UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| þ | QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2015 |
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
Commission file number: 333-167824
MJ HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| NEVADA (State or other jurisdiction of incorporation or organization) |
20-8235905 (I.R.S. Employer Identification No.) |
4141 NE 2nd
Avenue, Suite 204-A, Miami, Florida 33137
(Address of principal executive offices) (Zip Code)
(305) 455-1800
(Registrant’s telephone number, including area code)
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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company þ | |||
| (Do not check if a smaller reporting company) |
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
APPLICABLE TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding as of November 10, 2015 | |
| Common Stock, $0.001 | 14,027,939 |
| 1 |
MJ HOLDINGS, INC.
TABLE OF CONTENTS
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Condensed Consolidated Financial Statements | 3 |
| Notes to Condensed Consolidated Financial Statements | 6 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 16 |
| Item 4. | Controls and Procedures | 16 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 18 |
| Item 1A. | Risk Factors | 18 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 18 |
| Item 3. | Defaults Upon Senior Securities | 18 |
| Item 4. | Mine Safety Disclosures | 18 |
| Item 5. | Other Information | 18 |
| Item 6. | Exhibits | 18 |
| SIGNATURES | 19 | |
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
MJ HOLDINGS, INC.
Condensed Consolidated Balance Sheets
As of September 30, 2015, and December 31, 2014
(Unaudited)
| September 30, 2015 | December 31, 2014 | |||||||
| Assets | ||||||||
| Real estate property: | ||||||||
| Land | $ | 747,389 | $ | 551,251 | ||||
| Buildings and improvements | 3,141,193 | 2,442,188 | ||||||
| 3,888,582 | 2,993,439 | |||||||
| Accumulated depreciation | (111,717 | ) | (38,173 | ) | ||||
| Real estate property, net | 3,776,865 | 2,955,266 | ||||||
| Cash | 213,294 | 175,792 | ||||||
| Deferred leasing costs | 164,410 | 202,545 | ||||||
| Deferred rent receivable | 43,208 | 6,936 | ||||||
| Prepaid expenses and other assets | 24,318 | 73,377 | ||||||
| Total Assets | $ | 4,222,095 | $ | 3,413,916 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Notes payable - related party | $ | 2,725,000 | $ | 1,800,000 | ||||
| Security deposits | 95,203 | 102,045 | ||||||
| Accounts payable and accrued liabilities | 76,309 | 195,582 | ||||||
| Total Liabilities | 2,896,512 | 2,097,627 | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, par value $0.001, 5,000,000 shares authorized; 0 shares issued and outstanding | — | — | ||||||
| Common stock, par value $0.001, 95,000,000 shares authorized; 14,027,939 and 13,878,522 shares issued and outstanding, respectively | 14,028 | 13,879 | ||||||
| Additional paid-in capital | 2,779,105 | 2,640,120 | ||||||
| Accumulated deficit | (1,467,550 | ) | (1,337,710 | ) | ||||
| Total Stockholders’ Equity | 1,325,583 | 1,316,289 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 4,222,095 | $ | 3,413,916 | ||||
See accompanying notes to unaudited condensed
consolidated financial statements
| 3 |
MJ HOLDINGS, INC.
Condensed Consolidated Statements of Operations
For the three and nine months ended September 30, 2015 and 2014
(Unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues: | ||||||||||||||||
| Rental income | $ | 169,879 | $ | 32,347 | $ | 458,566 | $ | 36,775 | ||||||||
| Operating Expenses: | ||||||||||||||||
| Property expenses | 23,032 | 46,494 | 100,981 | 57,175 | ||||||||||||
| General and administrative expenses | 69,526 | 614,956 | 231,504 | 928,339 | ||||||||||||
| Depreciation expense | 28,871 | 5,591 | 73,544 | 7,515 | ||||||||||||
| Total operating expenses | 121,429 | 667,041 | 406,029 | 993,029 | ||||||||||||
| Operating income (loss) | 48,450 | (634,694 | ) | 52,537 | (956,254 | ) | ||||||||||
| Interest expense, net - related party | (71,843 | ) | (48,563 | ) | (182,377 | ) | (56,891 | ) | ||||||||
| Loss before income taxes | (23,393 | ) | (683,257 | ) | (129,840 | ) | (1,013,145 | ) | ||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||
| Net Loss | $ | (23,393 | ) | $ | (683,257 | ) | $ | (129,840 | ) | $ | (1,013,145 | ) | ||||
| Basic and diluted net loss per common share: | ||||||||||||||||
| Weighted average shares outstanding | 14,006,419 | 13,856,245 | 13,935,222 | 13,316,054 | ||||||||||||
| Net loss per common share | $ | (0.00 | ) | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.08 | ) | ||||
See accompanying notes to unaudited condensed consolidated financial statements
| 4 |
MJ HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2015 and 2014
(unaudited)
Nine Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| Cash flow from operating activities: | ||||||||
| Net loss | $ | (129,840 | ) | $ | (1,013,145 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | 73,544 | 7,515 | ||||||
| Stock-based compensation | 139,134 | 800,923 | ||||||
| Deferred rental income | (36,271 | ) | — | |||||
| Amortization of deferred leasing and debt costs | 30,095 | 2,759 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Deferred leasing costs | 17,511 | — | ||||||
| Prepaid and other assets | 50,222 | (63,017 | ) | |||||
| Security deposits | (6,842 | ) | 102,045 | |||||
| Accounts payable and accrued liabilities | (119,274 | ) | 70,747 | |||||
