balance sheet as a note payable at November 30, 2024. The $2,600,000 was used to retire debt in the aggregate principal amount of $2,868,282 in September 2024. We believe we have resources in place with existing and prospective lenders to continue to reduce our debt burden, though there can be no guarantee that this will be the case.
Our working capital deficit is due primarily to accruals for taxes payable under Section 280E of the Internal Revenue Code in the amount of $9,888,537 and $8,899,863 at November 30, 2024. It is the Company’s position that these taxes will not ultimately be owed. Removing this amount from the calculation of net working capital results in a working capital deficit of $3,227,690 at November 30, 2024.
The Company continues to generate positive cash flow from operating activities, which were $468,336 for the six months ended November 30, 2024 compared to $1,004,631 for the six months ended November 30, 2023. We intend to continue to focus on operational activities in order to further improve our cash flow.
We have one potential capital expenditure project planned for fiscal 2025, which is our proposed 3,700 square foot cannabis consumption lounge and 300 square foot outdoor patio area to be attached to the Oasis dispensary. We expect this project to require a capital expenditure in the range of $500,000 to $1,000,000, depending upon various buildout decisions.
We believe the resources are available to execute our business plan in the coming year from existing and prospective investors and from internally generated cash flow, though there is no guarantee 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 $114,275,584 as of November 30, 2024, compared to $113,367,050 as of May 31, 2024. We had a working capital deficit of $13,116,227 as of November 30, 2024, compared to a working capital deficit of $10,928,252 as of May 31, 2024. The report of our independent auditors for the year ended May 31, 2024 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 August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on June 1, 2024, including interim periods within such fiscal year. Adoption is either a modified retrospective method or a fully retrospective method of transition. We do not expect the implementation of this standard to have a material effect on our consolidated financial statements.
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:
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We do not have an independent body to oversee our internal controls over financial reporting 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: January 10, 2025 |
By: |
/s/ Andrew Glashow |
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Andrew Glashow Chairman of the Board of Directors and Chief Executive Officer |
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(Principal Executive, Financial and Accounting Officer) |
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EXHIBIT 31.1
CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew Glashow, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of CLS Holdings USA, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. As the registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control for financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to me by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. As the registrant’s certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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January 10, 2025 |
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/s/ Andrew Glashow |
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Andrew Glashow Chairman of the Board of Directors and Chief Executive Officer |
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(Principal Executive, Financial and Accounting Officer) |
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EXHIBIT 32.1
Certification by the Principal Financial Officer Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Andrew Glashow, certify pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the Quarterly Report on Form 10-Q of CLS Holdings USA, Inc. (the “Company”) for the quarter ended November 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: January 10, 2025 |
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/s/ Andrew Glashow |
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Andrew Glashow Chairman of the Board of Directors and Chief Executive Officer |
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(Principal Executive, Financial and Accounting Officer) |
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A signed original copy of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Property, plant and equipment, accumulated depreciation (in Dollars) | $ 3,572,740 | $ 3,318,550 |
| Intangible assets, accumulated amortization (in Dollars) | 351,824 | 348,015 |
| Notes payable, non-current, discount (in Dollars) | $ 0 | $ 193,756 |
| Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 345,000,000 | 345,000,000 |
| Common stock, shares issued | 164,734,517 | 124,500,873 |
| Common stock, shares outstanding | 164,734,517 | 124,500,873 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Nov. 30, 2024 |
Nov. 30, 2023 |
Nov. 30, 2024 |
Nov. 30, 2023 |
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| Income Statement [Abstract] | ||||
| Revenue | $ 4,161,270 | $ 5,197,214 | $ 8,966,435 | $ 10,311,741 |
| Cost of goods sold | 2,389,245 | 3,025,595 | 5,146,141 | 5,866,196 |
| Gross margin | 1,772,025 | 2,171,619 | 3,820,294 | 4,445,545 |
| Selling, general and administrative expenses | 2,095,099 | 2,606,918 | 4,279,932 | 5,336,818 |
| Total operating expenses | 2,095,099 | 2,606,918 | 4,279,932 | 5,336,818 |
| Operating income (loss) | (323,074) | (435,299) | (459,638) | (891,273) |
| Other (income) expense: | ||||
| Interest expense, net | 295,715 | 410,841 | 455,118 | 868,313 |
| Employee retention tax credit income | (50,103) | 0 | (50,103) | (924,862) |
| (Gain) on settlement of debt | (949,793) | 0 | (949,793) | 0 |
| (Gain) on settlement of accounts payable | 0 | 0 | 0 | (4,375) |
| Total other (income) expense | (704,181) | 410,841 | (544,778) | (60,924) |
| Income (Loss) before income taxes | 381,107 | (846,140) | 85,140 | (830,349) |
| Provision for income tax | (468,778) | (456,040) | (993,674) | (933,564) |
| Net loss | (87,671) | (1,302,180) | (908,534) | (1,763,913) |
| Non-controlling interest | 0 | (92) | 0 | (2,200) |
| Net loss attributable to CLS Holdings, Inc. | $ (87,671) | $ (1,302,272) | $ (908,534) | $ (1,766,113) |
| Net loss per share - basic (in Dollars per share) | $ 0 | $ (0.02) | $ (0.01) | $ (0.02) |
| Net loss per share - diluted (in Dollars per share) | $ 0 | $ (0.02) | $ (0.01) | $ (0.02) |
| Weighted average shares outstanding - basic (in Shares) | 167,203,078 | 72,543,141 | 146,045,945 | 72,543,141 |
| Weighted average shares outstanding - diluted (in Shares) | 167,203,078 | 72,543,141 | 146,045,945 | 72,543,141 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT - USD ($) |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Stock Payable [Member] |
Retained Earnings [Member] |
Noncontrolling Interest [Member] |
Total |
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| Balance at May. 31, 2023 | $ 7,255 | $ 96,147,784 | $ 65,702 | $ (108,879,446) | $ (1,141,867) | $ (13,800,572) |
| Balance (in Shares) at May. 31, 2023 | 72,543,141 | |||||
| Discount on convertible notes payable | 62,400 | 62,400 | ||||
| Shares purchased from related party | 0 | |||||
| Loss | (1,766,113) | 2,200 | (1,763,913) | |||
| Balance at Nov. 30, 2023 | $ 7,255 | 96,210,184 | 65,702 | (110,645,559) | (1,139,667) | (15,502,085) |
| Balance (in Shares) at Nov. 30, 2023 | 72,543,141 | |||||
| Balance at Aug. 31, 2023 | $ 7,255 | 96,147,784 | 65,702 | (109,343,287) | (1,139,759) | (14,262,305) |
| Balance (in Shares) at Aug. 31, 2023 | 72,543,141 | |||||
| Discount on convertible notes payable | 62,400 | 62,400 | ||||
| Loss | (1,302,272) | 92 | (1,302,180) | |||
| Balance at Nov. 30, 2023 | $ 7,255 | 96,210,184 | 65,702 | (110,645,559) | (1,139,667) | (15,502,085) |
| Balance (in Shares) at Nov. 30, 2023 | 72,543,141 | |||||
| Balance at May. 31, 2024 | $ 12,450 | 101,519,599 | 65,702 | (113,367,050) | (1,139,499) | (12,908,798) |
| Balance (in Shares) at May. 31, 2024 | 124,500,873 | |||||
| Conversion of notes payable | $ 5,685 | 2,194,315 | 2,200,000 | |||
| Conversion of notes payable (in Shares) | 56,847,545 | |||||
| Shares purchased from related party | $ (112) | (39,888) | (40,000) | |||
| Shares purchased from related party (in Shares) | (1,125,000) | |||||
| Shares and warrants cancelled in debt settlement | $ (1,549) | (679,961) | (681,510) | |||
| Shares and warrants cancelled in debt settlement (in Shares) | (15,488,901) | |||||
| Amortization of employee stock options | 52,184 | 52,184 | ||||
| Loss | (908,534) | (908,534) | ||||
| Balance at Nov. 30, 2024 | $ 16,474 | 103,046,249 | 65,702 | (114,275,584) | (1,139,499) | (12,286,658) |
| Balance (in Shares) at Nov. 30, 2024 | 164,734,517 | |||||
| Balance at Aug. 31, 2024 | $ 18,135 | 103,742,716 | 65,702 | (114,187,913) | (1,139,499) | (11,500,859) |
| Balance (in Shares) at Aug. 31, 2024 | 181,348,418 | |||||
| Shares purchased from related party | $ (112) | (39,888) | (40,000) | |||
| Shares purchased from related party (in Shares) | (1,125,000) | |||||
| Shares and warrants cancelled in debt settlement | $ (1,549) | (679,961) | (681,510) | |||
| Shares and warrants cancelled in debt settlement (in Shares) | (15,488,901) | |||||
| Amortization of employee stock options | 23,382 | 23,382 | ||||
| Loss | (87,671) | (87,671) | ||||
| Balance at Nov. 30, 2024 | $ 16,474 | $ 103,046,249 | $ 65,702 | $ (114,275,584) | $ (1,139,499) | $ (12,286,658) |
| Balance (in Shares) at Nov. 30, 2024 | 164,734,517 |
Nature of Business and Significant Accounting Policies |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies [Text Block] | 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 8:00 AM and 12:00 AM. 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 88 external customers as of November 30, 2024. 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, Cash Equivalents, and Restricted Cash
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 $592,584 and $600,007 as of November 30, 2024 and May 31, 2024, respectively.
