UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

For the fiscal year ended December 31, 2016

or2018

or

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

For the transition period fromfrom: _____________ to _____________

Commission File Number: 333-167824

MJ HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

4141 NE 2nd Avenue, Suite 204-A, Miami, Florida 33137
1300 South Jones Boulevard, Las Vegas, Nevada 89146

(Address of principal executive offices)

(305) 455-1881
(702) 879-4440

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yeso ☐ Noþ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yeso ☐ Noþ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesþNoo ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesþNoo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.þ ☐

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

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

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso ☐ Noþ

The aggregate market value of the voting and non-voting shares of the Company’s Common Stock held by non-affiliates based on the last sale of the Common Stock on JuneSeptember 30, 2016,2019, the last business day of the registrant’s most recently completed fiscal quarter, was $2,108,844.$15,937,098.

The number of shares outstanding of the issuer’s Common Stock as of March 20, 2017,October 15, 2019, was 12,227,939.64,624,781.

MJ HOLDINGS, INC.

TABLE OF CONTENTS

In this Annual Report on Form 10-K, unless the context otherwise requires, the terms “MJ Holdings, Inc.” “MJ Holdings,” “we,” “us,” “our” and the Company refer to MJ Holdings, Inc., formerly Securitas EDGAR Fiilngs, Inc.

Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “believe,” “expect,” “will,” “anticipate,” “intend,” “estimate,” “project,” “assume” or other similar expressions, although not all forward-looking statements contain these identifying words. All statements in this report regarding our future strategy, future operations, projected financial position, estimated future revenue, projected costs, future prospects, and results that might be obtained by pursuing management’s current plans and objectives are forward-looking statements. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Important risks that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report and in our subsequent filings with the SEC. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference may be significant and materially adverse to our stockholders.

PART I

Item 1. Business

Company BackgroundOverview

MJ Holdings Inc. (OTC Pink: MJNE) is a highly-diversified, publicly-traded, cannabis holding company providing cultivation management, licensing support, production management, asset and infrastructure development – concentrated in the Las Vegas market. It is our intention to grow our business and provide a 360-degree spectrum of infrastructure (including: cultivation, production management, dispensaries and consulting services) through: the acquisition of existing companies; joint ventures with existing companies possessing complementary expertise, and/or through the development of new opportunities. We intend to “prove the concept” profitably in the rapidly expanding Las Vegas market and then use that anticipated success as a template for replicating the concept in other developing states through a combination of strategic partnerships, acquisitions and opening new operations.

The Company’s assets and operations have expanded significantly over the past year; and, the Company recently received more than $6,000,000, from the sale of common stock previously returned to the Company, to facilitate further expansion of its cultivation footprint as well as to launch seed generation and production facilities and the rollout of its Highland Brothers brand of cannabis products for consumption in the United States, Canada and European markets.

Under the leadership of our CEO, Paris Balaouras, the Company has assembled a senior management team possessing significant experience in building, acquiring and operating high-growth, multi-division businesses in a public company setting. The Company also has retained operating level employees, directly and through strategic relationships, possessing significant experience in marijuana cultivation and production.

Current Initiatives include:

We also continue to identify potential acquisition of revenue producing assets and licenses within legalized cannabis markets both nationally and internationally that can maximize shareholder value while providing a 360-degree spectrum of infrastructure, cultivation, production, management, dispensaries and consulting services in the regulated cannabis industry

We may face substantial competition in the operation of cultivation facilities in Nevada. Numerous other companies have also been granted cultivation licenses, and, therefore, we anticipate that we will face competition from these other companies. Our management team has experience in successfully developing, implementing, and operating marijuana cultivation and related businesses in other legal cannabis markets. We believe our experience in cultivation and facility management will provide us with a competitive advantage over our competitors. Senior management now also includes a number of executives possessing significant experience with public companies, in mergers and acquisitions, and with raising public and private equity and debt financing.

The Company occupies the entire second floor of an approximately 10,000 sq. ft. office building, located in the City of Las Vegas. This properly was originallyacquired in October of 2018.

Corporate History/Acquisition of Red Earth

We were incorporated on November 17, 2006, as Securitas EDGAR Filings, Inc. under the laws of the State of Nevada. Until February 2014, wePrior to the formation of Securitas EDGAR Filings Inc., the business was operated as anXpedient EDGAR filing agent, wherein we assisted companies in preparing and filing periodic reports with the United States Securities and Exchange Commission (“SEC”)Filings, LLC, a Florida Limited Liability Company, formed on theOctober 31, 2005. On November 21, 2005, Xpedient EDGAR (electronic data gathering analysis retrieval) platform.Filings LLC amended its Articles of Organization to change its name to Securitas EDGAR Filings, LLC. On January, 21 2009, Securitas EDGAR Filings LLC merged into Securitas EDGAR Filings, Inc., a Nevada corporation. On February 14, 2014, we amended and restated our Articles of Incorporation and changed our business model.

All references to “MJ Holdings” the “Company,” “we,” “our” or “us” in this report arename to MJ Holdings, Inc.

MJ Holdings owned and leased real estate to licensed operators in the regulated cannabis industry. Additionally, we are developing desktop and mobile social, meet-up and health and wellness applications. We have been able to charge rents at a premium to current market rents as certain landlords have been resistant to lease to marijuana operators due to its legal status under federal law.

To date, we have financed our real estate acquisitions through the issuance of debt and equity.

Divestiture of Our Real Estate Business

On November 22, 2016, in connection with a plan to divest ourselves of our real estate business, we submitted to our shareholdersstockholders an offer to exchange (the “Exchange Offer”) our common stock for shares in MJ Real Estate Partners, LLC, (“MJRE”) a newly formednewly-formed LLC formed for the sole purpose of effecting the Exchange Offer. Subsequent to the completion of the Exchange Offer, which closed on January 10, 2017, MJRE will serve as a holding company for the real estate assets and business previously owned by MJ Holdings. Shareholders who participated in the Exchange Offer received one MJRE common unit for each share of MJ Holdings common stock accepted in the Exchange Offer.

On January 10, 2017, the Company accepted for exchange 1,800,000 shares of the Company’s common stockour Common Stock in exchange for 1,800,000 shares of MJRE’s common units, representing membership interests in MJRE. Effective February 1, 2017, the Companywe transferred itsour ownership interests in the real estate properties and itsour subsidiaries, through which the Company holdswe hold ownership of the real estate properties, to MJRE. MJRE also assumed the senior notes and any and all obligations associated with the real estate properties and business, effective February 1, 2017.

On December 15, 2017, we acquired all of the issued and outstanding membership interests of Red Earth, LLC, a Nevada limited liability company (“Red Earth”) established in October 2016, in exchange for 52,732,969 shares of our Common Stock and a promissory note in the amount of $900,000. The MJ Real Estate Partners separation is dueacquisition was accounted for as a “Reverse Merger”, whereby Red Earth was considered the accounting acquirer and became our wholly owned subsidiary. Upon the consummation of the acquisition, the now-former members of Red Earth became the beneficial owners of approximately 88% of our Common Stock, obtained controlling interest of the Company, and retained certain of our key management positions. In accordance with the accounting treatment for a “reverse merger” or a “reverse acquisition”, our historical financial statements prior to our inability to scale and expand our real estate business as previously planned and our intention to engage in business opportunities where we believe we have greater growth opportunities to which capitalthe reverse merger will be more readily available.replaced with the historical financial statements of Red Earth prior to the reverse merger in all future filings with the SEC.

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

From February 2014 to January 2017, we owned and leased to licensed marijuana operator’s real estate properties zoned for legalized marijuana operations.

Our Digital AssetsBusiness History

In April 2018, the Company entered into a management agreement with a Nevada 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 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 a publicly traded Canadian cannabis company; the acquisition was subject to all of the contractual obligations between the Company and the Licensed Operator.

Pursuant to those agreements, the Licensed Operator engaged us to develop, manage and operate a licensed cultivation facility on property owned by the Licensed Operator. Between April and August of 2018, at our sole cost and expense, we completed the construction of a 120,000 square-foot outdoor grow facility, including the construction of an 8,000 square-foot building and installation of required security fencing, meeting all of the State of Nevada’s stringent building codes and regulations. Operation of this facility commenced in August, 2018 with our first test grow. We commenced harvest operations in November of 2018 and completed the harvest on December 24, 2018 - yielding more than 5,000 total pounds of marijuana trim and flower.

In April 2018, the State of Nevada finalized and approved the transfer of provisional Medical Marijuana Establishment Registration Certificate No. 012 (the “Certificate”) from Acres Medical, LLC to our 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 on Western Avenue in the City of Las Vegas, which will be home to our 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 option to purchase the building for $2,607,880 which is exercisable between months 25 and 60 of the initial term of the lease. In August of 2018 we received final approval from the State of Nevada, Department of Taxation to commence cultivation activities with respect to the Certificate. Contemporaneously therewith, Red Earth was issued a Business License by the City of Las Vegas to operate a marijuana cultivation facility at the Western Facility; however, the City of Las Vegas Department of Building & Safety requested that additional modifications be made to the premises prior to issuance of a certificate of occupancy (“COI”). The COI is expected to be issued in the first quarter of 2020, which will then allow the Company to commence legal marijuana cultivation activities within the City of Las Vegas.

In July of 2018 the Company entered into a Corporate Advisory Agreement (“Advisory Agreement”) with a New York City based consulting company (the “Consultant”) to provide business management, corporate compliance and related services to the Company and its subsidiaries. The Advisory Agreement granted to the Consultant an option to acquire up to 10,000 additional shares of the Company’s common stock at an exercise price of $1.20. The options have a term of three years. The fair value of these stock options was determined to be $6,738 using the Black-Scholes-Merton option-pricing model based on the following assumptions: (i) volatility rate of 222%, (ii) discount rate of 2.88%, (iii) zero expected dividend yield, and (iv) expected life of three years. In September 2018, the Company terminated the Advisory Agreement pursuant to its terms and paid to the Consultant compensation consisting of 25,000 shares of the Company’s common stock and a $6,000 cash payment.

On August 13, 2018, the Company filed a Certificate of Designation of its Series A Convertible Preferred Stock with the Secretary of State of the State of Nevada to designate a series of its convertible preferred stock, consisting of 2,500 shares. The stated value of each share of Preferred Stock is $1,000. Subject to a standard “4.99% Beneficial Ownership Limitation blocker,” each share of Preferred Stock was convertible into shares of the Company’s common stock at any time or from time to time at a conversion price equivalent of $0.75 per share, subject to adjustment as described in Certificate of Designation.

On August 13, 2018 (the “Transaction Closing Date”), the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”), pursuant to which the Company sold and issued 2,500 shares of its Series A Convertible Preferred Stock (the “Preferred Stock”) to a single institutional, accredited investor for $1,000 per share or an aggregate subscription of $2,500,000. During the year ended December 31, 2018, the Preferred Stock was converted into 3,333,333 shares of the Company’s Common Stock at a conversion price of $0.75 per share, subject to adjustment as described in the Certificate of Designation. The Company also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the purchaser, which required the Company to register for resale the underlying common stock with the Securities and Exchange Commission. The registration statement on Form S-1/A was declared effective on October 24, 2018.

On August 13, 2018 (the “Effective Transaction Date”), the Company closed the transactions contemplated by an Exclusive Distribution Agreement (the “Distribution Agreement”). The Agreement is between the Company and Healthier Choices Management Corp., a designer and seller (the “Seller” or “HCMC”) of a series of integrated products, all of which are designed to be utilized to consume cannabis products by vaporizing oil and other related products (the “Goods”). The Company has the exclusive right to distribute the Goods in the territory of Nevada (the “Territory”). The Distribution Agreement further requires the Company to advertise and market the Goods in the Territory. Pursuant to the terms of the Distribution Agreement, the Company purchased certain of the Goods from the Seller and paid the sum of two million dollars ($2,000,000). The funds were transferred to HCMC on the Effective Transaction Date. The Seller has applied for and received patent protection in respect of one of the products. The Distribution Agreement is subject to standard termination provisions; however, the Seller has the option to terminate the Distribution Agreement, on 30 days’ written notice, if the Company fails to purchase a sufficient minimum quantity of Goods from the Seller. The Company has met its obligations for the first year of the Agreement. Thereafter, for each renewal term, the Company’s minimum purchase obligation for the Goods is $500,000, subject to good faith negotiation at the end of each contract year. In connection with the transactions contemplated by the Agreement, the Seller granted to the Company a non-exclusive, non-transferrable, and non-sub licensable fully paid license agreement. This Agreement was terminated, pursuant to the terms of the Agreement, effective August 12, 2019.

