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MJ HOLDINGS, INC.

Date Filed : Aug 05, 2022

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UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

WASHINGTON,D.C. 20549

 

 

 

FORMS-1

 

REGISTRATIONSTATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

 

 

MJHOLDINGS, INC.

(Exactname of registrant as specified in its charter)

 

nevada   20-8235905

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

2580S. Sorrel St, Las Vegas, NV 89146

(Addressof principal executive offices)

 

(702)879-4440

(Registrant’stelephone number, including area code)

 

LawOffices of Byron Thomas

3275S. Jones Blvd

LasVegas, NV 89146

(702)747-3103

 

(Name,address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Pleasesend copies of all communications to:

 

LawOffices of Gary L. Blum

3278Wilshire Boulevard, Suite 603

LosAngeles, CA 90010

(213)381-7450

 

Assoon as practicable after the effective date of this Registration Statement.

(Approximatedate of commencement of proposed sale to the public)

 

Ifany of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under theSecurities Act of 1933 check the following box: ☒

 

Ifthis Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, pleasecheck the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statementfor the same offering. ☐

 

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and listthe Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. ☐

 

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and listthe Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. [  ]

 

Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. 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

 

Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complyingwith any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

Calculationof Registration Fee

 

Title of Each Class of

Securities To Be Registered

 

Amount to

be

Registered

(1)(4)

 

Proposed
Maximum

Offering Price

Per Share (2)

  

Proposed
Maximum

Aggregate

Offering Price (2)

  

Amount of

Registration Fee (3)

 
Common stock, par value $.001 per share, previously issued to selling shareholders  7,000,000 shares  $0.2695   $

1,886,500

   $

175

  

 

 

(1)

Pursuant to Rule 416 under the Securities Act, the shares registered hereby also include an indeterminate number of additional shares as may from time to time become issuable by reason of stock splits, distributions, recapitalizations or other similar transactions.

   
(2)

Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act, on the basis of the average high and low sales price of the Registrant’s common stock as reported by the OTCQB Marketplace on July 29, 2022. The shares offered hereunder may be sold by the Selling Shareholders from time to time in the open market, through privately negotiated transactions, or a combination of these methods at market prices prevailing at the time of sale or at negotiated prices.

 

 
(3) Paid herewith. The fee is calculated by multiplying the aggregate offering amount by 0.0000927 pursuant to Section 6(b) of the Securities Act.
   
(4)

This Registration Statement covers the resale by our selling shareholders of up to 7,000,000 shares of common stock previously issued to such selling shareholders.

 

 

 

Theregistrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until theregistrant shall file a further amendment which specifically states that this registration statement shall thereafter become effectivein accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such dateas the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

  
 

 

Theinformation in this prospectus is not complete and may be changed. These securities may not be sold until the registration statementfiled with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is notsoliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARYPROSPECTUS - SUBJECT TO COMPLETION Dated August 5, 2022

 

MJHOLDINGS, INC.

 

7,000,000

Sharesof

CommonStock

 

Thisprospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”). Thisprospectus relates to the offering of up to 7,000,000 shares of our common stock, par value $0.001 per share (“Common Stock”)by selling shareholders. The information in this prospectus is not complete and may be changed. The sellingshareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where theoffer or sale is not permitted. 

 

OurCommon Stock is subject to quotation on OTCQB Marketplace under the symbol “MJNE.” On July 29, 2022, the lastreported sales price for our Common Stock was $0.2695 per share. We urge prospective purchasers of our Common Stock to obtain currentinformation about the market prices of our Common Stock. We will not receive proceeds from the sale of shares from the selling shareholders.

 

Theselling shareholders may offer, sell or distribute all or a portion of the shares of common stock registered hereby publicly or throughprivate transactions at prevailing market prices or at negotiated prices. Thereare no underwriting commissions involved in this offering. We have agreed to pay all the costs and expenses of this offering. Sellingshareholders will pay no offering expenses.

 

Thisoffering is highly speculative and these securities involve a high degree of risk and should be considered only by persons who can affordthe loss of their entire investment. Additionally, our auditor has expressed substantial doubt as to our Company’s ability to continueas a going concern. Our common stock involves a high degree of risk. You should read the “RISK FACTORS” sectionbeginning on page 30 before you decide to purchase any of our Common Stock.

 

TheCompany has minimal revenues to date and there can be no assurance that the Company will be successful in furthering its operations and/orrevenues. Persons should not invest unless they can afford to lose their entire investment. Investing in our securities involves a highdegree of risk. You should purchase these securities only if you can afford a complete loss of your investment. See “RiskFactors” beginning on page 30 of this prospectus.

 

Neitherthe SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy ofthis prospectus. Any representation to the contrary is a criminal offense.

 

Thedate of this prospectus is August 5, 2022.

 

  
 

 

TABLEOF CONTENTS

 

PROSPECTUS SUMMARY 6
THE OFFERING 28
SUMMARY FINANCIAL DATA 29
RISK FACTORS 30
NOTE ABOUT FORWARD-LOOKING STATEMENTS 43
TAX CONSIDERATIONS 43
USE OF PROCEEDS 43
DILUTION 43
SELLING SHAREHOLDERS 45
DESCRIPTION OF SECURITIES 46
DIVIDEND POLICY 47
DESCRIPTION OF BUSINESS 47
PROPERTIES 63
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 64
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS 69
EXECUTIVE COMPENSATION 71
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 73
MARKET FOR COMMON STOCK / SHARES ELIGIBLE FOR FUTURE SALE 75
WHERE YOU CAN FIND MORE INFORMATION 76
LEGAL PROCEEDINGS 76
EXPERTS 77
CORPORATE GOVERNANCE 77
FINANCIAL STATEMENTS 79

 

Nodealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus.You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares of common stockoffered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectusis current only as of its date.

 

3
 

 

ABOUTTHIS PROSPECTUS

 

Thisprospectus is part of a registration statement that we filed on behalf of the Selling Shareholders with the United States Securitiesand Exchange Commission (the “SEC”) to permit the Selling Shareholders to sell the shares described in this prospectus inone or more transactions. The Selling Shareholders and the plan of distribution of the shares being offered by them are described inthis prospectus under the headings “Selling Shareholders” and “Plan of Distribution.”

 

Youshould rely only on the information contained in this document and any free writing prospectus we provide to you. Neither we nor theSelling Shareholders have authorized anyone to provide any information or to make any representations other than those contained in thisprospectus or in any free writing prospectuses we have prepared. We and the Selling Shareholders take no responsibility for and can provideno assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the commonstock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in thisprospectus is current only as of its date.

 

Useof Industry and Market Data

 

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

 

4
 

 

CAUTIONARYNOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Thisprospectus contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events including,without limitation, the terms, timing and closing of our proposed acquisitions or our future financial performance. We have attemptedto identify forward-looking statements by using terminology such as “anticipates,” “believes,” “expects,”“can,” “continue,” “could,” “estimates,” “expects,” “intends,”“may,” “plans,” “potential,” “predict,” “should,” “will,” orthe negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors maycause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levelsor activity, performance, or achievements expressed or implied by these forward-looking statements. Although we believe that the expectationsreflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.Our expectations are as of the date this prospectus is filed, and we do not intend to update any of the forward-looking statements afterthe date this prospectus is filed to confirm these statements to actual results, unless required by law.

 

Youshould not place undue reliance on forward looking statements. The cautionary statements set forth in this prospectus identify importantfactors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

 

  Our ability to effectively execute our business plan;

 

  Our ability to manage our expansion, growth and operating expenses;
     
  Our ability to protect our brands and reputation;
     
  Our ability to repay our debts;
     
  Our ability to rely on third-party suppliers outside of the United States;
     
  Our ability to evaluate and measure our business, prospects and performance metrics;
     
  Our ability to compete and succeed in a highly competitive and evolving industry;
     
  Our ability to respond and adapt to changes in technology and customer behavior;
     
  Risks in connection with completed or potential acquisitions, dispositions and other strategic growth opportunities and initiatives;
     
  Risks related to the anticipated timing of the closing of any potential acquisitions;
     
  Risks related to the integration with regards to potential or completed acquisitions;
     
  Various risks related to health epidemics, pandemics and similar outbreaks, such as the coronavirus disease 2019 (“COVID-19”) pandemic, which may have material adverse effects on our business, financial position, results of operations and/or cash flows; and
     
  Our ability to take advantage of opportunities under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, and the potential impact of the CARES Act on our business, results of operations, financial condition or liquidity.

 

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

 

5
 

 

PROSPECTUSSUMMARY

 

Thissummary highlights certain information appearing elsewhere in this prospectus. This summary is not complete and does not contain allof the information you should consider prior to investing. After you read this summary, you should read and consider carefully the moredetailed information and financial statements and related notes that we include in this prospectus, especially the sections entitled“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”If you invest in our securities, you are assuming a high degree of risk.

 

Unless we have indicated otherwise or the contextotherwise requires, references in the prospectus to “MJ Holdings,” the “Company,” “we,” “us”and “our” or similar terms are to MJ Holdings, Inc.

 

DESCRIPTIONOF BUSINESS

 

CompanyOverview

 

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

 

CurrentInitiatives include:

 

  a three-acre, hybrid, outdoor, marijuana-cultivation facility (the “Cultivation Facility”) located in the Amargosa Valley of Nevada. The Company had the contractual right to manage and cultivate marijuana on this property until 2026, for which it would have received sixty percent (60%) of the net revenues realized from its management of this facility and twenty-five percent (25%) of the net revenues from equipment rental. The licensed facility is owned by Acres Cultivation, LLC, a wholly owned subsidiary of Curaleaf Holdings, Inc. On January 21, 2021, the Company received a Notice of Termination, effective immediately, from Acres Cultivation, LLC. During the year ended December 31, 2021, the Company relocated all of its equipment utilized on the Acres lease to its 260 Acres adjacent to the Acres lease. The Company will not generate any further revenue under the Acres relationship.
     
  260 acres of farmland for the purpose of cultivating additional marijuana (the “260 Acres”) purchased in January of 2019. The Company intends to utilize the state-of-the-art Cravo® cultivation system for growing an additional five acres of marijuana on this property. The Cravo® system will allow multiple harvests per year and should result in higher annual yields per acre. The land has more than 180-acre feet of permitted water rights, which will provide more than sufficient water to markedly increase the Company’s marijuana cultivation capabilities. This facility, upon receipt of its business license in Nye County and its final inspection by the Cannabis Compliance Board (“CCB”), is expected to become operational in the summer of 2022. During the year ended December 31, 2021, the Company elected to relocate all of its equipment utilized on the Acres lease to its 260 Acres adjacent to the Acres lease. The Company will utilize the 260 Acres for its own harvest along with additional harvests under any Cultivation and Sales Agreements.
     
  Cultivation and Sales Agreements entered into for multiple grows on the Company’s 260 Acres located in the Amargosa Valley of Nevada. During the years ended December 31, 2021 and 2020, the Company entered into separate Cultivation and Sales Agreements, whereby the Company shall retain certain independent growers to provide oversight and management of the Company’s cultivation and sale of products at its 260 Acres. The independent growers shall pay to the Company a royalty of net sales revenue with a minimum royalty after two years. As of the date of this filing, the Company is waiting on its business license in Nye County and its final inspection by the Cannabis Compliance Board before it can commence its operations under the Agreement.
     
  a nearby commercial trailer and RV park (THC Park – Tiny Home Community) was purchased in April of 2019 to supply necessary housing for the Company’s farm employees. After the Company’s 2018 harvest, it came to realize that it would need to find a more efficient method of housing and to bring its cultivation team to its facilities. The Company purchased the 50-acre plus THC Park for $600,000 in cash and $50,000 of the Company’s restricted common stock. At present, the Company’s construction and completion of this community is approximately seventy-five present complete. The impact of COVID-19 in obtaining inspections and permitting significantly delayed the completion of this community. The Company has elected to cease any renovations or additions at its Tiny Home Community until it plants its first grow on the 260 Acres and can better evaluate the need for additional housing.

 

6
 

 

  an agreement to acquire a cultivation license and production license, both currently located in Nye County Nevada. On February 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. In consideration of the sale, transfer, assignment and delivery of the Membership Interests to Purchaser, and the covenants made by Seller under the MIPA3, Purchaser agreed to pay a combination of cash, promissory notes, and stock in the amount of One-Million-Two-Hundred-Fifty Thousand Dollars ($1,250,000.00) in cash and/or promissory notes and 200,000 shares of the Company’s restricted common stock, all of which constitutes the consideration agreed to herein for (the “Purchase Price”), payable as follows: (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against future compensation due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, (v) $200,000 shall be deposited on or before June 12, 2021, and (vi) $250,000 shall be deposited within five (5) business days after the Nevada Cannabis Compliance Board (“CCB”) provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser. On April 12, 2022, the CCB issued an Adult-Use Production License to MJ Distributing P133, LLC and an Adult-Use Cultivation License to MJ Distributing C202, LLC. The Company is currently awaiting its business license to be issued by Nye County, Nevada.
     
  indoor cultivation facility build-out in the City of Las Vegas (the “Indoor Facility”). Through its former subsidiary, Red Earth, LLC (“Red Earth”), the Company held a Medical Marijuana Establishment Registration Certificate, Application No. C012. In August of 2019, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with Element NV, LLC (“Element”), to sell a 49% interest in the license. Under the terms of the Agreement, Element was required to invest more than $3,500,000 into this Indoor Facility. Element paid the monthly rent on the facility from December 2019 through March 2020 but failed to make any additional payments. On June 11, 2020, the Company entered into the First Amendment (“First Amendment”) to the Agreement. Under the terms of the First Amendment, the Closing Purchase Price was adjusted to $441,000, and Element was required to make a capital contribution (the “Initial Contribution Payment”) to the Target Company in the amount of $120,000 and was required to make an additional cash contribution (the Final Contribution Payment”) in the amount of $240,000. The Company terminated its discussions with Element regarding its past due payments. On or about May 7, 2021, Red Earth, received an inquiry from the State of Nevada Cannabis Compliance Board (“CCB”) regarding the transfer of ownership of the Subsidiary from its previous owners to the Company. The CCB has determined that the transfer was not formally approved, thus a Category II violation. On July 27, 2021, Red Earth entered into a Stipulation and Order for Settlement of Disciplinary Action (the “Stipulation Order”) with the CCB. Under the terms of the Stipulation Order, Red Earth agreed to present to the CCB, by not later than August 31, 2021, a plan pursuant to which the ownership of Red Earth would be returned to the original owners. The Parties to the Stipulation Order resolved the matter without the necessity of taking formal action. Red Earth agreed to pay a civil penalty of $10,000, which was paid on July 29, 2021. On August 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of Red Earth, Paris Balaouras, entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December 15, 2017, entered into between the Company and Red Earth was terminated as of the date of the Termination Agreement resulting in the return of ownership of Red Earth to Mr. Balaouras. Neither party shall have any further obligation to one another pursuant to the terms of the Purchase Agreement.

 

7
 

 

Acquisitionof MJH Research, Inc.

 

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

 

MJHResearch, Inc. is a Florida corporation whose operations center around providing consulting services for growing techniques, managementand cultivation of crops, as well as licensing support, production and asset and infrastructure development.

 

Cultivationand Sales Agreements

 

MKCDevelopment Group, LLC Agreement

 

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

 

Asdeposits, security and royalty, the Company shall pay to MJNE:

 

  (i) a $600,000 non-refundable deposit upon execution of the Agreement;
  (ii) a security deposit of $10,000 to be applied against the last month’s obligations and a $10,000 payment to be applied against the first month’s rent;
  (iii) $10,000 on the first of each month for security and compliance;
  (iv) a royalty of 10% of gross revenue less applicable taxes (hereinafter “Net Sales Revenue”) on all sales of product by the Company; and
  (v) the Company shall, after the first two (2) years from execution of the Agreement, be responsible to pay to MJNE a minimum royalty of $83,000.00 per month.

 

Ascompensation, MJNE shall pay to the Company:

 

  (i) 90% of Net Sales Revenue to the Company as the Management Fee.

 

Thetransaction closed on January 27, 2021. As of the date of this filing, the Company has made all required payments to MJNE. The partiesare awaiting the issuance of a business license from Nye County before any grow can be initiated. It is anticipated that the licensewill be approved and issued during the third quarter of 2022.

 

NaturalGreen, LLC Agreement

 

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

 

Asdeposits, security and royalty, the Company shall pay to MJNE:

 

  (i) a $500,000 Product Royalty deposit to be applied to the first Product Royalty or Product Royalties;
  (ii) a deposit of $20,000 to be applied against the first and last month’s Security and Compliance fee;
  (iii) $10,000 on the first of each month for Security and Compliance;
  (iv) a royalty of 10% of gross revenue less applicable taxes (hereinafter “Net Sales Revenue”) on all sales of product by the Company; and
  (v) the Company shall, after the first two (2) years from execution of the Agreement, be responsible to pay to MJNE a minimum royalty of $50,000.00 per month.

 

Ascompensation, MJNE shall pay to the Company:

 

  (i) 90% of Net Sales Revenue to the Company as the Management Fee.

 

OnMarch 26, 2021, MJNE and the Company entered into an Amendment to the Agreement whereby MJNE waived the Company’s requirement toobtain liability insurance and required the Company to pay MJNE $40,000 for capital expenditures costs. The transaction closed on April7, 2021. As of the date of this filing, the Company has made all required payments to MJNE. The parties are awaiting the issuance ofa business license from Nye County before any grow can be initiated. It is anticipated that the license will be approved and issued duringthe third quarter of 2022.

 

8
 

 

GreenGrow Investments Agreement

 

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

 

Asdeposits, security and royalty, the Company shall pay to MJNE:

 

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

 

Ascompensation, MJNE shall pay to the Company:

 

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

 

Asof the date of this filing, the Company has made all required payments to MJNE. The parties are awaiting the issuance of a business licensefrom Nye County before any grow can be initiated. It is anticipated that the license will be approved and issued during the third quarterof 2022.

 

RKGrow, LLC Agreement

 

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

 

Asdeposits, security and royalty, the Company shall pay to MJNE:

 

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

 

Ascompensation, MJNE shall pay to the Company:

 

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

 

Asof the date of this filing, the Company has made all required payments to MJNE. The parties are awaiting the issuance of a business licensefrom Nye County before any grow can be initiated. It is anticipated that the license will be approved and issued during the third quarterof 2022.

 

Terminationof Acres Cultivation, LLC Agreement

 

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

 

  (i) The Cultivation and Sales Agreement entered into by and between MJNE and Acres, dated as of January 1, 2019 (the “Cultivation and Sales Agreement” or “CSA”), pursuant to Sections 5.3, and 16.20 (cross-default);
     
  (ii) The Consulting Agreement, by and between Acres and MJNE, made as of January 1, 2019 (the “Consulting Agreement”), pursuant to Sections 10 and 11.10 (cross-default); and
     
  (iii) The Equipment Lease Agreement between Acres and MJNE, dated as of January 1, 2019 (the “Equipment Lease Agreement”), pursuant to Sections 8(ii), 8(iv), and 29 (cross-default).

 

9
 

 

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

 

TheCompany may also continue to seek to identify potential acquisitions of revenue producing assets and licenses within legalized cannabismarkets that can maximize shareholder value.

 

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

 

TheCompany presently occupies an office suite located at 2580 S. Sorrel St., Las Vegas, NV 89146. On January 12, 2021, the Companyclosed on the sale of its corporate office building located at 1300 S. Jones Blvd, Las Vegas, NV 89146 for the sale price of $1,627,500.The Company plans on remaining at its current location for the next 3-6 months until it can identify a new corporate office.

 

ConsultingAgreements

 

OnFebruary 25, 2021, the Company entered into a Consulting Agreement (the “Agreement”) with Sylios Corp (the “Consultant”).Under the terms of the Agreement, the Consultant shall prepare the Company’s filings with the Securities and Exchange Commission(the “SEC”) including its Annual report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. TheConsultant shall receive $50,000 in cash compensation plus 225,000 shares of the Company’s common stock. The Agreement has a termof the latter of one (1) year or until the Company’s Annual Report for the period ended December 31, 2021 is filed with the SEC.

 

OnJune 17, 2021, the Company entered into a Consulting Agreement (the “Agreement”) with Wolfpack Consulting, LLC (the “Consultant”).Under the terms of the Agreement, the Consultant shall use its commercially reasonable efforts and adequate business time and attentionto identify various properties that may fit into Client’s business model to develop, cultivate, and produce marijuana related products.The Consultant shall receive $25,000 in cash compensation. The Agreement shall begin on the Effective date and end upon the earlier of:(a) the first anniversary of the Effective Date (i.e., one year), or (b) either Party’s receipt of written notice from the otherparty of its intent to terminate this Agreement after the expiration of the first anniversary (the “Term”).

 

CorporateAdvisory Agreement (Research & Development)

 

Underthe terms of the Research & Development Agreement (the “Research Agreement”), GYB, LLC (the “Advisor”) shallreport to Company, in writing, on a quarterly basis beginning on July 1, 2021, on the status of the psychedelics industry including,but not limited to, those areas of importance identified in the Recitals, identify entities operating within the legally regulated psychedelicsindustry that may be suitable as a potential acquisition or merger candidate and other such services the parties agree upon. The ResearchAgreement has a term of one year and begins on May 18, 2021. As compensation for the services provided, the Company paid the Advisor$310,000 upon execution of the Research Agreement.

 

CorporateAdvisory Agreement (M&A and Funding)

 

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

 

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COVID-19

 

Thenovel coronavirus commonly referred to as “COVID-19” was identified in December 2019 in Wuhan, China. On January 30, 2020,the World Health Organization declared the outbreak a global health emergency, and on March 11, 2020, the spread of COVID-19 was declareda pandemic by the World Health Organization. On March 13, 2020, the spread of COVID-19 was declared a national emergency by former PresidentDonald Trump. The outbreak has spread throughout Europe, the Middle East and North America, causing companies and various internationaljurisdictions to impose restrictions such as quarantines, business closures and travel restrictions. While these effects are expectedto be temporary, the duration of the business disruptions internationally and related financial impact cannot be reasonably estimatedat this time. The rapid development of the COVID-19 pandemic and the measures being taken by governments and private parties to respondto it are extremely fluid. While the Company has continuously sought to assess the potential impact of the pandemic on its financialand operating results, any assessment is subject to extreme uncertainty as to probability, severity and duration of the pandemic as reflectedby infection rates at local, state, and regional levels. The Company has attempted to assess the impact of the pandemic by identifyingrisks in the following principal areas:

 

● MandatoryClosuresIn response to the pandemic, many states and localities implemented mandatory closures of, or limitations to,businesses to prevent the spread of COVID-19; this impacted the Company’s operations. More recently, the mandatory closures thatimpacted the Company’s operations were lifted and the Company resumed full operations, albeit subject to various COVID-19 relatedprecautions and changes in local infection rates. The Company’s ability to generate revenue would be materially impacted by anyfuture shut down of its operations.

 

● CustomerImpactWhile the Company has not experienced an overall downturn in demand for its products in connection with the pandemic,if its customers become ill with COVID-19, are forced to quarantine, decide to self-quarantine or not to visit stores where its productsmay be sold or distribution points to observe “social distancing”, it may have material negative impact on demand for itsproducts while the pandemic continues. While the Company has implemented measures, to reduce infection risk to its customers, regulatorsmay not permit such measures, or such measures may not prevent a reduction in demand.

 

● SupplyChain DisruptionThe Company relies on third party suppliers for equipment and services to produce its products and keepits operations going. If its suppliers are unable to continue operating due to mandatory closures or other effects of the pandemic, itmay negatively impact its own ability to continue operating. At this time, the Company has not experienced any failure to secure criticalsupplies or services. However, disruptions in the Company’s supply chain may affect its ability to continue certain aspects ofthe Company’s operations or may significantly increase the cost of operating its business and significantly reduce its margins.

 

● StaffingDisruptionThe Company is, for the time being, implementing among its staff where feasible “social distancing”measures recommended by such bodies as the Centers for Disease Control (CDC), the Presidential Administration, as well as state and localgovernments. The Company has cancelled non-essential travel by employees, implemented remote meetings where possible, and permitted allstaff who can work remotely to do so. For those whose duties require them to work on-site, measures have been implemented to reduce infectionrisk, such as reducing contact with customers, mandating additional cleaning of workspaces and hand disinfection, providing masks andgloves to certain personnel, and contact tracing following reports of employee infection. Nevertheless, despite such measures, the Companymay find it difficult to ensure that its operations remain staffed due to employees falling ill with COVID-19, becoming subject to quarantine,or deciding not to come to come to work on their own volition to avoid infection. At certain locations, the Company has experienced increasedabsenteeism due to increased COVID-19 infection rates in certain locales. If such absenteeism increases, the Company may not be able,including through replacement and temporary staff, to continue to operate at desired levels in some or all locations.

 

● RegulatoryBacklogRegulatory authorities, including those that oversee the cannabis industry on the state level, are heavily occupiedwith their response to the pandemic. These regulators as well as other executive and legislative bodies in the states in which the Companyoperates may not be able to provide the level of support and attention to day-to-day regulatory functions as well as to needed regulatorydevelopment and reform that they would otherwise have provided. Such regulatory backlog may materially hinder the development of theCompany’s business by delaying such activities as product launches, facility openings and approval of business acquisitions, thusmaterially impeding development of its business. The Company is actively addressing the risk to business continuity represented by eachof the above factors through the implementation of a broad range of measures throughout its structure and is reassessing its responseto the COVID-19 pandemic on an ongoing basis. The above risks individually or collectively may have a material impact on the Company’sability to generate revenue. Implementing measures to remediate the risks identified above may materially increase the Company’scosts of doing business, reduce its margins and potentially result in losses. While the Company has not to date experienced any overallmaterial negative impact on its operations or financial results related to the impact of the pandemic, so long as the pandemic and measurestaken in response to the pandemic are not abated, substantial risk of such impact remains, which could negatively impact the Company’sability to generate revenue and/or profits, raise capital and complete its development plans.