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 bad debt expense of $0 and $93 during the three months ended November 30, 2024 and 2023.
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:
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 November 30, 2024, 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 November 30, 2024 and 2023, the Company received an aggregate of $50,103 and $0, respectively, and during the six months ended November 30, 2024 and 2023, the Company received an aggregate of $50,103 and $924,862, respectively; these amounts were 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.” There was no non-controlling interest reported during the three and six months ended November 30, 2024. During the three and six months ended November 30, 2023, the Company reported a non-controlling interest in the amount of $(92) and ($2,200), 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.
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 $96,709 and $103,448 for the three months ended November 30, 2024 and 2023, respectively, and $174,710 and $227,059 for the six months ended November 30, 2024 and 2023, respectively.
Research and Development
Research and development expenses are charged to operations as incurred. The Company incurred research and development costs of $281 and $431 for the three months ended November 30, 2024 and 2023, respectively, and $421 and $1,887 for the six months ended November 30, 2024 and 2023, 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:
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 and six months ended November 30, 2024 and 2023:
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 November 30, 2024 and 2023, the Company had the following potentially dilutive instruments outstanding: at November 30, 2024, a total of 46,300,414 shares (14,549,685 issuable upon the exercise of warrants, 23,733,229 issuable upon the conversion of convertible notes payable and accrued interest, 8,000,000 shares issuable upon the conversion of stock options, and 17,500 in stock to be issued); and at November 30, 2023, a total of 73,715,637 shares (21,181,449 issuable upon the exercise of warrants, 52,516,688 issuable upon the conversion of convertible notes payable and accrued interest, and 17,500 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 November 30, 2024 and 2023. For the three months ended November 30, 2024 and 2023, 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 have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
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Going Concern |
6 Months Ended |
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Nov. 30, 2024 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Substantial Doubt about Going Concern [Text Block] | 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 $114,275,584 as of November 30, 2024. 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. |
Accounts Receivable |
6 Months Ended |
|---|---|
Nov. 30, 2024 | |
| Receivables [Abstract] | |
| Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | Note 3: Accounts Receivable
Accounts receivable was $1,152,082 and $682,894 at November 30, 2024 and May 31, 2024, respectively. The Company had bad debt expense of $0 and $93 during the three months ended November 30, 2024 and 2023. The Company had bad debt expense of $0 and $393 during the six months ended November 30, 2024 and 2023. No allowance for doubtful accounts was necessary during the three months ended November 30, 2024 and 2023. |
Inventory |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Text Block] | Note 4: 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:
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. |
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Prepaid Expenses and Other Current Assets |
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Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Other Current Assets [Text Block] | Note 5: Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at November 30, 2024 and May 31, 2024:
Prepaid expenses primarily of (i) annual license fees charged by the State of Nevada; (ii) insurance costs; (iii) supplies; (iv) rent; and (v) board fees. |
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Property, Plant and Equipment |
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Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment Disclosure [Text Block] | Note 6: Property, Plant and Equipment
Property, plant and equipment consisted of the following at November 30, 2024 and May 31, 2024:
The Company made payments in the amounts of $16,141 and $44,248 for property and equipment during the six months ended November 30, 2024 and 2023, respectively.
Depreciation expense totaled $121,219 and $158,497 for the three months ended November 30, 2024 and 2023, respectively. Depreciation expense totaled $254,880 and $317,250 for the six months ended November 30, 2024 and 2023, respectively. |
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Right of Use Assets and Liabilities – Operating Leases |
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| Disclosure Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Leases [Text Block] | Note 7: 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 November 30, 2024 and 2023 was entirely comprised of operating leases and amounted to $140,612 and $123,408, respectively. The Company’s lease expense for the six months ended November 30, 2024 and 2023 was entirely comprised of operating leases and amounted to $278,097 and $257,611, respectively.
The Company’s right of use (“ROU”) asset amortization for the three months ended November 30, 2024 and 2023 was $106,422 and $89,736, respectively. The Company’s ROU asset amortization for the six months ended November 30, 2024 and 2023 was $209,922 and $186,424, respectively.
The Company has recorded total right of use assets of $4,384,520 and liabilities in the amount of $4,341,120 through November 30, 2024.
Right of use assets – operating leases are summarized below:
Operating lease liabilities are summarized below:
Maturity analysis under these lease agreements is as follows:
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Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets Disclosure [Text Block] | Note 8: Intangible Assets
Intangible assets consisted of the following at November 30, 2024 and May 31, 2024:
Total amortization expense charged to operations for the three months ended November 30, 2024 and 2023 was $825 and $7,750, respectively. Total amortization expense charged to operations for the six months ended November 30, 2024 and 2023 was $1,651 and $15,501, respectively.
