MJ Pharmaceuticals Inc. - FORM 10-Q - May 19, 2015

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549  
 
 
FORM 10-Q  
 
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
 
or
 
o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the period from ___________ to ___________
 
Commission File Number: 000-54811
 
GRAPHIC
 
MJ PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE
46-4288088
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
7524 Glenturret Circle, The Colony, Texas
75056
(Address of principal executive offices)
(Zip Code)
 
Tel:(214) 505-3839
(Registrant’s telephone number, including area code)
 
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.     x Yes     o No
 
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).     x Yes     o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer
o
Accelerated Filer
o
Non-accelerated Filer
  (Do not check if a smaller  reporting company.)
o
Smaller Reporting Company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     o Yes     x No
 
As of May 18, 2015, there were 185,740,000 shares of common stock, par value $.0001, outstanding.
 
 
 
Table of Contents
 
 
PART I - FINANCIAL INFORMATION
 
Item 1.  Financial Statements.
 

MJ PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS

   
March 31, 2015
   
December 31, 2014
 
   
(Unaudited)
   
(Unaudited)
 
ASSETS
 
 
   
 
 
   
 
   
 
 
Current Assets:
 
 
   
 
 
   
 
   
 
 
Cash and cash equivalents
 
$
6,826
   
$
7,358
 
                 
Total Current Assets
   
6,826
     
7,358
 
                 
Total Assets
 
$
6,826
   
$
7,358
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current Liabilities:
               
                 
Loan from related party
 
$
449
   
$
449
 
                 
Total Current Liabilities
   
449
     
449
 
                 
STOCKHOLDERS' EQUITY
               
                 
Stockholders' equity
               
                 
Preferred stock par value $0.0001 per share; 20,000,000 shares authorized; none issued at March 31, 2015 and December 31, 2014.
   
–
     
–
 
                 
Common stock, par value $0.0001 per share; 500,000,000 shares authorized;
      185,740,000 shares issued and outstanding, at March 31, 2015 and December 31, 2014.
   
18,574
     
18,574
 
                 
Additional Paid In Capital
   
–
     
–
 
                 
Deficit accumulated during development stage
   
(12,197
)
   
( 11,665
)
                 
Total Stockholders' Equity
   
6,377
     
6,909
 
                 
Total Liabilities and Stockholders' Equity
 
$
6,826
   
$
7,358
 


The accompanying notes are an integral part of these financial statements.

 
MJ PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS

   
 
   
 
   
For the period from
 
   
 
   
 
   
February 21, 2012
 
   
 
   
 
   
(Date of Inception)
 
   
For the three months ended
   
through
 
   
March 31,
   
March 31,
 
   
2015
   
2014
   
2015
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
   
 
   
 
   
 
 
Net E-Commerce service revenue (Note 5)
 
$
–
   
$
–
   
$
6,731
 
Less - Net E-Commerce service cost
   
–
     
–
     
3,010
 
                         
Gross Margin
   
–
     
–
     
3,721
 
                         
Expenses
                       
General and administrative
   
–
     
194
     
4,397
 
Legal, organization and related expenses
   
532
     
979
     
8,721
 
Professional fees
   
–
     
1,500
     
2,800
 
                         
Total Expenses
   
532
     
2,673
     
15,918
 
                         
Net Profit (Loss)
 
$
(532
)
 
$
(2,673
)
 
$
(12,197
)
                         
                         
                         
Basic profit (loss) per share
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)
                         
Basic weighted average number of shares outstanding
   
185,740,000
     
40,575,889
     
185,740,000
 


The accompanying notes are an integral part of these financial statements .


