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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

COMMISSION FILE NUMBER 000-55900

 

 

MJ HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

nevada   20-8235905

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

5730 Sky Pointe Dr., Suite 102, Las Vegas, NV 89130

(Address of principal executive offices) (Zip Code)

 

(702) 879-4440

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered
Common Stock   MJNE   OTC “PINK” Marketplace

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
    Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of August 1, 2023, there were 58,272,167 shares of our Common Stock, par value $0.001 per share, outstanding.

 

 

 

   

 

 

MJ HOLDINGS, INC.

FORM 10-Q

FOR THE SIX MONTHS ENDED JUNE 30, 2023

 

INDEX

 

   PAGE
PART I - FINANCIAL INFORMATION   
    
Item 1. Consolidated Financial Statements (Unaudited)   
Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022  1
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited)  2
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2023 and 2022 (Unaudited)  3
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)  4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  22
Item 3. Quantitative and Qualitative Disclosure About Market Risk  31
Item 4. Controls and Procedures  32
    
PART II – OTHER INFORMATION   
    
Item 1. Legal Proceedings  33
Item 1A. Risk Factors  34
Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities  34
Item 3. Defaults Upon Senior Securities  34
Item 4. Mine Safety Disclosures  34
Item 5. Other Information  34
Item 6. Exhibits  35
EXHIBIT INDEX  35
    
SIGNATURES  36

 

 i 

 

 

USE OF MARKET AND INDUSTRY DATA

 

This Quarterly Report on Form 10-Q includes market and industry data that we have obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience and participation in these industries. While our management believes the third-party sources referred to in this Quarterly Report on Form 10-Q are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this Quarterly Report on Form 10-Q or ascertained the underlying economic assumptions relied upon by such sources. Furthermore, internally prepared and third-party market prospective information, in particular, are estimates only and there will usually be differences between the prospective and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Also, references in this Quarterly Report on Form 10-Q to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this Quarterly Report on Form 10-Q.

 

Solely for convenience, we refer to trademarks in this Quarterly Report on Form 10-Q without the ® or the ™ or symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our own trademarks. Other service marks, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, if any, are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.

 

OTHER PERTINENT INFORMATION

 

Unless the context otherwise indicates, when used in this Quarterly Report on Form 10-Q, the terms “MJ Holdings” “we,” “us,” “our,” the “Company” and similar terms refer to MJ Holdings, Inc., a Nevada corporation, and all of our subsidiaries and affiliates.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q for the period ended June 30, 2023 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events including, without limitation, the terms, timing and closing of our proposed acquisitions or our future financial performance. We have attempted to identify forward-looking statements by using terminology such as “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Quarterly Report on Form 10-Q is filed, and we do not intend to update any of the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to confirm these statements to actual results, unless required by law.

 

 ii 

 

 

You should not place undue reliance on forward looking statements. The cautionary statements set forth in this Quarterly Report on Form 10-Q identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

 

  ● Our ability to effectively execute our business plans including transitioning from being focused on end-to-end consumer product innovation, development, and commercialization to being focused on digital media, advertising and content technologies innovation, development, and commercialization;
  ● Our ability to manage our expansion, growth and operating expenses;
  ● Our ability to protect our brands, reputation and intellectual property rights;
  ● Our ability to obtain adequate financing to support our development plans;
  ● Our ability to repay our debts;
  ● Our ability to rely on third-party suppliers, content contributors, developers, and other business partners;
  ● Our ability to evaluate and measure our business, prospects and performance metrics;
  ● Our ability to compete and succeed in a highly competitive and evolving industry;
  ● Our ability to respond and adapt to changes in technology and consumer behavior;
  ● Our dependence on information technology, and being subject to potential cyberattacks, security problems, network disruptions, and other incidents;
  ● Our ability to comply with complex and evolving laws and regulations including those relating to privacy, data use and data protection, content, competition, safety and consumer protection, e-commerce, digital assets and other matters, many of which are subject to change and uncertain interpretation;
  ● Our ability to enhance disclosure and financial reporting controls and procedures and remedy the existing weakness;
  ● Risks in connection with completed or potential acquisitions, dispositions and other strategic growth opportunities and initiatives;
  ● Taxes;
  ● The stability of the governments and political and business conditions in certain foreign countries in which we or certain of our business partners may operate now or in the future;
  ● Costs and results of potential litigation;
  ● Changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies; and
  ● The use of social or digital media to disseminate false, misleading and/or unreliable or inaccurate information regarding our products, services or the industry in which we operate.

 

This Quarterly Report on Form 10-Q also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Quarterly Report on Form 10-Q and, accordingly, we cannot guarantee their accuracy or completeness, though we do generally believe the data to be reliable. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including, but not limited to, the possibility that we may fail to preserve our expertise in consumer product development; that existing and potential distribution partners may opt to work with, or favor the products of, competitors if our competitors offer more favorable products or pricing terms; that we may be unable to maintain or grow sources of revenue; that we may be unable maintain profitability; that we may be unable to attract and retain key personnel; or that we may not be able to effectively manage, or to increase, our relationships with customers; that we may have unexpected increases in costs and expenses. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

 

 iii 

 

 

PART I

 

INDEX TO FINANCIAL STATEMENTS

 

  

Page

Number

    
Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022  1
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited)  2
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2023 and 2022 (Unaudited)  3
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)  4
Notes to Condensed Consolidated Financial Statements  5

 

 iv 

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30, 2023   December 31, 2022 
   (Unaudited)     
ASSETS          
Current assets          
Cash  $248,557   $1,340,509 
Accounts receivable, net   63,458    10,149 
Loan receivable - related party   274,197    212,469 
Prepaid expenses   -    62,500 
Total current assets   586,212    1,625,627 
           
Property and equipment, net   2,449,801    2,494,953 
Deposits   1,250,000    1,010,000 
Total non-current assets   3,699,801    3,504,953 
           
Total assets  $4,286,013   $5,130,580 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
Current liabilities          
Accounts payable and accrued expenses  $842,347   $1,312,394 
Accrued interest payable, related party   4,336    - 
Contract liabilities   220,000    1,360,000 
Contingent liability   51,361    51,361 
Income taxes payable   277,000    277,000 
Note payable, currently in default   96,393    - 
Current portion of long-term notes payable   121,076    985,589 
Note payable, related party   306,083    - 
Current portion of operating lease obligation   171,088    171,088 
Total current liabilities   2,089,684    4,157,432 
           
Non-current liabilities          
Long-term notes payable   

855,661

    - 
Operating lease obligation, net of current portion   598,596    598,596 
           
Total non-current liabilities   1,454,257    598,596 
           
Total liabilities   3,543,941    4,756,028 
           
Commitments and contingencies (Note 10)   -    - 
           
Stockholders’ equity (deficit)          
Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares issued; Series A convertible Preferred stock $1,000 stated value, 2,500 authorized, 0 shares issued and outstanding   -    - 
Common stock, $0.001 par value, 95,000,000 shares authorized, 78,591,667 and 78,591,667 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively   78,590    78,590 
Additional paid-in capital   22,261,217    22,261,217 
Common stock issuable   84    84 
Accumulated deficit   (21,485,350)   (21,852,870)
Total stockholders’ equity (deficit) attributable to MJ Holdings, Inc.   854,541    487,021 
Noncontrolling interests   (112,469)   (112,469)
Total shareholders’ equity   742,072    374,552 
Total liabilities and stockholders’ equity  $4,286,013   $5,130,580 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 1 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2023   2022   2023   2022 
   For the three months ended   For the six months ended 
   June 30,   June 30, 
   2023   2022   2023   2022 
                 
Revenue, net  $119,124   $28,765   $159,879   $60,606 
                     
Operating expenses                    
Direct costs of revenue   3,200    -    3,200    - 
General and administrative   168,029    29,217    641,226    1,294,160 
Depreciation   57,506    87,786    115,012    130,180 
Marketing and selling   2,156    424    5,320    5,306 
Professional fees   305,781    -    376,658    - 
Total operating expenses   536,672    117,427    1,141,416    1,429,646 
                     
Operating loss   (417,548)   (88,662)   (981,537)   (1,369,040)
                     
Other income (expense)                    
Interest expense   (33,534)   (13,714)   (41,372)   (39,742)
Interest income   -    27,203    -    51,183 
Miscellaneous expense   -    (64,447)   -    (64,447)
Miscellaneous income   995,429    22,500    1,025,429    40,000 
Gain on sale of luxury box   -    -    -    44,444 
Gain on debt extinguishment   365,000    -    365,000    - 
Total other income (expense)   1,326,895    (28,458)   1,349,057    31,438 
                     
Net income (loss) before income taxes   909,347    (117,120)   367,520    (1,337,602)
Provision for income taxes   -    -    -    - 
Net income (loss)  $909,347   $(117,120)  $367,520   $(1,337,602)
                     
Loss (gain) attributable to non-controlling interest   -    -    -    - 
                     
Net income (loss) attributable to common stockholders  $909,347   $(117,120)  $367,520   $(1,337,602)
                     
Net income (loss) attributable to common stockholders per share- Basic  $(0.01)  $(0.00)  $(0.01)  $(0.02)
                     
Net income (loss) attributable to common stockholders per share - Diluted  $(0.01)  $(0.00)  $(0.01)  $(0.02)
                     
Weighted average number of shares outstanding:                    
Basic   78,591,667    71,501,667    78,591,667    71,501,667 
Diluted   78,591,667    71,501,667    78,591,667    71,501,667 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 2 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

 

   Shares   Amount   Shares   Amount   Capital   Interest   Deficit   Total 
   For the three months ended June 30, 2023 and 2022 
  

Common Stock

Issuable

   Common Stock  

Additional

paid-in

  

Non

Controlling

   Accumulated     
   Shares   Amount   Shares   Amount   Capital   Interest   Deficit   Total 
                                 
Balances at March 31, 2023   82,554   $84    78,591,667   $78,590   $22,261,217   $(112,469)  $(22,394,697)  $(167,275)
Net income for the three months ended June 30, 2023   -    -    -    -    -    -    909,347    909,347 
Balances at June 30, 2023   82,554   $84    78,591,667   $78,590   $22,261,217   $(112,469)  $(21,485,350)  $742,072 
                                         
Balances at March 31, 2022   82,554   $84    71,501,667   $71,500   $20,286,607   $(112,469)  $(17,693,111)  $2,552,611 
                                         
Net loss for the three months ended June 30, 2022   -    -    -    -    -    -    (117,120)   (117,120)
Balances at June 30, 2022   82,554   $84    71,501,667   $71,500   $20,286,607   $(112,469)  $(17,810,231)  $2,435,491 

 

   For the six months ended June 30, 2023 and 2022 
  

Common Stock

Issuable

   Common Stock  

Additional

paid-in

  

Non

Controlling

   Accumulated     
   Shares   Amount   Shares   Amount   Capital   Interest   Deficit   Total 
                                 
Balances at January 1, 2023   82,554   $84    78,591,667   $78,590   $22,261,217   $(112,469)  $(21,852,870)  $374,552 
Net income for the six months ended June 30, 2023   -    -    -    -    -    -    367,520    367,520 
Balances at June 30, 2023   82,554   $84    78,591,667   $78,590   $22,261,217   $(112,469)  $(21,485,350)  $742,072 
                                         
Balances at January 1, 2022   82,554   $84    71,501,667   $71,500   $20,279,897   $(112,469)  $(16,472,629)  $3,766,383 
                                         
Stock based compensation   -    -    -    -    6,710    -    -    6,710 
Net loss for the six months ended June 30, 2022   -           -    -    -    -    -    (1,337,602)   (1,337,602)
Balances at June 30, 2022   82,554   $84    71,501,667   $71,500   $20,286,607   $(112,469)  $(17,810,231)  $2,435,491 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 3 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   2023   2022 
   For the six months ended
June 30,		 
   2023   2022 
Cash Flows from Operating Activities          
Net income (loss)  $367,520   $(1,337,602)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization of right to use asset   -    - 
Depreciation   115,012    130,180 
Gain on sale of luxury box   -    (44,444)
Stock based compensation   -    6,710 
Gain on extinguishment of debt   (365,000)   - 
Changes in operating assets and liabilities:          
Accounts receivable   (53,309)   (87,553)
Prepaid expenses   62,500    - 
Other current assets   -    (375,000)
Deposits   (240,000)   - 
Accounts payable and accrued liabilities   201,036    167,806 
Accrued interest – related parties   4,336    - 
Contract liabilities   (1,140,000)   - 
Net cash used in operating activities   (1,047,905)   (1,539,903)
           
Cash Flows from Investing Activities          
Purchase of property and equipment   (69,860)   (41,444)
Loan receivable – related party   (61,728)   (72,304)
Net cash used in investing activities   (131,588)   (113,748)
           
Cash Flows from Financing activities          
Proceeds from notes payable   100,000    133,392 
Repayment of notes payable   (12,459)   (350,000)
Net cash provided by (used in) financing activities   87,541    (216,608)
           
Net change in cash   (1,091,952)   (1,870,259)
Cash, beginning of period   1,340,509    4,699,372 
           
Cash, end of period  $248,557   $2,829,113 
           
Supplemental disclosure of cash flow information:          
Interest paid  $-   $39,742 
Income taxes paid  $-   $- 
           
Non-cash investing and financing activities:          
Transfer of accrued compensation to notes payable  $306,083   $- 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 4 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 1 — Description of Business

 

MJ Holdings, Inc. (OTCQB: MJNE) is a highly-diversified cannabis holding company providing cultivation management, asset and infrastructure development – currently concentrated in the Las Vegas market. It is the Company’s intention to grow its business and provide a 360-degree spectrum of infrastructure, including, cannabis cultivation, production of cannabis related products, management services, dispensaries and consulting services. The Company intends to grow its business through joint ventures with existing companies possessing complementary subject matter expertise, acquisition of existing companies and through the development of new opportunities. The Company intends to “prove the concept” profitably in the rapidly expanding Las Vegas market and then use that anticipated success as a template for replicating the concept in other developing states through a combination of strategic partnerships, acquisitions and opening new operations.

 

The Company was incorporated on November 17, 2006, as Securitas EDGAR Filings, Inc. under the laws of the State of Nevada. Prior to the formation of Securitas EDGAR Filings Inc., the business was operated as Xpedient EDGAR Filings, LLC, a Florida Limited Liability Company, formed on October 31, 2005. On November 21, 2005, Xpedient EDGAR Filings LLC amended its Articles of Organization to change its name to Securitas EDGAR Filings, LLC. On January 21, 2009, Securitas EDGAR Filings LLC merged into Securitas EDGAR Filings, Inc., a Nevada corporation. On February 14, 2014, the Company amended and restated its Articles of Incorporation and changed its name to MJ Holdings, Inc.

 

On November 22, 2016, in connection with a plan to divest the Company of its real estate business, the Company submitted to its stockholders an offer to exchange (the “Exchange Offer”) its 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. On January 10, 2017, the Company accepted for exchange 1,800,000 shares of its 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 held 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.

 

MJH Research, Inc. Acquisition

 

On July 8, 2022, MJ Holdings, Inc. (the “Buyer”) entered into a Common Stock Purchase Agreement (the “Agreement”) with MJH Research, Inc. (the “Company”), a Florida corporation, and Sunstate Futures, LLC (the “Seller”), a Florida limited liability company. Under the terms of the Agreement, the Seller agreed to sale all issued and outstanding shares of common stock (100,000 shares) (the “Common Stock”) of the Company to the Buyer. In consideration of the purchase of the shares of Common Stock, the Buyer agreed to issue the Seller seven million (7,000,000) shares of its common stock. The transaction closed on July 11, 2022. Net assets and liabilities of MJH Research, Inc. were approximately $500,000 and consideration on the acquisition date equated to approximately $1,955,000, most of which would be applied to intellectual property related to research of MJH Research, Inc. Please see Note 4 — Acquisition of MJH Research, Inc. for further information.

 

 5 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies

 

Basis of Presentation

 

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2023 and the results of operations, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on May 5, 2023. The Company’s accounting policies are described in the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2022, and updated, as necessary, in this Quarterly Report on Form 10-Q.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, MJH Research, Inc., Icon Management, LLC, Condo Highrise Management, LLC, Prescott Management, LLC, Q Brands, LLC, Farm Road, LLC, Red Earth Holdings, LLC and its majority owned subsidiary, Alternative Hospitality, Inc. Inter-company balances and transactions have been eliminated in consolidation.

 

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 stock-based compensation. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.

 

Cash

 

Cash includes cash on hand and deposits placed with banks or other financial institutions, which are unrestricted as to withdrawal and use and with an original maturity of three months or less. The Company maintains its cash in bank deposit accounts.

 

The Company, at various times throughout the year, had cash in financial institutions in excess of Federally insured limits. At June 30, 2023, the Company had $0 in excess. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its credit balances.

 

Fair Value of Financial Instruments

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2023 and December 31, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

 

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market.

 

 6 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

 

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in these situations.

 

Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. The FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

 

Accounts Receivable and Allowance for Doubtful Accounts:

 

Accounts receivable are recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management’s judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable and current economic conditions. The determination of the collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole.

 

   June 30, 2023   December 31, 2022 
Accounts receivable  $63,458   $10,149 
Less allowance   -    - 
Net accounts receivable  $63,458   $10,149 

 

Debt Issuance Costs

 

Costs associated with obtaining, closing, and modifying loans and/or debt instruments are netted against the carrying amount of the debt instrument, and charged to interest expense over the term of the loan.

 

Inventory

 

Inventory is comprised of raw materials, finished goods and work-in-process such as pre-harvested cannabis plants and by-products to be extracted. The costs of growing cannabis, including but not limited to labor, utilities, nutrition and supplies, are capitalized into inventory until the time of harvest. All direct and indirect costs related to inventory are capitalized when incurred, and subsequently classified to cost of goods sold in the Consolidated Statements of Operations. Work-in-process is stated at the lower of cost or net realizable value, determined using the weighted average cost. Raw materials and finished goods inventory are stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. Net realizable value is determined as the estimated selling price in the ordinary course of business less estimated costs to sell. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items and reserves. The Company reviews inventory for obsolete, redundant and slow-moving goods and any such inventory is written down to net realizable value. Packaging and supplies are initially valued at cost. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and any impairment losses. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are expensed as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the consolidated statements of operations.

 

Construction in progress primarily represents the construction or the renovation costs stated at cost less any accumulated impairment loss, which is not depreciated. Costs incurred are capitalized and transferred to property and equipment upon completion, at which time depreciation commences.

 

 7 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Property and equipment are depreciated over their estimated useful lives as follows:

 

Buildings  12 years
Land  Not depreciated
Construction in progress  Not depreciated
Leasehold Improvements  Lessor of lease term or 5 years
Machinery and Equipment  5 years
Furniture and Fixtures  5 years

 

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.

 

Impairment of Long-lived Assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. The Company recorded an impairment of its long-lived assets in the amount of $0 and $0 for the six months ended June 30, 2023 and year ended December 31, 2022, respectively.

 

Contract Balances

 

The Company receives payments for new Cultivation and Sales Agreements (the “Agreements”) upon signing and defers revenue recognition for these payments until certain milestones are met as per the terms of the Agreements. These payments represent contract liabilities and are recorded as such on the balance sheet. As of June 30, 2023 and December 31, 2022, the Company’s contract liabilities were as follows:

 

   June 30, 2023   December 31, 2022 
MKC Development Group, LLC (i)  $-   $620,000 
Natural Green, LLC (ii)   -    520,000 
Green Grow Investments Corporation   50,000    50,000 
RK Grow, LLC   170,000    170,000 
Property and equipment, net  $220,000   $1,360,000 

 

  (i) On May 24, 2023 the Company entered into a settlement agreement with MKC Development Group, LLC (“MKC”) that terminated all of their rights, obligations, and responsibilities under the Agreement. As part of the settlement the Company agreed to refund $310,000 to MKC within one year of the date of the settlement agreement therefore the contract liability of $620,000 was written off the books, the refund amount of $310,000 was recorded in accounts payable, and the Company recorded $310,000 as miscellaneous income.
     
  (ii) On June 26, 2023 the Company entered into a termination agreement with Natural Green, LLC which terminated the original Cultivation and Sales Agreement and released each other of any liabilities, claims, or obligations under the Agreement.  As a result, the Company wrote off the $520,000 contract liability and recorded miscellaneous income.

 

Non- Controlling Interest

 

The Company’s non-controlling interest represents the minority shareholder’s ownership interest related to the Company’s subsidiary, Alternative Hospitality, Inc. The Company reports its non-controlling interest in subsidiaries as a separate component of equity in the Consolidated Balance Sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common shareholders on the face of the Consolidated Statements of Operations. The Company’s equity interest in Alternative Hospitality, Inc. is 51% and the non-controlling stockholder’s interest is 49%. This is reflected in the Consolidated Statements of Equity.

 

 8 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Revenue Recognition

 

On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers using the modified retrospective method. There was no impact upon adoption of ASC 606 on our consolidated financial statements. The new revenue standard was applied prospectively in the Company’s consolidated financial statements from January 1, 2018 forward and reported financial information for historical comparable periods will not be revised and will continue to be reported under the accounting standards in effect during those historical periods.

 

Generally, the Company considers all revenues as arising from contracts with customers. Revenue is recognized based on the five-step process outlined in the Accounting Standards Codification (“ASC”) 606:

 

Step 1 – Identify the Contract with the Customer – A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and it is probably that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

 

Step 2 – Identify Performance Obligations in the Contract – Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation.

 

Step 3 – Determine the Transaction Price – When (or as) a performance obligation is satisfied, the Company shall recognize as revenue the amount of the transaction price that is allocated to the performance obligation. The contract terms are used to determine the transaction price. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract would not occur.

 

Step 4 – Allocate the Transaction Price – After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price (SSP) at contract inception.

 

Step 5 – Satisfaction of the Performance Obligations (and Recognize Revenue) – Revenue is recognized when (or as) goods or services are transferred to a customer. The Company satisfies each of its performance obligations by transferring control of the promised good or service underlying that performance obligation to the customer. Control is the ability to direct the use of and obtain substantially all of the remaining benefits from an asset. It includes the ability to prevent other entities from directing the use of and obtaining the benefits from an asset. Indicators that control has passed to the customer include: a present obligation to pay; physical possession of the asset; legal title; risks and rewards of ownership; and acceptance of the asset(s). Performance obligations can be satisfied at a point in time or overtime.

 

 9 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

For the six months ended June 30, 2023, the majority of the Company’s revenue was derived from its Management Agreement with MJ Distributing, Inc. with the remainder from rental revenue from its Tiny Homes community. Rental revenue for operating leases is recognized on a straight-line basis over the term of the lease. Rental revenue recognition commences when the leased space is available for use by the lessee.

 

For the six months ended June 30, 2022, all of the Company’s revenue was derived from rental revenue from its Tiny Homes community.

 

   2023   2022 
   For the six months ended 
   June 30, 
   2023   2022 
Revenues:        
Rental income (i)  $41,263   $60,606 
Management income (ii)   118,616    - 
Total  $159,879   $60,606 

 

  (i) The rental income is from the Company’s THC Park.
     
  (ii) On February 5, 2021, the Company entered into a Management Agreement of Cannabis Production and Cultivation (the “Agreement”) with MJ Distributing, Inc. (the “Owner”) (together, the “Parties”). Under the terms of the Agreement, the Parties desire that the Company manage and operate the daily business of the Owner located in Pahrump, Nye County, Nevada. In consideration of the services to be performed by the Company, the Company and the Owner shall split the Net Profits of the business on a 50:50 basis. The Agreement was approved by the Cannabis Compliance Board at its July 26, 2022 meeting.

 

Stock-Based Compensation

 

The Company’s share-based payment awards principally consist of grants of common stock. In accordance with the applicable accounting guidance, stock-based payment awards are classified as either equity or liabilities. For equity-classified awards, the Company measures compensation cost based on the grant date fair value and recognizes compensation expense in the consolidated statements of operations over the requisite service or performance period the award is expected to vest. The fair value of liability-classified awards is at each reporting date through the settlement date. Change in fair value during the requisite service period will be remeasured as compensation cost over that period.

