THE
MARYJANE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
January 31,
|
|
April 30,
|
|
|
2016
|
|
2015
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
69,340
|
|
|
$
|
44,990
|
|
Inventory
|
|
|
2,160
|
|
|
|
—
|
|
Prepaid expenses
|
|
|
—
|
|
|
|
39,808
|
|
Employee advances
|
|
|
4,198
|
|
|
|
55
|
|
Total current assets
|
|
|
75,698
|
|
|
|
84,853
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
38,052
|
|
|
|
18,313
|
|
Security deposits
|
|
|
24,500
|
|
|
|
14,500
|
|
Non-refundable purchase deposit
|
|
|
30,000
|
|
|
|
—
|
|
Total assets
|
|
$
|
168,250
|
|
|
$
|
117,666
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Convertible notes payable, net of debt discount of $221,175 and $417,752, respectively
|
|
$
|
202,031
|
|
|
$
|
327,549
|
|
Accounts payable
|
|
|
66,760
|
|
|
|
23,056
|
|
Promissory notes
|
|
|
125,864
|
|
|
|
17,160
|
|
Other current liabilities
|
|
|
458,413
|
|
|
|
287,879
|
|
Total current liabilities
|
|
|
853,068
|
|
|
|
655,644
|
|
|
|
|
|
|
|
|
|
|
Long-term Liabilities:
|
|
|
|
|
|
|
|
|
Convertible notes payable, net of debt discount of $0 and $0, respectively
|
|
|
—
|
|
|
|
4,263
|
|
Accrued interest
|
|
|
106
|
|
|
|
603
|
|
Derivative liabilities
|
|
|
89,378
|
|
|
|
203,145
|
|
Total long-term liabilities
|
|
|
89,484
|
|
|
|
208,011
|
|
Total liabilities
|
|
|
942,552
|
|
|
|
863,655
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred stock - par value $0.001; 5,000,000 shares authorized; 300,000 shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock - par value $0.001; 15,000,000,000 shares authorized; 1,780,726,756 and 30,637,844 issued and outstanding, respectively
|
|
|
1,780,727
|
|
|
|
30,638
|
|
Additional paid in capital
|
|
|
1,941,428
|
|
|
|
2,211,957
|
|
Prepaid services
|
|
|
—
|
|
|
|
(54,536
|
)
|
Accumulated deficit
|
|
|
(4,493,545
|
)
|
|
|
(2,934,048
|
)
|
Total stockholders’ deficit
|
|
|
(774,302
|
)
|
|
|
(745,989
|
)
|
Total liabilities and stockholders’ deficit
|
|
$
|
168,250
|
|
|
$
|
117,666
|
|
The
accompanying footnotes are an integral part of these consolidated financial statements.
THE
MARYJANE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Three Months Ended
January 31,
|
|
Nine Months Ended
January 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$
|
196,384
|
|
|
$
|
140,086
|
|
|
$
|
743,991
|
|
|
$
|
417,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
198,883
|
|
|
|
122,269
|
|
|
|
585,914
|
|
|
|
303,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(2,499
|
)
|
|
|
17,817
|
|
|
|
158,077
|
|
|
|
113,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
25,457
|
|
|
|
92,603
|
|
|
|
668,874
|
|
|
|
1,665,457
|
|
Sales and marketing
|
|
|
6,702
|
|
|
|
5,789
|
|
|
|
61,372
|
|
|
|
15,421
|
|
Depreciation and amortization
|
|
|
2,501
|
|
|
|
1,764
|
|
|
|
6,893
|
|
|
|
3,779
|
|
Total operating expenses
|
|
|
158,830
|
|
|
|
100,156
|
|
|
|
861,309
|
|
|
|
1,684,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(37,159
|
)
|
|
|
(82,339
|
)
|
|
|
(579,062
|
)
|
|
|
(1,570,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous income
|
|
|
40
|
|
|
|
9,359
|
|
|
|
104
|
|
|
|
25,278
|
|
Interest expense
|
|
|
(206,110
|
)
|
|
|
(124,691
|
)
|
|
|
(817,491
|
)
|
|
|
(279,192
|
)
|
Loan closing costs
|
|
|
—
|
|
|
|
(20,600
|
)
|
|
|
—
|
|
|
|
(205,162
|
)
|
Disposal of fixed assets
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(52,142
|
)
|
Loss on settlement of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
(145,415
|
)
|
|
|
—
|
|
Change in fair value of derivative liability
|
|
|
11,341
|
|
|
|
—
|
|
|
|
(17,633
|
)
|
|
|
—
|
|
Total other income (expense)
|
|
|
(194,729
|
)
|
|
|
(299,894
|
)
|
|
|
(980,435
|
)
|
|
|
(511,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
|
|
(231,888
|
)
|
|
|
(382,233
|
)
|
|
|
(1,559,497
|
)
|
|
|
(2,082,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(231,888
|
)
|
|
$
|
(382,233
|
)
|
|
$
|
(1,559,497
|
)
|
|
$
|
(2,082,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basic
|
|
$
|
(0.00
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
1,509,624,732
|
|
|
|
19,879,500
|
|
|
|
991,686,729
|
|
|
|
19,461,448
|
|
The
accompanying footnotes are an integral part of these consolidated financial statements.