On August 13, 2018, the Company entered into a Stock Exchange Agreement with HCMC to acquire 1,500,000,000 shares of their common stock in exchange for 85,714 shares of the Company’s common stock. The value of the stock exchanged by each party on the date of exchange was $150,000. This represents a less than 5% ownership interest for each company in the others’ company, and the shares issued are restricted pursuant to Rule 144 of the Securities Act of 1933 (the “Act”). Please see note 11, Inventory, for further discussion of the Company’s additional business interests with HCMC.

The Company recorded the 85,714 shares of HCMC common stock as an available for sale security and intends to mark the value to market each reporting period based on the current market value of its held shares in HCMC. As of the transaction date, the price as quoted on the OTC Markets for HCMC common stock was $0.0001 per share.

In August of 2018, the Company executed a letter of 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 and the 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 following terms: a deposit of $50,000 in cash and $50,000 of the Company’s restricted common stock upon execution of the LOI, to be held in escrow until closing, $150,000 in cash payable at closing and a promissory note bearing 5% simple annual interest (the “Promissory Note”) in the amount of $750,000.00 payable to FR Holdings, LLC (an unrelated third party) (“FRH”) in 36 equal monthly interest 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 the MIPA, the Company acquired a 100% interest in Farm Road. The terms of the Promissory Note include a balloon payment to be made on January 17, 2022 of any then remaining principal balance and accrued interest. The MIPA further provides that FRH shall be entitled to receive a consulting fee of five per cent (5%) of the gross sales from any commercial use of the property up to a maximum of five hundred thousand ($500,000.00) dollars payable to FRH within two years of the January 18, 2019 closing date. This will be the home of our Nye County cultivation facility upon closing of our purchase of the required licenses. The Company has started construction of a state-of-the-art five-acre cultivation facility on this property which we expect to complete in the first quarter of 2020.

In September of 2018 the Company, through its wholly owned subsidiary Red Earth, applied for five Recreational Marijuana Establishment Licenses to operate up to five retail marijuana stores within the state of Nevada. The Company’s goal was to open a store within the City of Las Vegas, as well as additional dispensaries in Washoe County near Lake Tahoe, in North Las Vegas, unincorporated Clark County and Henderson, Nevada. The Company received notice in early December 2018 that none of the submitted applications received sufficiently high enough scores after being graded by the Nevada Department of Taxation (“NVDOT”). In connection with the license applications we entered into a Memorandum of Understanding (“MOU”) with a third party (the “Party”). Pursuant to the terms of the MOU the Party made payments to us totaling $232,500, which was paid during the year ended December 31, 2018. The Party was entitled to receive shares of our restricted common stock with a fair market value as of the trading day immediately preceding the date the first license application was submitted to NVDOT (September 20, 2018) equal to $232,500. The Company issued 91,177 shares of common stock to the Party in connection with this transaction. Subsequent to December 31, 2018, the Company has entered into an agreement with the Party to relieve the Company and the Party of any further obligations under the MOU in exchange for an additional 373,823 shares of the Company’s restricted common stock.

The Company has joined with more than 15 other plaintiffs in an action against the State of Nevada in regard to how the applications were scored and as to why licenses were granted to other applicants in contravention of the guidelines published by the State of Nevada. On August 23, 2019 a Nevada District Court judge issued a preliminary injunction enjoining any of the entities that were granted licenses from opening new dispensaries based upon the failure of NVDOT (the administrative body tasked with adopting and enforcing marijuana regulations within the State of Nevada) to enforce a provision of Ballot Question 2 (“BQ2”), that was approved by Nevada voters in 2016 and 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” undergo a background check. The judge found that many of the successful license applicants failed to comply with this requirement. On August 29, 2019 the judge modified the ruling and is allowing thirteen of the successful license applicants who the State of Nevada have certified as having complied with the requirements of BQ2 to open new dispensaries as granted in December of 2018. The plaintiffs shall now continue to trial on the merits of the pending litigation against the State of Nevada.

On September 21, 2018, the Company, through its wholly-owned subsidiary Prescott Management, LLC, entered into a contract to purchase an approximately 10,000 square foot office building located at 1300 South Jones Boulevard, Las Vegas, Nevada 89146 for $1,500,000, subject to seller financing in the amount of $1,100,000; amortizing over 30 years at an interest rate of 6.5% per annum with monthly installments of $6,952.75 beginning on November 1, 2018, and continuing on the same day of each month thereafter until October 31, 2019. Upon the one-year anniversary of the note, a principal reduction payment of $50,000 is due, and provided that the monthly payments and the principal reduction payment have been made, the payments will be recalculated and re-amortized on the same terms with a new scheduled monthly payment of $6,559 beginning on November 1, 2019 and continuing until October 31, 2023, at which time the entire sum of principal in the amount of $986,428, plus any accrued interest, is due and payable. The Company closed the purchase on October 18, 2018. The building is home to the Company’s business operations. In addition, the Company has leased some of the available portions of the building to other entities engaged in the regulated cannabis business generating approximately $1,150 of monthly revenue.

On October 5, 2018, in accordance with the Company’s obligations under the Registration Rights Agreement, the Company filed a Registration Statement on Form S-1 (File No. 333-227735) (the “Registration Statement”) with the SEC to register 3,335,000 shares of the Company’s stock for resale. The Company filed Amendment No. 1 to the Registration Statement in response to comments received by the SEC. The SEC declared the Registration Statement effective on October 24, 2018. Pursuant to the amended Registration Statement the holder of the 3,335,000 shares agreed not sell any of the stock at a price below $3.00 per share until such time as the Company was listed on a national exchange or was no longer being quoted on the OTC Markets Group Inc.’s Pink® Market. On November 6, 2018 the Company’s stock began trading through the quoted on the OTC Markets Group Inc.’s Pink® Market.

On October 15, 2018, we entered into an employment agreement (the “Tierney Employment Agreement”) with Terrence M. Tierney. Pursuant to the Employment Agreement, we appointed Terrence M. Tierney, to the additional position of Chief Administrative Officer, in addition to his current role as Secretary. The initial term of employment is for a three-year period (or until September 30, 2021), unless extended or otherwise terminated in accordance with its terms. The effective date of the Employment Agreement is October 15, 2018, and continues until the earlier of: (i) the effective date of any subsequent employment agreement between Mr. Tierney and us; (ii) the effective date of any termination of employment as provided for in the Employment Agreement; or (iii) three (3) years from the effective date; provided, that the Employment Agreement automatically renews for successive periods of three (3) years unless either party gives written notice to the other party that it does not wish to automatically renew the Employment Agreement, which written notice must be received by the other party no less than ninety (90) days and no more than one hundred eighty (180) days prior to the expiration of the applicable term. Mr. Tierney will report to the Chief Executive Officer and the Board of Directors.

Mr. Tierney’s annual salary shall be equal to or greater than any other senior executive of the Company with the exception of the Chief Executive Officer. Mr. Tierney is entitled to the benefits other employees are entitled to, including medical, dental, and vision insurance; life and disability insurance; retirement and profit-sharing programs; paid holidays; and such other benefits and perquisites as are approved by the Board of Directors. In addition, the Company agreed to issue 500,000 shares of common stock pursuant to a stock award agreement within thirty (30) days of adoption by the Company of an omnibus benefit plan. The Tierney Employment Agreement defers $10,000 per month of Mr. Tierney’s salary until such time as the Company has posted gross annual sales of $20,000,000 or net annual profits (as defined in the Tierney Employment Agreement) of $5,000,000 or has raised a total of $50,000,000 in equity or debt financing. Tierney’s employment may be terminated for cause or without cause. In addition, in the event of disability, the Company is entitled to terminate Mr. Tierney if he is unable to perform his duties without reasonable accommodation for a period of more than thirty (30) consecutive days. Upon such termination, Mr. Tierney is entitled to all accrued but unpaid salary and vacation. In the event of a “total disability,” as defined in the Employment Agreement, Mr. Tierney is also entitled to receive his normal monthly salary for the shorter of the first three (3) months of disability or until any disability insurance policy (offered as part of his employment) begins to pay benefits. After three (3) months, Mr. Tierney is only entitled to receive amounts under the disability insurance coverage, if any. In the event of partial disabilities, Mr. Tierney is entitled to that portion of his normal monthly salary that bears the same ratio to his normal monthly salary as the amount of time which the Executive is able to devote to the usual performance of duties during such period bears to the total time Mr. Tierney devoted to performing such services prior to the time the partial disability commenced. In the event of a combination of total and partial disability, the maximum total disability compensation Mr. Tierney shall be entitled to cannot exceed an amount equal to one (1) times his normal monthly compensation.

In November of 2018, the Company formed Alternative Hospitality, Inc. (“Alternative”), a Nevada corporation as a joint venture with TVK, LLC (“TVK”), an unrelated third-party, is a Florida limited liability company. The principals of TVK, have over 40 years of broad experience operating and developing hotel properties. The Company owns fifty-one percent (51%) of Alternative and TVK owns the remaining forty-nine percent (49%). Alternative will develop hotel properties with a focus on the wellness aspects of cannabis and cannabis related products. Roger Bloss, one of the principal owners of TVK, will serve as Alternative’s President, the Company’s Secretary, Terrence M. Tierney, will also serve as Vice President and Secretary of Alternative and Mr. Bernard Moyle has been appointed to serve as Alternative’s Treasurer. In April of 2019, Mr. Bloss was elected to the Board of Directors of the Company

In November of 2018 the Company commenced the harvest of more than 7,000 marijuana plants at the licensed facility that we manage in Amargosa, NV. We completed the harvest of approximately 5,400 lbs. of marijuana flower and trim in late December of 2018. We began realizing revenues from this harvest in the first quarter of 2019.

In January of 2019, the Company completed the purchase of 260-acres of fertile farmland in the Amargosa Valley of Nevada. 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 (see further description hereinabove). This will be the home of our Nye County cultivation facility pursuant to our purchase of the required licenses. The Company has started construction of a state-of-the-art five-acre cultivation facility on this property which we expect to complete in the first quarter of 2020.

In January of 2019, we formed Coachill-Inn, LLC (“Coachill-Inn”), a subsidiary of Alternative Hospitality to develop a proposed hotel in Desert Hot Springs, CA. From January of this year until June of this year we were actively engaged in negotiations with the property owner of the proposed location. In June of this year Coachill-Inn executed a purchase and sale agreement with Coachill Holdings, LLC (“CHL”) to acquire a 256,132 sq. ft. parcel of land within a 100-acre industrial cannabis park in Indigo, CA (the “Property”) to develop our first hotel project. The purchase price for the property is $5,125,000 CHL is contributing $3,000,000 toward the purchase price of this property in exchange for a twenty-five percent (25%) ownership interest in Coachill-Inn. Alternative Hospitality has made an initial deposit of $150,000 toward the purchase of the Property and will own fifty-one percent (51%) of Coachill-Inn when the transaction is scheduled to close in late Q4 2019.

In February of this year, our largest shareholder, Red Dot Development, LLC (“Red Dot”), returned 20,000,000 shares of the Company’s common stock to the Company for cancellation in exchange for a payment of $20,000, which as of March 31, 2019 has been accrued as a payable by the Company, significantly reducing the number of issued and outstanding shares of the Company. Beginning in March of this year, pursuant to the filing of a Form D with the SEC, the Company offered for sale 15,000,000 of these shares at a per share price of $0.50 per share. As of September 30, 2019, we have sold 12,850,000 shares for total proceeds of $6,425,000.

