UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2016
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number: 333-167824
MJ HOLDINGS, INC.
(Exact name of registrant as specified in
its charter)
NEVADA
(State or other jurisdiction of
incorporation or organization)
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20-8235905
(I.R.S. Employer
Identification No.)
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4141 NE 2nd Avenue, Suite 204-A, Miami,
Florida 33137
(Address of principal executive offices)
(305) 455-1881
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
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Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes
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No
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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. Yes
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No
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Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
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No
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Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Indicate
by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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No
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The aggregate market value of the voting and non-voting shares
of the Company’s Common Stock held by non-affiliates based on the last sale of the Common Stock on June 30, 2016, was $2,108,844.
The number of shares outstanding of the issuer’s Common
Stock as of March 20, 2017, was 12,227,939.
MJ HOLDINGS, INC.
TABLE OF CONTENTS
PART I
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Item 1.
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Business
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3
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Item 1A.
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Risk Factors
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5
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Item 1B.
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Unresolved Staff Comments
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5
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Item 2.
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Properties
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5
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Item 3.
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Legal Proceedings
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5
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Item 4.
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Mine Safety Disclosures
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5
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PART II
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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6
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Item 6.
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Selected Financial Data
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6
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Item 7.
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Management’s Discussion And Analysis of Financial Condition And Results of Operations
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Item 7A.
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Quantitative and Qualitative Disclosure About Market Risk
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6
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Item 8.
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Financial Statements and Supplementary Data
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12
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Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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12
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Item 9A.
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Controls and Procedures
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Item 9B.
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Other Information
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13
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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14
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Item 11.
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Executive Compensation
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14
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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15
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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16
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Item 14.
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Principal Accountant Fees and Services
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16
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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17
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SIGNATURES
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35
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In this Annual Report on Form 10-K, unless the context otherwise
requires, the terms “MJ Holdings, Inc.” “MJ Holdings,” “we,” “us,” “our” and
the Company refer to MJ Holdings, Inc., formerly Securitas EDGAR Fiilngs, Inc.
Forward-Looking Statements
In addition to historical information, this Annual Report
on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical
matters. You can generally identify forward-looking statements as statements containing the words “believe,” “expect,”
“will,” “anticipate,” “intend,” “estimate,” “project,” “assume” or
other similar expressions, although not all forward-looking statements contain these identifying words. All statements in this
report regarding our future strategy, future operations, projected financial position, estimated future revenue, projected costs,
future prospects, and results that might be obtained by pursuing management’s current plans and objectives are forward-looking
statements. You should not place undue reliance on our forward-looking statements because the matters they describe are subject
to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Important risks
that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained
in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations” of this report and in our subsequent filings with the SEC. Our forward-looking statements are based on the
information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim
any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations
to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will
likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements,
and such difference may be significant and materially adverse to our stockholders.
PART I
Item 1. Business
Company Background
MJ Holdings, Inc. was originally incorporated on November 17,
2006, as Securitas EDGAR Filings, Inc. under the laws of the State of Nevada. Until February 2014, we operated as an EDGAR filing
agent, wherein we assisted companies in preparing and filing periodic reports with the United States Securities and Exchange Commission
(“SEC”) on the EDGAR, (electronic data gathering analysis retrieval) platform. On February 14, 2014, we amended and restated
our Articles of Incorporation and changed our business model.
All references to “MJ Holdings” the “Company,”
“we,” “our” or “us” in this report are to MJ Holdings, Inc.
MJ Holdings owned and leased real estate to licensed operators
in the regulated cannabis industry. Additionally, we are developing desktop and mobile social, meet-up and health and wellness
applications. We have been able to charge rents at a premium to current market rents as certain landlords have been resistant to
lease to marijuana operators due to its legal status under federal law.
To date, we have financed our real estate acquisitions through
the issuance of debt and equity.
Divestiture of Our Real Estate Business
On November 22, 2016, in connection with a plan to divest ourselves
of our real estate business, we submitted to our shareholders an offer to exchange (the “Exchange Offer”) our common
stock for shares in MJ Real Estate Partners, LLC, (“MJRE”) a newly formed LLC formed for the sole purpose of effecting
the Exchange Offer. Subsequent to the completion of the Exchange Offer, which closed on January 10, 2017, MJRE will serve as a
holding company for the real estate assets and business previously owned by MJ Holdings. Shareholders who participated in the Exchange
Offer received one MJRE common unit for each share of MJ Holdings common stock accepted in the Exchange Offer.
On January 10, 2017, the Company accepted for exchange 1,800,000
shares of the Company’s common stock in exchange for 1,800,000 shares of MJRE’s common units, representing membership interests
in MJRE. Effective February 1, 2017, the Company transferred its ownership interests in the real estate properties and its subsidiaries,
through which the Company holds ownership of the real estate properties, to MJRE. MJRE also assumed the senior notes and any and
all obligations associated with the real estate properties and business, effective February 1, 2017.
The MJ Real Estate Partners separation is due to our inability
to scale and expand our real estate business as previously planned and our intention to engage in business opportunities where
we believe we have greater growth opportunities to which capital will be more readily available.
Our Digital Assets
We operate and are developing mobile and computer based applications
focused on providing cannabis for medical use content and educational materials to licensed medical professionals, in addition
to matching patients with medical professionals who are familiar with the therapeutic effects and indications of cannabinoids
and
making social connections by and between cannabis users.
Our goal is to:
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create a general awareness of the use of cannabis for therapeutic purposes,
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provide
educa
tional materials to medical professionals related to the indication of cannabis
as a therapeutic option for patients,
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provide meaningful information
to persons who suffer from medical conditions of the possibility that cannabis products
may be used with positive effect, and;
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easily match medical
doctors and patients together in a efficient and seamless way, and thereby creating a
better healthcare experience.
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Revenue
We have not generated any revenue from our digital assets and
do not anticipate generating revenues in the next six to nine months. Our goal is to develop a “freemium” based business
model, where we offer our services for free in an effort to build and develop a user-base. We expect to generate revenues in the
future through advertising and by marketing premium products and services to our growing user-base.
Sales and marketing
We expect to attract the majority of our users through word-of-mouth,
search engine, social media and other free channels. We believe that by aggregating compelling content we can generate traffic
to our websites. We further believe that if we are successful in recruiting medical professionals as advisors who will promote
the use of cannabis for medical use, we can build public awareness and drive engagement.
Competition
The medical information and content industry is extremely competitive.
We compete with mainstream companies as well as a number of other companies that are directing their efforts to the cannabis space.
In addition to other online brands, we compete indirectly with offline services, such as in-person caregivers in addition to internet
forums and social media platforms.
We believe that our ability to compete successfully will depend
primarily upon the following factors:
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our ability to increase create compelling content;
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our ability to build trust of our content among medical professionals;
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the breadth and depth of our content relative to those of our competitors;
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our ability to build a user-base of medical professionals, together with our ability to build
a user-base of users seeking to use cannabis for therapeutic purposes;
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our ability to efficiently acquire new users for our products;
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our ability to continue to monetization our content, products and services; and
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the ease of use of our products and design and functionality of our products.
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Intellectual property
We don’t own any intellectual property, other than common law
rights to our logo and trade dress. As we develop our business and products, we expect our intellectual property rights, including
trademarks, domain names and other intellectual property, will be critical to our success.
Government regulation
We are subject to foreign and domestic laws and regulations
that affect companies conducting business on the internet, generally, including laws relating to the liability of providers of
online services for their operations and the activities of their users. As a result, we could be subject to actions based on negligence,
various torts and trademark and copyright infringement, among other actions.
Because we receive, store and use information received from
or generated by our users, we are also impacted by laws and regulations governing privacy, the storage, sharing, use, processing,
disclosure and protection of personal data and data breaches,
Employees
As of December 31, 2016, we had no employees.
Item 1A. Risk Factors
Smaller reporting companies are not required to provide the
information required by this item.
I
tem 1B. Unresolved Staff Comments
None
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tem 2. Properties
The following table provides certain summary information about
our real estate properties held for disposition as of December 31, 2016:
Property
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Year
Built / (Renovated)
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Zoning
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Date of
Purchase
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Building
Square
Feet
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Land
Area
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Lease
Expiration
Date
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Monthly
Rental
Income as of
December 31,
2016
(1)
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5353 Joliet
Street
Denver, Colorado
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1980 /
(2014)
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Industrial
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6/19/2014
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22,144
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1.41 acres
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8/31/2021
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$
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30,746
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503 Havana Street
Aurora, Colorado
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1967 /
(2007)
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Retail
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9/24/2014
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1,255
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0.54 acres
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9/30/2024
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$
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14,827
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1126 S. Sheridan
Blvd
Denver, Colorado
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1973 /
(2015)
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Retail
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5/4/2015
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3,828
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0.41 acres
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4/30/2025
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$
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12,405
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(1)
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Monthly rental income
is straight-line rental income over the lease term, including the reimbursement of certain
operating expenses, in effect as of December 31, 2016
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We currently are using office space, provided to us by our co-CEO
Shawn Chemtov, at no cost.
Item 3. Legal Proceedings
There are no legal proceedings which are pending or have been
threatened against us or any of our officers, directors or control persons of which management is aware.
Item 4. Mine Safety Disclosures
Not applicable
PART II
I
tem 5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Market Information
Our shares of common stock are currently quoted on the OTC Bulletin
Board under the symbol MJNE. The following table sets forth the high and low closing bid prices of our common stock for the quarterly
periods for the years ended December 31, 2016 and 2015. These bid prices represent prices quoted by broker-dealers on the OTC Bulletin
Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual
transactions.
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Fiscal 2016
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Fiscal 2015
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High
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Low
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High
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Low
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First Quarter
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0.62
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0.62
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3.00
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0.88
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Second Quarter
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1.00
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0.65
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2.00
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0.55
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Third Quarter
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1.00
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0.635
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2.00
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0.50
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Fourth Quarter
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3.50
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0.53
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2.00
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0.50
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Holders
As of March 15, 2016, there were 13 shareholders of record.
However, we believe that there are more beneficial holders of our common stock as beneficial holders may hold their stock in “street”
name.