Remaining amortization expense for intangible assets as of November 30, 2024 is as follows:
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Goodwill |
6 Months Ended |
|---|---|
Nov. 30, 2024 | |
| Disclosure Text Block Supplement [Abstract] | |
| Goodwill Disclosure [Text Block] | Note 9: Goodwill
Goodwill in the amount of $557,896 is carried on the Company’s balance sheet at November 30, 2024 and May 31, 2024 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, 2024 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 May 31, 2024. As a result, no impairment was recorded. At November 30, 2024 and May 31, 2024, the net amount of goodwill on the Company’s balance sheet was $557,896. |
Other Assets |
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Nov. 30, 2024 | |||||||||||||||||||||||||||||||||||||
| Disclosure Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||
| Other Assets Disclosure [Text Block] | Note 10: Other Assets
Other assets included the following as of November 30, 2024 and May 31, 2024:
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Accounts Payable and Accrued Liabilities |
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Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Liabilities Disclosure [Text Block] | Note 11: Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at November 30, 2024 and May 31, 2024:
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Due to Related Party |
6 Months Ended |
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Nov. 30, 2024 | |
| Other Liabilities and Financial Instruments Subject to Mandatory Redemption [Abstract] | |
| Other Liabilities Disclosure [Text Block] | Note 12: Due to Related Party
On November 1, 2024, the Company acquired and cancelled 1,125,000 shares of common stock from a board member at a cost of $40,000. These shares were valued at $0.0557 per shares, which was the closing price on the date of the cancellation; a gain in the amount of $22,663 was recorded on this transaction. The purchase price of $40,000 had not been paid at November 30, 2024. |
Notes Payable |
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| Notes Payable [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] | Note 13: Notes Payable
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| Debt Disclosure [Text Block] | Note 15: Notes Payable – Related Party
Aggregate maturities of notes payable, convertible notes payable, and notes payable – related parties as of November 30, 2024 are as follows:
For the twelve months ended November 30,
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Convertible Notes Payable |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt [Text Block] | Note 14: Convertible Notes Payable
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Lease Liabilities - Financing Leases |
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| Disclosure Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Finance Leases [Text Block] | Note 16: Lease Liabilities - Financing Leases
Aggregate maturities of lease liabilities – financing leases as of November 30, 2024 are as follows:
For the period ended November 30,
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Stockholders’ Equity |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Text Block] | Note 17: Stockholders’ Equity
The Company’s authorized capital stock consists of 345,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.
Common stock transactions for the six months ended November 30, 2024
On August 30, 2024, the Company issued 56,847,545 shares of common stock pursuant to the conversion $2,200,000 of the principal amount of a note payable (see note 15). No gain or loss was recorded on this transaction as the conversion occurred according to the terms of the note.
On September 10, 2024, the Company settled three notes payable in the aggregate principal amount of $2,868,282 for a cash payment in the amount of $2,600,000. In addition, the noteholders returned for cancellation a total of 15,488,901 shares of the Company’s common stock and warrants to purchase 6,177,216 shares of the Company’s common stock. The cancelled shares were valued at the closing price of the Company’s common stock on the date of the cancellation, or $0.044 per share for a total value of $681,510. The warrants were valued at $4,136 using the Black-Sholes valuation model. A gain in the amount of $949,793 was recorded on this transaction. See note 18.
On November 1, 2024, the Company acquired and cancelled 1,125,000 shares of common stock from a board member at a cost of $40,000. These shares were valued at $0.0557 per shares, which was the closing price on the date of the cancellation; the amount of $22,663 was charged to additional paid-in capital on this related party transaction. The purchase price of $40,000 was unpaid at November 30, 2024. (see note 12)
Common stock transactions for the six months ended November 30, 2023
None.
Warrants
Warrants for the six months ended November 30, 2024:
The following table summarizes the significant terms of warrants outstanding at November 30, 2024. This table does not include the unit warrants. See Unit Warrants section below.
Transactions involving warrants are summarized as follows. This table does not include the unit warrants. See Unit Warrants section below.
Stock Options
Stock options for the six months ended November 30, 2024
During the six months ended November 30, 2024, 41,667 options issued to the Company’s previous Chief Science Officer expired.
The following table summarizes the significant terms of options outstanding at November 30, 2024.
Transactions involving options are summarized as follows.
The Company valued options using the Black-Scholes valuation model utilizing the following variables during the six months ended November 30, 2024:
Stock options for the three months ended November 30, 2023
None.
During the three and six months ended November 30, 2024, the Company charged $23,382 and $52,184, respectively, to stock-based compensation expense, in connection with the vesting of stock options. There were no comparable charges during the three and six months ended November 30, 2023.
The aggregate intrinsic value of options outstanding and exercisable at November 30, 2024 and 2023 was $16,637 and $0, respectively. Aggregate intrinsic value represents the difference between the fair value of the Company’s stock on the last day of the fiscal period, which was $0.045 as of November 30, 2024, and the exercise price multiplied by the number of options outstanding and exercisable. |
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Gain on Settlement of Debt |
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Nov. 30, 2024 | |||||||||||||||||||||||||||||||
| Gain On Settlement Of Debt Abstract | |||||||||||||||||||||||||||||||
| Gain on Settlement of Debt [Text Block] | Note 18: Gain on Settlement of Debt
On August 28, 2024, the Company raised $2,600,000 in cash from the issuance of PN9. See note 13. On August 30, 2024, the Company issued 56,847,545 shares of common stock pursuant to the conversion $2,200,000 of the principal amount of a note payable (see note 15). No gain or loss was recorded on this transaction as the conversion occurred according to the terms of the note.
On September 10, 2024, the Company utilized the proceeds of PN9 to settle three notes payable in the aggregate principal amount of $2,868,282 for a cash payment in the amount of $2,600,000. See note 17. In addition, the noteholders returned for cancellation a total of 15,488,901 shares of the Company’s common stock and warrants to purchase 6,177,216 shares of the Company’s common stock. The cancelled shares were valued at the closing price of the Company’s common stock on the date of the cancellation, or $0.044 per share for a total value of $681,510. The warrants were valued at $4,136 using the Black-Sholes valuation model. A gain in the amount of $949,793 was recorded on this transaction.
The Company valued the warrants using the Black-Scholes valuation model utilizing the following variables during the six months ended November 30, 2024:
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Related Party Transactions |
6 Months Ended |
|---|---|
Nov. 30, 2024 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions Disclosure [Text Block] | Note 19: Related Party Transactions
As of November 30, 2024 and May 31, 2024, 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 November 30, 2024, the Company made payments of $10,000 to one of its three directors and a payment of $5,000 to one director for their participation on the Board, for a total of $15,000. The Company also made a payment of $5,000 to one director for consulting fees. During the six months ended November 30, 2024, the Company made payments of $20,000 to one of its three and directors and $15,000 to one of its directors for their participation on the Board, for a total of $35,000; the Company also made a payment of $5,000 to one of its directors for consulting fees.
The Company’s CEO has waived his board fees for the period.
On November 1, 2024, the Company acquired and cancelled 1,125,000 shares of common stock from a board member at a cost of $40,000. These shares were valued at $0.0557 per shares, which was the closing price on the date of the cancellation. The amount of $22,663 was charged to additional paid-in capital on this transaction. The purchase price of $40,000 had not been paid at November 30, 2024.
On August 28, 2024 the Company issued PN9, a note payable to a related party, in the principal amount of $2,600,000. Principal in the amount of $2,200,000 automatically converted into 56,847,545 shares of the Company’s common stock on August 30,2024; the remaining principal in the amount of $400,000 bears interest at the rate of 12% per annum and matures on August 28, 2025. See note 15.
On October 15, 2024 the Company issued PN10, a note payable to a related party, in the principal amount of $150,000. Principal PN10 bears interest at the rate of 12% per annum. Principal and interest payments are due monthly for 24 months in the amount $7,061 beginning November 30, 2024. See note 15.
At November 30, 2024, there are nine related party notes outstanding with a total principal amount of $2,180,484. See note 15. |
Income Taxes |
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| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Text Block] | Note 20: Income Taxes
The following table summarizes the Company’s income tax accrued for the three months ended November 30, 2024 and 2023:
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:
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.
During the three months ended November 30, 2024, the Company received a notification from the Internal Revenue Service (“IRS”) that the Company has been assessed the amount of $111,441, consisting of estimated tax owed of $71,959, penalties of $26,771, and interest of $12,711 for failure to file its tax return for the year ended May 31, 2022. The Company made a good faith payment to the IRS in the amount of $5,000 pursuant to this notice during the three months ended November 30, 2024. The accounting firm responsible for this tax filing on behalf of the Company has been terminated, and the Company is pursuing this firm for recovery of penalties and interest assessed. |
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Commitments and Contingencies |
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Nov. 30, 2024 | ||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Text Block] | Note 21: 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.
