May 28, 2019
Donald Steinberg
Chief Executive Officer
Marijuana Co of America, Inc.
1340 West Valley Parkway, Suite 205
Escondido, California 92029
Re: Marijuana Co of America, Inc.
Form 10-K for period ended December 31, 2018
Filed April 15, 2019
Form 10-Q for the period ended March 31, 2019
Filed May 20, 2019
File No. 000-27039
Dear Mr. Steinberg:
We have reviewed your filing 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 to these comments, we may have additional
comments.
Form 10-K for period ended December 31, 2018 filed April 15, 2019
Business
Consulting Services, page 5
1. We note your revisions in amendment 2 to your Form S-1 to clarify that
you have not yet
offered any bookkeeping or property management services to date. Revise
your
disclosures throughout your Form 10-K to correct your descriptions of the
status of those
activities.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
22
2. It appears you have removed most of your disclosure about your
Bougainville and Gate
C joint ventures in your Form 10-K. Given that your MD&A is required to
address all the
Donald Steinberg
FirstName Co of America, Inc.
Marijuana LastNameDonald Steinberg
Comapany NameMarijuana Co of America, Inc.
May 28, 2019
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periods for which financial statements are presented and your
activities related to these
joint ventures significantly affected your results of operations and
cash flows in those
periods, revise to more clearly address the activities related to your
joint ventures
with Bougainville and Gate C, balanced with appropriate disclosure to
clearly explain the
current status of these joint ventures. Clearly quantify the amounts
invested and
impairments taken.
Results of Operations, page 22
3. Revise to provide a tabular breakdown of the amounts included in your
Selling, General
and Administrative expenses, and more clearly explain the fluctuations
during the periods
presented.
Revenue, page 22
4. Please address the following regarding your reported 89.4% increase in
annual revenue of
$225,305 to $252,135 at December 31, 2018 pursuant to Item
303(a)(3)(iii) of Regulation
S-K:
Please revise your brief discussion to provide a quantified
narrative explaining the
extent to which this increase is the result of price increases
versus volume increases.
You disclose on page 42 that you have introduced several new
products. Clearly
identify the nature of the new products and the amount of revenue
produced by the
new products.
5. Please address the following:
Tell us and revise your MD&A to more clearly identify the nature of
the revenues
labeled "Related Party Sales" on page 23.
Revise your related party disclosures to identify the recipient of
the services.
To the extent these revenues are derived from services rendered
rather than product
sales, separately report the cost of these revenues from your cost
of product sales.
Liquidity and Capital Resources, page 24
6. Please revise to address the following regarding the material
definitive agreement signed
with Natural Plant Extract of California, Inc. effective April 15,
2019 as disclosed on page
F-24:
Given the significance of the $2 million in cash and $1 million
worth of your restricted
common stock you committed to convey to Natural Plant Extract
within 90 days of
April 15, 2019 to your available liquidity, revise to describe the
expected material
impact to your capital resources, and disclose your anticipated
source of funding to
fulfill such commitment. The discussion should include cash,
equity, and any other
resources impacted. Refer to Item 303(a)(2) of Regulation S-K.
Revise the "one million shares of our restricted common stock"
currently disclosed
throughout this filing, to reconcile with the language in the Stock
Purchase
Donald Steinberg
Marijuana Co of America, Inc.
May 28, 2019
Page 3
Agreement in Exhibit 10.2 to Form 8-K dated April 15th and filed
April 17, 2019 that
the "Purchaser agreed to issue to Seller one million dollars worth
of Purchasers'
unregistered and restricted common stock."
Revise the "March 15, 2019" currently disclosed in this filing, to
reconcile the
inconsistency with the terms "effective on April 15, 2019" in the
agreement in the
aforementioned Form 8-K.
Revise to disclose a timeline of your activities and discussions
conducted with the
owners and management of Natural Plant Extract that culminated in
the material
definitive agreement.
Investing Activities, page 25
7. You disclose on page 24 that none of your investments in MoneyTrac,
Conveniant Hemp
Mart, and the joint ventures with Global Hemp Group have produced
revenue, and most
have been fully impaired with a significant impact to your liquidity
and results of
operations. Please revise to address the following:
Please revise to include all of your investments, including
Bougainville and Gate C.
Further revise to disclose this known trend and uncertainty
regarding these critical
estimates, specifically quantifying the amount impairment for each
of your
investments entered into during 2017 and 2018.
Item 9A. Controls and Procedures, page 30
8. Regarding your conclusion that your disclosure controls and procedures
(DCP) were
effective, please revise to address the following:
Please tell us how you were able to conclude that your DCP were
effective considering
the fact that you did not file all your periodic reports in a
timely manner. DCP should
be designed to ensure that information disclosed in your reports
filed or submitted
under the Exchange Act is recorded, processed, summarized, and
reported within the
periods specified in the SEC's rules.
