MJNE . Company Overview..This is huge
We are a holding company, whose subsidiaries provide infrastructure, consulting, and construction services, in addition to holding, and managing third-party state issued cultivation and production licenses.
We were originally 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, we amended and restated our Articles of Incorporation and changed our name to MJ Holdings, Inc.
From February 2014 to January 2017, we owned and leased real estate properties zoned for legalized marijuana operations to licensed marijuana operators.
On November 22, 2016, in connection with a plan to divest ourselves of our real estate business, we submitted to our stockholders an offer to exchange (the “Exchange Offer”) our common stock for shares in MJ Real Estate Partners, LLC, (“MJRE”) a newly formed LLC formed for the sole purpose of effecting the Exchange Offer. On January 10, 2017, the Company accepted for exchange 1,800,000 shares of our Common Stock in exchange for 1,800,000 shares of MJRE’s common units, representing membership interests in MJRE. Effective February 1, 2017, we transferred our ownership interests in the real estate properties and our subsidiaries, through which we hold 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.
Reverse Merger
On December 15, 2017, we 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 our 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 our wholly-owned subsidiary. Upon the consummation of the acquisition, the now-former members of Red Earth became the beneficial owners of approximately 88% of our Common Stock, obtained controlling interest of the Company, and retained certain of our key management positions. In accordance with the accounting treatment for a “reverse merger” or a “reverse acquisition,” our 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. The consolidated financial statements after completion of the reverse merger includes 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.
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Our Business
Through our acquisition of Red Earth and their wholly owned subsidiary, HDGLV, LLC (“HDGLV”) we expect to commence legal marijuana cultivation activities in the fourth quarter of 2018 upon approval by the Nevada Department of Taxation of the transfer of a Provisional Cultivation License to Red Earth, which occurred in April 2018, and the required state and city approvals for our cultivation facility. 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 provisional State of Nevada issued cannabis cultivation license, and through HDGLV, we hold a triple-net leasehold, with an option to buy, on a 17,298 square-foot building, which we expect will be home to our cultivation facility.
Marijuana Industry Overview
Marijuana cultivation refers to the planting, tending, improving and harvesting of the flowering plant Cannabis, primarily for the production and consumption of cannabis flowers, often referred to as “buds”. The cultivation techniques for marijuana cultivation differ than for other purposes such as hemp production. Generally, references to marijuana cultivation and production do not include hemp production.
Cannabis belongs to the genus Cannabis in the family Cannabaceae and for the purposes of production and consumption, includes three species, C. sativa (“Sativa”), C. indica (“Indica”), and C. ruderalis (“Ruderalis”). Sativa and Indica generally grow tall with some varieties reaching approximately 4 meters. The female plants produce flowers rich in tetrahydrocannabinol (“THC”). Ruderalis is a short plant and produces trace amounts of THC but is very rich in cannabidiol (“CBD”), which is an antagonist (inhibits the physiological action) to THC.
As of September 2018, there are a total of 31 states, plus the District of Columbia, with legislation passed as it relates to medicinal cannabis. These state laws are in direct conflict with the United States Federal Controlled Substances Act (21 U.S.C. § 811) (“CSA”), which places controlled substances, including cannabis, in a schedule. Cannabis is classified as a Schedule I drug, which is viewed as having a high potential for abuse, has no currently-accepted use for medical treatment in the U.S., and lacks acceptable safety for use under medical supervision.
As of September 2018, 31 states, plus the District of Columbia, have adopted laws that exempt patients who use medicinal cannabis under a physician’s supervision from state criminal penalties. These are collectively referred to as the states that have de-criminalized medicinal cannabis, although there is a subtle difference between de-criminalization and legalization, and each state’s laws are different. Additionally, nine states and the District of Columbia now allow for recreational use of marijuana.
Decriminalization of marijuana varies by state. As of September 2018, 13 states have decriminalized the non-medical use and possession of marijuana for personal consumption. Decriminalization generally means that violators of local marijuana laws may be subject to civil penalty rather than face criminal prosecution. In three states, Idaho, South Dakota, and Kansas, the cultivation, possession or use of marijuana is strictly prohibited and violators may be subject to criminal prosecution.
For example, Nevada legalized marijuana for recreational use, effective July 1, 2017, making it legal for adults over the age of 21 to use marijuana and to possess up to one ounce of marijuana flowers and one-eighth of an ounce of marijuana concentrates. Individuals are also permitted to grow up to six marijuana plants for personal use. In addition, businesses can legally, pursuant to state regulations, cultivate, process, dispense, distribute, and test marijuana products under certain conditions.