Dividends
We did not pay any cash dividends on our common stock during
2016 or 2015 and have no intention of doing so in the foreseeable future. We intend to retain any earnings for use in our operations
and the expansion of our business. Any future determination to declare and pay cash dividends will be made at the discretion of
our board of directors, subject to applicable laws and will depend on our financial condition, results of operations, liquidity,
capital requirements, general business conditions, any contractual restriction on the payment of dividends and other factors that
our board of directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation
Plans
None.
Item 6. Selected Financial Data
Smaller reporting companies are not required to provide the
information required by this item.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following management’s discussion and analysis of financial
condition and results of operations should be read in conjunction with our audited consolidated financial statements and related
notes thereto included elsewhere in this report.
Executive Overview and Plan of Operation
MJ Holdings, Inc. was originally incorporated on November 17,
2006, as Securitas EDGAR Filings, Inc. under the laws of the State of Nevada and until February 2014, we operated as an EDGAR filing
agent, wherein we assisted companies in preparing and filing periodic reports with the United States Securities and Exchange Commission
(“SEC”) on the EDGAR, (electronic data gathering analysis retrieval) platform. On February 14, 2014, we amended and restated
our Articles of Incorporation and changed our business model. Our fiscal year is a calendar year ending December 31.
Our principal executive offices are located at 4141 NE 2nd Avenue
Suite 204A, Miami, Florida 33137, and our telephone number is (305) 455-1800.
Divestiture of Our Real Estate Business
On November 22, 2016, in connection with a plan to divest ourselves
of our real estate business, we submitted to our shareholders an offer to exchange (the “Exchange Offer”) our common
stock for shares in MJ Real Estate Partners, LLC, (“MJRE”) a newly formed LLC formed for the sole purpose of effecting
the Exchange Offer. Subsequent to the completion of the Exchange Offer, which closed on January 10, 2017, MJRE will serve as a
holding company for the real estate assets and business previously owned by MJ Holdings. Shareholders who participated in the Exchange
Offer received one MJRE common unit for each share of MJ Holdings common stock accepted in the Exchange Offer.
On January 10, 2017, the Company accepted for exchange 1,800,000
shares of the Company’s common stock in exchange for 1,800,000 shares of MJRE’s common units, representing membership interests
in MJRE. Effective February 1, 2017, the Company transferred its ownership interests in the real estate properties and its subsidiaries,
through which the Company holds ownership of the real estate properties, to MJRE. MJRE also assumed the senior notes and any and
all obligations associated with the real estate properties and business, effective February 1, 2017.
The MJ Real Estate Partners separation is due to our inability
to scale and expand our real estate business as previously planned and our intention to engage in business opportunities where
we believe we have greater growth opportunities to which capital will be more readily available.
How We Plan to Generate Revenue
Our Digital Assets
We operate and are developing mobile and computer based applications
focused on:
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providing cannabis for medical use content and educational
materials to licensed medical professionals,
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·
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matching patients with medical professionals who
are familiar with the therapeutic effects and indications of cannabinoids
and;
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|
·
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making social connections by and
between cannabis users.
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We have not generated any revenue from our digital assets and
do not anticipate generating revenues in the next six to nine months. Our goal is to develop a “freemium” based business
model, where we offer our services for free in an effort to build and develop a user-base. We expect to generate revenues in the
future through advertising and by marketing premium products and services to our growing user-base.
As of December 31, 2016, we had acquired three real estate properties
in Colorado that are leased to state licensed marijuana operators and generated $57,978 in monthly rental income. The following
table provides certain summary information about our real estate properties held for disposition as of December 31, 2016:
Property
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Year
Built / (Renovated)
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Zoning
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Date of
Purchase
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Building
Square
Feet
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Land
Area
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Lease
Expiration
Date
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Monthly
Rental
Income
(1)
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5353
Joliet Street
Denver, Colorado
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1980
/
(2014)
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Industrial
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6/19/2014
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22,144
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1.41 acres
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8/31/2021
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$
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30,746
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503
Havana Street
Aurora, Colorado
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1967
/
(2007)
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Retail
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9/24/2014
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1,255
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0.54 acres
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9/30/2024
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14,827
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1126
S. Sheridan Blvd
Denver, Colorado
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1973
/
(2015)
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Retail
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5/4/2015
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3,828
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0.41 acres
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4/30/2025
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$
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12,405
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$
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57,978
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(1)
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Monthly rental income
is straight-line rental income over the lease term, including the reimbursement of certain
operating expenses, in effect as of December 31, 2016
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The Company does not and will not, until such time as Federal
law allows, grow, harvest, distribute or sell marijuana or any substances that violate the laws of the United States of America.
Critical Accounting Policies, Judgments and Estimates
Our discussion and analysis of our financial condition and results
of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted
Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates,
judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure
of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe
are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
An accounting policy is considered to be critical if it requires
an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made,
and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely
to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies
reflect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.
Revenue Recognition
Before revenue can be recognized, four basic criteria must be
met: persuasive evidence of an arrangement exists; the delivery has occurred or services have been rendered; the fee is fixed or
determinable; and collectability is reasonably assured.
The Company’s revenues are rental income generated by leasing
acquired real estate properties to licensed marijuana operators. All leases are classified as operating leases. Rental income is
recognized on a straight-line basis over the terms of the leases. Straight-line rent is recognized for all tenants with contractual
fixed increases in rent. Deferred rent receivable represents rental revenue recognized on a straight-line basis in excess of billed
rents. Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as rental income
in the period the applicable costs are incurred.
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance
on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized
if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the
largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties
related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized
any tax benefits from uncertain tax positions for any of the reporting periods presented.
Results of Operations For the Year Ended December 31, 2016
Compared to the Year Ended December 31, 2015
Revenue
Revenue for the year ended December 31, 2016, was $9,039 compared
with revenue of $0 for the year ended December 31, 2015. Revenue for 2016 was generated as a result of interest income from a $150,000
investment in a $1,750,000 promissory note secured by the assignment of a mortgage on real estate property located in Miami, Florida.
The promissory note paid interest at 12% per annum and provided for cash interest payments on a monthly basis, commencing on July
1, 2016. The outstanding principal amount and any unpaid interest were due on May 19, 2017. The promissory note contained a prepayment
charge equal to six months of interest on the prepaid amount less interest paid to the date of such prepayment. In September 2016,
the promissory note was repaid in full, including $3,600 of additional interest as a result of the prepayment.
Operating Expenses
General and administrative expenses
for the year ended
December 31, 2016, decreased by $164,718 to $92,600 compared with general and administrative expenses of $257,318 for the year
ended December 31, 2015. The decrease in general and administrative expenses during 2016 was primarily attributed to a reduction
in professional fees, legal fees, and consulting services, of which $139,134 was associated with non-cash stock-based compensation
for consulting services in 2015.
Loss from Continuing Operations
We had a loss from continuing operations of $84,133, or a basic
and diluted loss per share from continuing operations of less than $0.01, for the year ended December 31, 2016, compared with a
net loss of $257,376, or a basic and diluted loss per share from continuing operations of $0.02, for the year ended December 31,
2015. The decrease of $173,243 in the loss from continuing operations for 2016 compared with 2015 was primarily driven by the decrease
in operating expenses of $164,162, specifically the decreases in professional and consulting fees discussed above, and the increase
in revenues of $9,039 related to the $150,000 investment in a real estate loan.
Discontinued Operations
As of December 31, 2016, the real estate properties and corresponding
assets and liabilities included in the Exchange Offer qualified as assets held for disposition, and the results of operations to
be reported as discontinued operations for the current and prior periods presented.
The following is a summary of the results of operations reported
as discontinued operations for the years ended December 31, 2016 and 2015:
|
|
2016
|
|
2015
|
|
|
|
|
|
Rental income
|
|
$
|
697,997
|
|
|
$
|
625,864
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Property expenses
|
|
|
121,434
|
|
|
|
123,589
|
|
Depreciation expense
|
|
|
116,159
|
|
|
|
102,415
|
|
Total operating expenses
|
|
|
237,593
|
|
|
|
226,004
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
460,404
|
|
|
|
399,860
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net - related party
|
|
|
(272,500
|
)
|
|
|
(241,055
|
)
|
Interest expense, net
|
|
|
(9,222
|
)
|
|
|
(13,210
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
178,682
|
|
|
|
145,595
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
|
$
|
178,682
|
|
|
$
|
145,595
|
|
Revenues
for the year ended December 31, 2016, increased
by $72,133 to $697,9997 compared with revenue of $625,864 for the year ended December 31, 2015. Revenues from discontinued operations
were generated as a result of rental income from operating leases on three real estate properties held for disposition as of December
31, 2016. The increase in revenue for 2016 was primarily the result of rental income generated by our third real estate property
acquired in May 2015 and increases in certain property expenses reimbursed to the Company.
Certain property expenses are reimbursable to the Company through
our existing leasing arrangements. During the year ended December 31, 2016, the Company recorded $79,976 of revenue pursuant to
operating lease agreements to offset a portion of the
property expenses incurred during the respective periods compared with $57,223
of revenue recorded during the year ended December 31, 2015, to offset a portion of the property expenses incurred during the respective
periods.
Property expenses
consist of those costs associated with
acquiring and leasing real estate properties held for disposition. These expenses include costs for commissions, appraisals, real
property taxes, insurance, repairs and maintenance. For the year ended December 31, 2016, we incurred property expenses of $121,434
compared with $123,589 for the year ended December 31, 2015. The decrease of $2,155 in property expenses for 2016 was primarily
attributed to a decrease of $33,281 for property repairs and utility fees, partially offset by an increase of $31,142 in costs
for real property taxes during 2016.
Depreciation expense
recorded for real estate properties
held for disposition was $116,159 for the year ended December 31, 2016, compared with depreciation expense of $102,415 for the
year ended December 31, 2015. The increase in depreciation expense for 2016 was primarily associated with a full year of depreciation
recorded for the third real estate property acquired in May 2015.
