The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2020. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements. See "Cautionary Statement Regarding Forward Looking Information'' elsewhere in this report. Because this discussion involves risk and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements.





Overview


We own and operate CNP Operating, a leading CBD manufacturer vertically integrated with a 360 degree approach to the processing of high quality CBD products designed for growers, pharmaceutical, wellness providers, and retailers' needs, and a cannabis industry focused sponsored content and marketing business, or the CFN Business. Our ongoing operations currently consist primarily of CNP Operating and the CFN Business and we will continue to pursue strategic transactions and opportunities. We are currently in the process of launching an e-commerce network focused on the sale of general wellness CBD products.

CNP Operating provides toll processing services which includes extraction, distillation, remediation, isolation and chromatography. CNP Operating has a professional, organized and dedicated team with 30 years of combined experience. CNP Operating's state of the art facility, ISO compliant, has 30,000 square feet filled with proprietary technology distillation equipment, in house lab testing, distribution warehouse and white labelling product formulation and design.

The CFN Business generates revenue through sponsored content, including articles, press releases, videos, podcasts, advertisements and other media, email advertisements and other marketing campaigns run on behalf of public and private companies in the cannabis industry, helping them reach accredited, retail and institutional investors. Most revenue is generated through contracts involving a monthly cash payment.

The CFN Business' primary expenses come from advertising on platforms like Twitter and Facebook and from employee salaries and contractor fees. The CFN Business' content is primarily produced by a team of freelance writers and video content is produced through various vendors. The CFN Business also incurs hosting and development costs associated with maintaining and improving its website, web applications, and mobile applications. The CFN Business operates several media platforms, including CannabisFN.com, the CannabisFN iOS app, the CFN Media YouTube channel, the CFN Media podcast, and other venues. These properties are designed to educate and inform investors interested in the cannabis industry, as well as provide a platform for the clients of the CFN Business to reach investors. The CFN Business distributes content across numerous online platforms, including the CannabisFN.com website, press releases, financial news syndicates, search engines, YouTube, iTunes, Twitter, Instagram, Facebook, LinkedIn, and others.

The CFN Business targets the legal cannabis industry. According to Grand View Research, the global cannabis industry is expected to reach $146.4 billion by 2025, driven by the legalization of medical and adult-use cannabis across a growing number of jurisdictions. According to the Marijuana Index, there are approximately 400 public companies involved in the cannabis industry, which represents the primary target market of the CFN Business. The CFN Business' services are designed to help private companies prepare to go public and public companies grow their shareholder base through sponsored content and marketing outreach. The success of the CFN Business depends on the legal status of cannabis, investor demand for cannabis investments, and numerous other external factors.

The CFN Business competes with other public relations firms for clients, as well as online publishers for investors. Public relations competition includes investor awareness firms like Stockhouse Publishing, Catalyst Xchange, Stonebridge Partners and Midan Ventures. Online publisher competition includes firms like New Cannabis Ventures, Leafly and High Times. The CFN Business is regulated by rules established by the SEC, FINRA, and certain federal and state cannabis regulations.

On August 23, 2021, the Company entered into securities purchase agreements with CNP Operating and the Owners, whereby the Company acquired 100% of CNP Operating from the Owners in exchange for an aggregate of 354 million shares of the Company's common stock. On August 25, 2021 the transaction was closed and CNP Operating became a wholly owned subsidiary of the Company.

Our corporate website is: www.cfnenterprisesinc.com, the contents of which are not part of this quarterly report.

Our Common Stock is quoted on the OTCQB Marketplace under the symbol "CNFN."