The dichotomy between federal and state laws has limited the access to banking and other financial services by marijuana businesses. Recently the U.S. Department of Justice (the “DOJ”) and the U.S. Department of Treasury issued guidance for banks considering conducting business with marijuana dispensaries in states where those businesses are legal, pursuant to which banks must now file a Marijuana Limited Suspicious Activity Report that states the marijuana business is following the government’s guidelines with regard to revenue that is generated exclusively from legal sales. However, since the same guidance noted that banks could still face prosecution if they provide financial services to marijuana businesses, it has led to the widespread refusal of the banking industry to offer banking services to marijuana businesses operating within state and local laws.
MANAGEMENT
Directors and Executive Officers
Our directors and executive officers, their ages, positions held, and duration of such, are as follows:
Name of Director Age Position with Company Director Since
Paris Balaouras 46 CEO and Chairman of the Board of Directors December 15, 2017
John R. Wheeler 66 CFO -
Andrew Boutsikakis 41 President -
Terrence M. Tierney 57 Secretary -
Business Experience
The following is a brief overview of the education and business experience of each of our directors and executive officers during at least the past five years, including their principal occupations or employment during the period, the name and principal business of the organization by which they were employed, and certain of their other directorships:
Paris Balaouras was appointed Chief Executive Officer and Chairman of the Board on December 15, 2017. Mr. Balaouras has more than ten years of experience in the development and operations of legal cannabis businesses, including license acquisition, facility management, cannabis cultivation, and legislative initiatives. During the past five years, Mr. Balaouras has raised over $100,000,000 for the development, construction, and launch of cannabis related businesses in Arizona, California, and Nevada. Mr. Balaouras was the founding and managing partner of Acres Medical, LLC (“Acres Medical”) from April 2014 until February 2016. While with Acres Medical, Mr. Balaouras was instrumental in raising investment capital for the acquisition of five Nevada Medical and Recreational Marijuana Establishment Certificates, the development and opening of a 20,000 square foot dispensary in Las Vegas, Nevada, and the opening of a 37-acre cultivation facility in the Amargosa Valley, Nevada, creating the largest cultivation site in the State of Nevada. From 2012 until 2016, while serving as the Principal Officer at Natural Remedy Patient Center, Mr. Balaouras obtained an Arizona dispensary, cultivation, and production license. Mr. Balaouras is a member of the Nevada Dispensary Association, Americans for Safe Access, and the National Organization for the Reform of Marijuana Laws.
John R. Wheeler, Jr. was appointed as our Chief Financial Officer on December 15, 2017. Mr. Wheeler has over 40 years of experience in accounting and 10 years with companies in the cannabis industry. Mr. Wheeler graduated from the University of Arizona with a Bachelors in Accounting and received his CPA license in 1979. Starting his career, Mr. Wheeler worked for the IRS for 6 years and later worked for multiple CPA companies in California for 10 years. For the last 27 years, Mr. Wheeler ran his own CPA companies: Rocky Wheeler CPA and Wheeler & Associates CPA’s.
Andrew Boutsikakis was appointed as our President in December 2017. Prior to that, in March 2017, Mr. Boutsikakis become a consultant for Red Earth. Mr. Boutsikakis has over 15 years of sales experience in financial services, communications, and business development. In 2014, Mr. Boutsikakis formed AB Consulting Group (“AB Consulting”) to focus his efforts in the emerging medical marijuana industry in Nevada and Arizona. AB Consulting provided corporate consulting services primarily in sales, licensing, and mergers & acquisition to the legal cannabis industry. Previously, Andrew was the sales director at Markets Media and director of business development at Cohere Communication.
Terrence M. Tierney was appointed as our Secretary on September 19, 2018. Mr. Tierney has over 30 years of senior level management experience in both the private and public sectors. From October 2009 until October 2015, he served as the Managing Partner of Profesco Partners, a business management consulting firm focused on start-up companies, corporate reorganizations and tax qualified not for profit public charities. From October 2011 until October 2013, Mr. Tierney also served as the Managing Director of Building for America’s Bravest, a joint venture program between the Gary Sinise Foundation and the Stephen Siller Tunnel to Towers Foundation that builds custom designed “smart homes” for severely wounded U.S. military personnel. From October 2015 until September 2018, Mr. Tierney was President of Profesco, Inc., the successor in interest to Profesco Partners. Mr. Tierney earned a Bachelor of Science degree in Aeronautics/Professional Pilot from St. Louis University and was awarded a Juris Doctor degree from New York Law School in 1992.