 

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 Limitedavailability of vaccineOn December 11, 2020, the federal Food and Drug Administration (FDA) issued an emergency use authorization(EUA) for the Pfizer BioN-Tech COVID-19 vaccine, the first such approval. Additional EUAs were issued on December 18, 2020 for a vaccinecreated by Moderna, and on February 27, 2021 for a vaccine created by Janssen Biotech (a Johnson & Johnson affiliate). As of April4, 2021, the CDC reports that approximately 168 million doses of the various vaccines have been administered in the U.S., although boththe Pfizer and Moderna vaccines require the administration of two doses for full effectiveness. On March 2, 2021, President Biden statedthat the U.S. will have sufficient vaccine supply for all adults by the end of May 2021. Actual delivery of the vaccines to individuals,however, is controlled by state and local governments using various prioritization criteria and states continue to impose activity limitationsand other precautions on businesses during this period until the vaccine is widely disseminated. In addition, there can be no assuranceof when the Company’s employees in any particular jurisdiction will be able to access the vaccine. Moreover, there can be no assurancethat all employees will choose to avail themselves of the vaccine or, if so, when they will choose to do so. The same applies to theCompany’s, customers, regulators, and suppliers. Consequently, the COVID-19 risk factors described above continue to be applicable.

 

CorporateHistory

 

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

 

OnNovember 22, 2016, in connection with a plan to divest the Company of its real estate business, the Company submitted to itsstockholders an offer to exchange (the “Exchange Offer”) its common stock for shares in MJ Real Estate Partners, LLC,(“MJRE”) a newly formed LLC formed for the sole purpose of effecting the Exchange Offer. On January 10, 2017, theCompany accepted for exchange 1,800,000 shares of its Common Stock in exchange for 1,800,000 shares of MJRE’s common units,representing membership interests in MJRE. Effective February 1, 2017, the Company transferred its ownership interests in the realestate properties and its subsidiaries, through which the Company held ownership of the real estate properties, to MJRE. MJRE alsoassumed the senior notes and any and all obligations associated with the real estate properties and business, effective February 1,2017.

 

Acquisitionof Red Earth

 

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

 

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

 

Onor about May 7, 2021, the Subsidiary, received an inquiry from the State of Nevada Cannabis Compliance Board (“CCB”) regardingthe transfer of ownership of the Subsidiary from its previous owners to the Company. The CCB has determined that the transfer was notformally approved, thus a Category II violation.

 

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

 

OnAugust 1, 2021, the Company entered into a Memorandum of Understanding and Agreement for Technical Services and Short-Term Funding (the“Agreement”) with Red Earth, LLC (hereinafter, “Red Earth”), an entity controlled by its Chief Cultivation Officer,Paris Balaouras. Under the terms of the Agreement, the Company will provide a short-term loan (the “Loan”) to Red Earth forexpenses related to the activation and operation of Red Earth’s cultivation license. The Loan shall bear interest at 12% per annumand increase to 18% upon default. In addition, the Company shall provide Red Earth pre-opening technical services at a cost of $5,000to $7,500 per month. As of December 31, 2021, the amount due the Company under the short-term loan is $40,165.

 

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On August 26, 2021, theCompany and the Company’s Chief Cultivation Officer and previous owner of the Subsidiary, Paris Balaouras, entered into a TerminationAgreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December15, 2017, entered into between the Company and the Subsidiary was terminated as of the date of the Termination Agreement resulting inthe return of ownership of the Subsidiary to Mr. Balaouras. Neither party shall have any further obligation to one another pursuant tothe terms of the Purchase Agreement. Please see Note 14 — Related Party Transactions within the Company’s financialstatement for the three months ended March 31, 2022 for further information.

 

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

 

OurBusiness History

 

InApril 2018, the Company entered into a management agreement with Acres Cultivation, LLC, a Nevada limited liability company (the “LicensedOperator”) that holds a license for the legal cultivation of marijuana for sale under the laws of the State of Nevada. In Januaryof 2019, the Company entered into a revised agreement, which replaced the April 2018 agreement, with the Licensed Operator in order tobe more stringently aligned with Nevada marijuana laws. The material terms of the agreement remain unchanged. The Licensed Operator iscontractually obligated to pay over to the Company sixty percent (60%) of the net revenues realized from its management of this facilityand twenty-five percent (25%) of the net revenues from equipment rental. The agreement is to remain in force until April 2026. In April2019, the Licensed Operator was acquired by Curaleaf Holdings, Inc., a publicly traded Canadian cannabis company. The acquisition wassubject to all of the contractual obligations between the Company and the Licensed Operator.

 

In April 2018, the State of Nevada finalized andapproved the transfer of provisional Medical Marijuana Establishment Registration Certificate No. 012 (the “Certificate”)from Acres Medical, LLC to the Company’s former wholly owned subsidiary, Red Earth, LLC (“Red Earth”). HDGLV, LLC (“HDGLV”),a wholly owned subsidiary of Red Earth, holds a triple-net leasehold interest in a 17,298 square-foot commercial building located onWestern Avenue in the City of Las Vegas, which will be home to the Company’s indoor cultivation facility (the “Western Facility”).The initial term of the lease is for a period of ten years with two additional five-year lease options. HDGLV also possesses an optionto purchase the building for $2,607,880 which is exercisable between months 25 and 60 of the initial term of the lease. In August of2018, the Company received final approval from the State of Nevada, Department of Taxation, to commence cultivation activities with respectto the Certificate. Contemporaneously therewith, Red Earth was issued a Business License by the City of Las Vegas to operate a marijuanacultivation facility at the Western Facility. In October of 2018, the Company was requested by the City of Las Vegas Department of Building& Safety to make additional modifications to the building, specifically the removal and remediation of all asbestos materials inthe building, which was completed in June of 2019 at a cost of approximately $140,000. In July of 2019, the City of Las Vegas asked theCompany to amend its Business License and modify its Special Use Permit (“SUP”) to conform with updated marijuana cultivationrequirements within the City. A new SUP was granted on October 9, 2019. As of August 26, 2021, the Company was no longer the owner ofHDGLV as per the terms of the Termination Agreement between the Company and Paris Balaouras. Please see Note 7 — IntangibleAssets and Note 15 — Gain on Disposal of Subsidiary within the Company’s financials for the year ended December31, 2021 for further information.

 

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In August of 2018, the Company executed a letterof intent (“LOI”) for the acquisition of all of the membership units of Farm Road, LLC, a Wyoming limited liability company(“Farm Road”). Farm Road was the owner of five parcels of farmland in the Amargosa Valley of Nevada totaling 260 acres andthe concomitant 180 acre-feet of water rights. Pursuant to the terms of a Membership Interest Purchase Agreement (“MIPA”)executed between the Company and Farm Road in November of 2018, the Company was to acquire Farm Road for $1,000,000 on the followingterms: a deposit of $50,000 in cash and $50,000 of the Company’s restricted common stock upon execution of the LOI, was to be heldin escrow until closing, $150,000 in cash payable at closing and a promissory note bearing 5% simple annual interest (the “PromissoryNote”) in the amount of $750,000.00 payable to FR Holdings, LLC (an unrelated third party) (“FRH”) in 36 equal monthlyinterest only payments of three thousand one hundred twenty five ($3,125.00) dollars commencing on the March 1, 2019. On January 18,2019, pursuant to the terms of the MIPA, the Company acquired a 100% interest in Farm Road. The terms of the Promissory Note includea balloon payment to be made on January 17, 2022 of any of the then remaining principal balance and accrued interest. The MIPA furtherprovides that FRH shall be entitled to receive a consulting fee of five per cent (5%) of the gross sales from any commercial use of theproperty up to a maximum of five hundred thousand ($500,000.00) dollars payable to FRH within two years of the January 18, 2019 closingdate. The land acquired in Amargosa Valley will be the home of the Company’s Nye County cultivation facility upon closing of thepurchase of the cultivation and production certificates in the MIPA3. Please see Note 9 — Notes Payable within theCompany’s financial statement for the three months ended March 31, 2022 for further information.

 

TheCompany has joined with more than 15 other plaintiffs in an action against the State of Nevada in regard to how the applications werescored and as to why licenses were granted to other applicants in contravention of the guidelines published by the State of Nevada. OnAugust 23, 2019, a Nevada District Court judge issued a preliminary injunction enjoining any of the entities that were granted licensesfrom opening new dispensaries based upon the failure of NVDOT (the administrative body tasked with adopting and enforcing marijuana regulationswithin the State of Nevada) to enforce a provision of Ballot Question 2 (“BQ2”), that was approved by Nevada voters in 2016and adopted by the Nevada legislature and codified as NRS 453D, which legalized the sale and distribution of recreational use marijuana.The law requires that “each prospective owner, officer and board member of a marijuana establishment license applicant” undergoa background check. The judge found that many of the successful license applicants failed to comply with this requirement. On August29, 2019, the judge modified the ruling and is allowing thirteen of the successful license applicants who the State of Nevada have certifiedas having complied with the requirements of BQ2 to open new dispensaries as granted in December of 2018. The plaintiffs shall now continueto trial on the merits of the pending litigation against the State of Nevada. In March of 2020, counsel for Red Earth withdrew from itsrepresentation of Red Earth. Red Earth is actively trying to retain substitute counsel, which as of the date of this filing Red Earthremains unrepresented in this matter. The trial, which was scheduled to commence in April of 2020, has been postponed by the State ofNevada as part of their implementation measures to stop the spread of COVID-19, as of the date of this filing the trial has not commenced.

 

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InOctober of 2018, the Company entered into a Revenue Participation Rights Agreement (the “RPRA”) with Let’s Roll NV,LLC and Blue Sky Companies, LLC (together, the “Subscribers”). Under the terms of the RPRA, the Company transferred its ownershipinterest in 3.95% of the gross revenue from the “Amargosa Outdoor Grow” to the Subscribers in exchange for $100,000 cashpayment and a Subscription Agreement in the amount of $1,142,100. On or before April 30th for the next 8 years (2019-2026),the Company shall calculate the pro rata gross revenue due to the Subscribers with payments being made on or before May 31st ofeach year. On March 24, 2021, the Company entered into a Termination Agreement (the “Agreement”) with the Subscribers. Underthe terms of the Agreement, the Company has decided to terminate its involvement in the Amargosa Outdoor Grow facility to capitalizeon additional strategic opportunities for further co-ops and/or additional outdoor grow expansions on adjacently owned properties; andfurther that such termination of the Amargosa Grow would result in a complete loss of revenue sharing opportunities for the Subscribersunder the terms of the RPRA. In consideration of termination of the RPRA, the Company compensated the Partners; (i) $136,684, and (ii)1,000,000 shares of common stock.

 

InJanuary of 2019, the Company formed Coachill-Inn, LLC (“Coachill-Inn”), a subsidiary of Alternative Hospitality(“AH”), to develop a proposed hotel in Desert Hot Springs, CA. From January through June of 2019, the Company wasactively engaged in negotiations with the property owner of the proposed location. In June of 2019, Coachill-Inn executed a purchaseand sale agreement with Coachillin’ Holdings, LLC (“CHL”) to acquire a 256,132 sq. ft. parcel of land within a100-acre industrial cannabis park in Desert Hot Springs, CA (the “Property”) to develop its first hotel project. Thepurchase price for the property was $5,125,000. CHL was to contribute $3,000,000 toward the purchase price of this property inexchange for a twenty-five percent (25%) ownership interest in Coachill-Inn. AH made an initial non-refundable deposit in the amountof $150,000 toward the purchase of the Property. As of the date of this filing, the Company has terminated its participation in thedevelopment due to financing issues. The $150,000 deposit is classified as an impaired asset. Please see Note 9—Asset Impairment within the Company’s financial statement for the year ended December 31, 2021 for furtherinformation.

 

OnFebruary 15, 2019, the Company entered into a Licensing Agreement (the “Agreement”) with Highland Brothers, LLC, (“HB”)an entity controlled by the Company’s former Chief Executive Officer and current director. Under the terms of the Agreement, HBgranted the Company an exclusive license to use any and all branding materials of HB including, without limitation, its name, logo, andany and all intellectual property rights. In consideration of the license, the Company agreed to compensate HB seven percent (7%) ofthe net sales generated by the Company for any products utilizing and/or integrating property rights, brands or logos of HB commencingin 2020. The Agreement has a term of ten (10) years.

 

OnMarch 8, 2019, the Company entered into a fifteen-year Suite License Agreement (the “Agreement”) with LV Stadium Events Company,LLC (“LV Stadium”) for the lease of a suite within the multipurpose stadium (the “Stadium”) constructed in ClarkCounty, Nevada that is intended to be the home stadium for the Raiders National Football League team. Under the terms of the Agreement,the Company paid the initial deposit of $75,000, the second payment of $150,000 and the final payment on approximately October 15, 2020.Commencing with year 6 of the Term, the License Fee for each year of the Term shall be increased by an amount not to exceed three percent(3%) of the License Fee payable for the immediately preceding year.

 

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InApril of 2019, Roger Bloss was appointed to the Board of Directors of the Company.

 

InApril of 2019, the Company executed a Membership Interest Purchase Agreement (the “MIPA”) to acquire all of themembership interests in two Nevada limited liability companies that are each the holder of a State of Nevada marijuana license.Marijuana Establishment Registration Certificate, Application No. C202 and Marijuana Establishment Registration Certificate,Application No. P133 (collectively the “Certificates”). The terms of the MIPA required the Company to purchase thelicenses for the total sum of $1,250,000 each - $750,000 in cash per license and $500,000 of the Company’s restricted commonstock per license. The terms of the MIPA provide for a $250,000 non-refundable down payment and include a short term note in theamount of $500,000 carrying an annual interest rate of two percent (2%) that was due and payable on or before October 18, 2019. OnOctober 17, 2019, the State of Nevada’s Governor issued an executive order restricting the transfer of all Nevada marijuanalicenses (the “Moratorium”). As of the date of this filing, the Company has made deposits totaling $550,000 and hasreduced the principal of the aforementioned note to $250,000. The Company is required to issue $1,000,000 of shares of itsrestricted common stock in fulfillment of its obligations in the MIPA. As of the date of this filing, these shares have not beenissued. The Company also executed a $750,000 long term note (the “LT Note”) in favor of the current license holders thatbecomes due and payable upon the earliest of a) six months after the transfer of the Certificates to the Company, or b) six monthsafter the production/cultivation is declared fully operational by the applicable regulatory agencies, or c) March 10, 2020. OnFebruary 19, 2020, the Company was put on notice by the Seller that it is in default under the terms of the MIPA. Additionally,pursuant to the terms of the MIPA, the Company was required to enter into a $15,000 per month sub-lease (retroactive to March 1,2019) for the 10-acre cultivation/production facility located in Pahrump, Nye County, NV and install a mobile production trailer.The Company failed to make the required payments under the MIPA and the Agreement was terminated. Please see Note 9—Asset Impairment within the Company’s financial statement for the year ended December 31, 2021 for furtherinformation.

 

InApril of 2019, the Company consummated its purchase of an approximately 50-acre, commercial trailer and RV park (the “Trailer Park”)in close proximity to its Amargosa Valley cultivation facilities. The Trailer Park can accommodate up to 90 trailers and RV’s.There presently are 17 occupied trailers in the Trailer Park, and the Company is making the necessary upgrades to bring additional unitsto the facility to provide housing for its farm personnel. The Company purchased the Trailer Park for a total of $600,000 in cash and$50,000 of the Company’s restricted common stock, resulting in the issuance of 66,667 shares. The Sellers hold a $250,000 note,bearing interest at six and one-half percent resulting in monthly payments in the amount of $2,178 based upon a 15-year amortizationschedule (the “TP Note”). The TP Note requires additional principal reduction payments in the amount of $50,000 on or beforeApril 5, 2020 and April 5, 2021, respectively. As of the date of this filing, the Company has failed to make the required principal reductionpayment that was due on April 5, 2020. Additionally, due to the ongoing effects of COVID-19, the Company has been unable to make itsmonthly payments of $2,178 pursuant to the terms of the TP Note. The Company is in arrears to the holders of the TP Note in the amountof $58,711. The principal and interest payments will be recalculated based on a 15-year a amortization schedule upon each principal reductionpayment. A final balloon payment of any and all outstanding principal and accrued interest is due and payable on or before April 5, 2022.There are no prepayment penalties should the Company elect to retire the note prior to its maturity date.

 

OnJune 25, 2019, the Company entered into a Series Post Seed Preferred Stock and Series Post Seed Preferred Unit Investment Agreement(the “Agreement”) with Innovation Labs, Ltd. and Innovation Shares, LLC. Under the terms of the Agreement, the Companypurchased 238,096 Series Post Seed Preferred Stock Shares and 238,096 Series Post Seed Preferred Units for a purchase price of$250,000. Please see Note 9 —Asset Impairment within the Company’s financial statement for the year endedDecember 31, 2021 for further information.

 

OnAugust 28, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with Element NV,LLC, an Ohio limited liability company (the “Buyer”), to sell forty-nine percent (49%) of the membership interests inthe Company’s wholly owned subsidiary, Red Earth, LLC (“Red Earth”) for $441,000. The $441,000 was paid to theCompany on August 30, 2019. The Agreement required the Buyer to make an additional payment, in the amount of $3,559,000, to beutilized for the improvement and build-out of the Company’s Western Avenue leasehold in Las Vegas, Nevada. The payment was duewithin ten (10) days of the receipt by Red Earth of a special use permit (“SUP”) from the City of Las Vegas for itsWestern Avenue cultivation facility. The Company received the SUP on October 9, 2019. The Buyer, in conjunction with the Company,will jointly manage and operate the facility upon completion. The Agreement also requires the Buyer to make a final payment to theCompany of $1,000,000 between 90 and 180 days of issuance of the SUP or no later than April 9, 2020. On June 11, 2020, the Companyentered into the First Amendment (“First Amendment”) to the Agreement. Under the terms of the First Amendment, theClosing Purchase Price was adjusted to $441,000, the Buyer was required to make a capital contribution (the “InitialContribution Payment”) to the Target Company in the amount of $120,000 and the Buyer was required to make an additional cashcontribution (the Final Contribution Payment”) in the amount of $240,000. The Buyer failed to make the required payments underthe Agreement and the Agreement was thus terminated in 2021. Please see Note 7 — Intangible Assets and Note15 — Gain on Disposal of Subsidiary within the Company’s financial statement for the year ended December 31, 2021for further information.

 

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OnJanuary 22, 2020, the Company’s President, Richard S. Groberg, tendered his resignation to the Company’s Board of Directors(the “Board”). The Board accepted Mr. Groberg’s resignation effective immediately. The Company and Mr. Groberg executeda mutual Separation Agreement. On May 12, 2021, the Company entered into a Cooperation and Release Agreement (the “Agreement”)with Richard S. Groberg and RSG Advisors, LLC. Under the terms of the Agreement, Mr. Groberg agreed to relinquish all common stock ofthe Company issued to or owned by him and waived any right to any future stock issuances except for 100,000 shares to be retained byMr. Groberg.

 

OnJanuary 22, 2020 the Board appointed the Company’s Secretary and Chief Administrative Officer, Terrence M. Tierney, JD, age 58,to the additional position of interim President. Mr. Tierney was a consultant to the Company from July 1, 2018 until September 18, 2018when he was appointed Secretary of the Company. On October 15, 2018, Mr. Tierney became the Chief Administrative Officer of the Companyand signed a three-year employment agreement with the Company (which agreement has been previously filed with the SEC) that expires onSeptember 30, 2021. There were no changes to Mr. Tierney’s current employment agreement other than his additional duties as President.Mr. Tierney had day-to-day oversight of the Company’s operations and continue to advise the Board on strategic initiatives andbusiness development.

 

OnFebruary 20, 2020, the Company’s subsidiary, Alternative Hospitality, Inc. (the “Borrower”), issued a Short-TermPromissory Note (the “Note”) to Pyrros One, LLC (the “Holder”), an entity controlled by a relative of adirector of the Company, in the amount of $110,405 that matures on February 19, 2021. The Note shall bear interest at a rate of 9%per annum with interest-only payments in the amount of $825 due on or before the twentieth day of each month commencing on April 20,2020. The Borrower was required to make an interest and principal reduction payment in the amount of $1,233 on or before March 20,2020. The Holder was granted a security interest in that certain real property located at 1300 S. Jones Blvd, Las Vegas, NV 89146,which is owned by the Borrower. Please see Note 11 — Notes Payable – related parties within theCompany’s financial statement for the year ended December 31, 2021 for further information.

 

OnMarch 2, 2020, Mr. Ruhe tendered his resignation to the Company’s Board of Directors (the “Board”). The Board acceptedMr.Ruhe’s resignation effective immediately. Mr. Ruhe also stepped down as an advisor to the Company’s Audit Committee. Additionally,pursuant to the terms of Mr. Ruhe’s employment contract with the Company Mr. Ruhe shall forfeit 11,709 shares of invested commonstock previously issued to Mr. Ruhe. The Board has commenced a search to find a suitable individual to replace Mr. Ruhe.

 

OnMarch 31, 2020, the Company’s subsidiary, Condo Highrise Management, LLC (the “Borrower”), issued a Short-TermPromissory Note (the “Note”) to Pyrros One, LLC (the “Holder”), an entity controlled by a relative of adirector of the Company, in the amount of $90,000 that matures on March 30, 2021. The Note shall bear interest at a rate of 9% perannum with interest-only payments in the amount of $675 due on or before the first day of each month commencing on May 1, 2020. TheHolder was granted a security interest in that certain real property located at 4295 Hwy 343, Amargosa, NV 89020 which is owned bythe Borrower. Please see Note 11 — Notes Payable – related parties within the Company’s financialstatement for the year ended December 31, 2021 for further information.

 

OnJuly 22, 2020, the Company entered into a Securities Purchase Agreement (the “Agreement”) with an accredited investor (the“Investor”). Under the terms of the Agreement, the Investor agreed to purchase 4,500,000 shares of the Company’s commonstock at $0.088808889 per share for a total purchase price of $400,000. The Investor was also to be issued a warrant granting the Investorthe right to acquire 1,000,000 shares of the Company’s common stock at an exercise price of $0.10. The warrant was to be datedAugust 3, 2020 and have a term of three years. The Investor funded $250,000 of the purchase amount on July 31, 2020. On August 10, theCompany returned $125,465 of the funds to the Investor for a net investment of $124,535. The Company issued the Investor 1,402,279 sharesof common stock and a warrant granting the Investor the right to purchase 250,000 shares of common stock under the revised terms of theAgreement.

 

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On August 7, 2020, the Company’s Board ofDirectors terminated, with cause, the employment of Terrence M. Tierney, the Company’s former President and Secretary, effectiveimmediately. On March 9, 2021, Terrence Tierney filed for arbitration with the American Arbitration Association for: (i) breach of contract,(i) breach of the implied covenant of good faith and fair dealing, and (iii) NRS 608 wage claim. Mr. Tierney demanded payment in theamount of $501,085 for deferred business compensation, expenses paid on behalf of the Company, accrued vacation and severance pay. OnApril 7, 2021, the Company made payment against the wage claim in the amount of $62,392, inclusive of $59,583 for wages and $2,854 foraccrued vacation and, as such posits that any claims that Tierney may have had have been paid in full and that the Company otherwisehas no liability. The Company filed a counterclaim in the action declaring that Tierney breached the contract of employment, committedfraud, malfeasance and other nefarious acts causing substantial damage to the Company with estimated monetary damages well in excessof any monetary claim made by Tierney. After recent arbitrator rulings favorable to the Company, the parties agreed to postponethe June arbitration and have referred the matter to mediation. On June 23, 2022, the parties participated in mediation without resolution. The parties have met and conferred andare scheduled to proceed with arbitration on November 7-10, 2022.

 

OnSeptember 1, 2020, the Company entered into an Employment Agreement (the “Agreement”) with Paris Balaouras (the “Employee”).Under the terms of the Agreement, the Employee shall serve as the Company’s Chief Cultivation Officer for a term of three (3) years(the “Term”) commencing on September 15, 2020. The Employee shall receive a base salary of $105,000 annually, shall be eligibleto receive an annual discretionary bonus during the Term, based on performance criteria determined by the board of directors of the Companyin its sole discretion, in amount equal to up to 100% of Employee’s base salary for the then current fiscal year, shall be eligibleto receive an annual discretionary stock grant during the Term which shall be vested in equal increments of 1/3rd each overa three year period beginning on the first anniversary of employment, shall be eligible to receive a compensatory stock grant of 667,000shares for and in consideration of past compensation (approximately $500,000 over the past 2.5 years) foregone by Employee; such grantexercisable at Employee’s option as such time as Employer is profitable at the NOI level on a trailing twelve (12) month basisor upon other commercial reasonable terms as the Board may determine and shall be awarded options to purchase 500,000 shares of the Company’scommon stock, exercisable at a price of $.75 per share.

 

OnSeptember 1, 2020, the Company entered into an Employment Agreement (the “Agreement”) with Roger Bloss. Under the terms ofthe Agreement, the Employee shall serve as the Company’s Interim Chief Executive Officer for a term of six (6) months and the ChiefExecutive Officer and for an additional two (2) years and six (6) months as the Chief Executive Officer for a total of three (3) years(the “Term”) commencing on September 15, 2020. The Employee shall receive a base salary of $105,000 annually, shall be eligibleto receive an annual discretionary bonus during the Term, based on performance criteria determined by the board of directors of the Companyin its sole discretion, in amount equal to up to 100% of Employee’s base salary for the then current fiscal year, shall be eligibleto receive an annual discretionary stock grant during the Term which shall be vested in equal increments of 1/3rd each overa three year period beginning on the first anniversary of employment and shall be awarded options to purchase 500,000 shares of the Company’scommon stock, exercisable at a price of $.75 per share.