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Results of Operations for the Three Months Ended September 30, 2021 and 2020

The following are the results of our operations for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020:





                                              For the Three Months Ended
                                             September 30,   September 30,
                                                 2021            2020           Change

Net revenues                                 $948,254        $154,369        $837,198
Cost of revenue                              730,186         128,885         599,161
Gross profit                                 218,068         25,484          238,037

Operating expenses:
Selling, general and administrative          847,888         307,069         540,819
Total operating expenses                     847,888         307,069         540,819

Loss from operations                         (629,820)       (281,585)       (348,235)

Other income (expense):
Loss on extinguishment of debt               -               (30,069)        (30,069)
SBA PPP loan forgiveness                     263,000         10,000          253,000
Unrealized gain on investments               23,341          -               5,595
Interest expense                             (23,055)        (13,560)        (8,253)
Interest income                              2               2               (2)
Total other income (expense)                 263,288         (13,027)        (296,915)

Net loss before provision for income taxes   (366,532)       (315,212)       (51,320)
Provision for income taxes                   -               -               -
Net loss                                     $(366,532)      $(315,212)      $(51,320)




Net Revenues


The Company's revenues are generated from the sale of promotional service packages to customers ranging from 3 to 6 months. The Company offers different packages tailored to the type and stage of the potential customer, such as public companies looking to increase their shareholder base, as well as private companies potentially looking to go public and attract capital and publicity.

During the three months ended September 30, 2021, the Company started four new campaigns, compared with five during the same period in 2020. These campaigns have a value of $89,500 which will be recognized as revenue over the next three to six months. In 2020, the cumulative value of campaigns begun during the same period was $117,500 with much of the revenue recognized during the first quarter of 2020 attributable to the final stages of campaigns started in previous quarters.

The Company's subsidiary CNP Operating generated revenue of $780,000 from the sale of products produced from hemp material and manufactured into CBD distillate.





Cost of Revenue



The costs of revenue consist primarily of labor, fees paid for production of content for clients and the costs of placement of the content on various platforms. In 2021, the contracts required more production services and related labor than the contracts in 2020. As a result, the cost of revenue in 2021 was higher as a percentage of the revenue recognized during the quarter.

The Company's cost of revenue for the three months ended September 30, 2021 were higher than those in the corresponding three months in 2020 due largely to the acquisition of CNP Operating which represented approximately $635,000 of cost of revenue which primarily represents the cost of hemp material, manufacturing material such as solvent, fuel and equipment depreciation.





Operating Expenses


The Company's operating expenses for the three months ended September 30, 2021 were higher than those in the corresponding three months in 2020 due largely to the acquisition of CNP Operating which represented approximately $500,000 of additional general and administrative expenses representing wages.

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Other Income/Expense


Other income increased during the three months ended September 30, 2021 due to the forgiveness of the SBA PPP loan. In addition, the investments received by East West for services were marked to market and resulted in an unrealized loss for the period. The Company did not have a similar loss during the three months ended September 30, 2020.

Results of Operations for the nine Months Ended September 30, 2021 and 2020

The following are the results of our operations for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020:





                                               For the Nine Months Ended
                                             September 30,   September 30,
                                                 2021            2020           Change

Net revenues                                 $1,451,230      $349,071        $1,102,159
Cost of revenue                              949,170         414,154         535,016
Gross profit (loss)                          502,060         (65,083)        567,143

Operating expenses:
Selling, general and administrative          1,551,790       906,739         645,051
Total operating expenses                     1551,790        906,739         645,051

Loss from operations                         (1,049,730)     (971,822)       (77,908)

Other income (expense):
Loss on extinguishment of debt               (172,500)       (30,069)        (42,431)
Unrealized gain on investments               31,761          -               31,761
SBA PPP loan forgiveness                     263,000         10,000          253,000
Interest expense                             (53,723)        (38,055)        (15,668)
Interest income                              9               17              (8)
Total other income (expense)                 68,547          (58,107)        126,654

Net loss before provision for income taxes   (981,183)       (1,029,929)     48,746
Provision for income taxes                   -               -               -
Net loss                                     $(981,183)      $(1,029,929)    $48,746




Net Revenues


The Company's revenues are generated from the sale of promotional service packages to customers ranging from 3 to 6 months. The Company offers different packages tailored to the type and stage of the potential customer, such as public companies looking to increase their shareholder base, as well as private companies potentially looking to go public and attract capital and publicity.

During the nine months ended September 30, 2021, the Company started twenty-five new campaigns, compared with eight during the same period in 2020. These campaigns have a value of $651,000 which will be recognized as revenue over the next three to six months. In 2020, the cumulative value of campaigns begun in the first nine months was $167,500 with much of the revenue recognized during the first quarter of 2020 attributable to the final stages of campaigns started in previous quarters.