THE
MARYJANE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Nine Months Ended January 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,559,497
|
)
|
|
$
|
(2,082,075
|
)
|
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
6,893
|
|
|
|
3,779
|
|
Amortization of prepaid services
|
|
|
73,086
|
|
|
|
749,793
|
|
Amortization of debt discount
|
|
|
676,624
|
|
|
|
252,421
|
|
Amortization of prepaid expense
|
|
|
39,808
|
|
|
|
92,315
|
|
Non-cash loan closing costs
|
|
|
—
|
|
|
|
161,446
|
|
Write off of non-cash consulting costs
|
|
|
4,000
|
|
|
|
119,264
|
|
Change in fair value of derivative liability
|
|
|
(50,669
|
)
|
|
|
—
|
|
Gain (Loss) on disposal of fixed assets
|
|
|
—
|
|
|
|
33,277
|
|
Loss on settlement of debt
|
|
|
145,415
|
|
|
|
—
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
—
|
|
|
|
—
|
|
Other current assets
|
|
|
(6,302
|
)
|
|
|
13,394
|
|
Accounts payable
|
|
|
43,704
|
|
|
|
12,138
|
|
Bank overdraft
|
|
|
—
|
|
|
|
(13,757
|
)
|
Other current liabilities
|
|
|
201,292
|
|
|
|
155,627
|
|
Other long-term liabilities
|
|
|
1,221
|
|
|
|
7,371
|
|
Net cash flows used in operating activities
|
|
|
(424,425
|
)
|
|
|
(495,007
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Security deposit
|
|
|
(10,000
|
)
|
|
|
(14,500
|
)
|
Non refundable purchase deposit
|
|
|
(30,000
|
)
|
|
|
—
|
|
Purchase of fixed assets
|
|
|
(26,633
|
)
|
|
|
(4,699
|
)
|
Net cash flows used in investing activities
|
|
|
(66,633
|
)
|
|
|
(19,199
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from convertible promissory notes
|
|
|
410,175
|
|
|
|
506,100
|
|
Proceeds from promissory notes
|
|
|
210,214
|
|
|
|
—
|
|
Proceeds from sale of common stock
|
|
|
—
|
|
|
|
5,000
|
|
Payment of promissory notes
|
|
|
(104,981
|
)
|
|
|
—
|
|
Net cash flows provided by financing activities
|
|
|
515,408
|
|
|
|
511,100
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
24,350
|
|
|
|
(3,106
|
)
|
Cash, beginning of period
|
|
|
44,990
|
|
|
|
3,431
|
|
Cash, end of period
|
|
$
|
69,340
|
|
|
$
|
325
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
60,554
|
|
|
$
|
—
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash additions of convertible notes
|
|
$
|
24,250
|
|
|
$
|
—
|
|
Beneficial conversion feature for convertible notes
|
|
|
—
|
|
|
|
531,956
|
|
Shares issued with employment agreements
|
|
|
—
|
|
|
|
853,850
|
|
Shares issued for services
|
|
|
—
|
|
|
|
170,664
|
|
Warrants issued with debt
|
|
|
—
|
|
|
|
153,458
|
|
The
accompanying footnotes are an integral part of these consolidated financial statements.
THE
MARYJANE GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – THE COMPANY
The
MaryJane Group, Inc., f/k/a Pladeo Corp., a Nevada corporation (the Company), had six wholly-owned subsidiaries at
January 31, 2016, as listed below:
|
|
Date of
Organization or
Incorporation
|
|
|
|
Mary Jane Entertainment, LLC
|
|
May 21, 2013
|
Capital Growth Corporation
|
|
February 4, 2014
|
Bud and Breakfast, LLC
|
|
April 10, 2014
|
Mary Jane Hospitality, LLC
|
|
July 22, 2014
|
MJ Ranch, LLC
|
|
June 8, 2015
|
SA Hotel, LLC
|
|
June 23, 2015
|
Unless
the context otherwise requires, the Company and the above listed wholly-owned subsidiaries collectively are sometimes referred
to as our Company, we, our, or us.
Overview
of Operating Businesses
On
January 1, 2014, the State of Colorado became the first state to legalize the use of recreational marijuana. Colorado residents,
who are at least 21 years of age with photo identification, may purchase as much as one ounce of marijuana in a single transaction.
Non-Colorado residents, bearing the same identification, may purchase as much as one-quarter ounce. Marijuana cannot be consumed
in any public space, including the shops where it was purchased. Our operating subsidiaries, as outlined herein, were formed for
the purpose of providing financing to assist Colorado marijuana growers, providing cannabis friendly lodging and to provide value
added services of information and entertainment to the consumers supporting the recreational marijuana industry.
Bed
and Breakfast Lease
On
June 24, 2015, The MaryJane Group, Inc. (the Company) executed a Lease Option Agreement (the Lease) with
Hotel San Ayre, LLC for the purchase of Hotel San Ayre and its four property locations in Colorado Springs, Colorado. The two-year
lease option term commences on July 15, 2015 and terminates the earlier of July 14, 2017 or the closing date of the purchase thereof.
The base rental amount for the first 12 months of the Lease is $12,500 and is $13,500 for the last 12 months of the Lease. The
Company is responsible for all operation, repair, use and maintenance of the premises during the term of the Lease. Joel Schneider,
the Companys Chief Executive Officer, personally guaranteed the Lease.
Upon
execution of the Lease, the Company paid a hard deposit of $30,000 which may be applied to the future purchase; however, is not
considered a security deposit and is not refundable if the purchase option is not exercised. The purchase price for the Hotel
San Ayre is $2,100,000 on an as-is basis.
Fiscal
year end
We
elected April 30
th
as our fiscal year ending date.
Going
concern uncertainty
At
January 31, 2016, we had an accumulated deficit of $4,493,545 and for the nine months ended January 31, 2016, we
incurred losses of $1,559,944. Our ability to continue in business is dependent upon obtaining sufficient financing or
attaining profitable operations. However, there can be no assurance that management will be successful in obtaining
additional funding or in attaining profitable operations, and therefore, these matters raise substantial doubt about our
ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties, nor do they include adjustments relating to the recoverability and
realization of assets and classification of liabilities that might be necessary should we be unable to continue in
operation.
NOTE
2 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Interim
Financial Statements
The accompanying unaudited interim condensed consolidated financial statements of The MaryJane Group, Inc. have been prepared
in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim
financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of management, such financial statements include
all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information
included herein in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission (the “SEC”).
The balance sheet at April 30, 2015 has been derived from the audited consolidated financial statements at that date, but
does not include all of the information and footnotes required by GAAP for complete financial statements. The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results
of operations for interim periods are not necessarily indicative of results for the full year. The accompanying unaudited
condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and related notes included in our Annual Report on Form 10-K for the year ended April 30, 2015 as filed with the SEC on July
27, 2015.
Recently
Issued and Newly Adopted Accounting Pronouncements
There
have been no material changes to our significant accounting policies as summarized in NOTE 2 of our Annual Report on Form 10-K/A
for the year ended April 30, 2015. We do not expect that the adoption of any recent accounting pronouncements will have a material
impact on our accompanying condensed consolidated financial statements.
Reclassifications
Certain
prior period amounts have been reclassified to conform to the current period presentation.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fair
Value of Financial Instruments
Our
financial instruments consist primarily of receivables, accounts payable, accrued expenses and short- and long-term debt. The
carrying amount of receivables, accounts payable and accrued expenses approximates our fair value because of the short-term maturity
of such instruments. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates
fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms and
remaining maturities are used to estimate the fair value of the our short- and long-term debt and would be considered Level 3
inputs under the fair value hierarchy.
We
have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy
in accordance with GAAP.
The fair value hierarchy gives the highest priority to quoted prices in active markets for identical
assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).
