As our second year of operations comes to a close, we want to share with you, our fellow shareholders, a recap of our challenges and accomplishments this past year and, more importantly, our goals for 2020. While we have faced challenges and learned important lessons, we also have accumulated valuable assets and are now positioned to move from a development stage company to our next, even more exciting and hopefully rewarding phase.
As a U.S.-based, publicly traded company in the cannabis industry, we face greater regulatory headwinds and more SEC scrutiny than our Canadian compatriots and private entities in our industry. As a result of this, we have faced on-going challenges with the review and filing of our Company’s financials; and, thus, it has taken us a bit of time to identify and find the right audit firm that understands our industry, our corporate needs and has the resources required to support us. We have grown quickly, and some may say too quickly, as we underestimated both the internal and external resources that were required to insure the timely filing of information that is critical to providing our shareholders and the public at large with transparent, accurate and real-time understanding of what MJ Holdings is today and why we believe the future is bright. Over the past six months, we have: (i) found and are working closely with an audit firm that will help us thrive, and (ii) we have added strength to our management team at the Chief Financial Officer and President roles (hired in June and July, 2019, respectively).
In spite of these challenges, we are proud of what we have achieved over this past year. And, while we can always do better, we are excited about what we can achieve together in the coming years. Just to highlight some of our accomplishments, this was a year in which we acquired additional marijuana licenses (cultivation and production); purchased additional properties and leased additional production space; improved our infrastructure; added much needed internal and external resources and key employees, and raised significant equity capital – all without diluting shareholder value and while actually reducing our total number of shares outstanding:
· In January of this year, we closed on the purchase of 260 acres of fertile farmland in the Amargosa Valley of Nevada – immediately adjacent to our current, three-acre cultivation facility. With the acquisition of an additional cultivation license and the recent approvals of local and state regulators, we expect to commence grow operations this spring on a new five-acre facility utilizing the Cravo® cultivation system, bringing our total outdoor cultivation capacity to more than 320,000 square feet. With this and the addition of our 15,000 plus square foot indoor facility in Las Vegas coming on-line in 2020 (discussed further below), we expect that MJ Holdings will be the largest grower of marijuana in the State of Nevada by the end of 2020.
· While we had a successful first harvest of our “test grow” in late 2018, our dried product weight missed our initial estimates and we netted about 5,400 lbs. of tested product available for sale. Additionally, the THC levels of our product showed variations that made it difficult to sell as flower. Thus, we elected to concentrate on pre-rolled marijuana cigarettes and marijuana trim to be processed into oil. Due to a significant increase in failed flower entering the market (marijuana that has tested positive for yeast and mold but can still be processed into oil) from our competitors, we saw a steep drop in wholesale pricing for trim in Nevada to under $400 per pound. While we are disappointed that we were unable to achieve the goals that we set for ourselves with our first test grow, we are extremely happy that: (i) we were able to successfully grow in the harsh conditions of the Nevada desert; (ii) we had a more than 90% product passing rate, and (iii) the lessons we learned in our first season that we successfully implemented with our most recent harvest.
· In an effort to have greater control over our grow, we decided to scale back a bit in 2019, reducing our crop from 13 different marijuana strains down to six and reducing the number of plants in order to achieve better overall results. We harvested the plants a full month earlier this year and the results of our 2019 harvest indicate that we made very good decisions. While maintaining our more than 90% passing rate, our crop is showing much higher and consistent THC concentrations (between 20% and almost 27%) with excellent terpene profiles. We expect total 2019 dried weight to be in excess of 3,000 lbs. with as much as 1,500 lbs. being marketed as flower. Sales of our flower have been at upwards of $1,400 per pound; and, currently, the top Las Vegas dispensaries are acquiring our products, including our LV Slugger pre-rolls, our pre-packaged Highland Brothers brand flower and our processed distillate for use in their own edible and vape products. With our own processing facility expected to commence operations in mid 2020, we expect to have considerably higher revenues from this harvest than last year’s test grow.
· In August we entered into a joint venture with Element NV, LLC to provide $5,000,000 in funding to build out our approximately 17,000 square foot, Western Avenue location as an indoor, state-of-the-art agritourism cultivation facility, known as the Highland Show-Grow. The City of Las Vegas has issued a Special Use Permit to operate a recreational marijuana establishment and in conjunction with Element NV we have made our initial investment in improving the property and are preparing detailed construction plans for submission to the City of Las Vegas Department of Buildings for approval. We expect to begin construction in late February of 2020 and be operational by the fourth quarter of next year.