 

The Company utilizes its historical stock price to determine the volatility of any stock-based compensation.

 

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 term equal to the expected term of the stock-based award.

 

For stock-based financial instruments issued to parties other than employees, the Company uses 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 its best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and it uses different assumptions, its stock-based compensation expense could be materially different in the future.

 

 10 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Operating Leases

 

The Company adopted ASC Topic 842, Leases, on January 1, 2019. The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.

 

The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.

 

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 carry forwards. 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.

 

Reclassifications

 

Certain amounts in the condensed consolidated financial statements for the prior year have been reclassified to conform with the current year presentation.

 

Recent Accounting Pronouncements

 

As of June 30, 2023, there were no recently adopted accounting pronouncements that had a material effect on the Company’s consolidated financial statements.

 

Note 3 — Going Concern

 

The Company has recurring net losses, which have resulted in an accumulated deficit of $21,485,350 as June 30, 2023. The Company had negative cash flows from operations of $1,047,905 for the six months ended June 30, 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise capital, and generate revenues. The Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The Company’s current capital resources include cash. Historically, the Company has financed its operations principally through equity and debt financing.

 

 11 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 4 — Acquisition of MJH Research, Inc.

 

On July 8, 2022, MJ Holdings, Inc. (the “Buyer”) entered into a Common Stock Purchase Agreement (the “Agreement”) with MJH Research, Inc. (the “Company”), a Florida corporation, and Sunstate Futures, LLC (the “Seller”), a Florida limited liability company. Under the terms of the Agreement, the Seller agreed to sale all issued and outstanding shares of common stock (100,000 shares) (the “Common Stock”) of the Company to the Buyer. In consideration of the purchase of the shares of Common Stock, the Buyer agreed to issue the Seller seven million (7,000,000) shares of its common stock. The acquisition is a provisional estimate and is being further evaluated. The transaction closed on July 11, 2022.

 

Details regarding the book values and fair values of the net assets acquired are as follows:

 

   Book Value   Fair Value   Difference 
             
Cash  $504,685   $504,685   $       - 
Total  $504,685   $504,685   $- 

 

Goodwill and Intangibles

 

Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Intangible assets other than goodwill are recorded at fair value at the time acquired or at cost, if applicable. Intangible assets that do not have indefinite lives are amortized in line with the pattern in which the economic benefits of the intangible asset are consumed. If the pattern of economic benefit cannot be reliably determined, the intangible assets are amortized on a straight-line basis over the shorter of the legal or estimated life. Goodwill and indefinite-lived intangibles assets are not amortized but are tested for impairment in the fourth quarter using the same dates each year or more frequently if changes in circumstances or the occurrence of events indicate potential impairment.

 

In performing the annual impairment test, the fair value of each indefinite-lived intangible asset is compared to its carrying value and an impairment charge is recorded if the carrying value exceeds the fair value. For goodwill, the Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its’ carrying amount, and whether it is necessary to perform the quantitative goodwill impairment test. The quantitative test is required only if the Company concludes that it is more-likely-than-not that a reporting unit’s fair value is less than its’ carrying amount. For quantitative testing, the Company compares the fair value of each reporting unit with its’ carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

 

Fair values are determined using established business valuation techniques and models developed by the Company, estimates of market participant assumptions of future cash flows, future growth rates and discount rates to value estimated cash flows. Changes in economic and operating conditions, actual growth below the assumed market participant assumptions or an increase in the discount rate could result in an impairment charge in a future period.

 

 12 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 4 — Acquisition of MJH Research, Inc. (continued)

 

Acquisitions

 

Upon acquisition of a business, the Company uses the income, market or cost approach (or a combination thereof) for the valuation as appropriate. The valuation inputs in these models and analyses are based on market participant assumptions. Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability.

 

Fair value estimates are based on a series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Management values property, plant and equipment using the cost approach supported where available by observable market data, which includes consideration of obsolescence. Management values acquired intangible assets using the relief from royalty method or excess earnings method, forms of the income approach supported by observable market data for peer companies. The significant assumptions used to estimate the value of the acquired intangible assets include discount rates and certain assumptions that form the basis of future cash flows (such as revenue growth rates, customer attrition rates, and royalty rates). Acquired inventories are marked to fair value for valuation of the total purchase price. For certain items, the carrying value is determined to be a reasonable approximation of fair value based on information available to the Company.

 Schedule of Assets Acquired

Assets acquired 

As of July 11, 2022

 
     
Cash  $504,685 
Goodwill (i)   1,451,815 
Total purchase price  $1,956,500 

 

(i) Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired.

 

The changes in the carrying amount of goodwill for the period from July 11, 2022 through June 30, 2023 were as follows:

 

      
Balance as of July 11, 2022  $1,451,815 
Additions and adjustments   (1,451,815)
Balance as of June 30, 2023  $- 

 

Note 5 — Property and Equipment

 

Property and equipment at June 30, 2023 and December 31, 2022 consisted of the following:

 

   June 30, 2023   December 31, 2022 
Leasehold Improvements  $264,523   $264,523 
Machinery and Equipment   853,218    386,879 
Building and Land   1,650,000    1,650,000 
Furniture and Fixtures   561,352    561,352 
Construction in progress   -    396,480 
Total property and equipment   3,329,093    3,259,233 
Less: Accumulated depreciation   (879,292)   (764,280)
Property and equipment, net  $2,449,801   $2,494,953 

 

Depreciation expense for the six months ended June 30, 2023 and 2022 was $115,012 and $130,180, respectively.

 

 13 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 6 — Intangible Assets

 

In October 2016, Red Earth, LLC (“Red Earth”), a Nevada limited liability company, entered into an Asset Purchase and Sale Agreement with the owner of a provisional Medical Marijuana Establishment Registration Certificate (the “Provisional Grow License”) issued by the state of Nevada for the cultivation of medical marijuana for $300,000. To initiate the purchase and transfer the Provisional Grow License, the Company paid a $25,000 deposit to the seller in October 2016.

 

The Provisional Grow License remains in a provisional status until the Company has completed the buildout of a cultivation facility and obtained approval from the state of Nevada to begin cultivation in the approved facility. Once approval from the state of Nevada is received, the Company begins the cultivation process.

 

On December 15, 2017, the Company acquired 100% of the outstanding membership interests of Red Earth for 52,732,969 shares of common stock of the Company, par value $0.001 and a Promissory Note in the amount of $900,000. Red Earth became a wholly owned subsidiary (the “Subsidiary”) of the Company.

 

On or about May 7, 2021, the Subsidiary, received an inquiry from the State of Nevada Cannabis Compliance Board (“CCB”) regarding the transfer of ownership of the Subsidiary from its previous owners to the Company. The CCB has determined that the transfer was not formally approved, thus a Category II violation.

 

On July 27, 2021, the Subsidiary entered into a Stipulation and Order for Settlement of Disciplinary Action (the “Stipulation Order”) with the CCB. Under the terms of the Stipulation Order, the Subsidiary has agreed to present to the CCB, by not later than August 31, 2021, a plan pursuant to which the ownership of the Subsidiary will be returned to the original owners. The Parties to the Stipulation Order resolved the matter without the necessity of taking formal action. The Subsidiary agreed to pay a civil penalty of $10,000, which was paid on July 29, 2021.

 

On August 1, 2021, the Company entered into a Memorandum of Understanding and Agreement for Technical Services and Short-Term Funding (the “Agreement”) with Red Earth, LLC (hereinafter, “Red Earth”), an entity controlled by its Chief Cultivation Officer, Paris Balaouras. Under the terms of the Agreement, the Company will provide a short-term loan (the “Loan”) to Red Earth for expenses related to the activation and operation of Red Earth’s cultivation license. The Loan shall bear interest at 12% per annum and increase to 18% upon default. In addition, the Company shall provide Red Earth pre-opening technical services at a cost of $5,000 to $10,000 per month. As of March 31, 2023, the amount due the Company under the short-term loan is $244,197 and the amount of technical services income (other income) recorded for the three months ended March 31, 2023 was $30,000.

 

On August 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of the Subsidiary, Paris Balaouras, entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December 15, 2017, entered into between the Company and the Subsidiary was terminated as of the date of the Termination Agreement resulting in the return of ownership of the Subsidiary to Mr. Balaouras. Neither party shall have any further obligation to one another pursuant to the terms of the Purchase Agreement. Please see Note 14 — Related Party Transactions for further information.

 

On September 2, 2021, the Company received approval of the Termination Agreement from the CCB.

 

Note 7 — Deposits

 

Deposits as of June 30, 2023 and December 31, 2022 consist of the following:

  

   June 30, 2023   December 31, 2022 
MJ Distributing, Inc. (i)  $1,250,000   $1,010,000 
Total  $1,250,000   $1,010,000 

 

  (i) On February 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. In consideration of the sale, transfer, assignment and delivery of the Membership Interests to Purchaser, and the covenants made by Seller under the MIPA3, Purchaser agreed to pay a combination of cash, promissory notes, and stock in the amount of One-Million-Two-Hundred-Fifty Thousand Dollars ($1,250,000.00) in cash and/or promissory notes and 200,000 shares of the Company’s restricted common stock, all of which constitutes the consideration agreed to herein for (the “Purchase Price”), payable as follows: (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against future compensation due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, (v) $200,000 shall be deposited on or before June 12, 2021, and (vi) $250,000 shall be deposited within five (5) business days after the Nevada Cannabis Compliance Board (“CCB”) provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser.

 

 14 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 8 — Notes Payable

 

Note Payable, Currently in Default

 

Notes payable, currently in default as of June 30, 2023 and December 31, 2022 consist of the following:

 

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 6.5% originated April 1, 2019, due on March 31, 2022, originally $250,000  $96,393   $         - 
Total notes payable, currently in default  $96,393   $- 

 

On April 1, 2019, the Company executed a promissory note for $250,000 with John T. Jacobs and Teresa D. Jacobs. The note accrues interest at 6.5% per annum, payable in regular monthly installments of $2,178, due on or before the same day of each month beginning May 1, 2019 until March 31, 2020 at which time a principal reduction of $50,000 was due and the payments were re-amortized (15-year amortization). On or before March 31, 2021, a second principal reduction of $50,000 was due and the payments were re-amortized (15-year amortization). Payments were to continue to be paid until March 31, 2022, at which time the entire sum of principal and accrued interest was due and payable, however no such payment was made, thus the note went into default. As of June 30, 2023, $96,393 principal remains due.

 

Note Payable

 

Notes payable as of June 30, 2023 and December 31, 2022 consist of the following:

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 5.0%, originated January 17, 2019, due on February 1, 2025, originally $750,000 (i)  $876,737   $878,589 
Note payable bearing interest at 6.5% originated April 1, 2019, due on March 31, 2022, originally $250,000 (ii)   -    107,000 
Note payable bearing interest at 15%, originated May 10, 2023, due on May 10, 2024, originally $50,000 (iii)   50,000    - 
Note payable bearing interest at 7%, originated June 30, 2023, due on June 30, 2024, originally $50,000 (iv)   50,000    - 
Total notes payable  $976,737   $985,589 
Less: current portion   (121,076)   (985,589)
Long-term notes payable  $

855,661

   $- 

 

  (i) On January 17, 2019, the Company executed a promissory note for $750,000 with FR Holdings LLC (the “Holder”), a Wyoming limited liability company. The Noted Secured by Deed of Trust (the “Secured Note”) accrues interest at 5.0% per annum, payable in regular monthly installments of $3,125, due on or before the same day of each month beginning February 1, 2019 until January 31, 2022 at which the entire principal and any then accrued interest thereon shall be due and payable. On February 4, 2022, the Company entered into a Note Modification Agreement (the “Agreement”) with the Holder amending the terms of the Secured Note. The Parties agreed that the maturity date of the Secured Note being January 31, 2022, had passed and that the balance of the Secured Note was due (currently Seven-Hundred and Fifty-Thousand Dollars ($750,000), and the parties also agreed that the conditions in the Secured Note requiring the assessment of the additional Five-Hundred Thousand Dollars ($500,000) consulting fee was triggered bringing the total amount owed by the Company under the terms of the Secured Note to One-Million Two-Hundred Fifty-Thousand Dollars ($1,250,000). Under the terms of the Agreement, the Company made a payment in the amount of $357,343 bringing the new principal balance to $900,000. The interest rate is 7% per annum. Future payments shall be calculated on a 20-year amortization with a balloon payment in three years. The first monthly payment of $6,978 was made on March 25, 2022 with the final balloon payment due on February 1, 2025. As of March 31, 2023, $876,737 principal remains due.
     
  (ii) On April 1, 2019, the Company executed a promissory note for $250,000 with John T. Jacobs and Teresa D. Jacobs that became due in full on March 31, 2022. As the note was not paid in full on that date the note went into default, see Note Payable, Currently in Default section above.
     
  (iii) On May 10, 2023, the Company executed a promissory note for $50,000 with Fevos A LLC for a duration of 12 months. The note accrues interest at 15% per annum calculated on a simple basis and payable in full at the end of the loan term.
     
  (iv) On June 30, 2023, the Company executed a promissory note for $50,000 with Fort Freedom, LLC for a duration of 12 months. The note accrues interest at 7% per annum, payable in monthly interest payments due the 1st day of each month for the duration of the note. The principal amount will be repaid in full at the end of the loan term.

 

   Amount 
Fiscal year ending December 31:      
   $    
2023 (Excluding the six months Ended June 30, 2023)    109,496 
2024   

23,608

 
2025   

843,633

 
2026   - 
Thereafter    - 
Total minimum loan payments   $976,737 

 

 15 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 9 — Note Payable, related party

 

Note payable, related party, as of June 30, 2023 and December 31, 2022 consist of the following:

 

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 4.0% originated February 23, 2023, due on January 31, 2024, originally $350,000 (i)  $306,083   $           - 
Less: current portion   (306,083)   - 
Long-term notes payable  $-   $- 

 

  (i) On February 23, 2023, the Company issued a Secured Promissory Note (the “Note”) in the original amount of $350,000, to Paris Balaouras, the Company’s founder and ex-Chief Executive Officer, for accrued wages. Under the terms of the Note, the Note accrues interest at 4% per annum and shall terminate upon the earlier of January 31, 2024 or the sale of the Company’s Tiny Homes Farm located in Nye County, NV. On this same date, the Company entered into a Deed of Trust and Security Agreement and Fixture Filings with Assignment of Rents for the Company’s Tiny Homes Farm. The principal amount of the Note was reduced to $306,083 on March 1, 2023.

 

Note 10 — Commitments and Contingencies

 

Operating Leases

 

The Company leases a two production / warehouse facility under a non-cancelable operating lease that expires in June 2027 and September 2029, respectively.

 

As of June 30, 2023, the Company recorded operating lease liabilities of $769,684 and right of use assets for operating leases of $0. During the six months ended June 30, 2023, operating cash outflows relating to operating lease liabilities was $0. As of June 30, 2023, the Company’s operating leases had a weighted-average remaining term of 3 years.

 

Rent expense, incurred pursuant to operating leases for the six months ended June 30, 2023 and 2022, was $0 and $96,000, respectively.

 

 16 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 10 — Commitments and Contingencies (continued)

 

Litigation

 

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the liability includes probable and estimable legal cost associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company business.

 

MJ Holdings, Inc. Complaint

 

On December 14, 2021, MJ Holdings, Inc. (the “Plaintiff”) filed a Complaint against NCMM, LLC, AP Management, LLC and Valerie Small (collectively, the “Defendants”) (together, the “Parties”). In the Complaint, the Plaintiff alleges that the Defendants have refused to return the cannabis that was being stored for Plaintiff under a Storage and Purchase Agreement entered into with AP Management. By failing to return the cannabis to Plaintiff, or Plaintiff’s designee, the Defendants have deprived Plaintiff of the ability to sell, transfer or market the product. In addition, the Defendants have sought to unlawfully extort the Plaintiff for illicit payments of thousands of dollars in money and/or cannabis in exchange for returning the cannabis. On March 31, 2023, the Parties entered into a Settlement Agreement (the “Settlement Agreement”) whereby NCMM, LLC and Valerie Smalls shall (i) contact the CCB within 7 days of execution of the Settlement Agreement for authorization to transfer the approximately 1800 pounds of fresh frozen to MJ Distributing, both the passing and failed fresh frozen; and (ii) NCMM shall pay the Company a total of $60,000 as a Settlement Amount. The Settlement Amount shall be paid as $5,000 per month. In the event the Settlement Amount monthly payment is not paid by the fifth of every month, NCMM shall pay a late payment penalty fee of $100 per day. As of June 30, 2023 the unpaid balance related to this settlement was $50,000.

 

Gappy and Shaba Compliant

 

On December 3, 2021, a Complaint was filed against MJ Holdings, Inc., HDGLV, LLC, Red Earth, LLC (collectively, the “Defendants”) by Ziad Gappy and David Shaba (collectively, the “Plaintiffs”). In the Complaint, the Plaintiffs allege the Defendants made misleading statements and/or omissions relating to the Company in the Plaintiffs’ negotiation to purchase shares of MJ Holdings, Inc. In addition, the Plaintiffs allege that the Defendants have not honored the 2018 Agreements negotiated between the Plaintiffs and Defendants, MJ Holdings, Inc. has failed to issue an additional $125,000 in stock due to the Plaintiffs as was agreed to in writing and the Defendants have failed to start the Western Project. The case is ongoing. Defendants have denied all allegations. Discovery is currently open and is set to close in July of 2023.

 

DGMD Complaint

 

On March 19, 2021, a Complaint was filed against the Company, Jim Mueller, John Mueller, MachNV, LLC, Acres Cultivation, Paris Balaouras, Dimitri Deslis, ATG Holdings, LLC and Curaleaf, Inc. (collectively, the “Defendants”) by DGMD Real Estate Investments, LLC, ARMPRO, LLC, Zhang Springs LV, LLC, Prodigy Holdings, LLC and Green Organics, LLC (collectively, the “Plaintiffs”) in the District Court of Clark County, Nevada.

 

In the Complaint, the Plaintiffs allege that the Defendants: (i) intended to fraudulently obtain money from the Plaintiffs in order to put that money towards the Acres dispensary and to make Acres look more appealing to potential buyers as well as pay off Defendants’ agents, and (ii) the Defendants acted together in order to find investors to invest money into the Acres and MJ Holdings “Investment Schemes”, and (iii) the Defendants intended to fraudulently obtain Plaintiffs’ money for the purpose of harming the Plaintiffs to benefit the Defendants, and (iv) the Defendants committed unlawful fraudulent misrepresentation in the furtherance of the agreement to defraud the Plaintiffs. The Plaintiffs allege that damages are in excess of $15,000.

 

Discovery has concluded and the parties were unable to resolve the case through settlement negotiations. Paris Balaouras and MJ Holdings filed a motion for summary judgment against all Defendants. The Court granted the Motion as to Plaintiffs DGMD Real Estate Investments, LLC, Armpro, LLC and Zhang Springs LV, LLC. The Court denied the motion as to Prodigy Holdings LLC and Las Vegas Green Organics. The Case is set to go to trial on May 15, 2023.

 

Tierney Arbitration

 

On March 9, 2021, Terrence Tierney (“Claimant”), the Company’s former President and Secretary, who was terminated by the Company for Cause on August 7, 2020, filed for arbitration with the American Arbitration Association for: (i) breach of contract, (i) breach of the implied covenant of good faith and fair dealing, and (iii) NRS 608 wage claim. Mr. Tierney demanded payment in the amount of $501,085 for unpaid base pay and unpaid deferred business compensation (which was not earned nor due), expenses paid on behalf of the Company, accrued vacation and severance pay. On April 7, 2021, the Company made payment of unpaid base pay against the wage claim in the amount of $62,392, inclusive of $59,583 for wages and $2,854 for accrued vacation plus $8,307.60 for statutory penalties. As such, the Company posits that any compensation claims that Claimant may have had have been paid in full and that the Company otherwise has no liability. The Company filed a counterclaim in the action declaring that Tierney breached the contract of employment, committed fraud, malfeasance and other nefarious acts causing substantial damage to the Company with estimated monetary damages well in excess of any monetary claim made by Tierney. On May 4, 2022, the Arbitrator issued a ruling concluding that the Arbitrator did not have jurisdiction over Claimant’s statutory wage claim under NRS 608. On September 19, 2022, Claimant filed a complaint in state court seeking compensation under NRS 608.020. The Company asserts that the 2-year statute of limitations bars Claimant’s complaint, and further asserts that Claimant has been paid in full pursuant to the payments issued to Claimant on April 7, 2021. The arbitration proceeded to trial on January 9-12, 2023 and the Arbitrator issued her award on March 7, 2023, awarding Claimant $401,361 in damages, offset by $350,000 awarded to the Company for its counter-claims, with a net damage award to Claimant in the sum of $51,361. As of June 30, 2023 the full amount remains unpaid.

 

 17 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 11 — Stockholders’ Equity (Deficit)

 

General

 

The Company is currently authorized to issue up to 95,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par value $0.001 per share.

 

Common Stock

 

Of the 95,000,000 shares of Common Stock authorized by the Company’s Articles of Incorporation, 78,591,667 shares of Common Stock are issued and outstanding as of June 30, 2023. Each holder of Common Stock is entitled to one vote per share on all matters to be voted upon by the stockholders and are not entitled to cumulative voting for the election of directors. Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor subject to the rights of preferred stockholders. The Company has not paid any dividends and does not intend to pay any cash dividends to the holders of Common Stock in the foreseeable future. The Company anticipates reinvesting its earnings, if any, for use in the development of its business. In the event of liquidation, dissolution, or winding up of the Company, the holders of Common Stock are entitled, unless otherwise provided by law or the Company’s Articles of Incorporation, including any certificate of designations for a series of preferred stock, to share ratably in all assets remaining after payment of liabilities and the preferences of preferred stockholders. Holders of the Company’s Common Stock do not have preemptive, conversion, or other subscription rights. There are no redemptions or sinking fund provisions applicable to the Company’s Common Stock.

 

Common Stock Issuances

 

For the six months ended June 30, 2023:

 

None

 

 18 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 11 — Stockholders’ Equity (Deficit) (continued)

 

At June 30, 2023 and December 31, 2022, there are 78,591,667 and 78,591,667 shares of Common Stock issued and outstanding, respectively.

 

Preferred Stock

 

The Board is authorized, without further approval from our stockholders, to create one or more series of preferred stock, and to designate the rights, privileges, preferences, restrictions, and limitations of any given series of preferred stock. Accordingly, the Board may, without stockholder approval, issue shares of preferred stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of Common Stock. The issuance of preferred stock could have the effect of restricting dividends payable to holders of our Common Stock, diluting the voting power of our Common Stock, impairing the liquidation rights of our Common Stock, or delaying or preventing a change in control of us, all without further action by our stockholders. Of the 5,000,000 shares of preferred stock, par value $0.001 per share, authorized in our Articles of Incorporation, 2,500 shares are designated as Series A Convertible Preferred Stock.

 

Series A Convertible Preferred Stock

 

Each share of Series A Preferred Stock is convertible, at the option of the holder, into that number of shares of Common Stock determined by dividing the stated value of each share of Series A Preferred Stock (currently, $1,000) by the conversion price (currently, $0.75). The stated value and the conversion price are subject to adjustment as provided for in the Certificate of Designation. We are prohibited from effecting a conversion of the Series A Preferred Stock to the extent that, after giving effect to the conversion, the holder (together with such holder’s affiliates and any persons acting as a group with holder or any of such holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion. A holder, upon notice to us, may increase or decrease this beneficial ownership limitation; provided, that, in no event can the holder increase the beneficial ownership limitation in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series A Preferred Stock then held by holder. Such increase of the beneficial ownership limitation cannot be effective until the 61st day after such notice is given to us and shall apply only to such holder. The Series A Preferred Stock has no voting rights; however, as long as any shares of Series A Preferred Stock are outstanding, we are not permitted, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock to (i) alter or change adversely the powers, preferences, or rights given to the Series A Preferred Stock or alter or amend the Series A Preferred Stock Certificate of Designation, (ii) amend our Articles of Incorporation or other charter documents in any manner that adversely affects any rights of the holders, (iii) increase the number of authorized shares of Series A Preferred Stock, or (iv) enter into any agreement with respect to any of the forgoing.

