NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained herein involve risks and uncertainties, including statements as to:





  ? our future operating results;
  ? our business prospects;
  ? our contractual arrangements and relationships with third parties;
  ? the dependence of our future success on the general economy;
  ? our possible financings; and
  ? the adequacy of our cash resources and working capital.

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we "believe," "anticipate," "expect," "estimate" or words of similar meaning. Similarly, statements that describe our future plans, objectives, or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Overview

We operate as a Colorado corporation and through our subsidiaries which provide analytical testing and advisory services to the emerging legalized cannabis industry.

Our active subsidiaries as of March 31, 2020, are as follows:





                                           State of
 Trade Name (dba)      Company Name      Incorporation     Ownership %       Acquisition Month
                     Smith Scientific
EVIO Labs Medford    Industries, LLC    Oregon                       80 %      June 2016
                     Greenhaus
EVIO Labs Portland   Analytical Labs    Oregon                      100 %      October 2016
                     Viridis
EVIO Labs MA         Analytics          Massachusetts               100 %      August 2017
EVIO Labs Berkeley   C3 Labs, LLC       California                   90 %      January 2018
                     Keystone Labs,
Keystone Labs        Inc.               Ontario, Canada              50 %      May 2018

In addition to the wholly-owned subsidiaries, the Company has entered into license agreements with independent testing laboratories in Florida and Colorado. Under the terms of the agreements, the independent laboratories are granted non-transferable and non-exclusive rights to use the Company's trademarks and trade name.





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, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company's ability to continue as a going concern.





  32

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

In the coming year, the Company's foreseeable cash requirements will relate to the continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.

Historically, it has mostly relied upon private offerings and internally generated funds such as shareholder loans and advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company's stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company's failure to do so could have a material and adverse effect upon it and its shareholders.

Critical Accounting Policies and Estimates.

Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.





                             RESULTS OF OPERATIONS

Three Months Ended March 31, 2020, compared to Three Months Ended March 31, 2019





COVID-19

On March 11, 2020, the World Health Organization ("WHO") declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease.

COVID-19 and the US's response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.





Revenues

For the three months ended March 31, 2020, we generated revenues of $867,814 compared to $735,179 for the three months ended March 31, 2019, an increase of $132,635 or approximately 18%. The increase was due primarily to increased testing sales in Oregon and California.





  33







Gross Profit

For the three months ended March 31, 2020, the gross loss was $(152,632) compared to a gross loss of $(421,863) for the three months ended March 31, 2019 an increase of $269,231. The reduced losses was primarily attributed to increased sales in Oregon and decreased operating costs across all labs.





Operating Expenses

For the three months ended March 31, 2020, total operating expenses were $1,446,465 compared to $1,262,778 for the three months ended March 31, 2019, an increase of $183,697. The increase is primarily attributed to increase in sales, general and administrative expenses.





Other (Expense)

For the three months ended March 31, 2020, other expense, net was $1,383,589, compared to other expense, net of $2,135,116 for the three months ended March 31, 2019. The decrease in other income, net of $751,527 was primarily attributable to a decrease in the change in the fair market value of derivative liabilities of $1,215,039, offset by increased cost of debt discount amortization.





Net Loss

Net loss during the three months ended March 31, 2020, was $2,982,686, compared to a net loss of $3,820,370 during the three months ended March 31, 2019. The reduction of $837,684 in net loss is the result of an increase in gross margin and a reduction in other expenses, net.

Liquidity and Capital Resources

During the six months ended March 2020, the Company used $698,030 in cash from operating activities compared to cash used in operating activities of $1,078,049 for the six months ended March 31, 2019. The improvement of $535,401 is primarily attributable to a reduction in operating losses in 2019.

During the six months ended March 31, 2020, the Company used $44,674 in investing activities compared to $580,075 used in investing activities during the same period ended March 31, 2019. The reduction of $535,401 is attributable to a decrease in the purchase of fixed assets

During the six months ended March 31, 2020, net cash from financing activities was $648,477 compared to $1,631,419 during the same six month period ended March 31, 2019. The decrease in the 2019 period is primarily attributable a decrease in proceeds from the issuance of common stock, convertible debentures, and convertible notes, while the company increased its repayments of capital leases and loans.





Dividends

The Company has never declared dividends.

Critical Accounting Policies and Estimates.

Our Critical Accounting Policies can be found in Note 1. ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES to our consolidated financial statements.





  34







Our Website.

Our website can be found at www.eviolabs.com.

© Edgar Online, source Glimpses