Assets
and liabilities recorded in the condensed consolidated balance sheets at fair value are categorized based on a hierarchy of inputs,
as follows:
|
Level 1 -
|
Unadjusted
quoted prices in active markets for identical assets or liabilities.
|
|
|
|
|
Level 2 -
|
Quoted
prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly
or indirectly through market corroboration, for substantially the full term of the financial instrument.
|
|
|
|
|
Level 3 -
|
Unobservable
inputs for the asset or liability.
|
The
Companys financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant
liability as detailed below. The fair value of this warrant liability is included in long-term liabilities on the accompanying
condensed consolidated financial statements.
The
following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis:
Description
|
|
Assets/
(Liabilities)
Measured at
Fair Value
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable
Inputs
(Level3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrant liability
|
|
$
|
(89,378
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(89,378
|
)
|
The
following table provides a summary of changes in fair value associated with the Level 3 liabilities for the quarter ended
January 31, 2016
|
|
Fair Value
Measurements
Using
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
Balance at April 30, 2015
|
|
$
|
(203,145
|
)
|
Issuances of derivative liabilities
|
|
|
—
|
|
Change in fair value of derivative liabilities
|
|
|
17,633
|
|
Transfers in and/out of Level 3
|
|
|
—
|
|
Warrants exercised
|
|
|
96,134
|
|
Ending balance at January 31, 2016
|
|
$
|
(89,378
|
)
|
The
above table of Level 3 liabilities begins with the prior period balance and adjusts the balance for changes that occurred during
the current period. The ending balance of the Level 3 securities presented above represent our best estimates and may not be substantiated
by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current year presentation.
NOTE
4 – FIXED ASSETS
Fixed
assets consist of the following:
|
|
January 31,
2016
|
|
|
April 30,
2015
|
|
Furniture and fixtures
|
|
$
|
39,827
|
|
|
$
|
23,194
|
|
Leasehold improvements
|
|
|
2,320
|
|
|
|
2,320
|
|
Equipment
|
|
|
865
|
|
|
|
865
|
|
Lincoln MKX
|
|
|
10,000
|
|
|
|
—
|
|
|
|
|
53,011
|
|
|
|
26,379
|
|
Less: accumulated depreciation
|
|
|
(14,960
|
)
|
|
|
(8,066
|
)
|
TOTAL PROPERTY AND EQUIPMENT
|
|
$
|
38,052
|
|
|
$
|
18,313
|
|
Depreciation
expense for the three and nine months ended January 31, 2016 was $2,501 and $6,893. Depreciation expense for the three and
nine months ended January 31, 2015 was $1,764 and $3,779, respectively.
NOTE
5 – PROMISSORY NOTES
On
February 12, 2015, we entered into a loan agreement with an entity and borrowed $39,000. Pursuant to the terms of the loan agreement,
we are required to make 100 equal installments of $553, or an aggregate of $55,300, to repay the principal balance and interest
in full. On May 13, 2015, we entered into a new loan agreement with the same lender and borrowed $63,000. Pursuant to the terms
of the loan agreement, we are required to make 100 equal installments of $894, or an aggregate of $89,400, to repay the principal
balance and interest in full. We used approximately $20,500 to repay the February 12
th
loan and the balance of the
proceeds were used as working capital. During the quarter, we paid an additional $37,095 towards the principal.
On
May 22, 2015, a third party purchased a Convertible Promissory Note issued on April 30, 2014 in the aggregate amount of
$53,275. We issued a 12% Convertible Promissory Note in the aggregate amount of $53,275. We issued an additional 12%
Convertible Promissory Note in the aggregate amount of $38,000. Each note matures May 22, 2016 and is convertible at a 40%
discount from the lowest Trading Price in the 10 trading days prior to conversion date. We received $33,000 in net proceeds
from this transaction which we used for general working capital.
On
June 11, 2015, we issued an 8% Convertible Promissory Note in the aggregate amount of $60,000. This note matures on June 11, 2016
and is convertible at 57% of the lowest trading price for the 20 days prior to the conversion date. We received $57,000 in net
proceeds from this transaction which we used for general working capital.
On
June 12, 2015, a third party purchased two Convertible Promissory Notes issued on June 16, 2014 and July 1, 2014. We issued a
Convertible Promissory Note in the aggregate amount of $52,087 and an 8% Convertible Promissory Note in the aggregate amount of
$30,000. The notes mature June 12, 2016 and is convertible at 59% of the lowest trading price for the 20 days prior to the conversion
date. We received $28,500 in net proceeds from this transaction which we used for general working capital.
On
June 23, 2015, we issued a 10% Convertible Promissory Note in the aggregate amount of $69,000. The note matures June 23, 2016
and is convertible at 50% to the lowest sale price of common stock in (i) 25 trading days immediately prior to the Original Issue
Date or (ii) the 25 trading days prior to the conversion date. We received $60,000 in net proceeds from this transaction which
we used for general working capital.
On
June 30, 2015, we issued an 8% Convertible Promissory Note in the aggregate amount of $50,750. The note matures March 30, 2015
and is convertible at 55% of the average of the two lowest prices in the prior 5 trading days prior to the conversion date. We
received $45,000 in net proceeds from this transaction which we used for general working capital.
On August 6, 2015, we issued an 8% Convertible Promissory Note in the aggregate amount of $36,750. The note matures August
6, 2016 and is convertible at 57% of the lowest trading price for the 20 trading days prior to the conversion date. We received
$35,000 in net proceeds from this transaction which we used for general working capital.
On August 19, 2015, we issued a 10%
Convertible Promissory Note in the aggregate amount of $29,700. The note matures August 19, 2016 and is convertible at 50%
to the lowest sale price of common stock in (i) 25 trading days immediately prior to the Original Issuance Date or (ii) the
25 trading days prior to the conversion date. We received $25,000 in net proceeds from this transaction which we used for
general working capital.
On August 19, 2015, we entered into a loan agreement with an entity and borrowed $50,000. Pursuant to the terms of the loan
agreement, we are required to make 112 equal installments of $625, or an aggregate of $70,000, to repay the principal balance
and interest in full. As December 11, 2015, the Company has made 79 payments totaling $49,375 and the remaining balance due
under this loan on that date is $20,625. We received$50,000 in net proceeds from this transaction which we used for general
working capital. We have committed our daily receivables.
On October 12, 2015, we entered into a loan agreement with an entity and borrowed $53,000. Pursuant to the terms of the loan
agreement, we are required to make 110 equal installments of $689. Or an aggregate of $75,790, to repay the principal balance
and interest in full. As of December 11, 2015, the Company has made 40 payments totaling $27,560 and the remaining balance
due under this loan on that date is $48,230. We received $51,601 in net proceeds from this transaction after paying $1,399
in loan closing costs, which we used for general working capital.
