September 26, 2017
Donald Steinberg
Chief Executive Officer
Marijuana Company of America, Inc.
5256 S. Mission Road, 703 #314
Bonsall, CA 92003
Re: Marijuana Co of America, Inc.
Amendment No. 2 to Registration Statement on Form 10-12G
Filed September 12, 2017
File No. 000-27039
Dear Mr. Steinberg:
We have reviewed your amended registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we may
better understand your disclosure.
Please respond to these comments within ten business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response and any amendment you may file in response
to these
comments, we may have additional comments. Unless we note otherwise, our
references to prior
comments are to comments in our July 17, 2017 letter.
Amendment No. 2 to Registration Statement on Form 10-12G filed September 12,
2017
Business, page 3
1. We note your revised disclosure regarding the legality of your products.
Since it appears
that your products do contain cannabinoid extracts that are themselves
Schedule I
controlled substances, please revise to state that Marijuana and CBD
products are
Schedule 1 controlled substances and clearly indicate the consequence of
this
classification under federal law.
2. We note your statement that you "may or may not be directly or
indirectly involved in
any actual delta-9 tetrahydrocannabionol ("THC") research." Please
clearly disclose your
current involvement in THC research.
Donald Steinberg
Marijuana Company of America, Inc.
September 26, 2017
Page 2
3. We note your revised disclosure in response to prior comment 4 and "that
FDA will
continue to oversee "marketing claims" and the "process for drug
applications."" Please
revise to disclose the effect of the United States Food and Drug
Administration's
regulation on your business, including any requirement for FDA approval
of your
products, the nature and duration of the FDA approval process, the
status of your products
in this approval process, regulation of the manufacturing and labeling
of your products,
post-market approval reporting and record keeping, and the regulation of
the advertising
and promotion of your products. Also, please include an appropriate risk
factor that
includes a discussion of sanctions for non-compliance with FDA
regulation.
hempSMART, page 7
4. We acknowledge your revised disclosure in response to prior comment 5.
Please tell us
whether you have or will also change the advertising, packaging and/or
labeling for your
applicable products such that they no longer make any claims regarding
benefits of your
products. For example, we note the article on your website, You Can Make
Your Own
CBD Oil, which states "Hemp CBD has been proven in many studies that it
has many
beneficial medical and health properties. This oil can help one find
"relief from arthritis,
diabetes, alcoholism, schizophrenia, PTSD, MS, epilepsy, and chronic
pain.""
Sources and Availability of Raw Materials and the Names of Principal Suppliers,
page 7
5. We note your response to prior comment 6 and the disclosure updating the
status of the
GateC and Bourgainville joint ventures on page 9. We also note the
disclosure on page
17 of your Form 10-Q for the quarterly period ended June 30, 2017 that
provides the
interest rate, original issue discount, transactional costs and four
different funding
amounts for the St. George secured convertible promissory note, as well
as the
disclosures on page 20 of that filing quantifying the details of your
$1,500,000
commitment under the GateC joint venture. Please revise your Form 10
disclosure to
include and quantify these commitments in this section as well as the
Liquidity section of
Management's Discussion and Analysis.
Risk Factors, page 13
6. We note your revised disclosure in response to prior comment 2. Please
restore the risk
factor Marijuana and CBD remains illegal under federal law.
Management's Discussion and Analysis of Financial Condition and Results of
Operations for 2016
and 2015
Comparison the Interim Periods, page 23
7. We note your response to prior comment 8 and the revised disclosure to
include the
comparative interim periods for the first quarters of 2017 and 2016 on
pages 23 and 24, as
well as the removal of your previous assertion. Please revise to
re-insert the discussion
Donald Steinberg
Marijuana Company of America, Inc.
September 26, 2017
Page 3
on the comparative annual periods for 2016 and 2015 to remain compliant
with Item
303(a) of Regulation S-K by covering all periods presented.
8. We note your response to prior comment 9 and your revised disclosure on
pages 23 and
24 for the comparative interim periods for the first quarter of 2017 and
2016. Please
revise both the interim discussion as well as the discussion of your
comparative annual
periods for 2016 and 2015 to address the following:
Given the significant increase in selling, general, and
administrative expenses
between both the respective interim and annual periods, revise to
provide a tabular
breakdown of the components of these expenses by purpose of the expense.
While your
current disclosure indicates a portion of the increase is due to the
issuance of stock-based
instruments, clearly quantify the amount of salary, marketing, and other
expenses by
type.
Clearly quantify and discuss the nature of the marketing and
consulting expenses,
identifying the specific revenue streams to which the marketing related.
Separately quantify the amount of research and development expenses
for each
period presented, discussing any trends experienced. Tell us how you
considered whether
such amounts warranted separate line item disclosure.
Security Ownership of Certain Beneficial Owners and Management, page 25
9. We note your response to prior comment 11 adding a table for preferred
share ownership,
but removing the table relating to common stock ownership. Please revise
to include
disclosure pursuant to Regulation S-K Item 403 with respect to the
beneficial owners of
both your common and preferred stock.
Certain Relationships and Related Transactions, and Director Independence, page
29
10. We note your response to prior comment 12. Please expand to provide
disclosure
pursuant to Item 404 of Regulation S-K with respect to any transactions
in which the
amount exceeded the lesser of $120,000 or 1% of the average of your
total assets at year
end for the last two completed fiscal years. Refer to Item 404(d).