Other Expenses
Interest expense paid to related party, associated with promissory
notes held on certain real estate properties held for disposition, for the year ended December 31, 2016, increased by $31,445 to
$272,500 compared with interest expense of $241,055 for the year ended December 31, 2015. The increase in interest expense for
2016 was due to a full year of interest expense incurred on a $925,000 promissory note used to fund a real estate property acquisition
in May 2015.
Interest expense associated with the amortization of debt issuance
costs decreased by $3,988 to $9,222 compared with interest expense of $13,210 for the year ended December 31, 2015. As of December
31, 2016, $2,135 of debt issuance costs are included on the Balance Sheet, netted against outstanding notes payables, within current
liabilities held for disposition.
Liquidity and Capital Resources
The following table summarizes the cash flows for the years
ended December 31, 2016 and 2015:
|
|
2016
|
|
2015
|
Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(82,859
|
)
|
|
$
|
(103,472
|
)
|
Discontinued operations
|
|
|
247,238
|
|
|
|
213,825
|
|
Net cash provided by (used in) operating activities
|
|
|
164,379
|
|
|
|
110,353
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
—
|
|
|
|
(2,000
|
)
|
Discontinued operations
|
|
|
(3,974
|
)
|
|
|
(895,143
|
)
|
Net cash used in investing activities
|
|
|
(3,974
|
)
|
|
|
(897,143
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
—
|
|
|
|
914,366
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
160,405
|
|
|
|
127,576
|
|
Cash at beginning of period
|
|
|
303,368
|
|
|
|
175,792
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
463,773
|
|
|
$
|
303,368
|
|
The Company had cash of $463,773 at December 31, 2016, compared
with cash of $303,368 at December 31, 2015, an increase of $160,405. The increase in cash during 2016 was attributed to cash generated
from operating activities of $164,379, partially offset by $3,974 of cash used for building improvements on one of the real estate
properties held for disposition.
Operating Activities
Continuing Operations
We had net cash used in operating activities for continuing
operations of $82,859 for the year ended December 31, 2016, which consisted of a net loss from continuing operations of $84,133,
offset by depreciation of $667 and an increase in accounts payable and accrued liabilities of $607.
We had net cash used in operating activities for continuing
operations of $103,472 for the year ended December 31, 2015, which consisted of a net loss from continuing operations of $257,376,
offset by non-cash stock compensation of $139,134, an increase in accounts payable and accrued liabilities of $14,659, and depreciation
of $667.
Discontinued Operations
We had net cash provided by operating activities from discontinued
operations of $247,238 for the year ended December 31, 2016, which consisted of net income from discontinued operations of $178,682,
non-cash charges of $111,115; partially offset by an increase in working capital requirements of $42,559, consisting of an increase
in accounts receivables and other assets of $30,956, a decrease in security deposits of $25,035 and an increase in accounts payable
and accrued liabilities of $13,432.
We had net cash provided by operating activities from discontinued
operations of $213,825 for the year ended December 31, 2015, which consisted of net income from discontinued operations of $145,595,
non-cash charges of $95,469; partially offset by an increase in working capital requirements of $27,239, consisting of a decrease
in accounts payable and accrued liabilities of $91,259, a decrease in security deposits of $6,842, and a decrease in prepaid assets
and other assets of $70,862.
Investing Activities
Pursuant to the terms of the lease agreement for the real estate
property located in Aurora, Colorado, the Company agreed to contribute $150,000 to improvements to the property. During the year
ended December 31, 2016, we paid $3,974 for building improvements to the property in Aurora, Colorado. As of December 31, 2016,
the Company had paid $150,000 towards the improvements to the property in Aurora, Colorado.
During the year ended December 31, 2015, we purchased a 3,828
square feet retail building in Denver, Colorado for $771,750. In addition, we paid $123,393 for building improvements to property
in Aurora, Colorado and $2,000 for computer equipment and software.
Financing Activities
We had $914,366 in net cash provided by financing activities
for the year ended December 31, 2015, as a result of proceeds of $925,000 from the issuance of a promissory note, partially offset
by debt issuance costs of $10,634, used to finance the purchase of a third real estate property in May 2015.
Although we can provide no assurances, we believe our cash on
hand will provide sufficient liquidity and capital resources to fund our business for the next twelve months. In the event we experience
liquidity and capital resources constraints because of unanticipated operating losses, we may need to raise additional capital
in the form of equity and/or debt financing. If such additional capital is not available on terms acceptable to us or at all then
we may need to curtail our operations and/or take additional measures to conserve and manage our liquidity and capital resources,
any of which would have a material adverse effect on our business, results of operations and financial condition.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Seasonality
We do not consider our business to be seasonal.
Commitments and Contingencies
We are subject to the legal proceedings described in “Item
3. Legal Proceedings” of this report. There are no legal proceedings which are pending or have been threatened against us
or any of our officers, directors or control persons of which management is aware.
Inflation and Changing Prices
Neither inflation nor changing prices for the years ended December
31, 2015 and 2014 had a material impact on our operations.
Item 8. Financial Statements and Supplemental Data
The information required by this Item 8 is incorporated by reference
herein from “Item 15. Exhibits and Financial Statement Schedules” of this report.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act
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, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management,
including our Co-Chief Executive Officers and our Principal Financial Officer, to allow timely decisions regarding required disclosure.
We carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as
of December 31, 2016. Based upon that evaluation, our Co-Chief Executive Officers and our Principal Financial Officer concluded
that our disclosure controls and procedures were effective as of December 31, 2015.
Evaluation of Internal Controls and Procedures
We are responsible for establishing and maintaining adequate
internal control over financial reporting as such term is defined by Securities Exchange Act Rule 13a-15(f). Our internal controls
are designed to provide reasonable assurance as to the reliability of our financial statements for external purposes in accordance
with accounting principles generally accepted in the United States.
Internal control over financial reporting has inherent limitations
and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable,
not absolute, assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions,
the effectiveness of internal control over financial reporting may vary over time.
A material weakness is a deficiency, or a combination of deficiencies,
in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s
annual or interim financial statements will not be prevented or detected on a timely basis.
Under the supervision and with the participation of our Co-Chief
Executive Officers and our Chief Financial Officer, we have evaluated the effectiveness of our internal control over financial
reporting as of December 31, 2016, as required by Securities Exchange Act Rule 13a-15(c). In making our assessment, we have utilized
the criteria set forth by the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. We concluded that based on our evaluation, our internal control over financial reporting was effective
as of December 31, 2016.
The Company is neither an accelerated filer nor a large accelerated
filer, as defined in Rule 12b-2 under the Exchange Act, and there is not otherwise included in this Annual Report an attestation
report of the Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s
report was not required to be attested by the Company’s registered public accounting firm pursuant to Item 308(b) of Regulation
S-K.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting that occurred during the fourth quarter ended December 31, 2016, or subsequent to the date the Company completed its
evaluation, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors & Executive Officers
The names of our directors and certain information about them
are set forth below:
Name of Director
|
|
Age
|
|
Position
with Company
|
|
Director
Since
|
Shawn Chemtov
|
|
|
43
|
|
|
Co-CEO, Co-Chairman of the Board
of Directors
|
|
February 10, 2014
|
Adam Laufer
|
|
|
43
|
|
|
Co-CEO, Co-Chairman of the Board of Directors
|
|
February 10, 2014
|
Shawn Chemtov
was appointed Co-CEO and a member
of the Board of Directors of the Registrant on February 10, 2014. Mr. Chemtov is an active commercial real estate developer who
owns and manages a portfolio of income producing commercial and residential property. Mr. Chemtov is also the CEO of CMG Capital,
a licensed mortgage lender, which he founded in 2004. CMG Capital is a direct correspondent lender and an FHA licensee and portfolio
lender which has closed more than a billion dollars in residential and commercial property loans since its inception and has raised
and is currently servicing approximately $50,000,000 in real estate loans. Mr. Chemtov is a member of, the Florida Association
of Mortgage Professionals and Entrepreneurs Organization respectively.
Adam Laufer
was appointed as Co-CEO and a member
of the Board of Directors of the registrant on February 10, 2014. Mr. Laufer, is an entrepreneur and corporate securities attorney.
In 2013, Mr. Laufer, prior to his resignation as CEO and a director of Soleil Capital LP (OTC:JOBI,) successfully negotiated and
executed the acquisition of a portfolio of electronic cigarette and personal vaporizer patents. In 2009, Mr. Laufer executed a
reverse merger transaction with Vapor Corp. (OTC:VPCO), an electronic cigarette company. And from 2009-2013, Mr. Laufer continued
to serve the electronic cigarette company as an advisor; consulting on matters of corporate strategy and regulatory issues related
to electronic cigarette products, during which time the company’s revenues grew from approx $1M to approx $23M. Mr. Laufer has
significant experience in working with, start-up and development stage businesses in defining their corporate strategy, identifying
funding and growth opportunities, and in implementing liquidity strategies. Mr. Laufer is a member in good standing of the Florida
Bar.
Board Committees
Our board does not have a standing audit committee, a compensation
committee or a nominating and governance committee.
Director Compensation
Our board does not have any non-employee directors and no additional
compensation is paid to any of our employee directors for serving as a director.
Section 16(a) Beneficial Ownership Reporting Compliance
We are a voluntary filer and Section 16(a) of the Securities
Exchange Act of 1934 is not applicable to us.
Code of Ethics
The Company has a code of ethics, “Business Conduct: “Code
of Conduct and Policy,” that applies to all of the Company’s employees, including its principal executive officer, principal
financial officer and principal accounting officer, and the Board. The Company intends to disclose any changes in or waivers from
its code of ethics by posting such information on its website or by filing a Current Report on Form 8-K.
Item 11. Executive Compensation
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning
the compensation earned for services rendered to the Company for the fiscal years ended December 31, 2016 and 2015, by our Chief
Executive Officer and our two other most highly compensated executive officers (the “named executive officers”) who served
in such capacities at the end of the fiscal year ended December 31, 2016. Except as provided below, none of our named executive
officers received any other compensation required to be disclosed by law in excess of $10,000 annually.