 

Preferred Stock Issuances

 

For the six months ended June 30, 2023

 

None

 

At June 30, 2023 and December 31, 2022, there were 0 and 0 shares of Series A Preferred Stock issued and outstanding, respectively.

 

 19 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 12 — 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 stockholders 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 six months ended June 30, 2023, basic and diluted loss per common share were the same since there were no potentially dilutive shares outstanding during the respective periods. The outstanding options and warrants as of June 30, 2023, to purchase 1,500,000 and 250,000 shares of common stock, respectively, were not included in the calculations of diluted loss per share because the impact would have been anti-dilutive.

 

For the six months ended June 30, 2023, basic and diluted income per common share were based on 78,591,667 and 78,591,667 shares, respectively.

 

Note 13 — Stock Based Compensation

 

Warrants and Options

 

A summary of the warrants and options issued, exercised and expired are below:

 

Stock Options

 

On September 15, 2020, the Company issued an option to purchase 500,000 shares of common stock to each of Messrs. Balaouras, Bloss and Moyle as per the terms of their employment agreements. The options have an exercise price of $0.75 and expire on the three-year anniversary date.

 

A summary of the options issued, exercised and expired are below:

 

Options:   Shares  

Weighted Average

Exercise Price

  

Remaining Contractual

Life in Years

 
Balance at December 31, 2022    1,500,000   $0.75    0.68 
Issued    -    -    - 
Exercised    -    -    - 
Expired    -    -    - 
Balance at June 30, 2023    1,500,000   $0.75    0.18 
Exercisable at June 30, 2023    1,500,000   $0.75    0.18 

 

Options outstanding as of June 30, 2023 and December 31, 2022 were 1,500,000 and 1,500,000, respectively.

 

Warrants

 

On January 11, 2021, the Company issued an accredited investor a Common Stock Purchase Warrant Agreement in conjunction with the July 2020 Securities Purchase Agreement granting the holder the right to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $0.10 for a term of 4-years.

 

A summary of the warrants issued, exercised and expired are below:

 

Warrants:   Shares  

Weighted Avg.
Exercise Price

  

Remaining Contractual

Life in Years

 
Balance at December 31, 2022    250,000   $0.10    2.03 
Issued    -    -    - 
Exercised    -    -    - 
Expired    -    -    - 
Balance at June 30, 2023    250,000   $0.10    1.53 
Exercisable at June 30, 2023    250,000   $0.10    1.53 

 

Warrants outstanding as of June 30, 2023 and December 31, 2022 were 250,000 and 250,000, respectively.

 

 20 
 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 14 — Related Party Transactions

 

On August 1, 2021, the Company entered into a Memorandum of Understanding and Agreement for Technical Services and Short-Term Funding (the “Agreement”) with Red Earth, LLC (hereinafter, “Red Earth”), an entity controlled by its Chief Cultivation Officer, Paris Balaouras. Under the terms of the Agreement, the Company will provide a short-term loan (the “Loan”) to Red Earth for expenses related to the activation and operation of Red Earth’s cultivation license. The Loan shall bear interest at 12% per annum and increase to 18% upon default. In addition, the Company shall provide Red Earth pre-opening technical services at a cost of $5,000 to $7,500 per month. As of June 30, 2023, the amount due the Company under the short-term loan is $274,197 and for the six months ended June 30, 2023 the Company made payments of $61,728 on the loan and the amount of technical services income (other income) was $60,000.

 

On September 5, 2022, the Company entered into an Amendment (the “Amendment”) with Highland Brothers, LLC (together, the “Parties’) to amend the original agreement (the “Agreement”) between the Parties dated February 15, 2019. Under the terms of the Amendment, the term of the Agreement has been extended to fifteen years and the Company shall pay Highland Brothers, LLC $150,000 as cash consideration within 10 days of execution of the Amendment. The Company made the $150,000 payment on October 6, 2022.

 

Note 15 — Subsequent Events

 

The Company has evaluated events subsequent to the balance sheet through the date the financial statements were issued and noted the following events requiring disclosure:

 

On July 6, 2023, the Company agreed to issue a reversal of the cannabis license acquisition from Roll On LLC. As a result, 20,319,500 common shares of MJ Holdings, Inc., which were previously issued to Roll On LLC as partial compensation for the license purchase, were returned to the Company.

 

 21 
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Our Management’s Discussion and Analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report.

 

Forward-Looking Statements

 

This Quarterly Report contains forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this report, the words “believe,” “anticipate,” “expect,” “will,” “estimate,” “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved. Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and in our subsequent filings with the SEC, and include, among others, the following: marijuana is illegal under federal law, the marijuana industry is subject to strong competition, our business is dependent on laws pertaining to the marijuana industry, the marijuana industry is subject to government regulation, our business model depends on the availability of private funding, we will be subject to general real estate risks, if debt payments to note holder are not made we could lose our investment in our real estate properties, terms and deployment of capital. The terms “MJ Holdings, Inc.,” “MJ Holdings,” “MJ,” “we,” “us,” “our,” and the “Company” refer to MJ Holdings, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.

 

Company Overview

 

MJ Holdings, Inc. (OTCQB: MJNE) is a highly-diversified cannabis holding company providing cultivation management, asset and infrastructure development – currently concentrated in the Las Vegas market. It is the Company’s intention to grow its business and provide a 360-degree spectrum of infrastructure, including, cannabis cultivation, production of cannabis related products, management services, dispensaries and consulting services. The Company intends to grow its business through joint ventures with existing companies possessing complementary subject matter expertise, acquisition of existing companies and through the development of new opportunities. The Company intends to “prove the concept” profitably in the rapidly expanding Las Vegas market and then use that anticipated success as a template for replicating the concept in other developing states through a combination of strategic partnerships, acquisitions and opening new operations.

 

Current Initiatives include:

 

  ● 260 acres of farmland for the purpose of cultivating additional marijuana (the “260 Acres”) purchased in January of 2019. The Company intends to utilize the state-of-the-art Cravo® cultivation system for growing an additional five acres of marijuana on this property. The Cravo® system will allow multiple harvests per year and should result in higher annual yields per acre. The land has more than 180-acre feet of permitted water rights, which will provide more than sufficient water to markedly increase the Company’s marijuana cultivation capabilities. This facility, upon receipt of its business license in Nye County and its final inspection by the Cannabis Compliance Board (“CCB”), is expected to become operational in the summer of 2022. During the year ended December 31, 2021, the Company elected to relocate all of its equipment utilized on the Acres lease to its 260 Acres adjacent to the Acres lease. The Company will utilize the 260 Acres for its own harvest along with additional harvests under any Cultivation and Sales Agreements

 

  ● Cultivation and Sales Agreements entered into for multiple grows on the Company’s 260-acre farm located in the Amargosa Valley of Nevada. During the 4th quarter of 2021 and 1st quarter of 2021, the Company entered into separate Cultivation and Sales Agreements, whereby the Company shall retain certain independent growers to provide oversight and management of the Company’s cultivation and sale of products at its 260-acre farm. The independent growers shall pay to the Company a royalty of net sales revenue with a minimum royalty after two years. As of the date of this filing, the Company is waiting on its business license in Nye County and its final inspection by the Cannabis Compliance Board before it can commence its operations under the Agreement.

 

 22 
 

 

  ● a nearby commercial trailer and RV park (THC Park – Tiny Home Community) was purchased in April of 2019 to supply necessary housing for the Company’s farm employees. After the Company’s 2018 harvest, it came to realize that it would need to find a more efficient method of housing and to bring its cultivation team to its facilities. The Company purchased the 50-acre plus THC Park for $600,000 in cash and $50,000 of the Company’s restricted common stock. At present, the Company’s construction and completion of this community is approximately seventy-five percent complete. The impact of COVID-19 in obtaining inspections and permitting significantly delayed the completion of this community. The Company has elected to cease any renovations or additions at its Tiny Home Community but will continue to rent out those units that have been leased.
     
  ● an agreement to acquire a cultivation license and production license, both currently located in Nye County Nevada. On February 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. In consideration of the sale, transfer, assignment and delivery of the Membership Interests to Purchaser, and the covenants made by Seller under the MIPA3, Purchaser agreed to pay a combination of cash, promissory notes, and stock in the amount of One-Million-Two-Hundred-Fifty Thousand Dollars ($1,250,000.00) in cash and/or promissory notes and 200,000 shares of the Company’s restricted common stock, all of which constitutes the consideration agreed to herein for (the “Purchase Price”), payable as follows: (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against future compensation due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, (v) $200,000 shall be deposited on or before June 12, 2021, and (vi) $250,000 shall be deposited within five (5) business days after the CCB provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser. On April 12, 2022, the CCB issued an Adult-Use Production License to MJ Distributing P133, LLC and an Adult-Use Cultivation License to MJ Distributing C202, LLC. The Company is currently awaiting the transfer approval from the CCB.

 

MJH Research, Inc. Acquisition

 

On July 8, 2022, MJ Holdings, Inc. (the “Buyer”) entered into a Common Stock Purchase Agreement (the “Agreement”) with MJH Research, Inc. (the “Company”), a Florida corporation, and Sunstate Futures, LLC (the “Seller”), a Florida limited liability company. Under the terms of the Agreement, the Seller agreed to sale all issued and outstanding shares of common stock (100,000 shares) (the “Common Stock”) of the Company to the Buyer. In consideration of the purchase of the shares of Common Stock, the Buyer agreed to issue the Seller seven million (7,000,000) shares of its common stock. The transaction closed on July 11, 2022. Net assets and liabilities of MJH Research, Inc. were approximately $500,000 and consideration on the acquisition date equated to approximately $1,956,500, most of which would be applied to intellectual property related to research of MJH Research, Inc.

 

 23 
 

 

Cultivation and Sales Agreements

 

MKC Development Group, LLC Agreement

 

On January 22, 2021 (the “effective Date”), MJ Holdings, Inc. (“MJNE”) entered into a Cultivation and Sales Agreement (the “Agreement”) with MKC Development Group, LLC (“MKC”). Under the terms of the Agreement, MJNE shall retain MKC to provide oversight and management of MJNE’s cultivation and sale of products at MJNE’s Amargosa Valley, NV farm. The Agreement shall commence on the Effective Date, continue for a period of ten (10) years and automatically renew for a period of five (5) years.

 

As deposits, security and royalty, MKC shall pay to MJNE:

 

  (i) a $600,000 non-refundable deposit upon execution of the Agreement;
  (ii) a security deposit of $10,000 to be applied against the last month’s obligations and a $10,000 payment to be applied against the first month’s rent;
  (iii) $10,000 on the first of each month for security and compliance;
  (iv) a royalty of 10% of gross revenue less applicable taxes (hereinafter “Net Sales Revenue”) on all sales of product by the Company; and
  (v) MKC shall, after the first two (2) years from execution of the Agreement, be responsible to pay to MJNE a minimum royalty of $83,000 per month.

 

As compensation, MJNE shall pay to MKC:

 

  (i) 90% of Net Sales Revenue on all sales of product by MKC under this Agreement as the Management Fee.

 

The transaction closed on January 27, 2021. As of the date of this filing, MKC has made all required payments to MJNE. MKC’s business license was approved and issued by Nye County, Nevada in September 2022. The CCB has approved cultivation based on the approved management agreement between MKC and MJ Distributing, LLC. Seeds were planted in mid-September and harvest was anticipated by the end of the fourth quarter of 2022, however, on May 24, 2023 the parties entered into a settlement agreement that terminated all of their rights, obligations, and responsibilities under the Agreement. As part of the settlement MJNE agreed to refund $310,000 to MKC within one year of the date of the settlement agreement. If the refund payment is not paid within one year the refund amount is to be adjusted to $620,000.

 

Natural Green, LLC Agreement

 

On March 26, 2021 (the “effective Date”), MJ Holdings, Inc. (“MJNE”) entered into a Cultivation and Sales Agreement (the “Agreement”) with Natural Green, LLC (“Natural”). Under the terms of the Agreement, MJNE shall retain Natural to provide oversight and management of MJNE’s cultivation and sale of products at MJNE’s Amargosa Valley, NV farm. The Agreement shall commence on the Effective Date, continue for a period of ten (10) years and automatically renew for a period of five (5) years. Natural shall be responsible for compliance, standard of care, packaging, insurance, labor matters, policies and procedures, testing, record keeping, security and marketing.

 

As deposits, security and royalty, Natural shall pay to MJNE:

 

  (i) a $500,000 Product Royalty deposit to be applied to the first Product Royalty or Product Royalties;
  (ii) a deposit of $20,000 to be applied against the first and last month’s Security and Compliance fee;
  (iii) $10,000 on the first of each month for Security and Compliance;
  (iv) a royalty of 10% of gross revenue less applicable taxes (hereinafter “Net Sales Revenue”) on all sales of product by the Company; and
  (v) Natural shall, after the first two (2) years from execution of the Agreement, be responsible to pay to MJNE a minimum royalty of $50,000 per month.

 

As compensation, MJNE shall pay to Natural:

 

  (i) 90% of Net Sales Revenue on all sales of product by the Company under this Agreement as the Management Fee.

 

On March 26, 2021, MJNE and Natural entered into an Amendment to the Agreement whereby MJNE waived Natural’s requirement to obtain liability insurance and required Natural to pay MJNE $40,000 for capital expenditures costs. The transaction closed on April 7, 2021. As of the date of this filing, Natural has made all required payments to MJNE. Natural’s business license was approved and issued by Nye County, Nevada in September 2022. The CCB has approved cultivation based on the approved management agreement between the Company and MJ Distributing, LLC. Seeds were planted in mid-September and harvest was anticipated by the end of the fourth quarter of 2022, however, effective June 26, 2023 the parties entered into a termination agreement which terminated the Agreement and released each other of any liabilities, claims, or obligations under the Agreement.

 

 24 
 

 

Green Grow Investments Agreement

 

On May 7, 2021 (the “Effective Date”), MJ Holdings, Inc. (“MJNE”) entered into a Cultivation and Sales Agreement (the “Agreement”) with Green Grow Investments Corporation (the “Company”). Under the terms of the Agreement, MJNE shall retain the Company to provide oversight and management of MJNE’s cultivation and sale of products at MJNE’s Amargosa Valley, NV farm. The Agreement shall commence on the Effective Date, continue for a period of ten (10) years and automatically renew for a period of five (5) years. The Company shall be responsible for compliance, standard of care, packaging, insurance, labor matters, policies and procedures, testing, record keeping, security and marketing.

 

As deposits, security and royalty, the Company shall pay to MJNE:

 

  (i) a $600,000 Product Royalty of which $50,000 is due upon signing, $150,000 upon MJNE obtaining the licenses from MJ Distributing, Inc. and affiliates and $200,000 for each of the first and second years’ harvests;
  (ii) a deposit of $20,000 to be applied against the first and last month’s Security and Compliance fee;
  (iii) $10,000 on the first of each month for Security and Compliance;
  (iv) a royalty of 10% of gross revenue less applicable taxes (hereinafter “Net Sales Revenue”) on all sales of product by the Company; and
  (v) the Company shall, after the first two (2) years from execution of the Agreement, be responsible to pay to MJNE a minimum royalty of $50,000.00 per month.

 

As compensation, MJNE shall pay to the Company:

 

  (i) a Management Fee that is based upon the net sales price (after taxes) and further subject to all contractual expenses.

 

As of the date of this filing, the Company has made all required payments to MJNE. The Company’s business license was approved and issued by Nye County, Nevada in September 2022. The CCB has approved cultivation based on the approved management agreement between the Company and MJ Distributing, LLC. Seeds were planted in mid-September and harvest is anticipated by the end of the fourth quarter of 2022.

 

RK Grow, LLC Agreement

 

On June 22, 2021 (the “Effective Date”), MJ Holdings, Inc. (“MJNE”) entered into a Cultivation and Sales Agreement (the “Agreement”) with RK Grow, LLC (the “Company”). Under the terms of the Agreement, MJNE shall retain the Company to provide oversight and management of MJNE’s cultivation and sale of products at MJNE’s Amargosa Valley, NV farm. The Agreement shall commence on the Effective Date, continue for a period of fifteen (15) years and automatically renew for one fifteen (15) year period. The Company shall be responsible for compliance, standard of care, packaging, insurance, labor matters, policies and procedures, testing, record keeping, security and marketing. The Agreement is for a designated 40 acres for cultivation.

 

 25 
 

 

As deposits, security and royalty, the Company shall pay to MJNE:

 

  (i) a Product Royalty Deposit of $3,000,000.00 to be applied to the first Product Royalty or Product Royalties;
  (ii) a deposit of $20,000 to be applied against the first and last month’s Security and Compliance fee;
  (iii) $10,000 on the first of each month for Security and Compliance;
  (iv) a royalty of 10% of gross revenue less applicable taxes (hereinafter “Net Sales Revenue”) on all sales of product by the Company;
  (v) Minimum Monthly Product Royalty: Minimum Monthly Product Royalty (MMPR) shall be calculated on a per annum basis. Therefore, Company will have satisfied all MMPR obligations for the year upon remitting $1,080,000.00 to MJNE; and
  (vi) MJNE agrees to provide access to water for the Designated Acreage without charge to the Company. However, Company will be responsible for any construction required to have the water actually delivered to its Designated Acreage from the source.

 

As compensation, MJNE shall pay to the Company:

 

  (i) a Management Fee that is based upon the net sales price (after taxes) and further subject to all contractual expenses.

 

As of the date of this filing, the Company has made all required payments to MJNE. The Company’s business license was approved and issued by Nye County, Nevada in September 2022. The CCB has approved cultivation based on the approved management agreement between the Company and MJ Distributing, LLC. Seeds were planted in mid-September and harvest is anticipated by the end of the fourth quarter of 2022.

 

Termination of Acres Cultivation, LLC Agreement

 

On January 21, 2021, the Company received a Notice of Termination (the “Notice”), effective immediately, from Acres Cultivation, LLC (“Acres”) on the following three (3) agreements (collectively, herein the “Cooperation Agreement”):

 

  (i) The Cultivation and Sales Agreement entered into by and between MJNE and Acres, dated as of January 1, 2019 (the “Cultivation and Sales Agreement” or “CSA”), pursuant to Sections 5.3, and 16.20 (cross-default);

 

  (ii) The Consulting Agreement, by and between Acres and MJNE, made as of January 1, 2019 (the “Consulting Agreement”), pursuant to Sections 10 and 11.10 (cross-default); and
     
  (iii) The Equipment Lease Agreement between Acres and MJNE, dated as of January 1, 2019 (the “Equipment Lease Agreement”), pursuant to Sections 8(ii), 8(iv), and 29 (cross-default).

 

The Company initiated relocating its equipment to its 260-acre farm at the end of the first quarter and does not anticipate that it will generate any further revenue under the Acres relationship.

 

The Company may also continue to seek to identify potential acquisitions of revenue producing assets and licenses within legalized cannabis markets that can maximize shareholder value.

 

The Company may face substantial competition in the operation of cultivation facilities in Nevada. Numerous other companies have also been granted cultivation licenses, and, therefore, the Company anticipates that it will face competition from these other companies. The Company’s management team has experience in successfully developing, implementing, and operating marijuana cultivation and related businesses in other legal cannabis markets. The Company believes its experience in outdoor cultivation provides it with a distinct competitive advantage over its competitors, and it will continue to focus on this area of its operations. The Company still faces challenges engaging and retaining senior managers.

 

The Company presently occupies an office suite located at 5730 Sky Pointe Dr., Suite 102, Las Vegas, NV 89130. The Company plans on remaining at its current location for the next 3-6 months until it can identify a new corporate office.

 

Consulting Agreements

 

On September 14, 2022, the Company’s wholly owned subsidiary, MJH Research, Inc., entered into a Consulting Agreement (the “Agreement”) with Viridis Biotechnology, LLC (the “Consultant”). Under the terms of the Agreement, the Consultant shall provide agricultural and commercial consulting through December 31, 2022. As compensation, the Consultant shall receive a Management fee of $200,000. The initial payment of $100,000 shall be made within ten days of execution of the Agreement with the balance due payable through the issuance of thirty-three thousand shares of the Company’s common stock or through a second payment of $100,000 no later than February 15, 2023. The Company made the initial $100,000 payment on September 15, 2022 and the second payment has not yet been remitted.

 

 26 
 

 

Corporate Advisory Agreement (M&A and Funding)

 

Under the terms of the M&A and Funding Agreement (the “M&A Agreement”), GYB, LLC (the “Advisor”) shall identify prospective funding sources, identify potential companies for acquisition within the cannabis industry, identify pertinent technology companies that drive-up point of sale solutions and other such services the parties agree upon. The M&A Agreement has a term of two years and begins on May 18, 2021. As compensation for the services provided, the Company paid the Advisor $290,000 upon execution of the M&A Agreement.

 

Corporate History

 

The Company was incorporated on November 17, 2006, as Securitas EDGAR Filings, Inc. under the laws of the State of Nevada. Prior to the formation of Securitas EDGAR Filings Inc., the business was operated as Xpedient EDGAR Filings, LLC, a Florida Limited Liability Company, formed on October 31, 2005. On November 21, 2005, Xpedient EDGAR Filings LLC amended its Articles of Organization to change its name to Securitas EDGAR Filings, LLC. On January 21, 2009, Securitas EDGAR Filings LLC merged into Securitas EDGAR Filings, Inc., a Nevada corporation. On February 14, 2014, the Company amended and restated its Articles of Incorporation and changed its name to MJ Holdings, Inc.

 

On November 22, 2016, in connection with a plan to divest the Company of its real estate business, the Company submitted to its stockholders an offer to exchange (the “Exchange Offer”) its 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. On January 10, 2017, the Company accepted for exchange 1,800,000 shares of its 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 held 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.

 

Acquisition/Disposition of Red Earth

 

On December 15, 2017, the Company acquired all of the issued and outstanding membership interests of Red Earth, LLC, a Nevada limited liability company (“Red Earth”) established in October 2016, in exchange for 52,732,969 shares of its Common Stock and a promissory note in the amount of $900,000. The acquisition was accounted for as a “Reverse Merger”, whereby Red Earth was considered the accounting acquirer and became its wholly owned subsidiary. Upon the consummation of the acquisition, the now former members of Red Earth became the beneficial owners of approximately 88% of the Company’s Common Stock, obtained controlling interest of the Company, and retained certain of its key management positions. In accordance with the accounting treatment for a “reverse merger” or a “reverse acquisition”, the Company’s historical financial statements prior to the reverse merger will be replaced with the historical financial statements of Red Earth prior to the reverse merger in all future filings with the SEC. Red Earth is the holder of a Nevada Marijuana Establishment Certificate for the cultivation of marijuana.

 

On or about May 7, 2021, the Company’s wholly owned subsidiary, Red Earth, LLC (the “Subsidiary”), received an inquiry from the State of Nevada Cannabis Compliance Board (“CCB”) regarding the transfer of ownership of the Subsidiary from its previous owners to the Company. The CCB has determined that the transfer was not formally approved, thus a Category II violation.

 

The consolidated financial statements after completion of the reverse merger included: the assets, liabilities, and results of operations of the combined company from and after the closing date of the reverse merger, with only certain aspects of pre-consummation stockholders’ equity remaining in the consolidated financial statements. In February of 2019, the Company repurchased, from the Company’s largest shareholder, 20,000,000 of the 26,366,484 shares of common stock that this shareholder originally received in connection with the Reverse Merger - for a total purchase price of $20,000.

 

On July 27, 2021, the Subsidiary entered into a Stipulation and Order for Settlement of Disciplinary Action (the “Stipulation Order”) with the CCB. Under the terms of the Stipulation Order, the Subsidiary has agreed to present to the CCB, by no later than August 31, 2021, a plan pursuant to which the ownership of the Subsidiary will be returned to the original owners. The Parties to the Stipulation Order resolved the matter without the necessity of taking formal action. The Subsidiary agreed to pay a civil penalty of $10,000, which was paid on July 29, 2021.

