Certain statements in this Report constitute "forward-looking statements." Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that might
cause such a differences include, among others, uncertainties relating to
general economic and business conditions; industry trends; changes in demand for
our products and services; uncertainties relating to customer plans and
commitments and the timing of orders received from customers; announcements or
changes in our pricing policies or that of our competitors; unanticipated delays
in the development, market acceptance or installation of our products and
services; changes in government regulations; availability of management and
other key personnel; availability, terms and deployment of capital;
relationships with third-party equipment suppliers; inflation, the war in
Ukraine, supply chain slowdowns, reoccurring Covid-19 outbreaks both nationally
and internationally, particularly in China, and worldwide political stability
and economic growth. The words "believe," "expect," "anticipate," "hope,"
"intend" and "plan" and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made.
Results of Operations
Three Months Ended August 31, 2022 compared with the Three Months Ended August
31, 2021
The narrative comparison of results of operations for the three-month periods
ended August 31, 2022 and 2021, is based on the following table.
August 31, 2022 August 31, 2021
REVENUE $ 44,718 $ 74,685
COST OF REVENUE 83,071 20,129
Cost of revenue as a % of total revenue 186 % 27 %
Gross Profit (Loss) (38,353 ) 54,556
Gross profit as a % of revenue (86 %) 73 %
OPERATING EXPENSES
Officer and director compensation 95,000 135,000
General and administrative 187,770 26,354
Professional fees and contract services 61,517 74,893
Advertising and promotion 3,117 279,857
Total operating expenses 347,404 516,104
NET LOSS FROM OPERATIONS (385,757 ) (461,548 )
Revenues in the quarter ended August 31, 2022 decreased when compared to the
same period in 2021. The decrease is largely attributable to an intensified
effort to bring our Colorado and California facilities online. We do not
anticipate that the short-term decrease in sales will continue for long, as
sales ramp up in our Colorado and California facilities, and we expect to see an
increase in sales of farm implements and plant nutrients in the fiscal year
ended May 31, 2023. In this quarter, the Company generated $38,652 in sales of
cannabis products at our Colorado facility. The Colorado facility was newly
opened in our previous fiscal fourth quarter and was in the very early stage of
commencing sales activities. We expect a slow ramp up of sales of cannabis
products through the remainder of calendar year 2022. The Company generated
$5,316 in sales of cannabis products at our California facility, with the first
sales occurring in August 2022.
2
Cost of revenues as a percentage of sales increased in the quarter ended August
31, 2022, when compared with the same period in 2021. The increase is
attributable to the costs incurred in our Colorado and California operations. In
the three months ended August 31, 2022, we incurred operating costs associated
with setting up and documenting our manufacturing processes and producing test
batches of products to verify our systems were generating expected results at
our Colorado and California facilities. During this phase, we did not produce
significant quantities of product for resale. The production expenses of the
test batches were, however, recorded as manufacturing costs. We expect margins
to improve on our cannabis product lines in the coming periods as our
manufacturing processes are standardized and our need to run test batches and
adjust processes decreases.
Our General and Administrative costs ("G&A") increased in the quarter ended
August 31, 2022, compared with the same period in the prior year. The increase
in G&A costs were primarily due to our decision to further develop our cannabis
business through acquisition of the Colorado and California facilities and the
related costs of setting up geographically disbursed manufacturing operations.
Our advertising and promotion costs decreased significantly when compared to the
same reporting period in the previous year.
Net loss from operations decreased in the reporting period ending August 31,
2022 compared with the same period in 2021. The decrease in the net loss is
attributable to the factors identified above.
Liquidity and Capital Resources
Cash flow used by operating activities for the quarter ended August 31, 2022,
was $559,756 compared with $164,942 in the same period in 2021. During the
period, our total cash increased by $35,138 to $76,025. The increase in our cash
position at August 31, 2022, is largely attributable to the cash requirements
for starting up operations in Colorado and California. Cash to fund cash flow
from operations was derived primarily from proceeds of notes payable.
We continue to seek potential acquisition candidates with a focus on acquiring
additional operating companies with scale sufficient to support all aspects of
the Company's operations, including the public company infrastructure. The
Company is currently heavily dependent on funding through advances from related
parties, but no assurances can be given that such funding will continue to be
available in future periods. Our historic operations have not been sufficient to
support the existing infrastructure, much of which is required in order to
maintain public company status.
We have maintained active operations as a manufacturer and distributor of the
Debudder product line since 2018. We do not consider the Company to be a shell
company as that term is defined in the Securities Act of 1933, as amended.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course of
business. We incurred a net loss of $999,653 for the quarter ended August 31,
2022, bringing our accumulated deficit to $12,973,694 as of August 31, 2022.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. The Company may seek to raise money for working capital
purposes through a public offering of its equity capital or through a private
placement of equity capital or convertible debt. It will be important for the
Company to succeed in its efforts to raise capital in this manner to further its
business plan in an aggressive manner. Raising additional capital may cause
dilution to current shareholders. There are no assurances we can be successful
in our efforts to raise working capital.
COVID-19
The effects of the continued outbreak of COVID-19 and related government
responses have, and could continue to include, extended disruptions to supply
chains and capital markets, reduced labor availability, and a prolonged
reduction in economic activity. These effects could have a variety of adverse
impacts to the Company, including our ability to operate. As of August 31, 2022,
there were no material adverse impacts to our operations noted due to COVID-19.
The economic disruptions caused by COVID-19 could also adversely impact the
impairment risks for certain long-lived assets. Management evaluated these
impairment considerations and determined that no such impairments occurred as of
August 31, 2022.
3
Off Balance Sheet Arrangements
None
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