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Change in
Pensions
Value and
Nonqualified
Deferred
Compensation
Earnings ($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Shawn Chemtov
|
|
2016
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
co-Chief Executive Officer
|
|
2015
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam Laufer
|
|
2016
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
co-Chief Executive Officer
|
|
2015
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
Outstanding Equity Awards at Fiscal Year-End
The following table provides information with respect to outstanding
stock option awards for shares of our common stock classified as exercisable and unexercisable as of December 31, 2016, for the
named executive officers.
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Number of
Shares
or
Units of
Stock That
Have
Not
Vested
(#)
|
|
Market
Value of
Shares
or
Units of
Stock That
Have
Not
Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights
That
Have
Not
Vested
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Shawn Chemtov
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Adam Laufer
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Item 12. Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 20, 2017, and reflects the reduction of 1,800,000 shares outstanding as a result of the
Exchange Offer accepted in January 2017:
•
|
|
each person whom we know beneficially owns more than 5% of our common stock;
|
•
|
|
each of our named
executive officers and directors; and
|
•
|
|
all of our executive
officers and directors as a group.
|
Except as otherwise indicated, each person and each group shown
in the table has sole voting and investment power with respect to the shares of common stock indicated. For purposes of the table
below, in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person is deemed to be the beneficial
owner, of any shares of our common stock over which he or she has or shares, directly or indirectly, voting or investment power
or of which he or she has the right to acquire beneficial ownership at any time within 60 days. As used in this prospectus, “voting
power” is the power to vote or direct the voting of shares and “investment power” includes the power to dispose
or direct the disposition of shares. Common stock beneficially owned and percentage ownership was based on 12,227,939 shares outstanding
on March 15, 2017, plus 166,665 shares deemed outstanding pursuant to Rule 13d-3, for a total of 12,394,604 shares outstanding.
Unless otherwise indicated, the address for each person is our
address at 4141 NE 2nd Avenue Suite #204A., Miami, Florida 33137.
Beneficial Owner
|
# of Shares
|
% of Total
|
Directors and Executive Officers:
|
|
|
|
|
|
Shawn Chemtov
|
5,771,583
|
46.57%
|
co-Chief Executive Officer
|
|
|
|
|
|
Adam Laufer
|
5,671,582
|
45.76%
|
co-Chief Executive Officer
|
|
|
|
|
|
All directors and executive officers as a group (2 persons)
|
11,443,165
|
92.32%
|
|
|
|
Over 5% Shareholders:
|
|
|
None
|
|
|
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The following is a description of transactions since January
1, 2015, to which we have been a party in which:
•
|
|
the amounts involved exceeded or will exceed the lesser of $120,000 or one percent
of the average of our total assets at year end for the last two completed fiscal years; and
|
•
|
|
our directors and executive officers or holders of more than
5% of our common stock, or any member of the immediate family of the foregoing persons or entities affiliated with them, had or
will have a direct or indirect material interest.
|
In June 2014 the Company acquired real estate property in Denver,
Colorado for $2,214,000. The acquisition was partially funded with proceeds from the issuance of a secured promissory note in the
amount of $1,800,000. The promissory note is held by Chemtov Mortgage Group (“CMG”), an entity wholly-owned by the Company’s
co-CEO, Shawn Chemtov. CMG has assigned all ownership and security interest granted to it pursuant to the promissory note to 5353
Mortgage Loan, LLC, a single purpose entity created solely for the purpose of this transaction. CMG invested $100,000 of the $1,800,000
of funds used to finance the purchase of the promissory note. CMG acts as the loan servicing entity for the promissory note, administering
the note, processing payments from the Company, and transferring all payments to 5353 Mortgage Loan, LLC. CMG charges no administration
fees for servicing the promissory note. During the years ended December 31, 2016 and 2015, the Company paid $180,000 and $180,000,
respectively, of interest to CMG pursuant to the promissory note held by CMG.
In May 2015 the Company acquired real estate property in Denver,
Colorado for $771,750. The acquisition was funded with proceeds from the issuance of a secured promissory note in the amount of
$925,000. The promissory note is held by CMG, an entity wholly-owned by the Company’s co-CEO, Shawn Chemtov. CMG has assigned all
ownership and security interest granted to it pursuant to the promissory note to a single purpose entity created solely for the
purpose of this transaction. CMG acts as the loan servicing entity for the promissory note, administering the note and processing
payments from the Company. CMG charges no administration fees for servicing the promissory note. During the years ended December
31, 2016 and 2015, the Company paid $92,500 and $53,346, respectively, of interest to CMG pursuant to the promissory note held
by CMG.
In May 2016, the Company invested $150,000 in a $1,750,000 promissory
note secured by the assignment of a mortgage on real estate property located in Miami, Florida. The mortgage was held by CMG, an
entity wholly-owned by the Company’s co-CEO, Shawn
Chemtov. The Company did not incur any loan origination fees or any other
costs associated with the mortgage investment. The promissory note paid interest at 12% per annum and provided for cash interest
payments on a monthly basis, commencing on July 1, 2016. The outstanding principal amount and any unpaid interest were due on May
19, 2017. The promissory note contained a prepayment charge equal to six months of interest on the prepaid amount less interest
paid to the date of such prepayment. In September 2016, the promissory note was repaid in full, including $3,600 of additional
interest as a result of the prepayment. During 2016, the Company recorded $9,039 of revenue generated by interest income from the
$150,000 real estate loan.
Board Composition and Director Independence
Our business and affairs are managed under the direction of
the board of directors. Our board of directors is currently comprised of two members, Messrs. Chemtov and Laufer. Because of their
relationships with us, none of them are “independent” under the rules of any national securities exchange or Rule 10A-3
under the Securities Exchange Act of 1934, or the Exchange Act.
Item 14. Principal Accountant Fees and Services.
Paritz & Company, P.A. (“Paritz”) has served as
the Company’s independent registered public accounting firm for the years ended December 31, 2016 and 2015. In accordance
with the requirements of the Sarbanes-Oxley Act of 2002, all audit and audit-related services and all non-audit services performed
by our current independent public accounting firm are approved in advance by our Board of Directors, including the proposed fees
for any such service, in order to assure that the provision of any such service does not impair the accounting firm’s independence.
The Board of Directors is informed of each service actually rendered.
Independent Auditor Fees
The following table sets forth fees billed, or expected to be
billed, to the Company by the Company’s independent auditors for the years ended December 31, 2016 and 2015, for (i) services
rendered for the audit of the Company’s annual financial statements and the review of the Company’s quarterly financial
statements; (ii) services rendered that are reasonably related to the performance of the audit or review of the Company’s
financial statements that are not reported as Audit Fees; (iii) services rendered in connection with tax preparation, compliance,
advice and assistance; and (iv) all other services:
|
|
Paritz & Company, P.A.
|
|
|
2016
|
|
2015
|
Audit fees
|
|
$
|
15,475
|
|
$
|
14,610
|
Audit related fees
|
|
|
500
|
|
|
−
|
Tax fees
|
|
|
−
|
|
|
−
|
Other fees
|
|
|
−
|
|
|
−
|
Total Fees
|
|
$
|
15,975
|
|
$
|
14,610
|
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) List of Documents filed as part of this report:
(1) Financial Statements
Report of Paritz & Co., Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statement of Operations for the years ended December
31, 2016 and 2015
Consolidated Statement of Changes in Stockholders’ Equity for
the years ended December 31, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December
31, 2016 and 2015
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Schedule III - Real Estate and Accumulate Depreciation
All other schedules are omitted because they are not applicable,
or because the required information is included in the financial statements or notes thereto.
(b) Exhibits.
The following exhibits are filed herewith or incorporated herein
by reference.
Exhibit
Number
|
Description of Exhibit
|
3.1
|
Amended and Restated Certificate of Incorporation of the Registrant (1)
|
3.2
|
Bylaws of the Registrant (2)
|
4.4
|
Specimen Common Stock Certificate (2)
|
14.1
|
Code of Ethics (2)
|
31.1
|
Rule 13a14(a)/15d-14(a) Certification of co-Chief Executive Officer
|
31.2
|
Rule 13a14(a)/15d-14(a) Certification of Chief Financial Officer
|
31.3
|
Rule 13a14(a)/15d-14(a) Certification of co-Chief Executive Officer
|
32.1
|
Section 1350 Certification of co-Chief Executive Officer
|
32.2
|
Section 1350 Certification of Chief Financial Officer
|
32.3
|
Section 1350 Certification of co-Chief Executive Officer
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
101.DEF*
|
XBRL Taxonomy Definition Linkbase Document
|
*
|
Filed herewith.
|
(1)
|
Incorporated by reference to the Registrant’s Periodic Report on Form 8-K as filed with the SEC on February 28, 2014.
|
(2)
|
Incorporated by reference to Registration Statement on Form S-1, filed with the Securities and Exchange Commission, Registration
Statement File No. 333-167824, on June 28, 2010.
|
|
|
Paritz & Company, P.A.
|
15 Warren Street, Suite 25
Hackensack, New Jersey 07601
(201)342-7753
Fax: (201) 342-7598
|
|
|
|
|
|
|
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Stockholders of MJ Holdings, Inc.
We
have audited the accompanying consolidated balance sheets of MJ Holdings, Inc. as of December 31, 2016 and 2015, and the related
consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. Our audit also includes
the financial statement schedule listed in the index at Item 15. MJ Holding’s management is responsible for these financial
statements and financial statement schedule. Our responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MJ
Holdings, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in
the two year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements referred to above have been prepared assuming that MJ Holdings, Inc. will continue as a going
concern. As discussed in note 4 to the financial statements, the Company announced its plans to divest their real estate properties
and associated business. During the year ended December 31, 2016, the Company generated a loss from continuing operations of $84,133
and used $82,859 of cash from operating activities. Subsequent to the divesture of its real estate business in January 2017, the
Company does not expect to generate revenues for the next six to nine months. These factors, among others, raise substantial doubt
regarding the Company’s ability to continue as a going concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/Paritz & Company, P.A.
|
|
|
Hackensack, NJ
|
|
|
March 30, 2017
|
|
MJ Holdings, Inc.