 

OnSeptember 1, 2020, the Company entered into an Employment Agreement (the “Agreement”) with Bernard Moyle. Under the termsof the Agreement, the Employee shall serve as the Company’s Secretary/Treasurer for a term of three (3) years (the “Term”)commencing on September 15, 2020. The Employee shall receive a base salary of $60,000 annually, shall be eligible to receive an annualdiscretionary bonus during the Term, based on performance criteria determined by the board of directors of the Company in its sole discretion,in amount equal to up to 200% of Employee’s base salary for the then current fiscal year, shall, at commencement of the Term receivea grant of stock of 500,000 shares and shall be eligible to receive an annual discretionary stock grant during the Term which shall bevested in equal increments of 1/3rd each over a three year period beginning on the first anniversary of employment and shallbe awarded options to purchase 500,000 shares of the Company’s common stock, exercisable at a price of $.75 per share.

 

OnSeptember 15, 2020, the Company entered into a Board of Directors Services Agreement (the “Agreement”) with Messrs. Bloss,Dear and Balaouras (collectively, the “Directors”). Under the terms of the Agreement, each of the Directors shall provideservices to the Company as a member of the Board of Directors for a period of not less than one year. Each of the Directors shall receivecompensation as follows: (i) Fifteen Thousand and no/100 dollars ($15,000.00), paid in four (4) equal installments on the last calendarday of each quarter, and (ii) Fifteen Thousand (15,000) shares of the Company’s common stock on the last calendar day of each quarter.The Agreement for each of the Directors is effective as of October 1, 2020.

 

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OnOctober 1, 2020, the Company entered into an Employment Agreement (the “Agreement”) with Jim Kelly. The Agreement becameeffective as of October 1, 2020. Under the terms of the Agreement, the Employee shall serve as the Company’s Interim Chief FinancialOfficer for a term of (i) the sooner of six (6) months, or (ii) the completion of all regulatory filings, including but not limited tothe Company’s 2019 Annual Report on Form 10-K, the March 31, 2020 Quarterly Report on Form 10-Q, the June 30, 2020 Quarterly Reporton Form 10-Q, the September 30, 2020 Quarterly Report on Form 10-Q and all required Current Reports on Form 8-K, with the Securitiesand Exchange Commission (“SEC”) to bring the Company current with the SEC. The Employee shall receive a base salary of $24,000annually, shall be eligible to receive an annual discretionary bonus during the Term, based on performance criteria determined by theC-Suite of the Company in its sole discretion, in an amount equal to up to 400% of the Employee’s base salary for the then currentfiscal year, and at commencement of the Term the Employee shall receive a grant of stock of 500,000 restricted shares of the Company’scommon stock. On March 16, 2021, Mr. Kelly resigned in his position as Interim Chief FinancialOfficer.

 

OnDecember 8, 2020, the Company entered into Amendment No. 1 (the “Amendment”) to the Revenue Participation Rights Agreementpreviously entered into with Blue Sky Companies, LLC and Let’s Roll NV, LLC. Under the terms of the Amendment, the new effectiveDate of the Agreement shall be revised to the date that the first payment shall be due in 2021 from the 2020 3-acre grow. In addition,(i) the Company’s 2020 obligation under the original Agreement for the 2019 grow is deemed satisfied in full, (ii) on or beforeApril 30, 2027, the Company shall pay a $26,000 exit fee.

 

OnJanuary 12, 2021, the Company completed the sale of its commercial building for $1,627,500. On December 12, 2020, the Company, throughits wholly owned subsidiary (Prescott Management, LLC), entered into a sales contract with Helping Hands Support, Inc. for the sale ofthe Company’s commercial building located at 1300 South Jones Boulevard, Las Vegas, Nevada 89146.

 

OnFebruary 17, 2021, the Company entered into a Stock Purchase Agreement (the “Agreement”) with ATG Holdings, LLC (the “ATG”).Under the terms of the Agreement, the Company purchased 1,500,000,000 shares of common stock of Healthier Choices ManagementCorp (“HCMC”) from ATG for the purchase price of $200,000. The transaction closed on February 19, 2021. During the year endedDecember 31, 2021, the Company liquidated its marketable securities that it received in the Agreement with ATG.

 

OnMarch 12, 2021, the Company (the “Holder”) was issued a Convertible Promissory Note (the “Note”) by GeneRx(the “Borrower”), a Delaware corporation, in the amount of $300,000. The Note has a term of one year (April 7, 2022Maturity Date) and accrues interest at two percent (2%) per annum. The Note is convertible, at the option of the Holder, into sharesof common stock of the Borrower at a fixed conversion price of $1.00 per share. Upon an Event of Default, the Conversion Price shallequal the Alternate Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends orrights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower,combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Alternate ConversionPrice” shall equal the lesser of (i) 80% multiplied by the average of the three lowest daily volume weighted average prices(“VWAP”) during the previous twenty (20) Trading Days (as defined below) before the Issue Date of this Note(representing a discount rate of 20%) or (ii) 80% multiplied by the Market Price (as defined herein) (representing a discount rateof 20%). “Market Price” means the average of the three lowest daily VWAPs for the Common Stock during the twenty (20)Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. Any amount of principal or interest onthis Note which is not paid when due shall bear interest at the rate of twenty-four percent (24%) per annum from the due datethereof until the same is paid (the “Default Interest”). The Company funded $300,000 on March 15, 2021, $150,000 onApril 5, 2021 and $50,000 on April 7, 2021. Please see Note5 — Note Receivable within the Company’s financial statement for the three months ended March 31, 2022 for furtherinformation.

 

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OnApril 13, 2021, the Company entered into a Storage and Purchase Agreement (the “Agreement”) with AP Management, LLC (“AP”).Under the terms of the Agreement, AP agreed to store the Company’s fresh frozen marijuana (the “Product”) while grantingAP the right to purchase the Product at $175 per pound. In the event that AP does not purchase 500 pounds of the Product, the Companyshall reimburse AP for any costs incurred for storage.

 

OnApril 14, 2021, the Company entered into a Storage Agreement (the “Agreement”) with TapRoot Labs (“TapRoot”).Under the terms of the Agreement, the TapRoot, agreed to store the Company’s fresh frozen marijuana (the “Product”).As compensation for storage, the Company was to pay TapRoot the equivalent of $6,000 per month from product held in storage.

 

On May 12, 2021, the Company entered into a Cooperationand Release Agreement (the “Agreement”) with Richard S. Groberg and RSG Advisors, LLC. Under the terms of the Agreement,Mr. Groberg agreed to relinquish all common stock of the Company issued to or owned by him and waived any right to any future stock issuancesexcept for 100,000 shares to be retained by Mr. Groberg.

 

On June 17, 2021, the Company entered into a ConsultingAgreement (the “Agreement”) with Wolfpack Consulting, LLC (the “Consultant”). Under the terms of the Agreement,the Consultant shall use its commercially reasonable efforts and adequate business time and attention to identify various propertiesthat may fit into Client’s business model to develop, cultivate, and produce marijuana related products. The Consultant shall receive$25,000 in cash compensation. The Agreement shall begin on the Effective date and end upon the earlier of: (a) the first anniversaryof the Effective Date (i.e., one year), or (b) either party’s receipt of written notice from the other party of its intentto terminate this Agreement after the expiration of the first anniversary (the “Term”).

 

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TheCompany intends to continue to grow its business through the acquisition of existing companies and/or through the development of newopportunities and joint ventures that can maximize shareholder value while providing a 360-degree spectrum of infrastructure (dispensaries),cultivation, production, management, and consulting services in the regulated cannabis industry.

 

MarijuanaIndustry Overview

 

TheCompany currently operates a marijuana business in the State of Nevada. Although the possession, cultivation and distribution of marijuanais permitted in Nevada, provided compliance with applicable state and local laws, rules, and regulations, marijuana is illegal underfederal law. The Company believes it operates its business in compliance with applicable state laws and regulations. Any changes in federal,state, or local law enforcement regarding marijuana may affect its ability to operate its business. Strict enforcement of federal lawregarding marijuana would likely result in the inability to proceed with its business plans, could expose the Company to potential criminalliability, and could subject its properties to civil forfeiture. Any changes in banking, insurance, or other business services may alsoaffect the Company’s ability to operate its business.

 

Marijuanacultivation refers to the planting, tending, improving and harvesting of the flowering plant Cannabis, primarily for the production andconsumption of cannabis flowers, often referred to as “buds”. The cultivation techniques for marijuana cultivation differthan for other purposes such as hemp production. Generally, references to marijuana cultivation and production do not include hemp production.

 

Cannabisbelongs 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 generallygrow 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.

 

Asof July 2022, there are a total of 38 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 ashaving a high potential for abuse, has no currently accepted use for medical treatment in the U.S., and lacks acceptable safety for useunder medical supervision. These 35 states, plus the District of Columbia, have adopted laws that exempt patients who use medicinal cannabisunder a physician’s supervision from state criminal penalties. These are collectively referred to as the states that have de-criminalizedmedicinal cannabis, although there is a subtle difference between de-criminalization and legalization, and each state’s laws aredifferent.

 

Asof July 2022, 18 states and the District of Columbia now allow for the recreational use and possession of small amounts of marijuanaand marijuana products. Decriminalization of marijuana varies by state. Decriminalization generally means that violators of local marijuanalaws may be subject to civil penalty rather than face criminal prosecution. Fifteen states have decriminalized the possession of smallamounts of marijuana but have not legalized possession. In these states decriminalization can mean possession of as little as ten gramsof marijuana up to one-hundred grams of marijuana that will not result in any criminal prosecution but may result in civil fines. Inthree states, Idaho, South Dakota, and Kansas, the cultivation, possession or use of marijuana is strictly prohibited and violators maybe subject to criminal prosecution. In Nevada, where the Company is headquartered and has focused most of its activities, legalized marijuanafor recreational use was effective as of July 1, 2017, which made it legal for adults over the age of 21 to use marijuana and to possessup to one ounce of marijuana flowers and one-eighth of an ounce of marijuana concentrates. Individuals are also permitted to grow upto 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.

 

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Thedichotomy between federal and state laws has limited the access to banking and other financial services by marijuana businesses. Recentlythe U.S. Department of Justice (the “DOJ”) and the U.S. Department of Treasury issued guidance for banks considering conductingbusiness with marijuana dispensaries in states where those businesses are legal, pursuant to which banks must now file a Marijuana LimitedSuspicious Activity Report that states the marijuana business is following the government’s guidelines with regard to revenue thatis generated exclusively from legal sales. However, since the same guidance noted that banks could still face prosecution if they providefinancial services to marijuana businesses, it has led to the widespread refusal of the banking industry to offer banking services tomarijuana businesses operating within state and local laws. In March of this year, U.S. Congressman Ed Perlmutter (D – Colorado)introduced house bill H.R. 1595, known as the Secure and Fair Enforcement (SAFE) Banking Act to allow legally operating cannabis relatedbusinesses to utilize traditional banking services without fear of federal agencies taking legal action against the banks or their customers.The SAFE bill has strong bipartisan support in the House of Representatives and many industry observers anticipate it will be ratifiedwithin the next year.

 

TheDOJ has not historically devoted resources to prosecuting individuals whose conduct is limited to possession of small amounts of marijuanafor use on private property but has relied on state and local law enforcement to address marijuana activity.

 

Inthe event the DOJ reverses its stated policy and begins strict enforcement of the CSA in states that have laws legalizing medical marijuanaand recreational marijuana in small amounts, there may be a direct and adverse impact to the Company’s business and its revenueand profits.

 

Furthermore,H.R. 83, known as the Rohrabacher-Farr amendment, is a rider to the annual appropriations bill that prohibits the DOJ from using federalfunds to prevent certain states, including Nevada and California, from implementing their own laws that authorized the use, distribution,possession, or cultivation of medical marijuana. This prohibition was in place until November 21, 2019.

 

TheCompany is monitoring the Biden administration’s, the DOJ’s and Congress’ positions on federal marijuana law andpolicy. Based on public statements and reports, the Company understands that certain aspects of those laws and policies arecurrently under review, but no official changes have been announced. It is possible that certain changes to existing laws orpolicies could have a negative effect on its business and results of operations.

 

CorporateEntities

 

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

 

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Red Earth, LLC

Red Earth, established in 2016, was a wholly owned subsidiary of the Company from December 15, 2017 until August 30, 2019 prior to the Company selling a forty-nine percent (49%) interest in Red Earth to Element NV, LLC, an unrelated third party (See further description of the transaction hereinabove). Red Earth’s assets consist of: (i) a cultivation license to grow marijuana within the City of Las Vegas in the State 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 in Las Vegas, Nevada, which it expects to operate as an indoor marijuana cultivation facility. In July 2018, the Company completed the first phase of construction on this facility, and it received a City of Las Vegas Business License to operate a marijuana cultivation facility. On August 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of the Subsidiary, Paris Balaouras, entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December 15, 2017, entered into between the Company and the Red Earth was terminated as of the date of the Termination Agreement resulting in the return of ownership of Red Earth to Mr. Balaouras. Please see Note 7 — Intangible Assetsand Note 14 — Related Party Transactions within the Company’s financials for the three months ended March 31, 2022 for further information.

   
HDGLV, LLC HDGLV is a wholly owned subsidiary of Red Earth, LLC and is the holder of a triple net lease on a commercial building in Las Vegas, Nevada which is being developed to house the Company’s indoor grow facility.
   
Alternative Hospitality, Inc. Alternative Hospitality is a Nevada corporation formed in November of 2018. MJ Holdings owns fifty-one percent (51%) of the company and the remaining forty-nine percent (49%) is owned by TVK, LLC, a Florida limited liability company.
   
MJ International Research Company Limited MJ International is a wholly owned subsidiary of the Company that is headquartered in Dublin, Ireland. MJ International is the sole shareholder of MJ Holdings International Single Member S.A. and Gioura International Single Member Private Company.

 

CorporateInformation

 

TheCompany’s corporate headquarters is located at 2580 S. Sorrel St., Las Vegas, NV 89146 and its telephone numberis (702) 879-4440. The Company’s website address is: www.mjholdingsinc.com. Information on or accessed through its website is notincorporated into this Form 10-K.

 

TheCompany’s Common Stock is not listed on any national stock exchange but is quoted on the OTCQB Marketplaceunder the symbol “MJNE.”

 

Licenses:

 

On February 5, 2021, the Company (the “Purchaser”)executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquireall of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State ofNevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. At present,the Company is waiting for the Nevada Cannabis Compliance Board (“CCB”) to provide notice that the licenses are set for hearingto approve the transfer of ownership from the Seller to the Purchaser.

 

Patents/Trademarks:

 

Wecurrently hold no patents or trademarks.

 

Research& Development

 

Wehad no expenses in Research and Development costs during the three months ended March 31, 2022 or for the years ended December31, 2021 and 2020.

 

ComplianceExpenses

 

Ourcompany incurs annual expenses to comply with state and local corporate governance and business licensing requirements. We estimatethese costs to be under $20,000 per year.

 

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PrincipalProducts or Services and Markets

 

The principal services provided by the Companyare cultivation management and infrastructure development catering to cannabis and hemp growth.

 

Seasonality

 

The Company does not consider its business tobe seasonal.

 

Leases

 

TheCompany anticipates its most significant lease obligations will be classified as fixed assets that will be used in the normal courseof its business.  Some lease obligations may include renewal or purchase options, escalation clauses, restrictions, penalties orother obligations that we will consider in determining minimum lease payments. The leases will be classified as either operating leasesor capital leases, as appropriate.

 

GovernmentalRegulation

 

General

 

Cannabis is currently a Schedule I controlledsubstance under the Controlled Substances Act (“CSA”) and is, therefore, illegal under federal law. Even in thosestates in which the use of cannabis has been legalized pursuant to state law, its use, possession or cultivation remains a violationof federal law. A Schedule I controlled substance is defined as one that has no currently accepted medical use in the United States,a lack of safety for use under medical supervision and a high potential for abuse. The U.S. Department of Justice (the “DOJ”)defines Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe psychologicalor physical dependence.” If the federal government decides to enforce the CSA in those states which have legalized medicinal and/orrecreational use of cannabis, persons that are charged with distributing, possessing with intent to distribute or growing cannabis couldbe subject to fines and/or terms of imprisonment, the maximum being life imprisonment and a $50 million fine.

 

Notwithstanding the CSA, as of the date of thisprospectus, 36 states and the District of Columbia have legalized medical marijuana in some capacity. Additionally, 17 states and theDistrict of Colombia have approved the implementation of legal recreational marijuana use. Such state and territorial laws are in conflictwith the federal CSA, which makes cannabis use and possession illegal at the federal level.

 

In light of such conflict between federal lawsand state laws regarding cannabis, the previous administration under President Obama had effectively stated that it was not an efficientuse of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing theuse and distribution of medical cannabis. For example, the prior DOJ Deputy Attorney General of the Obama administration, James M. Cole,issued a memorandum (the “Cole Memo”) to all United States Attorneys providing updated guidance to federal prosecutorsconcerning cannabis enforcement under the CSA. In addition, the Financial Crimes Enforcement Network (“FinCEN”) providedguidelines (the “FinCEN Guidelines”) on February 14, 2014, regarding how financial institutions can provide servicesto cannabis-related businesses consistent with their Bank Secrecy Act obligations (.

 

During the Trump administration, there had beenindications of potential change in cannabis-related policies, including a memo issued by then Attorney General Jeff Sessions in January2018, although no formal action was ever taken. Although we expect this policy to continue under the Biden administration, there canbe no assurance that will be the case. Accordingly, until there are formal changes in Federal cannabis-related enforcement policies,we intend to remain within the guidelines outlined in the Cole Memo and the FinCEN Guidelines where applicable; however, we cannot provideassurance that we are in full compliance with the Cole Memo, the FinCEN Guidelines or any applicable federal laws or regulations.

 

Cole Memo

 

Because of the discrepancy between the laws insome states, which permit the distribution and sale of medical and recreational cannabis, from federal law that prohibits any such activities,DOJ Deputy Attorney General James M. Cole issued the Cole Memo concerning cannabis enforcement under the CSA. The Cole Memo guidanceapplies to all of the DOJ’s federal enforcement activity, including civil enforcement and criminal investigations and prosecutions,concerning cannabis in all states.

 

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The Cole Memo reiterates Congress’s determinationthat cannabis is a dangerous drug and that the illegal distribution and sale of cannabis is a serious crime that provides a significantsource of revenue to large-scale criminal enterprises, gangs, and cartels. The Cole Memo notes that the DOJ is committed to enforcementof the CSA consistent with those determinations. It also notes that the DOJ is committed to using its investigative and prosecutorialresources to address the most significant threats in the most effective, consistent, and rational way. In furtherance of those objectives,the Cole Memo provides guidance to DOJ attorneys and law enforcement to focus their enforcement resources on persons or organizationswhose conduct interferes with any one or more of the following important priorities (the “Enforcement Priorities”)in preventing:

 

  the distribution of cannabis to minors;
     
  revenue from the sale of cannabis from going to criminal enterprises, gangs, and cartels;
     
  the diversion of cannabis from states where it is legal under state law in some form to other states;
     
  state-authorized cannabis activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
     
  violence and the use of firearms in the cultivation and distribution of cannabis;
     
  drugged driving and the exacerbation of other adverse public health consequences associated with cannabis use;
     
  the growing of cannabis on public lands and the attendant public safety and environmental dangers posed by cannabis production on public lands; and
     
  cannabis possession or use on federal property.

 

We intend to conduct rigorous due diligence toverify the legality of all activities that we engage in and ensure that our activities do not interfere with any of the Enforcement Prioritiesset forth in the Cole Memo.

 

The Cole Memo is meant only as a guide for UnitedStates Attorneys and does not alter in any way the Department of Justice’s authority to enforce Federal law, including Federallaws relating to cannabis, regardless of state law.

  

AgricultureImprovement Act of 2018

 

The federal AgriculturalImprovement Act of 2018, signed into law on December 20, 2018, along with the Agricultural Act of 2014, the corresponding ConsolidatedAppropriations Act of 2016 provisions (as extended by resolution into 2018) and related state law, provide for the cultivation, processing,manufacturing and sale of hemp-derived products, as part of agricultural pilot programs and/or state plans adopted by individual states,including Colorado. However, there can be no assurance that new legislation or regulations may be introduced at either the federal and/orstate level which, if passed, would impose substantial new regulatory requirements on the manufacture, packaging, labeling, advertisingand distribution and sale of hemp-derived products. New legislation or regulations may require the reformulation, elimination or relabelingof certain products to meet new standards and revisions to certain sales and marketing materials and it is possible that the costs ofcomplying with these new regulatory requirements could be material.

 

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Competition

 

TheCompany may face substantial competition in the operation of cultivation facilities in Nevada. Numerous other companies have also beengranted cultivation licenses, and, therefore, the Company anticipates that it will face competition from these other companies. The Company’smanagement team has experience in successfully developing, implementing, and operating marijuana cultivation and related businesses inother legal cannabis markets. The Company believes its experience in outdoor cultivation provides it with a distinct competitive advantageover its competitors and it will continue to focus on this area of its operations.

 

Competitorsinclude private and public companies such as: Acres Cultivation, LLC, 8lFold, The Apothecary Shoppe, Bond Road Cannabis Company, Floravega,Remedy Cultivation and Flower One.

 

JointVenture/Acquisition Interest

 

TheCompany intends to continue to grow its business through the acquisition of existing companies and/or through the development of newopportunities and joint ventures that can maximize shareholder value while providing a 360-degree spectrum of infrastructure (dispensaries),cultivation, production, management, and consulting services in the regulated cannabis industry.

 

Employees

 

Asof the date of this Report, we 9 full-time and 3 part-time employees inclusive of a Chief Executive Officer, Interim ChiefFinancial Officer, Secretary and Chief Cultivation Officer. We contract all labor for public company governanceservices, website development, accounting, legal and daily activities outside of management. Please see DIRECTORS, EXECUTIVEOFFICERS, PROMOTERS, AND CONTROL PERSONS for additional information.

 

Reportto Shareholders

 

Thepublic may read and copy these reports, statements, or other information we file at the SEC’s public reference room at 100 F Street,NE., Washington, DC 20549 on official business days during the hours of 10 a.m. to 3 p.m. State that the public may obtain informationon the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet sitethat contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commissionat (http://www.sec.gov).

 

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GoingConcern

 

TheCompany has recurring net losses, which have resulted in an accumulated deficit of $18,193,111 as of March 31, 2022. The Companyhad negative cash flows from operations of $930,110 for the three months ended March 31, 2022. These factors raise substantialdoubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.

 

Therecan be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that fundswill be available from external sources such as debt or equity financings or other potential sources. The lack of additional capitalresulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Companyto substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, therecan be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantdilutive effect on the Company’s existing stockholders.

 

TheCompany intends to overcome the circumstances that impact its ability to remain a going concern through a combination of the commencementof revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing. The Company anticipatesraising additional funds through public or private financing, strategic relationships or other arrangements in the near future to supportits business operations; however, the Company may not have commitments from third parties for a sufficient amount of additional capital.The Company cannot be certain that any such financing will be available on acceptable terms, or at all, and its failure to raise capitalwhen needed could limit its ability to continue its operations. The Company’s ability to obtain additional funding will determineits ability to continue as a going concern. Failure to secure additional financing in a timely manner and on favorable terms would havea material adverse effect on the Company’s financial performance, results of operations and stock price and require it to curtailor cease operations, sell off its assets, seek protection from its creditors through bankruptcy proceedings, or otherwise. Furthermore,additional equity financing may be dilutive to the holders of the Company’s common stock, and debt financing, if available, mayinvolve restrictive covenants, and strategic relationships, if necessary, to raise additional funds, and may require that the Companyrelinquish valuable rights.

 

CompanyInformation

 

Weare a Nevada for-profit corporation. Our corporate address is 2580 S. Sorrel St, Las Vegas,NV 89146 our telephone number is (702) 879-4440 and our websiteaddress is www.mjholdingsinc.com. The information on our website is not a part of this prospectus. The Company’s stock is quotedunder the symbol “MJNE” on the OTCQB Marketplace. The Company’s transfer agent is Transhare Corporation whoseaddress is Bayside Center 1, 17755 North US Highway 19, Suite #140, Clearwater, FL 33764 and phone number is (303) 662-1112.

 

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SmallerReporting Company

 

Wealso qualify as a “smaller reporting company” under Rule 12b-2 of the Exchange Act, which is defined as a company with apublic equity float of less than $75 million. To the extent that we remain a smaller reporting company at such time as we are no longeran emerging growth company, we will still have reduced disclosure requirements for our public filings some of which are similar to thoseof an emerging growth company, including having to comply with the auditor attestation requirements of Section 404 of the Sarbanes-OxleyAct and the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

 

SUMMARYOF THE OFFERING

 

Securities offered   Up to 7,000,000 shares of our Common Stock
     
Offering Amount   $1,886,500
     
Terms of the Offering   The Selling Shareholders will determine when and how they sell the shares offered in this prospectus, as described in “Plan of Distribution” beginning on page 44.
     

Use of Proceeds

  We are not selling any of the shares of common stock being offered by this prospectus and will receive no proceeds from the sale of the shares by the Selling Shareholders.
     
