Forward-Looking Statements





The following discussion of our financial condition and results of operations
for the three and six months ended June 30, 2020 and 2019 should be read in
conjunction with our unaudited condensed consolidated financial statements and
the notes to those statements that are included elsewhere in this report. Our
discussion includes forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements as
a result of a number of factors, including those set forth under Item 1A. Risk
Factors appearing in our Annual Report on Form 10-K for the year ended December
31, 2019, as filed on March 30, 2020 with the SEC. We use words such as
"anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect,"
"believe," "intend," "may," "will," "should," "could," and similar expressions
to identify forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms "Helix", the "Company", "we", "us", and "our" refer to Helix Technologies, Inc.





Overview



Helix Technologies, Inc. provides critical infrastructure solutions to the legal
cannabis industry. Our mission is to provide clients with the best-in-class
critical infrastructure services through a single integrated platform which
enables them to run their businesses more safely, efficiently, and profitably.
As we increase our platform's scale and scope, clients will be able to realize
greater cost savings and operating advantages.

Our team is composed of former military, financial services, and technology professionals with deep experience in technology design and development, strategic partnerships, data aggregation, venture capital, private equity, risk-management, security and law enforcement, intelligence, banking, and finance.





Technology is a cornerstone of Helix's service offering. Our technology platform
allows clients to manage their business in a compliant manner with BioTrackTHC's
seed-to-sale software, as well as managing inventory and supply costs
through Cannabase. We also provide bespoke monitoring and transport solutions.
We focus on utilizing technology as an operations multiplier, bringing in and
managing unique partnerships across the technology and operations spectrum to
tailor and create desired outcomes for our clients.



Within the cannabis industry, no other activity carries as much potential for
unforeseen negative impact as a lapse in compliance operations. Helix brings a
broad range of compliance services to firms in the cannabis industry,
safeguarding their ability to operate while increasing their access to services
that offer them a competitive edge.



We have largely completed the financial and operational integrations of the
previous 24 months, namely the acquisitions of BioTrackTHC, Engeni, Tan Security
and Amercanex. BioTrackTHC specializes in providing cannabis software services,
ranging from monitoring of plant inventory to point-of-sale solutions.
BioTrackTHC's software is used by 9 government entities and more than 2,000
commercial client locations across 34 U.S. states and 6 countries. Engeni
provides a turnkey and comprehensive digital presence solution for small
businesses. The Engeni Growth solution includes an optimized web page, a fully
paid Google pay-per-click campaign, lead capture, lead delivery and ubiquitous
directory/map listings. Engeni has also become the Company's organic offshore
software development platform, and has delivered the second generation of the
BioTrackTHC software. These strategic acquisitions will help field the growing
demand in the Legal Cannabis Industry. Tan Security, a licensed security
company, provided the Company a platform with which to expand security
operations in the state of California. Amercanex is a business to business
wholesale marketplace that leverages blockchain technology and is capable of
facilitating wholesale cannabis and hemp transactions between licensed
businesses on a global scale. The Company has integrated Amercanex's technology
with BioTrackTHC's software platforms. Integration of the previously announced
acquisitions has already yielded the operational and financial results that the
management team sought, evidenced by strongly improved cash flows from
operations, growing market share, and a greatly accelerated software development
time with increased market responsiveness. These integrations still have room to
yield more financial and operational leverage, which will be welcome in the
unprecedented operating environment that now confronts the industry. Further,
the turnaround of the BioTrackTHC unit is well advanced, with strategic
restructuring in operations and personnel nearly complete, having been initiated
in 2019. The transition of BioTrackTHC from an operation with negative $800,000
of Adjusted EBITDA in 2018 (while still better than competitors) into an
operation that generated nearly $800,000 in Adjusted EBITDA in Q1 2020 and Q2
2020 is a transformational success.



                                       42






Today, the leadership team is focused on keeping our employees and clients as
safe as possible as we continue to execute our strategy in the face of the
emergence of the Covid-19 pandemic. As a former military officer with training
in Nuclear, Biological, and Chemical operations, Helix's CEO is focused on not
only the Company's strategic and operational results, but on the evolution of
the pandemic threat to the business and our lives.



On March 11, 2020, the World Health Organization ("WHO") recognized COVID-19 as
a global pandemic, prompting many national, regional, and local governments,
including in the markets that the Company operates in, to implement preventative
or protective measures, such as travel and business restrictions, wide-sweeping
quarantines and stay-at-home orders. As a result, COVID-19 has significantly
curtailed global economic activity, including in the industries in which the
Company operates.




