HFACTOR, INC. This Management's Discussion and Analysis ("MD&A") is intended to provide an
understanding of our financial condition, results of operations and cash flows
by focusing on changes in certain key measures from year to year. This
discussion should be read in conjunction with the Condensed Consolidated
Unaudited Financial Statements contained in this Quarterly Report on Form 10-Q
and the Consolidated Financial Statements and related notes and MD&A of
Financial Condition and Results of operations appearing in our Annual Report on
Form 10-K as of and for the years ended
Cautionary Statement Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management's existing beliefs about present and future events outside of management's control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended. We undertake no obligation to publicly update or revise any forward-looking statements to reflect actual results, changes in expectations or events or circumstances after the date this Quarterly Report on Form 10-Q is filed.
When this report uses the words "we," "us," "our," or "FICAAR" and the
"Company," they refer to
Plan of Operations
We continue in the process of identifying properties for purchase in
More importantly with the assistance of our consultants, we have developed a fully scalable design model centered around maximizing yields and meeting the needs of cannabis cultivators which will be our tenants. We believe that the cornerstone of our model is maximizing yields by properly implementing cutting edge technology that will maintain an ideal controlled environment for our tenant cultivators. It is anticipated that each property will be remodeled, in the case of existing structures; and designed, in the case of new construction, to contain numerous independent growers.
Each space will be a full-scale commercial cultivating facility with bay door access, adequate flowering, vegetative growth and propagating space including but not limited to access to large areas for harvesting and state of the art curing chambers. Our security will be on premise 24 hours per day. An IT camera system will be operational monitoring the inside and outside of the facility. Our design model is fully scalable. We believe that the cornerstone of our model is maximizing yields by properly implementing cutting edge technology that will maintain an ideal controlled environment for our tenant cultivators. This begins with an advanced controlled environment that is protected from the 18 outside environment. Specialized HVAC systems will maintain a constant temperature, humidity, airflow and CO2 with precise controls. High intensity discharge lighting systems will provide the ideal environment for growing. An integrated irrigation system can be modified to each tenant's specifications and requirements.
Our design model anticipates that our building will have "state of the art" security systems that will fully protect our tenant cultivator's crops and property as well as allow our tenants to view and monitor their crops remotely. In addition, our tenant cultivators will have a fully secure ingress and egress to our facility. Our design model also features solar power system in order to be more cost efficient and provide less of a carbon footprint. Our design model will ensure that our tenant cultivators will maximize their yields.
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Management is currently seeking to identify a suitable warehouse building in the
county of
Management has been engaged in discussions with private debt lenders with respect to the financing of the initial building locations. Although no agreements or commitments for such funding have been offered, Management believes that it will be able to obtain financing of the initial property; however, the terms of such financing will be less favorable than those offered to non-cannabis business due to the current state of Federal laws. Management believes that, assuming a suitable property is located and secured with a purchase agreement, the property purchase can be closed during the second quarter of 2021.
Upon the closing of the property purchase, the company will execute its build out pursuant to the business plans set forth above (i.e., dividing the property into separate leasable growing space for tenant cultivators; each leasable "unit" containing all of the necessary equipment and features for a full-scale commercial cultivating facility; including but not limited to:
(i) HVAC systems that will maintain a constant temperature, humidity,
airflow and CO2 with precise controls;
(ii) High intensity discharge lighting systems will provide the ideal
environment for growing;
(iii) An integrated irrigation system; and
(iv) Security.
Management anticipates that the buildout of the property will take at least six (6) months following the date of the consummation of the purchase of the property. Prior to the consummation of the buildout of the property, Management anticipates hiring employees to manage the property and engage the tenant cultivators. Assuming a suitable property is located and secured with a purchase agreement and the property purchase is closed during the second quarter of 2021, the property will be ready to lease to tenant cultivators by the fourth quarter of 2021 which would generate the initial revenue of the Company. The company expects to utilize private funding sources to finance the build out of the property. No agreements or commitments for such funding have been offered. Management anticipates that it will need to provide security for the financing of the property and the buildout of the property by way of a mortgage on the property as well as a security agreement for the equipment purchased in the buildout.
We believe that implementing our design model in an existing building or new construction will be a complete solution for the professional cultivator. Our plans will be dependent upon our ability to raise the capital required to acquire properties and remodel or construct such properties. We also intend to offer to our tenant cultivators certain value-added services that will be provided at additional costs. Such services may include but certainly will not be limited to fertilizer, additives, vitamins, and grow consultants.
Generally, the ownership and operation of real properties are subject to various laws, ordinances and regulations, including regulations relating to zoning, land use, water rights, wastewater, storm water runoff and lien sale rights and procedures.