In April of 2019, we executed a membership interest purchase agreement (the “MIPA2”) to acquire all of the membership 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 MIPA2 require the Company to purchase the licenses for the total sum of $1,250,000 each - $750,000 in cash per license and $500,000 per license in the Company’s restricted common stock.  The terms of the MIPA provide for a $250,000 non-refundable down payment and include a short term note in the amount of $500,000 carrying an annual interest rate of two percent (2%) which is due and payable on or before October 18, 2019, the Company has made non-refundable deposits totaling $550,000 and has reduced the principal of the aforementioned note to $200,000. We have made significant progress toward perfecting these licenses and transferring the membership interests in the licenses to the Company. It is expected that we will receive all of the necessary regulatory approvals during the fourth quarter of this year. The Company is required to issue 1,430,206 shares of our restricted common stock in fulfillment of our obligations in the MIPA2, as of the date of this filing these shares have not been issued. We also executed a $750,000 long term note (the “LT Note”) in favor of the current license holders that becomes due and payable upon the earliest of a) six months after the transfer of the Certificates to the Company, or b) six months after the production/cultivation is declared fully operational by the applicable regulatory agencies, or c) March 10, 2020. The LT Note carries an 8% annual interest rate and there is no penalty for any prepayments of the LT Note. Additionally, the sellers shall receive, at closing, warrants to purchase up to 1,500,000 additional shares of the Company’s common stock; 1,000,000 warrants shall be exercisable for a period of three years from the closing date at an exercise price of $2.00 per share and 500,000 warrants shall be exercisable for a period of two years from the closing date at an exercise price of $1.50 per share (collectively the “Warrants”). The LT Note Warrants and the restricted common shares issued will be held in escrow until the transaction closes upon the terms of the MIPA2. It is the intention of the Company, upon receipt of all necessary regulatory approvals, to move the cultivation license from its current location to the Company’s 260-acre facility in the Amargosa Valley of Nevada and move the production license into its recently acquired leasehold in Pahrump, Nevada.

In April of 2019, we consummated our purchase of an approximately 50-acre, commercial trailer and RV park (the “Trailer Park”) in close proximity to our 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 we are making necessary upgrades to bring additional units to the facility to provide housing for our farm personnel. We 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 $2,177.77 based upon a 15-year amortization schedule (the “TP Note”). The TP Note requires additional principal reduction payments in the amount of $50,000 on or before April 5, 2020 and April 5, 2021, respectively. The principal and interest payments will be recalculated. 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. It is the Company’s intention to locate our hemp seed genetics lab on this property. The land possesses sufficient water rights to successfully cultivate hemp for the purpose of developing proprietary hemp strains that should thrive in the harsh Amargosa climate.

On August 30, 2019 the Company entered into a material definitive agreement with 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 (“Red Earth”) for $441,000. The membership interest purchase agreement (the “MIPA3”) requires the Buyer to make an additional $3,559,000 payment to be utilized for the improvement and build-out of the Company’s Western Avenue leasehold in Las Vegas, Nevada. The payment is due within ten (10) days of the receipt by Red Earth of a special use permit (“SUP”) from the City of Las Vegas for our Western Avenue cultivation facility. The Company expects to receive the SUP in early October of 2019. The Buyer, in conjunction with the Company, will jointly manage and operate the facility upon completion. The MIPA3 also requires the Buyer to make a final payment to the Company of $1,000,000 between 90 and 180 days of issuance of the SUP. Additionally, the Buyer has a first refusal right to fund and build a 40,000 sq. ft. greenhouse facility at the Company’s Amargosa Valley Farm the terms of which are to be negotiated in good faith upon the exercise of any rights granted in the MIPA3.

We operateintend to grow continue to our business through the acquisition of existing companies and/or through the development of new opportunities and are developing mobilejoint ventures that can maximize shareholder value while providing a 360-degree spectrum of infrastructure (dispensaries), cultivation, production, management, and computer based applications focused on providingconsulting services in the regulated cannabis for medical use content and educational materials to licensed medical professionals, in addition to matching patients with medical professionals who are familiar with the therapeutic effects and indications of cannabinoidsand making social connections by and between cannabis users.

Our goal is to:industry.

RevenueMarijuana Industry Overview

We have not generated any revenue fromcurrently operate marijuana businesses in Nevada. Although the possession, cultivation and distribution of marijuana is permitted in Nevada, provided compliance with applicable state and local laws, rules, and regulations, marijuana is illegal under federal law. We believe we operate our digital assetsbusiness in compliance with applicable state laws and regulations. Any changes in federal, state, or local law enforcement regarding marijuana may affect our ability to operate our business. Strict enforcement of federal law regarding marijuana would likely result in the inability to proceed with our business plans, could expose us to potential criminal liability, and could subject our properties to civil forfeiture. Any changes in banking, insurance, or other business services may also affect our ability to operate our business.

Marijuana cultivation refers to the planting, tending, improving and harvesting of the flowering plant Cannabis, primarily for the production and consumption of cannabis flowers, often referred to as “buds”. The cultivation techniques for marijuana cultivation differ than for other purposes such as hemp production. Generally, references to marijuana cultivation and production do not anticipate generating revenues in the next six to nine months. Our goal is to develop a “freemium” based business model, where we offer our services for free in an effort to build and develop a user-base. We expect to generate revenues in the future through advertising and by marketing premium products and services to our growing user-base.include hemp production.

SalesCannabis belongs to the genus Cannabis in the family Cannabaceae and marketingfor the purposes of production and consumption, includes three species, C. sativa (“Sativa”), C. Indica (“Indica”), and C. ruderalis (“Ruderalis”). Sativa and Indica generally grow tall with some varieties reaching approximately 4 meters. The female plants produce flowers rich in tetrahydrocannabinol (“THC”). Ruderalis is a short plant and produces trace amounts of THC but is very rich in cannabidiol (“CBD”), which is an antagonist (inhibits the physiological action) to THC.

We expectAs of October 2019, there are a total of 33 states, plus the District of Columbia, with legislation passed as it relates to attractmedicinal cannabis. These state laws are in direct conflict with the majorityUnited States Federal Controlled Substances Act (21 U.S.C. § 811) (“CSA”), which places controlled substances, including cannabis, in a schedule. Cannabis is classified as a Schedule I drug, which is viewed as having a high potential for abuse, has no currently accepted use for medical treatment in the U.S., and lacks acceptable safety for use under medical supervision. These xx states, plus the District of our users through word-of-mouth, search engine, social mediaColumbia, have adopted laws that exempt patients who use medicinal cannabis under a physician’s supervision from state criminal penalties. These are collectively referred to as the states that have de-criminalized medicinal cannabis, although there is a subtle difference between de-criminalization and other free channels. We believelegalization, and each state’s laws are different.

As of October 2019, 11 states and the District of Columbia now allow for the recreational use and possession of small amounts of marijuana and marijuana products. Decriminalization of marijuana varies by state. Decriminalization generally means that by aggregating compelling content weviolators of local marijuana laws may be subject to civil penalty rather than face criminal prosecution. Fifteen states have decriminalized the possession of small amounts of marijuana but have not legalized possession. In these states decriminalization can generate trafficmean possession of as little as ten grams of marijuana up to our websites. We further believeone-hundred grams of marijuana that if we are successfulwill not result in recruiting medical professionals as advisors who will promoteany criminal prosecution but may result in civil fines. In three states, Idaho, South Dakota, and Kansas, the cultivation, possession or use of cannabismarijuana is strictly prohibited and violators may be subject to criminal prosecution. In Nevada, where the Company is headquartered and currently focused most of its activities, legalized marijuana for medicalrecreational use wewas effective as of July 1, 2017 and made it legal for adults over the age of 21 to use marijuana and to possess up to one ounce of marijuana flowers and one-eighth of an ounce of marijuana concentrates. Individuals are also permitted to grow up to six marijuana plants for personal use. In addition, businesses can build public awarenesslegally, pursuant to state regulations, cultivate, process, dispense, distribute, and drive engagement.

Competitiontest marijuana products under certain conditions.

The medical informationdichotomy between federal and content industrystate laws has limited the access to banking and other financial services by marijuana businesses. Recently the U.S. Department of Justice (the “DOJ”) and the U.S. Department of Treasury issued guidance for banks considering conducting business with marijuana dispensaries in states where those businesses are legal, pursuant to which banks must now file a Marijuana Limited Suspicious Activity Report that states the marijuana business is extremely competitive. We competefollowing the government’s guidelines with mainstream companies as well as a number of other companiesregard to revenue that are directing their effortsis generated exclusively from legal sales. However, since the same guidance noted that banks could still face prosecution if they provide financial services to marijuana businesses, it has led to the widespread refusal of the banking industry to offer banking services to marijuana businesses operating within state and local laws. 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 space. In additionrelated businesses to other online brands, we compete indirectly with offlineutilize traditional banking services such as in-person caregiverswithout fear of federal agencies taking legal action against the banks or their customers. The SAFE bill has strong bipartisan support in addition to internet forumsthe House of Representatives and social media platforms.

We believe that our ability to compete successfullymany industry observers anticipate it will depend primarily uponbe ratified within the following factors:next year.

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

We don’t own any intellectual property, other than common law rightsIn the event the DOJ reverses its stated policy and begins strict enforcement of the CSA in states that have laws legalizing medical marijuana and recreational marijuana in small amounts, there may be a direct and adverse impact to our logo and trade dress. As we develop our business and products, we expect our intellectual property rights, including trademarks, domain namesrevenue and other intellectual property, will be critical to our success.profits.

Government regulationFurthermore, H.R. 83, known as the Rohrabacher-Farr amendment, is a rider to the annual appropriations bill that prohibits the DOJ from using federal funds 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 is currently in place until November 21, 2019.

We are subject to foreignmonitoring the Trump administration’s, the DOJ’s, and domesticCongress’ positions on federal marijuana law and policy. Based on public statements and reports, we understand that certain aspects of those laws and regulationspolicies are currently under review, but no official changes have been announced. It is possible that affect companies conductingcertain changes to existing laws or policies could have a negative effect on our business and results of operations.

Corporate Entities

Corporate Information

Our corporate headquarters is located at 1300 South Jones Boulevard Las Vegas, Nevada 89146 and our telephone number are (702) 879-4440. Our website address is: www.MJHoldingsinc.com. Information on or accessed through our website is not incorporated into this Form 10-K

Our Common Stock is not listed on any national stock exchange but is quoted on the internet, generally, including laws relating toOTC Markets Group Inc.’s Pink® Market under the liability of providers of online services for their operations and the activities of their users. As a result, we could be subject to actions based on negligence, various torts and trademark and copyright infringement, among other actions.symbol “MJNE.”

BecauseRevenue

For the years ended December 31, 2018 and 2017, we receive, storegenerated $8,150 and use information received from or generated by our users, we are also impacted by laws and regulations governing privacy, the storage, sharing, use, processing, disclosure and protection$0, respectively, of personal data and data breaches,revenue.

Employees

As of December 31, 2016,2018, we had nofour full-time employees.

Item 1A. Risk Factors

You should carefully consider the risks, uncertainties and other factors described below, in addition to the other information set forth in this Annual Report on Form 10-K, 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, results of operations, cash flows, or prospects. In that case, the trading price of our Common Stock could decline, and you may lose all or part of your investment. An investment in our securities is speculative and involves a high degree of risk. You should not invest in our securities if 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 our business and financial position. See also “Cautionary Note Regarding Forward-Looking Statements.”

Smaller reportingRisks Relating to Our Business and Industry

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

Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. However, we are a development stage company with current operations established in October 2016. The Company’s primary asset is a Medical Marijuana Establishment Registration Certificate, Application No. C012 (the “License”) issued by the State of Nevada for the cultivation of marijuana. There is no assurance on the receipt and/or timing of final approvals from the appropriate authorities, as of July 19, 2019 we have not received final approval to commence cultivation under the License. As of December 31, 2018, we have generated little revenues and our accumulated deficit as of the same date was $7,870,449. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

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

We have 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 cannabis products, develop and maintain relationships with customers and strategic partners, to raise sufficient capital in the public and/or private markets, or respond effectively to competitive pressures. As a result, there can be no assurance that we will be able to develop or maintain consistent revenue sources, or that our operations will be profitable and/or generate positive cash flow.

Any forecasts 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 competitive developments and continue to attract, retain, and motivate qualified employees. There can be no assurance that we will be successful in 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 difficulties frequently 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.

We will likely need additional capital to sustain our operations and will likely need to seek further financing, which we may not be able to obtain on acceptable terms or at all. If we fail to raise additional capital, as needed, our ability to implement our business model and strategy could be compromised.

