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 November 30, 2022 compared with the Three Months Ended
November 30, 2021
The narrative comparison of results of operations for the three-month periods
ended November 30, 2022 and 2021 is based on the following table.
November 30, 2022 November 30, 2021
REVENUE $ 124,487 $ 48,367
COST OF REVENUE 35,280 16,240
Cost of revenue as a % of total revenue 28 % 34 %
Gross Profit 89,207 32,127
Gross profit as a % of revenue 72 % 66 %
OPERATING EXPENSES
Officer and director compensation 75,000 203,785
General and administrative 412,835 38,519
Professional fees and contract services 97,013 79,372
Advertising and promotion (9,126 ) 67,516
Total operating expenses 575,722 389,192
Loss from operations (486,515 ) (357,065 )
Other income (expense) (951,304 ) (132,812 )
NET LOSS $ (1,437,819 ) $ (489,877 )
Revenues in the quarter ended November 30, 2022 increased when compared to the
same period in 2021. The increase is largely attributable to an intensified
effort to bring our Colorado and California facilities online. In the quarter
ended November 30, 2022, the Company generated $124,346 in sales of cannabis
products.
Cost of revenues also increased in the quarter ended November 30, 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
November 30, 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.
2
Our General and Administrative costs ("G&A") increased in the quarter ended
November 30, 2022, compared with the same period in 2021. 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,
in particular rent expense. Our advertising and promotion costs decreased
significantly when compared to the same reporting period in the previous year.
Other income (expense) increased period over period due to interest expense on
additional borrowings and amortization of discount associated with new notes
payable.
Net loss increased in the three-month reporting period ending November 30, 2022
compared with the same period in 2021. The increase in the net loss is
attributable to the factors identified above.
Six Months Ended November 30, 2022 compared with the Six Months Ended November
30, 2021
The narrative comparison of results of operations for the six-month periods
ended November 30, 2022 and 2021, is based on the following table.
November 30, 2022 November 30, 2021
REVENUE $ 169,166 $ 123,052
COST OF REVENUE 118,351 36,369
Cost of revenue as a % of total revenue 70 % 30 %
Gross Profit 50,815 86,683
Gross profit as a % of revenue 30 % 70 %
OPERATING EXPENSES
Officer and director compensation 170,000 347,359
General and administrative 600,566 64,873
Professional fees and contract services 158,530 145,691
Advertising and promotion (6,009 ) 347,373
Total operating expenses 923,087 905,296
Loss from operations (872,272 ) (818,613 )
Other income (expense) (1,565,200 ) (611,458 )
NET LOSS $ (2,437,472 ) $ (1,430,071 )
Revenues in the six-month period ended November 30, 2022 increased when compared
to the same period in 2021. The increase is largely attributable to an
intensified effort to bring our Colorado and California facilities online. In
six-month period ended November 30,2022, the Company generated $168,265 in sales
of cannabis products.
Cost of revenues increased in the six-month period ended November 30, 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 six-month period
ended November 30, 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 six-month period
ended November 30, 2022, compared with the same period in 2021. 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,
in particular rent expense. Our advertising and promotion costs decreased
significantly when compared to the same reporting period in the previous year.
Other income (expense) increased period over period due to interest expense on
additional borrowings and amortization of discount associated with new notes
payable.
3
Net loss increased in the six-month reporting period ending November 30, 2022
compared with the same period in 2021. The increase in the net loss is
attributable to the factors identified above.
Liquidity and Capital Resources
Cash flow used by operating activities for the six month period ended November
30, 2022, was $903,035 compared with $252,786 in the same period in 2021. During
the period, our total cash increased by $9,334 to $50,221. The increase in our
cash position at November 30, 2022 is largely attributable to borrowings
associated with 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 $2,437,472 for the six months ended November
30, 2022, bringing our accumulated deficit to $14,411,513 as of November 30,
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.
Off Balance Sheet Arrangements
None
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