Consolidated Balance Sheets
As of December 31, 2016 and 2015
|
|
2016
|
|
2015
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash
|
|
$
|
463,773
|
|
|
$
|
303,368
|
|
Accounts receivable
|
|
|
30,187
|
|
|
|
—
|
|
Prepaid assets
|
|
|
6,862
|
|
|
|
6,093
|
|
Current assets held for disposition
|
|
|
54,419
|
|
|
|
68,521
|
|
Total current assets
|
|
|
555,241
|
|
|
|
377,982
|
|
Property and equipment, net of accumulated depreciation of $778 and $111
|
|
|
1,222
|
|
|
|
1,889
|
|
Noncurrent assets held for disposition
|
|
|
3,807,782
|
|
|
|
3,891,600
|
|
Total Assets
|
|
$
|
4,364,245
|
|
|
$
|
4,271,471
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
130,889
|
|
|
$
|
118,983
|
|
Accrued liabilities due to related party
|
|
|
2,132
|
|
|
|
—
|
|
Current liabilities held for disposition
|
|
|
2,722,865
|
|
|
|
1,795,902
|
|
Total current liabilities
|
|
|
2,855,886
|
|
|
|
1,914,885
|
|
Security deposits
|
|
|
70,168
|
|
|
|
95,203
|
|
Noncurrent liabilities held for disposition
|
|
|
—
|
|
|
|
917,741
|
|
Total Liabilities
|
|
|
2,926,054
|
|
|
|
2,927,829
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001, 5,000,000 shares authorized; 0 shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, par value $0.001, 95,000,000 shares authorized; 14,027,939 shares issued and outstanding
|
|
|
14,028
|
|
|
|
14,028
|
|
Additional paid-in capital
|
|
|
2,779,105
|
|
|
|
2,779,105
|
|
Accumulated deficit
|
|
|
(1,354,942
|
)
|
|
|
(1,449,491
|
)
|
Total Stockholders’ Equity
|
|
|
1,438,191
|
|
|
|
1,343,642
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
4,364,245
|
|
|
$
|
4,271,471
|
|
See accompanying notes to financial statements
MJ Holdings, Inc.
Consolidated Statements of Operations
For the years ended December 31, 2016
and 2015
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
|
|
|
Interest income from real estate loan
|
|
$
|
9,039
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
92,600
|
|
|
|
257,318
|
|
Depreciation expense
|
|
|
667
|
|
|
|
111
|
|
Total operating expenses
|
|
|
93,267
|
|
|
|
257,429
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(84,228
|
)
|
|
|
(257,429
|
)
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
95
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(84,133
|
)
|
|
|
(257,376
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, net of tax
|
|
|
(84,133
|
)
|
|
|
(257,376
|
)
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
|
|
178,682
|
|
|
|
145,595
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
94,549
|
|
|
$
|
(111,781
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per common share:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.00
|
)
|
|
$
|
(0.02
|
)
|
Discontinued operations
|
|
|
0.01
|
|
|
|
0.01
|
|
Net income (loss) per common share
|
|
$
|
0.01
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
14,027,939
|
|
|
|
13,958,592
|
|
See accompanying notes to financial statements
MJ Holdings, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2016 and 2015
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
Deficit
|
|
Total
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
|
Stockholders’
Equity
|
Balance at January 1, 2015
|
—
|
|
$
|
—
|
|
|
13,878,522
|
|
$
|
13,879
|
|
|
$
|
2,640,120
|
|
|
$
|
(1,337,710
|
)
|
|
$
|
1,316,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
—
|
|
|
—
|
|
|
149,417
|
|
|
149
|
|
|
|
138,985
|
|
|
|
—
|
|
|
|
139,134
|
|
Net Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
(111,781
|
)
|
|
|
(111,781
|
)
|
Balance at December 31, 2015
|
—
|
|
$
|
—
|
|
|
14,027,939
|
|
$
|
14,028
|
|
|
$
|
2,779,105
|
|
|
$
|
(1,449,491
|
)
|
|
$
|
1,343,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
94,549
|
|
|
|
94,549
|
|
Balance at December 31, 2016
|
—
|
|
$
|
—
|
|
|
14,027,939
|
|
$
|
14,028
|
|
|
$
|
2,779,105
|
|
|
$
|
(1,354,942
|
)
|
|
$
|
1,438,191
|
|
See accompanying notes to financial statements
MJ Holdings, Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2016
and 2015
|
|
2016
|
|
2015
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
94,549
|
|
|
$
|
(111,781
|
)
|
Less: income
from discontinued operations, net of tax
|
|
|
(178,682
|
)
|
|
|
(145,595
|
)
|
Loss from continuing operations,
net of tax
|
|
|
(84,133
|
)
|
|
|
(257,376
|
)
|
Adjustments to reconcile loss from
continuing operations to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
667
|
|
|
|
111
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
139,134
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
|
607
|
|
|
|
14,659
|
|
Net cash used in operating activities,
continuing operations
|
|
|
(82,859
|
)
|
|
|
(103,472
|
)
|
Net cash provided
by operating activities, discontinued operations
|
|
|
247,238
|
|
|
|
213,825
|
|
Net Cash Provided by Operating
Activities
|
|
|
164,379
|
|
|
|
110,353
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of computer equipment
and software
|
|
|
—
|
|
|
|
(2,000
|
)
|
Investment in real estate loans
receivable
|
|
|
(150,000
|
)
|
|
|
—
|
|
Repayment
of investment in real estate loans receivable
|
|
|
150,000
|
|
|
|
—
|
|
Net cash used in investing activities,
continuing operations
|
|
|
—
|
|
|
|
(2,000
|
)
|
Net cash used
in investing activities, discontinued operations
|
|
|
(3,974
|
)
|
|
|
(895,143
|
)
|
Net Cash Used in Investing
Activities
|
|
|
(3,974
|
)
|
|
|
(897,143
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from notes payable - related
party
|
|
|
—
|
|
|
|
925,000
|
|
Payment of
debt issuance costs
|
|
|
—
|
|
|
|
(10,634
|
)
|
Net Cash Provided by Financing
Activities
|
|
|
—
|
|
|
|
914,366
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
160,405
|
|
|
|
127,576
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of year
|
|
|
303,368
|
|
|
|
175,792
|
|
Cash at end of year
|
|
$
|
463,773
|
|
|
$
|
303,368
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest to related
party
|
|
$
|
272,500
|
|
|
$
|
233,346
|
|
See accompanying notes to financial statements
MJ Holdings, Inc.
Notes to the Consolidated Financial Statements
December 31, 2016
Note 1 — Description of Business
MJ Holdings owned and leased real estate to licensed operators
in the regulated cannabis industry. Additionally, we are developing desktop and mobile social, meet-up and health and wellness
applications. Our mobile and computer based applications are focused on providing cannabis for medical use content and educational
materials to licensed medical professionals, in addition to matching patients with medical professionals who are familiar with
the therapeutic effects and indications of cannabinoids and making social connections by and between cannabis users.
On November 22, 2016 in connection with a plan to divest ourselves
of our real estate business, we submitted to our shareholders an offer to exchange (the “Exchange Offer”) our common
stock for shares in MJ Real Estate Partners, LLC, (“MJRE”) a newly formed LLC formed for the sole purpose of effecting
the Exchange Offer. Subsequent to the completion of the Exchange Offer, which closed on January 10, 2017, MJRE will serve as a
holding company for the real estate assets and business previously owned by MJ Holdings. Shareholders who participated in the
Exchange Offer received one MJRE common unit for each share of MJ Holdings common stock accepted in the Exchange Offer.
The MJ Real Estate Partners separation was due to our inability
to scale and expand our real estate business as previously planned and our intention to engage in business opportunities where
we believe we have greater growth opportunities to which capital will be more readily available.
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, 5353 Joliet, LLC, MJ Havana, LLC and MJ Sheridan, LLC. Intercompany balances
and transactions have been eliminated in consolidation.
Reclassifications
Certain reclassifications of amounts previously reported have
been made to the accompanying consolidated financial statements in order to maintain consistency and comparability between the
periods presented, primarily related to discontinued operations discussed below in Note 3.
Use of Estimates
The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Significant estimates and assumptions are required in the determination of the fair value of financial instruments and
the valuation of long-lived and indefinite-lived assets. Some of these judgments can be subjective and complex, and, consequently,
actual results may differ from these estimates.
Fair Value of Financial Instruments
Financial instruments include cash, payables, and debt obligations.
Except as described below, due to the short-term nature of the financial instruments, there are no financial instruments measured
at fair value on a recovery basis.
Warrants to Purchase Common Stock and Other Derivative
Financial Instruments
We classify as equity any contracts that require physical settlement
or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or
net-share settlement) provided that such contracts are indexed to our own stock. We classify as assets or liabilities any contracts
that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event
is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement
or net-share settlement). We assess the classification of warrants issued to purchase our
common stock and any other financial
instrument at each reporting date to determine whether a change in classification between assets and liabilities is required.
Cash
The Company has cash in financial institutions in excess of
Federally insured limits. However, the Company has not experienced any losses in such accounts and believes it is not exposed
to any significant credit risk on its cash balances. Cash exceeding federally insured limits amounted to $213,773 and $53,368
as of December 31, 2016 and 2015, respectively.
Deferred Leasing Costs
Commissions and other direct costs associated with the acquisition
of tenants, or lessees, are capitalized and amortized on a straight-line basis over the terms of the related leases. Costs associated
with unsuccessful leasing opportunities are expensed as incurred.
Debt Issuance Costs
Costs associated with obtaining, closing, and modifying loans
and/or debt instruments such as, but not limited to placement agent fees, attorney fees and state documentary fees are capitalized,
netted against the carrying amount of the debt instrument, and charged to interest expense over the term of the loan.
Real Estate Property Held for Disposition
Real estate property is recorded at cost, less accumulated
depreciation and amortization. Real estate property, excluding land, is depreciated using the straight-line method over the estimated
useful life of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of
the related lease term or useful life. Maintenance, repairs, and minor improvements are charged to expense as incurred; major
renewals and betterments that extend the useful life of the associated asset are capitalized. When real estate property is sold
or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in results
of operations for the period.