On November 10, 2015, we issued a 10% Convertible Promissory Note in the aggregate amount of $10,000. The note matures November
10, 2016 and is convertible at 50% to the lowest sale price of common stock in (i) 25 trading days immediately prior to the
Original Issuance Date or (ii) the 25 trading days prior to the conversion date. We received $10,000 in net proceeds from
this transaction which we used for working capital.
On December 8, 2015 we completed a financing with three investors whereby
the Company received an aggregate of $75,000 in net proceeds from the transaction(s) which we used for working capital. Pursuant
to the transaction we issued three (3) notes in the aggregate amount of $81,000. The notes matures December 3, 2016 and is
convertible at 50% to the lowest sale price of common stock in (i) 20 trading days immediately prior to the Original Issuance
Date or (ii) the 20 trading days prior to the conversion date.
Contemporaneously with the transaction(s) described in the previous
paragraph, the three investors acquired a promissory note from a third party investor, which was originally issued in the
principal amount of $38,000, and with accrued and unpaid interest totaled approximately $40,448 on the date of sale. The Company
was in default under the terms of the promissory note and as a result the three investors acquired that note for an aggregate
of $50,000. As consideration for the financial accommodations made by these three investors preventing the note from going
into collections the Company issued each of these investors two additional notes, the first being in the amount of $13,482.88
or an aggregate of $40,448.64 which represented the principal and accrued interest amount due under the promissory note. The
second note issued to these investors was issued in the principal amount of $10,321.77, or $30,965.31 in the aggregate which
partially represented the additional expense of $9,552 of purchasing the note and an aggregate of $21,413.31 which represents
legal fees and an original issue discount related to the $27,000 promissory notes described in the preceding paragraph. In connection with this transaction the Company issued two of these investors
back end notes each in the principal amount of $27,000, simultaneously with that issuance the investors issued the Company
collateral notes in the principal amount of $27,000.
On December 23, 2016, we issued an 8% Convertible Promissory Note in the principal amount of $50,000 (the "December 2015 Note").
The December 2015 Note matures on September 23, 2016 and is convertible into shares of our Common Stock at a 45% discount
to the market price of our Common Stock. "Market Price" as defined in the December 2015 Note means the average of the lowest
two (2) trading prices for our Common Stock during the twenty-five trading day period ending on the latest complete trading
day prior to the date of conversion. We received net proceeds of $44,250 from this transaction after payment of $2,750 in
expenses and $3,000 in legal fees.
On January 27, 2016 we entered into a loan agreement with an entity and borrowed $100,000. Pursuant to the terms of the loan
agreement, we are required to make 145 equal installments of $1006.75, or an aggregate of $145,978.75, to repay the principal
balance and interest in full. In connection with this loan the Company pledged its accounts receivables as collateral for
the repayment of this loan. As of March 20, 2016, the Company has made 35 payments totaling $35,236.25 and the remaining balance
due under this loan on that date is $110,742.50. We received $67,000 in net proceeds from this transaction after paying $33,000
to payoff the loan dated October 12, 2015 which we used for general working capital.
Subsequent to January 31, 2016, approximately
$70,000 of principal and interest was converted into an aggregate of 7,020,124,436 shares of common stock.
NOTE
6 – OTHER CURRENT LIABILITIES
Other
current liabilities consist of the following:
|
|
January 31,
2016
|
|
|
April 30,
2015
|
|
Payroll tax liability
|
|
$
|
295,613
|
|
|
$
|
182,143
|
|
Accrued IRS and state interest and penalties
|
|
|
89,056
|
|
|
|
41,812
|
|
Accrued state sales tax interest and penalties
|
|
|
5,787
|
|
|
|
—
|
|
Accrued lodging and sales tax
|
|
|
48,067
|
|
|
|
35,269
|
|
Accrued interest expense
|
|
|
17,465
|
|
|
|
22,373
|
|
Accrued payroll
|
|
|
286
|
|
|
|
4,424
|
|
Other current liabilities
|
|
|
2,139
|
|
|
|
1,858
|
|
TOTAL OTHER CURRENT LIABILITIES
|
|
$
|
458,413
|
|
|
$
|
287,879
|
|
NOTE
7 – CAPITAL STOCK
Preferred
Stock
At
January 31, 2016 we had 2,000,000 shares of preferred stock, $0.001 par value authorized (the “Preferred
Shares”). We had no Preferred Shares outstanding at January 31, 2016. On June 19, 2015, the Board of Directors
designated 100,000 shares of its blank check preferred stock as Series A Preferred Stock, par value $0.001 per share. Each
share of Series A Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters submitted to a vote of the
stockholders of the Company. The Certificate of Designation is filed as an exhibit to this Current Report on Form 8K and is
incorporated herein by reference.
Common
Stock
At
January 31, 2016 we had 15,000,000,000 shares of common stock, $0.001 par value authorized (the “Common
Shares”), with 1,780,726,756 Common Shares issued and outstanding.
Common
Stock Issuances During the Quarter Ended January 31, 2016
Shares Issued
|
|
|
Fair Market
Value of Shares
Issued
|
|
|
Purpose
|
|
491,798,855
|
|
|
$
|
60,809
|
|
|
Debt conversion
|
Warrants
to Purchase Common Stock of the Company
We
use the Black-Scholes-Merton option pricing model (Black-Scholes Model) to determine the fair value of Warrant(s).
The Black-Scholes Model is an acceptable model in accordance with GAAP.
Warrant
Activity during the Nine Months Ended January 31, 2016
On June 26, 2015, warrants issued were exercised as a cashless conversion for 28,769,841 shares, net of 6,944,444 that were
surrendered as part of the cashless conversion. The remaining balance of shares eligible to be exercised is 61,085,658
On September 10, 2015, warrants issued were exercised as a cashless conversion for 44,642,847, net of 12,755,102 that were
surrendered as part of the cashless conversion. The remaining balance of shares eligible to be exercised is 31,250,000.
Amendment
to Articles of Incorporation
On
May 11, 2015, the Board of Directors and shareholders owning a majority of the shares outstanding of the Company approved an increase
in its authorized shares of common stock. The Company filed a Certificate of Amendment to Certificate of Incorporation with the
Nevada Secretary of State to increase its authorized shares of common stock from 200,000,000 to 1,000,000,000 shares, $0.001 par
value per share.
On
June 19, 2015, the Board of Directors designated 100,000 shares of its blank check preferred stock as Series A Preferred Stock,
par value $0.001 per share. Each share of Series A Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters
submitted to a vote of the stockholders of the Company.
