MJ HOLDINGS, INC. 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
Company Background
The Company's assets and operations have expanded significantly over the past
year; and, the Company has raised more than
Under the leadership of our CEO,
Current Initiatives include:
? a three-acre, hybrid, outdoor, marijuana-cultivation facility (the "Three
Acre Facility") in the Amargosa Valley of Nevada . We have the contractual
right to cultivate marijuana on this property until 2026, for which we
receive eighty-five percent (85%) of the net revenues realized from our
management of this facility. The Company recently completed its second
harvest on that land.
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? 260 acres of farmland for the purpose of cultivating additional marijuana
(the "260 Acres") purchased in January of 2019. This property, on which we
intend to utilize a state-of-the-art cultivation system for growing, an
additional five acres of marijuana in 2020, is contiguous to the property
that we manage in Amargosa. The land also 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.
? a nearby commercial trailer and RV park (THC Park - Tiny Home Community )
that can supply necessary housing for our farm employees. After our 2018
harvest, we came to realize that we would need to find a more efficient
method of housing and bringing our cultivation team to our facilities. In
April of 2019, we consummated the purchase of the 50-acre plus THC Park
for $600,000 in cash and $50,000 of the Company's restricted common stock
(see further description of this transaction hereinbelow).
? a definitive agreement to acquire an additional cultivation license and
production license, both currently located in Nye County Nevada . On April
2, 2019 we executed a membership interest purchase agreement to acquire
all of the outstanding membership interests of MJ Distributing C202, LLC
and MJ Distributing P133, LLC , the holders of a State of Nevada
provisional cultivation license and provisional production license,
respectively. The State of Nevada has placed a moratorium on the transfer
of all licenses within the state, we do not know when this moratorium will
be lifted. We are in negotiations with the Seller to enter into a
management and operating agreement to allow us to utilize and benefit from
these licenses. We have named two additional managers to the two LLC's,
both of whom are senior executives of the Company.
? indoor cultivation facility build-out in the City of Las Vegas (the
"Indoor Facility"). Through our subsidiary, Red Earth, LLC , we hold
Medical Marijuana Establishment Registration Certificate, Application No.
C012. In cooperation with our joint venture partners, Element NV, LLC we
expect to invest more than $3,500,000.00 in the build-out of this 17,000+
square foot state-of-the-art facility, which should be fully operational
in the second quarter of 2020 (see hereinabove for additional
information). We presently have approximately eight years remaining on our
lease on this building with two additional five-year options, as well as
an option to purchase the property for $2,607,880 .
? a wellness hotel concept (the "Alternative Hospitality"). In November of
2018 the Company formed Alternative Hospitality, Inc. , a joint venture
with a successful hotel operator, is developing hotel properties with a
focus on the wellness aspects of cannabis and cannabis related products.
? exploration of cannabis-related opportunities in the European Union , with
a particular focus on Greece - In December of 2018 we established MJ
International Research Company, Ltd. , headquartered in Dublin, Ireland . We
have established two wholly owned subsidiaries in Greece , Gioura
International Single Member Private Company for the acquisition of land
and MJ Holdings International Single Member S.A. for the required
licenses.
We also continue to identify potential acquisition of revenue producing assets and licenses within legalized cannabis markets both nationally and internationally that can maximize shareholder value while providing a 360-degree spectrum of infrastructure, cultivation, production, management, dispensaries and consulting services in the regulated cannabis industry.
We may face substantial competition in the operation of cultivation facilities
in
The Company occupies the entire second floor of an approximately 10,000 sq. ft.
office building, located in the
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Our Business
We commenced cultivation activities on our three-acre managed cultivation facility in August of 2018, harvesting two grows to-date, the most recent of which yielded more than 3,000 pounds of marijuana flower and trim with THC yields on products tested ranging from 19-27%. 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.