The COVID-19 pandemic has created significant disruption and volatility in the
capital markets, which, depending on future developments, could impact our
capital resources and liquidity in the future. If we need to raise additional
capital to support operations in the future, we may be unable to access the
capital markets.



In response to the health and safety risks and challenges presented by the
COVID-19 pandemic, the Company has been proactively and regularly implementing
measures to protect its employees. These measures include, but are not limited
to, the following:

? Abiding by national, state, and local recommendations to require the wearing of

protective face masks and practicing of social distancing.

? Adopting remote working protocols, systems, and processes.






While the Company is actively working to successfully navigate the financial,
operational, and personnel challenges presented by the COVID-19 pandemic, the
full extent of the impact of COVID-19 on our operational and financial
performance will depend on future developments, including the duration and
spread of the pandemic and related actions taken by the U.S. government, state
and local government officials, and international governments to prevent disease
spread, all of which are uncertain, out of our control and cannot be predicted
at this time. We believe that the economic impacts of the pandemic are not well
understood in terms of scope, scale and duration, and so we continue to focus on
accelerating our execution timeline while using our technology and data
resources to deliver greater reliability and profitability to our customers.

Results of Operations for the three months ended June 30, 2020 and 2019





The following table shows our results of operations for the three months ended
June 30, 2020 and 2019. The historical results presented below are not
necessarily indicative of the results that may be expected for any future
period.



                                             For the Three Months Ended
                                                      June 30,                            Change
                                                2020              2019           Dollars         Percentage
Revenue                                    $    4,762,711     $  3,898,873     $    863,838               22 %
Cost of revenue                                 2,385,668        1,996,699          388,969               19 %
Gross margin                                    2,377,043        1,902,174          474,869               25 %

Operating expenses                              3,422,350        4,367,897         (945,547 )            -22 %

Loss from operations                           (1,045,307 )     (2,465,723 )      1,420,416              -58 %


Other income (expense), net                    (2,079,838 )      7,278,031 

     (9,357,869 )           -129 %

Net income (loss)                          $   (3,125,145 )   $  4,812,308     $ (7,937,453 )           -165 %

Changes in foreign currency translation
adjustment                                 $       27,118     $       (590 )   $     27,708           -4,696 %

Net income (loss) attributable to common
shareholders                               $   (3,098,027 )   $  4,811,718     $ (7,909,745 )           -164 %




Revenue



Total revenue for the three-month period ended June 30, 2020 was $4,762,711,
which represented an increase of $863,838 compared to total revenue of
$3,898,873 for the three months ended June 30, 2019. The increase primarily
resulted from additional revenue resulting from continued growth in our software
client based, and an increase in the number of clients serviced by our security
operations.



Cost of Revenues



Cost of revenues for the three months ended June 30, 2020 and 2019 primarily
consisted of hourly compensation for security personnel and employees involved
in the creation and development of licensing software. Cost of revenues
increased by $388,969 for the three months ended June 30, 2020, to $2,385,668 as
compared to $1,996,699 for the three months ended June 30, 2019. The increase
resulted entirely from the substantial increase in the number of clients
serviced by Helix security, which required the hiring of additional employees.
Despite growing software revenues, our cost of revenues in that business unit
declined year over year.



                                       43





Operating Expenses



Our operating expenses encompass selling, general and administrative expenses,
salaries and wages, professional and legal fees and depreciation. Selling,
general and administrative expenses consist primarily of rent/moving expenses,
advertising and travel expenses. Salaries and wages is composed of non-revenue
generating employees. Professional services are principally comprised of outside
legal, audit, information technology consulting, marketing and outsourcing
services as well as the costs related to being a publicly traded company. Our
operating expenses during the three months ended June 30, 2020 and 2019 were
$3,422,350 and $4,367,897, respectively. The overall $945,547 decrease in
operating expenses was attributable to intense cost management efforts,
illustrated by the following increases/(decreases) in operating expenses of:



  ? Selling, general and administrative - $(452,288)

  ? Salaries and wages - $72,844

  ? Professional and legal fees - $(431,882)

  ? Depreciation and amortization - $(134,221)
The $452,288 decrease in selling, general and administrative expenses is a
result of decreases in rent expense, advertising and travel expenses resulting
from cost containment measures. The $72,844 increase in salaries and wages
resulted from an increase in stock compensation expense. The $431,221 decrease
in professional and legal fees primarily resulted from a decrease in legal fees
and costs associated with fundraising and acquisitions. The $134,221 decrease in
depreciation and amortization was due to reduced amortization of intangible
assets acquired in the Security Grade acquisition as we fully impaired certain
intangible assets in the first quarter of 2020.