 

On August 1, 2021, the Company entered into a Memorandum of Understanding and Agreement for Technical Services and Short-Term Funding (the “Agreement”) with Red Earth, LLC (hereinafter, “Red Earth”), an entity controlled by its Chief Cultivation Officer, Paris Balaouras. Under the terms of the Agreement, the Company will provide a short-term loan (the “Loan”) to Red Earth for expenses related to the activation and operation of Red Earth’s cultivation license. The Loan shall bear interest at 12% per annum and increase to 18% upon default. In addition, the Company shall provide Red Earth pre-opening technical services at a cost of $5,000 to $10,000 per month. As of June 30, 2023, the amount due the Company under the short-term loan is $306,083 and the amount of technical services income (other income) recorded for the six months ended June 30, 2023 was $60,000.

 

On August 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of Red Earth, Paris Balaouras, entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December 15, 2017, entered into between the Company and Red Earth was terminated as of the date of the Termination Agreement resulting in the return of ownership of Red Earth to Mr. Balaouras. Neither party shall have any further obligation to one another pursuant to the terms of the Purchase Agreement. On September 2, 2021, the Company received approval of the Termination Agreement from the CCB. Please see Note 14 — Related Party Transactions for further information.

 

 27 
 

 

Our Business

 

We commenced cultivation activities on our three-acre managed cultivation facility in August of 2018, harvesting more than 5,400 pounds of marijuana through December of 2018. In the fourth quarter of 2019, we completed our 2019 harvest of approximately 4,800 marijuana plants with expected yield of more than 3,300 pounds of marijuana flower and trim. As of the time of this filing, we have completed our 2020 harvest of approximately 7,600 marijuana plants with expected yield of more than 4,700 pounds of marijuana flower and trim. It is our intention to grow our business through the acquisition of existing companies and/or through the development of new opportunities that can provide a 360-degree spectrum of infrastructure (dispensaries), cultivation and production management, and consulting services in the regulated cannabis industry.

 

The Company currently operates through the following entities:

 

MJ Holdings, Inc.   This entity, the Parent, serves as a holding company for all of the operating businesses/assets.
     
Prescott Management, LLC   Prescott Management is a wholly owned subsidiary of the Company that provides day-to-day management and operational oversight to the Company’s operating subsidiaries.
     
Icon Management, LLC   Icon is a wholly owned subsidiary of the Company that provides Human Resource Management (“HR”) services to the Company. Icon is responsible for all payroll activities and administration of employee benefit plans and programs.
     
Farm Road, LLC   Farm Road, LLC is a wholly owned subsidiary of the Company that owns 260 acres of farmland in Amargosa, NV. The Company acquired all of the membership interests of Farm Road in January of 2019.
     
Condo Highrise Management, LLC   Condo Highrise Management is a wholly owned subsidiary of the Company that manages the Company owned Trailer Park in Amargosa, Nevada.
     
Q-Brands, LLC   Q-Brands is a wholly owned subsidiary of the Company. Q-Brands is responsible for the development and marketing of the Highland Brothers brand of cannabis products.

 

Alternative Hospitality, Inc.   Alternative Hospitality is a Nevada corporation formed in November of 2018. MJ Holdings owns fifty-one percent (51%) of the company and the remaining forty-nine percent (49%) is owned by TVK, LLC, a Florida limited liability company. Please see Note 10 — Commitments and Contingencies for further information.
     
MJH Research, Inc.   MJH Research Inc. is a Florida corporation whose operations center around providing consulting services for growing techniques, management and cultivation of crops, as well as licensing support, production and asset and infrastructure development.

 

Critical Accounting Policies, Judgments and Estimates

 

There were no material changes to the Company’s critical accounting policies and estimates during the six months ended June 30, 2023.

 

Please see our Annual Report on Form 10-K for the year ended December 31, 2022 filed on May 5, 2023, for a discussion of our critical accounting policies and estimates and their effect, if any, on the Company’s financial results.

 

 28 
 

 

Results of Operations

 

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

 

Revenues

 

The Company’s revenue was $119,124 for the three months ended June 30, 2023, compared to $28,765 for the three months ended June 30, 2022. The increase in revenue for the three months ended June 30, 2023 versus the three months ended June 30, 2022 was largely attributable to the revenue recognized through its Management Agreement, as further discussed below.

 

Revenue, by class, is as follows:

 

   For the three months ended 
   June 30, 
   2023   2022 
Revenues:        
Rental income (i)  $21,545   $28,765 
Management income (ii)   97,579    - 
Total  $119,124   $28,765 

 

  (i) The rental income is from the Company’s THC Park.
     
  (ii) On February 5, 2021, the Company entered into a Management Agreement of Cannabis Production and Cultivation (the “Agreement”) with MJ Distributing, Inc. (the “Owner”) (together, the “Parties”). Under the terms of the Agreement, the Parties desire that the Company manage and operate the daily business of the Owner located in Pahrump, Nye County, Nevada. In consideration of the services to be performed by the Company, the Company and the Owner shall split the Net Profits of the business on a 50:50 basis. The Agreement was approved by the Cannabis Compliance Board at its July 26, 2022 meeting.

 

Operating Expenses

 

For the three months ended June 30, 2023, our operating expenses were $536,672 compared to $117,427 for the three months ended June 30, 2022, resulting in an increase of $419,245. The increase was largely attributable to increases in general and administrative costs (salaries) and professional fees (consulting, legal, and accounting fees) from the prior year, as in the prior year the Company had limited its business development activities. In the current period the Company increased efforts to grow the business, remain compliant with laws and regulations, and address their legal issues, thus incurring more fees to do so.

 

 29 
 

 

Other Income (Expense)

 

For the three months ended June 30, 2023, our other income (expense) was $1,326,895 compared to ($28,458) for the three months ended June 30, 2022, resulting in an increase in other income of $1,355,353. The increase was largely attributable to miscellaneous income of $995,429 and gain on extinguishment of debt of $365,000 recognized for the three months ended June 30, 2023.

 

Net Income (Loss)

 

Net income (loss) attributable to common shareholders was $909,347 for the three months ended June 30, 2023, compared to a net loss of ($117,120) for the three months ended June 30, 2022. The increase in net income for the three months ended June 30, 2023 as compared to the same period in 2022 is largely attributable to the Company’s increase in revenue and other income during the three months ended June 30, 2023.

 

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

 

Revenues

 

The Company’s revenue was $159,879 for the six months ended June 30, 2023, compared to $60,606 for the six months ended June 30, 2022. The increase in revenue for the six months ended June 30, 2023 versus the six months ended June 30, 2022 was largely attributable to the revenue recognized through its Management Agreement, as further discussed below.

 

Revenue, by class, is as follows:

 

   For the six months ended 
   June 30, 
   2023   2022 
Revenues:        
Rental income (i)  $41,263   $31,841 
Management income (ii)   118,616    - 
Total  $159,879   $31,841 

 

  (i) The rental income is from the Company’s THC Park.
     
  (ii) On February 5, 2021, the Company entered into a Management Agreement of Cannabis Production and Cultivation (the “Agreement”) with MJ Distributing, Inc. (the “Owner”) (together, the “Parties”). Under the terms of the Agreement, the Parties desire that the Company manage and operate the daily business of the Owner located in Pahrump, Nye County, Nevada. In consideration of the services to be performed by the Company, the Company and the Owner shall split the Net Profits of the business on a 50:50 basis. The Agreement was approved by the Cannabis Compliance Board at its July 26, 2022 meeting.

 

Operating Expenses

 

For the six months ended June 30, 2023, our operating expenses were $1,141,416 compared to $1,429,646 for the six months ended June 30, 2022, resulting in a decrease of $288,230. The decrease was largely attributable to a decrease in general and administrative costs over time (due to the Company decreasing their salary expense and. limiting its business development activities), offset by an increase in professional fees (due to the Company hiring consultants and outside advisors to assist the Company with its compliance with laws and regulations and address their legal issues).

 

Other Income (Expense)

 

For the six months ended June 30, 2023, our other income (expense) was $1,349,057 compared to $31,438 for the six months ended June 30, 2022, resulting in an increase in other income of $1,317,619. The increase was largely attributable to miscellaneous income of $1,025,429 and gain on extinguishment of debt of $365,000 recognized for the six months ended June 30, 2023.

 

Net Income (Loss)

 

Net income (loss) attributable to common shareholders was $367,520 for the six months ended June 30, 2023, compared to a net loss of ($1,337,602) for the six months ended June 30, 2022. The increase in net income for the six months ended June 30, 2023 as compared to the same period in 2022 is largely attributable to the Company’s decrease in general and administrative expenses and increase in other income during the six months ended June 30, 2023.

 

 30 
 

 

Liquidity and Capital Resources

 

The following table summarizes the cash flows for the six months ended June 30, 2023 and 2022:

 

   2023   2022 
Cash Flows:          
           
Net cash (used in) operating activities   (1,117,765)   (1,539,903)
Net cash (used in) investing activities   (61,728)   (113,748)
Net cash provided by (used in) financing activities   87,541    (216,608)
           
Net increase (decrease) in cash   (1,091,952)   (1,870,259)
Cash at beginning of period   1,340,509    4,699,372 
           
Cash at end of period  $248,557   $2,829,113 

 

The Company had cash of $248,557 at June 30, 2023 compared with cash of $2,829,113 at June 30, 2022.

 

Operating Activities

 

Net cash (used in) operating activities for the six months ended June 30, 2023, was ($1,117,765) versus ($1,539,903) for the six months ended June 30, 2022. The decrease in cash used in operating activities in 2023 included a net income of $367,520, accounts payable and accrued expenses of $201,036, prepaid expenses of $62,500, a gain on depreciation of $45,152 offset by, gain on extinguishment of debt of ($365,000), accounts receivable ($53,309), deposits of ($240,000) and contract liabilities of ($1,140,000).

 

Investing Activities

 

Net cash (used in) investing activities during the six months ended June 30, 2023, was ($61,728) as compared to ($113,748) for the six months ended June 30, 2022. The net cash provided by investing activities for the six months ended June 30, 2023 was attributable to the loan receivable of ($61,728).

 

Financing Activities

 

Net cash (used in) financing activities during the six months ended June 30, 2023, was $87,541 as compared to ($216,608) for the six months ended June 30, 2022. The decrease in cash used in financing activities for the six months ended June 30, 2023 is largely attributable to the decrease of repayments of notes payable.

 

Off-Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Seasonality

 

We do not consider our business to be seasonal.

 

Commitments and Contingencies

 

We are subject to the legal proceedings described in “Part II, Item 1. 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 six months ended June 30, 2023 had a material impact on our operations.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required for smaller reporting companies.

 

 31 
 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Form 10-Q, management performed, with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based on the evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2023, our disclosure controls and procedures were not effective.

 

Due to resource constraints, material weaknesses are evident to management regarding our inability to generate all the necessary disclosure for inclusion in our filings with the Securities and Exchanges Commission, which is due to the lack of resources and segregation of duties. We lack sufficient personnel with the appropriate level of knowledge, experience and training in GAAP to meet the demands for a public company, including the accounting skills and understanding necessary to fulfill the requirements of GAAP-based reporting. This weakness causes us to not fully identify and resolve accounting and disclosure issues that could lead to a failure to perform timely internal control and reviews. In addition, the Company has not established an audit committee, does not have any independent outside directors on the Company’s Board of Directors, and lacks documentation of its internal control processes.

 

Changes in Internal Control over Financial Reporting

 

There was no change to our internal controls or in other factors that could affect these controls during the period ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, our Board is currently seeking to improve our controls and procedures to remediate the deficiency described above.

 

 32 
 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. I addition to the estimated loss, the liability includes probable and estimable legal cost associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company business.

 

MJ Holdings, Inc. Complaint

 

On December 14, 2021, MJ Holdings, Inc. (the “Plaintiff”)(the “Company”) filed a Complaint against NCMM, LLC, AP Management, LLC and Valerie Small (collectively, the “Defendants”) (together, the “Parties”). In the Complaint, the Plaintiff alleges that the Defendants have refused to return the cannabis that was being stored for Plaintiff under a Storage and Purchase Agreement entered into with AP Management. By failing to return the cannabis to Plaintiff, or Plaintiff’s designee, the Defendants have deprived Plaintiff of the ability to sell, transfer or market the product. In addition, the Defendants have sought to unlawfully extort the Plaintiff for illicit payments of thousands of dollars in money and/or cannabis in exchange for returning the cannabis. On March 31, 2023, the Parties entered into a Settlement Agreement (the “Settlement Agreement”) whereby NCMM, LLC and Valerie Smalls shall (i) contact the CCB within 7 days of execution of the Settlement Agreement for authorization to transfer the approximately 1800 pounds of fresh frozen to MJ Distributing, both the passing and failed fresh frozen; and (ii) NCMM shall pay the Company a total of $60,000 as a Settlement Amount. The Settlement Amount shall be paid as $5,000 per month. In the event the Settlement Amount monthly payment is not paid by the fifth of every month, NCMM shall pay a late payment penalty fee of $100 per day.

 

Gappy and Shaba Compliant

 

On December 3, 2021, a Complaint was filed against MJ Holdings, Inc., HDGLV, LLC, Red Earth, LLC (collectively, the “Defendants”) by Ziad Gappy and David Shaba (collectively, the “Plaintiffs”). In the Complaint, the Plaintiffs allege the Defendants made misleading statements and/or omissions relating to the Company in the Plaintiffs’ negotiation to purchase shares of MJ Holdings, Inc. In addition, the Plaintiffs allege that the Defendants have not honored the 2018 Agreements negotiated between the Plaintiffs and Defendants, MJ Holdings, Inc. has failed to issue an additional $125,000 in stock due to the Plaintiffs as was agreed to in writing and the Defendants have failed to start the Western Project. The case is ongoing. Defendants have denied all allegations. Discovery is currently open and is set to close in July of 2023.

 

DGMD Complaint

 

On March 19, 2021, a Complaint was filed against the Company, Jim Mueller, John Mueller, MachNV, LLC, Acres Cultivation, Paris Balaouras, Dimitri Deslis, ATG Holdings, LLC and Curaleaf, Inc. (collectively, the “Defendants”) by DGMD Real Estate Investments, LLC, ARMPRO, LLC, Zhang Springs LV, LLC, Prodigy Holdings, LLC and Green Organics, LLC (collectively, the “Plaintiffs”) in the District Court of Clark County, Nevada.

 

In the Complaint, the Plaintiffs allege that the Defendants: (i) intended to fraudulently obtain money from the Plaintiffs in order to put that money towards the Acres dispensary and to make Acres look more appealing to potential buyers as well as pay off Defendants’ agents, and (ii) the Defendants acted together in order to find investors to invest money into the Acres and MJ Holdings “Investment Schemes”, and (iii) the Defendants intended to fraudulently obtain Plaintiffs’ money for the purpose of harming the Plaintiffs to benefit the Defendants, and (iv) the Defendants committed unlawful fraudulent misrepresentation in the furtherance of the agreement to defraud the Plaintiffs. The Plaintiffs allege that damages are in excess of $15,000.

 

Discovery has concluded and the parties were unable to resolve the case through settlement negotiations. Paris Balaouras and MJ Holdings filed a motion for summary judgment against all Defendants. The Court granted the Motion as to Plaintiffs DGMD Real Estate Investments, LLC, Armpro, LLC and Zhang Springs LV, LLC. The Court denied the motion as to Prodigy Holdings LLC and Las Vegas Green Organics. The Case is set to go to trial on May 15, 2023.

 

 33 
 

 

Tierney Arbitration

 

On March 9, 2021, Terrence Tierney (“Claimant”), the Company’s former President and Secretary, who was terminated by the Company for Cause on August 7, 2020, filed for arbitration with the American Arbitration Association for: (i) breach of contract, (i) breach of the implied covenant of good faith and fair dealing, and (iii) NRS 608 wage claim. Mr. Tierney demanded payment in the amount of $501,085 for unpaid base pay and unpaid deferred business compensation (which was not earned nor due), expenses paid on behalf of the Company, accrued vacation and severance pay. On April 7, 2021, the Company made payment of unpaid base pay against the wage claim in the amount of $62,392, inclusive of $59,583 for wages and $2,854 for accrued vacation plus $8,307.60 for statutory penalties. As such, the Company posits that any compensation claims that Claimant may have had have been paid in full and that the Company otherwise has no liability. The Company filed a counterclaim in the action declaring that Tierney breached the contract of employment, committed fraud, malfeasance and other nefarious acts causing substantial damage to the Company with estimated monetary damages well in excess of any monetary claim made by Tierney. On May 4, 2022, the Arbitrator issued a ruling concluding that the Arbitrator did not have jurisdiction over Claimant’s statutory wage claim under NRS 608. On September 19, 2022, Claimant filed a complaint in state court seeking compensation under NRS 608.020. The Company asserts that the 2-year statute of limitations bars Claimant’s complaint, and further asserts that Claimant has been paid in full pursuant to the payments issued to Claimant on April 7, 2021. The arbitration proceeded to trial on January 9-12, 2023 and the Arbitrator issued her award on March 7, 2023, awarding Claimant $401,361 in damages, offset by $350,000 awarded to the Company for its counter-claims, with a net damage award to Claimant in the sum of $51,361.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

In connection with the foregoing, the Company relied upon the exemptions from registration provided by Rule 701 and Section 4(a)(2) under the Securities Exchange Act of 1933, as amended:

 

Issuance of common stock for the six months ended June 30, 2023

 

None

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

 34 
 

 

Item 6. Exhibits

 

The documents set forth below are filed, incorporated by reference or furnished herewith as indicated.

 

Index to Exhibits

 

Exhibit No,   Description of Exhibit
10.1   Purchase and Sale Agreement (“PSA”), PSA Amendment #1, PSA Amendment #2 and Promissory Note between MJ Holdings, Inc. and John T. Jacobs and Teresa Jacobs (previously filed on Form 10-Q as filed with the SEC on December 13, 2019)
10.2   Membership Interest Purchase Agreement between MJ Distributing, Inc. and MJ Holdings, Inc. dated April 2, 2019 (previously filed on Form 10-Q as filed with the SEC on December 13, 2019)
10.3   Membership Interest Purchase Agreement of MJ Distributing C202, LLC and MJ Distributing P133, LLC (previously filed on Form 8-K as filed with the SEC on February 23, 2021)
10.4   Memorandum of Understanding and Agreement for Technical Services and Short-Term Funding (previously filed on Form 10-K as filed with the SEC on June 16, 2022)
10.5   Note Modification Agreement (previously filed on Form 10-K as filed with the SEC on June 16, 2022)
10.6   Common Stock Purchase Agreement between the Company, MJH Research, Inc. and Sunstate Futures, LLC dated July 8, 2022 (previously filed on Form 8-K as filed with the SEC on July 13, 2022)
10.7   Addendum to Licensing Agreement between MJ Holdings, Inc. and Highland Brother, LLC (previously filed on Form 10-Q as filed with the SEC on November 21, 2022)
10.8   Consulting Agreement between MJH Research, Inc. and Viridis Biotechnology, LLC dated September 14, 2022 (previously filed on Form 10-Q as filed with the SEC on November 21, 2022)
10.9   Settlement Agreement between the Company, NCMM, LLC and Valerie Small dated March 31, 2023 (previously filed on Form 10-K as filed with the SEC on May 5, 2023)
10.10   Chief Financial Officer Independent Contractor Agreement (previously filed on Form 10-K as filed with the SEC on May 5, 2023)
10.11   Consulting Agreement between the Company and Carbek, LLC (previously filed on Form 10-K as filed with the SEC on May 5, 2023)
10.12   Secured Promissory Note between the Company and Paris Balaouras dated February 23, 2023 (previously filed on Form 10-K as filed with the SEC on May 5, 2023)
10.13   Loan Agreement dated May 11, 2023 (previously filed with the Form 10-Q filed with the SEC on May 23, 2023)
10.14   Management Agreement between the Company and MJ Distributing, Inc. (previously filed with the Form 10-Q filed with the SEC on May 23, 2023)

10.15*

   Settlement Agreement with MKC Development Group, LLC dated May 24, 2023.
21.1   Subsidiaries of the Registrant (previously filed on Form 10-K as filed with the SEC on December 10, 2020)
31.1*   Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*   Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.
** Furnished herewith.
+ Denotes a management compensatory plan, contract or arrangement

 

 35 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  MJ HOLDINGS, INC.
     