MJ PHARMACEUTICALS, INC.
 (A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM FEBRUARY 21, 2012 (INCEPTION) THROUGH MARCH 31, 2015
 
   
Common
Stock
   
Common
Stock
Amount
   
Additional
Paid-in
Capital
   
Deficit
Accumulated
During
Development
Stage
   
Total
 
                               
February 21, 2012 (Inception)
                             
                               
Shares issued for services at $0.0001 per share
   
31,390,000
   
$
3,139
   
 $
–
   
$
     
$
3,139
 
                                         
Net loss for year ended December 31, 2012
    –       –       –      
(3,139
)
   
(3,139
)
                                         
Balance December 31, 2012
   
31,390,000
     
3,139
     
-
     
(3,139
)
   
–
 
                                         
Shares issued during the period for services paid by sole shareholder
   
8,500,000
     
850
     
–
             
850
 
                                         
Net loss for year ended December 31, 2013
    –       –       –      
(850
)
   
(850
)
                                         
Balance December 31, 2013
   
39,890,000
     
3,989
     
–
     
(3,989
)
   
–
 
                                         
Shares issued during the period for cash and services paid by sole shareholder
   
145,850,000
     
14,585
     
–
             
14,585
 
                                         
Net loss for year ended December 31, 2014
    –       –       –      
(7,676
)
   
(7,676
)
                                         
Balance December 31, 2014
   
185,740,000
     
18,574
     
–
     
(11,665
)
   
6,909
 
                                         
Net loss for period ended March 31, 2015
    –       –       –      
(532
)
   
(532
)
                                         
Balance March 31, 2015
   
185,740,000
   
$
18,574
   
$
–
   
$
(12,197
)
 
$
6,377
 


The accompanying notes are an integral part of the consolidated financial statements.


MJ PHARMACEUTICALS, INC.
 (A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
 
               
For the period from
 
               
February 21, 2012
 
               
(Date of Inception)
 
   
For the three months ended
   
through
 
   
March 31,
   
March 31,
 
   
2015
   
2014
   
2015
 
                   
Operating activities:
                 
Net loss
 
$
(532
)
 
$
(2,673
)
 
$
(12,197
)
                         
Net cash used in operating activities
   
(532
)
   
(2,673
)
   
(12,197
)
                         
Financing activities
                       
Proceeds from issuance of common stock
   
–
     
6,173
     
18,574
 
Increase in related party loan
   
–
     
–
     
449
 
                         
Net cash provided by financing activities
   
–
     
6,173
     
19,023
 
                         
Net increase(decrease) in cash and cash equivalents
   
(532
)    
3,500
     
6,826
 
                         
Cash and cash equivalents, beginning of period
   
7,358
     
–
     
–
 
                         
Cash and cash equivalents, end of period
 
$
6,826
   
$
3,500
   
$
6,826
 
                         
                         
Supplemental disclosures of cash flow information:
                       
                         
Cash paid during the period for interest
 
$
–
   
$
–
   
$
–
 
                         
Cash paid during the period for taxes
 
$
–
   
$
–
   
$
–
 


The accompanying notes are an integral part of the consolidated financial statements.

 
MJ PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 21, 2012 (INCEPTION) TO MARCH 31, 2015
 
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
 
MJ Pharmaceuticals, Inc. (the "Company"), a development stage company, was incorporated under the laws of the State of Delaware on February 21, 2012.  The Company initially intends to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business.
 
On October 31, 2013, the initial owner of the Company transferred his 100% shares to a new owner, Uren Enterprises, LLC which is solely owned by Mr. Mark Uren.  The Company under the new ownership intends to serve as an investor in and provider of e-commerce operations to the property management and property rental industries, as well as investor in and provider of e-commerce operations and other services to the marijuana pharmaceutical industry.
 
On April 11, 2014, Melanthios Acquisition Corp filed a Certificate of Amendment of Certificate of Incorporation changing the name of the Corporation to Price My Rent Group, Inc.
 
The Company commenced limited initial e-commerce operations on September 1, 2014. In November 2014, the Company suspended these operations, subject to further development of the e-commerce portal.
 
On December 17, 2014, Price My Rent Group, Inc filed a Certificate of Amendment of Certificate of Incorporation changing the name of the Corporation to MJ Pharmaceuticals, Inc.
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
BASIS OF PRESENTATION - DEVELOPMENT STAGE COMPANY
 
The Company has earned limited revenue from the initial stages of its e-commerce operations.  Accordingly, the Company's activities have been accounted for as those of a "Development Stage Company" as set forth in Financial Accounting Standards Board Accounting Standards Codification 915 ("FASB ASC 915").  Among the disclosures required by FASB ASC 915 are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity and cash flows disclose activity since the date of the Company's inception.
 
Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
 
ACCOUNTING METHOD
 
The Company's financial statements are prepared using the accrual method of accounting.  The Company has elected a fiscal year ending on December 31.
 
USE OF ESTIMATES
 
The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America 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.
 
CASH AND CASH EQUIVALENTS
 
The Company considers all highly liquid investments with original maturities from date of purchase of three months or less to be cash equivalents.  Cash and equivalents consist of cash on deposit with domestic banks and, at times, may exceed federally insured limits.
 
 
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL DEBTS
 
Accounts receivable are generally due within 30 days and are recorded net of an allowance for doubtful accounts.  We consider accounts outstanding longer than the contractual terms past due.  We review accounts receivable on a regular basis and estimate an amount of losses for uncollectible accounts based on our historical collections experience, age of the receivable, knowledge of the customer and the condition of the general economy and industry as a whole.  We record changes in our estimate to the allowance for doubtful accounts through bad debt expense and relieve the allowance when accounts are ultimately determined to be uncollectible.  Bad debt expenses, if any, are included in general and administrative expenses.
 
REVENUE RECOGNITION
 
In general, we recognize revenue when (i) there is persuasive evidence of an arrangement, (ii) the solution and/or service has been provided to the customer, (iii) the collection of the fees is probable, and (iv) the amount of fees to be paid by the customer is fixed or determinable.
 
We currently generate revenue under our E-Commerce Software Solution which is primarily comprised of transaction fees for certain e-commerce software solutions, such as payment processing.  We recognize revenue from these transaction fees as the related services are performed.
 
COST OF REVENUE
 
Cost of revenue consists primarily of fees paid to third-party service providers.
 
ORGANIZATIONAL COSTS
 
Organizational costs represent management, consulting, legal, accounting, and filing fees incurred to date in the formation of the company.  Organizational costs are expensed as incurred in accordance with FASB ASC 720-15, "Start-Up Costs".
 
INCOME TAXES
 
The Company has adopted the provisions of FASB ASC 740, "Accounting for Income Taxes" which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.  Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
 
BASIC EARNINGS (LOSS) PER SHARE
 
The Company uses Topic 260 "Earnings Per Share", for calculating the basic and diluted profit (loss) per share.  The Company computes basic profit (loss) per share by dividing net profit (loss) and net profit (loss) attributable to common stockholders by the weighted average number of common shares outstanding.  Diluted profit (loss) per share is computed similar to basic profit (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential shares had been issued and if the additional shares were dilutive.  Common equivalent shares are excluded from the computation of net profit (loss) per share if their effect is anti-dilutive.  At March 31, 2015 and December 31, 2014, the Company did not have any stock equivalents.
 
FAIR VALUE MEASUREMENTS
 
GAAP defines fair value, provides guidance for measuring fair value and requires certain disclosures.  GAAP utilizes a fair value hierarchy which is categorized into three levels based on the inputs to the valuation techniques used to measure fair value.  These principles discuss valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flows) and the cost approach (cost to replace the service capacity of an asset or replacement cost).  These principles provide for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The following is a brief description of those three levels:
 
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that is observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the Company's assumptions.
 
The Company's financial instruments consist of accounts payable and accrued expenses.  The carrying value approximates fair value due to the short maturity of these instruments.
 
STOCK-BASED COMPENSATION
 
The Company recognizes the services received or goods acquired in a share-based payment transaction as services are received or when it obtains the goods as an increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria [ASC 718-10-25-2, Compensation-Stock Compensation, Recognition].
 
A share-based payment transaction with employees is measured base on the fair value (or, in some cases, a calculated or intrinsic value) of the equity instrument issued.  If the fair value of goods or services received in a share-based payment with non-employees is more reliably measurable than the fair value of the equity instrument issued, the fair value of the goods or services received shall be used to measure the transaction.  Conversely, if the fair value of the equity instruments issued in a share-based payment transaction with non-employees is more reliably measurable than the fair value of the consideration received, the transaction is measured at the fair value of the equity instruments issued [ASC 718-10-30-2, Compensation-Stock Compensation, Initial Measurement].
 