Lease Arrangements
The Company leases several facilities for office, warehouse, and retail space. Currently lease commitments are as follows:
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.
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. The $50,000 security deposit was forfeited to the Landlord and the Landlord has made no additional demands for payment or attempts at collection since August of 2017. These expenses, which are a liability of the Company’s Colorado subsidiary, have been accrued on the balance sheet as of November 30, 2024. |
Subsequent Events |
6 Months Ended |
|---|---|
Nov. 30, 2024 | |
| Subsequent Events [Abstract] | |
| Subsequent Events [Text Block] | Note 22: Subsequent Events
Termination of Chief Operating Officer
On December 17, 2024, the Company terminated the employment of Joseph Ramalho, its Chief Operating Officer.
Amendments to Convertible Debentures
On December 27, 2024, the Company executed a Supplemental Indenture to amend that certain debenture indenture by and between the Company and Odyssey Trust Company, as Trustee, dated as of December 12, 2018, as supplemented March 31, 2021, as supplemented September 15, 2022, and as supplemented December 28, 2023 (collectively, the “Debenture Indenture”), in order to amended the terms of its outstanding $1,378,778 principal amount unsecured convertible debentures (the “December Debentures”) issued December 12, 2018 to provide the Company an option to redeem all outstanding December Debentures in cash at a redemption price equal to $600 per $1,000 principal amount of December Debentures; any accrued but unpaid interest through to and including the redemption date shall not be paid and shall be cancelled. See note 14.
Secured Promissory Notes
On January 7, 2025, the Company entered into four secured promissory notes in the aggregate amount of $1,000,000. These notes bear interest at the rate of 12%, are payable in 24 equal monthly installments beginning January 31, 2025, and are due on December 31, 2026. Three of these notes with an aggregate principal amount of $900,000 are payable to related parties. |
Pay vs Performance Disclosure - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Nov. 30, 2024 |
Nov. 30, 2023 |
Nov. 30, 2024 |
Nov. 30, 2023 |
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| Pay vs Performance Disclosure | ||||
| Net Income (Loss) | $ (87,671) | $ (1,302,272) | $ (908,534) | $ (1,766,113) |
Insider Trading Arrangements |
3 Months Ended |
|---|---|
Nov. 30, 2024 | |
| Trading Arrangements, by Individual | |
| Rule 10b5-1 Arrangement Adopted | false |
| Non-Rule 10b5-1 Arrangement Adopted | false |
| Rule 10b5-1 Arrangement Terminated | false |
| Non-Rule 10b5-1 Arrangement Terminated | false |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Accounting, Policy [Policy Text Block] | 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. |
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| Consolidation, Policy [Policy Text Block] | 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. |
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| Use of Estimates, Policy [Policy Text Block] | 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. |
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| Reclassification, Comparability Adjustment [Policy Text Block] | 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.
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| Cash and Cash Equivalents, Policy [Policy Text Block] | Cash, Cash Equivalents, and Restricted Cash 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 $592,584 and $600,007 as of November 30, 2024 and May 31, 2024, respectively. |
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| Accounts Receivable [Policy Text Block] | 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 bad debt expense of $0 and $93 during the three months ended November 30, 2024 and 2023. |
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| Inventory, Policy [Policy Text Block] | 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. |
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| Property, Plant and Equipment, Policy [Policy Text Block] | 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:
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. |
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| Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | 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 November 30, 2024, the net carrying value of goodwill on the Company’s balance sheet remained at $557,896. |
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| Employee Retention Tax Credit , Policy [Policy Text Block] | 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 November 30, 2024 and 2023, the Company received an aggregate of $50,103 and $0, respectively, and during the six months ended November 30, 2024 and 2023, the Company received an aggregate of $50,103 and $924,862, respectively; these amounts were accounted for as other income on the Company’s condensed consolidated statement of operations.
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| Comprehensive Income, Policy [Policy Text Block] | 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. |
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| Consolidation, Subsidiaries or Other Investments, Consolidated Entities, Policy [Policy Text Block] | 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.” There was no non-controlling interest reported during the three and six months ended November 30, 2024. During the three and six months ended November 30, 2023, the Company reported a non-controlling interest in the amount of $(92) and ($2,200), respectively, representing 50% of the income (loss) incurred by its partially owned subsidiary, Kealii Okamalu. |
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| Consolidation, Variable Interest Entity, Policy [Policy Text Block] | 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. |
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| Concentration Risk, Credit Risk, Policy [Policy Text Block] | 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. |
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| Advertising Cost [Policy Text Block] | Advertising and Marketing Costs All costs associated with advertising and promoting products are expensed as incurred. Total recognized advertising and marketing expenses were $96,709 and $103,448 for the three months ended November 30, 2024 and 2023, respectively, and $174,710 and $227,059 for the six months ended November 30, 2024 and 2023, respectively. |
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| Research and Development Expense, Policy [Policy Text Block] | Research and Development Research and development expenses are charged to operations as incurred. The Company incurred research and development costs of $281 and $431 for the three months ended November 30, 2024 and 2023, respectively, and $421 and $1,887 for the six months ended November 30, 2024 and 2023, respectively. |
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| Fair Value of Financial Instruments, Policy [Policy Text Block] | 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. |
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| Revenue [Policy Text Block] | 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:
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. |
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| Long-Duration Contracts Revenue Recognition, Policy [Policy Text Block] | Disaggregation of Revenue The following table represents a disaggregation of revenue for the three and six months ended November 30, 2024 and 2023:
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| Earnings Per Share, Policy [Policy Text Block] | 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 November 30, 2024 and 2023, the Company had the following potentially dilutive instruments outstanding: at November 30, 2024, a total of 46,300,414 shares (14,549,685 issuable upon the exercise of warrants, 23,733,229 issuable upon the conversion of convertible notes payable and accrued interest, 8,000,000 shares issuable upon the conversion of stock options, and 17,500 in stock to be issued); and at November 30, 2023, a total of 73,715,637 shares (21,181,449 issuable upon the exercise of warrants, 52,516,688 issuable upon the conversion of convertible notes payable and accrued interest, and 17,500 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 November 30, 2024 and 2023. For the three months ended November 30, 2024 and 2023, 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. |
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| Income Tax, Policy [Policy Text Block] | 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. |
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| Commitments and Contingencies, Policy [Policy Text Block] | 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.
