Overview
The primary business of PotNetwork Holdings, Inc. ("POTN") is conducted through
its primary subsidiary, First Capital Venture Co., whose subsidiary, Diamond
CBD, Inc. ("Diamond CBD") is engaged in the development and sales of
hemp-derived CBD oil containing products. The Company also owns and operates
PotNetwork Media Group, Inc., operator of the informational website to the
cannabis and CBD industry, PotNetwork.com.
Results of Operations
Results of Operations during the year ended December 31, 2019 as compared to the
year ended December 31, 2018.
For the year ended December 31, 2019 and 2018, we had revenues of $15,060,840
and $25,583,761 respectively. This represents a decrease in revenue of
$(10,522,921) or 41.1%. This decrease in revenue was due to distribution
contraction as a result of the FDA Warning Letter, along with the paring and
streamlining of the product lines in mid-2019.
Our Gross Profit from the sale of all products the year ended December 31, 2019
and 2018 was $4,816,604 and $8,959,433 respectively, or a decrease of 46.2%.
Continued growth of the overall consumer market for CBD products and anticipated
increases in competition are anticipated to continue to create pressure on gross
profit margins.
Our Net Profit (Loss) for the years ended December 31, 2019 and 2018 decreased
to a Loss of $(3,367,831) from a Net Profit of $242,634 respectively,
attributable to the decrease in gross profit.
Operating expenses for the nine-month period ended September 30, 2019 compared
to September 30, 2018 decreased to $5,736,099 as compared to $7,325,012, a
decrease of 21.7% attributable to a decrease in sales and marketing expense from
$6,615,125 in the first nine months of 2018 to $5,108,343 during the same period
in 2019.
Total expenses for the year ended December 31, 2019 were $8,184,434 with
interest expense being $334,139 compared to $8,716,799 with interest expense of
$10,560 for the comparable period of 2018.
Liquidity and Capital Resources
Assets increased from $5,214,529 at the Company's fiscal year end of December
31, 2018 to $6,124,893 at December 31, 2019. The increase in the assets is
attributable to an increase in accounts receivable and an increase in prepaid
expenses, primarily an increase in advances paid to the drop shipper.
Liabilities increased from $4,082,194 as of December 31, 2018 to $5,907,000 as
of December 31, 2019. The increase is mainly attributed to loans to the Company
for its operating activities.
Cash Flow from Operating Activities
Net cash from operations for the year ended December 31, 2019 was $(3,599,572)
as compared to $(2,636,858) for the same period in 2018.
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Cash Flow from Investing Activities
Net cash provided by investing activities for the year ended December 31, 2019
was $2,453,389 as compared to $1,255,336 for the same period in 2018.
Cash Flow from Financing Activities
Net cash provided by financing activities for the year ended December 31, 2019
was $632,339 as compared to $1,711,376 for the same period in 2018.
Off-balance sheet arrangements
There are no 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, expenses, results of operations, liquidity,
capital expenditures or capital resources.
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