Further revise your DCP conclusion based on the other comments in
this letter as
necessary.
9. Please revise your disclosure to provide management's annual report on
internal control
over financial reporting. Refer to Regulation S-K, Item 308.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related
Stockholder Matters, page 33
FirstName LastNameDonald Steinberg
10. Please revise to provide the beneficial ownership of Robert L. Hymers
III or tell us
Comapany NameMarijuana is not required. Refer to Item 403(b) and Item 402(a)(3)
of
why the information Co of America, Inc.
Regulation S-K.
May 28, 2019 Page 3
FirstName LastName
Donald Steinberg
FirstName Co of America, Inc.
Marijuana LastNameDonald Steinberg
Comapany NameMarijuana Co of America, Inc.
May 28, 2019
May 28, 2019 Page 4
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Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm, page F-1
11. The audit report accompanying your financial statements omits the
opinion sentence, and
therefore, does not meet the requirements of Rule 2.02 of Regulation
S-X. Please address
the following:
As previously requested, please ensure that your auditors provide
reports that are fully
compliant with PCAOB AS 3101, including the actual opinion
sentence of the report.
Revise to ensure that the auditor's city and state reflected in both
this audit report and
the auditor's consent in exhibit 23 are consistent.
Note 1 - Significant Accounting Policies
Stock Based Compensation, page F-7
12. Please address the following:
As previously requested in comment #6 issued in our February 22,
2019 letter, revise
to specifically clarify whether you used the trading price of your
stock in determining
the fair value of your options via the Binomial Option Pricing
Model and whether any
adjustments were made to the trading price in determining the fair
value of the award.
If adjustments were made to the trading price, disclose the reasons
for and nature of
the adjustments, and tell us the amount of such adjustments.
To the extent you used the fair value of services rendered in lieu
of the share-based
payments, disclose the extent this occurred, and tell us the
amounts and reasons this
occurred.
13. You disclose on page F-7 that there were no stock options outstanding
as of December 31,
2018. However, elsewhere in your documents you disclose that there
were options
exercisable into one million shares outstanding as of December 31,
2018. Revise to
reconcile this apparent inconsistency. If the inconsistency relates to
the February 27, 2019
cancellation of Larsen and Steinberg options, revise to more clearly
disclose that fact and
how the cancellation was accounted for.
Adoption of Accounting Standards, page F-9
14. Your revenue recognition policy on page F-6 continues to be based on
the recognition
framework of ASC 605. However, elsewhere you disclose that you adopted
ASC 606
effective January 1, 2018. Please address the following:
Revise to provide the required transitional disclosures under ASC
606, including the
nature and amount of adjustments upon adoption.
To the extent you do not believe there were any adjustments upon
your adoption of
ASC 606, disclose that fact and tell us in detail how you arrived
at that conclusion.
Revise your revenue recognition policies throughout your document to
reflect your
appropriate consideration of the guidance and framework of ASC
606.
Donald Steinberg
FirstName Co of America, Inc.
Marijuana LastNameDonald Steinberg
Comapany NameMarijuana Co of America, Inc.
May 28, 2019
May 28, 2019 Page 5
Page 5
FirstName LastName
Note 4 - Investments, page F-10
15. We note your revision to disclose your quarterly investment activity
on page 44 of your
amended Form S-1. Revise to provide this rollforward in your Form
10-K. Further as
previously requested in comment #4 issued in our February 22, 2019
letter, in light of
your significant cash outlays, debt obligations, impairments, losses
on equity investments,
and gain on cancellation of debt related to your various interests
reported in both your
Investments and Short-term Investments line items, please also revise
your investment
rollforward to provide a separate tabular rollforward for the related
debt line items for
each of the periods presented in your next amendment that reconciles
to the amounts
presented on your Balance Sheet and Statements of Operations.
16. In addition, revise to disclose the following:
Separately disclose the activity of your two Global Hemp
investments: the New
Brunswick investment and the Scio, Oregon Investment, or explain
how they are
related to each other and why they should be combined.
Clearly label your Global Hemp investments throughout your filings
as related party
transactions.
Regarding each of the investments in the Global Hemp Group, explain
the following
for each investment:
o the $375,000 loss in the third quarter of 2017 after only a
$10,775 investment,
o the subsequent $364,225 gain in the fourth quarter of 2017 -
how it was calculated,
o the large $986,654 investment in 2018 after a zero balance at
December 31, 2017;
and
o why it was impaired at December 31, 2018;
Regarding Benihemp, identify the triggers for impairment at December
31, 2018.
Regarding MoneyTrac, explain why it was moved to short-term and how
the
unrealized gain was calculated.
Regarding Bougainville Ventures, Inc., disclose the background of
this
investment during the periods presented, including the impairments
taken, and identify
the triggers for those impairment charges.