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| New Accounting Pronouncements, Policy [Policy Text Block] | 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 have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
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Nature of Business and Significant Accounting Policies (Tables) |
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| Nature of Business and Significant Accounting Policies (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Table Text Block] | Property, plant and equipment consisted of the following at November 30, 2024 and May 31, 2024:
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| Disaggregation of Revenue [Table Text Block] | The following table represents a disaggregation of revenue for the three and six months ended November 30, 2024 and 2023:
|
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| Estimated Useful LIfe [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nature of Business and Significant Accounting Policies (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Table Text Block] | 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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Inventory (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventory, Current [Table Text Block] | 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:
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Prepaid Expenses and Other Current Assets (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block] | Prepaid expenses and other current assets consisted of the following at November 30, 2024 and May 31, 2024:
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Property, Plant and Equipment (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Table Text Block] | Property, plant and equipment consisted of the following at November 30, 2024 and May 31, 2024:
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Right of Use Assets and Liabilities – Operating Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease, Cost [Table Text Block] | Right of use assets – operating leases are summarized below:
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| Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block] | Maturity analysis under these lease agreements is as follows:
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Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Finite-Lived Intangible Assets [Table Text Block] | Intangible assets consisted of the following at November 30, 2024 and May 31, 2024:
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| Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] | Remaining amortization expense for intangible assets as of November 30, 2024 is as follows:
|
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Other Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | |||||||||||||||||||||||||||||||||||||
| Disclosure Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of Other Assets [Table Text Block] | Other assets included the following as of November 30, 2024 and May 31, 2024:
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Accounts Payable and Accrued Liabilities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] | Accounts payable and accrued liabilities consisted of the following at November 30, 2024 and May 31, 2024:
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Notes Payable (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable (Tables) [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Maturities of Long-Term Debt [Table Text Block] | Aggregate maturities of notes payable, convertible notes payable, and notes payable – related parties as of November 30, 2024 are as follows:
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| Nonrelated Party [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable (Tables) [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Debt [Table Text Block] |
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| Related Party [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable (Tables) [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Debt [Table Text Block] |
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Convertible Notes Payable (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Debt [Table Text Block] |
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Lease Liabilities - Financing Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Finance Lease [Table Text Block] |
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| Finance Lease, Liability, to be Paid, Maturity [Table Text Block] | Aggregate maturities of lease liabilities – financing leases as of November 30, 2024 are as follows:
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Stockholders’ Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block] | The following table summarizes the significant terms of warrants outstanding at November 30, 2024. This table does not include the unit warrants. See Unit Warrants section below.
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| Share-Based Payment Arrangement, Outstanding Award, Activity, Excluding Option [Table Text Block] | Transactions involving warrants are summarized as follows. This table does not include the unit warrants. See Unit Warrants section below.
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| Share-Based Payment Arrangement, Option, Exercise Price Range [Table Text Block] | The following table summarizes the significant terms of options outstanding at November 30, 2024.
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| Share-Based Payment Arrangement, Option, Activity [Table Text Block] | Transactions involving options are summarized as follows.
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| Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] | The Company valued options using the Black-Scholes valuation model utilizing the following variables during the six months ended November 30, 2024:
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Gain on Settlement of Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | |||||||||||||||||||||||||||||||
| Gain On Settlement Of Debt Abstract | |||||||||||||||||||||||||||||||
| Schedule of Share-Based Payment Award, Warrants, Valuation Assumptions [Table Text Block] | The Company valued the warrants using the Black-Scholes valuation model utilizing the following variables during the six months ended November 30, 2024:
|
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Income Taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | The components of the income tax provision include:
|
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Nature of Business and Significant Accounting Policies (Details) - Disaggregation of Revenue - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Nov. 30, 2024 |
Nov. 30, 2023 |
Nov. 30, 2024 |
Nov. 30, 2023 |
|
| Disaggregation of Revenue [Line Items] | ||||
| Revenue | $ 4,161,270 | $ 5,197,214 | $ 8,966,435 | $ 10,311,741 |
| Cannabis Dispensary [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenue | 2,706,856 | 3,104,064 | 5,773,932 | 6,412,606 |
| Cannabis Production [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenue | $ 1,454,414 | $ 2,093,150 | $ 3,192,503 | $ 3,899,135 |
Going Concern (Details) - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Retained Earnings (Accumulated Deficit) | $ (114,275,584) | $ (113,367,050) |
Accounts Receivable (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Nov. 30, 2024 |
Nov. 30, 2023 |
Nov. 30, 2024 |
Nov. 30, 2023 |
May 31, 2024 |
|
| Receivables [Abstract] | |||||
| Accounts Receivable, after Allowance for Credit Loss, Current | $ 1,152,082 | $ 1,152,082 | $ 682,894 | ||
| Accounts Receivable, Credit Loss Expense (Reversal) | 0 | $ 93 | 0 | $ 393 | |