  By: /s/ Tom Valenzuela
    Tom Valenzuela
    Interim Chief Executive Officer
    (Principal Executive Officer) and
Interim Chief Financial Officer
(Principal Financial Officer)
  Date: August 14, 2023

 

 36 

 

 

Exhibit 10.15

 

 

 
 

 

 

 
 

 

 

 

 

 

Exhibit 31.1

 

CERTIFICATIONS

 

I, Tom Valenzuela, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2023 of MJ Holdings, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2023  
   
/s/ Tom Valenzuela  
Tom Valenzuela  
Chief Executive Officer (Principal Executive Officer)  

 

   

 

Exhibit 31.2

 

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a)

under the Securities Exchange Act of 1934

 

I, Tom Valenzuela, Principal Financial Officer of MJ Holdings, Inc. certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2023 of MJ Holdings, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2023  
     
By: /s/ Tom Valenzuela  
  Tom Valenzuela  
 

Interim Chief Financial Officer (Principal Financial Officer)

 

  

 

   

 

Exhibit 32.1

 

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of MJ Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, hereby certify, in their capacity as an executive officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: August 14, 2023 /s/ Tom Valenzuela
  Tom Valenzuela
  Interim Chief Executive Officer (Principal Executive Officer) and Interim Chief Financial Officer (Principal Financial Officer)

 

   

v3.23.2
Cover - shares
 6 Months Ended
Jun. 30, 2023
Aug. 01, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2023  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 000-55900  
Entity Registrant Name MJ HOLDINGS, INC.  
Entity Central Index Key 0001456857  
Entity Tax Identification Number 20-8235905  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 5730 Sky Pointe Dr.  
Entity Address, Address Line Two Suite 102  
Entity Address, City or Town Las Vegas  
Entity Address, State or Province NV  
Entity Address, Postal Zip Code 89130  
City Area Code (702)  
Local Phone Number 879-4440  
Title of 12(b) Security Common Stock  
Trading Symbol MJNE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   58,272,167
v3.23.2
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Current assets    
Cash $ 248,557 $ 1,340,509
Accounts receivable, net 63,458 10,149
Loan receivable - related party 274,197 212,469
Prepaid expenses 62,500
Total current assets 586,212 1,625,627
Property and equipment, net 2,449,801 2,494,953
Deposits 1,250,000 1,010,000
Total non-current assets 3,699,801 3,504,953
Total assets 4,286,013 5,130,580
Current liabilities    
Accounts payable and accrued expenses 842,347 1,312,394
Accrued interest payable, related party 4,336
Contract liabilities 220,000 1,360,000
Contingent liability 51,361 51,361
Income taxes payable 277,000 277,000
Note payable, currently in default 96,393
Current portion of operating lease obligation 171,088 171,088
Total current liabilities 2,089,684 4,157,432
Non-current liabilities    
Long-term notes payable 855,661
Operating lease obligation, net of current portion 598,596 598,596
Total non-current liabilities 1,454,257 598,596
Total liabilities 3,543,941 4,756,028
Commitments and contingencies (Note 10)
Stockholders’ equity (deficit)    
Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares issued; Series A convertible Preferred stock $1,000 stated value, 2,500 authorized, 0 shares issued and outstanding
Common stock, $0.001 par value, 95,000,000 shares authorized, 78,591,667 and 78,591,667 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively 78,590 78,590
Additional paid-in capital 22,261,217 22,261,217
Common stock issuable 84 84
Accumulated deficit (21,485,350) (21,852,870)
Total stockholders’ equity (deficit) attributable to MJ Holdings, Inc. 854,541 487,021
Noncontrolling interests (112,469) (112,469)
Total shareholders’ equity 742,072 374,552
Total liabilities and stockholders’ equity 4,286,013 5,130,580
Nonrelated Party [Member]    
Current liabilities    
Note payable, related party 121,076 985,589
Related Party [Member]    
Current liabilities    
Note payable, related party $ 306,083
v3.23.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2023
Dec. 31, 2022
Preferred stock, stated value $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 95,000,000 95,000,000
Common stock, shares issued 78,591,667 78,591,667
Common stock, shares outstanding 78,591,667 78,591,667
Series A Convertible Preferred Stock [Member]    
Preferred stock, stated value $ 1,000 $ 1,000
Preferred stock, shares authorized 2,500 2,500
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
v3.23.2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Income Statement [Abstract]        
Revenue, net $ 119,124 $ 28,765 $ 159,879 $ 60,606
Operating expenses        
Direct costs of revenue 3,200 3,200
General and administrative 168,029 29,217 641,226 1,294,160
Depreciation 57,506 87,786 115,012 130,180
Marketing and selling 2,156 424 5,320 5,306
Professional fees 305,781 376,658
Total operating expenses 536,672 117,427 1,141,416 1,429,646
Operating loss (417,548) (88,662) (981,537) (1,369,040)
Other income (expense)        
Interest expense (33,534) (13,714) (41,372) (39,742)
Interest income 27,203 51,183
Miscellaneous expense (64,447) (64,447)
Miscellaneous income 995,429 22,500 1,025,429 40,000
Gain on sale of luxury box 44,444
Gain on debt extinguishment 365,000 365,000
Total other income (expense) 1,326,895 (28,458) 1,349,057 31,438
Net income (loss) before income taxes 909,347 (117,120) 367,520 (1,337,602)
Provision for income taxes
Net income (loss) 909,347 (117,120) 367,520 (1,337,602)
Loss (gain) attributable to non-controlling interest
Net income (loss) attributable to common stockholders $ 909,347 $ (117,120) $ 367,520 $ (1,337,602)
Net income (loss) attributable to common stockholders per share- Basic $ (0.01) $ (0.00) $ (0.01) $ (0.02)
Net income (loss) attributable to common stockholders per share - Diluted $ (0.01) $ (0.00) $ (0.01) $ (0.02)
Weighted average number of shares outstanding:        
Basic 78,591,667 71,501,667 78,591,667 71,501,667
Diluted 78,591,667 71,501,667 78,591,667 71,501,667
v3.23.2
Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit) (Unaudited) - USD ($)
Common Stock Issuable [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Noncontrolling Interest [Member]
Retained Earnings [Member]
Total
Beginning balance, value at Dec. 31, 2021 $ 84 $ 71,500 $ 20,279,897 $ (112,469) $ (16,472,629) $ 3,766,383
Beginning balance, shares at Dec. 31, 2021 82,554 71,501,667        
Net income (loss) (1,337,602) (1,337,602)
Stock based compensation 6,710 6,710
Ending balance, value at Jun. 30, 2022 $ 84 71,500 20,286,607 (112,469) (17,810,231) 2,435,491
Ending balance, shares at Jun. 30, 2022 82,554          
Beginning balance, value at Mar. 31, 2022 $ 84 $ 71,500 20,286,607 (112,469) (17,693,111) 2,552,611
Beginning balance, shares at Mar. 31, 2022 82,554 71,501,667        
Net income (loss) (117,120) (117,120)
Ending balance, value at Jun. 30, 2022 $ 84 71,500 20,286,607 (112,469) (17,810,231) 2,435,491
Ending balance, shares at Jun. 30, 2022 82,554          
Beginning balance, value at Dec. 31, 2022 $ 84 $ 78,590 22,261,217 (112,469) (21,852,870) 374,552
Beginning balance, shares at Dec. 31, 2022 82,554 78,591,667        
Net income (loss) 367,520 367,520
Ending balance, value at Jun. 30, 2023 $ 84 $ 78,590 22,261,217 (112,469) (21,485,350) 742,072
Ending balance, shares at Jun. 30, 2023 82,554 78,591,667        
Beginning balance, value at Mar. 31, 2023 $ 84 $ 78,590 22,261,217 (112,469) (22,394,697) (167,275)
Beginning balance, shares at Mar. 31, 2023 82,554 78,591,667        
Net income (loss) 909,347 909,347
Ending balance, value at Jun. 30, 2023 $ 84 $ 78,590 $ 22,261,217 $ (112,469) $ (21,485,350) $ 742,072
Ending balance, shares at Jun. 30, 2023 82,554 78,591,667        
v3.23.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Cash Flows from Operating Activities    
Net income (loss) $ 367,520 $ (1,337,602)
Adjustments to reconcile net loss to net cash used in operating activities:    
Amortization of right to use asset
Depreciation 115,012 130,180
Gain on sale of luxury box (44,444)
Stock based compensation 6,710
Gain on extinguishment of debt (365,000)
Changes in operating assets and liabilities:    
Accounts receivable (53,309) (87,553)
Prepaid expenses 62,500
Other current assets (375,000)
Deposits (240,000)
Accounts payable and accrued liabilities 201,036 167,806
Accrued interest – related parties 4,336
Contract liabilities (1,140,000)
Net cash used in operating activities (1,047,905) (1,539,903)
Cash Flows from Investing Activities    
Purchase of property and equipment (69,860) (41,444)
Loan receivable – related party (61,728) (72,304)
Net cash used in investing activities (131,588) (113,748)
Cash Flows from Financing activities    
Proceeds from notes payable 100,000 133,392
Repayment of notes payable (12,459) (350,000)
Net cash provided by (used in) financing activities 87,541 (216,608)
Net change in cash (1,091,952) (1,870,259)
Cash, beginning of period 1,340,509 4,699,372
Cash, end of period 248,557 2,829,113
Supplemental disclosure of cash flow information:    
Interest paid 39,742
Income taxes paid
Non-cash investing and financing activities:    
Transfer of accrued compensation to notes payable $ 306,083
v3.23.2
Description of Business
 6 Months Ended
Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business

Note 1 — Description of Business

 

MJ Holdings, Inc. (OTCQB: MJNE) is a highly-diversified cannabis holding company providing cultivation management, asset and infrastructure development – currently concentrated in the Las Vegas market. It is the Company’s intention to grow its business and provide a 360-degree spectrum of infrastructure, including, cannabis cultivation, production of cannabis related products, management services, dispensaries and consulting services. The Company intends to grow its business through joint ventures with existing companies possessing complementary subject matter expertise, acquisition of existing companies and through the development of new opportunities. The Company intends to “prove the concept” profitably in the rapidly expanding Las Vegas market and then use that anticipated success as a template for replicating the concept in other developing states through a combination of strategic partnerships, acquisitions and opening new operations.

 

The Company was incorporated on November 17, 2006, as Securitas EDGAR Filings, Inc. under the laws of the State of Nevada. Prior to the formation of Securitas EDGAR Filings Inc., the business was operated as Xpedient EDGAR Filings, LLC, a Florida Limited Liability Company, formed on October 31, 2005. On November 21, 2005, Xpedient EDGAR Filings LLC amended its Articles of Organization to change its name to Securitas EDGAR Filings, LLC. On January 21, 2009, Securitas EDGAR Filings LLC merged into Securitas EDGAR Filings, Inc., a Nevada corporation. On February 14, 2014, the Company amended and restated its Articles of Incorporation and changed its name to MJ Holdings, Inc.

 

On November 22, 2016, in connection with a plan to divest the Company of its real estate business, the Company submitted to its stockholders an offer to exchange (the “Exchange Offer”) its 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. On January 10, 2017, the Company accepted for exchange 1,800,000 shares of its 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 held 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.

 

MJH Research, Inc. Acquisition

 

On July 8, 2022, MJ Holdings, Inc. (the “Buyer”) entered into a Common Stock Purchase Agreement (the “Agreement”) with MJH Research, Inc. (the “Company”), a Florida corporation, and Sunstate Futures, LLC (the “Seller”), a Florida limited liability company. Under the terms of the Agreement, the Seller agreed to sale all issued and outstanding shares of common stock (100,000 shares) (the “Common Stock”) of the Company to the Buyer. In consideration of the purchase of the shares of Common Stock, the Buyer agreed to issue the Seller seven million (7,000,000) shares of its common stock. The transaction closed on July 11, 2022. Net assets and liabilities of MJH Research, Inc. were approximately $500,000 and consideration on the acquisition date equated to approximately $1,955,000, most of which would be applied to intellectual property related to research of MJH Research, Inc. Please see Note 4 — Acquisition of MJH Research, Inc. for further information.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 
v3.23.2
Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 2 — Summary of Significant Accounting Policies

 

Basis of Presentation

 

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2023 and the results of operations, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on May 5, 2023. The Company’s accounting policies are described in the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2022, and updated, as necessary, in this Quarterly Report on Form 10-Q.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, MJH Research, Inc., Icon Management, LLC, Condo Highrise Management, LLC, Prescott Management, LLC, Q Brands, LLC, Farm Road, LLC, Red Earth Holdings, LLC and its majority owned subsidiary, Alternative Hospitality, Inc. Inter-company balances and transactions have been eliminated in consolidation.

 

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 stock-based compensation. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.

 

Cash

 

Cash includes cash on hand and deposits placed with banks or other financial institutions, which are unrestricted as to withdrawal and use and with an original maturity of three months or less. The Company maintains its cash in bank deposit accounts.

 

The Company, at various times throughout the year, had cash in financial institutions in excess of Federally insured limits. At June 30, 2023, the Company had $0 in excess. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its credit balances.

 

Fair Value of Financial Instruments

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2023 and December 31, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

 

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

 

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in these situations.

 

Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. The FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

 

Accounts Receivable and Allowance for Doubtful Accounts:

 

Accounts receivable are recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management’s judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable and current economic conditions. The determination of the collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole.

 

   June 30, 2023   December 31, 2022 
Accounts receivable  $63,458   $10,149 
Less allowance   -    - 
Net accounts receivable  $63,458   $10,149 

 

Debt Issuance Costs

 

Costs associated with obtaining, closing, and modifying loans and/or debt instruments are netted against the carrying amount of the debt instrument, and charged to interest expense over the term of the loan.

 

Inventory

 

Inventory is comprised of raw materials, finished goods and work-in-process such as pre-harvested cannabis plants and by-products to be extracted. The costs of growing cannabis, including but not limited to labor, utilities, nutrition and supplies, are capitalized into inventory until the time of harvest. All direct and indirect costs related to inventory are capitalized when incurred, and subsequently classified to cost of goods sold in the Consolidated Statements of Operations. Work-in-process is stated at the lower of cost or net realizable value, determined using the weighted average cost. Raw materials and finished goods inventory are stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. Net realizable value is determined as the estimated selling price in the ordinary course of business less estimated costs to sell. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items and reserves. The Company reviews inventory for obsolete, redundant and slow-moving goods and any such inventory is written down to net realizable value. Packaging and supplies are initially valued at cost. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and any impairment losses. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are expensed as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the consolidated statements of operations.

 

Construction in progress primarily represents the construction or the renovation costs stated at cost less any accumulated impairment loss, which is not depreciated. Costs incurred are capitalized and transferred to property and equipment upon completion, at which time depreciation commences.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Property and equipment are depreciated over their estimated useful lives as follows:

 

Buildings  12 years
Land  Not depreciated
Construction in progress  Not depreciated
Leasehold Improvements  Lessor of lease term or 5 years
Machinery and Equipment  5 years
Furniture and Fixtures  5 years

 

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.

 

Impairment of Long-lived Assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. The Company recorded an impairment of its long-lived assets in the amount of $0 and $0 for the six months ended June 30, 2023 and year ended December 31, 2022, respectively.

 

Contract Balances

 

The Company receives payments for new Cultivation and Sales Agreements (the “Agreements”) upon signing and defers revenue recognition for these payments until certain milestones are met as per the terms of the Agreements. These payments represent contract liabilities and are recorded as such on the balance sheet. As of June 30, 2023 and December 31, 2022, the Company’s contract liabilities were as follows:

 

   June 30, 2023   December 31, 2022 
MKC Development Group, LLC (i)  $-   $620,000 
Natural Green, LLC (ii)   -    520,000 
Green Grow Investments Corporation   50,000    50,000 
RK Grow, LLC   170,000    170,000 
Property and equipment, net  $220,000   $1,360,000 

 

  (i) On May 24, 2023 the Company entered into a settlement agreement with MKC Development Group, LLC (“MKC”) that terminated all of their rights, obligations, and responsibilities under the Agreement. As part of the settlement the Company agreed to refund $310,000 to MKC within one year of the date of the settlement agreement therefore the contract liability of $620,000 was written off the books, the refund amount of $310,000 was recorded in accounts payable, and the Company recorded $310,000 as miscellaneous income.
     
  (ii) On June 26, 2023 the Company entered into a termination agreement with Natural Green, LLC which terminated the original Cultivation and Sales Agreement and released each other of any liabilities, claims, or obligations under the Agreement.  As a result, the Company wrote off the $520,000 contract liability and recorded miscellaneous income.

 

Non- Controlling Interest

 

The Company’s non-controlling interest represents the minority shareholder’s ownership interest related to the Company’s subsidiary, Alternative Hospitality, Inc. The Company reports its non-controlling interest in subsidiaries as a separate component of equity in the Consolidated Balance Sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common shareholders on the face of the Consolidated Statements of Operations. The Company’s equity interest in Alternative Hospitality, Inc. is 51% and the non-controlling stockholder’s interest is 49%. This is reflected in the Consolidated Statements of Equity.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Revenue Recognition

 

On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers using the modified retrospective method. There was no impact upon adoption of ASC 606 on our consolidated financial statements. The new revenue standard was applied prospectively in the Company’s consolidated financial statements from January 1, 2018 forward and reported financial information for historical comparable periods will not be revised and will continue to be reported under the accounting standards in effect during those historical periods.

 

Generally, the Company considers all revenues as arising from contracts with customers. Revenue is recognized based on the five-step process outlined in the Accounting Standards Codification (“ASC”) 606:

 

Step 1 – Identify the Contract with the Customer – A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and it is probably that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

 

Step 2 – Identify Performance Obligations in the Contract – Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation.

 

Step 3 – Determine the Transaction Price – When (or as) a performance obligation is satisfied, the Company shall recognize as revenue the amount of the transaction price that is allocated to the performance obligation. The contract terms are used to determine the transaction price. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract would not occur.

 

Step 4 – Allocate the Transaction Price – After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price (SSP) at contract inception.

 

Step 5 – Satisfaction of the Performance Obligations (and Recognize Revenue) – Revenue is recognized when (or as) goods or services are transferred to a customer. The Company satisfies each of its performance obligations by transferring control of the promised good or service underlying that performance obligation to the customer. Control is the ability to direct the use of and obtain substantially all of the remaining benefits from an asset. It includes the ability to prevent other entities from directing the use of and obtaining the benefits from an asset. Indicators that control has passed to the customer include: a present obligation to pay; physical possession of the asset; legal title; risks and rewards of ownership; and acceptance of the asset(s). Performance obligations can be satisfied at a point in time or overtime.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

For the six months ended June 30, 2023, the majority of the Company’s revenue was derived from its Management Agreement with MJ Distributing, Inc. with the remainder from rental revenue from its Tiny Homes community. Rental revenue for operating leases is recognized on a straight-line basis over the term of the lease. Rental revenue recognition commences when the leased space is available for use by the lessee.

 

For the six months ended June 30, 2022, all of the Company’s revenue was derived from rental revenue from its Tiny Homes community.

 

   2023   2022 
   For the six months ended 
   June 30, 
   2023   2022 
Revenues:        
Rental income (i)  $41,263   $60,606 
Management income (ii)   118,616    - 
Total  $159,879   $60,606 

 

  (i) The rental income is from the Company’s THC Park.
     
  (ii) On February 5, 2021, the Company entered into a Management Agreement of Cannabis Production and Cultivation (the “Agreement”) with MJ Distributing, Inc. (the “Owner”) (together, the “Parties”). Under the terms of the Agreement, the Parties desire that the Company manage and operate the daily business of the Owner located in Pahrump, Nye County, Nevada. In consideration of the services to be performed by the Company, the Company and the Owner shall split the Net Profits of the business on a 50:50 basis. The Agreement was approved by the Cannabis Compliance Board at its July 26, 2022 meeting.

 

Stock-Based Compensation

 

The Company’s share-based payment awards principally consist of grants of common stock. In accordance with the applicable accounting guidance, stock-based payment awards are classified as either equity or liabilities. For equity-classified awards, the Company measures compensation cost based on the grant date fair value and recognizes compensation expense in the consolidated statements of operations over the requisite service or performance period the award is expected to vest. The fair value of liability-classified awards is at each reporting date through the settlement date. Change in fair value during the requisite service period will be remeasured as compensation cost over that period.

 

The Company utilizes its historical stock price to determine the volatility of any stock-based compensation.

 

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 term equal to the expected term of the stock-based award.

 

For stock-based financial instruments issued to parties other than employees, the Company uses 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 its best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and it uses different assumptions, its stock-based compensation expense could be materially different in the future.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Operating Leases

 

The Company adopted ASC Topic 842, Leases, on January 1, 2019. The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.

 

The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.

 

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 carry forwards. 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.

 

Reclassifications

 

Certain amounts in the condensed consolidated financial statements for the prior year have been reclassified to conform with the current year presentation.

 

Recent Accounting Pronouncements

 

As of June 30, 2023, there were no recently adopted accounting pronouncements that had a material effect on the Company’s consolidated financial statements.

 
v3.23.2
Going Concern
 6 Months Ended
Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern

Note 3 — Going Concern

 

The Company has recurring net losses, which have resulted in an accumulated deficit of $21,485,350 as June 30, 2023. The Company had negative cash flows from operations of $1,047,905 for the six months ended June 30, 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise capital, and generate revenues. The Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The Company’s current capital resources include cash. Historically, the Company has financed its operations principally through equity and debt financing.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 
v3.23.2
Acquisition of MJH Research, Inc.
 6 Months Ended
Jun. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
Acquisition of MJH Research, Inc.

Note 4 — Acquisition of MJH Research, Inc.

 

On July 8, 2022, MJ Holdings, Inc. (the “Buyer”) entered into a Common Stock Purchase Agreement (the “Agreement”) with MJH Research, Inc. (the “Company”), a Florida corporation, and Sunstate Futures, LLC (the “Seller”), a Florida limited liability company. Under the terms of the Agreement, the Seller agreed to sale all issued and outstanding shares of common stock (100,000 shares) (the “Common Stock”) of the Company to the Buyer. In consideration of the purchase of the shares of Common Stock, the Buyer agreed to issue the Seller seven million (7,000,000) shares of its common stock. The acquisition is a provisional estimate and is being further evaluated. The transaction closed on July 11, 2022.

 

Details regarding the book values and fair values of the net assets acquired are as follows:

 

   Book Value   Fair Value   Difference 
             
Cash  $504,685   $504,685   $       - 
Total  $504,685   $504,685   $- 

 

Goodwill and Intangibles

 

Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Intangible assets other than goodwill are recorded at fair value at the time acquired or at cost, if applicable. Intangible assets that do not have indefinite lives are amortized in line with the pattern in which the economic benefits of the intangible asset are consumed. If the pattern of economic benefit cannot be reliably determined, the intangible assets are amortized on a straight-line basis over the shorter of the legal or estimated life. Goodwill and indefinite-lived intangibles assets are not amortized but are tested for impairment in the fourth quarter using the same dates each year or more frequently if changes in circumstances or the occurrence of events indicate potential impairment.

 

In performing the annual impairment test, the fair value of each indefinite-lived intangible asset is compared to its carrying value and an impairment charge is recorded if the carrying value exceeds the fair value. For goodwill, the Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its’ carrying amount, and whether it is necessary to perform the quantitative goodwill impairment test. The quantitative test is required only if the Company concludes that it is more-likely-than-not that a reporting unit’s fair value is less than its’ carrying amount. For quantitative testing, the Company compares the fair value of each reporting unit with its’ carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

 

Fair values are determined using established business valuation techniques and models developed by the Company, estimates of market participant assumptions of future cash flows, future growth rates and discount rates to value estimated cash flows. Changes in economic and operating conditions, actual growth below the assumed market participant assumptions or an increase in the discount rate could result in an impairment charge in a future period.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 4 — Acquisition of MJH Research, Inc. (continued)

 

Acquisitions

 

Upon acquisition of a business, the Company uses the income, market or cost approach (or a combination thereof) for the valuation as appropriate. The valuation inputs in these models and analyses are based on market participant assumptions. Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability.

 

Fair value estimates are based on a series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Management values property, plant and equipment using the cost approach supported where available by observable market data, which includes consideration of obsolescence. Management values acquired intangible assets using the relief from royalty method or excess earnings method, forms of the income approach supported by observable market data for peer companies. The significant assumptions used to estimate the value of the acquired intangible assets include discount rates and certain assumptions that form the basis of future cash flows (such as revenue growth rates, customer attrition rates, and royalty rates). Acquired inventories are marked to fair value for valuation of the total purchase price. For certain items, the carrying value is determined to be a reasonable approximation of fair value based on information available to the Company.

 Schedule of Assets Acquired

Assets acquired 

As of July 11, 2022

 
     
Cash  $504,685 
Goodwill (i)   1,451,815 
Total purchase price  $1,956,500 

 

(i) Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired.

 

The changes in the carrying amount of goodwill for the period from July 11, 2022 through June 30, 2023 were as follows:

 

      
Balance as of July 11, 2022  $1,451,815 
Additions and adjustments   (1,451,815)
Balance as of June 30, 2023  $- 

 
v3.23.2
Property and Equipment
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
Property and Equipment

Note 5 — Property and Equipment

 

Property and equipment at June 30, 2023 and December 31, 2022 consisted of the following:

 

   June 30, 2023   December 31, 2022 
Leasehold Improvements  $264,523   $264,523 
Machinery and Equipment   853,218    386,879 
Building and Land   1,650,000    1,650,000 
Furniture and Fixtures   561,352    561,352 
Construction in progress   -    396,480 
Total property and equipment   3,329,093    3,259,233 
Less: Accumulated depreciation   (879,292)   (764,280)
Property and equipment, net  $2,449,801   $2,494,953 

 

Depreciation expense for the six months ended June 30, 2023 and 2022 was $115,012 and $130,180, respectively.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 
v3.23.2
Intangible Assets
 6 Months Ended
Jun. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

Note 6 — Intangible Assets

 

In October 2016, Red Earth, LLC (“Red Earth”), a Nevada limited liability company, entered into an Asset Purchase and Sale Agreement with the owner of a provisional Medical Marijuana Establishment Registration Certificate (the “Provisional Grow License”) issued by the state of Nevada for the cultivation of medical marijuana for $300,000. To initiate the purchase and transfer the Provisional Grow License, the Company paid a $25,000 deposit to the seller in October 2016.

 

The Provisional Grow License remains in a provisional status until the Company has completed the buildout of a cultivation facility and obtained approval from the state of Nevada to begin cultivation in the approved facility. Once approval from the state of Nevada is received, the Company begins the cultivation process.

 

On December 15, 2017, the Company acquired 100% of the outstanding membership interests of Red Earth for 52,732,969 shares of common stock of the Company, par value $0.001 and a Promissory Note in the amount of $900,000. Red Earth became a wholly owned subsidiary (the “Subsidiary”) of the Company.

 

On or about May 7, 2021, the Subsidiary, received an inquiry from the State of Nevada Cannabis Compliance Board (“CCB”) regarding the transfer of ownership of the Subsidiary from its previous owners to the Company. The CCB has determined that the transfer was not formally approved, thus a Category II violation.

 

On July 27, 2021, the Subsidiary entered into a Stipulation and Order for Settlement of Disciplinary Action (the “Stipulation Order”) with the CCB. Under the terms of the Stipulation Order, the Subsidiary has agreed to present to the CCB, by not later than August 31, 2021, a plan pursuant to which the ownership of the Subsidiary will be returned to the original owners. The Parties to the Stipulation Order resolved the matter without the necessity of taking formal action. The Subsidiary agreed to pay a civil penalty of $10,000, which was paid on July 29, 2021.