| Net Cash Provided by (Used in) Operating Activities | 18,279 | (92,173 | ) | |||||
| Cash flow from investing activities: | ||||||||
| Acquisition of real estate property | (895,143 | ) | (2,970,806 | ) | ||||
| Net Cash Used in Investing Activities | (895,143 | ) | (2,970,806 | ) | ||||
| Cash flow from financing activities: | ||||||||
| Proceeds from the sale of common stock | — | 1,615,000 | ||||||
| Proceeds from notes payable - related party | 925,000 | 1,800,000 | ||||||
| Payment for debt issuance costs | (10,634 | ) | (19,152 | ) | ||||
| Proceeds from loans from stockholders | — | 200 | ||||||
| Net Cash Provided by Financing Activities | 914,366 | 3,396,048 | ||||||
| Net increase in cash | 37,502 | 333,069 | ||||||
| Cash at beginning of period | 175,792 | 478 | ||||||
| Cash at end of period | $ | 213,294 | $ | 333,547 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest to related party | $ | 165,221 | $ | 35,918 | ||||
| Supplemental schedule of non-cash financing activities: | ||||||||
| Accounts payable paid by principal stockholders | $ | — | $ | 7,665 | ||||
| Stockholder loans and accrued interest converted to common stock | $ | — | $ | 99,450 | ||||
See accompanying notes to unaudited condensed consolidated financial statements
| 5 |
MJ HOLDINGS, INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2015
Note 1 — Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required for audited annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the condensed consolidated financial statements not misleading have been included. The balance sheet at December 31, 2014, has been derived from the Company’s audited consolidated financial statements as of that date.
The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and the notes thereto that are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, that was filed with the SEC on March 30, 2015. The results of operations for the three and nine months ended September 30, 2015, are not necessarily indicative of the results to be expected for the full year.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, 5353 Joliet, LLC, MJ Havana, LLC, and MJ Sheridan, LLC. Intercompany balances and transactions have been eliminated in consolidation.
Note 2 — Summary of Significant Accounting Policies
The significant accounting policies followed by the Company for interim reporting are consistent with those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There were no material changes to our significant accounting policies during the interim period ended September 30, 2015.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued guidance to clarify the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a comprehensive framework for revenue recognition that supersedes current general revenue guidance and most industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. An entity should apply the guidance either retrospectively to each prior reporting period presented or retrospectively with the cumulative adjustment at the date of the initial application. In July 2015, the FASB delayed the effective date of the new guidance to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is now permitted after the original effective date of December 15, 2016. The Company is currently in the process of evaluating the impact of adoption of the new accounting guidance on its consolidated financial statements and has not determined the impact of adoption on its consolidated financial statements.
In August 2014, FASB issued guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The new guidance is effective for the annual period ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. Since this guidance primarily addresses certain disclosures to the financial statements, we anticipate no impact on our financial position, results of operations or cash flows from adopting this standard. The Company is currently in the process of evaluating the additional disclosure requirements of the new guidance and has not determined the impact of adoption on its financial statement disclosures.
| 6 |
In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs. This guidance provides that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is effective for fiscal years and interim periods beginning after December 15, 2015 and is required to be applied on a retrospective basis. Early adoption is permitted for financial statements that have not been previously issued. As of September 30, 2015, we had $15,097 in debt issuance costs associated with $2.7 million of notes payable that would be reclassified from other assets to a reduction in the carrying amount of the note payable. The adoption of this standard is not expected to have a material impact on our financial position and will not impact our results of operations or cash flows.
Note 3 — Going Concern
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. During the three and nine months ended September 30, 2015, the Company incurred net losses of $23,393 and $129,840, respectively. The Company had an accumulated deficit of $1,467,550 as of September 30, 2015. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. Although we can provide no assurances, we believe our cash on hand, coupled with revenues generated by rental income and our ability to refinance our equity in the real estate we own, will provide sufficient liquidity and capital resources to fund our business for the next twelve months.