Common Stock Issued and Outstanding Before This Offering  

79,327,355 (1)

     
Common Stock Issued and Outstanding After This Offering  

 

79,327,355 (2)

     
Risk Factors   See “Risk Factors” beginning on page 30 and the other information set forth in this prospectus for a discussion of factors you should consider before deciding to invest in our securities.
     
Market for Common Stock   Our Common Stock is subject to quotation on the OTCQB Marketplace under the symbol “MJNE.”
     
Dividends   We have not declared or paid any cash dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.
     
Transfer agent and registrar   Transhare Corporation

 

(1) The number of shares of our common stock outstanding before this Offering is 79,327,355 as of July 29, 2022.
   
(2) Shares of our common stock that will be outstanding after this offering is based on 79,327,755 shares of common stock outstanding as of July 29, 2022, but excludes:

 

  1,500,000 shares of common stock issuable upon exercise of the options issued to our Chief Executive Officer, Interim Chief Financial Officer and Chief Cultivation Officer.
  250,000 shares of common stock issuable upon exercise of the warrant issued in connection with the July 2020 Securities Purchase Agreement.

 

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SUMMARYFINANCIAL DATA

 

Thefollowing summary of our financial data should be read in conjunction with, and is qualified in its entirety by reference to, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, appearingelsewhere in this prospectus.

 

Statementsof Operations Data

 

  

For the

three months

ended

March 31, 2022

  

For the

year-ended

December 31, 2021

  

For the

year-ended
December 31, 2020

 
Revenue  $

31,841

   $

241,870

   $822,845 
Loss from operations  $(1,780,378)  $(8,647,086)  $(3,825,250)
Total other income (expense)  $59,896   $12,454,417  $(147,878)
Net income (loss)  $(1,720,482  $3,807,331  $(3,973,128)

  

BalanceSheet Data

 

   

As of

March 31, 2022

   

As of

December 31, 2021

   

As of

December 31, 2020

 
Cash   $

3,321,111

    $ 4,699,372     $ 117,536  
Total assets   $ 7,509,562     $ 8,842,641     $ 7,490,452  
Total liabilities   $ 4,770,677     $ 5,076,258     $ 8,788,580  
Total stockholders’ equity (deficiency)   $ 2,052,611     $ 3,766,383     $ (1,298,128 )

 

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RISKFACTORS

 

Youshould carefully consider the risks, uncertainties and other factors described below, in addition to the other information set forthin this Registration Statement on Form S-1, including our consolidated financial statements and the related notes thereto.Any of these risks, uncertainties and other factors could materially and adversely affect our business, financial condition, resultsof operations, cash flows, or prospects. In that case, the trading price of our Common Stock could decline, and you may lose all or partof your investment. An investment in our securities is speculative and involves a high degree of risk. You should not invest in our securitiesif you cannot bear the economic risk of your investment for an indefinite period of time and cannot afford to lose your entire investment.There may be additional risks that we do not presently know of or that we currently believe are immaterial which could also impair ourbusiness and financial position. See also “Cautionary Note Regarding Forward-Looking Statements.”

 

RisksRelating to Our Business and Industry

 

Thereport of our independent registered public accounting firm that accompanies our audited consolidated financial statements includesa going concern explanatory paragraph in which such firm expressed substantial doubt about our ability to continue as a goingconcern.

 

Ourfinancial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilitiesand commitments in the normal course of business. However, we are a development stage company with current operations established inOctober 2016. As of March 31, 2022, our accumulated deficit was $18,193,111. It is not possible at this time for us topredict with assurance the potential success of our business. The revenue and income potential of our proposed business and operationsare unknown. If we cannot continue as a viable entity, we may be unable to continue our operations and you may lose some or all of yourinvestment in our common stock. These factors, among others, raise substantial doubt about the Company’s ability to continue asa going concern.

 

Wehave a limited operating history, which may make it difficult for investors to predict future performance based on current operations.

 

Wehave a limited operating history upon which investors may base an evaluation of our potential future performance. In particular,we have not proven that we can sell cannabis products in a manner that enables us to be profitable and meet customer requirements,obtain the necessary permits and/or achieve certain milestones to develop our cultivation businesses, enhance our line of cannabisproducts, develop and maintain relationships with customers and strategic partners, to raise sufficient capital in the publicand/or private markets, or respond effectively to competitive pressures. As a result, there can be no assurance that we will beable to develop or maintain consistent revenue sources, or that our operations will be profitable and/or generate positive cashflow.

 

Anyforecasts we make about our operations may prove to be inaccurate. We must, among other things, determine appropriate risks, rewards,and level of investment in our product lines, respond to economic and market variables outside of our control, respond to competitivedevelopments and continue to attract, retain, and motivate qualified employees. There can be no assurance that we will be successfulin meeting these challenges and addressing such risks and the failure to do so could have a materially adverse effect on our business,results of operations, and financial condition. Our prospects must be considered in light of the risks, expenses, and difficultiesfrequently encountered by companies in the early stage of development. As a result of these risks, challenges, and uncertainties,the value of your investment could be significantly reduced or completely lost.

 

Wewill likely need additional capital to sustain our operations and will likely need to seek further financing, which we may notbe able to obtain on acceptable terms or at all. If we fail to raise additional capital, as needed, our ability to implement ourbusiness model and strategy could be compromised.

 

Asof March 31, 2022, we had limited capital resources and operations. Through that date, our operations had been funded primarilyfrom the proceeds of equity financings. We may require additional capital in the near future to develop business operations at our FarmRoad facility in Amargosa, Nevada, to expand our production of our future franchise production lines, to develop our intellectualproperty base, and establish our targeted levels of commercial production. We may not be able to obtain additional financing on termsacceptable to us, or at all. In particular, because marijuana is illegal under federal law, we may have difficulty attracting investors.

 

Wehave incurred losses in prior periods, and losses in the future could cause the quoted price of our Common Stock to decline orhave a material adverse effect on our financial condition, our ability to pay our debts as they become due, and on our cash flows.

 

Wehave incurred losses in prior periods. For the three months ended March 31, 2022, we incurred a net loss of $1,720,482and, as of that date, we had an accumulated deficit of $18,193,111. We had net income of $3,530,331 for theyear ended December 31, 2021 and, as of that date, we had an accumulated deficit of approximately $16,472,629. Any lossesin the future could cause the quoted price of our Common Stock to decline or have a material adverse effect on our financial condition,our ability to pay our debts as they become due, and on our cash flow.

 

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Evenif we obtain financing for our near-term operations, we expect that we will require additional capital thereafter. Our capital needswill depend on numerous factors including: (i) our profitability; (ii) the release of competitive products by our competition; (iii)the level of our investment in research and development, and (iv) the amount of our capital expenditures, including acquisitions. Wecannot assure you that we will be able to obtain capital in the future to meet our needs.

 

Ifwe raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership held by our existingstockholders will be reduced and our stockholders may experience significant dilution. In addition, new securities may contain rights,preferences, or privileges that are senior to those of our Common Stock. If we raise additional capital by incurring debt, this willresult in increased interest expense. If we raise additional funds through the issuance of securities, market fluctuations in the priceof our shares of Common Stock could limit our ability to obtain equity financing.

 

Wecannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.If we are unable to raise capital when needed, our business, financial condition, and results of operations would be materially adverselyaffected, and we could be forced to reduce or discontinue our operations.

 

Weface intense competition and many of our competitors have greater resources that may enable them to compete more effectively.

 

Theindustries in which we operate in general are subject to intense and increasing competition. Some of our competitors may have greatercapital resources, facilities, and diversity of product lines, which may enable them to compete more effectively in this market. Ourcompetitors may devote their resources to developing and marketing products that will directly compete with our product lines. Due tothis competition, there is no assurance that we will not encounter difficulties in obtaining revenues and market share or in the positioningof our products. There are no assurances that competition in our respective industries will not lead to reduced prices for our products.If we are unable to successfully compete with existing companies and new entrants to the market this will have a negative impact on ourbusiness and financial condition.

 

Ifwe fail to protect our intellectual property, our business could be adversely affected.

 

Ourviability will depend, in part, on our ability to develop and maintain the proprietary aspects of our intellectual property to distinguishour products from our competitors’ products. We rely on copyrights, trademarks, trade secrets, and confidentiality provisions toestablish and protect our intellectual property.

 

Anyinfringement or misappropriation of our intellectual property could damage its value and limit our ability to compete. We may have toengage in litigation to protect the rights to our intellectual property, which could result in significant litigation costs and requirea significant amount of our time. In addition, our ability to enforce and protect our intellectual property rights may be limited incertain countries outside the United States, which could make it easier for competitors to capture market position in such countriesby utilizing technologies that are similar to those developed or licensed by us.

 

Competitorsmay also harm our sales by designing products that mirror our products or processes without infringing on our intellectual property rights.If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectualproperty rights, our competitiveness could be impaired, which would limit our growth and future revenue.

 

Wemay also find it necessary to bring infringement or other actions against third parties to seek to protect our intellectual propertyrights. Litigation of this nature, even if successful, is often expensive and time-consuming to prosecute and there can be no assurancethat we will have the financial or other resources to enforce our rights or be able to enforce our rights or prevent other parties fromdeveloping similar products or processes or designing around our intellectual property.

 

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Althoughwe believe that our products and processes do not and will not infringe upon the patents or violate the proprietary rights ofothers, it is possible such infringement or violation has occurred or may occur, which could have a material adverse effect onour business.

 

Weare not aware of any infringement by us of any person’s or entity’s intellectual property rights. In the event thatproducts we sell or processes we employ are deemed to infringe upon the patents or proprietary rights of others, we could be requiredto modify our products or processes or obtain a license for the manufacture and/or sale of such products or processes or ceaseselling such products or employing such processes. In such event, there can be no assurance that we would be able to do so ina timely manner, upon acceptable terms and conditions, or at all, and the failure to do any of the foregoing could have a materialadverse effect upon our business.

 

Therecan be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement orproprietary rights violation action. If our products or processes are deemed to infringe or likely to infringe upon the patentsor proprietary rights of others, we could be subject to injunctive relief and, under certain circumstances, become liable fordamages, which could also have a material adverse effect on our business and our financial condition.

 

Ourtrade secrets may be difficult to protect.

 

Oursuccess depends upon the skills, knowledge, and experience of our scientific and technical personnel, our consultants and advisors,as well as our licensors and contractors. Because we operate in several highly competitive industries, we rely in part on tradesecrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentialityor non-disclosure agreements with our corporate partners, employees, consultants, outside scientific collaborators, developers,and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third parties’confidential information developed by the receiving party or made known to the receiving party by us during the course of thereceiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receivingparty in the course of rendering services to us will be our exclusive property, and we enter into assignment agreements to perfectour rights.

 

Theseconfidentiality, inventions, and assignment agreements may be breached and may not effectively assign intellectual property rightsto us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to preventthe use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and wasusing our trade secrets could be difficult, expensive, and time consuming and the outcome would be unpredictable. In addition,courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful tradesecret protection could adversely affect our competitive position.

 

Ourbusiness, financial condition, results of operations, and cash flow may in the future be negatively impacted by challenging globaleconomic conditions.

 

Futuredisruptions and volatility in global financial markets and declining consumer and business confidence could lead to decreasedlevels of consumer spending. These macroeconomic developments could negatively impact our business, which depends on the generaleconomic environment and levels of consumer spending. As a result, we may not be able to maintain our existing customers or attractnew customers, or we may be forced to reduce the price of our products. We are unable to predict the likelihood of the occurrence,duration, or severity of such disruptions in the credit and financial markets and adverse global economic conditions. Any generalor market-specific economic downturn could have a material adverse effect on our business, financial condition, results of operations,and cash flow.

 

32
 

 

Ourfuture success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.

 

Ourfuture success largely depends upon the continued services of our executive officers and management team. If one or more of ourexecutive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily,if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executiveofficers joins a competitor or forms a competing company, we may lose some or all of our customers. Finally, we do not maintain“key person” life insurance on any of our executive officers. Because of these factors, the loss of the services ofany of these key persons could adversely affect our business, financial condition, and results of operations, and thereby an investmentin our stock.

 

Ourcontinuing ability to attract and retain highly qualified personnel will also be critical to our success because we will needto hire and retain additional personnel as our business grows. There can be no assurance that we will be able to attract or retainhighly qualified personnel. We face significant competition for skilled personnel in our industries. In particular, if the marijuanaindustry continues to grow, demand for personnel may become more competitive. This competition may make it more difficult andexpensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may not be able to effectivelymanage or grow our business, which could adversely affect our financial condition or business. As a result, the value of yourinvestment could be significantly reduced or completely lost.

 

Wemay not be able to effectively manage our growth or improve our operational, financial, and management information systems, whichwould impair our results of operations.

 

Inthe near term, we intend to expand the scope of our operations activities significantly. If we are successful in executing ourbusiness plan, we will experience growth in our business that could place a significant strain on our business operations, finances,management, and other resources. The factors that may place strain on our resources include, but are not limited to, the following:

 

  The need for continued development of our financial and information management systems;
     
  The need to manage strategic relationships and agreements with manufacturers, customers, and partners, and
     
  Difficulties in hiring and retaining skilled management, technical, and other personnel necessary to support and manage our business

 

Additionally,our strategy envisions a period of rapid growth that may impose a significant burden on our administrative and operational resources.Our ability to effectively manage growth will require us to substantially expand the capabilities of our administrative and operationalresources and to attract, train, manage, and retain qualified management and other personnel. There can be no assurance that wewill be successful in recruiting and retaining new employees or retaining existing employees.

 

Wecannot provide assurances that our management will be able to manage this growth effectively. Our failure to successfully managegrowth could result in our sales not increasing commensurately with capital investments or otherwise materially adversely affectingour business, financial condition, or results of operations.

 

Ifwe are unable to continually innovate and increase efficiencies, our ability to attract new customers may be adversely affected.

 

Inthe area of innovation, we must be able to develop new technologies and products that appeal to our customers. This depends, inpart, on the technological and creative skills of our personnel and on our ability to protect our intellectual property rights.We may not be successful in the development, introduction, marketing, and sourcing of new technologies or innovations, that satisfycustomer needs, achieve market acceptance, or generate satisfactory financial returns.

 

Weare dependent on the popularity of consumer acceptance of our current and future product lines.

 

Ourability to generate revenue and be successful in the implementation of our business plan is dependent on consumer acceptance and demandof our current and future product lines. In the near term, we expect to begin operating a cultivation facility on our 260-acre Farmin Nevada at which we expect to grow and sell marijuana on a commercial basis. Acceptance of our cannabis products, will dependon several factors, including availability, cost, ease of use, familiarity of use, convenience, effectiveness, safety, and reliability.If customers do not accept our products, or if we fail to meet customers’ needs and expectations adequately, our ability to continuegenerating revenues could be reduced.

 

33
 

Adrop in the retail price of medical marijuana and recreational (adult use) marijuana products may negatively impact our business.

 

Inthe future, the demand for the marijuana we intend to cultivate will depend in part on the market price of commercially grownmarijuana. Fluctuations in economic and market conditions that impact the prices of commercially grown marijuana, such as increasesin the supply of such marijuana and the decrease in the price of products using commercially grown marijuana, could cause thedemand for our marijuana products to decline, which would have a negative impact on our business.

 

Federalregulation and enforcement may adversely affect the implementation of cannabis laws and regulations may negatively impact ourrevenues and profits.

 

Currently,there are 38 states plus the District of Columbia that have laws and/or regulations that recognize, in one form or another, legitimatemedical uses for cannabis and consumer use of cannabis in connection with medical treatment, as well as, in some cases, the legalizationof cannabis for adult use. Many other states are considering similar legislation. Conversely, under the CSA, the policies and regulationsof the federal government and its agencies are that cannabis has no medical benefit and a range of activities including cultivation andthe personal use of cannabis is prohibited. Unless and until Congress amends the CSA with respect to marijuana, as to the timing or scopeof any such potential amendments there can be no assurance, there is a risk that federal authorities may enforce current federal law,and we may be deemed to be producing, cultivating, or dispensing marijuana in violation of federal law. Thus, active enforcement of thecurrent federal regulatory position on cannabis may indirectly and adversely affect our revenues and profits. The risk of strict enforcementof the CSA in light of Congressional activity, judicial holdings, and stated federal policy remains uncertain. In February 2017, theTrump administration announced that there may be “greater enforcement” of federal laws regarding marijuana. Any such enforcementactions could have a negative effect on our business and results of operations.

 

OnJanuary 4, 2018, Attorney General Jeff Sessions issued a Marijuana Enforcement Memorandum that rescinded guidance previously issuedto federal law enforcement in a memorandum known as the “Cole Memo”. The Cole Memo provided that the DOJ is committedto the enforcement of the CSA, but the DOJ is also committed to using its limited investigative and prosecutorial resources toaddress the most significant threats in the most effective, consistent, and rational way. On April 10, 2019, U.S. Attorney GeneralWilliam Barr, during testimony before the U.S, Senate Appropriations sub-committee, stated “I am accepting the Cole Memorandumfor now, but I have generally left it up to the U.S. Attorneys in each state to determine what the best approach is in that state,”A.G. Barr further testified during the hearing. “I haven’t heard any complaints from the states that have legalizedmarijuana.”

 

Theguidance in the “Cole Memo” sets forth certain enforcement priorities that are important to the federal government:

 

  Distribution of marijuana to children;
     
  Revenue from the sale of marijuana going to criminals;
     
  Diversion of medical marijuana from states where it is legal to states where it is not;
     
  Using state authorized marijuana activity as a pretext of another illegal drug activity;
     
  Preventing violence in the cultivation and distribution of marijuana;
     
  Preventing drugged driving;
     
  Growing marijuana on federal property; and
     
  Preventing possession or use of marijuana on federal property.

 

34
 

 

TheDOJ historically has not devoted resources to prosecuting individuals whose conduct is limited to possession of small amountsof marijuana for use on private property but has relied on state and local law enforcement to address marijuana activity. In theevent the DOJ reverses its stated policy and begins strict enforcement of the CSA in states that have laws legalizing medicalmarijuana and recreational marijuana in small amounts, there may be a direct and adverse impact to our business and our revenueand profits. Furthermore, H.R. 83, known as the Rohrabacher-Farr amendment, is a rider to the annual appropriations bill thatprohibits the DOJ from using federal funds to prevent certain states, including Nevada and California, from implementing theirown laws that authorized the use, distribution, possession, or cultivation of medical marijuana.

 

OnSeptember 27, 2018, the U.S. Drug Enforcement Agency announced that drugs, including “finished dosage formulations”of CBD with THC below 0.1%, will be considered Schedule 5 drugs as long as the medications have been approved by the U.S. Foodand Drug Administration. The Agriculture Improvement Act of 2018 generally referred to as the 2018 Farm Bill included provisionsto greatly expand the ability to grow industrial hemp in the United States and declassified hemp as a Schedule 1 controlled substanceunder the Controlled Substances Act. By definition hemp must have a less than .03% concentration of THC or it is then consideredmarijuana. While the U.S. Department of Agriculture (“USDA”) has primary jurisdiction over the cultivation of industrialhemp, the U.S. Food and Drug Administration (“FDA”) continues to have responsibility to regulate cannabis productsunder the Food, Drug and Cosmetics Act (“FD&C Act”). Therefore, any product, including hemp derived products,that make any claims as to the therapeutic benefit of the product must be approved by the FDA in advance of any sales to the public.

 

Wecould be found to be violating laws related to cannabis.

 

Currently,there are 38 states plus the District of Columbia that have laws and/or regulations that recognize, in one form or another, legitimatemedical uses for cannabis and consumer use of cannabis in connection with medical treatment, as well as, in some cases, the legalizationof cannabis for adult use. Many other states are considering similar legislation. Conversely, under the CSA, the policies and regulationsof the federal government and its agencies are that cannabis has no medical benefit and a range of activities including cultivation andthe personal use of cannabis is prohibited. Unless and until Congress amends the CSA with respect to medical marijuana, as to the timingor scope of any such amendments there can be no assurance, there is a risk that federal authorities may enforce current federal law.The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings, and stated federal policy remains uncertain.With respect to our greenhouse products, we intend to market and sell our greenhouse solutions to marijuana growers. Should it be determinedunder the CSA that our greenhouse products or equipment are deemed to fall under the definition of drug paraphernalia because its productscould be determined to be primarily intended or designed for use in manufacturing or producing cannabis, we could be found to be in violationof federal drug paraphernalia laws and there may be a direct and adverse effect on our business, revenues, and profits. With respectto Red Earth, we do not currently cultivate, produce, sell, or distribute any marijuana, and, therefore, have no risk that we will bedeemed to cultivate, produce, sell, or distribute any marijuana in violation of federal law. However, if we obtain the necessary finalgovernmental approvals and permits in Nevada to commence the cultivation and production of marijuana, as to the successfully achievementof any or all of such objectives there can be no assurance, we could be found in violation of the CSA. This would cause a direct andadverse effect on our subsidiaries’ businesses, or intended businesses, and on our revenue and prospective profits.

 

Variationsin state and local regulation, and enforcement in states that have legalized cannabis, may restrict marijuana-related activities,including activities related to medical cannabis, which may negatively impact our revenues and prospective profits.

 

Individualstate laws do not always conform to the federal standard or to other states laws. A number of states have decriminalized marijuana tovarying degrees, other states have created exemptions specifically for medical cannabis, and several have both decriminalization andmedical laws. As of the date of this filing, 18 states and the District of Columbia have legalized the recreational use of cannabis.Variations exist among states that have legalized, decriminalized, or created medical marijuana exemptions. For example, certain stateshave limits on the number of marijuana plants that can be homegrown. In most states, the cultivation of marijuana for personal use continuesto be prohibited except for those states that allow small-scale cultivation by the individual in possession of medical marijuana needingcare or that person’s caregiver. Active enforcement of state laws that prohibit personal cultivation of marijuana may indirectlyand adversely affect our business and our revenue and profits.

 

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Prospectivecustomers may be deterred from doing business with a company with a significant nationwide online presence because of fears offederal or state enforcement of laws prohibiting possession and sale of medical or recreational marijuana.

 

Ourwebsite is visible in jurisdictions where medicinal and/or recreational use of marijuana is not permitted and, as a result, wemay be found to be violating the laws of those jurisdictions.

 

Marijuanaremains illegal under federal law.

 

Marijuanais a Schedule-I controlled substance and is illegal under federal law. Even in those 38 states in which the use of marijuana hasbeen legalized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana preempts state lawsthat legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with ourbusiness plan, especially in respect of our marijuana cultivation, production and dispensaries. In addition, our assets, including realproperty, cash, equipment, and other goods, could be subject to asset forfeiture because marijuana is still federally illegal.

 

InFebruary 2017, the Trump administration announced that there may be “greater enforcement” of federal laws regardingmarijuana. In January 2018, Attorney General Jeff Sessions rescinded previously issued guidance. Any such enforcement actionsor changes in federal policy or guidance could have a negative effect on our business and results of operations. On November 7,2018, Jeff Sessions resigned as the Attorney General of the United States. Mr. Sessions was succeeded by William Barr who haspublicly stated that he would not prosecute legal marijuana businesses that rely on the Cole memo.

 

Inthe future, we will not be able to deduct some of our business expenses.

 

Section280E of the Internal Revenue Code prohibits any business engaged in the trafficking of controlled substances (within the meaningof schedule I and II of the Controlled Substances Act) from deducting their ordinary and necessary business expenses, which mayforce us to pay higher effective federal tax rates than similar companies in other industries. The effective tax rate on a marijuanabusiness depends on how large its ratio of nondeductible expenses is to its total revenues. Therefore, our marijuana businessmay be less profitable than it could otherwise be.

 

Wemay not be able to attract or retain any independent directors.

 

Ourboard of directors (the “Board”) is not currently comprised of a majority of independent directors. We may have difficultyattracting and retaining independent directors because, among other things, we operate in the marijuana industry.

 

Wemay not be able to successfully execute on our merger and acquisition strategy.

 

Ourbusiness plan depends in part on merging with or acquiring other businesses in the marijuana industry. The success of any acquisitionwill depend upon, among other things, our ability to integrate acquired personnel, operations, products and technologies intoour organization effectively, to retain and motivate key personnel of acquired businesses, and to retain their customers. Anyacquisition may result in diversion of management’s attention from other business concerns, and such acquisition may bedilutive to our financial results and/or result in impairment charges and write-offs. We might also spend time and money investigatingand negotiating with potential acquisition or investment targets, but not complete the transaction.

 

Althoughwe expect to realize strategic, operational, and financial benefits as a result of our acquisitions, we cannot predict whetherand to what extent such benefits will be achieved. There are significant challenges to integrating an acquired operation intoour business.

 

Anyfuture acquisition could involve other risks, including the assumption of unidentified liabilities for which we, as a successorowner, may be responsible. These transactions typically involve a number of risks and present financial and other challenges,including the existence of unknown disputes, liabilities, or contingencies and changes in the industry, location, or regulatoryor political environment in which these investments are located, that our due diligence review may not adequately uncover andthat may arise after entering into such arrangements.

 

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Lawsand regulations affecting the medical and adult use marijuana industry are constantly changing, which could detrimentally affectour proposed cultivation and production operations and greenhouse products.

 

Local,state, and federal medical and adult use marijuana laws and regulations are broad in scope and subject to evolving interpretations,which could require us to incur substantial costs associated with compliance or alter certain aspects of our business plan. Inaddition, violations of these laws, or allegations of such violations, could disrupt certain aspects of our business plan andresult in a material adverse effect on certain aspects of our planned operations. In addition, it is possible that regulationsmay be enacted in the future that will be directly applicable to certain aspects of our proposed cultivation and production businesses,as well as our greenhouse solutions business. We cannot predict the nature of any future laws, regulations, interpretations, orapplications, nor can we determine what effect additional governmental regulations or administrative policies and procedures,when and if promulgated, could have on our business.