The cost of services received from employees in exchange for awards of share-based compensation generally is measured at the fair value of the equity instruments issued or at the fair value of the liabilities incurred.  The fair value of the liabilities incurred in share-based transactions with employees is remeasured at the end of each reporting period until settlement [ASC 718-10-30-3, Compensation-Stock Compensation, Initial Measurement].
 
Share-based payments awarded to an employee of the reporting entity by a related party or other holder of an economic interest in the entity as compensation for services provided to the entity are share-based transactions to be accounted for under ASC 718 unless the transfer is clearly for a purpose other than compensation for services to the reporting entity.  The substance of such a transaction is that the economic interest holder makes a capital contribution to the reporting entity and that entity makes a share-based payment to its employee in exchange for services rendered [ASC 718-10-15-4, Compensation-Stock Compensation, Scope and Scope Exceptions].
 
NOTE 3 - IMPACT OF NEW ACCOUNTING STANDARDS
 
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position, or cash flow.
 
NOTE 4 - GOING CONCERN
 
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has not established sufficient sources of revenue to cover its operating costs.  The Company will engage in very limited activities until a source of funding is secured.  The Company will offer noncash consideration and seek equity lines as a means of financing its operations.  If the Company is unable to obtain revenue producing contracts or financing or if the revenue or financing it does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders.
 
NOTE 5 - E-COMMERCE SERVICES REVENUE
 
A component of certain transactions under our E-Commerce Software Solution contains amounts directly attributable to clients.  The amount collected by us, for and on behalf of clients, is detailed below:
 
               
For the period from
 
               
February 21, 2012
 
               
(Date of Inception)
 
   
For the three months ended
   
through
 
   
March 31,
   
March 31,
 
   
2015
   
2014
   
2015
 
                   
E-Commerce services
                 
Gross sales
 
$
–
   
$
–
   
$
342,162
 
Less – Direct client component
   
–
     
–
     
335,431
 
                         
Net E-Commerce service revenue
 
$
–
   
$
–
   
$
6,731
 
 
 
 
NOTE 6 - INCOME TAXES
 
For the period from February 21, 2012 (Date of Inception) through March 31, 2015, the Company has incurred net losses and, therefore, has no tax liability.  The net deferred tax asset generated by the loss carry-forward has been fully reserved.  The cumulative net operating loss carry-forward is approximately $12,197 at March 31, 2015, and will expire in the year 2033.  The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
 
Deferred tax asset attributable to:
 
         
For the period from
  
         
February 21, 2012
  
   
For the
    
(Date of Inception)
  
   
three months ended
    
through
  
   
March 31, 2015
    
March 31, 2015
  
             
Net operating loss carryover
 
$
181
   
$
4,147
 
Valuation allowance
   
(181
)
   
(4,147
)
                 
Net deferred tax asset
 
$
–
   
$
–
 
 
Realization of deferred tax assets is not practical until subsequent to a business combination with target business opportunity, and such a target business opportunity has yet to be finalized.
 
The provision for income taxes consists of the following:
 
         
For the period from
  
         
February 21, 2012
  
   
For the
    
(Date of Inception)
  
   
three months ended
    
through
  
   
March 31, 2015
    
March 31, 2015
  
             
Current tax
 
$
181
   
$
4,147
 
Change in deferred tax asset
   
(181
)
   
(4,147
)
                 
Change in valuation allowance
 
$
–
   
$
–
 
 
The Company has elected to classify interest and/or penalties related to an uncertain position, if and when required, as part of other expenses in the statements of operation.  No such amounts have been incurred or accrued through March 31, 2015 by the Company.
 
For the period from February 21, 2012 (Date of Inception) through March 31, 2015, there is no unrecognized tax benefit.  Management does not anticipate any potential future adjustments which would result in a material change to its financial tax position.  As of March 31, 2015, the Company did not accrue any interest and penalties.
 
NOTE 7 - RELATED PARTY BALANCES AND TRANSACTIONS
 
On February 21, 2012 (Date of Inception), the Company issued 31,390,000 shares of common stock to the founding shareholder in exchange for incorporation fees of $89, annual resident agent fees in the State of Delaware for $50, and developing the Company's business concept and plan valued at $3,000 to a total sum of $3,139.
 