As of December 31, 2018, we had limited capital resources and operations. Through that date, our operations had been funded primarily from the proceeds of equity financings. We may require additional capital in the near future to develop business operations at our proposed production facilities in Las Vegas, Nevada, to expand our production of our future franchise production lines, to develop our intellectual property base, and establish our targeted levels of commercial production. We may not be able to obtain additional financing on terms acceptable to us, or at all. In particular, because marijuana is illegal under federal law, we may have difficulty attracting investors.

We have incurred losses in prior periods, and losses in 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 flows.

We have incurred losses in prior periods. For the year ended December 31, 2018, we incurred a net loss of $5,077,928 and, as of that date, we had an accumulated deficit of $7,870,449. Our historical financial statements prior to the Red Earth reverse merger were replaced with the historical financial statements of Red Earth, as the accounting acquirer, based on the accounting treatment for the reverse merger transactions. Accordingly, we had a net loss of $334,788 for the year ended December 31, 2017 and, as of that date, we had an accumulated deficit of approximately $362,521. Any losses in 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.

Even if we obtain financing for our near-term operations, we expect that we will require additional capital thereafter. Our capital needs will 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. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership held by our existing stockholders 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 will result in increased interest expense. If we raise additional funds through the issuance of securities, market fluctuations in the price of our shares of Common Stock could limit our ability to obtain equity financing.

We cannot 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 adversely affected, and we could be forced to reduce or discontinue our operations.

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

The industries in which we operate in general are subject to intense and increasing competition. Some of our competitors may have greater capital resources, facilities, and diversity of product lines, which may enable them to compete more effectively in this market. Our competitors may devote their resources to developing and marketing products that will directly compete with our product lines. Due to this competition, there is no assurance that we will not encounter difficulties in obtaining revenues and market share or in the positioning of 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 our business and financial condition.

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

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

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

Competitors may 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 intellectual property rights, our competitiveness could be impaired, which would limit our growth and future revenue.

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

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

We are not aware of any infringement by us of any person’s or entity’s intellectual property rights. In the event that products we sell or processes we employ are deemed to infringe upon the patents or proprietary rights of others, we could be required to providemodify our products or processes or obtain a license for the information required by this item.manufacture and/or sale of such products or processes or cease selling such products or employing such processes. In such event, there can be no assurance that we would be able to do so in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do any of the foregoing could have a material adverse effect upon our business.

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

Our trade secrets may be difficult to protect.

Our success 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 trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality or 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 the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property, and we enter into assignment agreements to perfect our rights.

These confidentiality, inventions, and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using 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 trade secret protection could adversely affect our competitive position.

Our business, financial condition, results of operations, and cash flow may in the future be negatively impacted by challenging global economic conditions.

Future disruptions and volatility in global financial markets and declining consumer and business confidence could lead to decreased levels of consumer spending. These macroeconomic developments could negatively impact our business, which depends on the general economic environment and levels of consumer spending. As a result, we may not be able to maintain our existing customers or attract new 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 general or market-specific economic downturn could have a material adverse effect on our business, financial condition, results of operations, and cash flow.

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

Our future success largely depends upon the continued services of our executive officers and management team. If one or more of our executive 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 executive officers 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 of any of these key persons could adversely affect our business, financial condition, and results of operations, and thereby an investment in our stock.

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

We may not be able to effectively manage our growth or improve our operational, financial, and management information systems, which would impair our results of operations.

In the near term, we intend to expand the scope of our operations activities significantly. If we are successful in executing our business 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:

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 operational resources and to attract, train, manage, and retain qualified management and other personnel. There can be no assurance that we will be successful in recruiting and retaining new employees or retaining existing employees.

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

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

In the area of innovation, we must be able to develop new technologies and products that appeal to our customers. This depends, in part, 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 satisfy customer needs, achieve market acceptance, or generate satisfactory financial returns.

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

Our ability to generate revenue and be successful in the implementation of our business plan is dependent on consumer acceptance and demand of our current and future product lines. During the first quarter of 2018, we began accepting customer deposits for the sale, design, installation, and/or construction of greenhouse solutions to be used in the cultivation process in the cannabis industry. In the near term, we expect to begin operating a cultivation facility in Nevada at which we expect to grow and sell marijuana on a commercial basis. Acceptance of our greenhouse solutions and, in the future, acceptance of our marijuana products, will depend on 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 continue generating revenues could be reduced.

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

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

Federal regulation and enforcement may adversely affect the implementation of cannabis laws and regulations may negatively impact our revenues and profits.

Currently, there are 33 states plus the District of Columbia that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment, as well as, in some cases, the legalization of cannabis for adult use. Many other states are considering similar legislation. Conversely, under the CSA, the policies and regulations of the federal government and its agencies are that cannabis has no medical benefit and a range of activities including cultivation and the personal use of cannabis is prohibited. Unless and until Congress amends the CSA with respect to marijuana, as to the timing or scope of 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 the current federal regulatory position on cannabis may indirectly and adversely affect our revenues and profits. The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings, and stated federal policy remains uncertain. In February 2017, the Trump administration announced that there may be “greater enforcement” of federal laws regarding marijuana. Any such enforcement actions could have a negative effect on our business and results of operations.

On January 4, 2018, Attorney General Jeff Sessions issued a Marijuana Enforcement Memorandum that rescinded guidance previously issued to federal law enforcement in a memorandum known as the “Cole Memo”. The Cole Memo provided that the DOJ is committed to the enforcement of the CSA, but the DOJ is also committed to using its limited investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational way.

The guidance, which has since been rescinded, set forth certain enforcement priorities that are important to the federal government:

The DOJ historically has not devoted resources to prosecuting individuals whose conduct is limited to possession of small amounts of marijuana for use on private property but has relied on state and local law enforcement to address marijuana activity. In the event the DOJ reverses its stated policy and begins strict enforcement of the CSA in states that have laws legalizing medical marijuana and recreational marijuana in small amounts, there may be a direct and adverse impact to our business and our revenue and 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 federal funds 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 is currently in place until November 21, 2019.

On September 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. Food and Drug Administration. The Agriculture Improvement Act of 2018 generally referred to as the 2018 Farm Bill included provisions to greatly expand the ability to grow industrial hemp in the United States and declassified hemp as a Schedule 1 controlled substance under the Controlled Substances Act. By definition hemp must have a less than .03% concentration of THC or it is then considered marijuana. While the U.S. Department of Agriculture (“USDA”) has primary jurisdiction over the cultivation of industrial hemp, the U.S. Food and Drug Administration (“FDA”) continues to have responsibility to regulate cannabis products under 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.

We could be found to be violating laws related to cannabis.

Currently, there are 33 states plus the District of Columbia that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment, as well as, in some cases, the legalization of cannabis for adult use. Many other states are considering similar legislation. Conversely, under the CSA, the policies and regulations of the federal government and its agencies are that cannabis has no medical benefit and a range of activities including cultivation and the personal use of cannabis is prohibited. Unless and until Congress amends the CSA with respect to medical marijuana, as to the timing or 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 determined under the CSA that our greenhouse products or equipment are deemed to fall under the definition of drug paraphernalia because its products could be determined to be primarily intended or designed for use in manufacturing or producing cannabis, we could be found to be in violation of federal drug paraphernalia laws and there may be a direct and adverse effect on our business, revenues, and profits. With respect to Red Earth, we do not currently cultivate, produce, sell, or distribute any marijuana, and, therefore, have no risk that we will be deemed to cultivate, produce, sell, or distribute any marijuana in violation of federal law. However, if we obtain the necessary final governmental approvals and permits in Nevada to commence the cultivation and production of marijuana, as to the successfully achievement of 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 and adverse effect on our subsidiaries’ businesses, or intended businesses, and on our revenue and prospective profits.

Variations in 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.

Individual state laws do not always conform to the federal standard or to other states laws. A number of states have decriminalized marijuana to varying degrees, other states have created exemptions specifically for medical cannabis, and several have both decriminalization and medical laws. As of October 2019, eleven 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 states have limits on the number of marijuana plants that can be homegrown. In most states, the cultivation of marijuana for personal use continues to be prohibited except for those states that allow small-scale cultivation by the individual in possession of medical marijuana needing care or that person’s caregiver. Active enforcement of state laws that prohibit personal cultivation of marijuana may indirectly and adversely affect our business and our revenue and profits.

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

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

Marijuana remains illegal under federal law.

Marijuana is a Schedule-I controlled substance and is illegal under federal law. Even in those 33 states in which the use of marijuana has been legalized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with our business plan, especially in respect of our marijuana cultivation, production and dispensaries. In addition, our assets, including real property, cash, equipment, and other goods, could be subject to asset forfeiture because marijuana is still federally illegal.

In February 2017, the Trump administration announced that there may be “greater enforcement” of federal laws regarding marijuana. In January 2018, Attorney General Jeff Sessions rescinded previously issued guidance. Any such enforcement actions or 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 has publicly stated that he would not prosecute legal marijuana businesses that rely on the Cole memo.

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

Section 280E of the Internal Revenue Code prohibits any business engaged in the trafficking of controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) from deducting their ordinary and necessary business expenses, which may force us to pay higher effective federal tax rates than similar companies in other industries. The effective tax rate on a marijuana business depends on how large its ratio of nondeductible expenses is to its total revenues. Therefore, our marijuana business may be less profitable than it could otherwise be.

We may not be able to attract or retain any independent directors.

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

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

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

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

Any future acquisition could involve other risks, including the assumption of unidentified liabilities for which we, as a successor owner, 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 regulatory or political environment in which these investments are located, that our due diligence review may not adequately uncover and that may arise after entering into such arrangements.

Laws and regulations affecting the medical and adult use marijuana industry are constantly changing, which could detrimentally affect our 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. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of our business plan and result in a material adverse effect on certain aspects of our planned operations. In addition, it is possible that regulations may 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, or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

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

We may not be able to obtain or maintain the necessary licenses, permits, authorizations, or accreditations for our proposed cultivation and production businesses and greenhouse solutions business, or may only be able to do so at great cost. In addition, we may not be 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 restrictions on our ability to operate the medical and adult use marijuana business, which could have a material adverse effect on our business.

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

Our participation in the medical and adult use marijuana industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental authorities against us. Litigation, complaints, and enforcement actions could consume considerable amounts of financial and other corporate resources, which could have a negative impact on our sales, 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, 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 with respect to the business of any our subsidiaries.

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

Since the use of marijuana is illegal under federal law, many banks will not except for deposit funds from businesses involved with the marijuana industry. Consequently, businesses involved in the marijuana industry often have difficulty finding a bank willing to accept their business. The inability to open or maintain bank accounts may make it difficult for us to operate our proposed marijuana businesses. If any of our bank accounts are closed, we may have difficulty processing transactions in the ordinary course of 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 Secure and Fair Enforcement (SAFE) Banking Act to allow legally operating cannabis related businesses to utilize traditional banking services without fear of federal agencies taking legal action against the banks or their customers. On September 25, 2019 the SAFE bill was passed with strong bipartisan support in the House of Representatives. Many industry observers anticipate that the bill will be signed into law within the next year.

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

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

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

As of December 31, 2018, our officers and directors owned approximately 36% of our outstanding Common Stock and thus exercise substantial control over stockholder matters, such as election of directors, amendments to the Articles of Incorporation, and approval of significant corporate transactions.

If we fail to implement and maintain proper and effective internal controls and disclosure controls and procedures pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our ability to produce accurate and timely financial statements and public reports could be impaired, which could adversely affect our operating results, our ability to operate our business, and investors’ views of us.

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

The failure to implement and maintain proper and effective internal controls and disclosure controls could result in material weaknesses in our financial reporting, such as errors in our financial statements and in the accompanying footnote disclosures that could require restatements. Investors may lose confidence in our reported financial information and disclosure, which could negatively impact our stock price.

We do not expect that our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Our insurance coverage may be inadequate to cover all significant risk exposures.

We will 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 substantial costs resulting from risks and uncertainties of our business. It is also not possible to obtain insurance to protect against all operational risks and liabilities. In particular, we may have difficulty obtaining insurance because we intend to operate in the marijuana industry. The failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse 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.