On
June 25, 2015, the Board of Directors and a majority of the shareholders approved an increase in its authorized shares and filed
a Certificate of Amendment to Certificate of Incorporation with the Nevada Secretary of State to increase its authorized capital
to 2,002,000,000 shares including 2,000,000,000 shares of common stock, $0.001 par value per share, and 2,000,000 of preferred
stock, $0.001 par value per share.
Issuance
of Series A Preferred Stock
On
June 23, 2015, the Board of Directors approved the issuance of 100,000 shares of Series A Preferred Stock to Joel Schneider, the
Companys Chief Executive Office and President, for certain financial accommodations made to the Company including personal guarantees
on loans and property leases.
NOTE
8 – SUBSEQUENT EVENTS
The Board of Directors of The MaryJane Group, Inc. (the "Company") approved an increase in the number of authorized shares
of Series A Preferred Stock from 100,000 shares to 300,000 shares on February 4, 2016. On February 18, 2016, the Board of
Directors approved the issuance of 200,000 shares of Series A Preferred Stock to Joel Schneider, the Company's Chief Executive
Office and President, for certain financial accommodations made to the Company including personal guarantees on loans and
property leases. Mr. Schneider already holds 100,000 shares of Series A Preferred Stock.
On February 4, 2016, the Board of
Directors increased the authorized shares of its Series A Preferred Stock from 100,000 shares to 300,000 shares. Each share
of Series A Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters submitted to a vote of the stockholders
of the Company.
On February 19, 2016, the Board of Directors approved an increase in its authorized shares and filed a Certificate
of Amendment to Certificate of Incorporation with the Nevada Secretary of State to increase its authorized capital to 5,002,000,000
shares including 5,000,000,000 shares of common stock, $0.001 par value per share, and 2,000,000 of preferred stock, $0.001
par value per share.
Conversion of Debt
On March 9, 2016, we issued a 10% Convertible Promissory Note in the principal amount of $30,800 (the
"March 2016 Note"). The March 2016 Note matures on March 9, 2017 and is convertible into shares of our Common Stock at a 50%
discount to the market price of our Common Stock. "Market Price" as defined in the March 2016 Note means the average of the
lowest trading prices for our Common Stock during the twenty-five trading day period ending on the latest complete trading
day prior to the date of conversion. We received net proceeds of $25,000 from this transaction after payment of $2,800 in
original discount of 10% and $3,000 in legal fees. In connection with this transaction we issued the Investor warrants to
purchase 308,000,000 shares of the Company’s common stock at $.0001 per share.
On March 10, 2016, The MaryJane Group,
Inc. (the “Company”) entered into a Lease and Service Agreement with Collins Ranch, LLC, (the “Landlord”)
(a Colorado Limited Liability Company) to lease the Aspen Canyon Ranch, located in Parshall, Colorado from July 1, 2016-July
12, 2016 and July 19, 2016-September 30, 2016 for a total of 85 dates. The total rent to be paid to the landlord is $215,628.
To date $25,000 of the rent has been paid to the Landlord. Pursuant to the Lease and Service Agreement the Landlord will provide
all necessary accommodations and services for up to 56 guests at a time, including but not limited to: check in/out services,
linens, housekeeping, daily breakfast services and other typical guest ranch services. The Company intends on operating Camp
Bud+Breakfast at Aspen Canyon Ranch during the aforementioned dates.
On March 10, 2016, the Board of Directors and shareholders owning a majority of the shares outstanding of The MaryJane Group,
Inc., (the "Company"), approved an increase in its authorized shares of common stock. The Company filed a Certificate of Amendment
to Certificate of Incorporation with the Nevada Secretary of State to increase its authorized shares of common stock from
5,000,000,000 to 15,000,000,000 shares, $0.001 par value per share.
Subsequent to January 31, 2016, approximately $70,000 of
principal and interest was converted into an aggregate of 702,012,436 shares of common stock.
The number of shares outstanding
as of the date of this filing includes 25,000 that are owed to a former consultant of the Company but have not been issued.
Item
2. Managements Discussion and Analysis of Financial Condition and Results of Operations
General
The
following discussion and analysis provides information which our management believes to be relevant to an assessment and understanding
of our results of operations and financial condition. This discussion should be read together with our financial statements and
the notes to the financial statements, which are included in this Quarterly Report on Form 10-Q (the Report). This
information should also be read in conjunction with the information contained in our Form 10-K filed with the Securities and Exchange
Commission (the SEC) on July 27, 2015 including the audited consolidated financial statements and notes included therein
as of and for the year ended April 30, 2015. The reported results will not necessarily reflect future results of operations or
financial condition.
Throughout
this Report, the terms we, us, our, our Company, or The Mary Jane Group,
refers to The MaryJane Group, Inc., a Nevada corporation, and unless otherwise specified, includes our wholly owned operating
subsidiaries listed below.
We
maintain a website at
www.themaryjanegrp.com
and our Common Stock trades on the OTCQB under the symbol MJMJ.
Corporate
Overview and History of The MaryJane Group, Inc.
The
MaryJane Group, Inc., f/k/a Pladeo Corp., a Nevada corporation (the Company)
was
incorporated in Nevada on February 16, 2012 for the purpose of developing online chat systems free of charge. The Company was
unable to raise sufficient funds to implement its business plan. As a result of being unable to properly fund and build our business
of developing online chart systems, we were considered a shell company under the rules of the Commission. On February
26, 2014, Joel Schneider, entered into a share purchase agreement with Lisbeth Guerrero, the Companys former sole officer and
director, pursuant to which he purchased 8,000,000 shares of the Companys common stock, representing 77.2% of the issued
and outstanding shares of the Companys common stock on that date (the
Share
Purchase Agreement)
. In connection with the purchase, Ms. Guerrero resigned as sole officer and director and Mr.
Schneider became our sole officer and director.
On
February 27, 2014, we entered into and closed a
Securities Exchange Agreement by and among
the Company, Capital Growth Corporation, a Colorado corporation (CGC) and the shareholders of CGC on February 27,
2014 (the CGC Acquisition) and
on March 14, 2014, we entered into and closed
a
Securities Exchange Agreement between the Company and the managing member of Mary Jane Entertainment, LLC, Mile High Times, LLC,
Mary Jane Tours, LLC, and Dab City Radio, LLC, each a Colorado limited liability company (referred to individually by name or
collectively as the Mary Jane companies) (the Mary Jane companies Acquisition).
As a result, we
ceased being a shell company upon the acquisition of the five operating subsidiaries. Shortly thereafter
,
the Company changed its name to The MaryJane Group, Inc.