On December 31, 2013, the Company issued 8,500,000 shares of common stock in exchange for filing fees of $187, courier fees of $163, and payment made for audit fees of $500.00 by the sole owner, Uren Enterprises, LLC.  The total amount is $850.
 
On March 31, 2014, the Company issued 61,730,000 shares of common stock in exchange for cash of $3,500, filing fees of $979, courier fees of $194, and payment made for audit fees of $1,500 by the sole owner, Uren Enterprises, LLC.  The total amount is $6,173.
 
On June 30, 2014, the Company issued 58,500,000 shares of common stock in exchange for franchise tax of $1,654, filing fees of $500, office expenses of $98, travel expenses of $3,581 and payment made for domain registration of $17 by the sole owner, Uren Enterprises, LLC.  The total amount is $5,850.
 
 
On August 29, 2014, the Company entered into a short term agreement, at cost plus $100 per month processing fee, with a corporation related to the sole director, Mark Uren, for the sole purposes of providing interim merchant services to the Company.  This agreement was to commence on September 1, 2014 and was terminated by the Company in November 2014.  At March 31, 2015 there were no recorded related party accounts receivable and no recorded related party accounts payable, in accordance with this short term agreement.
 
On September 30, 2014, the Company issued 25,620,000 shares of common stock in exchange for cash of $2,062 and filing fees of $500 by the sole owner, Uren Enterprises, LLC.  The total amount is $2,562.
 
On December 17, 2014, the Company recorded a loan from the sole owner, Uren Enterprises, LLC for payment of $450 filing fees for the name change of the Company to MJ Pharmaceuticals, Inc.
 
NOTE 8 - STOCKHOLDER'S EQUITY
 
The Company's Articles of Incorporation authorize 500,000,000 shares of $0.0001 par value Common Stock and 20,000,000 shares of $0.0001 par value Preferred Stock.
 
Since February 21, 2012, the date of inception, the Company has issued total of 185,740,000 shares of common stock in exchange for cash, general and administrative expenses, and incorporation related fees and services.
 
NOTE 9 - SUBSEQUENT EVENTS
 
None.
 
Subsequent events have been evaluated through May 18, 2015, the date the financial statements were issued.
 
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
This Quarterly Report contains "forward-looking statements".  All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
 
Forward-looking statements may include the words "may", "could", "estimate", "intend", "continue", "believe", "expect" or "anticipate" or other similar words.  These forward-looking statements present our estimates and assumptions only as of the date of this report.  Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made.  Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.  You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
 
Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.  The factors impacting these risks and uncertainties include, but are not limited to:
 
Ÿ our current lack of working capital;
Ÿ inability to raise additional financing;
Ÿ the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;
Ÿ deterioration in general or regional economic conditions;
Ÿ adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
Ÿ inability to efficiently manage our operations;
Ÿ inability to achieve future sales levels or other operating results; and
Ÿ the unavailability of funds for capital expenditures.
 
Throughout this Report references to "we", "our", "us", "MJ Pharmaceuticals", "the Company", and similar terms refer to MJ Pharmaceuticals, Inc.
 
Overview and Outlook
 
We are an "emerging growth company" ("EGC") that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our Business Startups Act ("the JOBS Act"), that eases restrictions on the sale of securities; and increases the number of shareholders a company must have before becoming subject to the U.S.  Securities and Exchange Commission's (SEC's) reporting and disclosure rules (See "Emerging Growth Companies" section above).
 
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.  As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
 
We currently engage in business activities that provide limited cash flow.
 
Key Components of our Results of Operations
 
Revenue
 
We anticipate we will derive our revenue from three primary sources: the licensing or sale of Medicinal Cannabis Patented Products, Cannabis Laboratory Testing and E-commerce Software Solutions.
 
To date, we have implemented limited operations under the E-commerce Software Solutions.
 
E-Commerce Software Solutions Revenue
Revenue from our e-commerce software solutions is comprised of transaction fees for certain e-commerce software solutions, such as payment processing. Typically, we price our e-commerce software solutions based primarily on customer usage.
 
