| Organization, Consolidation and Presentation of Financial Statements Disclosure | 1. Nature of Operations and Continuance of Business The financial statements included herein have been prepared by MJ Biotech, Inc. (formerly Michael James Enterprises, Inc.) (the Company) in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the SEC). We suggest that these interim financial statements be read in conjunction with the audited financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2017, as filed with the SEC. We believe that all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein and that the disclosures made are adequate to make the information not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year as reported in Form 10-K have been omitted. We were a Company focused on developing intellectual property. Since the beginning of the third quarter of 2017, we had changed our focus toward Nutraceuticals. With this change in focus we entered into a Binding Letter of Agreement on July 26, 2017 to acquire ZEN HERO, Inc. d/b/a Due to the enormous expansion in the cannabis sectors, we have changed our focus to distribution of Hemp (CBD) based Tea products. Pursuant to that we have created a line of CBD infused Teas for distribution through our agreement with MarijuanaDoctor.com. Marijuana Doctor operates 15 clinics in the state of Florida. Competition Most of MJ Biotech, Inc.s competitors are well-established and have substantially greater financial resources than we do. Some of our on-line competitors that sell CBD tea products are Buddha Teas, Canna Teas Kikukos delicious Positivi-Tea Governmental regulation While there are currently relatively few laws or regulations directly applicable to Internet access, E-commerce, or commercial search activity, there is increasing awareness and concern regarding some uses of the Internet and other online services, leading federal, state, local, and international governments to consider adopting civil and criminal laws and regulations, amending existing laws and regulations, conducting investigations, or commencing litigation with respect to the Internet and other online services covering issues such as: · user privacy; · trespass; · defamation; · database and data protection; · limitations on the distribution of materials considered harmful to children; · liability for misinformation provided over the web; · user protection, pricing, taxation, and advertising restrictions (including, for example, limitation on the advertising on Internet gambling websites or of certain products); · delivery of contextual advertisements via connected desktop software; · intellectual property ownership and infringement, including liability for listing or linking to third-party websites that include materials infringing copyrights or other rights; · distribution, characteristics, and quality of products and services; and other consumer protection laws. Legislation has also been introduced in the U.S. Congress and some state legislatures that is designed to regulate spyware, which does not have a precise definition, but which is often defined as software installed on consumers' computers without their informed consent and designed to gather and, in some cases, disseminate information about those consumers, including personally identifiable information. We do not expect to rely on spyware for any purpose, and it will not be part of our product offerings, but the definition of spyware or proposed legislation relating to spyware may be broadly defined or interpreted to include legitimate ad-serving software, including toolbar offerings and other downloadable software currently provided by our product offerings. Currently, legislation has focused on providing Internet users with notification of and the ability to consent or decline the installation of such software, but there can be no guarantee that future legislation will not provide more burdensome standards by which software can be downloaded onto consumers' computers. We expect that all downloadable software that we will distribute will require an express consent of the consumer and will provide consumers with an easy mechanism to delete the software once downloaded. However, if future legislation is adopted that makes the consent, notice, or uninstall procedures more onerous, we may have to develop new technology or methods to provide our services or discontinue those services in some jurisdictions or altogether. There is no guarantee we will be able to develop this new technology at all or in a timely fashion or on commercially reasonable terms. The adoption of any additional laws or regulations, application of existing laws to the Internet generally or our industry, or any governmental investigation or litigation related to the Internet generally, our industry, or our services may decrease the growth of the Internet or other online services. Federal regulation and enforcement may adversely affect the implementation of medical and recreational marijuana laws and regulations may negatively impact our revenues and profits. The U.S. Supreme Court declined to hear a case brought by San Diego County, California that sought to establish federal preemption over state medical marijuana laws. The preemption claim was rejected by every court that reviewed the case. The California 4th District Court of Appeals wrote in its unanimous ruling, Congress does not have the authority to compel the states to direct their law enforcement personnel to enforce federal laws. However, in another case, the U.S. Supreme Court held that, as long as the CSA contains prohibitions against marijuana, under the Commerce Clause of the United States Constitution, the United States may criminalize the production and use of homegrown cannabis even where states approve its use for medical purposes. In an effort to provide guidance to federal law enforcement, the Department of Justice (the DOJ) has issued Guidance Regarding Marijuana Enforcement to all United States Attorneys in a memorandum from Deputy Attorney General David Ogden on October 19, 2009, in a memorandum from Deputy Attorney General James Cole on June 29, 2011 and in a memorandum from Deputy Attorney General James Cole on August 29, 2013. Each memorandum provides 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 August 29, 2013 memorandum provides updated guidance to federal prosecutors concerning marijuana enforcement in light of state laws legalizing medical and recreational marijuana possession in small amounts. The memorandum sets forth certain enforcement priorities that are important to the federal government: · · · · · · · · The 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. 