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

We source some of our products from third-party suppliers. Although we are required by Nevada law to test the products we receive from 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 not have adequate insurance to cover any such claims, which could result in a negative effect on our results of operations.

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

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

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

Because of the data we expect to collect and manage using our hosted solutions, it is possible that hardware or software failures or errors in our systems (or those of our third-party service providers) could result in data loss or corruption, cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant or cause us to fail to meet committed 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 viruses or other malware may harm our systems, causing us to lose data, and the transmission of computer viruses or other malware could expose us to litigation. We may also find, on occasion, that we cannot deliver data and reports in near real time because of a number of factors, including failures of our network or software. If we supply inaccurate information or experience interruptions in our ability to capture, store and supply information in near real time or at all, our reputation could be harmed and we could lose customers, or we could be found liable for damages or incur other losses. Moreover, states in which we operate may require that we maintain certain information about our customers and transactions. If we fail to maintain such information, we could be in violation of state laws.

Risks Related to an Investment in Our Securities

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

The trading 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 have often been unrelated or disproportionate to the operating performance of companies with securities traded in those markets. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. All of these factors could adversely affect your ability to sell your shares of Common Stock or, if you are able to sell your shares, to sell your shares at a price that you determine to be fair or favorable.

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

Our Common Stock is categorized as “penny stock.” The SEC has adopted Rule 15g-9, which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The price of our Common Stock is significantly less than $5.00 per share and, therefore, is considered “penny stock.” This designation imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer buying our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that 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 directly or on behalf of their clients, may discourage potential stockholders from purchasing our Common Stock, or may adversely affect the ability of stockholders to sell their shares.

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

In addition to the “penny stock” rules described above, FINRA has adopted rules that require a broker-dealer to have reasonable 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 reasonable efforts 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 will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares of Common Stock, and thereby depress our price per share of Common Stock.

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

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

The elimination of monetary liability against our directors, officers, and employees under Nevada law and the existence of indemnification rights for our obligations to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees.

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

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

Our Articles 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 December 31, 2018, we had 70,894,146 shares of Common Stock, outstanding; however, we may issue additional shares of Common Stock or preferred stock in the future in connection with a financing or 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 dilute the percentage ownership interest of all stockholders, may dilute the book value per share of our Common Stock, and may negatively impact the market price of our Common Stock.

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

Nevada has a business combination law that prohibits certain business combinations between Nevada corporations and “interested stockholders” 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 “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

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

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

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

Item 1B. Unresolved Staff Comments

NoneThe disclosures are not applicable to us.

Item 2. Properties

The following table provides certain summary information about our real estate properties heldOur principal office is located at 1300 South Jones Boulevard, Las Vegas, Nevada 89146, where we occupy approximately 5,000 square feet of an approximately 10,000 square foot office building that the Company purchased in October of 2018 for disposition as$1,500,000 subject to a monthly mortgage payment of December 31, 2016:

We currently are using office space, provided to us by our co-CEO Shawn Chemtov, at no cost.$6,953.

We hold a triple net leasehold interest in a 17,298 square foot building located at 2310 Western Avenue, Las Vegas, Nevada.  The lease is for an initial term of 10 years, with a 12-month rent abatement.  The commencement date of the lease is June 29, 2017.  The lease includes two options to extend, each for an additional 5 years. The lease grants us an option to purchase the property on or after the 25^th month of the lease and continuing through the 60^th month of the lease for the sum of $2,607,880. Currently, we have no intention to exercise the purchase option.

In August of 2018, the Company executed a letter of 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 and the 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 following terms: a deposit of $50,000 in cash and $50,000 of the Company’s restricted common stock upon execution of the LOI, to be held in escrow until closing, $150,000 in cash payable at closing and a promissory note bearing 5% simple annual interest (the “Promissory Note”) in the amount of $750,000.00 payable to FR Holdings, LLC (an unrelated third party) (“FRH”) in 36 equal monthly interest 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 the MIPA, the Company acquired a 100% interest in Farm Road. The terms of the Promissory Note include a balloon payment to be made on January 17, 2022 of any then remaining principal balance and accrued interest. The MIPA further provides that FRH shall be entitled to receive a consulting fee of five per cent (5%) of the gross sales from any commercial use of the property up to a maximum of five hundred thousand ($500,000.00) dollars payable to FRH within two years of the January 18, 2019 closing date. The Company will utilize this acquisition to expand its Nevada outdoor cultivation capabilities.

Effective August 1, 2019 the Company entered into an agreement to lease an approximately 17,000 sq. ft. commercial building in Pahrump, NV. The lease is for a term of ten years at an initial monthly rent of $10,000 per month with rent increases each August 1^stduring the 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 (Urban Wage 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 commences on October 1, 2019. The Company has an option, exercisable between July 1, 2020 and July 1, 2024, to purchase the property for $1,800,000. The leasehold has previously been utilized as a fully-licensed, State of Nevada marijuana cultivation facility; and, it is the Company’s intention to move our marijuana processing into this facility upon receipt of all required regulatory approvals – anticipated in the fourth quarter of 2019.

Item 3. Legal Proceedings

There are noFrom time to time, the Company may become involved in various lawsuits and legal proceedings which arearise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the liability includes probable and estimable legal cost associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company business. There is no pending or have been threatened against us or any of our officers, directors or control persons of which management is aware.litigation involving the Company at this time.

Item 4. Mine Safety Disclosures

NotThe disclosures are not applicable to us.

PART II

ItemItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our shares of common stock are currently quoted on the OTC Bulletin BoardMarkets Group Inc.’s Pink® Market under the symbol MJNE. The following table sets forth the high and low closing bid prices of our common stock for the quarterly periods for the years ended December 31, 20162018 and 2015.2017. These bid prices represent prices quoted by broker-dealers on the OTC Bulletin Board.Markets Group Inc.’s Pink® Market. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

Holders

As of March 15, 2016,December 31, 2018, there were 13153 shareholders of record. However,

Between January 1, 2018 and December 31, 2018, we believe that there are more beneficial holderssold an aggregate of 4,475,841 shares of Common Stock for $3,121,001 to approximately 43 investors all of whom except one were accredited investors. The issuances were made pursuant to the exemptions for registration afforded by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D, promulgated under the Securities Act.

Between January 1, 2018 and December 2018, we issued 44,781 shares of Common Stock to three persons, all of whom were accredited investors, in exchange for providing services to us valued at approximately $59,990 The issuances were made pursuant to the exemptions for registration afforded by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D, promulgated under the Securities Act.

In August of 2018 we sold 2,500 shares of Preferred Stock to a single accredited investor for $2,500,000. The Preferred Stock was converted into 3,333,333 shares of the Company’s Common Stock. Pursuant to the Registration Rights Agreement between the Company and the holder of the Preferred Stock the Company was required to register the underlying common shares for resale with the SEC. In October of 2018 the company filed a registration statement with the SEC on Form S-1 and S-1/A and the SEC declared the registration statement effective on October 24, 2018. As of the date of this filing all of the Preferred Stock has been converted into Common Stock.

Between March 2019 and October 2019, we sold and issued an aggregate of 12,850,000 shares of our common stock as beneficial holders may hold their stock in “street” name.at a price of $0.50 per share for gross proceeds of $6,425,000 to 18 otherwise unaffiliated third parties, each of whom was an accredited investor.

DividendsThe shares were sold and issued pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D promulgated thereunder (“Regulation D”) since, among other things, the transactions did not involve a public offering or a general solicitation and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof. Offers and sales were made solely to persons qualifying as “accredited investors” (as such term is defined by Rule 501 of Regulation D).

We didWith the exception of the Preferred Stock transaction, all of the securities referenced in this section have not pay any cash dividends on our common stock during 2016been registered under the Securities Act and may not be offered or 2015 and have no intention of doing sosold in the foreseeable future. We intend to retain any earnings for use in our operations and the expansion of our business. Any future determination to declare and pay cash dividends will be made at the discretion of our board of directors, subject toUnited States absent registration or an applicable laws and will depend on our financial condition, results of operations, liquidity, capital requirements, general business conditions, any contractual restriction on the payment of dividends and other factors that our board of directors may deem relevant.exemption from registration requirements.

Securities Authorized for Issuance Under Equity Compensation Plans

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not, nor did any affiliated purchaser, make any repurchases of our securities during the fourth quarter of the year ended December 31, 2018.

Item 6. Selected Financial Data

Smaller reporting companies are not required to provide the information required by this item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes thereto included elsewhere in this report.

Executive Overview and Plan of OperationCompany Background

MJ Holdings Inc. was originally(OTC Pink: MJNE) is a highly-diversified, publicly-traded, cannabis holding company providing cultivation management, licensing support, production management and asset and infrastructure development – currently in the Las Vegas Market. It is our intention to grow our business and provide a 360-degree spectrum of infrastructure (including: cultivation, production management, dispensaries and consulting services) through: the acquisition of existing companies; joint ventures with existing companies possessing complementary expertise, and/or through the development of new opportunities. We intend to “prove the concept” profitably in the rapidly expanding Las Vegas market and then use that success as a template for replicating the concept in other developing states through a combination of strategic partnerships, acquisitions and opening new operations.

The Company’s assets and operations have expanded significantly over the past year; and, the Company recently received more than $6,000,000, from the sale of common stock previously returned to the Company, to facilitate further expansion of its cultivation footprint as well as to launch seed generation and production facilities and rollout of its Highland Brothers brand for consumption in the United States, Canada and European markets.

Lead by our CEO. Paris Balaouras, the Company has assembled a senior management team possessing significant experience building, acquiring and operating high-growth, multi-division businesses in a public company setting. The Company also has retained operating level employees, directly and through strategic relationships, possessing significant experience in marijuana cultivation and production.

Current Initiatives include:

We also continue to identify potential acquisition of revenue producing assets and licenses within legalized cannabis markets both nationally and internationally that can maximize shareholder value while providing a 360-degree spectrum of infrastructure, cultivation, production, management, dispensaries and consulting services in the regulated cannabis industry

We may face substantial competition in the operation of cultivation facilities in Nevada. Numerous other companies have also been granted cultivation licenses, and, therefore, we anticipate that we will face competition from these other companies. Our management team has experience in successfully developing, implementing, and operating marijuana cultivation and related businesses in other legal cannabis markets. We believe our experience in cultivation and facility management will provide us with a competitive advantage over our competitors. Senior management now also includes a number of executives possessing significant experience with public companies, in mergers and acquisitions, and with raising public and private equity and debt financing.

We were incorporated on November 17, 2006, as Securitas EDGAR Filings, Inc. under the laws of the State of Nevada and until February 2014, weNevada. Prior to the formation of Securitas EDGAR Filings Inc., the business was operated as anXpedient EDGAR filing agent, wherein we assisted companies in preparing and filing periodic reports with the United States Securities and Exchange Commission (“SEC”)Filings, LLC, a Florida Limited Liability Company, formed on theOctober 31, 2005. On November 21, 2005, Xpedient EDGAR (electronic data gathering analysis retrieval) platform.Filings LLC amended its Articles of Organization to change its name to Securitas EDGAR Filings, LLC. On January, 21 2009, Securitas EDGAR Filings LLC merged into Securitas EDGAR Filings, Inc., a Nevada corporation. On February 14, 2014, we amended and restated our Articles of Incorporation and changed our business model. Our fiscal year is a calendar year ending December 31.

Our principal executive offices are located at 4141 NE 2nd Avenue Suite 204A, Miami, Florida 33137, and our telephone number is (305) 455-1800.

Divestiture of Our Real Estate Businessname to MJ Holdings, Inc.

On November 22, 2016, in connection with a plan to divest ourselves of our real estate business, we submitted to our shareholdersstockholders an offer to exchange (the “Exchange Offer”) our common stock for shares in MJ Real Estate Partners, LLC, (“MJRE”) a newly formednewly-formed LLC formed for the sole purpose of effecting the Exchange Offer. Subsequent to the completion of the Exchange Offer, which closed on January 10, 2017, MJRE will serve as a holding company for the real estate assets and business previously owned by MJ Holdings. Shareholders who participated in the Exchange Offer received one MJRE common unit for each share of MJ Holdings common stock accepted in the Exchange Offer.

