The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, Notis Global's audited annual financial statements and the related notes thereto as filed with the Securities and Exchange Commission ("SEC") on January 8, 2019. This discussion contains certain forward-looking statements that involve risks and uncertainties, as described under the heading "Forward-Looking Statements" in this quarterly report. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see the disclosure under the heading "Risk Factors" elsewhere in this quarterly report.

We believe that our assumptions are based upon reasonable data derived from and known about our business and operations and the business and operations of the Company. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to, expected market demand for the Company's products and services and competition.





Overview

Historically, we established joint ventures and entered into operating and management agreements with our partners and acted as a distributor of hemp products processed by our contractors. We previously generated revenue from various sources on a "one-time basis" for services that we provided to clients in helping them obtain licenses, build out and open dispensaries and cultivation centers. Prior to 2017, we sold a line of portable vaporizers and accessories under the brand name Vaporfection. We discontinued these business operations in 2016 to focus on our current business in the industrial hemp industry.

Based upon our knowledge and expertise in the regulation of the industrial hemp industry, our business plan involves creating a sustainable business model to grow crops and manufacture products from hemp farmland and to market, sell, and distribute hemp derivative products such as CBD distillate and isolate, while exploring other business opportunities that complement our core business.

We operate through the following subsidiaries:





  ? Shi Farms, which cultivates and processes industrial hemp at a 320-acre farm
    in Pueblo, Colorado;

  ? NY - SHI, which conducted our pilot study in New York and will be our joint
    venture partner with Canbiola and Canbiola Sub;

  ? SHI Cooperative, which contracts with third-party farmers to cultivate hemp
    in, among other areas, Colorado, Nevada, and Oklahoma;

  ? Pueblo Agriculture Supply and Equipment LLC "PASE", which owns dehydration
    equipment;

  ? SOCO Processing, which will construct a pre-processing plant as part of the
    Partner Farm Agreement and Supply Agreement with Mile High; and

  ? Rock Acquisition Corporation, which will manage land containing potential sand
    and gravel assets in Pueblo, Colorado, under a mining permit with the State of
    Colorado.




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Comparison of the three months ended September 30, 2017 and 2016

The Company reported a consolidated net income of approximately $26 million for the three months ended September 30, 2017 and consolidated net loss of approximately $5.7 million for the three months ended September 30, 2016. The fluctuation of approximately $31.7 million was due to an increase in the fair value of the derivative liabilities of approximately $32.7 million.





Revenue

Revenue was $35,440 for the three months ended September 30, 2017, compared to $17,127 for the three months ended September 30, 2016. The increase of $18,313 in total revenue was due to the Company executing its business plan and increasing the size of its agricultural capacity by farming on 15 acres. The net result was an increase in biomass that we processed into CBD, which allowed us to commence sales of CBD.





Cost of revenue

Cost of revenues decreased by $108,439 for the three months ended September 30, 2017, as compared to the same period of 2016 because the Company incurred decreased cost related to procurement of CBD oils.





Operating Expenses

Operating expenses consist of all other costs incurred during the period, other than cost of revenue. The Company incurred approximately $1.8 million in operating expenses for the three months ended September 30, 2017, compared to approximately $1.9 million for the three months ended September 30, 2016. The decrease of $106,658 was primarily due to the decrease in the cost to procure of CBD oils.





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Other Expense

Other expense increased by approximately $31.7 million, primarily from the increase on change in fair value of derivative liabilities and warrant liabilities.





Net Income (Loss)

The net income for September 30, 2017 was approximately $26.1 million compared to net loss of $5.7 million for September 30, 2016. The increase of approximately $31.8 million was primarily due to the increase in total other income (expense).

Comparison of the nine months ended September 30, 2017 and 2016

The Company reported a consolidated net loss of approximately $20.4 million for the nine months ended September 30, 2017 and consolidated net income of approximately $2.1 million for the nine months ended September 30, 2016. The fluctuation of approximately $22.5 million was due to a decrease in the change in fair value of the derivative liabilities of approximately $17.9 million and increase in interest expense of approximately $9.1 million.





Revenue

Revenue was $171,635 for the nine months ended September 30, 2017, compared to $278,702 for the nine months ended September 30, 2016. The decrease of $107,067 in total revenue was due to the shift in the Company's business plan.





Cost of revenue

Cost of revenues decreased by approximately $287,000 for the nine months ended September 30, 2017 as compared to the same period of 2016 because the Company incurred decreased cost related to procurement of CBD oils.





Operating Expenses

Operating expenses consist of all other costs incurred during the period other than cost of revenue. The Company incurred approximately $4.0 million in operating expenses for the nine months ended September 30, 2017 compared to operating income of approximately $7.8 million for the nine months ended September 30, 2016. The decrease of approximately $3.8 million was primarily due to the decrease in general and administrative expenses of $3.8 million.





Other Income (Expense)

Other expense decreased by approximately $26.8 million, primarily from the decrease on the change in fair value of derivative liabilities, and an increase of $8.1 million on interest expense.





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Net Loss

The net loss for September 30, 2017 was approximately $20.4 million compared to net income of $2.1 million for September 30, 2016. The decrease of approximately $22.5 million was primarily due to the increase in total other income (expense).

Liquidity and Capital Resources

As of September 30, 2017, the Company had cash on hand of approximately $80,339 compared to approximately $23,967 at December 31, 2016.

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