The Company's subsidiary CNP Operating generated revenue of $780,000 from the sale of products produced from hemp material and manufactured into CBD distillate.





Cost of Revenue



The costs of revenue consist primarily of labor, fees paid for production of content for clients and the costs of placement of the content on various platforms. In 2020, the contracts required more production services and related labor than the contracts in 2021. As a result, the cost of revenue in 2021 was lower as a percentage of the revenue recognized during the quarter.

The Company's cost of revenue for the nine months ended September 30, 2021 were higher than those in the corresponding three months in 2020 due largely to the acquisition of CNP Operating which represented approximately $635,000 of cost of revenue which primarily represents the cost of hemp material, manufacturing material such as solvent, fuel and equipment depreciation.

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Operating Expenses


The Company's operating expenses for the nine months ended September 30, 2021 were higher than those in the corresponding three months in 2020 due largely to the acquisition of CNP Operating which represented approximately $500,000 of additional general and administrative expenses representing wages.





Other Income/Expense


Other expenses increased during the nine months ended September 30, 2021 due to the loss on extinguishment of debt the Company incurred as it issued common stock in payment of interest payable and extension of the maturity date on a note payable. In addition, the investments received by East West for services were marked to market and resulted in an unrealized gain of approximately $23,000 and the SBA PPP loan forgiveness of $268,000. The Company did not have a similar loss during the nine months ended September 30, 2020.

Liquidity, Capital Resources and Going Concern

On May 6, 2020, we received $263,000 in the form of a loan from the PPP, as well $150,000 in proceeds from a loan with the SBA on June 24, 2020. We also received a second PPP loan of $263,000 on February 25, 2021. Our plan to continue as a going concern includes raising additional capital in the form of debt or equity, growing the business acquired under the Emerging Growth Agreement and managing and reducing operating and overhead costs. We cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase the need for us to raise additional capital on an immediate basis.

These matters, among others, raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.





The following is a summary of our cash flows from operating, investing and
financing activities:

                                                               Nine Months Ended
                                                         September 30,   September 30,
                                                             2021            2020
Cash flows (used in) operating activities                $(255,152)      $(326,119)

Cash flows provided (used in) by investing activities $54,879 $(6,633) Cash flows provided by financing activities

$221,894        $353,000

As of September 30, 2021, we had unrestricted cash of $201,737.

Net cash used in operating activities was $255,152 during the nine months ended September 30, 2021, compared to cash used in operating activities of $326,119 during the same period in 2020.

Net cash provided by investing activities was $54,879 during the nine months ended September 30, 2021 primarily from the acquisition of the CNP Operating assets, compared to cash used in financing activities of $6,633 during the same period in 2020.

Net cash provided by financing activities during the nine months ended September 30, 2021 of $221,894 was the result of proceeds from a second PPP loan of $263,000, the sale of common stock for $10,000 and the exercise of $50,000 of warrants. In 2020 net cash provided from investing activities related of $353,000 was the result of proceeds from notes payable of $413,000, offset by the payment of preferred stock interest of $45,000.





Description of Indebtedness


On September 10, 2019, the Company entered into a promissory note payable whereby the Company borrowed $500,000 bearing interest at 8% per annum. Interest on the note is payable quarterly on the first business day of December, March, June and September commencing December 1, 2019. In May 2021, the Company and the holder of the promissory note reached an agreement to extend the maturity date of the note from September 30, 2022 to September 30, 2024. In connection with the extension, the Company issued 2,000,000 shares of its common stock to the noteholder in lieu of $40,000 of interest accrued and accruing on the promissory note through December 31, 2021.

In connection with the promissory note on September 10, 2019, the Company issued warrants to purchase 500,000 shares of the Company's common stock at an exercise price of $0.10 per share. The warrants were exercised on June 30, 2021 and the Company received $50,000.