On January 10, 2017, the Company accepted for exchange 1,800,000 shares of the Company’s common stock in exchange for 1,800,000 shares of MJRE’s common units, representing membership interests in MJRE. Effective February 1, 2017, the Company transferred its ownership interests in the real estate properties and its subsidiaries, through which the Company holds ownership of the real estate properties, to MJRE. MJRE also assumed the senior notes and any and all obligations associated with the real estate properties and business, effective February 1, 2017.

On December 15, 2017, we acquired all of the issued and outstanding membership interests of Red Earth LLC, a Nevada limited liability company (“Red Earth”) established in October 2016, in exchange for 52,732,969 shares of common stock of the Company, par value $0.001 and a Promissory Note in the amount of $900,000. The MJ Real Estate Partners separationmerger was accounted for as a reverse merger, whereby Red Earth was considered the accounting acquirer and became a wholly owned subsidiary of the Company. As a result of the acquisition, the members of Red Earth became the beneficial owners of approximately 88% of the Company’s common stock immediately following the acquisition, obtained controlling interest of the Company, and retained key management positions of the Company. In accordance with the accounting treatment for a “reverse merger” or a “reverse acquisition,” the Company’s historical financial statements prior to the reverse merger will be replaced with the historical financial statements of Red Earth prior to the reverse merger, in all future filings with the U.S. Securities and Exchange Commission (the “SEC”). The consolidated financial statements after completion of the reverse merger will include the assets, liabilities and results of operations of the combined company from and after the closing date of the reverse merger.

Our corporate headquarters is duelocated at 1300 South Jones Boulevard Las Vegas, Nevada 89146 and our telephone number are (702) 879-4440. Our website address is: www.MJHoldingsinc.com. No information available on or through our websites shall be deemed to be incorporated into this Form 10-K. Our common stock, par value $0.001 (the “Common Stock”), is quoted on the OTC Markets Group, Inc.’s Pink® Market under the symbol “MJNE.”

Our Business

Through fiscal 2018, through our inabilityacquisition of Red Earth and their wholly owned subsidiary, HDGLV, LLC (“HDGLV”), we cultivated marijuana, which commenced during the fourth quarter of 2018 upon approval by the Nevada Department of Taxation of the transfer of a Provisional Cultivation License to scale and expand our real estate business as previously planned andRed Earth, which occurred in April 2018. It is our intention to engagegrow our business through the acquisition of existing companies and/or through the development of new opportunities that can provide a 360-degree spectrum of infrastructure (dispensaries), cultivation and production management, and consulting services in business opportunities wherethe regulated cannabis industry.

Through Red Earth, we believehold a provisional State of Nevada issued cannabis cultivation license, and through HDGLV, we have greater growth opportunitieshold a triple-net leasehold, with an option to buy, on a 17,298 square-foot building, which capitalwe expect will be more readily available.

How We Plan to Generate Revenue

Our Digital Assets

We operate and are developing mobile and computer based applications focused on:

We have not generated any revenue from our digital assets and do not anticipate generating revenues in the next six to nine months. Our goal is to develop a “freemium” based business model, where we offer our services for free in an effort to build and develop a user-base. We expect to generate revenues in the future through advertising and by marketing premium products and serviceshome to our growing user-base.cultivation facility.

As of December 31, 2016, we had acquired three real estate properties in Colorado that are leased to state licensed marijuana operators and generated $57,978 in monthly rental income. The following table provides certain summary information about our real estate properties held for disposition as of December 31, 2016:

The Company does not and will not, until such time as Federal law allows, grow, harvest, distribute or sell marijuana or any substances that violatecurrently operates through the laws of the United States of America.following entities:

Critical Accounting Policies, Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.

Revenue Recognition

BeforeOn January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 –Revenue from Contracts with Customers using the modified retrospective method. Since the Company had not previously recognized any revenue canthere was no impact upon adoption of ASC 606 on our consolidated financial statements. The new revenue standard was applied prospectively in the Company’s consolidated financial statements from January 1, 2018 forward and reported financial information for historical comparable periods will not be revised and will continue to be reported under the accounting standards in effect during those historical periods. Revenues are recognized four basic criteria mustwhen control of the promised goods or performance obligations for services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be met: persuasive evidence of an arrangement exists;entitled to in exchange for the delivery has occurredgoods or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured.services.

The Company’s revenuesCompany recognized an insignificant amount of revenue during the year ended December 31, 2018. There was no revenue recognized in previous years.

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are rental income generated by leasing acquired real estate propertiesnot clearly and closely related to licensed marijuana operators. All leasesthe economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are classified as operating leases. Rental income is recognized on a straight-line basisamortized over the termsterm of the leases. Straight-line rentrelated debt to their stated date of redemption.

The Company evaluates convertible preferred stock in accordance with ASC 470-20-35-7. The issued Series A Preferred Stock was converted into shares of the Company’s Common Stock at a conversion price of $0.75 per share and the fair value of the common stock based on closing price of the Company’s common stock on the day of issuance of the Preferred Stock was $1.50 per share of common stock. Therefore, the intrinsic value is recognized for all tenants with contractual fixed increases in rent. Deferred rent receivable represents rental revenue recognizedcalculated at $0.75 per share.

The Company determined that there is a beneficial conversion feature (“BCF”) of $2,500,000. Since the holder can convert the preferred stock into shares of common stock at any time, amortization of this type of discount on convertible preferred stock occurs upon issuance. The Company treated the amortization of the BCF as a straight-line basis in excess of billed rents. Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as rentaldividend that reduces net income in the period the applicable costs are incurred. arriving at income available to common stockholders.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented.

Results of Operations Forfor the Year Ended December 31, 2016 Compared2018

The Company’s historical financial statements prior to the Year Ended December 31, 2015reverse merger were replaced with the historical financial statements of Red Earth, the “accounting acquirer,” based on the accounting treatment for reverse merger transactions.

RevenueRevenues

Revenue were $8,150 for the year ended December 31, 2016, was $9,0392018 compared with revenue ofto $0 for the year ended December 31, 2015. Revenue for 2016 was generated as a result of interest income from a $150,000 investment in a $1,750,000 promissory note secured by the assignment of a mortgage on real estate property located in Miami, Florida. The promissory note paid interest at 12% per annum and provided for cash interest payments on a monthly basis, commencing on July 1, 2016. The outstanding principal amount and any unpaid interest were due on May 19, 2017. The promissory note contained a prepayment charge equal to six months of interest on the prepaid amount less interest paid to the date of such prepayment. In September 2016, the promissory note was repaid in full, including $3,600 of additional interest as a result of the prepayment.

Operating Expenses

General and administrative, marketing and selling expenses were $4,680,769 for the year ended December 31, 2016, decreased by $164,7182018 compared to $92,600 compared with general and administrative expenses of $257,318$270,267 for the year ended December 31, 2015.2017, resulting in an increase of $4,410,502. The decreaseincrease was largely attributable to the following: (1) additional employee salaries and benefits (2) office rent, expensed leasehold improvements and rent for our Western Avenue cultivation facility (3) expenses for equipment, materials and equipment rental to build and operate our three-acre managed cultivation facility in generalAmargosa, NV (4) increased legal, accounting and administrativeother professional fees, cultivation consulting services and corporate advisory services (5) farm labor at our Amargosa cultivation facility and additional labor expenses during 2016 was primarily attributed to a reduction in professional fees, legal fees, and consulting services, of which $139,134 was associated with non-cash stock-based compensation for consulting services in 2015.the harvest period.

Loss from Continuing Operations

We had a loss from continuing operations of $84,133, or a basicDepreciation and diluted loss per share from continuing operations of less than $0.01,amortization were $123,256 for the year ended December 31, 2016,2018 compared with a net loss of $257,376, or a basic and diluted loss per share from continuing operations of $0.02,to $0 for the year ended December 31, 2015.2017, resulting in an increase of $123,256. The decrease of $173,243 in the loss from continuing operations for 2016 compared with 2015increase was primarily driven by the decrease in operating expenses of $164,162, specifically the decreases in professional and consulting fees discussed above, and the increase in revenues of $9,039 relatedlargely attributable to the $150,000 investment incompany purchasing equipment, furniture and a real estate loan.10,000 sq. ft. office building.

Discontinued OperationsOther income (expenses)

As of December 31, 2016, the real estate properties and corresponding assets and liabilities included in the Exchange Offer qualified as assets held for disposition, and the results of operations to be reported as discontinued operations for the current and prior periods presented.

The following is a summary of the results of operations reported as discontinued operations for the years ended December 31, 2016 and 2015:

RevenuesOther income/(expense) were ($202,053) for the year ended December 31, 2016, increased by $72,1332018 compared to $697,9997 compared with revenue of $625,864($64,521) for the year ended December 31, 2015. Revenues from discontinued operations were generated as a result2017, resulting in an increase of rental income from operating leases on three real estate properties held for disposition as of December 31, 2016.$137,532. The increase was largely attributable to a noncash charge related to shares granted in revenue for 2016 was primarily the result of rental income generated by our third real estate property acquired in May 2015 and increases in certain property expenses reimbursed to the Company.connection with a joint venture transaction.

Certain property expenses are reimbursable to the Company through our existing leasing arrangements. During the year ended December 31, 2016, the Company recorded $79,976 of revenue pursuant to operating lease agreements to offset a portion of the

property expenses incurred during the respective periods compared with $57,223 of revenue recorded during the year ended December 31, 2015, to offset a portion of the property expenses incurred during the respective periods.

Property expenses consist of those costs associated with acquiring and leasing real estate properties held for disposition. These expenses include costs for commissions, appraisals, real property taxes, insurance, repairs and maintenance. For the year ended December 31, 2016, we incurred property expenses of $121,434 compared with $123,589Net loss was $5,007,928 for the year ended December 31, 2015. The decrease2018 compared to loss of $2,155 in property expenses for 2016 was primarily attributed to a decrease of $33,281 for property repairs and utility fees, partially offset by an increase of $31,142 in costs for real property taxes during 2016.

Depreciation expense recorded for real estate properties held for disposition was $116,159$334,788 for the year ended December 31, 2016, compared with depreciation expense2017. The loss in 2018 is attributable to planned expansion of $102,415 for the year ended December 31, 2015. The increase in depreciation expense for 2016 was primarily associated with a full year of depreciation recorded for the third real estate property acquired in May 2015.business.

Other Expenses

Interest expense paid to related party, associated with promissory notes held on certain real estate properties held for disposition, for the year ended December 31, 2016, increased by $31,445 to $272,500 compared with interest expense of $241,055 for the year ended December 31, 2015. The increase in interest expense for 2016 was due to a full year of interest expense incurred on a $925,000 promissory note used to fund a real estate property acquisition in May 2015.

Interest expense associated with the amortization of debt issuance costs decreased by $3,988 to $9,222 compared with interest expense of $13,210 for the year ended December 31, 2015. As of December 31, 2016, $2,135 of debt issuance costs are included on the Balance Sheet, netted against outstanding notes payables, within current liabilities held for disposition.

Liquidity and Capital Resources

The following table summarizes the cash flows for the yearsyear ended December 31, 2016 and 2015:2018:

The Company had cash of $463,773$56,656 at December 31, 2016,2018, compared with cash of $303,368$2,513,863 at December 31, 2015, an increase of $160,405. The increase in cash during 2016 was attributed to cash generated from operating activities of $164,379, partially offset by $3,974 of cash used for building improvements on one of the real estate properties held for disposition.2017.

Operating Activities

Continuing Operations

We had netNet cash used in operating activities for continuing operations of $82,859 for the year ended December 31, 2016, which consisted of a net loss from continuing operations of $84,133, offset by depreciation of $667 and an increase in accounts payable and accrued liabilities of $607.

We had net cash used in operating activities for continuing operations of $103,472 for the year ended December 31, 2015, which consisted of a net loss from continuing operations of $257,376, offset by non-cash stock compensation of $139,134, an increase in accounts payable and accrued liabilities of $14,659, and depreciation of $667.

Discontinued Operations

We had net cash provided by operating activities from discontinued operations of $247,238 for the year ended December 31, 2016, which consisted of net income from discontinued operations of $178,682, non-cash charges of $111,115; partially offset by an increase in working capital requirements of $42,559, consisting of an increase in accounts receivables and other assets of $30,956, a decrease in security deposits of $25,035 and an increase in accounts payable and accrued liabilities of $13,432.