Long –lived Assets
Long-lived assets, including real estate property and intangible
assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not
be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash
flows the assets are expected to generate. If the assets are considered to be impaired, the impairment to be recognized equals
the amount by which the carrying value of the assets exceeds its fair value. We did not record any impairments of long-lived assets
during the year ended December 31, 2016.
Revenue Recognition
Before revenue can be recognized, four basic criteria must
be met: persuasive evidence of an arrangement exists; the delivery has occurred or services have been rendered; the fee is fixed
or determinable; and collectability is reasonably assured.
The Company records interest income generated from investments
in real estate loans on an accrual basis over the life of the investment using the effective interest method. Direct loan origination
fees and origination or acquisition costs, if applicable, are amortized over the term of the loan as an adjustment to interest
income.
Prior to the disposal of the real estate properties in the
Exchange Offer, the Company recorded revenues from rental income generated by leasing acquired real estate properties to licensed
marijuana operators. All leases are classified as operating leases. Rental income is recognized on a straight-line basis over
the terms of the leases. Straight-line rent is recognized for all tenants with contractual fixed increases in rent. Deferred rent
receivable represents rental revenue recognized on a straight-line basis in excess of billed rents. Reimbursements from tenants
for real estate taxes and other recoverable operating expenses are recognized as rental income in the period the applicable costs
are incurred.
Stock-Based Compensation
The Company estimates the fair values of share-based payments
on the date of grant using a Black-Scholes option pricing model, which requires assumptions for the expected volatility of the
share price of our common stock, the expected dividend yield, and a risk-free interest rate over the expected term of the stock-based
financial instrument.
Since the number of outstanding and free-trading shares of
the Company’s common stock is limited and the trading volume is relatively low, we do not have sufficient company specific
information regarding the volatility of our share price on which to base an estimate of expected volatility. As a result, we use
the average historical volatilities of similar entities within our industry as the expected volatility of our share price.
The expected dividend yield is 0% as the Company has not paid
any dividends on its common stock and does not anticipate it will pay any dividends in the foreseeable future.
The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of the grant date with a remaining term equal to the expected term of the stock-based award.
For stock-based financial instruments issued to parties other
than employees, we use the contractual term of the financial instruments as the expected term of the stock-based financial instruments.
The assumptions used in calculating the fair value of stock-based
financial instruments represent our best estimates, but these estimates involve inherent uncertainties and the application of
management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could
be materially different in the future.
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance
on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized
if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the
largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties
related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized
any tax benefits from uncertain tax positions for any of the reporting periods presented.
Advertising Costs
Costs related to advertising are expensed as incurred and are
included in general and administrative expenses.
Research and Development Costs
Costs related to research and development activities of new
business units related to the regulated marijuana industry are expensed as incurred and are included in general and administrative
expenses, totaling $4,144 and $3,905 for 2016 and 2015, respectively.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the
“FASB”) issued guidance to clarify the principles for recognizing revenue. The core principle of the guidance is that
an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a
comprehensive framework for revenue recognition that supersedes current general revenue guidance and most industry-specific guidance.
In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount,
timing, and uncertainty of revenue that is recognized. An entity should apply the
guidance either retrospectively to each prior
reporting period presented or retrospectively with the cumulative adjustment at the date of the initial application. In July 2015,
the FASB delayed the effective date of the new guidance to annual reporting periods beginning after December 15, 2017, including
interim periods within that reporting period. Early adoption is now permitted after the original effective date of December 15,
2016. The Company is still evaluating the impact of adopting the new accounting guidance, but does not expect the adoption to
have a material impact on its consolidated financial statements.
In August 2014, FASB issued guidance that requires management
to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as
a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations
as they become due within one year after the date that the financial statements are issued. The Company adopted this guidance
for the annual period ending December 31, 2016, beginning with the first quarter ended March 31, 2016. The adoption of this guidance
primarily addressed certain disclosures to the financial statements and had no impact on our financial position, results of operations
or cash flows.
In April 2015, the FASB issued guidance to simplify the presentation
of debt issuance costs. This guidance provides that debt issuance costs related to a recognized liability be presented in the
balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. The Company
adopted this guidance with the annual and the interim period beginning January 1, 2016, and applied the standard on a retrospective
basis as of December 31, 2015. As of December 30, 2016 and 2015, we had $2,135 and $11,357, respectively, of debt issuance costs
associated with $2.7 million of notes payable that were reclassified from other assets to a reduction in the carrying amount of
the notes payable included in current and noncurrent liabilities held for disposition. The adoption of this standard did not have
a material impact on our financial position and did not impact our results of operations or cash flows.
Note 3 — Discontinued Operations
As of December 31, 2016, the real estate properties and corresponding
assets and liabilities included in the Exchange Offer qualified as assets held for disposition and the results of operations reported
as discontinued operations.
A summary of the assets and liabilities held for disposition
as of December 31, 2016 and 2015, is as follows:
|
|
2016
|
|
2015
|
Assets held for disposition
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Deferred rent receivable
|
|
$
|
26,631
|
|
|
$
|
40,733
|
|
Deferred leasing costs
|
|
|
27,788
|
|
|
|
27,788
|
|
Current assets held for disposition
|
|
|
54,419
|
|
|
|
68,521
|
|
Noncurrent assets:
|
|
|
|
|
|
|
|
|
Land
|
|
|
747,389
|
|
|
|
747,389
|
|
Building and improvements
|
|
|
3,145,167
|
|
|
|
3,141,193
|
|
Less: accumulated depreciation
|
|
|
(256,747
|
)
|
|
|
(140,588
|
)
|
Real estate property, net
|
|
|
3,635,809
|
|
|
|
3,747,994
|
|
Deferred rent receivable
|
|
|
70,085
|
|
|
|
13,931
|
|
Deferred leasing costs
|
|
|
101,888
|
|
|
|
129,675
|
|
Noncurrent assets held for disposition
|
|
|
3,807,782
|
|
|
|
3,891,600
|
|
|
|
|
|
|
|
|
|
|
Total assets held for disposition
|
|
$
|
3,862,201
|
|
|
$
|
3,960,121
|
|
|
|
|
|
|
|
|
|
|
Liabilities held for disposition
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Notes payable, net of unamortized debt issuance costs
|
|
$
|
2,722,865
|
|
|
$
|
1,795,902
|
|
Current liabilities held for disposition
|
|
|
2,722,865
|
|
|
|
1,795,902
|
|
Noncurrent liabilities:
|
|
|
|
|
|
|
|
|
Notes payable, net of unamortized debt issuance costs
|
|
|
—
|
|
|
|
917,741
|
|
Noncurrent liabilities held for disposition
|
|
|
—
|
|
|
|
917,741
|
|
|
|
|
|
|
|
|
|
|
Total liabilities held for disposition
|
|
$
|
2,722,865
|
|
|
$
|
2,713,643
|
|
A summary of the results of operations reported as discontinued
operations for the years ended December 31, 2016 and 2015:
|
|
2016
|
|
2015
|
|
|
|
|
|
Net revenues
|
|
$
|
697,997
|
|
|
$
|
625,864
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Property expenses
|
|
|
121,434
|
|
|
|
123,589
|
|
Depreciation expense
|
|
|
116,159
|
|
|
|
102,415
|
|
Total operating expenses
|
|
|
237,593
|
|
|
|
226,004
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
460,404
|
|
|
|
399,860
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net - related party
|
|
|
(272,500
|
)
|
|
|
(241,055
|
)
|
Interest expense, net
|
|
|
(9,222
|
)
|
|
|
(13,210
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
178,682
|
|
|
|
145,595
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
|
$
|
178,682
|
|
|
$
|
145,595
|
|
A summary of the operating and investing cash flows of discontinued
operations for the years ended December 31, 2016 and 2015:
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Income from discontinued
operations, net of tax
|
|
$
|
178,682
|
|
|
$
|
145,595
|
|
Adjustments to reconcile income
from discontinued operations to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
116,159
|
|
|
|
102,415
|
|
Deferred rental income
|
|
|
(42,053
|
)
|
|
|
(47,728
|
)
|
Amortization of deferred leasing
and debt costs
|
|
|
37,009
|
|
|
|
40,782
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(30,187
|
)
|
|
|
—
|
|
Deferred leasing costs
|
|
|
—
|
|
|
|
17,511
|
|
Prepaid and other assets
|
|
|
(769
|
)
|
|
|
53,351
|
|
Security deposits
|
|
|
(25,035
|
)
|
|
|
(6,842
|
)
|
Accounts payable
and accrued liabilities
|
|
|
13,432
|
|
|
|
(91,259
|
)
|
Net Cash
Provided by Operating Activities
|
|
|
247,238
|
|
|
|
213,825
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition
of real estate property and building improvements
|
|
|
(3,974
|
)
|
|
|
(895,143
|
)
|
Net Cash
Used in Investing Activities
|
|
$
|
(3,974
|
)
|
|
$
|
(895,143
|
)
|
Note
4
—
Going Concern
The Company’s financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal
course of business. In November 2016, the Company announced its plan to divest their real estate properties and associated business.
During the year ended December 31, 2016, the Company generated a loss
from continuing operations of $84,133 and used $82,859 of
cash for operating activities. Subsequent to the divestiture of its real estate business in January 2017, the Company does not
expect to generate revenues for the next six to nine months. These factors, among others, raise substantial doubt about the Company’s
ability to continue as a going concern.
The Company is developing mobile and computer based applications
focused on providing cannabis for medical use content and educational materials to licensed medical professionals, in addition
to matching patients with medical professionals who are familiar with the therapeutic effects and indications of cannabinoids and
making social connections by and between cannabis users.
Our goal is to develop a “freemium” based business
model, where we offer our services for free in an effort to build and develop a user-base. We expect to generate revenues in the
future through advertising and by marketing premium products and services to our growing user-base.
Although we can provide no assurances, we believe our cash on
hand will provide sufficient liquidity and capital resources to fund our business for the next twelve months.