In the event the Company experiences liquidity and capital resource constraints because of unanticipated operating losses, we may need to raise additional capital in the form of equity and/or debt financing. If such additional capital is not available on terms acceptable to us or at all, then we may need to curtail our operations and/or take additional measures to conserve and manage our liquidity and capital resources, any of which would have a material adverse effect on our financial position, results of operations, and our ability to continue in existence. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 4 — Real Estate Property Acquisitions
5353 Joliet Street
In June 2014, through its wholly-owned subsidiary, 5353 Joliet LLC, the Company acquired an owner-occupied 22,144 square feet industrial building situated on 1.4 acres of land in Denver, Colorado for $2,214,000. The acquisition was funded with proceeds from the issuance of a secured promissory note in the amount of $1,800,000 and $414,000 of cash on-hand. The promissory note is held by Chemtov Mortgage Group (“CMG”), an entity wholly-owned by the Company’s co-CEO, Shawn Chemtov. CMG has assigned all ownership and security interest granted to it pursuant to the promissory note to 5353 Mortgage Loan, LLC, a single purpose entity created solely for the purpose of this transaction. CMG invested $100,000 of the $1,800,000 of funds used to finance the purchase of the promissory note. CMG acts as the loan servicing entity for the promissory note, administering the note, processing payments from the Company, and transferring all payments to 5353 Mortgage Loan, LLC. CMG charges no administration fees for servicing the promissory note.
The promissory note bears interest at 10% per annum, provides for cash interest payments on a monthly basis, matures on June 1, 2016, and is callable at the option of the Company at any time after June 19, 2015. The Company has guaranteed the promissory note and has pledged its ownership interest in 5353 Joliet LLC, and as such its fee-simple ownership interest in the property as security for the promissory note. The promissory note does not restrict the Company’s ability to incur future indebtedness. For the nine months ended September 30, 2015 and 2014, the Company recorded $135,000 and $50,918, respectively, of interest expense related to the promissory note.
In September 2014, the Company entered into a lease agreement contingent upon the lessee obtaining city and state licenses and permits for its intended operations at the premises. The contingencies were met by the lessee, and the lease agreement became effective December 1, 2014. The lease agreement is for a term of seven years and a monthly rent obligation of $25,835, subject to annual increases of 2% per year. Insurance and real property taxes
| 7 |
shall be paid by the Company and, subsequently, charged to the lessee as additional rent based on the actual expenses incurred - see Note 5 below for additional lease details.
503 Havana Street
In September 2014, through its wholly-owned subsidiary, MJ Havana LLC, the Company acquired an owner-occupied 1,250 square foot building situated on 23,625 square feet of land in Aurora, Colorado for $756,000, exclusive of closing costs. The acquisition was funded with cash on-hand. The property is zoned B-2 and has been approved by the city of Aurora as a retail dispensary for recreational marijuana.
Prior to closing on the property acquisition, the Company had pre-negotiated a 10-year lease agreement with a third-party, a licensed marijuana dispensary company serving both medical and adult (21+) customers in Colorado. Once the closing of the property was completed with the seller, the pre-negotiated lease was executed in September 2014 with the third-party. Pursuant to the terms of the lease agreement, the Company agreed to contribute $150,000 to improvements to the property - see Note 5 below for additional lease details. As of September 30, 2015, the Company had paid $146,026 towards the tenant’s building improvements.
1126 South Sheridan Boulevard
In May 2015, through its wholly-owned subsidiary, MJ Sheridan LLC, the Company acquired real estate property located at 1126 South Sheridan Boulevard in Denver, Colorado, for $771,750, exclusive of closing costs. The Company funded the acquisition through the issuance of a promissory note in the amount of $925,000 to a related party of which $771,750 was used to purchase the property. The balance of the funds will be used by the Company as working capital. The newly acquired property is 17,729 square feet with a 3,828 square foot one story free-standing building. The property is zoned B-2 and has been approved by the city of Denver as a retail dispensary for recreational marijuana.
The promissory note is held by CMG, an entity wholly-owned by the Company’s co-CEO, Shawn Chemtov. CMG has assigned all ownership and security interest granted to it pursuant to the promissory note to a single purpose entity created solely for the purpose of this transaction. CMG acts as the loan servicing entity for the promissory note, administering the note and processing payments from the Company. CMG charges no administration fees for servicing the promissory note.
The promissory note bears interest at 10% per annum, provides for cash interest payments on a monthly basis, matures on June 1, 2017. The promissory note is collateralized with the Company’s ownership interest in the newly acquired property and its previously acquired property located at 503 Havana Street in Aurora, Colorado. The promissory note does not restrict the Company’s ability to incur future indebtedness. For the nine months ended September 30, 2015, the Company recorded $37,929 of interest expense related to the promissory note.