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The note was discounted by $17,624 allocated from the valuation of the warrants issued. The discount recorded on the note is being amortized as interest expense through the maturity date, which amounted to $4,427 and $4,425 for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, the net book value of the promissory note amounted to $494,498 including the principal amount outstanding of $500,000 net of the remaining discount of $5,502.

On May 6, 2020, the Company entered into a promissory note, or the Note, with Pacific Western Bank, evidencing an unsecured loan, or the Loan, in the amount of $263,000 made to the Company under the Paycheck Protection Program, or the PPP.

The interest rate on the Loan is 1.0% per annum. The Note matures on May 6, 2022. The Company has applied for full forgiveness of the amounts due under the Note and received forgiveness during the period ending September 30, 2021.

On June 24, 2020, the Company entered into a Loan Authorization and Agreement with the SBA under which the Company borrowed $150,000 and issued to the SBA a note and security agreement for the amount borrowed. Outstanding borrowings accrue interest at a rate of 3.75% per annum, and installment payments, including principal and interest, of $731 are due monthly and begin 12 months from the date of the loan agreement. The balance of any remaining principal and interest is due 30 years from the date of the loan agreement. As collateral for the borrowing, the Company granted the SBA a security interest in substantially all assets of the Company.

On February 25, 2021, the Company entered into a secondary promissory note, or the Second PPP Note, with Pacific Western Bank, evidencing an unsecured loan, or the Second Loan, in the amount of $263,000 made to the Company under the PPP. Under the PPP, the proceeds of the Second Loan may be used to pay payroll and make certain covered interest payments, lease payments and utility payments, or the Qualifying Expenses. The Company intends to use the entire Second Loan amount for Qualifying Expenses under the PPP. Under the terms of the CARES Act, PPP loan recipients can be granted forgiveness for all or a portion of the loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of Qualifying Expenses and the Company maintaining its payroll levels over certain required thresholds under the PPP. The terms of any forgiveness also may be subject to further requirements in any regulations and guidelines the SBA may adopt. No assurance can be provided that the Company will obtain forgiveness of the Second Loan in whole or in part.

The interest rate on the Second Loan is 1.0% per annum. The Second PPP Note matures on February 25, 2023. On September 1, 2022 and on the first day of each month thereafter until February 1, 2024, the Company must make monthly payments of $14,727 under the Second Loan that is not forgiven in accordance with the terms of the PPP and related accrued interest thereon. The Second PPP Note contains events of default and other conditions customary for a note of this type. As of June 30, 2021, the current portion of the Second Loan due within the next 12 months amounted to $0. The Company plans to apply for full forgiveness of the Second PPP Note.

On October 28, 2019, the Company's subsidiary CNP Operating entered into a promissory note payable with Complete Business Solutions Group, Inc ("CBSG") whereby the Company borrowed $3,050,000. Full payment of the borrowed amount is over a three-year period. The first 12 consecutive monthly payments must equal a minimum of $1 million. Monthly payment ranging month 13 to month 24 must equal a minimum amount of no less than $1 million dollars. Monthly payments ranging month 25 to month 36 must equal $1,050,000. The outstanding balance of the note was $2,840,000 at September 30, 2021.

On September 30, 2019, the Company's subsidiary CNP Operating entered into a promissory note payable with Eagle Six Consultants, Inc. ("Eagle") whereby the Company borrowed $550,000 bearing interest at 16% per annum. Interest of $7,334 on the note is payable monthly on the seventh business day of the month commencing October 7, 2019. A final payment equal to the total amount of principal, interest, total funded and other charges are due and payable on or before October 31, 2020. The outstanding balance of the note was $550,000 at September 30, 2021.

On June 6, 2020, the Company's subsidiary CNP Operating entered into a second promissory note payable with Eagle whereby the Company borrowed $300,000 bearing interest at 18% per annum. Interest of $4,500 on the note is payable monthly on the sixteenth business day of the month commencing July 16, 2020. A final payment equal to the total amount of principal, interest, total funded and other charges are due and payable on or before June 16, 2021. The outstanding balance of the note was $300,000 September 30, 2021.