During the three months ended March 31, 2015, revenue from our e-commerce software solutions was $Nil.
 
 
Cost of Revenue
 
Cost of revenue will consist primarily of personnel costs related to our operations, support services, training and implementation services, expenses related to the operation of our data center and fees paid to third-party service providers. Personnel costs will include salaries, bonuses, stock-based compensation and employee benefits. Cost of revenue will also include an allocation of facilities costs, overhead costs and depreciation, as well as amortization of acquired technology related to strategic acquisitions, if any, and amortization of capitalized development costs. We will primarily allocate facilities costs, overhead costs and depreciation based on head count.
 
Operating Expenses
 
We classify our operating expenses into three categories: product development, sales and marketing, and general and administrative. Our operating expenses will primarily consist of personnel costs, which will include compensation, employee benefits and payroll taxes, costs for third-party contracted development, marketing, legal, accounting and consulting services and other professional service fees. Personnel costs for each category of operating expenses will include salaries, bonuses, stock-based compensation and employee benefits for employees in that category. In addition, our operating expenses will include an allocation of our facilities costs, overhead costs and depreciation based on head count for that category, as well as amortization of purchased intangible assets resulting from any acquisitions.
 
Product development . - Product development expense will consist primarily of personnel costs for our product development employees and executives and fees to contract development vendors. Our product development efforts are focused primarily on increasing the functionality and enhancing the ease of use of our e-commerce software solutions and expanding our licensing and subscription software solutions as well as our promotional software solutions. We expect our product development expenses to increase in absolute dollars.
 
Sales and marketing . - Sales and marketing expense will consist primarily of personnel costs for our sales, marketing and business development employees and executives, travel and entertainment and marketing programs. Marketing programs may consist of advertising, tradeshows, user conferences, public relations, industry sponsorships and affiliations and product marketing. In addition, sales and marketing expense may include amortization of certain purchased intangible assets, including customer relationships and key vendor and supplier relationships obtained in connection with any acquisitions. We expect our sales and marketing expense to increase in absolute dollars.
 
General and administrative . - General and administrative expense will consist of personnel costs for our executive, finance and accounting, human resources, management information systems and legal personnel, as well as legal, accounting and other professional service fees and other corporate expenses. We expect our general and administrative expense to increase in absolute dollars.
 
Income Taxes
 
Historically, we have incurred annual operating losses and have not benefited from these losses.  As of March 31, 2015, we had net operating loss carry forwards for federal and state income tax purposes of $12,197.  Based on current period income and projected future year income, we believe that it is more likely than not that the net deferred tax assets recorded will be realized.  If not utilized, our federal net operating loss and tax credit carry forwards will begin to expire in 2033.  While not currently subject to an annual limitation, the utilization of these carry forwards may become subject to an annual limitation because of provisions in the Internal Revenue Code that are applicable if we experience an "ownership change," which may occur, for example, as a result of this offering or other issuances of stock.
 
Critical Accounting Policies
 
Our financial statements are prepared in accordance with GAAP.  In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application, while in other cases, management's judgment is required in selecting among available alternative accounting standards that allow different accounting treatment for similar transactions.  The preparation of our financial statements and related disclosures may require us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures.  We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances.  In some instances, we could reasonably use different accounting estimates, and in some instances results could differ significantly from our estimates.  We will evaluate our estimates and assumptions on an ongoing basis.  To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
 
 
 
We believe that the assumptions and estimates associated with revenue recognition, accounts receivable and capitalized product development costs have the greatest potential impact on our financial statements.  Therefore, we believe the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving our management's judgments, assumptions and estimates.
 
Revenue Recognition
 
We will derive our revenue from three primary sources: e-commerce software solutions; licensing and subscription software solutions; and promotional software solutions.  In general, we recognize revenue when all of the following conditions are reasonably assured:
 
Ÿ there is persuasive evidence of an arrangement;
Ÿ the solution and/or service has been provided to the customer;
Ÿ the collection of the fees is probable; and
Ÿ the amount of fees to be paid by the customer is fixed or determinable.
 