Prior to closing on the property acquisition, the Company had pre-negotiated a 10-year lease agreement with a third-party, a licensed marijuana dispensary company serving both medical and adult (21+) customers in Colorado. Once the closing of the property was completed with the seller, the pre-negotiated lease was executed in May 2015 with the third-party - see Note 5 below for additional lease details.
A summary of real estate property at September 30, 2015, is as follows:
| Estimated | September 30, | |||||
| Life | 2015 | |||||
| Buildings | 30 years | $ | 2,995,167 | |||
| Improvements | 9-10 years | 146,026 | ||||
| Land | Not depreciated | 747,389 | ||||
| Total real estate property | 3,888,582 | |||||
| Less: Accumulated depreciation | (111,717 | ) | ||||
| Real estate property, net | $ | 3,776,865 | ||||
| 8 |
Note 5 — Operating Leases
The Company generates revenues by leasing its acquired real estate properties through operating leasing arrangements. A summary of revenues generated from our rental properties for the three and nine months ended September 30, 2015 and 2014, is as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues: | ||||||||||||||||
| Rental payments | $ | 140,195 | $ | 24,765 | $ | 380,719 | $ | 29,193 | ||||||||
| Reimbursed operating expenses | 15,646 | 7,199 | 41,576 | 7,199 | ||||||||||||
| Deferred rent revenue | 14,038 | 383 | 36,271 | 383 | ||||||||||||
| Total revenues from rental properties | $ | 169,879 | $ | 32,347 | $ | 458,566 | $ | 36,775 | ||||||||
503 Havana Street
In September 2014, the Company entered into a non-cancelable operating lease agreement with a marijuana dispensary (the “Lessee”) to move into the Company’s acquired property located at 503 Havana Street in Aurora, Colorado. The lease agreement is for a term of ten years and a monthly rent obligation of $11,250, subject to annual increases of 3% per year. Insurance and real property taxes shall be paid by the Company and, subsequently, charged to the Lessee as additional rent based on the actual expenses incurred. Pursuant to the terms of the lease agreement, the Company has agreed to contribute $150,000 to improvements to the property.
Upon the expiration of the term of ten years, the Lessee has the option to renew the lease agreement for one additional ten-year term, on the same terms as provided in the lease agreement. During the third year of the lease agreement, the Lessee may exercise an option to purchase the Property.
5353 Joliet Street
In September 2014, the Company entered into a lease agreement for its property and warehouse building located at 5353 Joliet Street in Denver, Colorado. The lease agreement is for a term of seven years and a monthly rent obligation of $25,835, subject to annual increases of 2% per year. Insurance and real property taxes shall be paid by the Company and, subsequently, charged to the lessee as additional rent based on the actual expenses incurred.
The lease was contingent upon the lessee, obtaining city and state licenses and permits for its intended operations at the premises, within the dates provided in the lease agreement. The contingencies were met by the lessee, and the lease agreement became effective December 1, 2014.
Upon the expiration of the seven-year term, the lessee has the option to renew the lease for two separate five-year terms, subject to rent reviews and adjustments, as set out in the lease agreement.
1126 South Sheridan Boulevard
In May 2015, the Company entered into a lease agreement for its acquired property located at 1126 South Sheridan Boulevard in Denver, Colorado. The lease agreement is for a term of ten years and a monthly rent obligation of $10,945, subject to annual increases of 3% per year. Insurance and real property taxes shall be paid by the Company and, subsequently, charged to the Lessee as additional rent based on the actual expenses incurred.
Upon the expiration of the term of ten years, the Lessee has the option to renew the lease agreement for one additional ten-year term, on the same terms as provided in the lease agreement. During the third year of the lease agreement, the Lessee may exercise an option to purchase the Property.
Future minimum rental payments, excluding the reimbursement of specified operating expenses, for non-cancelable operating lease agreements are as follows as of September 30, 2015:
| 9 |
| 2015 | $ | 142,758 | ||
| 2016 | 575,968 | |||
| 2017 | 590,069 | |||
| 2018 | 604,530 | |||
| 2019 | 619,359 | |||
| Thereafter | 2,124,431 | |||
| Total minimal rental payments | $ | 4,657,115 |
Note 6 — Related Party Transactions
In February 2014, in connection with the change in control of the Company, the principal stockholders paid $7,665 of the Company’s accounts payable, which was recorded as a capital contribution to the Company.
During the nine months ended September 30, 2014, the Company borrowed $5,277 from its principal stockholders and repaid $5,077 of the borrowings to its principal shareholders, resulting in $200 of net borrowings from related parties.
During the nine months ended September 30, 2015, the Company paid $165,221 for interest due pursuant to $2,725,000 of promissory notes held by CMG, wholly-owned by the Company’s co-CEO and shareholder, Shawn Chemtov - see Note 4 above for additional details regarding the promissory notes held by related party.