We had net cash provided by operating activities from discontinued operations of $213,825 for the year ended December 31, 2015, which consisted of net income from discontinued operations of $145,595, non-cash charges of $95,469; partially offset by an increase in working capital requirements of $27,239, consisting of a decrease in accounts payable and accrued liabilities of $91,259, a decrease in security deposits of $6,842, and a decrease in prepaid assets and other assets of $70,862.

Investing Activities

Pursuant to the terms of the lease agreement for the real estate property located in Aurora, Colorado, the Company agreed to contribute $150,000 to improvements to the property. During the year ended December 31, 2016, we paid $3,974 for building improvements to the property in Aurora, Colorado. As of December 31, 2016, the Company had paid $150,000 towards the improvements to the property in Aurora, Colorado.

During the year ended December 31, 2015, we purchased a 3,828 square feet retail building in Denver, Colorado for $771,750. In addition, we paid $123,393 for building improvements to property in Aurora, Colorado and $2,000 for computer equipment and software.

Financing Activities

We had $914,366 in net cash provided by financing activities for the year ended December 31, 2015,2018, was $5,792,542 versus $122,453 for the year ended December 31, 2017.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2018, was $2,734,672 as a resultcompared to $317,535 for the year ended December 31, 2017. The increase in the investing activities in 2018 is attributable to the planned expansion of the business.

Financing Activities

During 2017, the Company raised $2,643,372 through the sale of shares of the Company’s common stock at $0.75 per share and will continue to raise capital in 2018 to fund the build out and development of our business operations. In addition, the Company received gross proceeds of $925,000$350,000 from an investor advance to fund the issuancepurchase of a promissory note,provisional grow license issued by the State of Nevada, partially offset by debt issuance costs of $10,634, used$14,521 and the $25,000 distribution to finance the purchase of a third real estate property in May 2015.founding member.

Although we can provide no assurances, we believe our cash on hand will provide sufficient liquidity and capital resources to fund our business for the next twelve months. In the event we experience liquidity and capital resources constraints because of unanticipated operating losses, we may need to raise additional capital in the form of equity and/or debt financing. If such additional capital is not available on terms acceptable to us or at all then we may need to curtail our operations and/or take additional measures to conserve and manage our liquidity and capital resources, any of which would have a material adverse effect on our business, results of operations and financial condition.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Seasonality

We do not consider our business to be seasonal.

Commitments and Contingencies

We are subject to the legal proceedings described in “Item 3. Legal Proceedings” of this report. There are no legal proceedings which are pending or have been threatened against us or any of our officers, directors or control persons of which management is aware.

Inflation and Changing Prices

Neither inflation nor changing prices for the yearsyear ended December 31, 2015 and 20142018 had a material impact on our operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The disclosures are not applicable to us.

Item 8. Financial Statements and Supplemental Data

The information required by this Item 8 is incorporated by reference herein from “Item 15. Exhibits and Financial Statement Schedules” of this report.

Item 9. Changes in and Disagreements Withwith Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Co-ChiefChief Executive OfficersOfficer and our PrincipalChief Financial Officer, to allow timely decisions regarding required disclosure.

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2016.2018. Based upon that evaluation, our Co-ChiefChief Executive OfficersOfficer and our PrincipalChief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2015.2018.

Evaluation of Internal Controls and Procedures

We are responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined by Securities Exchange Act Rule 13a-15(f). Our internal controls are designed to provide reasonable assurance as to the reliability of our financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Internal control over financial reporting has inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable, not absolute, assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Under the supervision and with the participation of our Co-ChiefChief Executive OfficersOfficer and our Chief Financial Officer, we have evaluated the effectiveness of our internal control over financial reporting as of December 31, 2016,2018, as required by Securities Exchange Act Rule 13a-15(c). In making our assessment, we have utilized the criteria set forth by the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We concluded that based on our evaluation, our internal control over financial reporting was not effective as of December 31, 2016.2018.

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2018, due to resource constraints, material weaknesses became evident to management regarding our inability to generate all the necessary disclosures for inclusion in our filings with the Securities and Exchanges Commission due to the lack of resources and segregation of duties. We lacked sufficient personnel with the appropriate level of knowledge, experience and training in GAAP to meet the demands for a public company, including the accounting skills and understanding necessary to fulfill the requirements of GAAP-based reporting. This weakness causes us to not fully identify and resolve accounting and disclosure issues that could lead to a failure to perform timely internal control and reviews. In addition, the Company has not established an audit committee, does not have any independent outside directors on the Company’s Board of Directors, and lacks documentation of its internal control processes. The Company intends to add additional external accounting support and establish an audit committee and compensation committee by the end of 2019. Beginning in July of 2019 the Company’s executive management team began convening weekly meetings to review expenditures and provide cash flow analysis.

The Company is neither an accelerated filer nor a large accelerated filer, as defined in Rule 12b-2 under the Exchange Act, and there is not otherwise included in this Annual Report an attestation report of the Company’s registered public accounting firm regarding

internal control over financial reporting. Management’s report was not required to be attested by the Company’s registered public accounting firm pursuant to Item 308(b) of Regulation S-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter ended December 31, 2016, or subsequent to the date the Company completed its evaluation,2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During 2019, as our business operations expand, the Company plans to hire additional employees and engage outside professionals to address the material weaknesses identified above.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Directors & Executive Officers

The names of ourOur directors and certain information about them are set forth below:executive officers, their ages, positions held, and duration of such, were as follows as of October 1, 2018:

Business Experience

The following is a brief overview of the education and business experience of each of our directors and executive officers during at least the past five years, including their principal occupations or employment during the period, the name and principal business of the organization by which they were employed, and certain of their other directorships:

Shawn ChemtovParis Balaouras was appointed Co-CEOChief Executive Officer and a memberChairman of the Board on December 15, 2017. Mr. Balaouras assumed the title of DirectorsPresident of the RegistrantCompany on February 10, 2014.January 1, 2019. Mr. Chemtov is an active commercial real estate developer who owns and manages a portfolio of income producing commercial and residential property. Mr. Chemtov is also the CEO of CMG Capital, a licensed mortgage lender, which he founded in 2004. CMG Capital is a direct correspondent lender and an FHA licensee and portfolio lender whichBalaouras has closed more than ten years of experience in the development and operations of legal cannabis businesses, including license acquisition, facility management, cannabis cultivation, and legislative initiatives. Mr. Balaouras was the founding and managing partner of Acres Medical, LLC (“Acres Medical”) from April 2014 until February 2016. While with Acres Medical, Mr. Balaouras was instrumental in raising investment capital for the acquisition of five Nevada Medical and Recreational Marijuana Establishment Certificates, the development and opening of a billion dollars20,000 square foot dispensary in residentialLas Vegas, Nevada, and commercial property loans since its inceptionthe acquisition of a 37-acre cultivation facility in the Amargosa Valley, Nevada, creating the largest cultivation site in the State of Nevada. From 2012 until 2016, while serving as the Principal Officer at Natural Remedy Patient Center, Mr. Balaouras obtained an Arizona dispensary, cultivation, and has raised and is currently servicing approximately $50,000,000 in real estate loans.production license. Mr. ChemtovBalaouras is a member of the FloridaNevada Dispensary Association, Americans for Safe Access, and the National Organization for the Reform of Mortgage ProfessionalsMarijuana Law. Mr. Balaouras’ extensive experience and Entrepreneurs Organization respectively.background with entities related to the Company’s core business initiatives uniquely qualifies him to serve on our Board of Directors.

Adam LauferRoger J. Blosswas elected to the Company’s Board of Directors on April 1, 2019. Mr. Bloss has more than 40 years of experience in the hospitality industry and has served in executive positions with several major hotel franchise companies including as Executive VP and President of Global Development at Red Lion Hotels Corp. and President and Chief Executive Officer of Vantage Hospitality Group, Inc. which he co-founded in 1996. Mr. Bloss’ vast business and senior level management experience with both private and public companies makes him highly qualified to serve on our Board of Directors.

Richard S. Grobergwas appointed to the office of President on July 15, 2019. Mr. Groberg reports directly to the Company’s Chief Executive Officer and the Board and has primary responsibility for overseeing day-to-day operations and business development activities. Mr. Groberg has significant experience, as both an operating and financial executive, building, acquiring and operating high-growth, multi-location businesses. He also has significant experience with M&A; public and private equity and debt financing and managing public companies. Mr. Groberg previously served for the past five years as the Managing Member of RSG Advisors, LLC a financial advisory firm that provided interim CFO and other advisory services to a variety of clients. Additionally, most recently, from October 2018 until July 2019, Mr. Groberg served as an Operating Advisor for Atlantic Street Capital. From January 2018 through October 2018, Mr. Groberg served as CFO of Freedom Leaf, Inc., a publicly traded Nevada corporation that engages in hemp-based CBD activities. From August 2014 to the present, Mr. Groberg (through September 2018 as an employee and, subsequently, as a consultant through RSG Advisors, LLC, served as Chief Financial Officer and then Contracts Manager for Ever Well Health Systems, LLC.

Laurence Ruhewas appointed to the office of Treasurer and Chief Financial Officer on June 1, 2019. Mr. Ruhe reports directly to the Company’s CEO and has primary responsibility for all accounting functions and public information filings with the U.S. Securities and Exchange Commission. From July 2018 through May 2019, Mr. Ruhe served as the Chief Financial Officer of Freedom Leaf, Inc., a publicly traded Nevada corporation that engages in hemp-based CBD activities, where his primary responsibilities included all accounting functions, SEC 10-K and 10-Q preparation and filing, implementation of financial controls and procedures and providing monthly reports to senior management. Mr. Ruhe previously provided accounting consulting services to Ultimate Staffing and from August 2007 until June 2017 he was employed as the Senior Vice President/Controller of BMM Testing Labs in Las Vegas, NV where he also served on BMM’s audit and finance committees.

Terrence M. Tierneywas appointed as Co-CEOour Secretary on September 19, 2018. On October 15, 2018 Mr. Tierney was named the Company’s Chief Administrative Officer. Mr. Tierney has over 30 years of senior level management experience in both the private and public sectors. From October 2009 until October 2015, he served as the Managing Partner of Profesco Partners, a member of the Board of Directors of the registrantbusiness management consulting firm focused on February 10, 2014. Mr. Laufer, is an entrepreneurstart-up companies, corporate reorganizations and corporate securities attorney. Intax qualified not for profit public charities. From October 2011 until October 2013, Mr. Laufer, priorTierney also served as the Managing Director of Building for America’s Bravest, a joint venture program between the Gary Sinise Foundation and the Stephen Siller Tunnel to Towers Foundation that builds custom designed “smart homes” for severely wounded U.S. military personnel. From October 2015 until September 2018, Mr. Tierney was President of Profesco, Inc., the successor in interest to Profesco Partners. Mr. Tierney earned a Bachelor of Science degree in Aeronautics/Professional Pilot from St. Louis University and was awarded a Juris Doctor degree from New York Law School in 1992.

John R. Wheeler, Jr. was appointed as our Chief Financial Officer on December 15, 2017. Mr. Wheeler has over 40 years of experience in accounting and 10 years with companies in the cannabis industry. Mr. Wheeler graduated from the University of Arizona with a BA in accounting and received his resignationCPA license in 1979. Starting his career, Mr. Wheeler worked for the IRS for 6 years and later worked for multiple CPA companies in California for 10 years. For the last 27 years, Mr. Wheeler ran his own CPA companies: Rocky Wheeler CPA and Wheeler & Associates CPA’s. Mr. Wheeler resigned from the Company on May 31, 2019

Andrew Boutsikakis was appointed as CEOour President in December 2017. Prior to that, in March 2017, Mr. Boutsikakis became a consultant for Red Earth. Mr. Boutsikakis has over 15 years of sales experience in financial services, communications, and business development. In 2014, Mr. Boutsikakis formed AB Consulting Group (“AB Consulting”) to focus his efforts in the emerging medical marijuana industry in Nevada and Arizona. AB Consulting provided corporate consulting services primarily in sales, licensing, and mergers & acquisition to the legal cannabis industry. Previously, Andrew was the sales director at Markets Media and director of business development at Cohere Communication. Mr. Boutsikakis employment with the Company was terminated effective December 31, 2018.