Description of Registrant's Securities to be Registered, page 44
11. We note your response to comment 15 that current beneficial owners of
the Company's
Class A Preferred stock control in excess of 50% of the votes. Please
remove the
statement that "holders of in excess of 50% of the aggregate number of
shares of
Common Stock outstanding will be able to elect all of the directors of
the Company and
to approve or disapprove any other matter...."
Donald Steinberg
Marijuana Company of America, Inc.
September 26, 2017
Page 4
Consolidated Financial Statements
Note 1 -- Significant Accounting Policies, page F-21
12. We note your response to prior comment 17 and your disclosure on page 7
of the change
in control. Please revise your financial statements and Management's
Discussion and
Analysis to disclose the revisions you proposed in your response dated
July 31, 2017.
13. We note your response to prior comment 18, including your disclosures on
page F-8.
Please revise your annual financial statements to provide a similar
tabular breakdown as
of December 31, 2016 and 2015.
14. We note your brief disclosure on page F-24 regarding your recent
accounting
pronouncements, and refer to your January 1, 2008 adoption of ASC 825-10
on page F-
13. Given the significant number of recent authoritative accounting
literature issued that
can impact the financial statements of marketing and distribution
companies, including
ASU 2016-01 for ASC 825-10 that is effective after December 15, 2017,
please revise
your Form 10 to provide, and confirm that you will maintain in your
future annual and
interim filings, the footnote disclosure required by SAB 74 with respect
to the adoption of
new accounting literature, including FASB Staff Positions:
Provide a brief description of the new standard, including when
adoption is required
and if you plan to early adopt the standard.
Include a discussion of the adoption methods allowed and the method
you expect to
use.
Form 10-Q for the quarterly period ended June 30, 2017, filed August 21, 2017
Note 3 Summary of Significant Accounting Policies, page 8
15. We note your response to prior comment 18 and your revised inventory
component
disclosure for both March 31, 2017 and December 31, 2016 on page F-8 of
the Form 10-
12G. Confirm that all your future interim and annual balance sheets or
footnotes will
provide a quantified breakdown by major class of inventory as required
by ASC 210-10-
S99-1, or tell us why you believe such disclosure is not required.
16. We note your accounting policy for derivative financial instruments
discusses conversion
options embedded within your issued convertible debt that are recorded
as liabilities and
fair valued at each reporting period. Please tell us the following:
Given your significant $1,508,993 of derivative liabilities at June
30, 2017, please
clarify how you calculated the $221,406 embedded derivative on the March
30, 2017
issued 6.5% convertible promissory notes, as well as the $1,317,555
embedded derivative
on the June 30, 2017 issued 5.0% convertible promissory notes, including
the amounts
and dates of net proceeds received, and tell usthe accounting literature
upon which you
relied.
Donald Steinberg
Marijuana Company of America, Inc.
September 26, 2017
Page 5
Please identify the amount charged to interest expense for each
note, and theperiods
over which the discounts are being accreted.
Please identify the related parties as well as the nature of the
relationships for the
various notes payable.
On page 13 you disclose that on June 30, 2017 you issued a
convertible promissory
note for consideration of $585,092. Tell us how this amount is reflected
in your
Statement of Cash Flows on page 6, which quantifies the proceeds of the
note as
$395,880.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 20
17. We note your response to prior comment 9. It appears the trend, gross
profit margin,
selling, general, and administrative expense, interest expense, and
other requested
information are missing from your Form 10-Q for the quarter ended June
30, 2017.
Confirm that, if material, all your future interim and annual
comparisons will remain
compliant with Item 303(a) and (b) of Regulation S-K. Refer to the
Instructions to
paragraph 303 of Regulation S-K that state, in part: "The discussion and
analysis shall
focus specifically on material events and uncertainties known to
management that would
cause reported financial information not to be necessarily indicative of
future operating
results or of future financial condition. This would include
descriptions and amounts of
(A) matters that would have an impact on future operations and have not
had an impact
in the past, and (B) matters that have had an impact on reported
operations and are not
expected to have an impact upon future operations. Where the
consolidated financial
statements reveal material changes from year to year in one or more line
items, the
causes for the changes shall be described to the extent necessary to an
understanding of
the registrant's businesses as a whole; Registrants need not recite the
amounts of changes
from year to year which are readily computable from the financial
statements. The
discussion shall not merely repeat numerical data contained in the
consolidated financial
statements."
Item 4. Controls and Procedures
Disclosure Controls and Procedures, page 24
18. We note that you conclude that your disclosure controls and procedures
were not
effective during the period ended June 30, 2017. Please tell us and
revise your
disclosures in future filings to clearly discuss the material
weakness(es) you identified,
when the material weaknesses were discovered, and the steps and status
of your plans to
remediate the material weaknesses.
Donald Steinberg
Marijuana Company of America, Inc.
September 26, 2017
Page 6
You may contact Bonnie Baynes at 202-551-4924 or Kevin Vaughn at
202-551-3494 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Jeffrey Gabor at 202-551-2544 or Mary Beth Breslin at 202-551-3625 with
any other
questions.
Division of
Corporation Finance
Office of Healthcare
& Insurance
cc: Tad Mailander