| Accounts Receivable, Allowance for Credit Loss | $ 0 | $ 0 | $ 0 | $ 0 | |
Inventory (Details) - Schedule of Inventory, Current - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Schedule Of Inventory Current Abstract | ||
| Raw materials | $ 287,064 | $ 386,803 |
| Finished goods | 1,518,597 | 1,581,770 |
| Total | $ 1,805,661 | $ 1,968,573 |
Prepaid Expenses and Other Current Assets (Details) - Deferred Costs, Capitalized, Prepaid, and Other Assets - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Deferred Costs Capitalized Prepaid And Other Assets Abstract | ||
| Prepaid license fees | $ 7,000 | $ 14,659 |
| Other prepaid expenses | 32,934 | 34,650 |
| Total | $ 39,934 | $ 49,309 |
Property, Plant and Equipment (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Nov. 30, 2024 |
Nov. 30, 2023 |
Nov. 30, 2024 |
Nov. 30, 2023 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Payments to Acquire Property, Plant, and Equipment | $ 16,141 | $ 44,248 | ||
| Depreciation | $ 121,219 | $ 158,497 | $ 254,880 | $ 317,250 |
Property, Plant and Equipment (Details) - Property, Plant and Equipment - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Less: accumulated depreciation | $ (3,572,740) | $ (3,318,550) |
| Property, plant, and equipment, net | 2,184,815 | 2,423,553 |
| Computer Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant, and equipment, gross | 163,126 | 163,126 |
| Furniture and Fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant, and equipment, gross | 149,478 | 148,358 |
| Machinery and Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant, and equipment, gross | 2,522,795 | 2,519,455 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant, and equipment, gross | $ 2,922,156 | $ 2,911,164 |
Right of Use Assets and Liabilities – Operating Leases (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 63 Months Ended | ||
|---|---|---|---|---|---|
Nov. 30, 2024 |
Nov. 30, 2023 |
Nov. 30, 2024 |
Nov. 30, 2023 |
Aug. 31, 2024 |
|
| Right of Use Assets and Liabilities – Operating Leases (Details) [Line Items] | |||||
| Operating Lease, Expense | $ 140,612 | $ 123,408 | $ 278,097 | $ 257,611 | |
| Operating Lease, Right-of-Use Asset, Periodic Reduction | $ 106,422 | $ 89,736 | 209,922 | 186,424 | |
| Operating Lease, Right-of-Use Asset, Before Accumulated Amortization | $ 4,384,520 | ||||
| Right-of-Use Asset Obtained in Exchange for Operating Lease Liability | $ 120,401 | $ 224,899 | $ 4,341,120 | ||
| Minimum [Member] | |||||
| Right of Use Assets and Liabilities – Operating Leases (Details) [Line Items] | |||||
| Lessee, Operating Lease, Term of Contract | 1 year | ||||
| Maximum [Member] | |||||
| Right of Use Assets and Liabilities – Operating Leases (Details) [Line Items] | |||||
| Lessee, Operating Lease, Term of Contract | 10 years 6 months | ||||
Right of Use Assets and Liabilities – Operating Leases (Details) - Lessee, Operating Lease, Liability, Maturity - USD ($) |
Nov. 30, 2024 |
May 31, 2019 |
|---|---|---|
| Lessee Operating Lease Liability Maturity Abstract | ||
| Twelve months ended November 30, 2025 | $ 676,970 | |
| Twelve months ended November 30, 2026 | 395,348 | |
| Twelve months ended November 30, 2027 | 321,828 | |
| Twelve months ended November 30, 2028 | 322,329 | |
| Twelve months ended November 30, 2029 | 263,561 | |
| Thereafter | 155,779 | |
| Total | 2,135,815 | |
| Less: Present value discount | (462,421) | |
| Lease liability | $ 1,673,394 | $ 4,461,521 |
Intangible Assets (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Nov. 30, 2024 |
Nov. 30, 2023 |
Nov. 30, 2024 |
Nov. 30, 2023 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization of Intangible Assets | $ 825 | $ 7,750 | $ 1,651 | $ 15,501 |
Intangible Assets (Details) - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Schedule Of Finite Lived Intangible Assets Future Amortization Expense Abstract | ||
| 2025 | $ 2,478 | |
| 2026 | 3,304 | |
| 2027 | 2,545 | |
| Finite-Lived Intangible Assets, Net | $ 8,327 | $ 9,978 |
Goodwill (Details) - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Disclosure Text Block Supplement [Abstract] | ||
| Goodwill | $ 557,896 | $ 557,896 |
Other Assets (Details) - Schedule of Other Assets - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Schedule Of Other Assets Abstract | ||
| Security deposits | $ 157,500 | $ 157,500 |
| Other assets | $ 157,500 | $ 157,500 |
Accounts Payable and Accrued Liabilities (Details) - Schedule of Accounts Payable and Accrued Liabilities - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Schedule Of Accounts Payable And Accrued Liabilities Abstract | ||
| Trade accounts payable | $ 3,708,509 | $ 2,508,769 |
| Accrued payroll and payroll taxes | 313,275 | 313,296 |
| Accrued liabilities | 378,253 | 533,994 |
| Total | $ 4,400,037 | $ 3,356,059 |
Due to Related Party (Details) - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Nov. 30, 2024 |
Sep. 10, 2024 |
May 31, 2024 |
|
| Due to Related Party (Details) [Line Items] | |||
| Share Price (in Dollars per share) | $ 0.045 | $ 0.044 | |
| Gain on Repurchase and Cancellation of Common Stock | $ 22,663 | ||
| Other Liabilities, Current | $ 40,000 | $ 0 | |
| Related Party [Member] | |||
| Due to Related Party (Details) [Line Items] | |||
| Stock Repurchased and Retired During Period, Shares (in Shares) | 1,125,000 | ||
| Payments for Repurchase of Common Stock | $ 40,000 | ||
| Share Price (in Dollars per share) | $ 0.0557 | ||
| Other Liabilities, Current | $ 40,000 |
Notes Payable (Details) - Schedule of Debt - Notes Payable, Other Payables [Member] - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Notes Payable (Details) - Schedule of Debt [Line Items] | ||
| Debenture | $ 163,600 | $ 741,052 |
| Less: Discount | 0 | (193,756) |
| Nonrelated Party [Member] | ||
| Notes Payable (Details) - Schedule of Debt [Line Items] | ||
| Notes Payable, Net of Discount | 163,600 | 547,296 |
| Total Notes Payable, Current Portion | 128,898 | 139,345 |
| Total Notes Payable, Long-term Portion | 34,702 | 407,951 |
| Debenture 2 [Member] | ||
| Notes Payable (Details) - Schedule of Debt [Line Items] | ||
| Debenture | 0 | 17,917 |
| Debenture 6 [Member] | ||
| Notes Payable (Details) - Schedule of Debt [Line Items] | ||
| Debenture | 0 | 500,632 |
| PN6 [Member] | ||
| Notes Payable (Details) - Schedule of Debt [Line Items] | ||
| Debenture | $ 163,600 | $ 222,502 |
Notes Payable (Details) - Schedule of Debt (Parentheticals) - Notes Payable, Other Payables [Member] - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
Jan. 04, 2022 |
Dec. 21, 2021 |
Nov. 30, 2024 |
Nov. 30, 2024 |
May 31, 2024 |
Feb. 22, 2024 |
Dec. 21, 2012 |
|
| Debenture 2 [Member] | |||||||||
| Notes Payable (Details) - Schedule of Debt (Parentheticals) [Line Items] | |||||||||
| Amount | $ 250,000 | ||||||||
| Interest payable | payable quarterly commencing six months after issuance | ||||||||
| Interest Rate | 15.00% | ||||||||
| Warrants (in Shares) | 75,758 | ||||||||
| Maturity | Jul. 10, 2024 | ||||||||
| Warrants at an exercise price of (in Dollars per share) | $ 1.65 | ||||||||
| Payments | 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. | ||||||||
| Discount | $ 6,501 | $ 10,428 | |||||||
| Original issue discount | 37,500 | $ 187,000 | |||||||
| Gain on extinguishment of debt | 111,807 | ||||||||
| Amortized discounts | $ 0 | $ 197 | |||||||
| principal payments | 0 | $ 17,917 | |||||||
| Debenture 6 [Member] | |||||||||
| Notes Payable (Details) - Schedule of Debt (Parentheticals) [Line Items] | |||||||||
| Amount | $ 500,000 | ||||||||
| Interest payable | payable quarterly commencing nine months after issuance | ||||||||
| Interest Rate | 15.00% | ||||||||
| Warrants (in Shares) | 151,516 | ||||||||
| Maturity | Jul. 10, 2024 | Oct. 31, 2024 | |||||||
| Warrants at an exercise price of (in Dollars per share) | $ 1.65 | ||||||||
