Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is designed to provide a reader of the financial statements
with a narrative report on our financial condition, results of operations, and
liquidity. We use United States GAAP financial measures in the MD&A, unless
otherwise noted. All the GAAP financial measures used by us in this report
relate to the inclusion of financial information. This MD&A should be read in
conjunction with the audited Financial Statements and notes thereto for the year
ended December 31, 2020 and 2019 included under Item 8 in this Report. The MD&A
contains forward-looking statements that involve risks and uncertainties, such
as statements of our plans, objectives, expectations, and intentions. Our actual
results could differ materially from those discussed in the forward-looking
statements. See the cautionary language at the beginning of this Report
regarding forward-looking statements.
Potential Impact of COVID-19
--------------------------------------------------------------------------------
22
--------------------------------------------------------------------------------
In March 2020, the World Health Organization declared the outbreak of COVID-19
as a pandemic based on the rapid increase in global exposure. COVID-19 continues
to spread throughout the world, including the United States. Our business
operations, which commenced during this pandemic, continue to be operational
and, to date, we have not seen any significant direct negative impact of
COVID-19 to our newly commenced business. However, the COVID-19 pandemic
continues to impact economic conditions, which could impact the short-term and
long-term demand from our customers and, therefore, has the potential to
negatively impact our results of operations, cash flows, and financial position
in the future. Management is actively monitoring this situation and any impact
on our financial condition, liquidity, and results of operations. However, we
are not presently able to estimate the effects of the COVID-19 pandemic on our
future results of operations, financial condition, or liquidity for the
remainder of fiscal year 2021 and beyond.
Liquidity and Capital Resources
For the years ended December 31, 2020 and 2019, we generated revenues of $16,691
and $41,344, respectively, and we reported net losses of $1,045,479 and
$563,072, respectively. We had negative cash flow from operating activities of
$101,554 and $387,734, respectively. As of December 31, 2020, we had an
accumulated deficit of $4,326,338 and a shareholders' deficit of $1,135,712.
Our auditors have raised substantial doubt regarding our ability to continue as
a going concern as a result of our historical recurring losses and negative cash
flows from operations as well as our dependence on private equity and
financings. We anticipate that we will continue to report losses and negative
cash flow. To date, we have financed our activities principally from the sale of
common stock and loans from Company officers. We intend on financing our future
working capital needs from these sources until such time that funds provided by
our operations are sufficient to fund our working capital requirements. We
believe that the current cash on hand, loans from Company officers and funds
raised from the sale of our common stock allows us sufficient capital for
operations and to continue as a going concern.
In April 2021, we authorized an offering of up to 1,000,000 shares of common
stock at $0.51 per share, providing proceeds of up to $510,000. This offering
will be sold only to investors that qualify as "accredited investors," as that
term is defined in Regulation D, and terminates on June 30, 2021. A total of
46,020 shares of common stock have been sold under the Offering for proceeds of
$25,000 as of the date of this Report. There is no assurance that we can raise
money under this offering, but management believes the full proceeds of this
offering will provide sufficient cash for 12 months' operating expenses.
Results of Operations
Year Ended December 31, 2020, compared to the year ended December 31, 2019
For the years ended December 31, 2020 and 2019, we generated revenues of $16,691
and $41,344, respectively, a decrease of $24,653. We generate five types of
revenue, which generally
--------------------------------------------------------------------------------
23
--------------------------------------------------------------------------------
consist of fees from subscriptions, affiliate advertising, event sales,
referrals and consulting. Our revenues for the years ended December 31, 2020 and
2019 were as follows:
December 31,
2020 2019
Subscription fees $ - $ -
Affiliate advertising 2,671 -
Event Sales 2,020 -
Referral fees 11,250 41,344
Consulting and other 750 -
$ 16,691 $ 41,344
We generated revenues across most categories for the year ended December 31,
2020 versus all of our revenues from referrals for the year ended December 31,
2019. The negative impact of COVID-19 resulted in a significant decrease in our
referral revenues, as we were able to hold one @420 virtual event this year with
a limited number of company presenters. We expect to be able to resume our @420
networking events in person in the third quarter of 2021. In addition, in March
2021, we were able to secure a merchant account which will allow us to resume
charging subscription fees for The WeedClub Platform® premium memberships.