 

Wemay not obtain the necessary permits and authorizations to operate our proposed marijuana business.

 

Wemay not be able to obtain or maintain the necessary licenses, permits, authorizations, or accreditations for our proposed cultivationand production businesses and greenhouse solutions business, or may only be able to do so at great cost. In addition, we may notbe able to comply fully with the wide variety of laws and regulations applicable to the medical and adult use marijuana industry.Failure to comply with or to obtain the necessary licenses, permits, authorizations, or accreditations could result in restrictionson our ability to operate the medical and adult use marijuana business, which could have a material adverse effect on our business.

 

Ifwe incur substantial liability from litigation, complaints, or enforcement actions, our financial condition could suffer.

 

Ourparticipation in the medical and adult use marijuana industry may lead to litigation, formal or informal complaints, enforcementactions, and inquiries by various federal, state, or local governmental authorities against us. Litigation, complaints, and enforcementactions could consume considerable amounts of financial and other corporate resources, which could have a negative impact on oursales, revenue, profitability, and growth prospects. We have not been, and are not currently, subject to any material litigation,complaint, or enforcement action regarding marijuana (or otherwise) brought by any federal, state, or local governmental authority.Certain of our operating subsidiaries, may in the future engage in the distribution of marijuana; however, we have not been, andare not currently, subject to any material litigation, complaint, or enforcement action regarding marijuana (or otherwise) broughtby any federal, state, or local governmental authority with respect to the business of any our subsidiaries.

 

Wemay have difficulty accessing the service of banks, which may make it difficult for us to operate.

 

Sincethe use of marijuana is illegal under federal law, many banks will not except for deposit funds from businesses involved withthe marijuana industry. Consequently, businesses involved in the marijuana industry often have difficulty finding a bank willingto accept their business. The inability to open or maintain bank accounts may make it difficult for us to operate our proposedmarijuana businesses. If any of our bank accounts are closed, we may have difficulty processing transactions in the ordinary courseof business, including paying suppliers, employees and landlords, which could have a significant negative effect on our operations.In March of this year, U.S. Congressman Ed Perlmutter (D – Colorado) introduced house bill H.R. 1595, known as the Secureand Fair Enforcement (SAFE) Banking Act to allow legally operating cannabis related businesses to utilize traditional bankingservices without fear of federal agencies taking legal action against the banks or their customers. On September 25, 2019, theSAFE bill was passed with strong bipartisan support in the House of Representatives. Many industry observers anticipate that thebill will be signed into law within the next year.

 

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Litigationmay adversely affect our business, financial condition, and results of operations.

 

Fromtime to time in the normal course of our business operations, we may become subject to litigation that may result in liabilitymaterial to our financial statements as a whole or may negatively affect our operating results if changes to our business operationsare required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also maybe adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless ofwhether the allegations are valid or whether we are ultimately found liable. Insurance may not be available at all or in sufficientamounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurancecoverage for any claims could adversely affect our business and the results of our operations.

 

Ourofficers and directors have substantial equity ownership in the Company and substantial control over certain corporate actions.

 

Asof July 29, 2022, our officers and directors owned approximately 31% of our outstanding Common Stock and thus exercisesubstantial control over stockholder matters, such as election of directors, amendments to the Articles of Incorporation, and approvalof significant corporate transactions.

 

Ifwe fail to implement and maintain proper and effective internal controls and disclosure controls and procedures pursuant to Section404 of the Sarbanes-Oxley Act of 2002, our ability to produce accurate and timely financial statements and public reports couldbe impaired, which could adversely affect our operating results, our ability to operate our business, and investors’ viewsof us.

 

Ourinternal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP rules. Our internal controlswere adversely affected by deficiencies in the design or operation of our internal controls, which management considered to bematerial weaknesses. These material weaknesses include the following:

 

  lack of a majority of independent members and a lack of a majority of outside directors on our Board, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
     
  inadequate segregation of duties consistent with control objectives;
     
  ineffective controls over period end financial disclosure and reporting processes;
     
  beginning in July of 2019 the Company’s executive management team began convening weekly meetings to review expenditures and provide cash flow analysis, and
     
  the Company intends to add additional external accounting support. On October 1, 2019, the Company established an audit committee which is chaired by Roger Bloss, the Company’s Interim Chief Executive Officer and a Director of the Company and established a compensation committee which is chaired by Paris Balaouras, the Company’s Chief Cultivation Officer and a Director of the Company.

 

Thefailure to implement and maintain proper and effective internal controls and disclosure controls could result in material weaknessesin our financial reporting, such as errors in our financial statements and in the accompanying footnote disclosures that couldrequire restatements. Investors may lose confidence in our reported financial information and disclosure, which could negativelyimpact our stock price.

 

Wedo not expect that our internal controls over financial reporting will prevent all errors and all fraud. A control system, nomatter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectiveswill be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefitsof controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, bycollusion of two or more people, or by management override of the controls. Over time, controls may become inadequate becausechanges in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherentlimitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

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Ourinsurance coverage may be inadequate to cover all significant risk exposures.

 

Wewill be exposed to liabilities that are unique to the products we provide. While we intend to maintain insurance for certain risks,the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantialcosts resulting from risks and uncertainties of our business. It is also not possible to obtain insurance to protect against alloperational risks and liabilities. In particular, we may have difficulty obtaining insurance because we intend to operate in themarijuana industry. The failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a materialadverse effect on our business, financial condition, and results of operations. We do not have any business interruption insurance.Any business disruption or natural disaster could result in substantial costs and diversion of resources.

 

Ifour products are contaminated, we may have litigation and products liability exposure.

 

Wesource some of our products from third-party suppliers. Although we are required by Nevada law to test the products we receivefrom third-party suppliers, we may not identify all contamination in those products. Possible contaminates include pesticides,molds, and fungus. If a customer suffers an injury from our products, they may sue us in addition to the supplier and we may nothave adequate insurance to cover any such claims, which could result in a negative effect on our results of operations.

 

Someof our lines of business rely on our third-party service providers to host and deliver services and data, and any interruptionsor delays in these hosted services, security or privacy breaches, or failures in data collection could expose us to liabilityand harm our business and reputation.

 

Someof our lines of business and services rely on services hosted and controlled directly by third-party service providers. We donot have redundancy for all of our systems, many of our critical applications reside in only one of our data centers and our disasterrecovery planning may not account for all eventualities. If our business relationship with a third-party provider of hosting orsoftware services is negatively affected, or if one of our service providers were to terminate its agreement with us, we mightnot be able to deliver access our data, which could subject us to reputational harm and cause us to lose customers and futurebusiness, thereby reducing our revenue.

 

Wemay hold large amounts of customer data, some of which will likely be hosted in third-party facilities. A security incident atthose facilities or ours may compromise the confidentiality, integrity or availability of customer data. Unauthorized access tocustomer data stored on our computers or networks may be obtained through break-ins, breaches of our secure network by an unauthorizedparty, employee theft or misuse or other misconduct. It is also possible that unauthorized access to customer data may be obtainedthrough inadequate use of security controls by customers. Accounts created with weak passwords could allow cyber-attackers togain access to customer data. If there were an inadvertent disclosure of customer information, or if a third party were to gainunauthorized access to the information we possess on behalf of our customers, our operations could be disrupted, our reputationcould be damaged, and we could be subject to claims or other liabilities. In addition, such perceived or actual unauthorized disclosureof the information we collect, or breach of our security could damage our reputation, result in the loss of customers and harmour business.

 

Becauseof the data we expect to collect and manage using our hosted solutions, it is possible that hardware or software failures or errorsin our systems (or those of our third-party service providers) could result in data loss or corruption, cause the informationthat we collect to be incomplete or contain inaccuracies that our customers regard as significant or cause us to fail to meetcommitted service levels. Furthermore, our ability to collect and report data may be delayed or interrupted by a number of factors,including access to the Internet, the failure of our network or software systems or security breaches. In addition, computer virusesor other malware may harm our systems, causing us to lose data, and the transmission of computer viruses or other malware couldexpose us to litigation. We may also find, on occasion, that we cannot deliver data and reports in near real time because of anumber of factors, including failures of our network or software. If we supply inaccurate information or experience interruptionsin our ability to capture, store and supply information in near real time or at all, our reputation could be harmed and we couldlose customers, or we could be found liable for damages or incur other losses. Moreover, states in which we operate may requirethat we maintain certain information about our customers and transactions. If we fail to maintain such information, we could bein violation of state laws.

 

Ourbusiness operations have been and may continue to be materially and adversely affected by the outbreak of the novel respiratoryillness coronavirus (“COVID-19”).

 

OnMarch 11, 2020, the World Health Organization declared the outbreak of the novel respiratory illness COVID-19 a pandemic. Thenew strain of COVID-19 is considered to be highly contagious and poses a serious public health threat.

 

Anyoutbreak of such epidemic illness or other adverse public health developments may materially and adversely affect the global economy,our markets and our business. In the first two quarters of 2020, the COVID-19 outbreak has caused disruptions in our grow operations,which have resulted in delays in the shipment of products to certain of our customers and ultimately, a suspension of our operations.A prolonged disruption or any further unforeseen delay in our operations of the growing and delivery process within any of ourfacilities could continue to result in delays in the shipment of products to our customers, increased costs and reduced revenue.

 

Wecannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration ofits impact. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial conditionmay be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional andnational economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot foresee.Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, causeuncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materiallyand adversely impact our business, financial condition and results of operations.

 

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Weface potential business disruptions and related risks resulting from the recent outbreak of the novel coronavirus, which couldhave a material adverse effect on our business, financial condition and results of operations.

 

InDecember 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China. The COVID-19 outbreakhas grown into a global pandemic that has impacted Asia, United States, Europe and other countries throughout the world. Financialmarkets have been experiencing extreme fluctuations that may cause a contraction in available liquidity globally as importantsegments of the credit markets react to the development. The pandemic may lead to a decline in business and consumer confidence.The global outbreak of COVID-19 continues to rapidly evolve. As a result, businesses have closed and limits have been placed ontravel. The extent to which COVID-19 may impact our business, such as the ultimate geographic spread of the disease, the durationof the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or businessdisruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

 

Weare monitoring the potential impact of the COVID-19 outbreak, and if COVID-19 continues to spread globally, including in the UnitedStates, we may experience disruptions that could severely impact the Company’s grow opportunities along with sales, including:

 

  the pandemic has reduced foot traffic in the stores where our products are sold that remain open, and the global economic impact of the pandemic has reduced consumer demand for our products generally;
     
  the uncertainty that our contractors, suppliers, and other business partners may be prevented from conducting business activities for an unknown period of time;
     
  the impact of social distancing at commercial and retail facilities;
     
  delays in receiving approval from local regulatory authorities in the completion of the Company’s Tiny Home community;
     
  the pandemic has reduced foot traffic in the stores where our products are sold that remain open, and the global economic impact of the pandemic has reduced consumer demand for our products generally; and
     
  the majority of our retail customers have been unable to sell our products in their stores due to government-mandated closures and have temporarily reduced orders for our products;

 

Quarantines,shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conductof business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party suppliersin the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. Anymanufacturing supply interruption of materials could adversely affect our ability to conduct ongoing and future research and testingactivities.

 

Thespread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economicimpact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result insignificant disruption of global financial markets, reducing our ability to access capital, which could in the future negativelyaffect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affectour business and the value of our common stock.

 

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RisksRelated to an Investment in Our Securities

 

Weexpect to experience volatility in the price of our Common Stock, which could negatively affect stockholders’ investments.

 

Thetrading price of our Common Stock may be highly volatile and could be subject to wide fluctuations in response to various factors,some of which are beyond our control. The stock market in general has experienced extreme price and volume fluctuations that haveoften been unrelated or disproportionate to the operating performance of companies with securities traded in those markets. Broadmarket and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actualoperating performance. All of these factors could adversely affect your ability to sell your shares of Common Stock or, if youare able to sell your shares, to sell your shares at a price that you determine to be fair or favorable.

 

OurCommon Stock is categorized as “penny stock,” which may make it more difficult for investors to sell their sharesof Common Stock due to suitability requirements.

 

OurCommon Stock is categorized as “penny stock.” The SEC has adopted Rule 15g-9, which generally defines “pennystock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price ofless than $5.00 per share, subject to certain exceptions. The price of our Common Stock is significantly less than $5.00 per shareand, therefore, is considered “penny stock.” This designation imposes additional sales practice requirements on broker-dealerswho sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer buyingour securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determinethat the purchaser is reasonably suitable to purchase the securities given the increased risks generally inherent in penny stocks.These rules may restrict the ability and/or willingness of brokers or dealers to buy or sell our Common Stock, either directlyor on behalf of their clients, may discourage potential stockholders from purchasing our Common Stock, or may adversely affectthe ability of stockholders to sell their shares.

 

FinancialIndustry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability tobuy and sell our Common Stock, which could depress the price of our Common Stock.

 

Inaddition to the “penny stock” rules described above, FINRA has adopted rules that require a broker-dealer to havereasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer.Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonableefforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information.Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities willnot be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommendthat their customers buy our Common Stock, which may limit your ability to buy and sell our shares of Common Stock, have an adverseeffect on the market for our shares of Common Stock, and thereby depress our price per share of Common Stock.

 

OurCommon Stock may not be eligible for listing or quotation on any national securities exchange.

 

Wedo not currently meet the initial quantitative listing standards of any national securities exchange. We cannot assure you that we willbe able to meet the initial listing standards of any national securities exchange in the future, or, if we do meet such initial listingstandards, that we will be able to maintain any such listing. Until our Common Stock is listed on a national securities exchange, whichevent may never occur, we expect that it will continue to be eligible and quoted on the OTCQB Marketplace.However, investors may find it difficult to obtain accurate quotations as to the market value of our Common Stock. Further, the nationalsecurities exchanges are adopting so-called “seasoning” rules that will require that we meet certain requirements, includingprescribed periods of time trading over the counter and minimum filings of periodic reports with the SEC, before we are eligible to applyfor listing on such national securities exchanges. In addition, if we fail to meet the criteria set forth in SEC regulations, variousrequirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accreditedinvestors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affectits liquidity. This would also make it more difficult for us to raise additional capital.

 

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Theelimination of monetary liability against our directors, officers, and employees under Nevada law and the existence of indemnificationrights for our obligations to our directors, officers, and employees may result in substantial expenditures by us and may discouragelawsuits against our directors, officers, and employees.

 

OurArticles of Incorporation contain a provision permitting us to eliminate the personal liability of our directors to us and ourstockholders for damages for the breach of a fiduciary duty as a director or officer to the extent provided by Nevada law. Wemay also have contractual indemnification obligations under any future employment agreements with our officers or agreements enteredinto with our directors. The foregoing indemnification obligations could result in us incurring substantial expenditures to coverthe cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions andthe resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciaryduties and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officerseven though such actions, if successful, might otherwise benefit us and our stockholders.

 

Wemay issue additional shares of Common Stock or preferred stock in the future, which could cause significant dilution to all stockholders.

 

OurArticles of Incorporation authorize the issuance of up to 95,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock,with a par value of $0.001 per share. As of March 31, 2022, we had 71,501,667 shares of Common Stock and 0 shares of PreferredStock, outstanding; however, we may issue additional shares of Common Stock or Preferred Stock in the future in connection with a financingor an acquisition. Such issuances may not require the approval of our stockholders. Any issuance of additional shares of our Common Stock,or equity securities convertible into our Common Stock, including but not limited to, Preferred Stock, warrants, and options, will dilutethe percentage ownership interest of all stockholders, may dilute the book value per share of our Common Stock, and may negatively impactthe market price of our Common Stock.

 

Anti-takeovereffects of certain provisions of Nevada state law hinder a potential takeover of us.

 

Nevadahas a business combination law that prohibits certain business combinations between Nevada corporations and “interestedstockholders” for three years after an “interested stockholder” first becomes an “interested stockholder,”unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interestedstockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the votingpower of the outstanding voting shares of the corporation or (ii) an affiliate or associate of the corporation and at any timewithin the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power ofthe then outstanding shares of the corporation. The definition of the term “business combination” is sufficientlybroad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets tofinance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

 

Theeffect of Nevada’s business combination law is potentially to discourage parties interested in taking control of us fromdoing so if they cannot obtain the approval of our Board. Both of these provisions could limit the price investors would be willingto pay in the future for shares of our Common Stock.

 

Becausewe do not intend to pay any cash dividends on our Common Stock, our stockholders will not be able to receive a return on theirshares unless they sell them.

 

Weintend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying anycash dividends on our Common Stock in the foreseeable future. Declaring and paying future dividends, if any, will be determinedby our Board, based upon earnings, financial condition, capital resources, capital requirements, restrictions in our Articlesof Incorporation, contractual restrictions, and such other factors as our Board deems relevant. Unless we pay dividends, our stockholderswill not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be ableto sell shares when desired or for prices that they deem acceptable.

 

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NOTEABOUT FORWARD-LOOKING STATEMENTS

 

Statementsunder “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditionand Results of Operations,” “Description of Business” and elsewhere in this prospectus may be “forward-lookingstatements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations,strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statementsinclude, among other things, statements regarding:

 

  the growth of our business and revenues and our expectations about the factors that influence our success;
     
  our plans to continue to invest in systems, facilities, and infrastructure, increase our hiring and grow our business;
     
  our plans for the build out, expansion and funding of;
     
  our ability to identify and acquire waste management facilities that are accretive to future earnings;
     
  our ability to identify and acquire;
     
  our ability to identify joint ventures and other business combinations;
     
  our ability to attain funding for the development of;
     
  our ability to attain funding and the sufficiency of our sources of funding;
     
  our expectation that our cost of revenues, development expenses, sales and marketing expenses, and general and administrative expenses will increase;
     
  fluctuations in our capital expenditures; and
     
  our plans for potential business partners and any acquisition plans.

 

aswell as other statements regarding our future operations, financial condition and prospects, and business strategies. These statementsare based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. Thesestatements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore,actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statementsdue to numerous factors, including those described above and those risks discussed from time to time in this registration statement,of which this prospectus is a part, including the risks described under “Risk Factors.” Any forward-looking statements speakonly as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflectevents or circumstances that occur in the future.

 

Ifone or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual resultsmay vary materially from what we may have projected. Any forward-looking statements you read in this prospectus reflect our current viewswith respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, resultsof operations, financial condition, growth strategy and liquidity. You should specifically consider the factors identified in this prospectusthat could cause actual results to differ before making an investment decision. In addition, as discussed in “Risk Factors,”our shares may be considered a “penny stock” and, as a result, the safe harbors provided for forward-looking statements madeby a public company that files reports under the federal securities laws may not be available to us.

 

TAXCONSIDERATIONS

 

Weare not providing any tax advice as to the acquisition, holding or disposition of the securities offered herein. In making an investmentdecision, investors are strongly encouraged to consult their own tax advisor to determine the U.S. Federal, state and any applicableforeign tax consequences relating to their investment in our securities.

 

USEOF PROCEEDS

 

Thisprospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. We willnot receive any proceeds from the sale of shares of common stock in this offering.

 

DETERMINATIONOF OFFERING PRICE

 

Thepricing of the Shares has been arbitrarily determined and established by the Company. No independent accountant or appraiser has beenretained to protect the interest of the investors. No assurance can be made that the offering price is in fact reflective of the underlyingvalue of the Shares. Each prospective investor is urged to consult with his or her counsel and/or accountant as to offering price andthe terms and conditions of the Shares. Factors to be considered in determining the price include the amount of capital expected to berequired, the market for securities of entities in a new business venture, projected rates of return expected by prospective investorsof speculative investments, the Company’s prospects for success and prices of similar entities.

 

DILUTION

 

Notapplicable. We are not offering any shares in this registration statement. All shares are being registered on behalf of our selling shareholders.

 

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PLANOF DISTRIBUTION

 

TheSelling Shareholders and any of its pledgees, donees, assignees and other successors-in-interest may, from time to time, sell any orall of their shares of Common Stock on any market or trading facility on which the shares are traded or in private transactions. Thesesales may be at fixed or negotiated prices. On July 29, 2022, the last reported sales price for our Common Stock was $0.2695per share. We urge prospective purchasers of our Common Stock to obtain current information about the market prices of our Common Stock.The Company will not receive any of the proceeds from the sale by the Selling Shareholders. A Selling Shareholder may use any one ormore of the following methods when selling securities:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
     
  block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal;
     
  facilitate the transaction;
     
  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  an exchange distribution in accordance with the rules of the applicable exchange;
     
  privately-negotiated transactions;
     
  broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
     
  through the writing of options on the shares;
     
  a combination of any such methods of sale; and
     
  any other method permitted pursuant to applicable law.

 

Theselling stockholders may also sell shares under Rule 144 of the Securities Act, if available, rather than under this prospectus. Theselling stockholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if it deemsthe purchase price to be unsatisfactory at any particular time.

 

Theselling stockholders or their respective pledgees, donees, transferees or other successors in interest, may also sell the shares directlyto market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers mayreceive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of sharesfor whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealermight be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own accountand at their own risk. It is possible that a selling stockholder will attempt to sell shares of common stock in block transactions tomarket makers or other purchasers at a price per share which may be below the then existing market price. We cannot assure that all orany of the shares offered in this prospectus will be issued to, or sold by, the selling stockholders. The selling stockholders and anybrokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, may be deemed to be “underwriters”as that term is defined under the Securities Exchange Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and therules and regulations of such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resaleof the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

 

Weare required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel tothe selling stockholders, but excluding brokerage commissions or underwriter discounts.

 

Theselling stockholders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. The sellingstockholders have not entered into any agreement with a prospective underwriter and there is no assurance that any such agreement willbe entered into.

 

Theselling stockholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling stockholderdefaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The selling stockholders and any otherpersons participating in the sale or distribution of the shares will be subject to applicable provisions of the Securities Exchange Actof 1934, as amended, and the rules and regulations under such Act, including, without limitation, Regulation M. These provisions mayrestrict certain activities of and limit the timing of purchases and sales of any of the shares by, the selling stockholders or any othersuch person. In the event that any of the selling stockholders are deemed an affiliated purchaser or distribution participant withinthe meaning of Regulation M, then the selling stockholders will not be permitted to engage in short sales of common stock. Furthermore,under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making andcertain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions,subject to specified exceptions or exemptions. In addition, if a short sale is deemed to be a stabilizing activity, then the sellingstockholders will not be permitted to engage in a short sale of our common stock. All of these limitations may affect the marketabilityof the shares.

 

Ifa selling stockholder notifies us that it has a material arrangement with a broker-dealer for the resale of the common stock, then wewould be required to amend the registration statement of which this prospectus is a part and file a prospectus supplement to describethe agreements between the selling stockholder and the broker-dealer.

 

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SELLINGSHAREHOLDERS

 

Thisprospectus covers the resale from time to time by the selling shareholders identified in the table below of up to 7,000,000 sharesof our common stock, which were issued in various transactions exempt from registration under the Securities Act, as follows:

 

Theshares to be offered by the Selling Shareholders named in this prospectus are “restricted” securities under applicable federaland state securities laws and are being registered under the Securities Act to give those Selling Shareholders the opportunity to publiclysell these shares, if they elect to do so. The registration of these shares does not require that any of the shares be offered or soldby the Selling Shareholders. We are registering the shares in order to permit the Selling Shareholders to offer the shares for resalefrom time to time. For additional information regarding these shares, see “Private Placement of Securities” above.

 

Thetable below lists the Selling Shareholders and other information regarding the beneficial ownership of shares of common stock by eachof the Selling Shareholders. The first column in the table below lists the name of each Selling Shareholder. The second column liststhe number of shares of common stock beneficially owned by each Selling Shareholder, based on its ownership of the shares of common stock,as of July 29, 2022.

 

Thefourth column lists the shares of common stock being offered by this prospectus by the Selling Shareholders.

 

Inaccordance with the terms of a registration rights agreement between the Company and the Selling Shareholders, this prospectus generallycovers the resale of all shares of common stock held by the Selling Shareholders. The fourth column assumes the sale of all of the sharesoffered by the Selling Shareholders pursuant to this prospectus.

 

TheSelling Shareholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

 

Stockholder   Beneficial Ownership Before Offering
(ii)
    Percentage
of
Common Stock
Owned
Before
Offering
(ii)
    Shares of Common Stock Included
in Prospectus
    Beneficial Ownership After the Offering
(iii)
    Percentage
of
Common Stock
Owned
After the Offering
(iii)
 
Sunstate Futures, LLC     7,000,000       8.63 %     7,000,000       0       0.00 %
TOTAL     7,000,000       8.63 %     7,000,000       0       0.00 %

 

 

*Less than 1%

 

(i)These columns represent the aggregate maximum number and percentage of shares that the selling stockholders can own at one time (andtherefore, offer for resale at any one time).

 

(ii)The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficialownership includes any shares as to which the selling stockholders has sole or shared voting power or investment power and also anyshares, which the selling stockholders has the right to acquire within 60 days. The percentage of shares owned by each sellingstockholder is based on 81,077,355 shares that is comprised of 79,327,355 shares of common stock issued andoutstanding as of July 29, 2022, 1,500,000 shares of common stock issuable upon exercise of the options issued to our Chief Executive Officer, ChiefFinancial Officer and Chief Cultivation Officer and 250,000 shares of common stock issuable upon exercise of the warrant issued inconnection with the July 2020 Securities Purchase Agreement.

 

(iii)Assumes that all securities registered will be sold.