Subsequent
to completing the Acquisition with CGC and the Mary Jane companies, we formed the following Colorado limited liability companies
as wholly-owned subsidiaries, namely: Mary Jane Glassworks, LLC and Bud and Breakfast, LLC (both organized on April 10, 2014),
Mary Jane Hospitality, LLC and Mary Jane Events, LLC (both organized on July 22, 2014), and Mary Jane Designs, LLC (organized
on August 28, 2014). In an effort to streamline operations and focus on our core business of hospitality in the cannabis industry,
we dissolved the following entities on November 21, 2014: (i) Mary
Jane Tours, LLC; (ii) Mile High Times, LLC; (iii) Dab City Radio, LLC; and (iv) Mary Jane Glassworks, LLC.
Unless
otherwise stated or unless the context otherwise requires, the description of our business set forth below is provided on a combined
basis, taking into account our newly-acquired wholly owned subsidiaries mentioned herein.
Overview
of Operating Businesses
Our
primary focus includes providing lodging, events, spa services and brand merchandising concentrated in the cannabis industry.
Legalization
of recreational marijuana initially in Colorado and Washington and the growing number of jurisdictions with medical marijuana
laws spawned a Green Rush in America in 2014. On January 1, 2014, the State of Colorado became the first state to
legalize the use of recreational marijuana. Colorado residents, who are at least 21 years of age with photo identification, may
legally purchase as much as one ounce of marijuana in a single transaction. Non-Colorado residents, bearing the same identification,
may purchase as much as one-quarter ounce. Marijuana cannot be consumed in any public space, including the shops where it was
purchased. In 2015, Oregon, Alaska and the District of Columbia legalized marijuana for recreational use; however, sales currently
remain banned in the District. Additionally, 23 states have legalized marijuana for medical purposes.
According
to a recent report from The ArcView Group, a cannabis industry investment and research firm based in Oakland, California (ArcView),
found that the U.S. market for legal cannabis grew 74% in 2014 to $2.7 billion, up from 1.5 billion in 2013, making legal marijuana
the fastest-growing industry in the United States. The report projects a 32% growth in the market and concluded that if the trend
toward legalization spreads to all 50 states, the total market value would top $36.8 billion – more than $3 billion larger
than the organic food industry. ArcView predicts that over the next five years, 14 more states will legalize recreational marijuana
and two more states will legalize medical marijuana. Currently, at least ten states are already considering legalizing recreational
marijuana.
In
Colorado, the recreational and medical marijuana sales totaled $700 million in 2014; however, the real economic impact is expected
to be much higher as this figure excludes marijuana-related products such as pipes or any marijuana-related increase in tourism.
Our
operating subsidiaries, as outlined herein, were formed for the purpose of providing financing to assist Colorado marijuana growers,
providing cannabis-friendly lodging and providing value added services of information and entertainment to consumers supporting
the recreational marijuana industry. While our services are currently concentrated only in Colorado, we believe that our business
model can easily be expanded as recreational marijuana becomes legal in other states.
Capital
Growth Corporation, organized on February 4, 2014 (Capital Growth), was formed for the purpose of providing short-
and long-term financing to assist growers and retail establishments engaged in the manufacture and distribution of recreational
marijuana within the State of Colorado. Since its formation, Capital Growth has not entered into any funding transactions. The
Company utilizes Capital Growth as a business development company. Mary Jane Entertainment, LLC was formed to provide contracted
limousine and party-bus services and currently continues to operate on a limited basis. Bud and Breakfast, LLC was formed to operate
and manage our two marijuana-friendly Bud + Breakfast locations with a third location opening in mid-July 2015. We intend to actively
seek additional Bud + Breakfast locations. Mary Jane Hospitality, LLC was formed to seek additional lodging and hospitality businesses
located in Colorado, and to also seek the same type of businesses in other jurisdictions as recreational marijuana becomes legal
in other states. Mary Jane Events, LLC was formed for the purposes of planning private and corporate events focused upon the recreational/medicinal
marijuana industry. Mary Jane Designs, LLC was formed to expand and promote our branded merchandise at our properties.
Neither
the Company, nor any of its subsidiaries, have been involved in any bankruptcy, receivership or any similar proceeding, and except
for the subject acquisitions set forth herein, has not had or been a party to any material reclassifications, mergers or consolidations
since inception.
The
Companys primary SIC code is 7990 – Services; Miscellaneous Amusement and Recreation.
We
maintain the following websites:
www.themaryjanegrp.com
and
www.budandbfast.com
.
Our
Products
Bud
+ Breakfast at the Adagio
On
April 10, 2014, we entered into a one-year lease with the owner of the Adagio Bed and Breakfast located at 1430 Race Street, Denver,
Colorado (the Adagio). We transformed the Adagio from a traditional bed and breakfast to the first, all-inclusive
Bud + Breakfast in what our management believes to be the first of its kind. The guest package includes a Wake and
Bake Breakfast, a 4:20 Happy Hour and a facility to consume the best marijuana and marijuana edibles Colorado has to offer. We
provide our guests an on-site chef who prepares a gourmet breakfast and afternoon hors doeuvres. Since beginning Bud +
Breakfast operations in April 2014, reservations and occupancy rates have increased dramatically with corresponding revenue of
approximately $50,000 to $60,000 per month. Our Bud + Breakfast locations allow us to book tours and sell our branded apparel,
merchandise and remaining glass products to guests. As a result of our success at the Adagio, we are actively seeking additional
lodging facilities.
On February 27, 2015, we exercised our option to purchase the Adagio and executed a Contract to Buy and Sell Real Estate (the
"Sales Contract") with A Capital Inn, Inc. (the "Seller"). The purchase price for the Adagio was $1,500,000 with the Seller
agreeing to finance $1,000,000. Upon execution of the Sales Contract, the Company made a non-refundable deposit of $50,000
and on May 15, 2015 we made an additional $25,000 non-refundable deposit; however, we were unable to secure proper financing
to close the purchase. Subsequently, we entered into a six-month lease agreement for the monthly rate of $10,000 plus a royalty
of 2 ½% of gross lodging revenue which ends on December 31, 2015. We are currently negotiating a longer term lease
for the Adagio. In the event we are unable to negotiate a long term lease for the adagio we will vacate that property on or
about January 31, 2016. The Company is also seeking a new location within the City of Denver.
Bud
+ Breakfast at Mountain Vista
After validating our Bud + Breakfast business model at the Adagio, on September 4, 2014, we entered into a one-year lease
with the owners of the Mountain Vista Bed and Breakfast located at 358 Lagoon Lane, Silverthorne, Colorado. Since opening
on October 1, 2014, we have achieved occupancy levels higher than expected and generated revenues of approximately $12,000
to $17,000 per month. Effective June 1, 2015, we added a fifth room to the property and project this additional room will
generate an additional $1,800 to $2,500 per month. We extended the lease for the Bud + Breakfast at Mountain Vista until December
31, 2016. The new lease terms require us to pay a base rent of $5,000 per month and a 1% royalty per month.