 

On August 1, 2021, the Company entered into a Memorandum of Understanding and Agreement for Technical Services and Short-Term Funding (the “Agreement”) with Red Earth, LLC (hereinafter, “Red Earth”), an entity controlled by its Chief Cultivation Officer, Paris Balaouras. Under the terms of the Agreement, the Company will provide a short-term loan (the “Loan”) to Red Earth for expenses related to the activation and operation of Red Earth’s cultivation license. The Loan shall bear interest at 12% per annum and increase to 18% upon default. In addition, the Company shall provide Red Earth pre-opening technical services at a cost of $5,000 to $10,000 per month. As of March 31, 2023, the amount due the Company under the short-term loan is $244,197 and the amount of technical services income (other income) recorded for the three months ended March 31, 2023 was $30,000.

 

On August 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of the Subsidiary, Paris Balaouras, entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December 15, 2017, entered into between the Company and the Subsidiary was terminated as of the date of the Termination Agreement resulting in the return of ownership of the Subsidiary to Mr. Balaouras. Neither party shall have any further obligation to one another pursuant to the terms of the Purchase Agreement. Please see Note 14 — Related Party Transactions for further information.

 

On September 2, 2021, the Company received approval of the Termination Agreement from the CCB.

 
v3.23.2
Deposits
 6 Months Ended
Jun. 30, 2023
Deposits

Note 7 — Deposits

 

Deposits as of June 30, 2023 and December 31, 2022 consist of the following:

  

   June 30, 2023   December 31, 2022 
MJ Distributing, Inc. (i)  $1,250,000   $1,010,000 
Total  $1,250,000   $1,010,000 

 

  (i) On February 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. In consideration of the sale, transfer, assignment and delivery of the Membership Interests to Purchaser, and the covenants made by Seller under the MIPA3, Purchaser agreed to pay a combination of cash, promissory notes, and stock in the amount of One-Million-Two-Hundred-Fifty Thousand Dollars ($1,250,000.00) in cash and/or promissory notes and 200,000 shares of the Company’s restricted common stock, all of which constitutes the consideration agreed to herein for (the “Purchase Price”), payable as follows: (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against future compensation due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, (v) $200,000 shall be deposited on or before June 12, 2021, and (vi) $250,000 shall be deposited within five (5) business days after the Nevada Cannabis Compliance Board (“CCB”) provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 
v3.23.2
Notes Payable
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
Notes Payable

Note 8 — Notes Payable

 

Note Payable, Currently in Default

 

Notes payable, currently in default as of June 30, 2023 and December 31, 2022 consist of the following:

 

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 6.5% originated April 1, 2019, due on March 31, 2022, originally $250,000  $96,393   $         - 
Total notes payable, currently in default  $96,393   $- 

 

On April 1, 2019, the Company executed a promissory note for $250,000 with John T. Jacobs and Teresa D. Jacobs. The note accrues interest at 6.5% per annum, payable in regular monthly installments of $2,178, due on or before the same day of each month beginning May 1, 2019 until March 31, 2020 at which time a principal reduction of $50,000 was due and the payments were re-amortized (15-year amortization). On or before March 31, 2021, a second principal reduction of $50,000 was due and the payments were re-amortized (15-year amortization). Payments were to continue to be paid until March 31, 2022, at which time the entire sum of principal and accrued interest was due and payable, however no such payment was made, thus the note went into default. As of June 30, 2023, $96,393 principal remains due.

 

Note Payable

 

Notes payable as of June 30, 2023 and December 31, 2022 consist of the following:

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 5.0%, originated January 17, 2019, due on February 1, 2025, originally $750,000 (i)  $876,737   $878,589 
Note payable bearing interest at 6.5% originated April 1, 2019, due on March 31, 2022, originally $250,000 (ii)   -    107,000 
Note payable bearing interest at 15%, originated May 10, 2023, due on May 10, 2024, originally $50,000 (iii)   50,000    - 
Note payable bearing interest at 7%, originated June 30, 2023, due on June 30, 2024, originally $50,000 (iv)   50,000    - 
Total notes payable  $976,737   $985,589 
Less: current portion   (121,076)   (985,589)
Long-term notes payable  $

855,661

   $- 

 

  (i) On January 17, 2019, the Company executed a promissory note for $750,000 with FR Holdings LLC (the “Holder”), a Wyoming limited liability company. The Noted Secured by Deed of Trust (the “Secured Note”) accrues interest at 5.0% per annum, payable in regular monthly installments of $3,125, due on or before the same day of each month beginning February 1, 2019 until January 31, 2022 at which the entire principal and any then accrued interest thereon shall be due and payable. On February 4, 2022, the Company entered into a Note Modification Agreement (the “Agreement”) with the Holder amending the terms of the Secured Note. The Parties agreed that the maturity date of the Secured Note being January 31, 2022, had passed and that the balance of the Secured Note was due (currently Seven-Hundred and Fifty-Thousand Dollars ($750,000), and the parties also agreed that the conditions in the Secured Note requiring the assessment of the additional Five-Hundred Thousand Dollars ($500,000) consulting fee was triggered bringing the total amount owed by the Company under the terms of the Secured Note to One-Million Two-Hundred Fifty-Thousand Dollars ($1,250,000). Under the terms of the Agreement, the Company made a payment in the amount of $357,343 bringing the new principal balance to $900,000. The interest rate is 7% per annum. Future payments shall be calculated on a 20-year amortization with a balloon payment in three years. The first monthly payment of $6,978 was made on March 25, 2022 with the final balloon payment due on February 1, 2025. As of March 31, 2023, $876,737 principal remains due.
     
  (ii) On April 1, 2019, the Company executed a promissory note for $250,000 with John T. Jacobs and Teresa D. Jacobs that became due in full on March 31, 2022. As the note was not paid in full on that date the note went into default, see Note Payable, Currently in Default section above.
     
  (iii) On May 10, 2023, the Company executed a promissory note for $50,000 with Fevos A LLC for a duration of 12 months. The note accrues interest at 15% per annum calculated on a simple basis and payable in full at the end of the loan term.
     
  (iv) On June 30, 2023, the Company executed a promissory note for $50,000 with Fort Freedom, LLC for a duration of 12 months. The note accrues interest at 7% per annum, payable in monthly interest payments due the 1st day of each month for the duration of the note. The principal amount will be repaid in full at the end of the loan term.

 

   Amount 
Fiscal year ending December 31:      
   $    
2023 (Excluding the six months Ended June 30, 2023)    109,496 
2024   

23,608

 
2025   

843,633

 
2026   - 
Thereafter    - 
Total minimum loan payments   $976,737 

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 
v3.23.2
Note Payable, related party
 6 Months Ended
Jun. 30, 2023
Related Party [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Note Payable, related party

Note 9 — Note Payable, related party

 

Note payable, related party, as of June 30, 2023 and December 31, 2022 consist of the following:

 

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 4.0% originated February 23, 2023, due on January 31, 2024, originally $350,000 (i)  $306,083   $           - 
Less: current portion   (306,083)   - 
Long-term notes payable  $-   $- 

 

  (i) On February 23, 2023, the Company issued a Secured Promissory Note (the “Note”) in the original amount of $350,000, to Paris Balaouras, the Company’s founder and ex-Chief Executive Officer, for accrued wages. Under the terms of the Note, the Note accrues interest at 4% per annum and shall terminate upon the earlier of January 31, 2024 or the sale of the Company’s Tiny Homes Farm located in Nye County, NV. On this same date, the Company entered into a Deed of Trust and Security Agreement and Fixture Filings with Assignment of Rents for the Company’s Tiny Homes Farm. The principal amount of the Note was reduced to $306,083 on March 1, 2023.

 
v3.23.2
Commitments and Contingencies
 6 Months Ended
Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 10 — Commitments and Contingencies

 

Operating Leases

 

The Company leases a two production / warehouse facility under a non-cancelable operating lease that expires in June 2027 and September 2029, respectively.

 

As of June 30, 2023, the Company recorded operating lease liabilities of $769,684 and right of use assets for operating leases of $0. During the six months ended June 30, 2023, operating cash outflows relating to operating lease liabilities was $0. As of June 30, 2023, the Company’s operating leases had a weighted-average remaining term of 3 years.

 

Rent expense, incurred pursuant to operating leases for the six months ended June 30, 2023 and 2022, was $0 and $96,000, respectively.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 10 — Commitments and Contingencies (continued)

 

Litigation

 

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the liability includes probable and estimable legal cost associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company business.

 

MJ Holdings, Inc. Complaint

 

On December 14, 2021, MJ Holdings, Inc. (the “Plaintiff”) filed a Complaint against NCMM, LLC, AP Management, LLC and Valerie Small (collectively, the “Defendants”) (together, the “Parties”). In the Complaint, the Plaintiff alleges that the Defendants have refused to return the cannabis that was being stored for Plaintiff under a Storage and Purchase Agreement entered into with AP Management. By failing to return the cannabis to Plaintiff, or Plaintiff’s designee, the Defendants have deprived Plaintiff of the ability to sell, transfer or market the product. In addition, the Defendants have sought to unlawfully extort the Plaintiff for illicit payments of thousands of dollars in money and/or cannabis in exchange for returning the cannabis. On March 31, 2023, the Parties entered into a Settlement Agreement (the “Settlement Agreement”) whereby NCMM, LLC and Valerie Smalls shall (i) contact the CCB within 7 days of execution of the Settlement Agreement for authorization to transfer the approximately 1800 pounds of fresh frozen to MJ Distributing, both the passing and failed fresh frozen; and (ii) NCMM shall pay the Company a total of $60,000 as a Settlement Amount. The Settlement Amount shall be paid as $5,000 per month. In the event the Settlement Amount monthly payment is not paid by the fifth of every month, NCMM shall pay a late payment penalty fee of $100 per day. As of June 30, 2023 the unpaid balance related to this settlement was $50,000.

 

Gappy and Shaba Compliant

 

On December 3, 2021, a Complaint was filed against MJ Holdings, Inc., HDGLV, LLC, Red Earth, LLC (collectively, the “Defendants”) by Ziad Gappy and David Shaba (collectively, the “Plaintiffs”). In the Complaint, the Plaintiffs allege the Defendants made misleading statements and/or omissions relating to the Company in the Plaintiffs’ negotiation to purchase shares of MJ Holdings, Inc. In addition, the Plaintiffs allege that the Defendants have not honored the 2018 Agreements negotiated between the Plaintiffs and Defendants, MJ Holdings, Inc. has failed to issue an additional $125,000 in stock due to the Plaintiffs as was agreed to in writing and the Defendants have failed to start the Western Project. The case is ongoing. Defendants have denied all allegations. Discovery is currently open and is set to close in July of 2023.

 

DGMD Complaint

 

On March 19, 2021, a Complaint was filed against the Company, Jim Mueller, John Mueller, MachNV, LLC, Acres Cultivation, Paris Balaouras, Dimitri Deslis, ATG Holdings, LLC and Curaleaf, Inc. (collectively, the “Defendants”) by DGMD Real Estate Investments, LLC, ARMPRO, LLC, Zhang Springs LV, LLC, Prodigy Holdings, LLC and Green Organics, LLC (collectively, the “Plaintiffs”) in the District Court of Clark County, Nevada.

 

In the Complaint, the Plaintiffs allege that the Defendants: (i) intended to fraudulently obtain money from the Plaintiffs in order to put that money towards the Acres dispensary and to make Acres look more appealing to potential buyers as well as pay off Defendants’ agents, and (ii) the Defendants acted together in order to find investors to invest money into the Acres and MJ Holdings “Investment Schemes”, and (iii) the Defendants intended to fraudulently obtain Plaintiffs’ money for the purpose of harming the Plaintiffs to benefit the Defendants, and (iv) the Defendants committed unlawful fraudulent misrepresentation in the furtherance of the agreement to defraud the Plaintiffs. The Plaintiffs allege that damages are in excess of $15,000.

 

Discovery has concluded and the parties were unable to resolve the case through settlement negotiations. Paris Balaouras and MJ Holdings filed a motion for summary judgment against all Defendants. The Court granted the Motion as to Plaintiffs DGMD Real Estate Investments, LLC, Armpro, LLC and Zhang Springs LV, LLC. The Court denied the motion as to Prodigy Holdings LLC and Las Vegas Green Organics. The Case is set to go to trial on May 15, 2023.

 

Tierney Arbitration

 

On March 9, 2021, Terrence Tierney (“Claimant”), the Company’s former President and Secretary, who was terminated by the Company for Cause on August 7, 2020, filed for arbitration with the American Arbitration Association for: (i) breach of contract, (i) breach of the implied covenant of good faith and fair dealing, and (iii) NRS 608 wage claim. Mr. Tierney demanded payment in the amount of $501,085 for unpaid base pay and unpaid deferred business compensation (which was not earned nor due), expenses paid on behalf of the Company, accrued vacation and severance pay. On April 7, 2021, the Company made payment of unpaid base pay against the wage claim in the amount of $62,392, inclusive of $59,583 for wages and $2,854 for accrued vacation plus $8,307.60 for statutory penalties. As such, the Company posits that any compensation claims that Claimant may have had have been paid in full and that the Company otherwise has no liability. The Company filed a counterclaim in the action declaring that Tierney breached the contract of employment, committed fraud, malfeasance and other nefarious acts causing substantial damage to the Company with estimated monetary damages well in excess of any monetary claim made by Tierney. On May 4, 2022, the Arbitrator issued a ruling concluding that the Arbitrator did not have jurisdiction over Claimant’s statutory wage claim under NRS 608. On September 19, 2022, Claimant filed a complaint in state court seeking compensation under NRS 608.020. The Company asserts that the 2-year statute of limitations bars Claimant’s complaint, and further asserts that Claimant has been paid in full pursuant to the payments issued to Claimant on April 7, 2021. The arbitration proceeded to trial on January 9-12, 2023 and the Arbitrator issued her award on March 7, 2023, awarding Claimant $401,361 in damages, offset by $350,000 awarded to the Company for its counter-claims, with a net damage award to Claimant in the sum of $51,361. As of June 30, 2023 the full amount remains unpaid.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 
v3.23.2
Stockholders’ Equity (Deficit)
 6 Months Ended
Jun. 30, 2023
Equity [Abstract]  
Stockholders’ Equity (Deficit)

Note 11 — Stockholders’ Equity (Deficit)

 

General

 

The Company is currently authorized to issue up to 95,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par value $0.001 per share.

 

Common Stock

 

Of the 95,000,000 shares of Common Stock authorized by the Company’s Articles of Incorporation, 78,591,667 shares of Common Stock are issued and outstanding as of June 30, 2023. Each holder of Common Stock is entitled to one vote per share on all matters to be voted upon by the stockholders and are not entitled to cumulative voting for the election of directors. Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor subject to the rights of preferred stockholders. The Company has not paid any dividends and does not intend to pay any cash dividends to the holders of Common Stock in the foreseeable future. The Company anticipates reinvesting its earnings, if any, for use in the development of its business. In the event of liquidation, dissolution, or winding up of the Company, the holders of Common Stock are entitled, unless otherwise provided by law or the Company’s Articles of Incorporation, including any certificate of designations for a series of preferred stock, to share ratably in all assets remaining after payment of liabilities and the preferences of preferred stockholders. Holders of the Company’s Common Stock do not have preemptive, conversion, or other subscription rights. There are no redemptions or sinking fund provisions applicable to the Company’s Common Stock.

 

Common Stock Issuances

 

For the six months ended June 30, 2023:

 

None

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 11 — Stockholders’ Equity (Deficit) (continued)

 

At June 30, 2023 and December 31, 2022, there are 78,591,667 and 78,591,667 shares of Common Stock issued and outstanding, respectively.

 

Preferred Stock

 

The Board is authorized, without further approval from our stockholders, to create one or more series of preferred stock, and to designate the rights, privileges, preferences, restrictions, and limitations of any given series of preferred stock. Accordingly, the Board may, without stockholder approval, issue shares of preferred stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of Common Stock. The issuance of preferred stock could have the effect of restricting dividends payable to holders of our Common Stock, diluting the voting power of our Common Stock, impairing the liquidation rights of our Common Stock, or delaying or preventing a change in control of us, all without further action by our stockholders. Of the 5,000,000 shares of preferred stock, par value $0.001 per share, authorized in our Articles of Incorporation, 2,500 shares are designated as Series A Convertible Preferred Stock.

 

Series A Convertible Preferred Stock

 

Each share of Series A Preferred Stock is convertible, at the option of the holder, into that number of shares of Common Stock determined by dividing the stated value of each share of Series A Preferred Stock (currently, $1,000) by the conversion price (currently, $0.75). The stated value and the conversion price are subject to adjustment as provided for in the Certificate of Designation. We are prohibited from effecting a conversion of the Series A Preferred Stock to the extent that, after giving effect to the conversion, the holder (together with such holder’s affiliates and any persons acting as a group with holder or any of such holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion. A holder, upon notice to us, may increase or decrease this beneficial ownership limitation; provided, that, in no event can the holder increase the beneficial ownership limitation in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series A Preferred Stock then held by holder. Such increase of the beneficial ownership limitation cannot be effective until the 61st day after such notice is given to us and shall apply only to such holder. The Series A Preferred Stock has no voting rights; however, as long as any shares of Series A Preferred Stock are outstanding, we are not permitted, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock to (i) alter or change adversely the powers, preferences, or rights given to the Series A Preferred Stock or alter or amend the Series A Preferred Stock Certificate of Designation, (ii) amend our Articles of Incorporation or other charter documents in any manner that adversely affects any rights of the holders, (iii) increase the number of authorized shares of Series A Preferred Stock, or (iv) enter into any agreement with respect to any of the forgoing.

 

Preferred Stock Issuances

 

For the six months ended June 30, 2023

 

None

 

At June 30, 2023 and December 31, 2022, there were 0 and 0 shares of Series A Preferred Stock issued and outstanding, respectively.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 
v3.23.2
Basic and Diluted Earnings (Loss) per Common Share
 6 Months Ended
Jun. 30, 2023
Earnings Per Share [Abstract]  
Basic and Diluted Earnings (Loss) per Common Share

Note 12 — 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 stockholders 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 six months ended June 30, 2023, basic and diluted loss per common share were the same since there were no potentially dilutive shares outstanding during the respective periods. The outstanding options and warrants as of June 30, 2023, to purchase 1,500,000 and 250,000 shares of common stock, respectively, were not included in the calculations of diluted loss per share because the impact would have been anti-dilutive.

 

For the six months ended June 30, 2023, basic and diluted income per common share were based on 78,591,667 and 78,591,667 shares, respectively.

 
v3.23.2
Stock Based Compensation
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Stock Based Compensation

Note 13 — Stock Based Compensation

 

Warrants and Options

 

A summary of the warrants and options issued, exercised and expired are below:

 

Stock Options

 

On September 15, 2020, the Company issued an option to purchase 500,000 shares of common stock to each of Messrs. Balaouras, Bloss and Moyle as per the terms of their employment agreements. The options have an exercise price of $0.75 and expire on the three-year anniversary date.

 

A summary of the options issued, exercised and expired are below:

 

Options:   Shares  

Weighted Average

Exercise Price

  

Remaining Contractual

Life in Years

 
Balance at December 31, 2022    1,500,000   $0.75    0.68 
Issued    -    -    - 
Exercised    -    -    - 
Expired    -    -    - 
Balance at June 30, 2023    1,500,000   $0.75    0.18 
Exercisable at June 30, 2023    1,500,000   $0.75    0.18 

 

Options outstanding as of June 30, 2023 and December 31, 2022 were 1,500,000 and 1,500,000, respectively.

 

Warrants

 

On January 11, 2021, the Company issued an accredited investor a Common Stock Purchase Warrant Agreement in conjunction with the July 2020 Securities Purchase Agreement granting the holder the right to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $0.10 for a term of 4-years.

 

A summary of the warrants issued, exercised and expired are below:

 

Warrants:   Shares  

Weighted Avg.
Exercise Price

  

Remaining Contractual

Life in Years

 
Balance at December 31, 2022    250,000   $0.10    2.03 
Issued    -    -    - 
Exercised    -    -    - 
Expired    -    -    - 
Balance at June 30, 2023    250,000   $0.10    1.53 
Exercisable at June 30, 2023    250,000   $0.10    1.53 

 

Warrants outstanding as of June 30, 2023 and December 31, 2022 were 250,000 and 250,000, respectively.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 
v3.23.2
Related Party Transactions
 6 Months Ended
Jun. 30, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

Note 14 — Related Party Transactions

 

On August 1, 2021, the Company entered into a Memorandum of Understanding and Agreement for Technical Services and Short-Term Funding (the “Agreement”) with Red Earth, LLC (hereinafter, “Red Earth”), an entity controlled by its Chief Cultivation Officer, Paris Balaouras. Under the terms of the Agreement, the Company will provide a short-term loan (the “Loan”) to Red Earth for expenses related to the activation and operation of Red Earth’s cultivation license. The Loan shall bear interest at 12% per annum and increase to 18% upon default. In addition, the Company shall provide Red Earth pre-opening technical services at a cost of $5,000 to $7,500 per month. As of June 30, 2023, the amount due the Company under the short-term loan is $274,197 and for the six months ended June 30, 2023 the Company made payments of $61,728 on the loan and the amount of technical services income (other income) was $60,000.

 

On September 5, 2022, the Company entered into an Amendment (the “Amendment”) with Highland Brothers, LLC (together, the “Parties’) to amend the original agreement (the “Agreement”) between the Parties dated February 15, 2019. Under the terms of the Amendment, the term of the Agreement has been extended to fifteen years and the Company shall pay Highland Brothers, LLC $150,000 as cash consideration within 10 days of execution of the Amendment. The Company made the $150,000 payment on October 6, 2022.

 
v3.23.2
Subsequent Events
 6 Months Ended
Jun. 30, 2023
Subsequent Events [Abstract]  
Subsequent Events

Note 15 — Subsequent Events

 

The Company has evaluated events subsequent to the balance sheet through the date the financial statements were issued and noted the following events requiring disclosure:

 

On July 6, 2023, the Company agreed to issue a reversal of the cannabis license acquisition from Roll On LLC. As a result, 20,319,500 common shares of MJ Holdings, Inc., which were previously issued to Roll On LLC as partial compensation for the license purchase, were returned to the Company.
v3.23.2
Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2023 and the results of operations, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on May 5, 2023. The Company’s accounting policies are described in the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2022, and updated, as necessary, in this Quarterly Report on Form 10-Q.

 
Principles of Consolidation

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, MJH Research, Inc., Icon Management, LLC, Condo Highrise Management, LLC, Prescott Management, LLC, Q Brands, LLC, Farm Road, LLC, Red Earth Holdings, LLC and its majority owned subsidiary, Alternative Hospitality, Inc. Inter-company balances and transactions have been eliminated in consolidation.

 
Use of Estimates

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 stock-based compensation. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.

 
Cash

Cash

 

Cash includes cash on hand and deposits placed with banks or other financial institutions, which are unrestricted as to withdrawal and use and with an original maturity of three months or less. The Company maintains its cash in bank deposit accounts.

 

The Company, at various times throughout the year, had cash in financial institutions in excess of Federally insured limits. At June 30, 2023, the Company had $0 in excess. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its credit balances.

 
Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2023 and December 31, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

 

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

 

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in these situations.

 

Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. The FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

 
Accounts Receivable and Allowance for Doubtful Accounts:

Accounts Receivable and Allowance for Doubtful Accounts:

 

Accounts receivable are recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management’s judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable and current economic conditions. The determination of the collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole.

 

   June 30, 2023   December 31, 2022 
Accounts receivable  $63,458   $10,149 
Less allowance   -    - 
Net accounts receivable  $63,458   $10,149 

 
Debt Issuance Costs

Debt Issuance Costs

 

Costs associated with obtaining, closing, and modifying loans and/or debt instruments are netted against the carrying amount of the debt instrument, and charged to interest expense over the term of the loan.