 

(iv)Included within Sunstate Futures, LLC’s beneficial ownership includes 7,000,000 shares of common stock issued inconnection with the Common Stock Purchase Agreement dated July 8, 2022. The principal for Sunstate Futures, LLC is JimKelly and its address is 3507 Acorn St., Tampa, FL 33619.

 

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DESCRIPTIONOF SECURITIES

 

Descriptionof Registrant’s Securities to be Registered.

 

Weare registering on this Registration Statement only our common stock, the terms of which are described below. However, because our preferredstock will remain outstanding following the effectiveness of this Registration Statement, we also describe below the terms of our preferredstock to the extent such terms qualify the rights of our common stock.

 

Ourauthorized capital consists of 95,000,000 shares of common stock, par value $.0001 per share (the “Common Stock”) and 5,000,000are shares of preferred stock, par value $.0001 per share (the “Preferred Stock”). At March 31, 2022, December 31,2021 and December 31, 2020, the Company had 71,501,667, 71,501,667 and 68,613,541 shares of Common Stockissued and outstanding, respectively, and 0, 0 and 0 shares of Preferred Stock issued and outstanding, respectively.

 

CommonStock

 

Ofthe 95,000,000 shares of Common Stock authorized by the Company’s Articles of Incorporation, 71,501,667 shares of CommonStock are issued and outstanding as of March 31, 2022. Each holder of Common Stock is entitled to one vote per share on all mattersto be voted upon by the stockholders and are not entitled to cumulative voting for the election of directors. Holders of Common Stockare entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legallyavailable therefor subject to the rights of preferred stockholders. The Company has not paid any dividends and does not intend to payany cash dividends to the holders of Common Stock in the foreseeable future. The Company anticipates reinvesting its earnings, if any,for use in the development of its business. In the event of liquidation, dissolution, or winding up of the Company, the holders of CommonStock are entitled, unless otherwise provided by law or the Company’s Articles of Incorporation, including any certificate of designationsfor a series of preferred stock, to share ratably in all assets remaining after payment of liabilities and the preferences of preferredstockholders. Holders of the Company’s Common Stock do not have preemptive, conversion, or other subscription rights. There areno redemptions or sinking fund provisions applicable to the Company’s Common Stock.

 

PreferredStock

 

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

 

SeriesA Convertible Preferred Stock

 

Eachshare of Series A Preferred Stock is convertible, at the option of the holder, into that number of shares of Common Stock determinedby dividing the stated value of each share of Series A Preferred Stock (currently, $1,000) by the conversion price (currently, $0.75).The stated value and the conversion price are subject to adjustment as provided for in the Certificate of Designation. The Company isprohibited from effecting a conversion of the Series A Preferred Stock to the extent that, after giving effect to the conversion, theholder (together with such holder’s affiliates and any persons acting as a group with holder or any of such holder’s affiliates)would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to theissuance of shares of Common Stock issuable upon conversion. A holder, upon notice to us, may increase or decrease this beneficial ownershiplimitation; provided, that, in no event can the holder increase the beneficial ownership limitation in excess of 9.99% of the numberof shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon the conversion ofthe Series A Preferred Stock then held by holder. Such increase of the beneficial ownership limitation cannot be effective until the61st day after such notice is given to us and shall apply only to such holder. The Series A Preferred Stock has no votingrights; however, as long as any shares of Series A Preferred Stock are outstanding, the Company is not permitted, without the affirmativevote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock to (i) alter or change adversely thepowers, preferences, or rights given to the Series A Preferred Stock or alter or amend the Series A Preferred Stock Certificate of Designation,(ii) amend the Company’s Articles of Incorporation or other charter documents in any manner that adversely affects any rights ofthe holders, (iii) increase the number of authorized shares of Series A Preferred Stock, or (iv) enter into any agreement with respectto any of the forgoing.

  

AtMarch 31, 2022, December 31, 2021 and December 31, 2020, there are 0, 0 and 0 shares of Series A Preferred Stockissued and outstanding, respectively.

 

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Optionsand Warrants

 

Asof March 31, 2022, the Company has 1,500,000 options and 250,000 warrants outstanding. Please see Note 13 —Stock Based Compensation within the Company’s financial statement for the three months ended March 31, 2022 for furtherinformation.

 

Todate, no warrants or options have been issued under shareholder approved plans and no shareholder approved plans currently exist.

 

TransferAgent and Registrar

 

Thetransfer agent and registrar for our common stock is Transhare Corporation whose address is Bayside Center 1, 17755 North US Highway19, Suite #140, Clearwater, FL 33764 and phone number is (303) 662-1112.

 

INTERESTSOF NAMED EXPERTS AND COUNSEL

 

Thevalidity of the shares of common stock offered hereby will be passed upon for the Registrant by the Law Offices of Gary L. Blum, 3278Wilshire Boulevard, Suite 603, Los Angeles, CA 90010. The financial statements for the years ended December 31, 2021 and 2020for MJ Holdings, Inc. included in this prospectus and elsewhere in the registration statement have been audited by Sadler Gibb, 344W. 13800 S., Suite 250, Draper, UT 84020 as indicated in its report with respect thereto, and are included herein in reliance upon theauthority of said firm as experts in auditing and accounting in giving said reports.

 

DIVIDENDPOLICY

 

Wehave never paid any cash dividends on our common stock and anticipate that, for the foreseeable future, no cash dividends will be paidon our common stock.

 

INFORMATION WITH RESPECT TO THE REGISTRANT

 

Descriptionof Business

 

Organization

 

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

 

CurrentInitiatives include:

 

  a three-acre, hybrid, outdoor, marijuana-cultivation facility (the “Cultivation Facility”) located in the Amargosa Valley of Nevada. The Company had the contractual right to manage and cultivate marijuana on this property until 2026, for which it would have received sixty percent (60%) of the net revenues realized from its management of this facility and twenty-five percent (25%) of the net revenues from equipment rental. The licensed facility is owned by Acres Cultivation, LLC, a wholly owned subsidiary of Curaleaf Holdings, Inc. On January 21, 2021, the Company received a Notice of Termination, effective immediately, from Acres Cultivation, LLC. During the year ended December 31, 2021, the Company relocated all of its equipment utilized on the Acres lease to its 260 Acres adjacent to the Acres lease. The Company will not generate any further revenue under the Acres relationship.
     
  260 acres of farmland for the purpose of cultivating additional marijuana (the “260 Acres”) purchased in January of 2019. The Company intends to utilize the state-of-the-art Cravo® cultivation system for growing an additional five acres of marijuana on this property. The Cravo® system will allow multiple harvests per year and should result in higher annual yields per acre. The land has more than 180-acre feet of permitted water rights, which will provide more than sufficient water to markedly increase the Company’s marijuana cultivation capabilities. This facility, upon receipt of its business license in Nye County and its final inspection by the Cannabis Compliance Board (“CCB”), is expected to become operational in the summer of 2022. During the year ended December 31, 2021, the Company elected to relocate all of its equipment utilized on the Acres lease to its 260 Acres adjacent to the Acres lease. The Company will utilize the 260 Acres for its own harvest along with additional harvests under any Cultivation and Sales Agreements.
     
  Cultivation and Sales Agreements entered into for multiple grows on the Company’s 260 Acres located in the Amargosa Valley of Nevada. During the years ended December 31, 2021 and 2020, the Company entered into separate Cultivation and Sales Agreements, whereby the Company shall retain certain independent growers to provide oversight and management of the Company’s cultivation and sale of products at its 260 Acres. The independent growers shall pay to the Company a royalty of net sales revenue with a minimum royalty after two years. As of the date of this filing, the Company is waiting on its business license in Nye County and its final inspection by the Cannabis Compliance Board before it can commence its operations under the Agreement.

 

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  a nearby commercial trailer and RV park (THC Park – Tiny Home Community) was purchased in April of 2019 to supply necessary housing for the Company’s farm employees. After the Company’s 2018 harvest, it came to realize that it would need to find a more efficient method of housing and to bring its cultivation team to its facilities. The Company purchased the 50-acre plus THC Park for $600,000 in cash and $50,000 of the Company’s restricted common stock. At present, the Company’s construction and completion of this community is approximately seventy-five present complete. The impact of COVID-19 in obtaining inspections and permitting significantly delayed the completion of this community. The Company has elected to cease any renovations or additions at its Tiny Home Community until it plants its first grow on the 260 Acres and can better evaluate the need for additional housing.
     
  an agreement to acquire a cultivation license and production license, both currently located in Nye County Nevada. On February 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. In consideration of the sale, transfer, assignment and delivery of the Membership Interests to Purchaser, and the covenants made by Seller under the MIPA3, Purchaser agreed to pay a combination of cash, promissory notes, and stock in the amount of One-Million-Two-Hundred-Fifty Thousand Dollars ($1,250,000.00) in cash and/or promissory notes and 200,000 shares of the Company’s restricted common stock, all of which constitutes the consideration agreed to herein for (the “Purchase Price”), payable as follows: (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against future compensation due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, (v) $200,000 shall be deposited on or before June 12, 2021, and (vi) $250,000 shall be deposited within five (5) business days after the Nevada Cannabis Compliance Board (“CCB”) provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser. On April 12, 2022, the CCB issued an Adult-Use Production License to MJ Distributing P133, LLC and an Adult-Use Cultivation License to MJ Distributing C202, LLC. The Company is currently awaiting its business license to be issued by Nye County, Nevada.
     
  indoor cultivation facility build-out in the City of Las Vegas (the “Indoor Facility”). Through its former subsidiary, Red Earth, LLC (“Red Earth”), the Company held a Medical Marijuana Establishment Registration Certificate, Application No. C012. In August of 2019, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with Element NV, LLC (“Element”), to sell a 49% interest in the license. Under the terms of the Agreement, Element was required to invest more than $3,500,000 into this Indoor Facility. Element paid the monthly rent on the facility from December 2019 through March 2020 but failed to make any additional payments. On June 11, 2020, the Company entered into the First Amendment (“First Amendment”) to the Agreement. Under the terms of the First Amendment, the Closing Purchase Price was adjusted to $441,000, and Element was required to make a capital contribution (the “Initial Contribution Payment”) to the Target Company in the amount of $120,000 and was required to make an additional cash contribution (the Final Contribution Payment”) in the amount of $240,000. The Company terminated its discussions with Element regarding its past due payments. On or about May 7, 2021, Red Earth, received an inquiry from the State of Nevada Cannabis Compliance Board (“CCB”) regarding the transfer of ownership of the Subsidiary from its previous owners to the Company. The CCB has determined that the transfer was not formally approved, thus a Category II violation. On July 27, 2021, Red Earth entered into a Stipulation and Order for Settlement of Disciplinary Action (the “Stipulation Order”) with the CCB. Under the terms of the Stipulation Order, Red Earth agreed to present to the CCB, by not later than August 31, 2021, a plan pursuant to which the ownership of Red Earth would be returned to the original owners. The Parties to the Stipulation Order resolved the matter without the necessity of taking formal action. Red Earth agreed to pay a civil penalty of $10,000, which was paid on July 29, 2021. On August 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of Red Earth, Paris Balaouras, entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December 15, 2017, entered into between the Company and Red Earth was terminated as of the date of the Termination Agreement resulting in the return of ownership of Red Earth to Mr. Balaouras. Neither party shall have any further obligation to one another pursuant to the terms of the Purchase Agreement.

 

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Cultivationand Sales Agreements

 

MKCDevelopment Group, LLC Agreement

 

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

 

Asdeposits, security and royalty, the Company shall pay to MJNE:

 

  (i) a $600,000 non-refundable deposit upon execution of the Agreement;
  (ii) a security deposit of $10,000 to be applied against the last month’s obligations and a $10,000 payment to be applied against the first month’s rent;
  (iii) $10,000 on the first of each month for security and compliance;
  (iv) a royalty of 10% of gross revenue less applicable taxes (hereinafter “Net Sales Revenue”) on all sales of product by the Company; and
  (v) the Company shall, after the first two (2) years from execution of the Agreement, be responsible to pay to MJNE a minimum royalty of $83,000.00 per month.

 

Ascompensation, MJNE shall pay to the Company:

 

  (i) 90% of Net Sales Revenue to the Company as the Management Fee.

 

Thetransaction closed on January 27, 2021. As of the date of this filing, the Company has made all required payments to MJNE. The partiesare awaiting the issuance of a business license from Nye County before any grow can be initiated. It is anticipated that the licensewill be approved and issued during the third quarter of 2022.

 

NaturalGreen, LLC Agreement

 

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

 

Asdeposits, security and royalty, the Company shall pay to MJNE:

 

  (i) a $500,000 Product Royalty deposit to be applied to the first Product Royalty or Product Royalties;
  (ii) a deposit of $20,000 to be applied against the first and last month’s Security and Compliance fee;
  (iii) $10,000 on the first of each month for Security and Compliance;
  (iv) a royalty of 10% of gross revenue less applicable taxes (hereinafter “Net Sales Revenue”) on all sales of product by the Company; and
  (v) the Company shall, after the first two (2) years from execution of the Agreement, be responsible to pay to MJNE a minimum royalty of $50,000.00 per month.

 

Ascompensation, MJNE shall pay to the Company:

 

  (i) 90% of Net Sales Revenue to the Company as the Management Fee.

 

OnMarch 26, 2021, MJNE and the Company entered into an Amendment to the Agreement whereby MJNE waived the Company’s requirement toobtain liability insurance and required the Company to pay MJNE $40,000 for capital expenditures costs. The transaction closed on April7, 2021. As of the date of this filing, the Company has made all required payments to MJNE. The parties are awaiting the issuance ofa business license from Nye County before any grow can be initiated. It is anticipated that the license will be approved and issued duringthe third quarter of 2022.

   

GreenGrow Investments Agreement

 

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

 

Asdeposits, security and royalty, the Company shall pay to MJNE:

 

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

 

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Ascompensation, MJNE shall pay to the Company:

 

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

 

Asof the date of this filing, the Company has made all required payments to MJNE. The parties are awaiting the issuance of a business licensefrom Nye County before any grow can be initiated. It is anticipated that the license will be approved and issued during the third quarterof 2022.

 

RKGrow, LLC Agreement

 

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

 

Asdeposits, security and royalty, the Company shall pay to MJNE:

 

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

 

Ascompensation, MJNE shall pay to the Company:

 

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

 

Asof the date of this filing, the Company has made all required payments to MJNE. The parties are awaiting the issuance of a business licensefrom Nye County before any grow can be initiated. It is anticipated that the license will be approved and issued during the third quarterof 2022.

 

Terminationof Acres Cultivation, LLC Agreement

 

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

 

  (i) The Cultivation and Sales Agreement entered into by and between MJNE and Acres, dated as of January 1, 2019 (the “Cultivation and Sales Agreement” or “CSA”), pursuant to Sections 5.3, and 16.20 (cross-default);
     
  (ii) The Consulting Agreement, by and between Acres and MJNE, made as of January 1, 2019 (the “Consulting Agreement”), pursuant to Sections 10 and 11.10 (cross-default); and
     
  (iii) The Equipment Lease Agreement between Acres and MJNE, dated as of January 1, 2019 (the “Equipment Lease Agreement”), pursuant to Sections 8(ii), 8(iv), and 29 (cross-default).

 

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

 

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TheCompany may also continue to seek to identify potential acquisitions of revenue producing assets and licenses within legalized cannabismarkets that can maximize shareholder value.

 

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

 

ConsultingAgreements

 

OnFebruary 25, 2021, the Company entered into a Consulting Agreement (the “Agreement”) with Sylios Corp (the “Consultant”).Under the terms of the Agreement, the Consultant shall prepare the Company’s filings with the Securities and Exchange Commission(the “SEC”) including its Annual report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. TheConsultant shall receive $50,000 in cash compensation plus 225,000 shares of the Company’s common stock. The Agreement has a termof the latter of one (1) year or until the Company’s Annual Report for the period ended December 31, 2021 is filed with the SEC.

 

OnJune 17, 2021, the Company entered into a Consulting Agreement (the “Agreement”) with Wolfpack Consulting, LLC (the “Consultant”).Under the terms of the Agreement, the Consultant shall use its commercially reasonable efforts and adequate business time and attentionto identify various properties that may fit into Client’s business model to develop, cultivate, and produce marijuana related products.The Consultant shall receive $25,000 in cash compensation. The Agreement shall begin on the Effective date and end upon the earlier of:(a) the first anniversary of the Effective Date (i.e., one year), or (b) either Party’s receipt of written notice from the otherparty of its intent to terminate this Agreement after the expiration of the first anniversary (the “Term”).

 

CorporateAdvisory Agreement (Research & Development)

 

Underthe terms of the Research & Development Agreement (the “Research Agreement”), GYB, LLC (the “Advisor”) shallreport to Company, in writing, on a quarterly basis beginning on July 1, 2021, on the status of the psychedelics industry including,but not limited to, those areas of importance identified in the Recitals, identify entities operating within the legally regulated psychedelicsindustry that may be suitable as a potential acquisition or merger candidate and other such services the parties agree upon. The ResearchAgreement has a term of one year and begins on May 18, 2021. As compensation for the services provided, the Company paid the Advisor$310,000 upon execution of the Research Agreement.

 

CorporateAdvisory Agreement (M&A and Funding)

 

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

 

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Background:MJ Holdings, Inc.

 

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

 

OnNovember 22, 2016, in connection with a plan to divest the Company of its real estate business, the Company submitted to its stockholdersan offer to exchange (the “Exchange Offer”) its common stock for shares in MJ Real Estate Partners, LLC, (“MJRE”)a newly formed LLC formed for the sole purpose of effecting the Exchange Offer. On January 10, 2017, the Company accepted for exchange1,800,000 shares of its Common Stock in exchange for 1,800,000 shares of MJRE’s common units, representing membership interestsin MJRE. Effective February 1, 2017, the Company transferred its ownership interests in the real estate properties and its subsidiaries,through which the Company held ownership of the real estate properties, to MJRE. MJRE also assumed the senior notes and any and all obligationsassociated with the real estate properties and business, effective February 1, 2017.

 

Acquisitionof Red Earth

 

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

 

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

 

Onor about May 7, 2021, the Subsidiary, received an inquiry from the State of Nevada Cannabis Compliance Board (“CCB”) regardingthe transfer of ownership of the Subsidiary from its previous owners to the Company. The CCB has determined that the transfer was notformally approved, thus a Category II violation.

 

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

 

OnAugust 1, 2021, the Company entered into a Memorandum of Understanding and Agreement for Technical Services and Short-Term Funding (the“Agreement”) with Red Earth, LLC (hereinafter, “Red Earth”), an entity controlled by its Chief Cultivation Officer,Paris Balaouras. Under the terms of the Agreement, the Company will provide a short-term loan (the “Loan”) to Red Earth forexpenses related to the activation and operation of Red Earth’s cultivation license. The Loan shall bear interest at 12% per annumand increase to 18% upon default. In addition, the Company shall provide Red Earth pre-opening technical services at a cost of $5,000to $7,500 per month. As of March 31, 2022, the amount due the Company under the short-term loan is $138,316. Please see Note 14 — Related Party Transactions within the Company’s financial statementfor the three months ended March 31, 2022 for further information.

 

OnAugust 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of the Subsidiary, Paris Balaouras,entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”),dated December 15, 2017, entered into between the Company and the Subsidiary was terminated as of the date of the Termination Agreementresulting in the return of ownership of the Subsidiary to Mr. Balaouras. Neither party shall have any further obligation to one anotherpursuant to the terms of the Purchase Agreement. Please see Note 15 — Gain on Disposal of Subsidiary within the Company’sfinancial statement for the year ended December 31, 2021 for further information.

 

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

 

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OurBusiness History

 

In April 2018, the Company entered into a managementagreement with Acres Cultivation, LLC, a Nevada limited liability company (the “Licensed Operator”) that holds a licensefor the legal cultivation of marijuana for sale under the laws of the State of Nevada. In January of 2019, the Company entered into arevised agreement, which replaced the April 2018 agreement, with the Licensed Operator in order to be more stringently aligned with Nevadamarijuana laws. The material terms of the agreement remain unchanged. The Licensed Operator is contractually obligated to pay over tothe Company sixty percent (60%) of the net revenues realized from its management of this facility and twenty-five percent (25%) of thenet revenues from equipment rental. The agreement is to remain in force until April 2026. In April 2019, the Licensed Operator was acquiredby Curaleaf Holdings, Inc., a publicly traded Canadian cannabis company. The acquisition was subject to all of the contractual obligationsbetween the Company and the Licensed Operator.

 

In April 2018, the State of Nevada finalized andapproved the transfer of provisional Medical Marijuana Establishment Registration Certificate No. 012 (the “Certificate”)from Acres Medical, LLC to the Company’s former wholly owned subsidiary, Red Earth, LLC (“Red Earth”). HDGLV, LLC (“HDGLV”),a wholly owned subsidiary of Red Earth, holds a triple-net leasehold interest in a 17,298 square-foot commercial building located onWestern Avenue in the City of Las Vegas, which will be home to the Company’s indoor cultivation facility (the “Western Facility”).The initial term of the lease is for a period of ten years with two additional five-year lease options. HDGLV also possesses an optionto purchase the building for $2,607,880 which is exercisable between months 25 and 60 of the initial term of the lease. In August of2018, the Company received final approval from the State of Nevada, Department of Taxation, to commence cultivation activities with respectto the Certificate. Contemporaneously therewith, Red Earth was issued a Business License by the City of Las Vegas to operate a marijuanacultivation facility at the Western Facility. In October of 2018, the Company was requested by the City of Las Vegas Department of Building& Safety to make additional modifications to the building, specifically the removal and remediation of all asbestos materials inthe building, which was completed in June of 2019 at a cost of approximately $140,000. In July of 2019, the City of Las Vegas asked theCompany to amend its Business License and modify its Special Use Permit (“SUP”) to conform with updated marijuana cultivationrequirements within the City. A new SUP was granted on October 9, 2019. As of August 26, 2021, the Company was no longer the owner ofHDGLV as per the terms of the Termination Agreement between the Company and Paris Balaouras. Please see Note 7 — IntangibleAssets and Note 15 — Gain on Disposal of Subsidiary within the Company’s financials for the year ended December31, 2021 for further information.

  

In August of 2018, the Company executed a letterof intent (“LOI”) for the acquisition of all of the membership units of Farm Road, LLC, a Wyoming limited liability company(“Farm Road”). Farm Road was the owner of five parcels of farmland in the Amargosa Valley of Nevada totaling 260 acres andthe concomitant 180 acre-feet of water rights. Pursuant to the terms of a Membership Interest Purchase Agreement (“MIPA”)executed between the Company and Farm Road in November of 2018, the Company was to acquire Farm Road for $1,000,000 on the followingterms: a deposit of $50,000 in cash and $50,000 of the Company’s restricted common stock upon execution of the LOI, was to be heldin escrow until closing, $150,000 in cash payable at closing and a promissory note bearing 5% simple annual interest (the “PromissoryNote”) in the amount of $750,000.00 payable to FR Holdings, LLC (an unrelated third party) (“FRH”) in 36 equal monthlyinterest only payments of three thousand one hundred twenty five ($3,125.00) dollars commencing on the March 1, 2019. On January 18,2019, pursuant to the terms of the MIPA, the Company acquired a 100% interest in Farm Road. The terms of the Promissory Note includea balloon payment to be made on January 17, 2022 of any of the then remaining principal balance and accrued interest. The MIPA furtherprovides that FRH shall be entitled to receive a consulting fee of five per cent (5%) of the gross sales from any commercial use of theproperty up to a maximum of five hundred thousand ($500,000.00) dollars payable to FRH within two years of the January 18, 2019 closingdate. The land acquired in Amargosa Valley will be the home of the Company’s Nye County cultivation facility upon closing of thepurchase of the cultivation and production certificates in the MIPA3. Please see Note 9 — Notes Payable within theCompany’s financial statement for the three months ended March 31, 2022 for further information.

 

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The Company has joined with more than 15 otherplaintiffs in an action against the State of Nevada in regard to how the applications were scored and as to why licenses were grantedto other applicants in contravention of the guidelines published by the State of Nevada. On August 23, 2019, a Nevada District Courtjudge issued a preliminary injunction enjoining any of the entities that were granted licenses from opening new dispensaries based uponthe failure of NVDOT (the administrative body tasked with adopting and enforcing marijuana regulations within the State of Nevada) toenforce a provision of Ballot Question 2 (“BQ2”), that was approved by Nevada voters in 2016 and adopted by the Nevada legislatureand codified as NRS 453D, which legalized the sale and distribution of recreational use marijuana. The law requires that “eachprospective owner, officer and board member of a marijuana establishment license applicant” undergo a background check. The judgefound that many of the successful license applicants failed to comply with this requirement. On August 29, 2019, the judge modified theruling and is allowing thirteen of the successful license applicants who the State of Nevada have certified as having complied with therequirements of BQ2 to open new dispensaries as granted in December of 2018. The plaintiffs shall now continue to trial on the meritsof the pending litigation against the State of Nevada. In March of 2020, counsel for Red Earth withdrew from its representation of RedEarth. Red Earth is actively trying to retain substitute counsel, which as of the date of this filing Red Earth remains unrepresentedin this matter. The trial, which was scheduled to commence in April of 2020, has been postponed by the State of Nevada as part of theirimplementation measures to stop the spread of COVID-19, as of the date of this filing the trial has not commenced.