Significant Employees

At December 31, 2018 we did not have any significant employees other than our executive officers.

Family Relationships

There are no familial relationships by and between Mr. Balaouras and any director, executive officer or person nominated or chosen by the Company to become a director of Soleil Capital LP (OTC:JOBI,) successfully negotiated and executed the acquisition of a portfolio of electronic cigarette and personal vaporizer patents. In 2009, Mr. Laufer executed a reverse merger transaction with Vapor Corp. (OTC:VPCO), an electronic cigarette company. And from 2009-2013, Mr. Laufer continued to serve the electronic cigarette company as an advisor; consulting on matters of corporate strategy and regulatory issues related to electronic cigarette products, during which time the company’s revenues grew from approx $1M to approx $23M. Mr. Laufer has significant experience in working with, start-up and development stage businesses in defining their corporate strategy, identifying funding and growth opportunities, and in implementing liquidity strategies. Mr. Laufer is a member in good standing of the Florida Bar.or executive officer.

Board Committees

Our board doesBoard, at December 31, 2018, did not have a standing audit committee, a compensation committee, or a nominating and governance committee.committee, or committees performing similar functions, and, therefore, the entire board of directors performs such functions. The Company’s common stock is not currently listed on any national exchange and we are not required to maintain such committees by any self-regulatory agency. The Board intends to enact certain of the foregoing committees prior to calendar year end of 2019.

Director Compensation

Our board doesBoard, at December 31, 2018, did not have any non-employee directors and no additional compensation is paid to any of our employee directors for serving as a director.

Section 16(a) Beneficial Ownership Reporting Compliance

We are a voluntary filer and Section 16(a) of the Securities Exchange Act of 1934, as amended, is not applicable to us.

Code of Ethics

The Company has adopted a code of ethics within the meaning of Item 406 of Regulation S-K promulgated under the Securities Act of 1933, as amended, titled, “Business Conduct: “Code of Conduct and Policy,” that applies to all of the Company’s employees, including its principal executive officer, principal financial officer and principal accounting officer, and the Board. The Company intends to disclose any changes in or waivers from its code of ethics by posting such information on its website or by filing a Current Report on Form 8-K.

Item 11. Executive Compensation

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table provides certain summary information concerning the compensation earned for services rendered to the Company for the fiscal years ended December 31, 20162018 and 2015,2017, by our Chief Executive Officer and our two other most highly compensated executive officers (the “named executive officers”) who served in such capacities at the end of the fiscal year ended December 31, 2016.2018. Except as provided below, none of our named executive officers received any other compensation required to be disclosed by law in excess of $10,000 annually.

Outstanding Equity Awards at Fiscal Year-End

The following table provides information with respect to outstanding stock option awards for shares of our common stock classified as exercisable and unexercisable as of December 31, 2016,2018, for the named executive officers.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding the beneficial ownership of our common stock as of March 20, 2017, and reflects the reduction of 1,800,000 shares outstanding as a result of the Exchange Offer accepted in January 2017:October 1, 2018:

Except as otherwise indicated, each person and each group shown in the table has sole voting and investment power with respect to the shares of common stock indicated. For purposes of the table below, in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person is deemed to be the beneficial owner, of any shares of our common stock over which he or she has or shares, directly or indirectly, voting or investment power or of which he or she has the right to acquire beneficial ownership at any time within 60 days. As used in this prospectus,Annual Report, “voting power” is the power to vote or direct the voting of shares and “investment power” includes the power to dispose or direct the disposition of shares. Common stock beneficially owned, and percentage ownership was based on 12,227,93970,894,146 shares outstanding on March 15, 2017,December 31, 2018, plus 166,6650 shares deemed outstanding pursuant to Rule 13d-3, for a total of 12,394,60470,894,146 shares outstanding.

Unless otherwise indicated, the address for each person is our address at 4141 NE 2nd Avenue Suite #204A.1300 South Jones Boulevard., Miami, Florida 33137.Las Vegas, Nevada 89146.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Transactions with Related Persons

The following is a description of transactions since January 1, 2015,October 17, 2016, to which we have been a party in which:

In June 2014On December 15, 2017, as part of the Reverse Merger transaction, the Company acquired real estate property in Denver, Colorado for $2,214,000. The acquisition was partially funded with proceeds from the issuance ofissued a secured promissoryconvertible note payable in the amount of $1,800,000. The promissory note is held by Chemtov Mortgage Group (“CMG”), an entity wholly-owned by$900,000 to the now-former members of Red Earth. At the time of the transaction, Paris Balaouras, the Company’s co-CEO, Shawn Chemtov. CMG has assigned all ownershipChief Executive Officer, was a 50% partner and security interest granted to it pursuant to the promissory note to 5353 Mortgage Loan, LLC, a single purpose entity created solely for the purposemanaging member of this transaction. CMG invested $100,000 of the $1,800,000 of funds used to finance the purchase of the promissory note. CMG acts as the loan servicing entity for the promissory note, administering the note, processing payments from the Company, and transferring all payments to 5353 Mortgage Loan, LLC. CMG charges no administration fees for servicing the promissory note. During the years ended December 31, 2016 and 2015, the Company paid $180,000 and $180,000, respectively, of interest to CMG pursuant to the promissory note held by CMG.Red Earth.

In May 2015December 2017, upon completion of the Company acquired real estate property in Denver, Colorado for $771,750. The acquisition was funded with proceeds from the issuance of a secured promissory note in the amount of $925,000. The promissory note is held by CMG, an entity wholly-owned byReverse Merger, the Company’s co-CEO, Shawn Chemtov. CMG has assigned all ownership and security interest granted to it pursuant to$400,000 debt obligation was assumed by Paris Balaouras, the promissory note to a single purpose entity created solely for the purposeChief Executive Officer of this transaction. CMG acts as the loan servicing entity for the promissory note, administering the note and processing payments from the Company. CMG charges no administration fees for servicing the promissory note. During the years ended

Between April 2018 and December 31, 20162018, we engaged Desert Star Construction, LLC (“Desert Star”) to perform general contractor services at our managed facility in Amargosa Valley and 2015, the Company paid $92,500 and $53,346, respectively,our leased premises at 2310 Western Avenue. We made payments to Desert Star in excess $190,000. Ronald Sassano, a Managing Member of interest to CMG pursuant to the promissory note held by CMG.Red Dot is also a Manager of Desert Star.

InBetween March 2018 and May 2016, the Company invested $150,000 in a $1,750,000 promissory note secured2018, we made payments totaling $54,000 to Apex Operations, LLC (“Apex”) as commission payments for third party contracts for assembly of greenhouses on property owned and licensed by the assignment of a mortgage on real estate property located in Miami, Florida. The mortgage was held by CMG, an entity wholly-owned by the Company’s co-CEO, ShawnAcres Cultivation, LLC. Upon information and belief, Ronald Sassano and/or Michael Sassano are controlling parties with regard to Apex.

Chemtov. The Company did not incur any loan origination fees or any other costs associated with the mortgage investment. The promissory note paid interest at 12% per annum and provided for cash interest payments on a monthly basis, commencing on July 1, 2016. The outstanding principal amount and any unpaid interest were due on May 19, 2017. The promissory note contained a prepayment charge equal to six months of interest on the prepaid amount less interest paid to the date of such prepayment. In September 2016, the promissory note was repaid in full, including $3,600 of additional interest as a result of the prepayment. During 2016, the Company recorded $9,039 of revenue generated by interest income from the $150,000 real estate loan.

Board Composition and Director Independence

Our business and affairs are managed under the direction of the board of directors. OurAt December 21, 2018 our board of directors iswas currently comprised of two members, Messrs. Chemtov and Laufer.one member, Mr. Paris Balaouras. Because of their relationships with us, none of them arehis relationship to the Company, Mr. Balaouras is not “independent” under the rules of any national securities exchange or Rule 10A-3 under the Securities Exchange Act of 1934, or the Exchange Act.as amended.

Item 14. Principal Accountant Fees and Services.

Paritz & Company, P.A. (“Paritz”) hashad served as the Company’s independent registered public accounting firm for the years ended December 31, 20162017 and 2015.2016. In accordance with the requirements of the Sarbanes-Oxley Act of 2002, all audit and audit-related services and all non-audit services performed by our current independent public accounting firm are approved in advance by our Board of Directors, including the proposed fees for any such service, in order to assure that the provision of any such service does not impair the accounting firm’s independence. The Board of Directors is informed of each service actually rendered. On October 10, 2018. the Company was informed by Paritz that it was being acquired by Prager Metis CPAs LLC (“Prager”) and would no longer continue to serve as the Company’s independent registered public accounting firm. As a result, the Company’s Board of Directors engaged Prager to serve as the Company’s independent registered public accounting firm effective October 10, 2018. On December 21, 2018 Prager advised the Company of its resignation effective on the same date. On February 15, 2019 the Company’s Board of Directors engaged Marcum, LLP as its independent registered public accounting firm.

Independent Auditor Fees

The following table sets forth fees billed, or expected to be billed, to the Company by the Company’s independent auditors for the years ended December 31, 20162018 and 2015,2017, for (i) services rendered for the audit of the Company’s annual financial statements and the review of the Company’s quarterly financial statements; (ii) services rendered that are reasonably related to the performance of the audit or review of the Company’s financial statements that are not reported as Audit Fees; (iii) services rendered in connection with tax preparation, compliance, advice and assistance; and (iv) all other services:

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) List of Documents filed as part of this report:

(1) Financial Statements

Report of Paritz & Co., Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2016 and 2015

Consolidated Statement of Operations for the years ended December 31, 2016 and 2015

Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2016 and 2015

Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

Schedule III - Real Estate and Accumulate Depreciation

All other schedulesSchedules are omitted because they are not applicable, or because the required information is included in the financial statements or notes thereto.

(b) Exhibits.

The following exhibits are filed herewith or incorporated herein by reference.FINANCIAL STATEMENT INDEX

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
Stockholders of

MJ Holdings, Inc.

Las Vegas, NV

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MJ Holdings, Inc. (the “Company”) as of December 31, 20162017 and 2015,2016, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended. Our audit also includesyear ended December 31, 2017 and for the period from inception (October 17, 2016) to December 31, 2016, and the related notes (collectively referred to as the financial statement schedule listedstatements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the year ended December 31, 2017 and for the period from inception (October 17, 2016) to December 31, 2016, in conformity with accounting principles generally accepted in the index at Item 15. MJ Holding’s management is responsible for theseUnited States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company’s primary asset is a provisional Medical Marijuana Establishment Registration Certificate issued by the State of Nevada for the cultivation of medical marijuana. There is no assurance on the receipt and/or timing of final approvals from the appropriate authorities. The Company has not generated any revenues from inception (October 17, 2016) to December 31, 2017 and has an accumulated deficit at December 31, 2017. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 4. The financial statement schedule.statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The companyCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Paritz& Company, P.A.

We have served as the Company’s auditor since 2011.

Hackensack, NJ

July 26, 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

MJ Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of MJ Holdings, Inc. (the “Company”) as of December 31, 2018, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MJ Holdings, Inc.the Company as of December 31, 2016 and 2015,2018, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2016,2018, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements referred to above have been prepared assuming that MJ Holdings, Inc.the Company will continue as a going concern. As discussedmore fully described in noteNote 4, to the financial statements, the Company announcedhas incurred significant losses and needs to raise additional funds to meet its plans to divest their real estate propertiesobligations and associated business. During the year ended December 31, 2016, the Company generated a loss from continuing operations of $84,133 and used $82,859 of cash from operating activities. Subsequent to the divesture ofsustain its real estate business in January 2017, the Company does not expect to generate revenues for the next six to nine months.operations. These factors, among others,conditions raise substantial doubt regardingabout the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 4. The accompanyingconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcumllp

Marcumllp

We have served as the Company’s auditor since 2019.

Melville, NY
October 15, 2019

MJ Holdings, Inc.

Consolidated Balance Sheets

As of December 31, 20162018, and 20152017

See accompanying notes to consolidated financial statementsstatements.

MJ Holdings, Inc.

Consolidated Statements of Operations

For the years ended December 31, 2016 and 2015