· We have entered into an agreement to acquire two additional marijuana licenses in Nevada – our first production license and an additional cultivation license. We have been working diligently with the current license holders to perfect both licenses and make them operational by the end of this year. We anticipate moving the production license to our new leased facility in Pahrump, NV in the first quarter of 2020 and the cultivation license to our farm in Amargosa in May of next year. We will have operational control of both licenses upon the issuance of Conditional Marijuana Establishment Licenses by the State of Nevada’s Department of Taxation which is imminent.
· This year, we acquired a trailer/tiny home park near our Amargosa farm. This facility is providing temporary and permanent housing for our growing number of farm employees. We are continuing to make improvements to this property, and once renovated, it will become a positive revenue-generating asset as it borders a popular national wildlife refuge and sits near the entrance to Death Valley.
· We formed Alternative Hospitality, Inc. in late 2018 as a joint venture to operate a chain of cannabis-friendly, lifestyle hotel properties. Many of you may have seen the considerable press that this concept has received, primarily due to the efforts of Alternative’s President and MJ Board member, renowned hotelier Roger Bloss. We are in contract to develop our first property in Southern California and have received significant, unsolicited interest regarding other locations; we are truly excited about the future of this subsidiary.
· We formed MJ International Research Company, Ltd., a wholly-owned subsidiary of MJ Holdings, Inc., to take advantage of developing opportunities in the European Union, especially Greece; the Company is headquartered in Dublin, Ireland. We will continue to monitor the regulatory landscape and seek appropriate opportunities for MJ International in Europe.
· Last year, we shared with you our vision for potential opportunities in the burgeoning hemp industry. It was our plan to launch a small grow this year; however, we decided, after much internal debate, not to move forward at this time. We believe we made the right decision. The wholesale price for hemp biomass has plummeted by more than 70% and there appears to be a tremendous amount of raw material presently available in the marketplace. Processing of this biomass continues to represent a significant choke point for the hemp industry. We have identified a number of potential joint venture partners for the distribution of hemp related products and we will continue to seek and engage in appropriate opportunities for MJ Holdings in the overall hemp products industry.
While the overall cannabis sector has been prone to stock price volatility and we remain concerned about the current price of our stock, we are confident that improving our business fundamentals by commercializing and monetizing the assets we’ve accumulated will lead to an improved share price. In 2019, we were able to raise more than $6,000,000 in equity financing and $2,000,000 in debt financing to grow our business and position us to provide a 360-degree spectrum of infrastructure (including: cultivation, cultivation and production management, brand development and consulting services). We continue to seek the right dispensary acquisition for the Company. We expect that 2020 will be the year where we start to “prove our concept”, become vertically integrated by marrying our unique sun grown marijuana with our own production facility and dispensary thus creating a clear path to 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 of new operations.
In the new year, will look to take steps to improve the liquidity of our stock and get back on the OTCQB, we will insure our public information is timely filed and we will continue to improve communication with our shareholders.
In closing, the future for legalized marijuana throughout the United States is looking brighter with each passing year. We will continue to be on the forefront of changing attitudes and opportunities in other legal jurisdictions. You, our shareholders, remain instrumental in our future success; we appreciate your patience, and, again, want to again thank you for all of your continuing support. We hope you continue to be part of the MJ Holdings family as we chart a course towards great success and prosperity.
Wishing everyone a happy and healthy New Year.
About MJ Holdings, Inc.
MJ Holdings Inc. (OTC PINK®: MJNE) is a highly diversified publicly traded holding company headquartered in Las Vegas, NV providing cultivation services, cultivation and production management, branding and consulting services to the regulated cannabis industry. Our management operations include a three-acre, outdoor marijuana cultivation facility in the Amargosa Valley of Nevada; we are developing a fully-licensed, indoor agritourism cultivation facility located in the city of Las Vegas known as the Highland Show-Grow and we are developing an additional five-acre farm and our own production capabilities. We are also active in identifying and acquiring revenue producing assets and licenses within legalized cannabis markets both nationally and internationally.
The information provided in this press release may include forward-looking statements relating to future events or the future financial performance of the Company. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Words such as “anticipates,” “plans,” “expects,” “intends,” “will,” “potential,” “hope” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon current expectations of the Company and involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties. Detailed information regarding factors that may cause actual results to differ materially from the results expressed or implied by statements in this press release relating to the Company may be found in the Company’s periodic filings with the Securities and Exchange Commission, including the factors described in the sections entitled “Risk Factors”, copies of which may be obtained from the SEC’s website at www.sec.gov. The parties do not undertake any obligation to update forward-looking statements contained in this press release.
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