Other Income (Expense), net



Other income (expense), net consisted of a change in the fair value of
convertible notes, change in the fair value of convertible notes - related
party, change in fair value of warrant liability, change in fair value of
contingent consideration, loss on issuance of warrants, gain on reduction of
obligation pursuant to acquisition and interest (expense) income. Other income
(expense), net during the six months ended June 30, 2020 and 2019 was
$(1,730,035) and $(967,007), respectively. The $763,028 decrease in other income
(expense), net was primarily attributable to a loss on the change in fair value
of convertible notes of $782,941 as compared with a loss of $142,341 in the
prior period, and loss on conversion of convertible notes of $1,424,422,
partially offset by gain on the change in fair value of convertible notes -
related party of $498,233, gain on the change in fair value of warrant liability
of $615,678 as compared with a gain of $2,238,145 in the prior period, other
income of $37,507, a loss on the change in fair value of warrant liability of
880,050 in the prior period, and a loss on issuance of warrants in the prior
period of 787,209.



Net income (loss)




For the foregoing reasons, we had a net loss of $(3,125,145) for the three
months ended June 30, 2020, or $(0.03) per basic share, compared to net income
of $4,812,308 for the three months ended June 30, 2019, or $0.06 net income

per
basic share.

Net income (loss) Attributable to common shareholders





For the foregoing reasons, we had a net loss attributable to common shareholders
of $(3,098,027) for the three months ended June 30, 2020, or $(0.03) per basic
share attributable to common shareholders, compared to net income attributable
to common shareholders of $4,811,718 for the three months ended June 30, 2019,
or $0.06 net income per basic share attributable to common shareholders.



                                       44

Results of Operations for the six months ended June 30, 2020 and 2019





The following table shows our results of operations for the six months ended
June 30, 2020 and 2019. The historical results presented below are not
necessarily indicative of the results that may be expected for any future
period.



                                             For the Six Months Ended
                                                     June 30,                           Change
                                               2020             2019           Dollars        Percentage
Revenue                                    $  9,315,142     $  7,269,980     $ 2,045,162               28 %
Cost of revenue                               4,652,347        3,921,918         730,429               19 %
Gross margin                                  4,662,795        3,348,062       1,314,733               39 %

Operating expenses                            9,124,129        8,410,448         713,681                8 %

Loss from operations                         (4,461,334 )     (5,062,386 )       601,052              -12 %


Other income (expense), net                  (1,730,035 )       (967,007 ) 

    (763,028 )             79 %

Net loss                                   $ (6,191,369 )   $ (6,029,393 )   $  (161,976 )              3 %

Changes in foreign currency translation
adjustment                                 $     48,195     $      3,657     $    44,538            1,218 %

Net loss attributable to common
shareholders                               $ (6,143,174 )   $ (6,025,736 )   $  (117,438 )              2 %




Revenue




Total revenue for the six-month period ended June 30, 2020 was $9,315,142, which
represented an increase of $2,045,162 compared to total revenue of $7,269,980
for the six months ended June 30, 2019. The increase primarily resulted from
additional revenue resulting from continued growth in our software client based,
and an increase in the number of clients serviced by our security operations.



Cost of Revenues




Cost of revenues for the six months ended June 30, 2020 and 2019 primarily
consisted of hourly compensation for security personnel and employees involved
in the creation and development of licensing software. Cost of revenues
increased by $730,429 for the six months ended June 30, 2020, to $4,652,347 as
compared to $3,921,918 for the six months ended June 30, 2019. The increase
resulted entirely from the substantial increase in the number of clients
serviced by Helix security, which required the hiring of additional employees.
Despite growing software revenues, our cost of revenues in that business unit
declined year over year.