In the event the Company experiences liquidity and capital resource
constraints because of unanticipated operating losses, we may need to raise additional capital in the form of equity and/or debt
financing. If such additional capital is not available on terms acceptable to us or at all, then we may need to curtail our operations
and/or take additional measures to conserve and manage our liquidity and capital resources, any of which would have a material
adverse effect on our financial position, results of operations, and our ability to continue in existence. These financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Note 5 — Investment in Real Estate Loan
In May 2016, the Company invested $150,000 in a $1,750,000 promissory
note secured by the assignment of a mortgage on real estate property located in Miami, Florida. The mortgage was held by Chemtov
Mortgage Group (“CMG”), an entity wholly-owned by the Company’s co-CEO, Shawn Chemtov. The Company did not incur
any loan origination fees or any other costs associated with the mortgage investment.
The promissory note paid interest at 12% per annum and provided
for cash interest payments on a monthly basis, commencing on July 1, 2016. The outstanding principal amount and any unpaid interest
were due on May 19, 2017. The promissory note contained a prepayment charge equal to six months of interest on the prepaid amount
less interest paid to the date of such prepayment.
In September 2016, the promissory note was repaid in full, including
$3,600 of additional interest as a result of the prepayment. During the year ended December 31, 2016, the Company recorded $9,039
of revenue generated by interest income from the $150,000 real estate loan.
Note
6
—
Real Estate Property Held for Disposition
5353 Joliet Street
In June 2014, through its wholly-owned subsidiary, 5353 Joliet
LLC, the Company acquired an owner-occupied 22,144 square feet industrial building situated on 1.4 acres of land in Denver, Colorado
for $2,214,000. The acquisition was funded with proceeds from the issuance of a secured promissory note in the amount of $1,800,000
and $414,000 of cash on-hand. The promissory note is held by CMG, an entity wholly-owned by the Company’s co-CEO, Shawn Chemtov.
CMG has assigned all ownership and security interest granted to it pursuant to the promissory note to 5353 Mortgage Loan, LLC,
a single purpose entity created solely for the purpose of this transaction. CMG invested $100,000 of the $1,800,000 of funds used
to finance the purchase of the promissory note. CMG acts as the loan servicing entity for the promissory note, administering the
note, processing payments from the Company, and transferring all payments to 5353 Mortgage Loan, LLC. CMG charges no administration
fees for servicing the promissory note.
The promissory note bears interest at 10% per annum, provides
for cash interest payments on a monthly basis, matured on June 1, 2016. The Company is currently in the process of refinancing
or extending the due date of the promissory note. In the interim, the Company continues paying the monthly interest payments. The
Company has guaranteed the promissory note and has pledged its ownership interest in 5353 Joliet LLC, and as such its fee-simple
ownership interest in the property as security for the promissory note.
For the years ended December 31, 2016 and 2015, the Company
recorded $180,000 and $180,000, respectively, of interest expense related to the promissory note.
Effective December 1, 2014, the Company entered in a seven-year
lease agreement for the property. Insurance and real property taxes shall be paid by the Company and, subsequently, charged to
the lessee as additional rent based on the actual expenses incurred - see Note 7 below for additional lease details.
503 Havana Street
In September 2014, through its wholly-owned subsidiary, MJ Havana
LLC, the Company acquired an owner-occupied 1,250 square foot building situated on 23,625 square feet of land in Aurora, Colorado
for $756,000, exclusive of closing costs. The acquisition was funded with cash on-hand. The property is zoned B-2 and has been
approved by the city of Aurora as a retail dispensary for recreational marijuana.
Prior to closing on the property acquisition, the Company had
pre-negotiated a 10-year lease agreement with a third-party, a licensed marijuana dispensary company serving both medical and adult
(21+) customers in Colorado. Once the closing of the property was completed with the seller, the pre-negotiated lease was executed
in September 2014 with the third-party. Pursuant to the terms of the lease agreement, the Company agreed to contribute $150,000
to improvements to the property - see Note 7 below for additional lease details. As of December 31, 2016, the Company had paid
$150,000 towards the tenant’s building improvements.
1126 South Sheridan Boulevard
In May 2015, through its wholly-owned subsidiary, MJ Sheridan
LLC, the Company acquired real estate property located at 1126 South Sheridan Boulevard in Denver, Colorado, for $771,750, exclusive
of closing costs. The Company funded the acquisition through the issuance of a promissory note in the amount of $925,000 to a related
party of which $771,750 was used to purchase the property. The balance of the funds will be used by the Company as working capital.
The acquired property is 17,729 square feet with a 3,828 square foot one story free-standing building. The property is zoned B-2
and has been approved by the city of Denver as a retail dispensary for recreational marijuana.
The promissory note is held by CMG, an entity wholly-owned by
the Company’s co-CEO, Shawn Chemtov. CMG has assigned all ownership and security interest granted to it pursuant to the promissory
note to a single purpose entity created solely for the purpose of this transaction. CMG acts as the loan servicing entity for the
promissory note, administering the note and processing payments from the Company. CMG charges no administration fees for servicing
the promissory note.
The promissory note bears interest at 10% per annum, provides
for cash interest payments on a monthly basis, matures on June 1, 2017. The promissory note is collateralized with the Company’s
ownership interest in the newly acquired property and its previously acquired property located at 503 Havana Street in Aurora,
Colorado. The promissory note does not restrict the Company’s ability to incur future indebtedness. For the years ended December
31, 2016 and 2015, the Company recorded $92,500 and $61,054, respectively, of interest expense related to the promissory note.
Prior to closing on the property acquisition, the Company had
pre-negotiated a 10-year lease agreement with a third-party, a licensed marijuana dispensary company serving both medical and adult
(21+) customers in Colorado. Once the closing of the property was completed with the seller, the pre-negotiated lease was executed
in May 2015 with the third-party - see Note 5 below for additional lease details.
A summary of real estate property held for disposition
at December 31, 2016 and 2015, is as follows:
|
|
Estimated
|
|
|
|
|
|
|
|
|
Life
|
|
2016
|
|
2015
|
Buildings
|
|
|
30 years
|
|
|
$
|
2,995,167
|
|
|
$
|
2,995,167
|
|
Improvements
|
|
|
9-10 years
|
|
|
|
150,000
|
|
|
|
146,026
|
|
Land
|
|
|
Not depreciated
|
|
|
|
747,389
|
|
|
|
747,389
|
|
Total real estate property
|
|
|
|
|
|
|
3,892,556
|
|
|
|
3,888,582
|
|
Less: Accumulated depreciation
|
|
|
|
|
|
|
(256,747
|
)
|
|
|
(140,588
|
)
|
Real estate property, net
|
|
|
|
|
|
$
|
3,635,809
|
|
|
$
|
3,747,994
|
|
Note
7
—
Operating Leases Held for Disposition
The Company generated revenues by leasing its acquired real
estate properties through operating leasing arrangements. A summary of revenues generated from our rental properties, which have
been reclassified as discontinued operations for the years ended December 31, 2016 and 2015, is as follows:
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
|
|
|
Rental payments
|
|
$
|
575,968
|
|
|
$
|
520,913
|
|
Reimbursed operating expenses
|
|
|
79,976
|
|
|
|
57,223
|
|
Deferred rental income
|
|
|
42,053
|
|
|
|
47,728
|
|
Total revenues from rental properties
|
|
$
|
697,997
|
|
|
$
|
625,864
|
|
503 Havana Street
In September 2014, the Company entered into a non-cancelable
operating lease agreement with a marijuana dispensary (the “Lessee”) to move into the Company’s acquired property located
at 503 Havana Street in Aurora, Colorado. The lease agreement is for a term of ten years and an initial monthly rent obligation
of $11,250, subject to annual increases of 3% per year. Insurance and real property taxes shall be paid by the Company and, subsequently,
charged to the Lessee as additional rent based on the actual expenses incurred. Pursuant to the terms of the lease agreement, the
Company agreed to contribute $150,000 to improvements to the property.
Upon the expiration of the term of ten years, the Lessee has
the option to renew the lease agreement for one additional ten-year term, on the same terms as provided in the lease agreement.
During the third year of the lease agreement, the Lessee may exercise an option to purchase the Property.
5353 Joliet Street
In September 2014, the Company entered into a lease agreement
for its property and warehouse building located at 5353 Joliet Street in Denver, Colorado. The lease agreement is for a term of
seven years and a monthly rent obligation of $25,835, subject to annual increases of 2% per year. Insurance and real property taxes
shall be paid by the Company and, subsequently, charged to the lessee as additional rent based on the actual expenses incurred.
The lease was contingent upon the lessee, obtaining city and
state licenses and permits for its intended operations at the premises, within the dates provided in the lease agreement. The contingencies
were met by the lessee, and the lease agreement became effective December 1, 2014.
Upon the expiration of the seven-year term, the lessee has the
option to renew the lease for two separate five-year terms, subject to rent reviews and adjustments, as set out in the lease agreement.
1126 South Sheridan Boulevard
In May 2015, the Company entered into a lease agreement for
its acquired property located at 1126 South Sheridan Boulevard in Denver, Colorado. The lease agreement is for a term of ten years
and a monthly rent obligation of $10,945, subject to annual increases of 3% per year. Insurance and real property taxes shall be
paid by the Company and, subsequently, charged to the Lessee as additional rent based on the actual expenses incurred.
Upon the expiration of the term of ten years, the Lessee has
the option to renew the lease agreement for one additional ten-year term, on the same terms as provided in the lease agreement.
During the third year of the lease agreement, the Lessee may exercise an option to purchase the Property.
Future minimum rental payments, excluding the reimbursement
of specified operating expenses, for non-cancelable operating lease agreements are as follows as of December 31, 2016:
2017
|
|
590,069
|
|
2018
|
|
604,530
|
|
2019
|
|
619,359
|
|
2020
|
|
634,568
|
|
2021
|
|
532,046
|
|
Thereafter
|
|
957,816
|
|
Total minimal rental payments
|
$
|
3,938,388
|
|
Note
8
—
Related Party Transactions
During the years ended December 31, 2016 and 2015, the Company
paid $272,500 and $233,346, respectively, for interest due pursuant to $2,725,000 of promissory notes held by CMG, wholly-owned
by the Company’s co-CEO and shareholder, Shawn Chemtov - see Note 6 above for additional details regarding promissory notes held
by related party.