Through Red Earth, we hold a conditional
The Company currently operates through the following entities:
MJ Holdings, Inc. This entity, the Parent, serves as a holding company for all the operating businesses/assets. Alternative Alternative Hospitality is aNevada corporation formed inHospitality. Inc November of 2018.MJ Holdings owns fifty-one percent (51%) of the company and the remaining forty-nine percent (49%) is owned byTVK, LLC , an unrelated third-party, is aFlorida limited liability company. Mr.Roger Bloss , a member of the Board of Directors ofMJ Holdings, Inc. , is a managing member ofTVK, LLC .Farm Road, LLC Farm Road, LLC , is aWyoming limited liability company that owns 260 acres of farmland inAmargosa, NV . The Company acquired all the membership interests of Farm Road in January of 2019. Icon Management, Icon is a wholly owned subsidiary of the Company that LLC provides Human Resource Management ("HR") services toMJ Holdings . Icon is responsible for all payroll activities and administration employee benefit plans and programs.HDGLV, LLC HDGLV is a wholly owned subsidiary ofRed Earth, LLC and is the holder of a triple net lease on a commercial building inLas Vegas, Nevada which is being developed to house our indoor grow facility. Condo Highrise Condo Highrise Management is a wholly owned subsidiary ofManagement, LLC the Company that manages the Company ownedTHC Park in Amargosa,Nevada . MJ International MJ International is a wholly owned subsidiary of the CompanyResearch Company that is headquartered inDublin, Ireland . MJ International Limited is the sole shareholder of MJ Holdings International SingleMember S.A. andGioura International Single Member Private Company , both Greek entities. Prescott Management, Prescott Management is a wholly owned subsidiary of the LLC Company that provides day-to-day management and operational oversight to the Company's operating subsidiaries.Red Earth, LLC Red Earth, established in 2016, was a wholly owned subsidiary of the Company fromDecember 15, 2017 untilAugust 28, 2019 when we sold a forty-nine percent (49%) interest in Red Earth toElement NV, LLC , an unrelated third party. Red Earth's assets consist of: (i) a cultivation license to grow marijuana within theCity of Las Vegas in theState of Nevada and (ii) all of the outstanding membership interests in HDGLV, which holds a triple net leasehold interest in a 17,298 square-foot building inLas Vegas, Nevada , which we expect to operate as an indoor marijuana cultivation facility. We expect to complete construction of this facility in the second quarter of 2020. 15 InApril 2018 , theState of Nevada finalized and approved the transfer of the provisional cultivation license fromAcres Medical, LLC , an unrelated third-party, to Red Earth. InJuly 2018 , we completed the first phase of construction on this facility and we received a City of Las Vegas Conditional Business License to operate a marijuana cultivation facility. We expect to obtain final approvals towards perfecting the cultivation license from theState of Nevada regulatory authorities in the second quarter of 2020, but we can provide no assurances on the receipt and/or timing of the final approvals.
Red Earth Holdings, LLC It is anticipated that this recently formed (
subsidiary of the Company will eventually be the holder of
the Company's primary cannabis license assets. As of the
date of this report Red Earth Holdings has no operations and
holds no assets.
On
Effective
Critical Accounting Policies, Judgments and Estimates
There were no material changes to our critical accounting policies and estimates
during the interim period ended
Please see our Annual Report on Form 10-K for the year ended
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Results of Operations
Three Months Ended
Revenues
Our revenue was
For the three months ended
September 30,
Revenues: 2019 2018
Rental income $ 25,246 $ -
Sale of products 393,282 -
Total $ 418,528 $ -
The revenues from the sale of product is derived from our expertise in
constructing greenhouses. The majority of rental income is from
Operating Expenses Direct costs of revenues were$346,367 and$0 for the three months endedSeptember 2019 and 2018, respectively. Direct costs of revenues, by class, is as follows: For the three months ended September 30, Direct costs of revenue: 2019 2018 Rental income $ - $ - Sale of products 346,367 - Total$ 346,367 $ -
The direct costs of revenue of
General and administrative
For the three months ended
Other Income/(Expense)
For the three months ended
Net Loss
Net loss attributable to common shareholders was
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Nine Months Ended
Revenues
Our revenue was
For the nine months ended
September 30,
Revenues: 2019 2018
Rental income $ 60,046 $ -
Sale of products 1,137,552 -
Total $ 1,197,598 $ -
The revenues from the sale of product is derived from our Agreement with the
Licensed Operator and our expertise in constructing greenhouses. The majority of
rental income is from
Operating Expenses Direct costs of revenues were$885,862 and$0 for the nine months endedSeptember 2019 and 2018, respectively. Direct costs of revenues, by class, is as follows: For the nine months ended September 30, Direct costs of revenue: 2019 2018 Rental income $ - $ - Sale of products 885,862 - Total$ 885,862 $ -
The direct costs of revenue of
General and administrative
For the nine months ended
Other Income/(Expense)
For the nine months ended
Net Loss.
Net loss attributable to common shareholders was
Liquidity and Capital Resources
As of
We used cash in investing activities of
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We had cash provided by financing activities of
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 nine months ended
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