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 difference 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; and worldwide political stability and economic
growth. The words "believe," "expect," "anticipate," "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
Fiscal year ended December 31, 2019 compared with fiscal year ended December 31,
2018
Revenue for the fiscal years ended December 31, 2019 and 2018 were $1,159,737
and $505,705, respectively. Cost of revenues for the fiscal years ended December
31, 2019 and 2018 were $462,940 and $209,871, respectively. Gross profit for the
fiscal years ended December 31, 2019 and 2018 were $696,797 and $295,834,
respectively. The increases for 2019 are a result of the improved business
operations of PrestoCorp, our 51% owned subsidiary. Telemedicine is a growth
area, especially now with the COVID-19 pandemic, and this growth drove revenues
higher in 2019.
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Net loss for the fiscal year ended December 31, 2019 was $4,006,713 compared to
net loss of $4,909,769 for the fiscal year ended December 31, 2018. The
decrease in the net loss resulted primarily from a significant reduction in
professional fees to $547,284 in 2019, compared to $1,304,735 in 2018 and a
decrease in general and administrative expenses to $1,427,402 in 2019 compared
to $1,965,767 in 2018. These decreases were partially offset by an increase in
wages and salaries to $393,310 in 2019 compared to $226,029 in 2018 and an
increase in advertising to $195,879 in 2019 compared to $104,018 in 2018.
Depreciation and amortization was essentially unchanged on a year over year
basis. In 2019, we reduced our reliance on outside professionals and focused
primarily on building our PrestoCorp subsidiary while looking for other
acquisition candidates to expand our base business. As noted in the description
of our business, in 2019 we negotiated the acquisition of certain production
equipment and in February 2020, we closed on the acquisition and established a
new operating subsidiary to engage in contract manufacturing of products
containing hemp based CBD.
Total operating expenses were $4,501,902 for the year ended December 31, 2019
compared to $5,336,005 for the fiscal year ended December 31, 2018. The bulk of
the operating expenses for both years were paid using the Company's common stock
and therefore required minimal cash. During 2019 and 2018, the Company impaired
its goodwill and intangible assets an aggregate of $1,376,593 and $1,173,000,
respectively. Impairment expense is also a non-cash item. Despite the large net
loss amounts for both years, because of non-cash transactions, the Company had
positive net cash provided by operations in 2019 of $94,648, compared to net
cash used in operating activities of $689,876 for 2018.
Fiscal year ended December 31, 2018 compared with fiscal year ended December 31,
2017
Revenue for the fiscal years ended December 31, 2018 and 2017 was $505,705 and
$317,985, respectively. Cost of revenues for the fiscal years ended December 31,
2018 and 2017 was $209,871 and $154,451, respectively. Gross profit for the
fiscal years ended December 31, 2018 and 2017 was $295,834 and $163,534,
respectively. The increase in each of the numbers for 2018 is primarily a
result of the increased impact of the business operations of PrestoCorp, our 51%
owned subsidiary, on the business operations of the Company.
Net loss for the fiscal year ended December 31, 2018 was $4,909,769 compared to
net loss of $7,811,489 for the fiscal year ended December 31, 2017. The
decrease resulted primarily from a change in our compensation structure in 2018
for members of management, consultants, board members, and attorneys. In 2017,
these persons were compensated primarily with the issuance of set amounts of
stock. Compensation expense during 2017 rose with the rise in our stock price
resulting in a higher net loss. In 2018, we changed our compensation
arrangements with persons being issued stock based upon the value of the stock
at the time of issuance rather than a set number of shares.
Total operating expenses were $5,336,005 for the fiscal year ended December 31,
2018 and $8,010,622 for the fiscal year ended December 31, 2017. The bulk of
the expenses for both years were paid using the Company's common stock and
therefore required no cash. In 2018, consulting and legal services were
incurred in the amount of $2,186,796. In 2017, the large non-cash transaction
was also stock issued for services in the amount of $4,729,452. During 2018
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and 2017, the Company impaired its goodwill and intangible assets an aggregate
of $1,173,000 and $980,944, respectively. Despite the large net loss amounts for
both years, because of non-cash transactions, the net cash used in operating
activities was $689,876 for 2018 and $964,661 for 2017. Also, during the year
ended December 31, 2018, 332,447 shares were returned due to cancellation of a
service contract that was originated in 2017. The value of the shares returned
was approximately $991,000 which was recorded as a reduction of the professional
fees incurred since the inception of the contract.
Liquidity and Capital Resources
As stated above, our operations generated $94,648 in cash for the year ended
December 31, 2019. During the same year, financing activities provided cash of
$141,882, consisting of proceeds from sales of restricted stock in the amount of
$50,000 and from proceeds from related parties in the amount of $91,882. We
ended 2019 with $336,107 in cash on hand.
In the year ended December 31, 2018, our operations used $689,876 in cash.
During the same year, financing activities provided cash of $665,295. Cash
required during 2018 came from cash proceeds from sales of restricted stock and
warrant exercises in the amount of $361,750 and from proceeds from related
parties in the amount of $303,545. We ended 2018 with $151,946 in cash on hand.
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 net losses of $3,936,386 and $4,128,346, respectively,
for the years ended December 31, 2019 and 2018 and had an accumulated deficit of
$74,855,147 as of December 31, 2019. 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 be successful in its efforts to raise capital in
this manner if it is going to be able to further its business plan in an
aggressive manner. Raising capital in this manner will cause dilution to
current shareholders.
As of April 20, 2020, the Company had cash on hand of approximately $134,000.
As a result, the Company has does not have sufficient liquidity to meet the
immediate needs of our current operations. Cash represents cash deposits held
at financial institutions. Cash is held at major financial institutions and
insured by the Federal Deposit Insurance Corporation (FDIC) up to federal
insurance limits.
Off Balance Sheet Arrangements
None
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CANNABIS SATIVA, INC. 