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. Variations in state and local regulation and enforcement in states that have legalized medical cannabis that may restrict marijuana-related activities, including activities related to medical cannabis may negatively impact our revenues and profits. Marijuana remains illegal under Federal law. Laws and regulations affecting the marijuana industry are constantly changing, which could detrimentally affect our proposed operations. Intellectual property We rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success will depend on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. We expect to also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to, and distribution of, our product formulations and other proprietary information. Employees As of June 30, 2018, we have 2 full time employees, and Company operations are being conducted at our corporate offices located in Cheyenne Wyoming at 109 East 17 th Our History We were organized under the laws of the State of Delaware on December 30, 2010 under the name Spicy Gourmet International, Inc. as part of the implementation of the Chapter 11 plan of reorganization of Spicy Gourmet Organics, Inc. ("SGO"), a California corporation. SGO was incorporated in the State of California in 2006 and was formed to import specialty, organic spices from South Asia and sell them in the United States. SGO was undercapitalized and sales of its spice products were slow to develop, possibly due to the recession in the 2007-2008-time period. As a result, SGO lacked sufficient cash flow to meet its current obligations and on October 1, 2010 SGO filed a voluntary petition for bankruptcy under Chapter 11 in the U.S. Bankruptcy Court for the Central District of California. SGO's plan of reorganization was confirmed by the Court on November 19, 2010. The plan of reorganization provided for the acquisition by SGO of a new, unrelated, retail business and the spin-off of all of the various elements of SGO's spice business to four different entities. The plan of reorganization called for the spin-off of SGO's manufacturing business to our company, the incorporation of our company, and the distribution of shares of our common stock to the bankruptcy creditors. The plan required us to issue 1,180,000 shares of our common stock and distribute these to SGO's general unsecured creditors, to its administrative creditors, and to its shareholders. The shares were distributed pursuant to Section 1145 of the U.S. Bankruptcy Code. The Court also ordered the distribution of warrants to all administrative creditors of SGO, with these creditors to receive five warrants exercisable into shares of our common stock for each $0.05 of SGO's administrative debt which they held. All warrants were exercisable at any time prior to November 19, 2017. No Warrants were exercised prior to their expiration. On October 20, 2012, we acquired from James M. Palladino, then an unrelated third party, the URL domain name and websites of bullsnbears.com for $150,000. Following this asset purchase we were no longer considered a shell company. On October 23, 2012, our former officers and directors resigned and certain of the then officers and directors were appointed, with the balance of our directors being newly appointed in December 2012. In November 2012 we changed our name to BullsnBears.com, Inc. Effective December 11, 2015, we changed our name to Michael James Enterprises, Inc., and entered into an Agreement for Plan of Merger and Reorganization between the Company and Michael James Enterprises, Inc., a Nevada corporation. Prior to that, effective December 11, 2015, the Company filed an Amendment to the Companys Articles of Incorporation changing the Companys name to Michael James Enterprises Inc. and filed with FINRA for a new stock ticker symbol MJTV. On December 31, 2015, the Company formed a new wholly-owned company, BullsnBears Holdings, LLC., for the purpose of holding the Companys intellectual property assets. As contractually agreed to, the Company's wholly-owned subsidiary, BullsnBears, Holdings LLC. was spun off in its entirety including all of the assets and liabilities of the subsidiary including certain liabilities of the parent company that were incurred by the previous management including BullsnBears Holdings, LLC. Intellectual Property assets, including its websites, URLs, and proprietary software, were transferred through a share dividend to MJTV shareholders of record as of the close of business on December 28, 2016, with one share of BullsnBears Holdings, LLC. Common Stock distributed for each one share of MJTV Common Stock owned as of the record date. Distribution of the shares took place on December 28, 2016. On August 4, 2016, the companys Board of Directors approved an asset purchase agreement with RP Capital Group, Ltd. to acquire all rights and title to the studies and intellectual property to a dronabinol based treatment for sleep apnea. This acquisition substituted the contemplated acquisition of Michael James Enterprise, Inc., a Nevada corporation acquisition that did not move forward as the acne-based product it was bringing to market had experienced several significant setbacks and the Board of Directors has determined that the proposed agreement was not in the best interest of the Company and its shareholders. Since August of 2016 the Company created the alchemy of essential oils called LUNA to help a person relax and hopefully achieve better sleep. Additionally, the Companys then CEO, James M. Farinella, designed a creative noninvasive delivery system for an active ingredient which was assigned to the company by the then CEO in exchange for 2,350,000 Preferred B shares. This product VOLUPTAS, now patent pending with a filing for a trademark on the Name VOLUPTAS. On December 28, 2016 the Company's wholly-owned subsidiary, BullsnBears Holdings, Inc., (BNBI) was spun off spun-off through a share dividend to BNBI shareholders of record as of the close of business, with one share of BullsnBears Holdings Common Stock distributed for each one share of MJTV Common Stock owned as of the record date. Distribution of the shares is the responsibility of BullsnBears Holdings, Inc. and will take place upon the effectiveness of a Registration Statement filed with the U.S. Securities and Exchange Commission. On April 12, 2017, the Company changes its name to MJ Biotech, Inc. to better represent the new direction of the Company. MJ Biotech has also changed its state of incorporation to the state of Wyoming. The change of domicile took place on August 25, 2017. On July 26, 2017, the Company entered into a Binding Letter of Agreement for the acquisition of ZEN HERO, Inc. d/b/a On May 28, 2018, Fernando Lopez resigned as the Chief Operating Officer and Director, of MJ Biotech, Inc. Mr. Lopez' resignation was due to personal reasons and did not reflect any concerns and/or disagreements relating to MJ Biotech, Inc., its operations, policies or practices. Mr. Lopez will return all company stock issued to him during the tenure of his association with MJ Biotech, Inc. On June 4, 2018 the Company formed a new wholly-owned corporation MJ Syndicated, Inc. a Florida corporation, based out of Florida. During the Quarter ended June 30, 2018 the Company issued Shares for services 4,875,000 valued at $24,400. During the Quarter ended June 30, 2018 the Company sold 231,200 Preferred B shares for $15,000. During the Quarter ended June 30, 2018 the Company issued Shares 500 Preferred B shares for services valued at $1,000. Going Concern The Company's financial statements are prepared using Generally Accepted Accounting Principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has recently accumulated significant losses and has negative working capital. All of these items raise substantial doubt about its ability to continue as a going concern. Management's plans with respect to alleviating the adverse financial conditions that caused management to express substantial doubt about the Company's ability to continue as a going concern are as follows: We have incurred net losses of $15,957,307 since inception through June 30, 2018. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2017 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our loss from operations and working capital deficit. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to generate revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company. The Company is currently trying to raise new debt or equity for acquisitions regarding setting up a facility for the manufacturing nutraceutical Teas and Herbs infused with CBD oils and powders If the Company is not successful in the development and implementation of a concept which produces positive cash flows from operations, the Company may be forced to continue to raise additional equity or debt financing to fund its ongoing obligations or risk ceasing doing business. There can be no assurance that the Company will be able to achieve its business plans, raise any more required capital or secure the financing necessary to achieve its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. Basic and Diluted Loss Per Share The Company presents both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including convertible debt, stock options, and warrants, using the treasury stock method, and convertible securities, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company had loss gain as of June 30, 2018 of $(1,496,915) and net loss as of June 30, 2017 of $(5,960,012) so the diluted EPS excluded all dilutive potential shares in the diluted EPS because their effect is anti-dilutive. The Company had outstanding warrants to purchase 5,000,000 shares of common stock which expired November 2017. The Company also had outstanding and convertible notes of 495,248 plus interest of $157,740 that could be converted into additional shares as of June 30, 2018. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), Fair Value Measurements and Disclosures" for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value: - Level 1: Quoted prices in active markets for identical assets or liabilities. - Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. - Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amounts of the Companys financial instruments as of June 30, 2018, reflect: Cash: Level 1 Measurement based on bank reporting. Level 2 Loans from Officers and related parties Level 2 Based on promissory notes. Level 3 Derivative Liabilities. Income Taxes Federal Income taxes are not currently due since we have had losses since inception. On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the Tax Act) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (Federal Tax Rate) from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the years ended December 31, 2017 and 2016 using a Federal Tax Rate of 21%. Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes Recognition. Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. As of June 30, 2018, we had a net operating loss carry-forward of approximately $(15,957,307) and a deferred tax asset of approximately $3,351,034 using the statutory rate of 21%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty of future events we have booked valuation allowance of $(3,351,034). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At June 30, 2018 the Company had not taken any tax positions that would require disclosure under FASB ASC 740. June 30, 2018 December 31, 2017 Deferred Tax Asset $ 3,351,034 $1,013,316 Valuation Allowance (3,351,034) (1,013,316) Deferred Tax Asset (Net) $ - $ - . Although Management believes that its estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in our tax provisions. Ultimately, the actual tax benefits to be realized will be based upon future taxable earnings levels, which are very difficult to predict. No provision was made for federal income tax, since the Company had an overall net operating loss and has accumulated net operating loss carryforwards. No income tax expense has been realized as a result of operations and no income tax penalties and/or interest have been accrued related to uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and in the State of California. These filings are subject to a three-year statute of limitations. The Companys evaluation of income tax positions included the years ended December 15 through 2017 could be subject to agency examinations. No filings are currently under examination. No adjustments have been made to reduce the estimated income tax benefit at fiscal year-end or at the quarterly reporting dates. Any valuations relating to these income tax provisions will comply with U.S. generally accepted accounting principles. Derivative Liabilities Certain of the Companys convertible notes payable described in Note 3contain conversion features that qualify for embedded derivative classification. The Company accounts for the embedded derivative features in its convertible debentures in accordance FASB ASC 815-10- Derivatives and Hedging, New Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases, which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 with early adoption permitted. Under Accounting Standards Update 2016-02, lessees will be required to recognize for all leases at the commencement date a lease liability, which is a lessees obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessees right to use or control the use of a specified asset for the lease term. The Company is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures. In May 2017, the FASB amended authoritative guidance on modifications related to stock compensation, codified in ASC 718, Compensation - Stock Compensation. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. The guidance is effective for the Company as of the first quarter of its fiscal year ending December 31, 2019. The Company does not believe the update will have a material impact on its financial statements. The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on the Companys financial statements or its financial position or results of operations. |