Note 7 — Stockholder Loans Payable
Stockholder loans payable consisted of three promissory notes with each of two of its stockholders in which the company may borrow up to $25,000, $20,000, and $10,000, respectively. These borrowings accrued interest at 5%, 8%, and 8% per annum, respectively. They were due in part in December 2014 and December 2016.
In February 2014, in connection with the change of control of the Company, Messrs. Chemtov and Laufer, purchased the Stock holder loans from Messrs. Peraman and Sarfoh.
On August 31, 2014, the outstanding balance of $99,450 for the stockholder loans and the associated accrued interest were converted to 19,890 shares of the Company’s common stock at a conversion price of $5.00 per share.
For the nine months ended September 30, 2014, the Company accrued interest expense of $3,214 related to the outstanding stockholder loans.
Note 8 — Sale of Unregistered Securities
The Company conducted a private placement of its shares of common stock, whereby we sold 1,615,000 shares of common stock for an aggregate of $1,615,000. We began accepting subscriptions on March 24, 2014 and closed the private placement on April 9, 2014.
For the nine months ended September 30, 2014, the Company received proceeds from the private placement of $1,615,000.
The shares were issued pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D promulgated thereunder (“Regulation D”) since, among other things, the transactions did not involve a public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof. Offers and sales were made solely to persons qualifying as “accredited investors” (as such term is defined by Rule 501 of Regulation D).
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The securities offered will not be and have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Note 9 — Stock Based Compensation
Warrants
In May 2014, the Company entered into a consulting services agreement for the generation of qualified leads and referrals for the Company’s real estate financing products, with a wholly-owned subsidiary of Medbox, Inc (“Medbox”), a leader in dispensing technologies and consulting services in the regulated marijuana industry.
During the term of the Agreement, Medbox received warrants to purchase 199,998 shares of the Company’s common stock. The warrants have a five-year term. The exercise price for each monthly warrant was determined based on the volume weighted average price of the Company’s common stock for the thirty days prior to the grant date of the warrant. In May 2014, Medbox exercised 33,333 warrants pursuant to a cashless exercise provision, in which Medbox received 10,825 shares of the Company’s common stock based on an exercise price of $6.42 per share.
The Agreement’s initial term was for six months, and was to renew automatically for successive one month terms and could be canceled by either party with 5 days written notice. In October 2014, the agreement with Medbox was terminated and no additional warrants were issued to Medbox pursuant to the agreement.
The fair values of the warrants granted during the term of the agreement were determined using the Black-Scholes option pricing model with the following weighted-average assumptions:
| Risk-free interest rate: | 1.64 | % | |||
| Expected term: | 5 years | ||||
| Expected dividend yield: | 0.00 | % | |||
| Expected volatility: | 131.22 | % |
For the nine months ended September 30, 2014, the Company recorded $728,423 of stock-based compensation expense related to warrants issued for services, which has been classified as General and administrative expenses.
A summary of warrants issued, exercised and expired during the nine months ended September 30, 2015, is as follows:
| Weighted | ||||||||
| Avg. | ||||||||
| Exercise | ||||||||
| Warrants: | Shares | Price | ||||||
| Balance at January 1, 2015 | 166,665 | $ | 5.88 | |||||
| Issued | — | — | ||||||
| Exercised | — | — | ||||||
| Expired | — | — | ||||||
| Balance at September 30, 2015 | 166,665 | $ | 5.88 | |||||
Common Stock
During the nine months ended September 30, 2015 and 2014, the Company issued 149,417 and 12,925, respectively, shares of common stock for consulting services and recorded $139,134 and $72,500, respectively, of stock-based compensation expense for these consulting services, which has been classified as General and administrative expenses. The stock-based compensation expense was calculated based on the grant date fair value of the common stock shares issued in exchange for the consulting services.
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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, 2014 and in our subsequent filings with the SEC, and include, among others, the following: marijuana is illegal under federal law, competition, our business is dependent on laws pertaining to the marijuana industry, government regulation, our business model depends on the availability of private funding, we will be subject to general real estate risks and the availability, 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.
Business Overview
MJ Holdings owns, operates and is developing a portfolio of business units related to the regulated marijuana industry, including internet websites, mobile apps and consumer products, in addition to our portfolio of income producing real estate . As of September 30, 2015, we have acquired three real estate properties in Colorado that are leased to state licensed marijuana operators and generating $56,626 in monthly rental income.
We have devised our current business strategy based on certain limitations related to the legal status of marijuana under federal law and the fact that we are a public company and make certain representations and warranties in connection with our public filings with the United States Securities and Exchange Commission. We recognize the significant opportunities in the legalized marijuana space and believe that using our current business model, we can position ourselves to not only develop a significant business along our current path, but be able to leverage our position, relationships and assets to capitalize on additional opportunities in the future, if and when federal law reconciles with state law; resulting in the federal legalization of marijuana.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies
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reflect the more significant estimates and assumptions used in the preparation of the consolidated financial statements:
Deferred Leasing Costs
Commissions and other direct costs associated with the acquisition of tenants, or lessees, are capitalized and amortized on a straight-line basis over the terms of the related leases. Costs associated with unsuccessful leasing opportunities are expensed.