Hotel
San Ayre, a Bud + Breakfast Property
On
June 24, 2015, we executed a two-year lease with the owner of Hotel San Ayre with an option to purchase its four locations in
Colorado Springs, Colorado. This property is our largest project to date in terms of rentable units with 11 rooms.
The business model for Hotel San Ayre will be slightly different from our traditional Bud + Breakfast locations. Guests will
receive similar offerings including our Wake and Bake Breakfast and 4:20 Happy Hour. Our staffing needs are less robust at
this location and all guests have access to our lounge that includes all amenities found at our other locations including a
game room, hot tub, and outdoor lounge area.
Camp
Bud+Breakfast at Aspen Canyon Ranch
On
May 22, 2015, we entered into a joint-venture agreement with the owners of the Wilderness Trails Ranch, LLC to open an exclusive
cannabis resort near Durango, Colorado. As of July 2, 2105 we withdrew our position in the joint-venture due to our partners
lack of ability to perform. We are currently seeking a new location for Canna-camp 2016.
Funding
During Three Months Ended January 31, 2016
On November 10, 2015, we issued a 10% Convertible Promissory Note in the aggregate amount of $10,000. The note matures November
10, 2016 and is convertible at 50% to the lowest sale price of common stock in (i) 25 trading days immediately prior to the
Original Issuance Date or (ii) the 25 trading days prior to the conversion date. We received $10,000 in net proceeds from
this transaction which we used for working capital.
On December 8, 2015 we completed a financing
with three investors whereby the Company received an aggregate of $75,000 in net proceeds from the transaction(s) which we
used for working capital. Pursuant to the transaction we issued three (3) notes in the aggregate amount of $81,000. The notes
matures December 3, 2016 and is convertible at 50% to the lowest sale price of common stock in (i) 20 trading days immediately
prior to the Original Issuance Date or (ii) the 20 trading days prior to the conversion date.
Contemporaneously with the transaction(s)
described in the previous paragraph, the three investors acquired a promissory note from a third party investor, which originally
issued in the principal amount of $38,000, and with accrued and unpaid interest totaled approximately $40,448 on the date
of sale. The Company was in default under the terms of the promissory note and as a result the three investors acquired that
note for an aggregate of $50,000. As consideration for the financial accommodations made by these three investors preventing
the note from going into collections the Company issued each of these investors two additional notes, the first being in the
amount of $13,482.88 or an aggregate of $40,448.64 which represented the principal and accrued interest amount due under the
promissory note. The second note issued to these investors was issued in the principal amount of $10,321.77, or $30,965.31
in the aggregate which partially represented the additional expense of $9,552 of purchasing the note and an aggregate of $21,413.31
which represents legal fees and an original issue discount related to the $27,000 promissory notes described in the preceding
paragraph. The Company received no proceeds from this transaction(s). In connection with this transaction the Company issued two of these investors
back end notes each in the principal amount of $27,000, simultaneously with that issuance the investors issued the Company
collateral notes in the principal amount of $27,000.
On December 23, 2015, we issued an 8% Convertible Promissory Note in the principal amount of $50,000 (the "December 2015 Note").
The December 2015 Note matures on September 23, 2016 and is convertible into shares of our Common Stock at a 45% discount
to the market price of our Common Stock. "Market Price" as defined in the December 2015 Note means the average of the lowest
two (2) trading prices for our Common Stock during the twenty-five trading day period ending on the latest complete trading
day prior to the date of conversion. We received net proceeds of $44,250 from this transaction after payment of $2,750 in
expenses and $3,000 in legal fees.
On January 27, 2016
we entered into a loan agreement with an entity and borrowed $100,000. Pursuant to the terms of the loan agreement, we are
required to make 145 equal installments of $1006.75, or an aggregate of $145,978.75, to repay the principal balance and
interest in full. In connection with this loan the Company pledged its accounts receivables as collateral for the repayment
of this loan. As of March 20, 2016, the Company has made 35 payments totaling $35,236.25 and the remaining balance due under
this loan on that date is $110,742.50. We received $67,000 in net proceeds from this transaction after paying $33,000 to
payoff the loan dated October 12, 2015 which we used for general working capital.
Recent
Events Since January 31, 2016
The
Board of Directors of The MaryJane Group, Inc. (the "Company") approved an increase in the number of authorized shares of
Series A Preferred Stock from 100,000 shares to 300,000 shares on February 4, 2016. On February 18, 2016, the Board
of Directors approved the issuance of 200,000 shares of Series A Preferred Stock to Joel Schneider, the Company's Chief
Executive Office and President, for certain financial accommodations made to the Company including personal guarantees on
loans and property leases. Mr. Schneider already holds 100,000 shares of Series A Preferred Stock.
On February 4, 2016, the
Board of Directors increased the authorized shares of its Series A Preferred Stock from 100,000 shares to 300,000 shares.
Each share of Series A Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters submitted to a vote of
the stockholders of the Company.
On February 19, 2016, the Board of Directors approved an increase in its authorized shares
and filed a Certificate of Amendment to Certificate of Incorporation with the Nevada Secretary of State to increase its
authorized capital to 5,002,000,000 shares including 5,000,000,000 shares of common stock, $0.001 par value per share, and
2,000,000 of preferred stock, $0.001 par value per share.
On March 9, 2016, we issued a 10% Convertible Promissory Note in the
principal amount of $30,800 (the "March 2016 Note"). The March 2016 Note matures on March 9, 2017 and is convertible into
shares of our Common Stock at a 50% discount to the market price of our Common Stock. "Market Price" as defined in the March
2016 Note means the average of the lowest trading prices for our Common Stock during the twenty-five trading day period
ending on the latest complete trading day prior to the date of conversion. We received net proceeds of $25,000 from this
transaction after payment of $2,800 in original discount of 10% and $3,000 in legal fees. In connection with this transaction
we issued the Investor warrants to purchase 308,000,000 shares of the Company’s common stock at $.0001 per share.
On
March 10, 2016, The MaryJane Group, Inc. (the “Company”) entered into a Lease and Service Agreement with Collins
Ranch, LLC, (the “Landlord”) (a Colorado Limited Liability Company) to lease the Aspen Canyon Ranch, located in
Parshall, Colorado from July 1, 2016-July 12, 2016 and July 19, 2016-September 30, 2016 for a total of 85 dates. The total
rent to be paid to the landlord is $215,628. To date $25,000 of the rent has been paid to the Landlord. Pursuant to the Lease
and Service Agreement the Landlord will provide all necessary accommodations and services for up to 56 guests at a time,
including but not limited to: check in/out services, linens, housekeeping, daily breakfast services and other typical guest
ranch services. The Company intends on operating Camp Bud+Breakfast at Aspen Canyon Ranch during the aforementioned dates.