  

In October of 2018, the Company entered into aRevenue Participation Rights Agreement (the “RPRA”) with Let’s Roll NV, LLC and Blue Sky Companies, LLC (together,the “Subscribers”). Under the terms of the RPRA, the Company transferred its ownership interest in 3.95% of the gross revenuefrom the “Amargosa Outdoor Grow” to the Subscribers in exchange for $100,000 cash payment and a Subscription Agreement inthe amount of $1,142,100. On or before April 30th for the next 8 years (2019-2026), the Company shall calculate the pro ratagross revenue due to the Subscribers with payments being made on or before May 31st of each year. On March 24, 2021, the Companyentered into a Termination Agreement (the “Agreement”) with the Subscribers. Under the terms of the Agreement, the Companyhas decided to terminate its involvement in the Amargosa Outdoor Grow facility to capitalize on additional strategic opportunities forfurther co-ops and/or additional outdoor grow expansions on adjacently owned properties; and further that such termination of the AmargosaGrow would result in a complete loss of revenue sharing opportunities for the Subscribers under the terms of the RPRA. In considerationof termination of the RPRA, the Company compensated the Partners; (i) $136,684, and (ii) 1,000,000 shares of common stock.

 

In January of 2019, the Company formed Coachill-Inn,LLC (“Coachill-Inn”), a subsidiary of Alternative Hospitality (“AH”), to develop a proposed hotel in Desert HotSprings, CA. From January through June of 2019, the Company was actively engaged in negotiations with the property owner of the proposedlocation. In June of 2019, Coachill-Inn executed a purchase and sale agreement with Coachillin’ Holdings, LLC (“CHL”)to acquire a 256,132 sq. ft. parcel of land within a 100-acre industrial cannabis park in Desert Hot Springs, CA (the “Property”)to develop its first hotel project. The purchase price for the property was $5,125,000. CHL was to contribute $3,000,000 toward the purchaseprice of this property in exchange for a twenty-five percent (25%) ownership interest in Coachill-Inn. AH made an initial non-refundabledeposit in the amount of $150,000 toward the purchase of the Property. As of the date of this filing, the Company has terminated itsparticipation in the development due to financing issues. The $150,000 deposit is classified as an impaired asset. Please seeNote 9 —Asset Impairment within the Company’s financial statement for the year ended December 31, 2021 for furtherinformation.

 

On February 15, 2019, the Company entered intoa Licensing Agreement (the “Agreement”) with Highland Brothers, LLC, (“HB”) an entity controlled by the Company’sformer Chief Executive Officer and current director. Under the terms of the Agreement, HB granted the Company an exclusive license touse any and all branding materials of HB including, without limitation, its name, logo, and any and all intellectual property rights.In consideration of the license, the Company agreed to compensate HB seven percent (7%) of the net sales generated by the Company forany products utilizing and/or integrating property rights, brands or logos of HB commencing in 2020. The Agreement has a term of ten(10) years.

 

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On March 8, 2019, the Company entered into a fifteen-yearSuite License Agreement (the “Agreement”) with LV Stadium Events Company, LLC (“LV Stadium”) for the lease ofa suite within the multipurpose stadium (the “Stadium”) constructed in Clark County, Nevada that is intended to be the homestadium for the Raiders National Football League team. Under the terms of the Agreement, the Company paid the initial deposit of $75,000,the second payment of $150,000 and the final payment on approximately October 15, 2020. Commencing with year 6 of the Term, the LicenseFee for each year of the Term shall be increased by an amount not to exceed three percent (3%) of the License Fee payable for the immediatelypreceding year.

  

In April of 2019, Roger Bloss was appointed tothe Board of Directors of the Company.

 

In April of 2019, the Company executed a MembershipInterest Purchase Agreement (the “MIPA”) to acquire all of the membership interests in two Nevada limited liability companiesthat are each the holder of a State of Nevada marijuana license. Marijuana Establishment Registration Certificate, Application No. C202and Marijuana Establishment Registration Certificate, Application No. P133 (collectively the “Certificates”). The terms ofthe MIPA required the Company to purchase the licenses for the total sum of $1,250,000 each - $750,000 in cash per license and $500,000of the Company’s restricted common stock per license. The terms of the MIPA provide for a $250,000 non-refundable down paymentand include a short term note in the amount of $500,000 carrying an annual interest rate of two percent (2%) that was due and payableon or before October 18, 2019. On October 17, 2019, the State of Nevada’s Governor issued an executive order restricting the transferof all Nevada marijuana licenses (the “Moratorium”). As of the date of this filing, the Company has made deposits totaling$550,000 and has reduced the principal of the aforementioned note to $250,000. The Company is required to issue $1,000,000 of sharesof its restricted common stock in fulfillment of its obligations in the MIPA. As of the date of this filing, these shares have not beenissued. The Company also executed a $750,000 long term note (the “LT Note”) in favor of the current license holders thatbecomes due and payable upon the earliest of a) six months after the transfer of the Certificates to the Company, or b) six months afterthe production/cultivation is declared fully operational by the applicable regulatory agencies, or c) March 10, 2020. On February 19,2020, the Company was put on notice by the Seller that it is in default under the terms of the MIPA. Additionally, pursuant to the termsof the MIPA, the Company was required to enter into a $15,000 per month sub-lease (retroactive to March 1, 2019) for the 10-acre cultivation/productionfacility located in Pahrump, Nye County, NV and install a mobile production trailer. The Company failed to make the required paymentsunder the MIPA and the Agreement was terminated. Please see Note 9 —Asset Impairment within the Company’s financialstatement for the year ended December 31, 2021 for further information.

 

In April of 2019, the Company consummated itspurchase of an approximately 50-acre, commercial trailer and RV park (the “Trailer Park”) in close proximity to its AmargosaValley cultivation facilities. The Trailer Park can accommodate up to 90 trailers and RV’s. There presently are 17 occupied trailersin the Trailer Park, and the Company is making the necessary upgrades to bring additional units to the facility to provide housing forits farm personnel. The Company purchased the Trailer Park for a total of $600,000 in cash and $50,000 of the Company’s restrictedcommon stock, resulting in the issuance of 66,667 shares. The Sellers hold a $250,000 note, bearing interest at six and one-half percentresulting in monthly payments in the amount of $2,178 based upon a 15-year amortization schedule (the “TP Note”). The TPNote requires additional principal reduction payments in the amount of $50,000 on or before April 5, 2020 and April 5, 2021, respectively.As of the date of this filing, the Company has failed to make the required principal reduction payment that was due on April 5, 2020.Additionally, due to the ongoing effects of COVID-19, the Company has been unable to make its monthly payments of $2,178 pursuant tothe terms of the TP Note. The Company is in arrears to the holders of the TP Note in the amount of $58,711. The principal and interestpayments will be recalculated based on a 15-year a amortization schedule upon each principal reduction payment. A final balloon paymentof any and all outstanding principal and accrued interest is due and payable on or before April 5, 2022. There are no prepayment penaltiesshould the Company elect to retire the note prior to its maturity date.

 

On June 25, 2019, the Company entered into a SeriesPost Seed Preferred Stock and Series Post Seed Preferred Unit Investment Agreement (the “Agreement”) with Innovation Labs,Ltd. and Innovation Shares, LLC. Under the terms of the Agreement, the Company purchased 238,096 Series Post Seed Preferred Stock Sharesand 238,096 Series Post Seed Preferred Units for a purchase price of $250,000. Please see Note 9 —Asset Impairmentwithin the Company’s financial statement for the year ended December 31, 2021 for further information.

 

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On August 28, 2019, the Company entered into aMembership Interest Purchase Agreement (the “Agreement”) with Element NV, LLC, an Ohio limited liability company (the “Buyer”),to sell forty-nine percent (49%) of the membership interests in the Company’s wholly owned subsidiary, Red Earth, LLC (“RedEarth”) for $441,000. The $441,000 was paid to the Company on August 30, 2019. The Agreement required the Buyer to make an additionalpayment, in the amount of $3,559,000, to be utilized for the improvement and build-out of the Company’s Western Avenue leaseholdin Las Vegas, Nevada. The payment was due within ten (10) days of the receipt by Red Earth of a special use permit (“SUP”)from the City of Las Vegas for its Western Avenue cultivation facility. The Company received the SUP on October 9, 2019. The Buyer, inconjunction with the Company, will jointly manage and operate the facility upon completion. The Agreement also requires the Buyer tomake a final payment to the Company of $1,000,000 between 90 and 180 days of issuance of the SUP or no later than April 9, 2020. On June11, 2020, the Company entered into the First Amendment (“First Amendment”) to the Agreement. Under the terms of the FirstAmendment, the Closing Purchase Price was adjusted to $441,000, the Buyer was required to make a capital contribution (the “InitialContribution Payment”) to the Target Company in the amount of $120,000 and the Buyer was required to make an additional cash contribution(the Final Contribution Payment”) in the amount of $240,000. The Buyer failed to make the required payments under the Agreementand the Agreement was thus terminated in 2021. Please see Note 7 — Intangible Assets and Note 15 — Gain onDisposal of Subsidiary within the Company’s financial statement for the year ended December 31, 2021 for further information.

  

On January 22, 2020, the Company’s President,Richard S. Groberg, tendered his resignation to the Company’s Board of Directors (the “Board”). The Board acceptedMr. Groberg’s resignation effective immediately. The Company and Mr. Groberg executed a mutual Separation Agreement. On May 12,2021, the Company entered into a Cooperation and Release Agreement (the “Agreement”) with Richard S. Groberg and RSG Advisors,LLC. Under the terms of the Agreement, Mr. Groberg agreed to relinquish all common stock of the Company issued to or owned by him andwaived any right to any future stock issuances except for 100,000 shares to be retained by Mr. Groberg.

 

On January 22, 2020 the Board appointed the Company’sSecretary and Chief Administrative Officer, Terrence M. Tierney, JD, age 58, to the additional position of interim President. Mr. Tierneywas a consultant to the Company from July 1, 2018 until September 18, 2018 when he was appointed Secretary of the Company. On October15, 2018, Mr. Tierney became the Chief Administrative Officer of the Company and signed a three-year employment agreement with the Company(which agreement has been previously filed with the SEC) that expires on September 30, 2021. There were no changes to Mr. Tierney’scurrent employment agreement other than his additional duties as President. Mr. Tierney had day-to-day oversight of the Company’soperations and continue to advise the Board on strategic initiatives and business development.

 

On February 20, 2020, the Company’s subsidiary,Alternative Hospitality, Inc. (the “Borrower”), issued a Short-Term Promissory Note (the “Note”) to Pyrros One,LLC (the “Holder”), an entity controlled by a relative of a director of the Company, in the amount of $110,405 that matureson February 19, 2021. The Note shall bear interest at a rate of 9% per annum with interest-only payments in the amount of $825 due onor before the twentieth day of each month commencing on April 20, 2020. The Borrower was required to make an interest and principal reductionpayment in the amount of $1,233 on or before March 20, 2020. The Holder was granted a security interest in that certain real propertylocated at 1300 S. Jones Blvd, Las Vegas, NV 89146, which is owned by the Borrower. Please see Note 11 — Notes Payable– related parties within the Company’s financial statement for the year ended December 31, 2021 for further information.

 

On March 2, 2020, Mr. Ruhe tendered his resignationto the Company’s Board of Directors (the “Board”). The Board accepted Mr.Ruhe’s resignation effective immediately.Mr. Ruhe also stepped down as an advisor to the Company’s Audit Committee. Additionally, pursuant to the terms of Mr. Ruhe’semployment contract with the Company Mr. Ruhe shall forfeit 11,709 shares of invested common stock previously issued to Mr. Ruhe. TheBoard has commenced a search to find a suitable individual to replace Mr. Ruhe.

 

On March 31, 2020, the Company’s subsidiary,Condo Highrise Management, LLC (the “Borrower”), issued a Short-Term Promissory Note (the “Note”) to Pyrros One,LLC (the “Holder”), an entity controlled by a relative of a director of the Company, in the amount of $90,000 that matureson March 30, 2021. The Note shall bear interest at a rate of 9% per annum with interest-only payments in the amount of $675 due on orbefore the first day of each month commencing on May 1, 2020. The Holder was granted a security interest in that certain real propertylocated at 4295 Hwy 343, Amargosa, NV 89020 which is owned by the Borrower. Please see Note 11 — Notes Payable –related parties within the Company’s financial statement for the year ended December 31, 2021 for further information.

 

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On July 22, 2020, the Company entered into a SecuritiesPurchase Agreement (the “Agreement”) with an accredited investor (the “Investor”). Under the terms of the Agreement,the Investor agreed to purchase 4,500,000 shares of the Company’s common stock at $0.088808889 per share for a total purchase priceof $400,000. The Investor was also to be issued a warrant granting the Investor the right to acquire 1,000,000 shares of the Company’scommon stock at an exercise price of $0.10. The warrant was to be dated August 3, 2020 and have a term of three years. The Investor funded$250,000 of the purchase amount on July 31, 2020. On August 10, the Company returned $125,465 of the funds to the Investor for a netinvestment of $124,535. The Company issued the Investor 1,402,279 shares of common stock and a warrant granting the Investor the rightto purchase 250,000 shares of common stock under the revised terms of the Agreement.

  

On August 7, 2020, the Company’s Board ofDirectors terminated, with cause, the employment of Terrence M. Tierney, the Company’s former President and Secretary, effectiveimmediately. On March 9, 2021, Terrence Tierney filed for arbitration with the American Arbitration Association for: (i) breach of contract,(i) breach of the implied covenant of good faith and fair dealing, and (iii) NRS 608 wage claim. Mr. Tierney demanded payment in theamount of $501,085 for deferred business compensation, expenses paid on behalf of the Company, accrued vacation and severance pay. OnApril 7, 2021, the Company made payment against the wage claim in the amount of $62,392, inclusive of $59,583 for wages and $2,854 foraccrued vacation and, as such posits that any claims that Tierney may have had have been paid in full and that the Company otherwisehas no liability. The Company filed a counterclaim in the action declaring that Tierney breached the contract of employment, committedfraud, malfeasance and other nefarious acts causing substantial damage to the Company with estimated monetary damages well in excessof any monetary claim made by Tierney. After recent arbitrator rulings favorable to the Company, the parties agreed to postponethe June arbitration and have referred the matter to mediation. On June 23, 2022, the parties participated in mediation without resolution. The parties have met and conferred andare scheduled to proceed with arbitration on November 7-10, 2022.

 

On September 1, 2020, the Company entered intoan Employment Agreement (the “Agreement”) with Paris Balaouras (the “Employee”). Under the terms of the Agreement,the Employee shall serve as the Company’s Chief Cultivation Officer for a term of three (3) years (the “Term”) commencingon September 15, 2020. The Employee shall receive a base salary of $105,000 annually, shall be eligible to receive an annual discretionarybonus during the Term, based on performance criteria determined by the board of directors of the Company in its sole discretion, in amountequal to up to 100% of Employee’s base salary for the then current fiscal year, shall be eligible to receive an annual discretionarystock grant during the Term which shall be vested in equal increments of 1/3rd each over a three year period beginning onthe first anniversary of employment, shall be eligible to receive a compensatory stock grant of 667,000 shares for and in considerationof past compensation (approximately $500,000 over the past 2.5 years) foregone by Employee; such grant exercisable at Employee’soption as such time as Employer is profitable at the NOI level on a trailing twelve (12) month basis or upon other commercial reasonableterms as the Board may determine and shall be awarded options to purchase 500,000 shares of the Company’s common stock, exercisableat a price of $.75 per share.

 

On September 1, 2020, the Company entered intoan Employment Agreement (the “Agreement”) with Roger Bloss. Under the terms of the Agreement, the Employee shall serve asthe Company’s Interim Chief Executive Officer for a term of six (6) months and the Chief Executive Officer and for an additionaltwo (2) years and six (6) months as the Chief Executive Officer for a total of three (3) years (the “Term”) commencing onSeptember 15, 2020. The Employee shall receive a base salary of $105,000 annually, shall be eligible to receive an annual discretionarybonus during the Term, based on performance criteria determined by the board of directors of the Company in its sole discretion, in amountequal to up to 100% of Employee’s base salary for the then current fiscal year, shall be eligible to receive an annual discretionarystock grant during the Term which shall be vested in equal increments of 1/3rd each over a three year period beginning onthe first anniversary of employment and shall be awarded options to purchase 500,000 shares of the Company’s common stock, exercisableat a price of $.75 per share.

 

On September 1, 2020, the Company entered intoan Employment Agreement (the “Agreement”) with Bernard Moyle. Under the terms of the Agreement, the Employee shall serveas the Company’s Secretary/Treasurer for a term of three (3) years (the “Term”) commencing on September 15, 2020. TheEmployee shall receive a base salary of $60,000 annually, shall be eligible to receive an annual discretionary bonus during the Term,based on performance criteria determined by the board of directors of the Company in its sole discretion, in amount equal to up to 200%of Employee’s base salary for the then current fiscal year, shall, at commencement of the Term receive a grant of stock of 500,000shares and shall be eligible to receive an annual discretionary stock grant during the Term which shall be vested in equal incrementsof 1/3rd each over a three year period beginning on the first anniversary of employment and shall be awarded options to purchase500,000 shares of the Company’s common stock, exercisable at a price of $.75 per share.

 

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On September 15, 2020, the Company entered intoa Board of Directors Services Agreement (the “Agreement”) with Messrs. Bloss, Dear and Balaouras (collectively, the “Directors”).Under the terms of the Agreement, each of the Directors shall provide services to the Company as a member of the Board of Directors fora period of not less than one year. Each of the Directors shall receive compensation as follows: (i) Fifteen Thousand and no/100 dollars($15,000.00), paid in four (4) equal installments on the last calendar day of each quarter, and (ii) Fifteen Thousand (15,000) sharesof the Company’s common stock on the last calendar day of each quarter. The Agreement for each of the Directors is effective asof October 1, 2020.

  

On October 1, 2020, the Company entered into anEmployment Agreement (the “Agreement”) with Jim Kelly. The Agreement became effective as of October 1, 2020. Under the termsof the Agreement, the Employee shall serve as the Company’s Interim Chief Financial Officer for a term of (i) the sooner of six(6) months, or (ii) the completion of all regulatory filings, including but not limited to the Company’s 2019 Annual Report onForm 10-K, the March 31, 2020 Quarterly Report on Form 10-Q, the June 30, 2020 Quarterly Report on Form 10-Q, the September 30, 2020Quarterly Report on Form 10-Q and all required Current Reports on Form 8-K, with the Securities and Exchange Commission (“SEC”)to bring the Company current with the SEC. The Employee shall receive a base salary of $24,000 annually, shall be eligible to receivean annual discretionary bonus during the Term, based on performance criteria determined by the C-Suite of the Company in its sole discretion,in an amount equal to up to 400% of the Employee’s base salary for the then current fiscal year, and at commencement of the Termthe Employee shall receive a grant of stock of 500,000 restricted shares of the Company’s common stock. OnMarch 16, 2021, Mr. Kelly resigned in his position as Interim Chief Financial Officer.

 

On December 8, 2020, the Company entered intoAmendment No. 1 (the “Amendment”) to the Revenue Participation Rights Agreement previously entered into with Blue Sky Companies,LLC and Let’s Roll NV, LLC. Under the terms of the Amendment, the new effective Date of the Agreement shall be revised to the datethat the first payment shall be due in 2021 from the 2020 3-acre grow. In addition, (i) the Company’s 2020 obligation under theoriginal Agreement for the 2019 grow is deemed satisfied in full, (ii) on or before April 30, 2027, the Company shall pay a $26,000 exitfee.

 

On January 12, 2021, the Company completed thesale of its commercial building for $1,627,500. On December 12, 2020, the Company, through its wholly owned subsidiary (Prescott Management,LLC), entered into a sales contract with Helping Hands Support, Inc. for the sale of the Company’s commercial building locatedat 1300 South Jones Boulevard, Las Vegas, Nevada 89146.

 

On February17, 2021, the Company entered into a Stock Purchase Agreement (the “Agreement”) with ATG Holdings, LLC (the “ATG”).Under the terms of the Agreement, the Company purchased 1,500,000,000 shares of common stock of Healthier Choices ManagementCorp (“HCMC”) from ATG for the purchase price of $200,000. The transaction closed on February 19, 2021. During the year endedDecember 31, 2021, the Company liquidated its marketable securities that it received in the Agreement with ATG.

 

On March12, 2021, the Company (the “Holder”) was issued a Convertible Promissory Note (the “Note”) by GeneRx (the “Borrower”),a Delaware corporation, in the amount of $300,000. The Note has a term of one year (April 7, 2022 Maturity Date) and accrues interestat two percent (2%) per annum. The Note is convertible, at the option of the Holder, into shares of common stock of the Borrower at afixed conversion price of $1.00 per share. Upon an Event of Default, the Conversion Price shall equal the Alternate Conversion Price(as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relatingto the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications,extraordinary distributions and similar events). The “Alternate Conversion Price” shall equal the lesser of (i) 80% multipliedby the average of the three lowest daily volume weighted average prices (“VWAP”) during the previous twenty (20) TradingDays (as defined below) before the Issue Date of this Note (representing a discount rate of 20%) or (ii) 80% multiplied by the MarketPrice (as defined herein) (representing a discount rate of 20%). “Market Price” means the average of the three lowest dailyVWAPs for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the ConversionDate. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty-four percent(24%) per annum from the due date thereof until the same is paid (the “Default Interest”). The Company funded $300,000 onMarch 15, 2021, $150,000 on April 5, 2021 and $50,000 on April 7, 2021. Please see Note 5 — Note Receivablewithin the Company’s financial statement for the three months ended March 31, 2022 for further information.

 

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On April 13, 2021, the Company entered into aStorage and Purchase Agreement (the “Agreement”) with AP Management, LLC (“AP”). Under the terms of the Agreement,AP agreed to store the Company’s fresh frozen marijuana (the “Product”) while granting AP the right to purchase theProduct at $175 per pound. In the event that AP does not purchase 500 pounds of the Product, the Company shall reimburse AP for any costsincurred for storage.

 

On April 14, 2021, the Company entered into aStorage Agreement (the “Agreement”) with TapRoot Labs (“TapRoot”). Under the terms of the Agreement, the TapRoot,agreed to store the Company’s fresh frozen marijuana (the “Product”). As compensation for storage, the Company wasto pay TapRoot the equivalent of $6,000 per month from product held in storage.

 

On May 12, 2021, the Company entered into a Cooperationand Release Agreement (the “Agreement”) with Richard S. Groberg and RSG Advisors, LLC. Under the terms of the Agreement,Mr. Groberg agreed to relinquish all common stock of the Company issued to or owned by him and waived any right to any future stock issuancesexcept for 100,000 shares to be retained by Mr. Groberg.

 

On June 17, 2021, the Company entered into a ConsultingAgreement (the “Agreement”) with Wolfpack Consulting, LLC (the “Consultant”). Under the terms of the Agreement,the Consultant shall use its commercially reasonable efforts and adequate business time and attention to identify various propertiesthat may fit into Client’s business model to develop, cultivate, and produce marijuana related products. The Consultant shall receive$25,000 in cash compensation. The Agreement shall begin on the Effective date and end upon the earlier of: (a) the first anniversaryof the Effective Date (i.e., one year), or (b) either party’s receipt of written notice from the other party of its intent to terminatethis Agreement after the expiration of the first anniversary (the “Term”).

 

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CorporateEntities

 

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

  

Red Earth, LLC

Red Earth, established in 2016, was a wholly owned subsidiary of the Company from December 15, 2017 until August 30, 2019 prior to the Company selling a forty-nine percent (49%) interest in Red Earth to Element NV, LLC, an unrelated third party (See further description of the transaction hereinabove). Red Earth’s assets consist of: (i) a cultivation license to grow marijuana within the City of Las Vegas in the State 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 in Las Vegas, Nevada, which it expects to operate as an indoor marijuana cultivation facility. In July 2018, the Company completed the first phase of construction on this facility, and it received a City of Las Vegas Business License to operate a marijuana cultivation facility. On August 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of the Subsidiary, Paris Balaouras, entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December 15, 2017, entered into between the Company and the Red Earth was terminated as of the date of the Termination Agreement resulting in the return of ownership of Red Earth to Mr. Balaouras. Please see Note 7 — Intangible Assets and Note 14 — Related Party Transactions within the Company’s financial statement for the three months ended March 31, 2022 for further information.

 

HDGLV, LLC HDGLV is a wholly owned subsidiary of Red Earth, LLC and is the holder of a triple net lease on a commercial building in Las Vegas, Nevada which is being developed to house the Company’s indoor grow facility.
   
Alternative Hospitality, Inc. Alternative Hospitality is a Nevada corporation formed in November of 2018. MJ Holdings owns fifty-one percent (51%) of the company and the remaining forty-nine percent (49%) is owned by TVK, LLC, a Florida limited liability company.
   
MJ International Research Company Limited MJ International is a wholly owned subsidiary of the Company that is headquartered in Dublin, Ireland. MJ International is the sole shareholder of MJ Holdings International Single Member S.A. and Gioura International Single Member Private Company.

 

CorporateInformation

 

TheCompany’s corporate headquarters is located at 2580 S. Sorrel St., Las Vegas, NV 89146 and its telephone number is (702) 879-4440.The Company’s website address is: www.mjholdingsinc.com. Information on or accessed through its website is not incorporated intothis Form 10-K.

 

TheCompany’s Common Stock is not listed on any national stock exchange but is quoted on the OTCQB Marketplace under the symbol“MJNE.”

 

Licenses:

 

OnFebruary 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) withMJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLCand MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisionalmedical and recreational production license. At present, the Company is waiting for the Nevada Cannabis Compliance Board (“CCB”)to provide notice that the licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser.

 

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Patents/Trademarks:

 

Wecurrently hold no patents or trademarks.

 

Research& Development

 

Wehad no expenses in Research and Development costs during the three months ended March 31, 2022 or for the yearsended December 31, 2021 and 2020.

 

ComplianceExpenses

 

Ourcompany incurs annual expenses to comply with state corporate governance and business licensing requirements. We estimate these coststo be under $20,000 per year for the establishment of foreign corporations in other states that we plan to operate.