On May 12, 2021 the Company's subsidiary CNP Operating restructured the CSBG note payable of $2,957,000, the Eagle #1 note payable of $550,000 and the Eagle #2 note payable of $300,000 by entering into a payment and indemnification agreement with the receivers/trustee of CBSG and Eagle. The receiver has agreed that the balance of the outstanding amounts will be paid over the course of 24 months in equal payments of $158,625. Further, the Company shall pay $20,000 per month toward the balance and Anthony Zingarelli ("Zingarelli") and Colorado Sky Industrial Supply LLC ("CSIS"), agree to personally pay the sum of $138,625 per month. Zingarelli is the only member of CNP Operating that signed a personal guarantee on the loans and Zingarelli is the sole member of CSIS. Zingarelli and CSIS has agreed to indemnify and hold the Company harmless from any and all losses, liabilities and claims. If a loss is incurred by the Company with respect to any claims, Zingarelli shall reimburse the Company for the amount of any such loss. The Company has recorded the Zingarelli portion of the entire obligations as an offset to member's contribution.

On January 10, 2020 the Company's subsidiary CNP Operating purchased a distillation machine for $248,000. The company paid $108,000 and entered into a promissory note with company owned by one of the partners. The original value of the note was $140,000

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and has no terms such as interest rate, maturity or monthly payments. Imputed interested was not material. The outstanding balance of the note was $49,331 at September 30, 2021.

On Nov 19, 2020 the Company's subsidiary CNP Operating purchased equipment for $58,095 which was financed at zero interest rate. The monthly payments of $968 will be made for the next 60 months and mature on Nov 19, 2025. Imputed interested was not material. The outstanding balance of the note was $49,331 at September 30, 2021.

The Company's subsidiary CNP Operating also entered into a note payable during 2020 with the landlord for additional improvements to the facility in Centennial, Colorado. The outstanding balance of this note was $11,708 at December 31, 2020 and $29,981 as of September 30, 2021 because additional improvements were completed during the period.

Obligations Under Preferred Stock

On June 20, 2019, existing debtholders with outstanding principal balances totaling $500,000 were issued an aggregate of 500 shares of Series A Preferred Stock, each with a stated value per share of $1,000, as conversion of $500,000 worth of outstanding promissory notes. The Series A Preferred Stock bears interest at 12% per annum, and is convertible into our common stock at the election of the holder at a conversion price per share to be mutually agreed between us and the holder in the future, and be redeemable at our option following the third year after issuance, without voting rights or a liquidation preference.

On June 20, 2019, we issued 3,000 shares of Series B Preferred Stock, each with a stated value of $1,000 per share, to Emerging Growth, LLC as part of the Emerging Growth Agreement. The aggregate fair value of $687,000 was recorded as part of the acquisition price of the net assets acquired from Emerging Growth, LLC. The Series B Preferred Stock bears interest at 6% per annum and is convertible into our common stock at the election of Emerging Growth, LLC at a conversion price per share to be mutually agreed between us and Emerging Growth, LLC in the future, without voting rights or a liquidation preference, except with respect to accrued penalty interest.

Other outstanding obligations at September 30, 2021





Warrants


As of September 30, 2021, 4,687,500 shares of our common stock are issuable pursuant to the exercise of warrants.





Options


As of September 30, 2021, 3,160,000 shares of our common stock are issuable pursuant to the exercise of options.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.





COVID-19


The outbreak of a strain of coronavirus (COVID-19) in the U.S. has had an unfavorable impact on our business operations. Our main customer market suffered its worst decline, decreasing our revenue. Mandatory closures of businesses imposed by the federal, state and local governments to control the spread of the virus disrupted the operations of our management, business and finance teams. In addition, the COVID-19 outbreak has adversely affected the U.S. economy and financial markets, which may result in a long-term economic downturn that could negatively affect future performance. We took steps to diversify our revenue model by creating our CBD ecommerce business which has higher margins during the second half of 2020 and to acquire CNP Operating in August 2021 and to reduce our costs. The extent to which COVID-19 will impact our business and our consolidated financial results further will depend on future developments which are highly uncertain and cannot be predicted at this time, but may result in a material adverse impact on our business, results of operations and financial condition.

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