On
March 10, 2016, the Board of Directors and shareholders owning a majority of the shares outstanding of The MaryJane Group,
Inc., (the "Company"), approved an increase in its authorized shares of common stock. The Company filed a Certificate of
Amendment to Certificate of Incorporation with the Nevada Secretary of State to increase its authorized shares of common
stock from 5,000,000,000 to 15,000,000,000 shares, $0.001 par value per share.
Subsequent to January 31, 2016, approximately $70,000 of principal and interest was converted into an aggregate of 702,012,436
shares of common stock.
Results
of Operations
Three
months ended January 31, 2106 compared to three months ended January 31, 2015
Net
Revenue
Net revenue for the three months ended January 31, 2016 totaled $196,384 compared to $140,086 in the comparable period in
2015, representing an increase of 40%. Our net revenue decreased $114,203 from net revenue of $301,587 during the three months
ended October 31, 2015, representing an decrease of 37% from the prior fiscal quarter. This decrease is primarily a result
of decreased revenue from our bed and breakfast operations during the quarter which management believes is a direct result
of the a slower marijuana tourism season in Colorado.
Cost
of Goods Revenue
Cost of revenue for the three months ended January 31, 2016 totaled $198,883 compared to $122,269 in the comparable period
in 2015. Our cost of revenue decreased by $15,897 from cost of revenue of $214,780 during the quarter ended October 31, 2015.
Cost of revenue as a percentage of sales for the three months ended January 31, 2016 was 101% compared to 87% for the three
months ended January 31, 2015. The reduction of our gross profit is a result of the additional costs related to the operations
of the Hotel San Ayre and decreased revenue at both the Adagio and Hotel San Ayre.
General
and Administrative
General and administrative costs for the three months ended January 31, 2016 decreased by $67,146 to $25,457 from $92,603
in the comparable period in 2015.
Sales
and Marketing
Sales and marketing costs for the three months ended January 31, 2016 were $6,702 compared to $5,789 for the comparable period
in 2015.
Depreciation
Depreciation expense for the three months ended January 31, 2016 was $2,501 compared to $1,764 for the comparable period in
2015.
Other
Income (Expense)
Other expense for the three months ended January 31, 2016 was $194,729 compared to $299,894 for the comparable period in 2015,
primarily a result of interest expense and loan closing costs associated with our financing activity.
Net
Loss
Net loss for the three months ended January 31, 2016 was $231,888 compared to $382,233 for the comparable period in 2015.
Nine months ended
January 31, 2016 compared to nine months ended January 31, 2015
Net Revenue
Net revenue for the nine months ended January 31, 2016 totaled $743,991 compared to $417,318 in the comparable period in 2015.
These increases are primarily a result of revenue from our bed and breakfast operations.
Cost of Goods Revenue
Cost of revenue for the nine months ended January 31, 2016 totaled $585,914 compared to $303,518 in the comparable period
in 2015. Cost of revenue as a percentage of sales for the nine months ended January 31, 2016 was 79% as compared to 73% during
the same period in 2015.
General and Administrative
General and
administrative costs for the nine months ended January 31, 2016 decreased by $996,583 to $668,874 from $1,665,457 in the
comparable period in 2015. This decrease is directly attributable to less costs associated with the issuance of shares of our
Common Stock to employees, consultants, vendors and other stock based compensation.
Sales and Marketing
Sales and marketing costs for the nine months ended January 31, 2016 were $61,372 compared to $15,421 for the comparable period
in 2015.
Depreciation
Depreciation expense for the nine months ended January 31, 2016 was $6,893 compared to $3,779 for the comparable period in
2015.
Other Income (Expense)
Other expense for the nine months ended January 31, 2016 was $980,435 compared to $511,218 for the comparable period in 2015,
primarily a result of interest expense associated with our financing activity.
Net Loss
Net loss for the nine months ended January 31, 2016 was $1,559,497 compared to $2,082,075 for the comparable period in 2015.
Liquidity
and Capital Resources
We are dependent upon obtaining additional financing in order to adequately fund working capital, infrastructure, expansion
expenses and significant marketing/investor related expenditures to gain market recognition, so that it can achieve a level
of revenue adequate to support our cost structure, none of which can be assured. We believe that we will need approximately
$1 million over the next twelve months. While initial operations have been funded with private placements of equity and bridge
loans, there can be no assurance that adequate financing will continue to be available, and, if available, be on terms that
are favorable. As of January 31, 2016, we had $69,340 on deposit.
As of January 31, 2016, our working capital deficit was $777,008, our accumulated deficit was $4,493,545, and our stockholders’
deficit was $773,940. Operating loss was $37,158 for the three months ended January 31, 2016.
We reduced our net cash flows used in operation during the three months ended January 31, 2016 from the three months ended
October 31, 2015 and we expect to improve upon it further during the fiscal year ended April 30, 2016 as the Hotel San Ayre
increases its occupancy; however, due to conditions and influences out of our control, including the current state of the
national economy, we cannot guarantee that this improvement will be achieved or that it will be achieved in the stated time
frame, nor is there any assurance that such an operating level can ever be achieved.
Off-Balance
Sheet Arrangements
As of January 31, 2016, we had no material off-balance sheet arrangements.
In
the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally
relate to lawsuits, claims, environmental actions or the actions of various regulatory agencies. We consult with counsel and other
appropriate experts to assess the claim. If, in our opinion, we have incurred a probable loss as set forth by generally accepted
accounting principles in the U.S. (GAAP), an estimate is made of the loss and the appropriate accounting entries are
reflected in our financial statements. After consultation with legal counsel, we do not anticipate that liabilities arising out
of currently threatened lawsuits and claims, if any, will have a material adverse effect on our financial position, results of
operations or cash flows.
Critical
Accounting Estimates
Please
refer to our Annual Report on Form 10-K for the year ended April 30, 2015 filed with the Commission on July 27, 2015 and incorporated
herein by reference, for detailed explanations of our critical accounting estimates, which have not changed significantly during
the three months ended January 31, 2016.
New Accounting
Pronouncements
There
have been no material changes to our significant accounting policies
as summarized in our
Annual Report on Form 10-K for the year ended April 30, 2015
. We
do not expect that
the adoption of any recent accounting pronouncements will have a material impact on our condensed consolidated financial statements.