 

PrincipalProducts or Services and Markets

 

The principal services provided by the Companyare cultivation management and infrastructure development catering to cannabis and hemp growth.

 

Seasonality

 

TheCompany does not consider its business to be seasonal. 

 

Leases

 

TheCompany anticipates its most significant lease obligations will be classified as fixed assets that will be used in the normal courseof its business.  Some lease obligations may include renewal or purchase options, escalation clauses, restrictions, penalties orother obligations that we will consider in determining minimum lease payments. The leases will be classified as either operating leasesor capital leases, as appropriate.

 

Employeesand Consultants

 

As of the date of thisReport, we have 9 full-time and 3 part-time employees inclusive of a Chief Executive Officer, Interim Chief Financial Officer,Secretary and Chief Cultivation Officer. We contract all labor for public company governance services, websitedevelopment, accounting, legal and daily activities outside of management. Please see DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,AND CONTROL PERSONS for additional information.

 

AmountSpent on Research and Website Development

 

Forthe three months ended March 31, 2022 and years ended December 31, 2021 and 2020, the Company spent $0, $0and $0 on research and website development, respectively.

 

Compliance Expenses

 

Our company incurs annual expenses to comply withstate corporate governance and business licensing requirements. We estimate these costs to be under $20,000 per year for the establishmentof foreign corporations in other states that we plan to operate.

 

Insurance

 

MJ Holdings, Inc. currentlyoffers health, dental and vision insurance to its employees at an estimated monthly cost of $7,500. MJ Holdings, Inc. also carriesgeneral liability insurance. We do not currently hold any other forms of insurance, including directors’ and officers’ insurance.Because we do not have any insurance, if we are made a party of a legal action, we may not have sufficient funds to defend the litigation.If that occurs a judgment could be rendered against us that could cause us to cease operations.

 

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Patents/Trademarks:

 

We currently hold no patents or trademarks.

 

Competitors,Methods of Completion, Competitive Business Conditions

 

The Companymay face substantial competition in the operation of cultivation facilities in Nevada. Numerous other companies have also been grantedcultivation licenses, and, therefore, the Company anticipates that it will face competition from these other companies. The Company’smanagement team has experience in successfully developing, implementing, and operating marijuana cultivation and related businesses inother legal cannabis markets. The Company believes its experience in outdoor cultivation provides it with a distinct competitive advantageover its competitors and it will continue to focus on this area of its operations.

 

Competitors include private and public companiessuch as: Acres Cultivation, LLC, 8lFold, The Apothecary Shoppe, Bond Road Cannabis Company, Floravega, Remedy Cultivation and FlowerOne.

 

LegalProceedings

 

Fromtime to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that aloss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. I additionto the estimated loss, the liability includes probable and estimable legal cost associated with the claim or potential claim. Litigationis subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Companybusiness. There is no pending litigation involving the Company at this time.

 

MJHoldings, Inc. Complaint

 

OnDecember 14, 2021, MJ Holdings, Inc. (the “Plaintiff”) filed a Complaint against NCMM, LLC, AP Management, LLC and ValerieSmall (collectively, the “Defendants”). In the Complaint, the Plaintiff alleges that the Defendants have refused to returnthe cannabis that was being stored for Plaintiff under a Storage and Purchase Agreement entered into with AP Management. By failing toreturn the cannabis to Plaintiff, or Plaintiff’s designee, the Defendants have deprived Plaintiff of the ability to sell, transferor market the product. In addition, the Defendants have sought to unlawfully extort the Plaintiff for illicit payments of thousands ofdollars in money and/or cannabis in exchange for returning the cannabis. As of the date of this filing, pleadings are pending.

 

Gappyand Shaba Compliant

 

OnDecember 3, 2021, a Complaint was filed against MJ Holdings, Inc., HDGLV, LLC, Red Earth, LLC (collectively, the “Defendants”)by Ziad Gappy and David Shaba (collectively, the “Plaintiffs”). In the Complaint, the Plaintiffs allege the Defendants mademisleading statements and/or omissions relating to the Company in the Plaintiffs’ negotiation to purchase shares of MJ Holdings,Inc. In addition, the Plaintiffs allege that the Defendants have not honored the 2018 Agreements negotiated between the Plaintiffs andDefendants, MJ Holdings, Inc. has failed to issue an additional $125,000 in stock due to the Plaintiffs as was agreed to in writing andthe Defendants have failed to start the Western Project. The Defendants will vigorously defendthemselves against this action and will file an appropriate and timely answer to the Complaint including a lengthy and comprehensiveseries of affirmative defenses and liability and damage avoidances. As of the date of this filing, the Defendants have yet to file ananswer.

 

DGMDComplaint

 

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

 

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

 

Asthe complaint pleads only the statutory minimum of damages, the Company is unable to estimate the potential exposure, if any, resultingfrom this matter but believes it is without merit as to liability and otherwise deminimis as to damages. Thus, the Company does not expectthis matter to have a material effect on the Company’s consolidated financial position or its results of operations. The Companywill vigorously defend itself against this action and has filed anappropriate and timely answer to the Complaint including a lengthy and comprehensive series of affirmative defenses and liability anddamage avoidances. As of the date of this filing, discovery has commenced and written discovery has been exchanged between the parties.

 

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TierneyArbitration

 

On March 9, 2021, Terrence Tierney, the Company’sformer President and Secretary, filed for arbitration with the American Arbitration Association for: (i) breach of contract, (i) breachof the implied covenant of good faith and fair dealing, and (iii) NRS 608 wage claim. Mr. Tierney demanded payment in the amount of $501,085for deferred business compensation, expenses paid on behalf of the Company, accrued vacation and severance pay. On April 7, 2021, theCompany made payment against the wage claim in the amount of $62,392, inclusive of $59,583 for wages and $2,854 for accrued vacationand, as such posits that any claims that Tierney may have had have been paid in full and that the Company otherwise has no liability.The Company filed a counterclaim in the action declaring that Tierney breached the contract of employment, committed fraud, malfeasanceand other nefarious acts causing substantial damage to the Company with estimated monetary damages well in excess of any monetary claimmade by Tierney. After recent arbitrator rulings favorable to the Company, the parties agreed to postpone the June arbitration and havereferred the matter to mediation. On June 23, 2022, the parties participated in mediation without resolution. The parties have met andconferred and are scheduled to proceed with arbitration on November 7-10, 2022.

 

Sourcesand Availability of Raw Materials

 

Wedo not use raw materials in our business.

 

SeasonalAspect of our Business

 

Noneof our products are affected by seasonal factors.

 

Reportsto Security Holders

 

Weare required to file reports and other information with the SEC. You may read and copy any document that we file at the SEC’s publicreference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information aboutits public reference facilities. Our SEC filings are available to you free of charge at the SEC’s web site at www.sec.gov. We arean electronic filer with the SEC and, as such, our information is available through the Internet site maintained by the SEC that containsreports, proxy and information statements and other information regarding issuers that file electronically with the SEC. This informationmay be found at www.sec.gov and posted on our website for investors at http://www.mjholdingsinc.com.

 

PROPERTIES

 

TheCompany’s principal office is located at 2580 S. Sorrel St., Las Vegas, NV 89146. InJanuary 2021, the Company sold its commercial office building located at 1300 South Jones Boulevard, Las Vegas, NV 89146.

 

TheCompany held a triple net leasehold interest, through its former subsidiary Red Earth LLC (“Red Earth”), in a 17,298 squarefoot building located at 2310 Western Avenue, Las Vegas, Nevada (the “Western lease”). The lease was for an initial termof 10 years, with a 12-month rent abatement. The commencement date of the lease was June 29, 2017. The lease included two options toextend, each for an additional 5 years. The lease granted the Company an option to purchase the property on or after the 25th monthof the lease and continuing through the 60th month of the lease for the sum of $2,607,880. On August 26, 2021, the Companyand the Company’s Chief Cultivation Officer and previous owner of Red Earth, Paris Balaouras, entered into a Termination Agreement.Under the terms of the Termination Agreement, the Purchase Agreement, dated December 15, 2017, entered into between the Company and RedEarth was terminated as of the date of the Termination Agreement resulting in the return of ownership of Red Earth to Mr. Balaouras.As such, the Company no longer holds any interest in the Western lease.

 

In August of 2018, the Company executed a letterof intent (“LOI”) for the acquisition of all of the membership units of Farm Road, LLC, a Wyoming limited liability company(“Farm Road”). Farm Road was the owner of five parcels of farmland in the Amargosa Valley of Nevada totaling 260 acres andthe concomitant 180 acre-feet of water rights. Pursuant to the terms of a Membership Interest Purchase Agreement (“MIPA”)executed between the Company and Farm Road in November of 2018, the Company was to acquire Farm Road for $1,000,000 on the followingterms: a deposit of $50,000 in cash and $50,000 of the Company’s restricted common stock upon execution of the LOI, was to be heldin escrow until closing, $150,000 in cash payable at closing and a promissory note bearing 5% simple annual interest (the “PromissoryNote”) in the amount of $750,000.00 payable to FR Holdings, LLC (an unrelated third party) (“FRH”) in 36 equal monthlyinterest only payments of three thousand one hundred twenty five ($3,125.00) dollars commencing on the March 1, 2019. On January 18,2019, pursuant to the terms of the MIPA, the Company acquired a 100% interest in Farm Road. The terms of the Promissory Note includea balloon payment to be made on January 17, 2022 of any of the then remaining principal balance and accrued interest. The MIPA furtherprovides that FRH shall be entitled to receive a consulting fee of five per cent (5%) of the gross sales from any commercial use of theproperty up to a maximum of five hundred thousand ($500,000.00) dollars payable to FRH within two years of the January 18, 2019 closingdate. The land acquired in Amargosa Valley will be the home of the Company’s Nye County cultivation facility upon closing of thepurchase of the cultivation and production certificates in the MIPA3. Please see Note 9 — Notes Payable within theCompany’s financial statement for the three months ended March 31, 2022 for further information.

 

EffectiveAugust 1, 2019, the Company entered into an agreement to lease an approximately 17,000 sq. ft. commercial building in Pahrump, NV. Thelease is for a term of ten years at an initial monthly rent of $10,000 per month with rent increases each August 1st duringthe term of the lease equal to the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for CPI W (UrbanWage Earners and Clerical Workers) for Las Vegas, Nevada. The Company paid the property owner a security deposit in the amount of $20,000.While the Company took possession of the premises on August 1, 2019, the monthly rent commenced on October 1, 2019. The Company has anoption, exercisable between July 1, 2020 and July 1, 2024, to purchase the property for $1,800,000. The leasehold has previously beenutilized as a fully licensed State of Nevada marijuana cultivation facility. On November 29, 2019, the building suffered significantdamage after a windstorm swept through the town of Pahrump. The storm caused structural damage as well as damage to the plumbing andelectrical supply to the building, making the facility unusable. Pursuant to the terms of the lease, the inability to occupy and utilizethe facility relieves us of any obligation to pay rent. As of the date of this filing, repairs to the building have not yet commenced.It was the Company’s intention to move its marijuana processing into this facility upon receipt of all required regulatory approvals.The Company has no intention to occupy the leased space.

 

Webelieve that our facilities are adequate for our current needs and that, if required, we will be able to expand our current space orlocate suitable new office space and obtain a suitable replacement for our executive and administrative headquarters.

 

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MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

ANDRESULTS OF OPERATION

 

Pleaseread the following discussion of our financial condition and results of operations in conjunction with financial statements and notesthereto, as well as the “Risk Factors” and “Description of Business” sections included elsewhere in this prospectus.The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results coulddiffer materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differencesinclude those discussed below and elsewhere in this prospectus, particularly in “Risk Factors”.

 

Overview

 

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

 

CurrentInitiatives include:

 

 

a three-acre, hybrid, outdoor, marijuana-cultivation facility (the “Cultivation Facility”) located in the Amargosa Valley of Nevada. The Company had the contractual right to manage and cultivate marijuana on this property until 2026, for which it would have received sixty percent (60%) of the net revenues realized from its management of this facility and twenty-five percent (25%) of the net revenues from equipment rental. The licensed facility is owned by Acres Cultivation, LLC, a wholly owned subsidiary of Curaleaf Holdings, Inc. On January 21, 2021, the Company received a Notice of Termination, effective immediately, from Acres Cultivation, LLC. During the year ended December 31, 2021, the Company relocated all of its equipment utilized on the Acres lease to its 260 Acres adjacent to the Acres lease. The Company will not generate any further revenue under the Acres relationship.

 

  260 acres of farmland for the purpose of cultivating additional marijuana (the “260 Acres”) purchased in January of 2019. The Company intends to utilize the state-of-the-art Cravo® cultivation system for growing an additional five acres of marijuana on this property, that is contiguous to the three-acre property that it manages in Amargosa. The Cravo® system will allow multiple harvests per year and should result in higher annual yields per acre. The land has more than 180-acre feet of permitted water rights, which will provide more than sufficient water to markedly increase the Company’s marijuana cultivation capabilities. This facility, upon receipt of required funding, is expected to become operational in the summer of 2021. Subsequent to year end, the Company elected to relocate all of its equipment utilized on the Acres lease to its 260 acres adjacent to the Acres lease. The Company will utilize the 260 Acres for its own harvest along with additional harvests under any Cultivation and Sales Agreements.
     
  Cultivation and Sales Agreements entered into for multiple grows on the Company’s 260 Acres located in the Amargosa Valley of Nevada. During the years ended December 31, 2021 and 2020, the Company entered into separate Cultivation and Sales Agreements, whereby the Company shall retain certain independent growers to provide oversight and management of the Company’s cultivation and sale of products at its 260 Acres. The independent growers shall pay to the Company a royalty of net sales revenue with a minimum royalty after two years. As of the date of this filing, the Company is waiting on its business license in Nye County and its final inspection by the Cannabis Compliance Board before it can commence its operations under the Agreement.

 

  a nearby commercial trailer and RV park (THC Park – Tiny Home Community) was purchased in April of 2019 to supply necessary housing for the Company’s farm employees. After the Company’s 2018 harvest, it came to realize that it would need to find a more efficient method of housing and to bring its cultivation team to its facilities. The Company purchased the 50-acre plus THC Park for $600,000 in cash and $50,000 of the Company’s restricted common stock. The Company has elected to reinitiate renovations and/or additions at its Tiny Home Community so that workers on the 260 Acres will be afforded housing.

  

  an agreement to acquire an additional cultivation license and production license, both currently located in Nye County Nevada. On February 5, 2021, the Company (the “Purchaser”) executed a Membership Interest Purchase Agreement (“MIPA3”) with MJ Distributing, Inc. (the “Seller”) to acquire all of the outstanding membership interests of MJ Distributing C202, LLC and MJ Distributing P133, LLC, each the holder of a State of Nevada provisional medical and recreational cultivation license and a provisional medical and recreational production license. In consideration of the sale, transfer, assignment and delivery of the Membership Interests to Purchaser, and the covenants made by Seller under the MIPA3, Purchaser agrees to pay a combination of cash, promissory notes, and stock in the amount of One-Million-Two-Hundred-Fifty Thousand Dollars ($1,250,000.00) in cash and/or promissory notes and 200,000 shares of the Company’s restricted common stock, all of which constitutes the consideration agreed to herein for (the “Purchase Price”), payable as follows: (i) a non-refundable down payment in the amount of $300,000 was made on January 15, 2021, (ii) the second payment in the amount of $200,000 was made on February 5, 2021, (iii) a deposit in the amount of $310,000 was paid on February 22, 2021 ($210,000 was a pre-payment against the June 12, 2021 payment due under the MIPA3), (iv) $200,000 was deposited on June 24, 2021, and (v) $250,000 shall be deposited within five (5) business days after the Nevada Cannabis Compliance Board (“CCB”) provides notice on its agenda that the Licenses are set for hearing to approve the transfer of ownership from the Seller to the Purchaser. On April 12, 2022, the CCB issued an Adult-Use Production License to MJ Distributing P133, LLC and an Adult-Use Cultivation License to MJ Distributing C202, LLC. The Company is currently awaiting its business license to be issued by Nye County, Nevada.
     
 

indoor cultivation facility build-out in the City of Las Vegas (the “Indoor Facility”). Through its former subsidiary, Red Earth, LLC (“Red Earth”), the Company held a Medical Marijuana Establishment Registration Certificate, Application No. C012. In August of 2019, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with Element NV, LLC (“Element”), to sell a 49% interest in the license. Under the terms of the Agreement, Element was required to invest more than $3,500,000 into this Indoor Facility. Element paid the monthly rent on the facility from December 2019 through March 2020 but failed to make any additional payments. On June 11, 2020, the Company entered into the First Amendment (“First Amendment”) to the Agreement. Under the terms of the First Amendment, the Closing Purchase Price was adjusted to $441,000, and Element was required to make a capital contribution (the “Initial Contribution Payment”) to the Target Company in the amount of $120,000 and was required to make an additional cash contribution (the Final Contribution Payment”) in the amount of $240,000. The Company terminated its discussions with Element regarding its past due payments. On or about May 7, 2021, Red Earth, received an inquiry from the State of Nevada Cannabis Compliance Board (“CCB”) regarding the transfer of ownership of the Subsidiary from its previous owners to the Company. The CCB has determined that the transfer was not formally approved, thus a Category II violation. On July 27, 2021, Red Earth entered into a Stipulation and Order for Settlement of Disciplinary Action (the “Stipulation Order”) with the CCB. Under the terms of the Stipulation Order, Red Earth agreed to present to the CCB, by not later than August 31, 2021, a plan pursuant to which the ownership of Red Earth would be returned to the original owners. The Parties to the Stipulation Order resolved the matter without the necessity of taking formal action. Red Earth agreed to pay a civil penalty of $10,000, which was paid on July 29, 2021. On August 26, 2021, the Company and the Company’s Chief Cultivation Officer and previous owner of Red Earth, Paris Balaouras, entered into a Termination Agreement. Under the terms of the Termination Agreement, the Purchase Agreement (the “Purchase Agreement”), dated December 15, 2017, entered into between the Company and Red Earth was terminated as of the date of the Termination Agreement resulting in the return of ownership of Red Earth to Mr. Balaouras. Neither party shall have any further obligation to one another pursuant to the terms of the Purchase Agreement.

 

The below discussions are as of the date stated(unless specifically noted otherwise) and should be read in conjunction with financial statements and notes thereto for the applicableperiod referenced. These discussions may include information that has since changed and may not be consistent with other sections ofthis prospectus.

 

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Resultsof Operations

 

ThreeMonths Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

 

Revenues

 

TheCompany’s revenue was $31,841 for the three months ended March 31, 2022, compared to $307,375 for the threemonths ended March 31, 2021. The decrease in revenue for the three months ended March 31, 2022 versus the threemonths ended March 31, 2021 was largely attributable to the termination of the management agreement with Acres Cultivation,LLC. Revenue, by class, is as follows:

 

   For the three months ended 
   March 31, 
   2022   2021 
Revenues:        
Rental income (i)  $31,841   $19,861 
Management income (ii)   -    202,951 
Equipment lease income (ii)   -    84,563 
Total  $31,841   $307,375 

 

  (i) The rental income is from the Company’s THC Park.
     
  (ii) In April 2018, the Company entered into a management agreement with Acres Cultivation, LLC, a Nevada limited liability company (the “Licensed Operator”) that holds a license for the legal cultivation of marijuana for sale under the laws of the State of Nevada. In January of 2019, the Company entered into a revised agreement, which replaced the April 2018 agreement, with the Licensed Operator in order to be more stringently aligned with Nevada marijuana laws. The material terms of the agreement remain unchanged. The Licensed Operator is contractually obligated to pay over to the Company eighty-five (85%) percent of gross revenues defined as gross proceeds from sales of marijuana products minus applicable state excise taxes and local sales tax. The agreement is to remain in force until April 2026. In April 2019, the Licensed Operator was acquired by Curaleaf Holdings, Inc., a publicly traded Canadian cannabis company. On January 21, 2021, the Company received a Notice of Termination, effective immediately, from Acres Cultivation, LLC. The Company will not generate any further revenue under the Acres relationship.

 

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OperatingExpenses

 

Directcosts of revenues were $- and $- for the three months ended March 31, 2022 and 2021, respectively.

 

   For the three months ended 
Direct costs of revenue:  March 31, 
   2022   2021 
Management and equipment lease income  $      -   $      - 
Total  $-   $- 

 

Thedirect costs of revenue of $- for the three months ended March 31, 2022 is attributable to: labor, compliance, testingand others related expenses – all of which are directly related to the Consulting and Equipment Lease Agreements with the LicensedOperator.

 

Generaland administrative

 

Forthe three months ended March 31, 2022, our general and administrative expenses were $1,764,943 compared to $2,805,927for the three months ended March 31, 2021, resulting in a decrease of $1,040,984. The decrease was largelyattributable to the termination of the management agreement with Acres Cultivation, LLC.

 

OtherIncome (Expense)

 

Forthe three months ended March 31, 2022, our other income (expense) were $59,896 compared to $9,836,205 forthe three months ended March 31, 2021, resulting in a decrease in other income of $9,776,309. The decreasewas largely attributable to the Company’s liquidation of its marketable securities held for sale during the three monthsended March 31, 2021 as compared to no liquidation of marketable securities in the three months ended March 31, 2022.

 

NetIncome (Loss)

 

Netloss attributable to common shareholders was ($1,720,482) for the three months ended March 31, 2022, compared to net incomeof $7,240,183 for the three months ended March 31, 2021. The decrease in net income for the three monthsended March 31, 2022 as compared to the same period in 2021 is largely attributable to the Company’s liquidationof its marketable securities held for sale during the three months ended March 31, 2021 as compared to no liquidation of marketablesecurities in the three months ended March 31, 2022.

 

YearEnded December 31, 2021 Comparedto the Year ended December 31, 2020

 

TheCompany’s historical financial statements prior to the reverse merger were replaced with the historical financial statements ofRed Earth, the “accounting acquirer,” based on the accounting treatment for reverse merger transactions.

 

Revenues

 

Revenueswere $241,870 for the year ended December 31, 2021 compared to $822,845 for the year ended December 31, 2020.

 

   For the years ended 
   December 31, 
   2021   2020 
Revenues:          
Rental income (i)  $74,003   $140,391 
Management income (ii)   30,989    587,237 
Equipment lease income (ii)   12,912    95,217 
Product sales (iii)   123,966    - 
Total  $241,870   $822,845 

 

  (i) The rental income is from the Company’s THC Park.
  (ii) In April 2018, the Company entered into a management agreement with Acres Cultivation, LLC, a Nevada limited liability company (the “Licensed Operator”) that holds a license for the legal cultivation of marijuana for sale under the laws of the State of Nevada. In January of 2019, the Company entered into a revised agreement, which replaced the April 2018 agreement, with the Licensed Operator in order to be more stringently aligned with Nevada marijuana laws. The material terms of the agreement remain unchanged. The Licensed Operator is contractually obligated to pay over to the Company eighty-five (85%) percent of gross revenues defined as gross proceeds from sales of marijuana products minus applicable state excise taxes and local sales tax. The agreement is to remain in force until April 2026. In April 2019, the Licensed Operator was acquired by Curaleaf Holdings, Inc., a publicly traded Canadian cannabis company. On January 21, 2021, the Company received a Notice of Termination, effective immediately, from Acres Cultivation, LLC. The Company does not anticipate that it will generate any further revenue under the Acres relationship.
  (iii) Product sales from Company inventory. As part of the termination of the Acres Cultivation, LLC Cultivation and Sales Agreement, the Company was given cannabis available for resale. Sales in 2021 include product sold to third parties and product given in exchange for rent. Please see Note 4 — Inventory within the Company’s financial statement for the year ended December 31, 2021 for further information.

 

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OperatingExpenses

 

Directcost of revenue was $341,626 for the year ended December 31, 2021 compared to $1,206,960 for the year ending December 31, 2020, resultingin a decrease of $865,334. The decrease was largely attributable to the termination of the management agreement with Acres Cultivation,LLC.

 

   Year ended 
   December 31, 
Direct costs of revenue:  2021   2020 
Rental income  $-   $- 
Management and lease equipment income   -    1,206,960 
Product sales   341,626    - 
Total  $341,626   $1,206,960 

 

Generaland administrative, marketing and selling expenses were $4,903,085 for the year ended December 31, 2021 compared to $2,064,911 for theyear ended December 31, 2020, resulting in an increase of $2,838,174. The increase was largely attributable to an increase in the Company’spayment for payroll expenses and the settlement of its rights participation agreement.

 

Depreciationand amortization were $293,937 for the year ended December 31, 2021 compared to $453,887 for the year ended December 31, 2020, resultingin a decrease of $159,950. The decrease was largely attributable to disposal of the Company’s subsidiary, Red Earth.

 

Otherincome (expenses)

 

Otherincome (expenses) were $12,454,417 for the year ended December 31, 2021 compared to ($147,878) for the year ended December 31, 2020,resulting in an increase of $12,602,295. The increase was largely attributable to the gain on sale of marketable securities of $9,857,429and other income of $2,416,357.

 

Netincome (loss)

 

Netincome (loss) was $3,530,331 for the year ended December 31, 2021 compared to loss of ($3,973,128) for the year ended December 31, 2020,resulting in an increase of $7,503,459. The increase in net income in 2021 is largely attributable to the gain on sale of marketablesecurities of $9,857,429 and other income of $2,416,357.

 

Liquidityand Capital Resources

 

WorkingCapital

 

Thefollowing table summarizes the working capital at March 31, 2022 and December 31, 2021:

 

   Three months ended March 31, 2022   Year ended December 31, 2021 
Current Assets  $3,980,880   $5,247,526&