Deferred leasing costs charged to property expenses for the nine months ended September 30, 2015 and 2014, were $20,624 and $0, respectively. As of September 30, 2015, $164,410 of deferred leasing costs are included on the Balance Sheet as a deferred asset.
Debt Issuance Costs
Costs associated with obtaining, closing, and modifying loans and/or debt instruments such as, but not limited to placement agent fees, attorney fees and state documentary fees are capitalized and charged to interest expense over the term of the loan.
Debt issuance costs charged to interest expense for the nine months ended September 30, 2015 and 2014, were $9,470 and $2,759, respectively. As of September 30, 2015, $15,097 of debt issuance costs are included on the Balance Sheet within the Prepaid expenses and other assets.
Real Estate Property
Real estate property is recorded at cost, less accumulated depreciation and amortization. Real estate property, excluding land, is depreciated using the straight-line method over the estimated useful life of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the related lease term or useful life. Maintenance, repairs, and minor improvements are charged to expense as incurred; major renewals and betterments that extend the useful life of the associated asset are capitalized. When real estate property is sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in results of operations for the period.
Revenue Recognition
Before revenue can be recognized, four basic criteria must be met: persuasive evidence of an arrangement exists; the delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured.
The Company’s revenues are rental income generated by leasing acquired real estate properties to licensed marijuana operators. All leases are classified as operating leases. Rental income is recognized on a straight-line basis over the terms of the leases. Straight-line rent is recognized for all tenants with contractual fixed increases in rent. Deferred rent receivable represents rental revenue recognized on a straight-line basis in excess of billed rents. Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as rental income in the period the applicable costs are incurred.
Stock-Based Compensation
The Company estimates the fair values of share-based payments on the date of grant using a Black-Scholes option pricing model, which requires assumptions for the expected volatility of the share price of our common stock, the expected dividend yield, and a risk-free interest rate over the expected term of the stock-based financial instrument.
Since the number of outstanding and free-trading shares of the Company’s common stock is limited and the trading volume is relatively low, we do not have sufficient company specific information regarding the volatility of our share price on which to base an estimate of expected volatility. As a result, we use the average historical volatilities of similar entities within our industry as the expected volatility of our share price.
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The expected dividend yield is 0% as the Company has not paid any dividends on its common stock and does not anticipate it will pay any dividends in the foreseeable future.
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant date with a remaining term equal to the expected term of the stock-based award.
For stock-based financial instruments issued to parties other than employees, we use the contractual term of the financial instruments as the expected term of the stock-based financial instruments.
The assumptions used in calculating the fair value of stock-based financial instruments represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.
Results of Operations For the Three and Nine Months Ended September 30, 2015 Compared to the Three and Nine Months Ended September 30, 2014
Revenue
Revenue for the three and nine months ended September 30, 2015, was $169,879 and $458,566, respectively, compared with revenue of $32,347 and $36,775 for the three and nine months ended September 30, 2014, respectively. The increase in revenue for the three and nine months ended September 30, 2015, was generated as a result of rental income from operating leases for three real estate properties acquired in June 2014, September 2014, and May 2015.
Certain property expenses are reimbursable to the Company through our existing leasing arrangements. During the three and nine months ended September 30, 2015, the Company recorded $15,646 and $41,576, respectively, of revenue pursuant to operating lease agreements to offset a portion of the property expenses incurred during the respective periods. During the three and nine months ended September 30, 2014, the Company recorded $7,199 of revenue pursuant to operating lease agreements to offset a portion of the property expenses incurred during the respective periods.
Operating Expenses
Property expenses consist of those costs associated with acquiring and leasing real estate properties. These expenses include costs for commissions, appraisals, real property taxes, insurance, repairs and maintenance. For the three and nine months ended September 30, 2015, we incurred property expenses of $23,032 and $100,981, respectively, compared with $46,494 and $57,175 for the three and nine months ended September 30, 2014. The property expenses for the three and nine months ended September 30, 2015, were the result of costs incurred from the three real estate properties acquired in June 2014,September 2014, and May 2015 and from costs incurred as a result of analyzing potential real estate acquisition opportunities.
General and administrative expenses for the three months ended September 30, 2015, decreased by $545,430 to $69,526 compared with general and administrative expenses of $614,956 for the three months ended September 30, 2014. For the nine months ended September 30, 2015, general and administrative expenses decreased by $696,835 to $231,504 compared with general and administrative expenses of $928,339 for the nine months ended September 30, 2014. The decreases in general and administrative expenses for the three and nine months ended September 30, 2015, were primarily attributed to decreases of 473,922 and 661,789, respectively, in non-cash stock-based compensation for consulting services and decreases of $68,784 and $52,555 for professional fees, respectively, compared to the three and nine months ended September 30, 2014.