                                       45





Operating Expenses



Our operating expenses encompass selling, general and administrative expenses,
salaries and wages, professional and legal fees and depreciation. Selling,
general and administrative expenses consist primarily of rent/moving expenses,
advertising and travel expenses. Salaries and wages is composed of non-revenue
generating employees. Professional services are principally comprised of outside
legal, audit, information technology consulting, marketing and outsourcing
services as well as the costs related to being a publicly traded company. Our
operating expenses during the six months ended June 30, 2020 and 2019 were
$9,124,129 and $8,410,448, respectively. The overall $713,681 increase in
operating expenses was attributable to the following increases in operating
expenses of:



  ? Selling, general and administrative - $(485,435)

  ? Salaries and wages - $552,328

  ? Professional and legal fees - $(645,920)

  ? Depreciation and amortization - $(77,270)

  ? Loss on impairment of intangible assets - $1,369,978
The $485,435 decrease in selling, general and administrative expenses is a
result of decreases in rent expense, advertising and travel expenses. The
$552,328 increase in salaries and wages resulted from share-based compensation
and separation payments to terminated employees. The $645,920 decrease in
professional and legal fees primarily resulted from a decrease in legal fees and
costs associated with fundraising and acquisitions. The $1,369,978 increase in
loss on impairment of intangible assets was due to the full impairment of the
Security Grade customer list in the first quarter of 2020.



Other Income (Expense), net



Other income (expense), net consisted of a change in the fair value of
convertible notes, change in the fair value of convertible notes - related
party, change in fair value of warrant liability, change in fair value of
contingent consideration, loss on issuance of warrants, gain on reduction of
obligation pursuant to acquisition and interest (expense) income. Other income
(expense), net during the six months ended June 30, 2020 and 2019 was
$(1,730,035) and $(967,007), respectively. The $763,028 decrease in other income
(expense), net was primarily attributable to a loss on the change in fair value
of convertible notes of $782,941 as compared with a loss of $142,341 in the
prior period, and loss on conversion of convertible notes of $1,424,422,
partially offset by gain on the change in fair value of convertible notes -
related party of $498,233, gain on the change in fair value of warrant liability
of $615,678 as compared with a gain of $2,238,145 in the prior period, other
income of $37,507, a loss on the change in fair value of warrant liability of
880.050 in the prior period, and a loss on issuance of warrants in the prior
period of 787,209, during the six months ended June 30, 2020.



Net income (loss)



For the foregoing reasons, we had a net loss of $(6,191,369) for the six months
ended June 30, 2020, or $(0.06) net loss per common share - basic and diluted,
compared to a net loss of $(6,029,393) for the six months ended June 30, 2019,
or $(0.08) net loss per common share - basic and diluted.

Net income (loss) Attributable to common shareholders





For the foregoing reasons, we had a net loss attributable to common shareholders
of $(6,143,174) for the six months ended June 30, 2020, or $(0.06) net loss per
share attributable to common shareholders - basic and diluted, compared to net
loss attributable to common shareholders of $(6,025,736) for the six months
ended June 30, 2019, or $(0.08) net loss per share attributable to common
shareholders - basic and diluted.



                                       46

Liquidity, Capital Resources and Cash Flows





Going Concern




Management believes that we will continue to incur losses for the immediate
future. Therefore, we may either need additional equity or debt financing until
we can achieve profitability and positive cash flows from operating activities,
if ever. These conditions raise substantial doubt about our ability to continue
as a going concern. Our condensed consolidated financial statements do not
include any adjustments relating to the recovery of assets or the classification
of liabilities that may be necessary should we be unable to continue as a going
concern. For the six months ended June 30, 2020, we have generated revenue and
are trying to achieve positive cash flows from operations.



As of June 30, 2020, we had a cash balance of $2,001,931, accounts receivable,
net of $1,350,513 and $6,148,926 in current liabilities. At the current cash
consumption rate, we may need to consider additional funding sources toward the
end of fiscal 2020. We've taken proactive measures to reduce operating expenses,
drive growth in revenue and expeditiously resolve any remaining legal matters.



The successful outcome of future activities cannot be determined at this time
and there is no assurance that, if achieved, we will have sufficient funds to
execute our intended business plan or generate positive operating results.



The condensed consolidated financial statements do not include any adjustments
related to this uncertainty and as to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should we be unable to continue as a going concern.



Capital Resources

The following table summarizes total current assets, liabilities and working capital for the periods indicated:





                        June 30,       December 31,
                          2020             2019            Change

Current assets $ 4,748,165 $ 3,518,224 $ 1,229,941 Current liabilities 6,148,926 6,934,725 (785,799 ) Working capital $ (1,400,761 ) $ (3,416,501 ) $ 2,015,740

As of June 30, 2020, and December 31, 2019, we had a cash balance of $2,001,931 and $652,524, respectively.





                                       47

© Edgar Online, source Glimpses