| Payments | 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. | ||||||||
| Discount | 209,783 | $ 17,154 | |||||||
| Original issue discount | 75,000 | $ 375,000 | |||||||
| Gain on extinguishment of debt | $ 402,370 | ||||||||
| Amortized discounts | 183,263 | $ 193,560 | |||||||
| principal payments | 511,340 | 511,340 | |||||||
| Interest Capitalized | 10,708 | 10,708 | |||||||
| PN6 [Member] | |||||||||
| Notes Payable (Details) - Schedule of Debt (Parentheticals) [Line Items] | |||||||||
| Amount | $ 250,000 | ||||||||
| Interest Rate | 12.00% | ||||||||
| principal payments | 29,890 | 58,902 | |||||||
| payments due | $ 11,799 | ||||||||
| Interest Expense [Member] | PN6 [Member] | |||||||||
| Notes Payable (Details) - Schedule of Debt (Parentheticals) [Line Items] | |||||||||
| interest payments | $ 5,508 | $ 11,895 |
Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) - Convertible Debt [Member] - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 27, 2024 |
Jan. 04, 2024 |
Dec. 29, 2023 |
Dec. 28, 2023 |
Sep. 15, 2023 |
Sep. 15, 2022 |
Apr. 15, 2021 |
Mar. 21, 2021 |
Jul. 26, 2019 |
Dec. 12, 2018 |
Oct. 31, 2018 |
Oct. 18, 2018 |
Oct. 10, 2018 |
Nov. 30, 2024 |
Nov. 30, 2019 |
Nov. 30, 2024 |
May 31, 2024 |
May 31, 2023 |
May 31, 2022 |
May 31, 2021 |
|
| Navy Capital Debenture 2 [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Amount | $ 1,000,000 | |||||||||||||||||||
| dated | Oct. 31, 2018 | |||||||||||||||||||
| Interest rate | 8.00% | |||||||||||||||||||
| Conversion price (in Dollars per share) | $ 3.2 | |||||||||||||||||||
| Discount | $ 813,724 | |||||||||||||||||||
| Maturity | 3 years | |||||||||||||||||||
| Debt Amendment | (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. | |||||||||||||||||||
| Loss on extinguishment of debt | $ 422,331 | $ 509,700 | ||||||||||||||||||
| Convertible | (i) the conversion price of the debentures was reduced to $0.07 per unit; (ii) the conversion price of warrants underlying the units issuable upon conversion was reduced to $0.10 per share; (iii) principal payments in the amount of $8,000 per month are due for 48 months beginning January 31, 2024, and a balloon payment in the amount of $235,658 will be due on January 31, 2028; (iv) accrued interest in the amount of $54,053 was added to the principal balance. | (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 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. | |||||||||||||||||
| Converted shares (in Shares) | 2,410,279 | |||||||||||||||||||
| Converted, warrants (in Shares) | 1,205,140 | |||||||||||||||||||
| Accrued interest | $ 37,526 | $ 27,717 | ||||||||||||||||||
| principal payments | $ 471,387 | 481,005 | ||||||||||||||||||
| Gain on settlement of debt | $ (422,331) | $ (509,700) | ||||||||||||||||||
| outstanding | 0 | 0 | 481,005 | |||||||||||||||||
| Navy Capital Debenture 2 [Member] | Conversion Options [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Loss on extinguishment of debt | $ 344,036 | $ 223,515 | ||||||||||||||||||
| Gain on settlement of debt | $ (344,036) | (223,515) | ||||||||||||||||||
| Navy Capital Debenture 2 [Member] | Note Warrant [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Loss on extinguishment of debt | 198,816 | |||||||||||||||||||
| Gain on settlement of debt | (198,816) | |||||||||||||||||||
| Canaccord Debentures [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Amount | $ 186,111 | $ 12,012,000 | ||||||||||||||||||
| dated | Dec. 12, 2018 | |||||||||||||||||||
| Interest rate | 8.00% | 8.00% | ||||||||||||||||||
| Conversion price (in Dollars per share) | $ 3.2 | |||||||||||||||||||
| Maturity | 3 years | |||||||||||||||||||
| Debt Amendment | (i) the conversion price of the debentures was reduced to $0.07 per unit; (ii) the conversion price of warrants underlying the units issuable upon conversion was reduced to $0.10 per share; (iii) the maturity date was extended to January 31, 2028; | (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. | (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. | |||||||||||||||||
| Loss on extinguishment of debt | $ 1,727,071 | $ 4,547,660 | (2,015,051) | $ 3,286,012 | ||||||||||||||||
| Convertible | 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. | |||||||||||||||||||
| Converted shares (in Shares) | 8,081 | 234,167 | ||||||||||||||||||
| Converted, warrants (in Shares) | 4,040 | 117,084 | ||||||||||||||||||
| Converted | $ 2,325,056 | $ 25,857 | $ 281,000 | |||||||||||||||||
| Cash available for debt service | 750,000 | |||||||||||||||||||
| Forgiven | 1,550,039 | |||||||||||||||||||
| Balloon payment to be paid | 1,038,777 | 1,038,777 | ||||||||||||||||||
| Capitalized interest | 32,788 | 64,930 | ||||||||||||||||||
| Gain on settlement of debt | (1,727,071) | $ (4,547,660) | 2,015,051 | (3,286,012) | ||||||||||||||||
| outstanding | $ 1,378,778 | 1,661,326 | 1,661,326 | 1,596,396 | ||||||||||||||||
| option to redeem | option to redeem all outstanding Canaccord Debentures in cash at a redemption price equal to $600 per $1,000 principal amount | |||||||||||||||||||
| Canaccord Debentures [Member] | Conversion Options [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Loss on extinguishment of debt | 2,623,852 | |||||||||||||||||||
| Gain on settlement of debt | (2,623,852) | |||||||||||||||||||
| Canaccord Debentures [Member] | Note Warrant [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Loss on extinguishment of debt | 1,923,808 | |||||||||||||||||||
| Gain on settlement of debt | $ (1,923,808) | |||||||||||||||||||
| US Convertible Debenture 1 [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Amount | $ 4,000,000 | |||||||||||||||||||
| dated | Oct. 31, 2018 | |||||||||||||||||||
| Interest rate | 8.00% | |||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.07 | |||||||||||||||||||
| Discount | $ 3,254,896 | |||||||||||||||||||
| Maturity | 3 years | |||||||||||||||||||
| Debt Amendment | (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. | (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. | 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. | |||||||||||||||||
| Loss on extinguishment of debt | $ 1,376,083 | $ 1,689,368 | 2,038,803 | |||||||||||||||||
| Convertible | 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. | |||||||||||||||||||
| Converted shares (in Shares) | 9,641,118 | |||||||||||||||||||
| Converted, warrants (in Shares) | 4,820,560 | |||||||||||||||||||
| principal payments | 1,885,556 | 1,924,030 | ||||||||||||||||||
| Gain on settlement of debt | $ (1,376,083) | $ (1,689,368) | $ (2,038,803) | |||||||||||||||||
| Maturity date | Jan. 31, 2028 | |||||||||||||||||||
| added principal | $ 215,414 | |||||||||||||||||||
| US Convertible Debenture 1 [Member] | Note Warrant [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Loss on extinguishment of debt | 894,090 | $ 795,278 | ||||||||||||||||||
| Gain on settlement of debt | (894,090) | $ (795,278) | ||||||||||||||||||
| Principal [Member] | Navy Capital Debenture 2 [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Converted | $ 675,668 | |||||||||||||||||||
| Principal [Member] | Canaccord Debentures [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Converted | $ 3,875,095 | |||||||||||||||||||
| Principal [Member] | US Convertible Debenture 1 [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Converted | $ 2,702,674 | |||||||||||||||||||
| Accrued Interest [Member] | Canaccord Debentures [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Converted | $ 465,012 | |||||||||||||||||||
| Accrued Interest [Member] | US Convertible Debenture 1 [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| Converted | $ 45,044 | |||||||||||||||||||
| Interest Expense [Member] | Navy Capital Debenture 2 [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| interest payments | 6,381 | 6,381 | ||||||||||||||||||