During the year ended December 31, 2016, the Company received
interest income of $9,039 from a $150,000 investment in a $1,750,000 promissory note secured by the assignment of a mortgage on
real estate property located in Miami, Florida. The mortgage was held by Chemtov Mortgage Group (“CMG”), an entity
wholly-owned by the Company’s co-CEO, Shawn Chemtov. The $150,000 investment was repaid in September 2016 - see Note 5 above
for additional details regarding the $150,000 investment.
Note
9
—
Stock Based Compensation
Warrants
A summary of warrants issued, exercised and expired during the
years ended December 31, 2015 and 2016, is as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
|
Avg.
|
|
|
|
|
|
Exercise
|
Warrants:
|
|
Shares
|
|
|
Price
|
Balance at January 1, 2015
|
|
|
166,665
|
|
|
$
|
5.88
|
Issued
|
|
|
—
|
|
|
|
—
|
Exercised
|
|
|
—
|
|
|
|
—
|
Expired
|
|
|
—
|
|
|
|
—
|
Balance at December 31, 2015
|
|
|
166,665
|
|
|
$
|
5.88
|
Issued
|
|
|
—
|
|
|
|
—
|
Exercised
|
|
|
—
|
|
|
|
—
|
Expired
|
|
|
—
|
|
|
|
—
|
Balance at December 31, 2016
|
|
|
166,665
|
|
|
$
|
5.88
|
Common Stock
During the year ended December 31, 2015, the Company issued
149,417 shares of common stock, respectively, for consulting services and recorded $139,134 of stock-based compensation expense
for these consulting services, which has been classified as General and administrative expenses. The stock-based compensation expense
was calculated based on the grant date fair value of the common stock shares issued in exchange for the consulting services.
Note
10
—
Income Taxes
The Company did not incur any federal or state income tax expense
or benefit for the years ended December 31, 2016 and 2015.
The provision for income taxes differs from the amounts which
would result from applying the federal statutory rate of 34% to the Company’s loss before income taxes as follows:
|
|
For the years
ended December 31,
|
|
|
2016
|
|
|
2015
|
Computed “expected” income tax benefit
|
|
$
|
32,147
|
|
|
$
|
(38,006)
|
State income tax benefit, net of federal benefit
|
|
|
2,867
|
|
|
|
(5,773)
|
Change in valuation allowance
|
|
|
(35,047)
|
|
|
|
70,007
|
Nondeductible expenses
|
|
|
33
|
|
|
|
122
|
True-up of deferred tax asset for stock compensation
|
|
|
—
|
|
|
|
(26,350)
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
Temporary differences that give rise to the components of deferred
tax assets and liabilities are as follows:
|
|
As of December 31,
|
|
|
2016
|
|
2015
|
Deferred tax assets:
|
|
|
|
|
|
|
Deferred expenses
|
|
$
|
147,648
|
|
$
|
174,384
|
Net operating loss carry-forwards
|
|
|
225,472
|
|
|
253,278
|
Accrued expenses
|
|
|
5,531
|
|
|
—
|
Property and equipment
|
|
|
27,740
|
|
|
14,492
|
Advance payment
|
|
|
9,319
|
|
|
8,603
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
415,710
|
|
|
450,757
|
Less: Valuation allowance
|
|
|
(415,710)
|
|
|
(450,757)
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
—
|
|
$
|
—
|
As of December 31, 2016, the Company had net operating losses
of approximately $608,000 for federal and state income tax purposes that can be carried forward for up to twenty years and deducted
against future federal taxable income. The net operating loss carryforwards expire in various years through 2035. All of the federal
and state net operating losses incurred prior to 2014 are subject to 100 percent limitation under the provisions of Internal Revenue
Code section 382 due to an ownership change and the continuity of business requirement.
As of December 31, 2016 and 2015, management determined a valuation
allowance against the net deferred tax assets of $415,710 and $450,757, respectively. In assessing the ability to realize a portion
of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities and projected future taxable income in making the assessment.
The Company files federal and state income tax returns. These
returns remain subject to examination by taxing authorities for all years after December 31, 2012.
Note 11 — Basic and Diluted Earnings (Loss) per Common
Share
Basic earnings (loss) per share is computed by dividing the
net income or net loss available to common shareholders by the weighted average number of common shares outstanding for the period.
Diluted earnings (loss) per share is calculated using the treasury stock method and reflects the potential dilution that could
occur if warrants were exercised and were not anti-dilutive.
For the years ended December 31, 2016 and 2015, basic and diluted
earnings (loss) per common share were the same since there were no potentially dilutive shares outstanding during the respective
periods. The outstanding warrants as of December 31, 2016 and 2015, to purchase 166,665 shares of common stock were not included
in the calculations of diluted income per share because the impact would have been anti-dilutive for each of the periods presented.
Note 12 — Subsequent Events
On January 10, 2017, the Company accepted for exchange 1,800,000
shares of the Company’s common stock in exchange for 1,800,000 shares of MJRE’s common units, representing membership interests
in MJRE. Effective February 1, 2017, the Company
transferred its ownership interests in the real estate properties and its subsidiaries,
through which the Company holds ownership of the real estate properties, to MJRE. MJRE will also assume the senior notes and any
and all obligations associated with the real estate properties and business, effective February 1, 2017.
On February 1, 2017, the 1,800,000 shares of the Company’s common
stock acquired in the Exchange Offer will be recorded as an acquisition of treasury stock at a cost equal to the market value of
the shares of the Company’s common stock accepted in the exchange offer. Any difference between the net book value of the assets
and liabilities exchanged and the market value of the shares of the Company’s common stock acquired at that date will be recorded
as additional paid-in capital due to the common controlling interests between the two entities involved with the Exchange Offer.
The historical results of the disposed assets and liabilities will be shown in the Company’s financial statements as discontinued
operations for periods presented before the exchange. In subsequent periods, the Company’s financial statements will no longer
reflect the assets, liabilities, results of operations or cash flows attributable to the disposed assets and liabilities.
MJ Holdings, Inc.
Schedule III - Real Estate and Accumulated
Depreciation
December 31, 2016
As of December 31, 2016, the following real estate properties
were held for disposition - see Note 3— Discontinued Operations in the accompanying notes to the financial statements:
|
|
|
|
Initial
Cost
|
|
|
|
Total
Cost
|
|
|
|
|
|
|
|
|
|
Life
on
Which
Depreciation
in Latest
Income
Statement is
Computed
|
Description / Location
of Property
|
|
Encumbrances
|
|
Land
|
|
Buildings &
Improvements
|
|
Improvement
Costs
Capitalized
Subsequent to
Acquisition
|
|
Land
|
|
Buildings &
Improvements
|
|
Total
|
|
Accumulated
Depreciation
|
|
Net
Real
Estate
|
|
Year of
Construction
|
|
Date
Acquired
|
|
5353 Joliet Street
Industrial Building
Denver, Colorado
|
|
$
|
1,800,000
|
|
$
|
324,912
|
|
$
|
1,889,088
|
|
$
|
—
|
|
$
|
324,912
|
|
$
|
1,889,088
|
|
$
|
2,214,000
|
|
$
|
159,348
|
|
$
|
2,054,652
|
|
1980
|
|
|
6/19/2014
|
|
30 yrs.
(1)
|
503 Havana Street
Retail Store
Aurora, Colorado
|
|
|
—
|
|
|
226,339
|
|
|
530,467
|
|
|
150,000
|
|
|
226,339
|
|
|
680,467
|
|
|
906,806
|
|
|
65,575
|
|
|
841,231
|
|
1967
|
|
|
9/24/2014
|
|
30 yrs.
(1)
9 yrs.
(2)
|
1126 S Sheridan Blvd
Retail Store
Denver, Colorado
|
|
|
925,000
|
|
|
196,138
|
|
|
575,612
|
|
|
—
|
|
|
196,138
|
|
|
575,612
|
|
|
771,750
|
|
|
31,824
|
|
|
739,926
|
|
1973
|
|
|
5/4/2015
|
|
30 yrs.
(1)
|
|
|
$
|
2,725,000
|
|
$
|
747,389
|
|
$
|
2,995,167
|
|
$
|
150,000
|
|
$
|
747,389
|
|
$
|
3,145,167
|
|
$
|
3,892,556
|
|
$
|
256,747
|
|
$
|
3,635,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Estimated useful life for buildings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Estimated useful life for building improvements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the changes in the balance of real estate
held for disposition during the years ended December 31, 2016 and 2015:
|
|
2016
|
|
|
2015
|
|
Balance at beginning of period
|
|
$
|
3,888,582
|
|
|
$
|
2,993,439
|
|
Additions:
|
|
|
|
|
|
|
|
|
Acquisitions during period
|
|
|
—
|
|
|
|
771,750
|
|
Improvements
|
|
|
3,974
|
|
|
|
123,393
|
|
Deductions:
|
|
|
|
|
|
|
|
|
Dispositions during period
|
|
|
—
|
|
|
|
—
|
|
Balance at end of period
|
|
$
|
3,892,556
|
|
|
$
|
3,888,582
|
|
The following table reconciles the changes in the balance of
accumulated depreciation during the years ended December 31, 2016 and 2015:
|
|
2016
|
|
|
2015
|
|
Balance at beginning of period
|
|
$
|
140,588
|
|
|
$
|
38,173
|
|
Depreciation expense during period
|
|
|
116,159
|
|
|
|
102,415
|
|
Dispositions during period
|
|
|
—
|
|
|
|
—
|
|
Balance at end of period
|
|
$
|
256,747
|
|
|
$
|
140,588
|
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Miami, Florida this 30th day of March 2016.
|
MJ HOLDINGS, INC.
|
|
|
|
|
By:
|
/s/ Shawn Chemtov
|
|
|
Shawn Chemtov
|
|
|
co-Chief Executive Officer
|
|
|
|
|
By:
|
/s/ Adam Laufer
|
|
|
Adam Laufer
|
|
|
co-Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated:
Name
|
|
Title
|
Date
|
/s/Shawn Chemtov
|
|
|
March 30, 2017
|
Shawn Chemtov
|
|
Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial Officer)
|
|
|
|
|
|
/s/Adam Laufer
|
|
|
March 30, 2017
|
Adam Laufer
|
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
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