For multi-element arrangements that include multiple solutions and/or services, we will allocate arrangement consideration to all deliverables that have stand-alone value based on their relative selling prices.  In such circumstances, we will utilize the following hierarchy to determine the selling price to be used for allocating revenue to deliverables as follows:
 
Ÿ Vendor specific objective evidence (VSOE), if available.  The price at which we sell the element in a separate stand-alone transaction;
Ÿ Third-party evidence of selling price (TPE), if VSOE of selling price is not available.  Evidence from us or other companies of the value of a largely interchangeable element in a transaction; and
Ÿ Estimated selling price (ESP), if neither VSOE nor TPE of selling price is available.  Our best estimate of the stand-alone selling price of an element in a transaction.
 
Our process for determining ESP for deliverables without VSOE or TPE considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable.  Key factors primarily considered in developing ESP include prices charged by us for similar offerings when sold separately, pricing policies and approvals from standard pricing and other business objectives.
 
Accounts Receivable
 
For several of our solutions, we may invoice our customers prior to the period in which service is provided.  Accounts receivable represent trade receivables from third-party service providers and customers when we have invoiced for software solutions and/or services where we have not yet received payment.  We will present accounts receivable net of an allowance for doubtful accounts.  We will maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments, or the customer cancelling prior to the service being rendered.  In doing so, we will consider the current financial condition of the customer, the specific details of the customer account, the age of the outstanding balance, the current economic environment and historical credit trends.  As a result of a portion of our allowance being for services not yet rendered, a portion of our allowance m ay be charged as an offset to deferred revenue, which does not have an effect on the statement of operations.  Any change in the assumptions used in analyzing a specific account receivable might result in an additional allowance for doubtful accounts being recognized in the period in which the change occurs.
 
Capitalized Product Development Costs
 
We will capitalize specific product development costs, including costs to develop software products or the software components of our solutions to be marketed to our customers, as well as software programs to be used solely to meet our internal needs.  The costs incurred in the preliminary stages of development related to research, project planning, training, maintenance and general and administrative activities, and overhead costs are expensed as incurred.  The costs of relatively minor upgrades and enhancements to the software are also expensed as incurred.  Once an application has reached the development stage, internal and external costs incurred in the performance of application development stage activities, including materials, services and payroll-related costs for employees will be capitalized, if direct and incremental, until the software is substantially complete and ready for its intended use.  Capitalization will cease upon completion of all substantial testing.  We will also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality.  Capitalized costs will be recorded as part of property and equipment.  Internal use software will be amortized on a straight-line basis over its estimated useful life, generally three years.  Management will evaluate the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.
 
 
Liquidity and Capital Resources
 
As of March 31, 2015, we had $6,826 in cash and did not have any other cash equivalents.  The following table provides detailed information about our net cash flow for all financial statement periods presented in this Report.  To date, we have financed our operations through the issuance of stock and limited revenues.
 
The following table summarizes total current assets, total current liabilities and working capital of the Company at March 31, 2015 compared to year end December 31, 2014.
 
 
 
 
 
 
 
 
 
Increase / (Decrease)
 
 
 
March 31, 2015
    
December 31, 2014
    
$
    
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
$
6,826
 
 
$
7,358
 
 
$
(532
)
 
 
(7.2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
$
449
 
 
$
449
 
 
$
–
 
 
 
0.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Working capital (deficit)
 
$
6,377
 
 
$
6,909
 
 
$
(532
)
 
 
(7.7)
 
 
Liquidity is a measure of a company's ability to meet potential cash requirements.  We have historically met our capital requirements through the issuance of stock, which has been invested in us by Uren Enterprises, LLC, our controlling shareholder, or Mark Uren, our sole officer, director, or other investors.  In the future, we anticipate we will be able to provide the necessary liquidity needed from the revenues generated from operations but there is no assurance that this will happen.
 
Since inception, we have financed our cash flow requirements through issuance of common stock and limited revenues.  As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations.  Additionally we anticipate obtaining additional financing to fund operations through additional common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital.
 