| Interest Expense [Member] | US Convertible Debenture 1 [Member] | ||||||||||||||||||||
| Convertible Notes Payable (Details) - Convertible Debt (Parentheticals) [Line Items] | ||||||||||||||||||||
| interest payments | $ 25,226 | $ 25,226 | ||||||||||||||||||
Notes Payable – Related Party (Details) - Schedule of Maturities of Long-term Debt |
Nov. 30, 2024
USD ($)
|
|---|---|
| Schedule Of Maturities Of Long Term Debt Abstract | |
| 2025 | $ 1,769,303 |
| 2026 | 866,804 |
| 2027 | 309,042 |
| 2028 | 1,060,261 |
| Total | $ 4,005,410 |
Lease Liabilities - Financing Leases (Details) - Finance Lease - USD ($) |
Nov. 30, 2024 |
May 31, 2024 |
|---|---|---|
| Lease Liabilities - Financing Leases (Details) - Finance Lease [Line Items] | ||
| Financing lease obligation | $ 148,309 | $ 196,476 |
| Current portion | 108,410 | 96,224 |
| Long-term maturities | 39,899 | 100,252 |
| Total | 148,309 | 196,476 |
| Finance Lease #1 [Member] | ||
| Lease Liabilities - Financing Leases (Details) - Finance Lease [Line Items] | ||
| Financing lease obligation | 145,851 | 193,117 |
| Total | 145,851 | 193,117 |
| Finance Lease #2 [Member] | ||
| Lease Liabilities - Financing Leases (Details) - Finance Lease [Line Items] | ||
| Financing lease obligation | 2,458 | 3,359 |
| Total | $ 2,458 | $ 3,359 |
Lease Liabilities - Financing Leases (Details) - Finance Lease (Parentheticals) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 20, 2022 |
Mar. 14, 2022 |
Nov. 30, 2024 |
Nov. 30, 2024 |
|
| Finance Lease #1 [Member] | ||||
| Lease Liabilities - Financing Leases (Details) - Finance Lease (Parentheticals) [Line Items] | ||||
| Original amount | $ 359,900 | |||
| Payable | forty-eight monthly installments of $10,173 | |||
| interest rate | 15.89% | |||
| Principal payments | $ 23,168 | $ 47,266 | ||
| Interest payments | 6,421 | 13,772 | ||
| Finance Lease #2 [Member] | ||||
| Lease Liabilities - Financing Leases (Details) - Finance Lease (Parentheticals) [Line Items] | ||||
| Original amount | $ 12,400 | |||
| Payable | forty-eight monthly installments of $350 | |||
| interest rate | 15.78% | |||
| Principal payments | 456 | 901 | ||
| Interest payments | $ 69 | $ 149 |
Lease Liabilities - Financing Leases (Details) - Finance Lease, Liability, Fiscal Year Maturity |
Nov. 30, 2024
USD ($)
|
|---|---|
| Finance Lease Liability Fiscal Year Maturity Abstract | |
| 2025 | $ 108,410 |
| 2026 | 39,899 |
| Total | $ 148,309 |
Stockholders’ Equity (Details) - Share-Based Payment Arrangement, Outstanding Award, Activity, Excluding Option - $ / shares |
6 Months Ended | 12 Months Ended |
|---|---|---|
Nov. 30, 2024 |
May 31, 2024 |
|
| Share Based Payment Arrangement Outstanding Award Activity Excluding Option Abstract | ||
| Warrants outstanding, Number of Shares | 20,726,901 | 21,181,449 |
| Warrants outstanding, Weighted Average Exercise Price | $ 0.4 | $ 0.4 |
| Granted, Number of Shares | 0 | |
| Granted, Weighted Average Exercise Price | $ 0 | |
| Exercised, Number of Shares | 0 | 0 |
| Exercised, Weighted Average Exercise Price | $ 0 | $ 0 |
| Cancelled / Expired, Number of Shares | (6,177,216) | (454,548) |
| Cancelled / Expired, Weighted Average Exercise Price | $ 0.4 | $ 0.41 |
| Warrants outstanding, Number of Shares | 14,549,685 | 20,726,901 |
| Warrants outstanding, Weighted Average Exercise Price | $ 0.4 | $ 0.4 |
Stockholders’ Equity (Details) - Share-Based Payment Arrangement, Option, Exercise Price Range |
6 Months Ended |
|---|---|
|
Nov. 30, 2024
$ / shares
shares
| |
| Share Based Payment Arrangement Option Exercise Price Range Abstract | |
| Range of exercise Prices. Lower limit | $ 0.039 |
| Range of exercise Prices, Upper limit | $ 0.039 |
| Number of options Outstanding (in Shares) | shares | 8,000,000 |
| Weighted average remaining contractual life | 9 years 1 month 24 days |
| Weighted average exercise price of outstanding Options | $ 0.039 |
| Number of Options Exercisable (in Shares) | shares | 2,520,832 |
| Weighted average exercise price of exercisable Option | $ 0.039 |
Stockholders’ Equity (Details) - Share-Based Payment Arrangement, Option, Activity |
6 Months Ended |
|---|---|
|
Nov. 30, 2024
$ / shares
shares
| |
| Share Based Payment Arrangement Option Activity Abstract | |
| Options Outstanding, Number of Shares | shares | 8,041,667 |
| Options Outstanding, Weighted Average Exercise Price | $ / shares | $ 0.039 |
| Granted, Number of Shares | shares | 0 |
| Granted, Weighted Average Exercise Price | $ / shares | $ 0 |
| Exercised, Number of Shares | shares | 0 |
| Exercised, Weighted Average Exercise Price | $ / shares | $ 0 |
| Cancelled / Expired, Number of Shares | shares | (41,667) |
| Cancelled / Expired, Weighted Average Exercise Price | $ / shares | $ 0 |
| Options Outstanding, Number of Shares | shares | 8,000,000 |
| Options Outstanding, Weighted Average Exercise Price | $ / shares | $ 0.039 |
Stockholders’ Equity (Details) - Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions |
6 Months Ended |
|---|---|
|
Nov. 30, 2024
USD ($)
| |
| Schedule Of Share Based Payment Award Stock Options Valuation Assumptions Abstract | |
| Volatility | 269.44% |
| Dividends (in Dollars) | $ 0 |
| Risk-free interest rates | 3.80% |
| Expected term (years) | 5 years |
Gain on Settlement of Debt (Details) - Schedule of Share-Based Payment Award, Warrants, Valuation Assumptions - Warrant [Member] |
6 Months Ended |
|---|---|
|
Nov. 30, 2024
USD ($)
| |
| Gain on Settlement of Debt (Details) - Schedule of Share-Based Payment Award, Warrants, Valuation Assumptions [Line Items] | |
| Volatility | 104.68% |
| Dividends (in Dollars) | $ 0 |
| Risk-free interest rates | 4.36% |
| Expected term (years) | 1 year 18 days |
Income Taxes (Details) |
3 Months Ended |
|---|---|
|
Nov. 30, 2024
USD ($)
| |
| Income Tax Disclosure [Abstract] | |
| Taxes Payable | $ 111,441 |
| Accrued Income Taxes | 71,959 |
| Income Tax Examination, Penalties Accrued | 26,771 |
| Income Tax Examination, Interest Accrued | 12,711 |
| Payments for Other Taxes | $ 5,000 |
Income Taxes (Details) - Schedule of Components of Income Tax Expense (Benefit) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Nov. 30, 2024 |
Nov. 30, 2023 |
Nov. 30, 2024 |
Nov. 30, 2023 |
|
| Schedule Of Components Of Income Tax Expense Benefit Abstract | ||||
| Revenue | $ 4,161,270 | $ 5,197,214 | $ 8,966,435 | $ 10,311,741 |
| Directly attributable costs | (1,928,995) | (3,025,595) | (4,234,657) | (5,866,196) |
| Deferred | $ 2,232,275 | $ 2,171,619 | $ 4,731,778 | $ 4,445,545 |
| Tax rate | 21.00% | 21.00% | 21.00% | 21.00% |
| Tax expense | $ 468,778 | $ 456,040 | $ 993,674 | $ 933,564 |
Subsequent Events (Details) - Subsequent Event [Member] |
23 Months Ended | 24 Months Ended | ||
|---|---|---|---|---|
|
Dec. 27, 2024
USD ($)
|
Dec. 31, 2026 |
Dec. 31, 2026 |
Jan. 07, 2025
USD ($)
|
|
| Subsequent Events (Details) [Line Items] | ||||
| Debt Instrument, Face Amount | $ 1,000,000 | |||
| Debt Instrument, Interest Rate, Stated Percentage | 12.00% | |||
| Debt Instrument, Term | 24 months | |||
| Debt Instrument, Frequency of Periodic Payment | monthly | |||
| Debt Instrument, Maturity Date | Dec. 31, 2026 | |||
| Number of Related Party Notes Payable | 3 | |||
| Related Party [Member] | ||||
| Subsequent Events (Details) [Line Items] | ||||
| Notes Payable | $ 900,000 | |||
| Canaccord Debentures [Member] | ||||
| Subsequent Events (Details) [Line Items] | ||||
| Convertible Notes Payable | $ 1,378,778 | |||
| Debt Instrument, Redemption, Description | option to redeem all outstanding December Debentures in cash at a redemption price equal to $600 per $1,000 principal amount of December Debentures; any accrued but unpaid interest through to and including the redemption date shall not be paid and shall be cancelled |
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