 
Inventory

Inventory

 

Inventory is comprised of raw materials, finished goods and work-in-process such as pre-harvested cannabis plants and by-products to be extracted. The costs of growing cannabis, including but not limited to labor, utilities, nutrition and supplies, are capitalized into inventory until the time of harvest. All direct and indirect costs related to inventory are capitalized when incurred, and subsequently classified to cost of goods sold in the Consolidated Statements of Operations. Work-in-process is stated at the lower of cost or net realizable value, determined using the weighted average cost. Raw materials and finished goods inventory are stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. Net realizable value is determined as the estimated selling price in the ordinary course of business less estimated costs to sell. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items and reserves. The Company reviews inventory for obsolete, redundant and slow-moving goods and any such inventory is written down to net realizable value. Packaging and supplies are initially valued at cost. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods.

 
Property and Equipment

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and any impairment losses. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are expensed as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the consolidated statements of operations.

 

Construction in progress primarily represents the construction or the renovation costs stated at cost less any accumulated impairment loss, which is not depreciated. Costs incurred are capitalized and transferred to property and equipment upon completion, at which time depreciation commences.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

Property and equipment are depreciated over their estimated useful lives as follows:

 

Buildings  12 years
Land  Not depreciated
Construction in progress  Not depreciated
Leasehold Improvements  Lessor of lease term or 5 years
Machinery and Equipment  5 years
Furniture and Fixtures  5 years

 
Long–lived Assets

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.

 
Impairment of Long-lived Assets

Impairment of Long-lived Assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. The Company recorded an impairment of its long-lived assets in the amount of $0 and $0 for the six months ended June 30, 2023 and year ended December 31, 2022, respectively.

 
Contract Balances

Contract Balances

 

The Company receives payments for new Cultivation and Sales Agreements (the “Agreements”) upon signing and defers revenue recognition for these payments until certain milestones are met as per the terms of the Agreements. These payments represent contract liabilities and are recorded as such on the balance sheet. As of June 30, 2023 and December 31, 2022, the Company’s contract liabilities were as follows:

 

   June 30, 2023   December 31, 2022 
MKC Development Group, LLC (i)  $-   $620,000 
Natural Green, LLC (ii)   -    520,000 
Green Grow Investments Corporation   50,000    50,000 
RK Grow, LLC   170,000    170,000 
Property and equipment, net  $220,000   $1,360,000 

 

  (i) On May 24, 2023 the Company entered into a settlement agreement with MKC Development Group, LLC (“MKC”) that terminated all of their rights, obligations, and responsibilities under the Agreement. As part of the settlement the Company agreed to refund $310,000 to MKC within one year of the date of the settlement agreement therefore the contract liability of $620,000 was written off the books, the refund amount of $310,000 was recorded in accounts payable, and the Company recorded $310,000 as miscellaneous income.
     
  (ii) On June 26, 2023 the Company entered into a termination agreement with Natural Green, LLC which terminated the original Cultivation and Sales Agreement and released each other of any liabilities, claims, or obligations under the Agreement.  As a result, the Company wrote off the $520,000 contract liability and recorded miscellaneous income.

 
Non- Controlling Interest

Non- Controlling Interest

 

The Company’s non-controlling interest represents the minority shareholder’s ownership interest related to the Company’s subsidiary, Alternative Hospitality, Inc. The Company reports its non-controlling interest in subsidiaries as a separate component of equity in the Consolidated Balance Sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common shareholders on the face of the Consolidated Statements of Operations. The Company’s equity interest in Alternative Hospitality, Inc. is 51% and the non-controlling stockholder’s interest is 49%. This is reflected in the Consolidated Statements of Equity.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 
Revenue Recognition

Revenue Recognition

 

On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers using the modified retrospective method. There was no impact upon adoption of ASC 606 on our consolidated financial statements. The new revenue standard was applied prospectively in the Company’s consolidated financial statements from January 1, 2018 forward and reported financial information for historical comparable periods will not be revised and will continue to be reported under the accounting standards in effect during those historical periods.

 

Generally, the Company considers all revenues as arising from contracts with customers. Revenue is recognized based on the five-step process outlined in the Accounting Standards Codification (“ASC”) 606:

 

Step 1 – Identify the Contract with the Customer – A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and it is probably that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

 

Step 2 – Identify Performance Obligations in the Contract – Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation.

 

Step 3 – Determine the Transaction Price – When (or as) a performance obligation is satisfied, the Company shall recognize as revenue the amount of the transaction price that is allocated to the performance obligation. The contract terms are used to determine the transaction price. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract would not occur.

 

Step 4 – Allocate the Transaction Price – After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price (SSP) at contract inception.

 

Step 5 – Satisfaction of the Performance Obligations (and Recognize Revenue) – Revenue is recognized when (or as) goods or services are transferred to a customer. The Company satisfies each of its performance obligations by transferring control of the promised good or service underlying that performance obligation to the customer. Control is the ability to direct the use of and obtain substantially all of the remaining benefits from an asset. It includes the ability to prevent other entities from directing the use of and obtaining the benefits from an asset. Indicators that control has passed to the customer include: a present obligation to pay; physical possession of the asset; legal title; risks and rewards of ownership; and acceptance of the asset(s). Performance obligations can be satisfied at a point in time or overtime.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 

For the six months ended June 30, 2023, the majority of the Company’s revenue was derived from its Management Agreement with MJ Distributing, Inc. with the remainder from rental revenue from its Tiny Homes community. Rental revenue for operating leases is recognized on a straight-line basis over the term of the lease. Rental revenue recognition commences when the leased space is available for use by the lessee.

 

For the six months ended June 30, 2022, all of the Company’s revenue was derived from rental revenue from its Tiny Homes community.

 

   2023   2022 
   For the six months ended 
   June 30, 
   2023   2022 
Revenues:        
Rental income (i)  $41,263   $60,606 
Management income (ii)   118,616    - 
Total  $159,879   $60,606 

 

  (i) The rental income is from the Company’s THC Park.
     
  (ii) On February 5, 2021, the Company entered into a Management Agreement of Cannabis Production and Cultivation (the “Agreement”) with MJ Distributing, Inc. (the “Owner”) (together, the “Parties”). Under the terms of the Agreement, the Parties desire that the Company manage and operate the daily business of the Owner located in Pahrump, Nye County, Nevada. In consideration of the services to be performed by the Company, the Company and the Owner shall split the Net Profits of the business on a 50:50 basis. The Agreement was approved by the Cannabis Compliance Board at its July 26, 2022 meeting.

 
Stock-Based Compensation

Stock-Based Compensation

 

The Company’s share-based payment awards principally consist of grants of common stock. In accordance with the applicable accounting guidance, stock-based payment awards are classified as either equity or liabilities. For equity-classified awards, the Company measures compensation cost based on the grant date fair value and recognizes compensation expense in the consolidated statements of operations over the requisite service or performance period the award is expected to vest. The fair value of liability-classified awards is at each reporting date through the settlement date. Change in fair value during the requisite service period will be remeasured as compensation cost over that period.

 

The Company utilizes its historical stock price to determine the volatility of any stock-based compensation.

 

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 term equal to the expected term of the stock-based award.

 

For stock-based financial instruments issued to parties other than employees, the Company uses 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 its best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and it uses different assumptions, its stock-based compensation expense could be materially different in the future.

 

 

MJ HOLDINGS, INC. and SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

Note 2 — Summary of Significant Accounting Policies (continued)

 
Operating Leases

Operating Leases

 

The Company adopted ASC Topic 842, Leases, on January 1, 2019. The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.

 

The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.

 
Income Taxes

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 carry forwards. 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.

 
Reclassifications

Reclassifications

 

Certain amounts in the condensed consolidated financial statements for the prior year have been reclassified to conform with the current year presentation.

 
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

As of June 30, 2023, there were no recently adopted accounting pronouncements that had a material effect on the Company’s consolidated financial statements.

 
v3.23.2
Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Schedule of Accounts Receivable and Allowance for Doubtful Accounts

   June 30, 2023   December 31, 2022 
Accounts receivable  $63,458   $10,149 
Less allowance   -    - 
Net accounts receivable  $63,458   $10,149 
Schedule of Property and Equipment Estimated Useful Lives

Property and equipment are depreciated over their estimated useful lives as follows:

 

Buildings  12 years
Land  Not depreciated
Construction in progress  Not depreciated
Leasehold Improvements  Lessor of lease term or 5 years
Machinery and Equipment  5 years
Furniture and Fixtures  5 years
Schedule of Contract Liabilities

The Company receives payments for new Cultivation and Sales Agreements (the “Agreements”) upon signing and defers revenue recognition for these payments until certain milestones are met as per the terms of the Agreements. These payments represent contract liabilities and are recorded as such on the balance sheet. As of June 30, 2023 and December 31, 2022, the Company’s contract liabilities were as follows:

 

   June 30, 2023   December 31, 2022 
MKC Development Group, LLC (i)  $-   $620,000 
Natural Green, LLC (ii)   -    520,000 
Green Grow Investments Corporation   50,000    50,000 
RK Grow, LLC   170,000    170,000 
Property and equipment, net  $220,000   $1,360,000 

 

  (i) On May 24, 2023 the Company entered into a settlement agreement with MKC Development Group, LLC (“MKC”) that terminated all of their rights, obligations, and responsibilities under the Agreement. As part of the settlement the Company agreed to refund $310,000 to MKC within one year of the date of the settlement agreement therefore the contract liability of $620,000 was written off the books, the refund amount of $310,000 was recorded in accounts payable, and the Company recorded $310,000 as miscellaneous income.
     
  (ii) On June 26, 2023 the Company entered into a termination agreement with Natural Green, LLC which terminated the original Cultivation and Sales Agreement and released each other of any liabilities, claims, or obligations under the Agreement.  As a result, the Company wrote off the $520,000 contract liability and recorded miscellaneous income.
Schedule of Rental Revenue Recognition

 

   2023   2022 
   For the six months ended 
   June 30, 
   2023   2022 
Revenues:        
Rental income (i)  $41,263   $60,606 
Management income (ii)   118,616    - 
Total  $159,879   $60,606 

 

  (i) The rental income is from the Company’s THC Park.
     
  (ii) On February 5, 2021, the Company entered into a Management Agreement of Cannabis Production and Cultivation (the “Agreement”) with MJ Distributing, Inc. (the “Owner”) (together, the “Parties”). Under the terms of the Agreement, the Parties desire that the Company manage and operate the daily business of the Owner located in Pahrump, Nye County, Nevada. In consideration of the services to be performed by the Company, the Company and the Owner shall split the Net Profits of the business on a 50:50 basis. The Agreement was approved by the Cannabis Compliance Board at its July 26, 2022 meeting.
v3.23.2
Acquisition of MJH Research, Inc. (Tables)
 6 Months Ended
Jun. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
Schedule of Fair Value of Net Assets Acquired

Details regarding the book values and fair values of the net assets acquired are as follows:

 

   Book Value   Fair Value   Difference 
             
Cash  $504,685   $504,685   $       - 
Total  $504,685   $504,685   $- 
Schedule of Assets Acquired

 Schedule of Assets Acquired

Assets acquired 

As of July 11, 2022

 
     
Cash  $504,685 
Goodwill (i)   1,451,815 
Total purchase price  $1,956,500 

 

(i) Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired.
Schedule of Goodwill

The changes in the carrying amount of goodwill for the period from July 11, 2022 through June 30, 2023 were as follows:

 

      
Balance as of July 11, 2022  $1,451,815 
Additions and adjustments   (1,451,815)
Balance as of June 30, 2023  $- 
v3.23.2
Property and Equipment (Tables)
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment

Property and equipment at June 30, 2023 and December 31, 2022 consisted of the following:

 

   June 30, 2023   December 31, 2022 
Leasehold Improvements  $264,523   $264,523 
Machinery and Equipment   853,218    386,879 
Building and Land   1,650,000    1,650,000 
Furniture and Fixtures   561,352    561,352 
Construction in progress   -    396,480 
Total property and equipment   3,329,093    3,259,233 
Less: Accumulated depreciation   (879,292)   (764,280)
Property and equipment, net  $2,449,801   $2,494,953 
v3.23.2
Deposits (Tables)
 6 Months Ended
Jun. 30, 2023
Schedule of Deposits

Deposits as of June 30, 2023 and December 31, 2022 consist of the following:

  

   June 30, 2023   December 31, 2022 
MJ Distributing, Inc. (i)  $1,250,000   $1,010,000 
Total  $1,250,000   $1,010,000 

 

  (i) On February 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. In consideration of the sale, transfer, assignment and delivery of the Membership Interests to Purchaser, and the covenants made by Seller under the MIPA3, Purchaser agreed to pay a combination of cash, promissory notes, and stock in the amount of One-Million-Two-Hundred-Fifty Thousand Dollars ($1,250,000.00) in cash and/or promissory notes and 200,000 shares of the Company’s restricted common stock, all of which constitutes the consideration agreed to herein for (the “Purchase Price”), payable as follows: (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against future compensation due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, (v) $200,000 shall be deposited on or before June 12, 2021, and (vi) $250,000 shall be deposited within five (5) business days after the Nevada Cannabis Compliance Board (“CCB”) provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser.
v3.23.2
Notes Payable (Tables)
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
Schedule of Notes Payable Current

Notes payable, currently in default as of June 30, 2023 and December 31, 2022 consist of the following:

 

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 6.5% originated April 1, 2019, due on March 31, 2022, originally $250,000  $96,393   $         - 
Total notes payable, currently in default  $96,393   $- 
Schedule of Notes Payable

Notes payable as of June 30, 2023 and December 31, 2022 consist of the following:

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 5.0%, originated January 17, 2019, due on February 1, 2025, originally $750,000 (i)  $876,737   $878,589 
Note payable bearing interest at 6.5% originated April 1, 2019, due on March 31, 2022, originally $250,000 (ii)   -    107,000 
Note payable bearing interest at 15%, originated May 10, 2023, due on May 10, 2024, originally $50,000 (iii)   50,000    - 
Note payable bearing interest at 7%, originated June 30, 2023, due on June 30, 2024, originally $50,000 (iv)   50,000    - 
Total notes payable  $976,737   $985,589 
Less: current portion   (121,076)   (985,589)
Long-term notes payable  $

855,661

   $- 

 

  (i) On January 17, 2019, the Company executed a promissory note for $750,000 with FR Holdings LLC (the “Holder”), a Wyoming limited liability company. The Noted Secured by Deed of Trust (the “Secured Note”) accrues interest at 5.0% per annum, payable in regular monthly installments of $3,125, due on or before the same day of each month beginning February 1, 2019 until January 31, 2022 at which the entire principal and any then accrued interest thereon shall be due and payable. On February 4, 2022, the Company entered into a Note Modification Agreement (the “Agreement”) with the Holder amending the terms of the Secured Note. The Parties agreed that the maturity date of the Secured Note being January 31, 2022, had passed and that the balance of the Secured Note was due (currently Seven-Hundred and Fifty-Thousand Dollars ($750,000), and the parties also agreed that the conditions in the Secured Note requiring the assessment of the additional Five-Hundred Thousand Dollars ($500,000) consulting fee was triggered bringing the total amount owed by the Company under the terms of the Secured Note to One-Million Two-Hundred Fifty-Thousand Dollars ($1,250,000). Under the terms of the Agreement, the Company made a payment in the amount of $357,343 bringing the new principal balance to $900,000. The interest rate is 7% per annum. Future payments shall be calculated on a 20-year amortization with a balloon payment in three years. The first monthly payment of $6,978 was made on March 25, 2022 with the final balloon payment due on February 1, 2025. As of March 31, 2023, $876,737 principal remains due.
     
  (ii) On April 1, 2019, the Company executed a promissory note for $250,000 with John T. Jacobs and Teresa D. Jacobs that became due in full on March 31, 2022. As the note was not paid in full on that date the note went into default, see Note Payable, Currently in Default section above.
     
  (iii) On May 10, 2023, the Company executed a promissory note for $50,000 with Fevos A LLC for a duration of 12 months. The note accrues interest at 15% per annum calculated on a simple basis and payable in full at the end of the loan term.
     
  (iv) On June 30, 2023, the Company executed a promissory note for $50,000 with Fort Freedom, LLC for a duration of 12 months. The note accrues interest at 7% per annum, payable in monthly interest payments due the 1st day of each month for the duration of the note. The principal amount will be repaid in full at the end of the loan term.
Schedule of Minimum Loan Payments

   Amount 
Fiscal year ending December 31:      
   $    
2023 (Excluding the six months Ended June 30, 2023)    109,496 
2024   

23,608

 
2025   

843,633

 
2026   - 
Thereafter    - 
Total minimum loan payments   $976,737 
v3.23.2
Note Payable, related party (Tables)
 6 Months Ended
Jun. 30, 2023
Defined Benefit Plan Disclosure [Line Items]  
Schedule of Notes Payable, Related Party

Notes payable as of June 30, 2023 and December 31, 2022 consist of the following:

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 5.0%, originated January 17, 2019, due on February 1, 2025, originally $750,000 (i)  $876,737   $878,589 
Note payable bearing interest at 6.5% originated April 1, 2019, due on March 31, 2022, originally $250,000 (ii)   -    107,000 
Note payable bearing interest at 15%, originated May 10, 2023, due on May 10, 2024, originally $50,000 (iii)   50,000    - 
Note payable bearing interest at 7%, originated June 30, 2023, due on June 30, 2024, originally $50,000 (iv)   50,000    - 
Total notes payable  $976,737   $985,589 
Less: current portion   (121,076)   (985,589)
Long-term notes payable  $

855,661

   $- 

 

  (i) On January 17, 2019, the Company executed a promissory note for $750,000 with FR Holdings LLC (the “Holder”), a Wyoming limited liability company. The Noted Secured by Deed of Trust (the “Secured Note”) accrues interest at 5.0% per annum, payable in regular monthly installments of $3,125, due on or before the same day of each month beginning February 1, 2019 until January 31, 2022 at which the entire principal and any then accrued interest thereon shall be due and payable. On February 4, 2022, the Company entered into a Note Modification Agreement (the “Agreement”) with the Holder amending the terms of the Secured Note. The Parties agreed that the maturity date of the Secured Note being January 31, 2022, had passed and that the balance of the Secured Note was due (currently Seven-Hundred and Fifty-Thousand Dollars ($750,000), and the parties also agreed that the conditions in the Secured Note requiring the assessment of the additional Five-Hundred Thousand Dollars ($500,000) consulting fee was triggered bringing the total amount owed by the Company under the terms of the Secured Note to One-Million Two-Hundred Fifty-Thousand Dollars ($1,250,000). Under the terms of the Agreement, the Company made a payment in the amount of $357,343 bringing the new principal balance to $900,000. The interest rate is 7% per annum. Future payments shall be calculated on a 20-year amortization with a balloon payment in three years. The first monthly payment of $6,978 was made on March 25, 2022 with the final balloon payment due on February 1, 2025. As of March 31, 2023, $876,737 principal remains due.
     
  (ii) On April 1, 2019, the Company executed a promissory note for $250,000 with John T. Jacobs and Teresa D. Jacobs that became due in full on March 31, 2022. As the note was not paid in full on that date the note went into default, see Note Payable, Currently in Default section above.
     
  (iii) On May 10, 2023, the Company executed a promissory note for $50,000 with Fevos A LLC for a duration of 12 months. The note accrues interest at 15% per annum calculated on a simple basis and payable in full at the end of the loan term.
     
  (iv) On June 30, 2023, the Company executed a promissory note for $50,000 with Fort Freedom, LLC for a duration of 12 months. The note accrues interest at 7% per annum, payable in monthly interest payments due the 1st day of each month for the duration of the note. The principal amount will be repaid in full at the end of the loan term.
Related Party [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Schedule of Notes Payable, Related Party

Note payable, related party, as of June 30, 2023 and December 31, 2022 consist of the following:

 

   June 30, 2023   December 31, 2022 
         
Note payable bearing interest at 4.0% originated February 23, 2023, due on January 31, 2024, originally $350,000 (i)  $306,083   $           - 
Less: current portion   (306,083)   - 
Long-term notes payable  $-   $- 

 

  (i) On February 23, 2023, the Company issued a Secured Promissory Note (the “Note”) in the original amount of $350,000, to Paris Balaouras, the Company’s founder and ex-Chief Executive Officer, for accrued wages. Under the terms of the Note, the Note accrues interest at 4% per annum and shall terminate upon the earlier of January 31, 2024 or the sale of the Company’s Tiny Homes Farm located in Nye County, NV. On this same date, the Company entered into a Deed of Trust and Security Agreement and Fixture Filings with Assignment of Rents for the Company’s Tiny Homes Farm. The principal amount of the Note was reduced to $306,083 on March 1, 2023.
v3.23.2
Stock Based Compensation (Tables)
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Schedule of Options Issued, Exercised and Expired

A summary of the options issued, exercised and expired are below:

 

Options:   Shares  

Weighted Average

Exercise Price

  

Remaining Contractual

Life in Years

 
Balance at December 31, 2022    1,500,000   $0.75    0.68 
Issued    -    -    - 
Exercised    -    -    - 
Expired    -    -    - 
Balance at June 30, 2023    1,500,000   $0.75    0.18 
Exercisable at June 30, 2023    1,500,000   $0.75    0.18 
Schedule of Warrants Issued, Exercised and Expired

A summary of the warrants issued, exercised and expired are below:

 

Warrants:   Shares  

Weighted Avg.
Exercise Price

  