We anticipate that we will incur operating losses in the next twelve months.  Our minimal operating history makes predictions of future operating results difficult to ascertain.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets.  Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth.  To address these risks, we must, among other things, increase our customer base, further and improve our marketing strategy, continually develop and upgrade our website, provide national and regional businesses with an effective, efficient and accessible website on which we are able to promote ours and their services through the Internet, respond to competitive developments, and attract, retain and motivate qualified personnel.  There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
 
Operating activities
 
Net cash used in operating activities was $532 for the three months ended March 31, 2015, as compared to $2,673 for the three months ended March 31, 2014.  The decrease in net cash used in operating activities was primarily due to decreased operating expenses related to organizational costs.
 
Financing activities
 
Net cash provided by financing activities for the three months ended March 31, 2015, was $Nil, as compared to $6,173 for the year three months ended March 31, 2014.  The decrease of net cash provided by financing activities was mainly attributable to a decrease in capital provided through issuance of common stock.
 
 
We believe that cash flow from operations will not meet our present and near-term cash needs and thus we will require additional cash resources, including the sale of equity or debt securities, to meet our planned capital expenditures and working capital requirements for the next 12 months.  We will require additional cash resources due to changed business conditions, finalization and launch of our website, implementation of our strategy to expand our sales and marketing initiatives, increase brand and services awareness.  If our own financial resources and then current cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities.  The sale of additional equity securities will result in dilution to our stockholders.  The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business.  Financing may not be available in amounts or on terms acceptable to us, if at all.  Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.
 
 
Significant Accounting Policies
(Please see Note 1.  Nature of Operations and Summary of Accounting Policies.)
 
The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.  As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
 
Off-Balance Sheet Arrangements
 
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
 
Contractual Obligations
 
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
 
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
 
Item 4.  Controls and Procedures.
 
The Company's management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the supervision and with the participation of the Company's management.  Mark Uren, the Company's President, Principal Financial Officer and Secretary, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this Annual Report.  Based on that evaluation, the Company's sole officer concluded that the Company's disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the Company's reports filed or submitted under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in the Commission's rules and forms.
 
Evaluation of Internal Controls over Financial Reporting
 
This report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
 
Changes in Internal Controls over Financial Reporting
 
There have been no significant changes to the Company's internal controls over financial reporting that occurred during our last fiscal quarter, that materially affected, or were reasonably likely to materially affect, our internal controls over financial reporting.
 
 
PART II - OTHER INFORMATION
 
Item 1.  Legal Proceedings.
 
There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it.
 
Item 1A.  Risk Factors.
 
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
 
On March 31, 2014, the Company issued 61,730,000 shares of common stock in exchange for cash of $3,500, filing fees of $979, courier fees of $194, and payment made for audit fees of $1,500 by the sole owner, Uren Enterprises, LLC.  The total amount is $6,173.
 
On June 30, 2014, the Company issued 58,500,000 shares of common stock in exchange for franchise tax of $1,654, filing fees of $500, office expenses of $98, travel expenses of $3,581 and payment made for domain registration of $17 by the sole owner, Uren Enterprises, LLC.  The total amount is $5,850.
 
On September 30, 2014, the Company issued 25,620,000 shares of common stock in exchange for cash of $2,062 and filing fees of $500 by the sole owner, Uren Enterprises, LLC.  The total amount is $2,562.
 
Item 3.  Defaults Upon Senior Securities.
 
The Company currently does not have senior securities
 
Item 4.  Mine Safety Disclosures.
 
Not applicable.
 
Item 5.  Other Information.
 
None.
 
Item 6.  Exhibits.
 
Exhibits required by Item 601 of Regulation S-K
 
   
   
101.INS   XBRL Instance Document
101.SCH   XBRL Schema Document
101.CAL   XBRL Calculation Linkbase Document
101.DEF   XBRL Definition Linkbase Document
101.LAB   XBRL Label Linkbase Document
101.PRE   XBRL Presentation Linkbase Document
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
     
   
MJ PHARMACEUTICALS, INC.
     
May 19, 2015
 
By: /s/ Mark Uren
Date
 
Mark Uren,
Chief Executive Officer (Principal Executive Officer),
Chief Financial Officer (Principal Financial Officer) and Chairman of the Board of Directors
     
     
 
 
 
 
 
17

MJ Pharmaceuticals Inc. Reports