You should read the following discussion and analysis by our management of our financial condition and results of operations in conjunction with our Consolidated Financial Statements and the accompanying notes.
The following discussion includes many forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. For cautions about relying on such forward-looking statements, please refer to the section entitled "Cautionary Note Regarding Forward-Looking Statements" at the beginning of this Report immediately prior to Item 1.
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:
?EWSD I, LLC d/b/aShi Farms , which cultivates and processes industrial hemp at a 320-acre farm inPueblo, Colorado ; ? NY -SHI LLC , which conducted our pilot study inNew York and will be our joint venture partner with Canbiola and Canbiola Sub; ?SHI Cooperative LLC , which will contract with third-party farmers to cultivate hemp in, among other areas,Colorado ,Nevada , andOklahoma ; ?Pueblo Agriculture Supply and Equipment, LLC , "PASE" which owns dehydration equipment; ?SOCO Processing LLC , which will construct a pre-processing plant as part of the Partner Farm Agreement and Supply Agreement withMile High ; and ?Rock Acquisition Corporation , which will manage land containing potential sand and gravel assets inPueblo, Colorado , under a mining permit with theState of Colorado . 29
Comparison of the years ended
Net Loss
The Company reported a consolidated net loss of approximately
Revenue
Revenue was
Costs of Revenue
Costs of revenues increased by
We incurred costs related to the cultivation of crops during
In light of the court order to destroy all of the Whole Hemp plants, the Company
has immediately expensed all capitalized agricultural costs of
Operating Expenses
Operating expenses consist of all other costs incurred during the period, other
than cost of revenue. We incurred approximately
30 Other Expense
Other expense increased by approximately
Liquidity and Capital Resources
As of
Cash Flow
During the year ended
For the year ended December 31, Cash flow 2017 2016 Net cash used in operating activities$ (1,584,213 ) $ (3,552,099 ) Net cash used in investing activities (588,063 ) (638,048 ) Net cash provided by financing activities 2,236,319 4,179,138 Cash Flows from discontinued operations 2,456 (17,858 ) Net decrease in cash $ 66,499$ (28,867 )
Cash Flows - Operating Activities
During the year ended
Cash Flows - Investing Activities
During the year ended
Cash Flows - Financing Activities
During the year ended
31 Liquidity and Cash Flows
Management believes that our cash balances on hand, cash flows expected to be
generated from operations, proceeds from current and future expected debt
issuances and proceeds from future share capital issuances, if any, may not be
sufficient to fund the Company's net cash requirements through
Our financial statements were prepared on a going concern basis. The going
concern basis assumes that we will continue in operation for the foreseeable
future and will be able to realize our assets and discharge our liabilities in
the normal course of business. During the year ended
We will continue to execute on our business model by attempting to raise additional capital through the sales of debt or equity securities or other means. However, there is no guarantee that such financing will be available on terms or timing acceptable to us, or at all. If we are successful, we expect that these efforts could provide us with the necessary liquidity to continue operations at least through the first quarter of the fiscal year during which this Report has been filed. If we are unable to obtain adequate debt or equity financing, we may be forced to slow or reduce the scope of operations and proposed expansion, and our business would be materially affected. It is uncertain whether we can obtain financing to fund operating deficits until profitability is achieved or until revenues increase. This need may be adversely impacted by: unavailability of financing, uncertain market conditions, the success of the crop growing season, the demand for CBD oil, our ability to obtain financing for the equipment and labor needed to cultivate hemp and extract the CBD oil, and adverse operating results. The outcome of these matters cannot be predicted at this time.
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