Depreciation expense for the three and nine months ended September 30, 2015, was $28,871 and $73,544, respectively, compared with depreciation expense of $5,591 and $7,515 for the three and nine months ended September 30, 2014. The increases in depreciation expense for the three and nine months ended September 30,
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2015, were associated with the depreciation of the three real estate properties acquired in June 2014, September 2014, and May 2015.
Other Expenses
Interest expense for the three months ended September 30, 2015, increased by $23,280 to $71,843 compared with interest expense of $48,563 for the three months ended September 30, 2014. Interest expense for the nine months ended September 30, 2015, increased by $125,486 to $182,377 compared with interest expense of $56,891 for the nine months ended September 30, 2014. The increases in interest expense were primarily attributed to interest expense incurred on $2.7 million of promissory notes from a related party used to fund real estate property acquisitions in June 2014 and May 2015.
Net Loss
We had a net loss of $23,393, or a basic and diluted loss per share of $0.002, for the three months ended September 30, 2015, compared with a net loss of $683,257, or a basic and diluted loss per share of $0.049, for the three months ended September 30, 2014. We had a net loss of $129,840, or a basic and diluted loss per share of $0.009, for the nine months ended September 30, 2015, compared with a net loss of $1,013,145, or a basic and diluted loss per share of $0.076, for the nine months ended September 30, 2014. The decreases in the net loss was primarily due to increases in revenues as a result of rental income generated from operating leases for three real estate properties acquired in June 2014, September 2014, and May 2015, and decreases in operating expenses primarily as a result of lower non-cash stock-based compensation for consulting services and reduced professional fees incurred during the three and nine months ended September 30, 2015.
Liquidity and Capital Resources
The following table summarizes the cash flows for the nine months ended September 30, 2015 and 2014:
For the Nine Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| Cash Flows: | ||||||||
| Net cash provided by (used in) operating activities | $ | 18,279 | $ | (92,173 | ) | |||
| Net cash used in investing activities | (895,143 | ) | (2,970,806 | ) | ||||
| Net cash provided by financing activities | 914,366 | 3,396,048 | ||||||
| Net increase in cash | 37,502 | 333,069 | ||||||
| Cash at beginning of period | 175,792 | 478 | ||||||
| Cash at end of period | $ | 213,294 | $ | 333,547 | ||||
The Company had cash of $213,294 at September 30, 2015, compared with cash of $175,792 at December 31, 2014, an increase of $37,502. The increase in cash during the nine months ended September 30, 2015, was primarily attributed to cash provided by the net proceeds from financing activities of $914,366 and cash provided by operating activities of $18,279, partially offset by $895,143 of cash used for the acquisition of real estate property.
Operating Activities
We had net cash provided by operating activities of $18,279 for the nine months ended September 30, 2015, which consisted of non-cash charges of $206,502, a decrease in prepaid and other assets of $50,222, and a decrease in deferred leasing costs of $17,511, partially offset by a decrease of $119,274 in accounts payable and accrued liabilities, a net loss of $129,840, and a decrease in security deposits of $6,842,.
We had net cash used in operating activities of $92,173 for the nine months ended September 30, 2014, which consisted of a net loss of $1,013,145 and an increase of $63,017 in prepaid and other assets, partially offset by non-
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cash charges of $811,197, an increase of $70,747 in accounts payable and accrued liabilities, and receipt of $102,045 in security deposits associated with new operating leases.
Investing Activities
During the nine months ended September 30, 2015, we purchased a 3,828 square feet retail building in Denver, Colorado for $771,750. In addition, pursuant to the terms of the lease agreement for the real estate property located in Aurora, Colorado, the Company agreed to contribute $150,000 to improvements to the property. For the nine months ended September 30, 2015, we paid $123,393 for building improvements to the property in Aurora, Colorado. As of September 30, 2015, the Company had paid $146,026 of the $150,000 towards the improvements to the property.
During the nine months ended September 30, 2014, we acquired two real estate properties for $2,970,806 in Denver and Aurora, Colorado.
Financing Activities
We had $914,366 in net cash provided by financing activities for the nine months ended September 30, 2015, which consisted of proceeds of $925,000 from the issuance of a promissory note, partially offset by debt issuance costs of $10,634.
We had $3,396,048 in net cash provided by financing activities for the nine months ended September 30, 2014, which consisted of proceeds of $1,800,000 from the issuance of a promissory note and proceeds of $1,615,000 received from the sale of common stock, partially offset by debt issuance costs of $19,152.