Zoning sets forth the approved use of land in any given city, county or municipality. Zoning is set by local governments or local voter referendum and may otherwise be restricted by state laws. For example, under certain state laws a seller of liquor may not be allowed to operate within 1,000 feet of a school. There are similar restrictions imposed on cannabis operators, which will restrict where cannabis operations may be located and the manner and size to which they can grow and operate. These zoning restrictions vary in each State, County, City and Township. Zoning can be subject to change or withdrawal, and properties can be re-zoned. The zoning of our properties will have a direct impact on our business operations.
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In addition, other laws, ordinances or regulations, such as the Comprehensive Environmental Response and Compensation Liability Act (known as "CERCLA") and its state analogs, or any changes to any such laws, ordinances or regulations, could result in or increase the potential liability for environmental conditions or circumstances existing, or created by tenants or others, on our properties. Laws related to upkeep, safety and taxation requirements may result in significant unanticipated expenditures, loss of our properties or other impairments to operations, any of which would adversely affect our cash flows from operating activities.
Our property management activities, to the extent we are required to engage in them due to lease defaults by tenants or vacancies on certain properties, will likely be subject to state real estate brokerage laws and regulations as determined by the particular real estate commission for each state.
The properties that we acquire will be leased to tenant cultivators who will use their leased properties primarily for cultivation and production of cannabis and thus will be subject to the laws, ordinances and regulations of state, local and federal governments, including laws, ordinances and regulations involving land use and usage, water rights, treatment methods, disturbance, the environment, and eminent domain.
In addition, state, local and federal governments also seek to regulate the type, quantity and method of use of chemicals and materials for growing crops, including fertilizers, pesticides and nutrient rich materials. Such regulations could include restricting or preventing the use of such chemicals and materials near residential housing or near water sources. Further, some regulations have strictly forbidden or significantly limited the use of certain chemicals and materials. Licenses, permits and approvals must be obtained from governmental authorities requiring such licenses, permits and approvals before chemicals and materials can be used at grow facilities. Reports on the usage of such chemicals and materials must be submitted pursuant to applicable laws, ordinances, and regulations and the terms of the specific licenses, permits and approvals. Failure to comply with laws, ordinances and regulations, to obtain required licenses, permits and approvals or to comply with the terms of such licenses, permits and approvals could result in fines, penalties and/or imprisonment.
As an owner of the properties, we may be liable or responsible for the actions or inactions of our tenants with respect to these laws, regulations and ordinances.
The Company owns the following domain names (pursuant to the Purchase Agreement): www.standardcanna.com www.standardcultivation.com www.standardgrow.com
Our Products, Services and Customers
We operate in a rapidly evolving and highly regulated industry that, as has been
estimated by some, will exceed
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We plan to provide services and solutions to the regulated cannabis industry
throughout
Comparison of Three Months EndedSeptember 30, 2020 to Three Months EndedSeptember 30, 2019 Results of Operations Three months ended September 30, Percent 2020 2019 Change Change Revenues $ - $ - $ - -% Operating expenses (3,360 ) (4,991 ) (1,632 ) (33)% Other expense-interest (2,145 ) (2,060 ) 85 4% Net loss$ (5,505 ) $ (7,051 ) $ (1,546 ) (22)%
For the three months ended
Total operating expenses were
Interest expense costs were
Comparison of Nine Months EndedSeptember 30, 2020 to Nine Months EndedSeptember 30, 2019 Results of Operations Nine months ended September 30, Percent 2020 2019 Change Change Revenues $ - $ - $ - -% Operating expenses (10,512 ) (23,238 ) (12,726 ) (55)% Other expense-interest (6,390 ) (5,584 ) 806 14% Net loss$ (16,902 ) $ (28,822 ) $ (11,920 ) (41)%
For the nine months ended
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Total operating expenses were
Interest expense costs were
Liquidity and Capital Resources
As of this date, the Company has not started generating revenues from operations and has financed its operations primarily through the issuance of capital stock by way of convertible loans from third party and related party loans.
The Company's objectives when managing its liquidity and capital resources are
to generate sufficient cash to fund the Company's operating and working capital
requirements. The Company reported working capital deficit of
We had cash of
Operating Activities:
For the nine months ended
Investing and Financing Activities:
Net cash flows provided by investing and financing activities for the period
ended
Liquidity and Capital Resource Measures:
The Company's primary source of liquidity has been from convertible loans and third party and related party loans.
Loans and Credit Facilities:
1. A term loan with a balance of
2. A term loan payable to an officer of
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Transaction with Related Parties:
None Critical Accounting Policies
Our condensed consolidated financial statements and accompanying notes have been
prepared in accordance with
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
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