Remaining Contractual

Life in Years

 
Balance at December 31, 2022    250,000   $0.10    2.03 
Issued    -    -    - 
Exercised    -    -    - 
Expired    -    -    - 
Balance at June 30, 2023    250,000   $0.10    1.53 
Exercisable at June 30, 2023    250,000   $0.10    1.53 
v3.23.2
Description of Business (Details Narrative) - USD ($)
Jul. 11, 2022
Jul. 08, 2022
Jan. 10, 2017
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]      
Number of common stock exchanged during period     1,800,000
Common Stock Purchase Agreement [Member] | MJH Research Inc and Sunstate Futures LLC [Member]      
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]      
Sale of stock   100,000  
Issuance of shares   7,000,000  
Business combination, assets acquired and liabilities assumed, net $ 500,000    
Payment to acquire asset $ 1,955,000    
MJ Real Eatste Partners [Member]      
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]      
Number of common stock exchanged during period     1,800,000
v3.23.2
Schedule of Accounts Receivable and Allowance for Doubtful Accounts (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Accounting Policies [Abstract]    
Accounts receivable $ 63,458 $ 10,149
Less allowance
Net accounts receivable $ 63,458 $ 10,149
v3.23.2
Schedule of Property and Equipment Estimated Useful Lives (Details)
Jun. 30, 2023
Building [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful life 12 years
Land [Member]  
Property, Plant and Equipment [Line Items]  
Property, Plant, and Equipment, Useful Life, Term, Description [Extensible Enumeration] Useful Life, Lease Term [Member]
Construction in Progress [Member]  
Property, Plant and Equipment [Line Items]  
Property, Plant, and Equipment, Useful Life, Term, Description [Extensible Enumeration] Useful Life, Lease Term [Member]
Leasehold Improvements [Member]  
Property, Plant and Equipment [Line Items]  
Property, Plant, and Equipment, Useful Life, Term, Description [Extensible Enumeration] Useful Life, Lease Term [Member]
Machinery and Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful life 5 years
Furniture and Fixtures [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful life 5 years
v3.23.2
Schedule of Contract Liabilities (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 26, 2023
May 24, 2023
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Refund amount     $ 220,000   $ 220,000   $ 1,360,000
Property and equipment, net     220,000   220,000   1,360,000
Miscellaneous income     995,429 $ 22,500 1,025,429 $ 40,000  
M K C Development Group L L C [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Refund amount   $ 620,000 [1]   [1]   620,000 [1]
Property and equipment, net   620,000 [1]   [1]   620,000 [1]
Refund amount   310,000          
Miscellaneous income   310,000          
M K C Development Group L L C [Member] | Accounts Payable [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Refund amount   $ 310,000          
Natural Green L L C [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Refund amount [2]         520,000
Property and equipment, net [2]         520,000
Miscellaneous income $ 520,000            
Green Grow Investments Corporation [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Refund amount     50,000   50,000   50,000
Property and equipment, net     50,000   50,000   50,000
R K Grow L L C [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Refund amount     170,000   170,000   170,000
Property and equipment, net     $ 170,000   $ 170,000   $ 170,000
[1] On May 24, 2023 the Company entered into a settlement agreement with MKC Development Group, LLC (“MKC”) that terminated all of their rights, obligations, and responsibilities under the Agreement. As part of the settlement the Company agreed to refund $310,000 to MKC within one year of the date of the settlement agreement therefore the contract liability of $620,000 was written off the books, the refund amount of $310,000 was recorded in accounts payable, and the Company recorded $310,000 as miscellaneous income.
[2] On June 26, 2023 the Company entered into a termination agreement with Natural Green, LLC which terminated the original Cultivation and Sales Agreement and released each other of any liabilities, claims, or obligations under the Agreement.  As a result, the Company wrote off the $520,000 contract liability and recorded miscellaneous income.
v3.23.2
Schedule of Rental Revenue Recognition (Details) - USD ($)
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Defined Benefit Plan Disclosure [Line Items]    
Rental income [1] $ 41,263 $ 60,606
Total 159,879 60,606
MJH Research, Inc. [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Management income [2] $ 118,616
[1] The rental income is from the Company’s THC Park.
[2] On February 5, 2021, the Company entered into a Management Agreement of Cannabis Production and Cultivation (the “Agreement”) with MJ Distributing, Inc. (the “Owner”) (together, the “Parties”). Under the terms of the Agreement, the Parties desire that the Company manage and operate the daily business of the Owner located in Pahrump, Nye County, Nevada. In consideration of the services to be performed by the Company, the Company and the Owner shall split the Net Profits of the business on a 50:50 basis. The Agreement was approved by the Cannabis Compliance Board at its July 26, 2022 meeting.
v3.23.2
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Cash $ 0  
Impairment of long lived assets $ 0 $ 0
Expected dividend yield 0.00%  
Stockholder [Member]    
Non-controlling interest percentage 49.00%  
Alternative Hospitality, Inc [Member]    
Equity method investment, ownership percentage 51.00%  
v3.23.2
Going Concern (Details Narrative) - USD ($)
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]      
Accumulated deficit $ 21,485,350   $ 21,852,870
Cash flows from operations $ 1,047,905 $ 1,539,903  
v3.23.2
Schedule of Fair Value of Net Assets Acquired (Details)
Jul. 11, 2022
USD ($)
Business Acquisition [Line Items]  
Cash $ 504,685
Total 504,685
Book Value [Member]  
Business Acquisition [Line Items]  
Cash 504,685
Total 504,685
Difference [Member]  
Business Acquisition [Line Items]  
Cash
Total
v3.23.2
Schedule of Assets Acquired (Details) - USD ($)
Jun. 30, 2023
Jul. 11, 2022
Jul. 09, 2022
Business Combination and Asset Acquisition [Abstract]      
Cash   $ 504,685  
Goodwill 1,451,815 [1] $ 1,451,815
Total purchase price   $ 1,956,500  
[1] Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired.
v3.23.2
Schedule of Goodwill (Details)
 12 Months Ended
Jun. 30, 2023
USD ($)
Business Combination and Asset Acquisition [Abstract]  
Balance as of July 11, 2022 $ 1,451,815
Additions and adjustments (1,451,815)
Balance as of June 30, 2023
v3.23.2
Acquisition of MJH Research, Inc. (Details Narrative) - Common Stock Purchase Agreement [Member] - MJH Research Inc and Sunstate Futures LLC [Member]
Jul. 08, 2022
shares
Business Acquisition [Line Items]  
Sale of stock 100,000
Issuance of common stock for cash, shares 7,000,000
v3.23.2
Schedule of Property and Equipment (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 3,329,093 $ 3,259,233
Less: Accumulated depreciation (879,292) (764,280)
Property and equipment, net 2,449,801 2,494,953
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 264,523 264,523
Machinery and Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 853,218 386,879
Land, Buildings and Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 1,650,000 1,650,000
Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 561,352 561,352
Construction in Progress [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 396,480
v3.23.2
Property and Equipment (Details Narrative) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Property, Plant and Equipment [Abstract]        
Depreciation $ 57,506 $ 87,786 $ 115,012 $ 130,180
v3.23.2
Intangible Assets (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended
Aug. 01, 2021
Jul. 29, 2021
Dec. 15, 2017
Jan. 10, 2017
Oct. 31, 2016
Mar. 31, 2023
Jun. 30, 2023
Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]                
Number of common stocks exchanged during period       1,800,000        
Common stock, par value             $ 0.001 $ 0.001
Civil penalty amount   $ 10,000            
Red Earth LLC [Member]                
Finite-Lived Intangible Assets [Line Items]                
Outstanding membership interests acquired percentage     100.00%          
Number of common stocks exchanged during period     52,732,969          
Common stock, par value     $ 0.001          
Note payable     $ 900,000          
Interest rate 12.00%              
Increase in interest rate upon default 18.00%              
Short term borrowings           $ 244,197    
Other income           $ 30,000    
Red Earth LLC [Member] | Minimum [Member]                
Finite-Lived Intangible Assets [Line Items]                
Periodic payment $ 5,000              
Red Earth LLC [Member] | Maximum [Member]                
Finite-Lived Intangible Assets [Line Items]                
Periodic payment $ 10,000              
Red Earth LLC [Member] | Provisional Grow License [Member] | Asset Purchase and Sale Agreement [Member]                
Finite-Lived Intangible Assets [Line Items]                
Agreement amount received from seller         $ 300,000      
Payment for deposit         $ 25,000      
v3.23.2
Schedule of Deposits (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Total $ 1,250,000 $ 1,010,000
MJ Distributing, Inc. [Member]    
Total [1] $ 1,250,000 $ 1,010,000
[1] On February 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. In consideration of the sale, transfer, assignment and delivery of the Membership Interests to Purchaser, and the covenants made by Seller under the MIPA3, Purchaser agreed to pay a combination of cash, promissory notes, and stock in the amount of One-Million-Two-Hundred-Fifty Thousand Dollars ($1,250,000.00) in cash and/or promissory notes and 200,000 shares of the Company’s restricted common stock, all of which constitutes the consideration agreed to herein for (the “Purchase Price”), payable as follows: (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against future compensation due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, (v) $200,000 shall be deposited on or before June 12, 2021, and (vi) $250,000 shall be deposited within five (5) business days after the Nevada Cannabis Compliance Board (“CCB”) provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser.
v3.23.2
Schedule of Deposits (Details) (Parenthetical) - Membership Interest Purchase Agreement Member [Member] - MJ Distributing, Inc. [Member]
Feb. 05, 2021
USD ($)
shares
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Cash distributions paid | $ $ 1,250,000.00
Net of forfeitures shares | shares 200,000
Distribution payment description (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against future compensation due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, (v) $200,000 shall be deposited on or before June 12, 2021, and (vi) $250,000 shall be deposited within five (5) business days after the Nevada Cannabis Compliance Board (“CCB”) provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser
v3.23.2
Schedule of Notes Payable Current (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Note Payable [Member]    
Short-Term Debt [Line Items]    
Total notes payable, currently in default $ 96,393
Notes Payable Currently In Default [Member]    
Short-Term Debt [Line Items]    
Total notes payable, currently in default $ 96,393
v3.23.2
Schedule of Notes Payable Current (Details) (Parenthetical) - Promissory Note [Member] - USD ($)
Apr. 01, 2019
Jun. 30, 2023
Feb. 23, 2023
Short-Term Debt [Line Items]      
Debt instrument interest rate     4.00%
John T. Jacobs and Teresa D. Jacobs [Member]      
Short-Term Debt [Line Items]      
Debt instrument interest rate 6.50%    
Debt instrument, maturity date Mar. 31, 2022    
Debt instrument face amount $ 250,000 $ 96,393  
Debt instrument monthly installments $ 2,178    
Debt instrument maturity date, description beginning May 1, 2019 until March 31, 2020    
John T. Jacobs and Teresa D. Jacobs [Member] | Second Payment [Member]      
Short-Term Debt [Line Items]      
Debt instrument principal payment reduction $ 50,000    
Debt instrument, interest rate terms the payments were re-amortized (15-year amortization)    
John T. Jacobs and Teresa D. Jacobs [Member] | Second Payment [Member] | March 31, 2021 [Member]      
Short-Term Debt [Line Items]      
Debt instrument principal payment reduction $ 50,000    
Debt instrument, interest rate terms the payments were re-amortized (15-year amortization)    
v3.23.2
Schedule of Notes Payable (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Nonrelated Party [Member]    
Short-Term Debt [Line Items]    
Total notes payable $ 976,737 $ 985,589
Less: current portion (121,076) (985,589)
Long-term notes payable 855,661
Note Payable One [Member]    
Short-Term Debt [Line Items]    
Total notes payable [1] 876,737 878,589
Note Payable Two [Member]    
Short-Term Debt [Line Items]    
Total notes payable [2] 107,000
Note Payable Three [Member]    
Short-Term Debt [Line Items]    
Total notes payable [3] 50,000
Note Payable Four [Member]    
Short-Term Debt [Line Items]    
Total notes payable [4] $ 50,000
[1] On January 17, 2019, the Company executed a promissory note for $750,000 with FR Holdings LLC (the “Holder”), a Wyoming limited liability company. The Noted Secured by Deed of Trust (the “Secured Note”) accrues interest at 5.0% per annum, payable in regular monthly installments of $3,125, due on or before the same day of each month beginning February 1, 2019 until January 31, 2022 at which the entire principal and any then accrued interest thereon shall be due and payable. On February 4, 2022, the Company entered into a Note Modification Agreement (the “Agreement”) with the Holder amending the terms of the Secured Note. The Parties agreed that the maturity date of the Secured Note being January 31, 2022, had passed and that the balance of the Secured Note was due (currently Seven-Hundred and Fifty-Thousand Dollars ($750,000), and the parties also agreed that the conditions in the Secured Note requiring the assessment of the additional Five-Hundred Thousand Dollars ($500,000) consulting fee was triggered bringing the total amount owed by the Company under the terms of the Secured Note to One-Million Two-Hundred Fifty-Thousand Dollars ($1,250,000). Under the terms of the Agreement, the Company made a payment in the amount of $357,343 bringing the new principal balance to $900,000. The interest rate is 7% per annum. Future payments shall be calculated on a 20-year amortization with a balloon payment in three years. The first monthly payment of $6,978 was made on March 25, 2022 with the final balloon payment due on February 1, 2025. As of March 31, 2023, $876,737 principal remains due.
[2] On April 1, 2019, the Company executed a promissory note for $250,000 with John T. Jacobs and Teresa D. Jacobs that became due in full on March 31, 2022. As the note was not paid in full on that date the note went into default, see Note Payable, Currently in Default section above.
[3] On May 10, 2023, the Company executed a promissory note for $50,000 with Fevos A LLC for a duration of 12 months. The note accrues interest at 15% per annum calculated on a simple basis and payable in full at the end of the loan term.
[4] On June 30, 2023, the Company executed a promissory note for $50,000 with Fort Freedom, LLC for a duration of 12 months. The note accrues interest at 7% per annum, payable in monthly interest payments due the 1st day of each month for the duration of the note. The principal amount will be repaid in full at the end of the loan term.
v3.23.2
Schedule of Notes Payable (Details) (Parenthetical) - Promissory Note [Member] - USD ($)
Jun. 30, 2023
May 10, 2023
Feb. 23, 2023
Feb. 04, 2022
Apr. 01, 2019
Jan. 17, 2019
Mar. 31, 2023
Mar. 25, 2022
Apr. 02, 2019
Short-Term Debt [Line Items]                  
Debt instrument interest rate     4.00%            
John T. Jacobs and Teresa D. Jacobs [Member]                  
Short-Term Debt [Line Items]                  
Debt instrument interest rate         6.50%        
Debt Instrument, Maturity Date         Mar. 31, 2022        
Debt instrument face amount $ 96,393       $ 250,000        
Debt instrument monthly installments         $ 2,178        
Debt instrument maturity date, description         beginning May 1, 2019 until March 31, 2020        
Fevos A LLC [Member]                  
Short-Term Debt [Line Items]                  
Debt instrument interest rate   15.00%              
Debt Instrument, Maturity Date   May 10, 2024              
Debt instrument face amount   $ 50,000              
Fort Freedom, LLC [Member]                  
Short-Term Debt [Line Items]                  
Debt instrument interest rate 7.00%                
Debt Instrument, Maturity Date Jun. 30, 2024                
Debt instrument face amount $ 50,000                
FR Holdings, LLC [Member]                  
Short-Term Debt [Line Items]                  
Debt instrument interest rate           5.00%     7.00%
Debt Instrument, Maturity Date     Jan. 31, 2024     Feb. 01, 2025      
Debt instrument face amount     $ 350,000     $ 750,000 $ 876,737 $ 697,800  
Debt instrument monthly installments           $ 3,125      
Debt instrument maturity date, description           beginning February 1, 2019 until January 31, 2022      
FR Holdings, LLC [Member] | Note Modification Agreement [Member]                  
Short-Term Debt [Line Items]                  
Debt instrument, interest rate terms       On February 4, 2022, the Company entered into a Note Modification Agreement (the “Agreement”) with the Holder amending the terms of the Secured Note. The Parties agreed that the maturity date of the Secured Note being January 31, 2022, had passed and that the balance of the Secured Note was due (currently Seven-Hundred and Fifty-Thousand Dollars ($750,000), and the parties also agreed that the conditions in the Secured Note requiring the assessment of the additional Five-Hundred Thousand Dollars ($500,000) consulting fee was triggered bringing the total amount owed by the Company under the terms of the Secured Note to One-Million Two-Hundred Fifty-Thousand Dollars ($1,250,000). Under the terms of the Agreement, the Company made a payment in the amount of $357,343 bringing the new principal balance to $900,000          
Fevos A LLC [Member]                  
Short-Term Debt [Line Items]                  
Debt instrument interest rate   15.00%              
Fort Freedom, LLC [Member]                  
Short-Term Debt [Line Items]                  
Debt instrument interest rate 7.00%                
v3.23.2
Schedule of Minimum Loan Payments (Details)
Jun. 30, 2023
USD ($)
Debt Disclosure [Abstract]  
2023 (Excluding the six months Ended June 30, 2023) $ 109,496
2024 23,608
2025 843,633
2026
Thereafter
Total minimum loan payments $ 976,737
v3.23.2
Schedule of Notes Payable, Related Party (Details) - Related Party [Member] - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Defined Benefit Plan Disclosure [Line Items]    
Note payable bearing interest at 4.0% originated February 23, 2023, due on January 31, 2024, originally $350,000 [1] $ 306,083
Less: current portion (306,083)
Long-term notes payable
[1] On February 23, 2023, the Company issued a Secured Promissory Note (the “Note”) in the original amount of $350,000, to Paris Balaouras, the Company’s founder and ex-Chief Executive Officer, for accrued wages. Under the terms of the Note, the Note accrues interest at 4% per annum and shall terminate upon the earlier of January 31, 2024 or the sale of the Company’s Tiny Homes Farm located in Nye County, NV. On this same date, the Company entered into a Deed of Trust and Security Agreement and Fixture Filings with Assignment of Rents for the Company’s Tiny Homes Farm. The principal amount of the Note was reduced to $306,083 on March 1, 2023.
v3.23.2
Schedule of Notes Payable, Related Party (Details) (Parenthetical) - USD ($)
Feb. 23, 2023
Jan. 17, 2019
Mar. 31, 2023
Mar. 01, 2023
Mar. 25, 2022
Apr. 02, 2019
Promissory Note [Member]            
Short-Term Debt [Line Items]            
Debt instrument interest rate 4.00%          
Promissory Note [Member] | FR Holdings, LLC [Member]            
Short-Term Debt [Line Items]            
Debt instrument interest rate   5.00%       7.00%
Debt Instrument, Maturity Date Jan. 31, 2024 Feb. 01, 2025        
Debt instrument face amount $ 350,000 $ 750,000 $ 876,737   $ 697,800  
Secured Promissory Note [Member]            
Short-Term Debt [Line Items]            
Debt instrument interest rate 4.00%          
Debt instrument face amount $ 350,000     $ 306,083    
v3.23.2
Commitments and Contingencies (Details Narrative) - USD ($)
 6 Months Ended
Mar. 31, 2023
Mar. 07, 2023
Dec. 03, 2021
Apr. 07, 2021
Mar. 19, 2021
Mar. 09, 2021
Jun. 30, 2023
Jun. 30, 2022
Loss Contingencies [Line Items]                
Operating lease description             The Company leases a two production / warehouse facility under a non-cancelable operating lease that expires in June 2027 and September 2029, respectively  
Operating lease, liability             $ 769,684  
Operating lease, right-of-use asset             0  
Operating lease, payments             $ 0  
Operating lease, weighted-average remaining term             3 years  
Rent expense             $ 0 $ 96,000
Settlement Agreement terms the Parties entered into a Settlement Agreement (the “Settlement Agreement”) whereby NCMM, LLC and Valerie Smalls shall (i) contact the CCB within 7 days of execution of the Settlement Agreement for authorization to transfer the approximately 1800 pounds of fresh frozen to MJ Distributing, both the passing and failed fresh frozen; and (ii) NCMM shall pay the Company a total of $60,000 as a Settlement Amount. The Settlement Amount shall be paid as $5,000 per month. In the event the Settlement Amount monthly payment is not paid by the fifth of every month, NCMM shall pay a late payment penalty fee of $100 per day              
Settlement amount $ 60,000              
Settlement amount per month 5,000              
Penalty fee per day $ 100              
Settlement liabilities             $ 50,000  
Loss contingency allegations     the Defendants have not honored the 2018 Agreements negotiated between the Plaintiffs and Defendants, MJ Holdings, Inc. has failed to issue an additional $125,000 in stock due to the Plaintiffs as was agreed to in writing and the Defendants have failed to start the Western Project          
Awarding claimant   $ 51,361            
Awarding Claiment [Member]                
Loss Contingencies [Line Items]                
Awarding claimant   401,361            
Counter Claims [Member]                
Loss Contingencies [Line Items]                
Awarding claimant   $ 350,000            
Former Secretary and President [Member]                
Loss Contingencies [Line Items]                
Deferred compensation expense           $ 501,085    
Payment made for wage claim       $ 62,392        
Wages       59,583        
Accrued vacation       2,854        
Statutory penalties       $ 8,307.60        
Minimum [Member]                
Loss Contingencies [Line Items]                
Damage value         $ 15,000      
v3.23.2
Stockholders’ Equity (Deficit) (Details Narrative) - $ / shares
 6 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Class of Stock [Line Items]    
Common stock shares authorized 95,000,000 95,000,000
Preferred stock, shares authorized 5,000,000 5,000,000
Common stock, par value $ 0.001 $ 0.001
Common stock shares issued 78,591,667 78,591,667
Common stock shares outstanding 78,591,667 78,591,667
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares issued 0 0
Series A Convertible Preferred Stock [Member]    
Class of Stock [Line Items]    
Preferred stock, shares authorized 2,500 2,500
Preferred stock, par value $ 1,000 $ 1,000
Conversion price $ 0.75  
Ownership percentage 4.99%  
Beneficial ownership terms A holder, upon notice to us, may increase or decrease this beneficial ownership limitation; provided, that, in no event can the holder increase the beneficial ownership limitation in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series A Preferred Stock then held by holder  
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
v3.23.2
Basic and Diluted Earnings (Loss) per Common Share (Details Narrative) - shares
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Basic shares 78,591,667 71,501,667 78,591,667 71,501,667
Diluted shares 78,591,667 71,501,667 78,591,667 71,501,667
Options [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Earnings per share, amount     1,500,000  
Warrant [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Earnings per share, amount     250,000  
v3.23.2
Schedule of Options Issued, Exercised and Expired (Details) - $ / shares
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]    
Options, Beginning Balance 1,500,000  
Weighted Average Exercise Price, Beginning Balance $ 0.75  
Remaining Contractual Life in Years 2 months 4 days 8 months 4 days
Options, Issued  
Weighted Average Exercise Price, Issued  
Options, Exercised  
Weighted Average Exercise Price, Exercised  
Options, Expired  
Weighted Average Exercise Price, Expired  
Options, Ending Balance 1,500,000 1,500,000
Weighted Average Exercise Price, Ending Balance $ 0.75 $ 0.75
Options, Exercisable, Ending Balance 1,500,000  
Weighted Average Exercise Price, Exercisable, Ending Balance $ 0.75  
Remaining Contractual Life in Years, Exercisable 2 months 4 days  
v3.23.2
Schedule of Warrants Issued, Exercised and Expired (Details) - $ / shares
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]    
Warrants Shares, Beginning Balance 250,000  
Weighted Avg. Exercise Price Warrant, Beginning Balance $ 0.10  
Remaining Contractual Life in Years 1 year 6 months 10 days 2 years 10 days
Warrants Shares, Issued  
Weighted Avg. Exercise Price Warrant, Issued  
Warrants Shares, Exercised  
Weighted Avg. Exercise Price Warrant, Exercised  
Warrants Shares, Expired  
Weighted Avg. Exercise Price Warrant, Expired  
Warrants Shares, Ending Balance 250,000 250,000
Weighted Avg. Exercise Price Warrant, Ending Balance $ 0.10 $ 0.10
Weighted Avg. Exercise Price Warrants, Exercisable, Ending Balance $ 0.10  
Remaining Contractual Life in Years, Warrants Exercisable 1 year 6 months 10 days  
v3.23.2
Stock Based Compensation (Details Narrative) - $ / shares
 6 Months Ended
Sep. 15, 2020
Jun. 30, 2023
Dec. 31, 2022
Jan. 11, 2021
Defined Benefit Plan Disclosure [Line Items]        
Number of option granted, shares      
Option exercise price per share      
Options, outstanding, number   1,500,000 1,500,000  
Warrant outstanding   250,000 250,000  
Common Stock Purchase Warrant Agreement [Member]        
Defined Benefit Plan Disclosure [Line Items]        
Warrant to purchase common stock       250,000
Warrants exercise price       $ 0.10
Warrant term       4 years
Messrs. Balaouras [Member]        
Defined Benefit Plan Disclosure [Line Items]        
Number of option granted, shares 500,000      
Option exercise price per share $ 0.75      
Messrs. Bloss [Member]        
Defined Benefit Plan Disclosure [Line Items]        
Number of option granted, shares 500,000      
Option exercise price per share $ 0.75      
Messrs. Moyle [Member]        
Defined Benefit Plan Disclosure [Line Items]        
Number of option granted, shares 500,000      
Option exercise price per share $ 0.75      
v3.23.2
Related Party Transactions (Details Narrative) - USD ($)
 6 Months Ended
Oct. 06, 2022
Sep. 05, 2022
Aug. 01, 2021
Jun. 30, 2023
The Agreement [Member] | Highland Brothers LLC [Member]        
Related Party Transaction [Line Items]        
Payments of related party $ 150,000      
Cash consideration   $ 150,000    
Red Earth LLC [Member]        
Related Party Transaction [Line Items]        
Interest rate     12.00%  
Change in interest rate     18.00%  
Short term borrowings       $ 274,197
Payments of related party       61,728
Other income       $ 60,000
Red Earth LLC [Member] | Minimum [Member]        
Related Party Transaction [Line Items]        
Periodic payment     $ 5,000  
Red Earth LLC [Member] | Maximum [Member]        
Related Party Transaction [Line Items]        
Periodic payment     $ 7,500  
v3.23.2
Subsequent Events (Details Narrative)
Jul. 06, 2023
shares
Subsequent Event [Member] | Common Stock [Member] | Roll On LLC [Member]  
Subsequent Event [Line Items]  
Issuance of common shares 20,319,500
MJ (PK) (USOTC:MJNE)
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