Regarding Gate C Research, Inc., disclose the background of this
investment during
the periods presented, including the impairments taken, and
identify the triggers for
those impairment charges.
Note 13 - Commitments and Contingencies
Litigation, page F-21
17. We note $1,682,870 of legal contingency expense in 2018 on pages F-3
and 23, and stock
issued to settle a legal case on pages F-4 and F-17. Please revise the
following:
Revise this litigation footnote to describe each material case or
exposure experienced
during the periods presented;
Revise MD&A to describe this material unusual event; and
Donald Steinberg
FirstName Co of America, Inc.
Marijuana LastNameDonald Steinberg
Comapany NameMarijuana Co of America, Inc.
May 28, 2019
May 28, 2019 Page 6
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FirstName LastName
Revise your critical accounting policies and significant
accounting policies to address
your accounting for loss contingencies, including how you ensure
they are recorded on
a timely basis.
Note 15 - Subsequent Events, page F-24
18. We note the Letter of Intent you entered into with Natural Plant
Extract of California, Inc.
on March 18, 2019 on page F-24. Please provide the following:
It appears the material definitive agreement was effective on April
15, 2019, which is
the same as the audit report date. Revise your subsequent events
footnote to
acknowledge existence and terms of the material definitive
agreement.
Please provide us with your quantified significance tests for this
investment for
purposes of both Rule 8-03(b) Regulation S-X and ASC 323-10-50-3.
Certifications, page E.31
19. We note the certifications filed as Exhibits 31.1 and 31.2, with this
10-K on April 15,
2019, are missing the introductory language in paragraph 4 referring
to internal control
over financial reporting. We note that you also omitted the paragraph
regarding design of
internal control over financial reporting. Accordingly, please file an
amendment to your
Form 10-K that includes the entire filing together with the
certifications of each of your
current CEO and CFO in the form currently set forth in Item 601(b)(31)
of Regulation S-
K.
Form 10-Q for period ended March 31, 2019 filed May 20, 2019
Condensed Consolidated Interim Financial Statements
Statement of Cash Flows, page 7
20. We note your $12,000 impairment of investment in BV joint venture
during the three
months ended March 31, 2019. Please revise your MD&A to disclose the
trigger for this
impairment charge, including the timing for this charge after the
investment was fully
impaired in 2018.
Note 3--Summary of Significant Accounting Policies
Revenue Recognition, page 9
21. Revise your disclosures here to reflect your adoption of ASC 606 as
noted in above
comment.
Note 3--Summary of Significant Accounting Policies
Recent Accounting Pronouncements, page 12
22. You disclose here that you adopted ASC 842 for leases as of January 1,
2019 using the
modified retrospective method. Revise to provide the disclosures
required by ASC 842,
Donald Steinberg
FirstName Co of America, Inc.
Marijuana LastNameDonald Steinberg
Comapany NameMarijuana Co of America, Inc.
May 28, 2019
Page 7
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FirstName LastName
including the transitional guidance depicting the adjustments
reflecting the impact of your
adoption. To the extent you believe there were no adjustments, provide
us with your
detailed analysis of the literature as it applies to your current
leases that supports your
position.
Note 11 - Subsequent Events, page 22
23. Please revise to address the following regarding your definitive
material agreement with
Unicast Equities, LLC entered into on May 1, 2019, and your Letter of
Intent with
Essence Farms, LLC signed on May 14, 2019, on page 22:
Please revise to disclose the details and timing of any current or
future commitments
you made under either transaction.
Please revise to discuss the nature of the Unicast consulting
agreement.
File the documents related to the Essence Farms agreements.
Management's Discussion and Analysis, page 24
24. Revise to provide the investment and joint venture rollforward similar
to that provided in
your Form S-1 for the periods presented here. Update the rollforward
to address the
relevant comments, including addition of the debt related to those
investments.
Item 4. Controls and Procedures, page 32
25. Regarding your conclusion that your disclosure controls and procedures
(DCP) were
effective, please revise to address the following:
Please tell us how you were able to conclude that your DCP were
effective considering
the fact that you did not file all your periodic reports in a
timely manner. DCP should
be designed to ensure that information disclosed in your reports
filed or submitted
under the Exchange Act is recorded, processed, summarized, and
reported within the
periods specified in the SEC's rules.
Further revise your DCP conclusion based on the other comments in
this letter as
necessary.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Donald Steinberg
Marijuana Co of America, Inc.
May 28, 2019
Page 8
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.
Sincerely,
FirstName LastNameDonald Steinberg
Division of
Corporation Finance
Comapany NameMarijuana Co of America, Inc.
Office of Healthcare
& Insurance
May 28, 2019 Page 8
cc: Tad Mailander, Esq.
FirstName LastName