For the years ended December 31, 2020 and 2019, general and administrative
expenses were $370,908 and $372,019, respectively, a slight overall decrease of
approximately $1,100. For the year ended December 31, 2020, labor related
expenses, including payroll and consulting, increased by approximately $12,700
and public company related expenses, including OTC listing and SEC filing fees,
increased by approximately $10,500. These increases were offset by a decrease of
approximately $24,300 in overall general and administrative expenses, including
travel and entertainment.
For the years ended December 31, 2020 and 2019, professional fees were $197,559
and $217,931, respectively, a decrease of approximately $20,400. Our
professional fees the years ended December 31, 2020 and 2019 were comprised of
the following:
December 31,
2020 2019
Legal $ 56,855 $ 151,446
Accounting and audit 102,594 57,050
Other 38,110 9,435
$ 197,559 $ 217,931For the years ended December 31, 2020, legal expenses decreased by approximately
$94,600 due to engaging a new "contingency-based" law firm in February 2020 to
continue to pursue the litigation against LAFI. Reference is made to Note 9,
Litigation, to the Consolidated Financial Statements included under Item 8 in
this Report. Accounting and audit expenses increased by
--------------------------------------------------------------------------------
24
--------------------------------------------------------------------------------
approximately $45,600 for the year ended December 31, 2020, which included
increases in fees to our outside bookkeeping services by approximately $7,600,
our independent public accounting firm by approximately $2,000, and our
contracted CFO, Kevin Asher by approximately $36,000. Other professional fees
increased by approximately $28,700 for the year ended December 31, 2020,
comprised entirely of fees to our contracted software engineers and developers
on The WeedClub Platform®.
In accordance with generally accepted accounting principles related to
Intangible Assets, we determined that the fair market value of our intangible
assets to be zero as of December 31, 2020. Accordingly, we incurred a loss on
impairment of intangible assets of $455,000 for the year ended December 31,
2020. Reference is made to Note 5, Intangible Assets, to the Consolidated
Financial Statements included under Item 8 in this Report.
Other (income) and expenses for the years ended December 31, 2020 and 2019 were
as follows:
December 31,
2020 2019
Gain on extinguishment $ (26,492) $ (1,872)
Interest expense 63,280 13,999
$ 36,788 $ 12,127
For the years ended December 31, 2020, we were able to write-off several old
accounts payable liabilities from 2018, which resulted in gain on extinguishment
of approximately $26,500.
For the year ended December 31, 2020, interest expense increased by
approximately $49,300 compared to the year ended December 31, 2019. The increase
in interest expense was entirely due to interest expense accrued on our unpaid
liability to our predecessor law firm in the aforementioned litigation. This law
firm resigned in April 2020 when we engaged a new "contingency-based" law firm
and started accruing interest expense on their unpaid amount. The entire
liability, plus accrued interest, is recorded as accrued legal fees on the
accompanying balance sheet as of December 31, 2020.
Overall, for the year ended December 31, 2020, we reported a net loss of
$1,045,479 compared to a net loss of $563,072 for the year ended December 31,
2019. Without considering the $455,000 loss on impairment of our intangible
assets, our comparative net loss for the year ended December 31, 2020 was
$590,479, an overall increase of approximately $27,400 over the year ended
December 31, 2019.
Contractual Obligations
We qualify as a smaller reporting company, as defined by Item 10 of Regulation
S-K and, thus, are not required to provide the information required by this
Item.
Off Balance Sheet Arrangements
--------------------------------------------------------------------------------
25
--------------------------------------------------------------------------------
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to investors.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three
months or less when purchased to be cash equivalents. Cash and cash equivalents
were $3,906 and $7,313 as of December 31, 2020 and 2019, respectively.
Critical Accounting Policies and Estimates
Reference is made to Note 2, Summary of Significant Accounting Policies, to the
Consolidated Financial Statements included under Item 8 in this Report.
Recently Adopted Accounting Pronouncements
Reference is made to Note 2, Summary of Significant Accounting Policies, to the
Consolidated Financial Statements included under Item 8 in this Report.
© Edgar Online, source Glimpses
FARMHOUSE, INC 