Although we can provide no assurances, we believe our cash on hand, coupled with revenues generated by rental income and our ability to refinance our equity in the real estate we own, will provide sufficient liquidity and capital resources to fund our business for the next twelve months. In the event we experience liquidity and capital resources constraints because of unanticipated operating losses, we may need to raise additional capital in the form of equity and/or debt financing. If such additional capital is not available on terms acceptable to us or at all then we may need to curtail our operations and/or take additional measures to conserve and manage our liquidity and capital resources, any of which would have a material adverse effect on our business, results of operations and financial condition.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Seasonality
We do not consider our business to be seasonal.
Inflation and Changing Prices
Neither inflation or changing prices for the nine months ended September 30, 2015, had a material impact on our operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
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Securities Exchange Act of 1934, as amended) as of September 30, 2015. Based on that evaluation, our Co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2015.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2015, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rules 13a-15 or 15d-15 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings, which are pending or have been threatened against us or any of our officers, directors or control persons of which management is aware.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Please refer to the “Risks Factors” section in our Annual Report for a discussion of risks to which our business, financial condition, results of operations and cash flows are subject.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the nine months ended September 30, 2015, the Company issued 149,417 shares of common stock in exchange for consulting services. The securities were issued in reliance upon the exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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 |
| 31.1* | Rule 13a14(a)/15d-14(a) Certification of co-Chief Executive Officer |
| 31.2* | Rule 13a14(a)/15d-14(a) Certification of Chief Financial Officer |
| 31.3* | Rule 13a14(a)/15d-14(a) Certification of co-Chief Executive Officer |
| 32.1* | Section 1350 Certification of Chief Executive Officer |
| 32.2* | Section 1350 Certification of Chief Financial Officer |
| 32.3* | Section 1350 Certification of Chief Executive Officer |
| 101.INS** | XBRL Instance Document |
| 101.SCH** | XBRL Taxonomy Extension Schema Document |
| 101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.LAB** | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
| 101.DEF** | XBRL Taxonomy Definition Linkbase Document |
| * | Filed Herewith |
| ** | Furnished herewith (not filed). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MJ HOLDINGS, INC. | ||
| Date: November 12, 2015 | By: | /s/ Adam Laufer |
| Adam Laufer | ||
| Co-Chief Executive Officer | ||
| (co-Principal Executive Officer ) | ||
| MJ HOLDINGS, INC. | ||
| Date: November 12, 2015 | By: | /s/ Shawn Chemtov |
| Shawn Chemtov | ||
| Co-Chief Executive Officer and | ||
| Chief Financial Officer (co-Principal | ||
| Executive Officer, Principal Financial | ||
| Officer and Principal Accounting Officer ) | ||
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Exhibit 31.1
CO-CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Adam Laufer, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q 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. | The Registrant’s other certifying officer and I are 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 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. | The Registrant’s other certifying officer and I have disclosed, based on our 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. |
| Dated: November 12, 2015 | /s/ Adam Laufer | |
| Name: Adam Laufer | ||
| Title: Co-Chief Executive Officer |
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Shawn Chemtov, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q 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. | The Registrant’s other certifying officer and I are 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 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. | The Registrant’s other certifying officer and I have disclosed, based on our 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. |
| Dated: November 12, 2015 | /s/ Shawn Chemtov | |
| Name: Shawn Chemtov | ||
| Title: Chief Financial Officer |
Exhibit 31.3
CO-CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Shawn Chemtov, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q 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. | The Registrant’s other certifying officer and I are 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 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. | The Registrant’s other certifying officer and I have disclosed, based on our 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. |
| Dated: November 12, 2015 | /s/ Shawn Chemtov | |
| Name: Shawn Chemtov | ||
| Title: Co-Chief Executive Officer |
Exhibit 32.1
CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Adam Laufer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of MJ Holdings, Inc. on Form 10-Q for the period ended September 30, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of MJ Holdings, Inc.
| Dated: November 12, 2015 | /s/ Adam Laufer | |
| Name: Adam Laufer | ||
| Title: Co-Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to MJ Holdings, Inc. and will be retained by MJ Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Shawn Chemtov, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of MJ Holdings, Inc. on Form 10-Q for the period ended September 30, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of MJ Holdings, Inc.
| Dated: November 12, 2015 | /s/ Shawn Chemtov | |
| Name: Shawn Chemtov | ||
| Title: Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to MJ Holdings, Inc. and will be retained by MJ Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.3
CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Shawn Chemtov, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of MJ Holdings, Inc. on Form 10-Q for the period ended September 30, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of MJ Holdings, Inc.
| Dated: November 12, 2015 | /s/ Shawn Chemtov | |
| Name: Shawn Chemtov | ||
| Title: Co-Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to MJ Holdings, Inc. and will be retained by MJ Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.