Quarterly report pursuant to Section 13 or 15(d)

SEGMENT INFORMATION

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SEGMENT INFORMATION
 6 Months Ended
Jun. 30, 2015
Notes to Financial Statements  
Note 16. SEGMENT INFORMATION

Our operating and reportable segments are currently organized around the following products that we offer as part of our core business strategy: 

 

· Hydroponic Produce
· Cannabis Products

 

These two reportable segments, described in greater detail below, had previously been reported on a combined basis as they had been operated and evaluated as one operating segment. We experienced significant growth over the last year in most of our product areas. As we have grown organically, and as we have added to our capabilities through acquisitions, our products have increased in scale and become more strategically important and distinctly organized and managed under these two groupings. In addition, our chief operating decision maker (“CODM”) has begun reviewing results and managing and allocating resources among these two strategic business groupings, and we have begun budgeting using these business segments. Our segment information for the six months and quarter ended June 30, 2014 have been reclassified to conform to our current presentation. 

 

Our CODM reviews revenues including intersegment revenues, gross profit and operating income (loss) before income taxes when evaluating segment performance and allocating resources to each segment. Accordingly, intersegment revenue is included in the segment revenues presented in the tables below and is eliminated from revenues and cost of sales in the “Eliminations and Other” column. The “Eliminations and Other” column also includes various income and expense items that we do not allocate to our operating segments. These income and expense amounts include the results of our hydroponic equipment, which are not material, interest income, interest expense, corporate overhead, and corporate-wide expense items such as legal and professional fees as well as expense items for which we have not identified a reasonable basis for allocation. The accounting policies of the reportable segments are the same as those described in Note 1 of the Notes to the Consolidated Condensed Financial Statements. 

 

Hydroponic Produce - Our locally grown hydroponic produce is started from seed and is grown in environmentally controlled greenhouses. When harvested, the products are sold through retailers targeted to customers seeking fresh produce locally grown using environmentally sustainable methods. 

 

Cannabis Products - IVXX’s cannabis products are currently produced in our supercritical CO2 lab in California and are sold in select dispensaries throughout California. We plan to operate medical marijuana cultivation, production, and dispensary facilities in Nevada through our subsidiaries, MediFarm, MediFarm I, and MediFarm II. We were granted eight provisional permits in Nevada and have received approval from the local authorities with respect to six of the eight permits. 

 

Summarized financial information concerning our reportable segments is shown in the following tables. Total asset amounts at June 30, 2015 and 2014 exclude intercompany receivable balances eliminated in consolidation. 

 

    3 Months Ended June 30, 2015  
    Hydroponic     Cannabis     Eliminations        
    Produce     Products     and Other     Total  
Total Revenues   $ 4,776,654     $ 127,747     $ 119,889     $ 5,024,290  
Cost of Goods Sold     4,607,961       32,616       121,099       4,761,676  
      168,693       95,131       (1,210 )     262,614  
Selling, general and administrative expenses     462,734       329,845       2,569,267       3,361,846  
Loss from operations     (294,041 )     (234,714 )     (2,570,477 )     (3,099,232 )
                                 
Other Income (Expenses)                                
Amortization of debt discount     -       -       (224,729 )     (224,729 )
Loss from derivatives issued with debt greater than debt carrying value     -       -       (337,000 )     (337,000 )
Gain (Loss) on fair market valuation of derivatives     -       -       999,000       999,000  
Interest Income (Expense)     -       -       (129,701 )     (129,701 )
Total Other Income (Expense)     -       -       307,570       307,570  
Loss before Provision of Income Taxes   $ (294,041 )   $ (234,714 )   $ (2,262,907 )   $ (2,791,662 )

 

    3 Months Ended June 30, 2014  
    Hydroponic     Cannabis     Eliminations        
    Produce     Products     and Other     Total  
Total Revenues   $ 3,695,513     $ -     $ 16,288     $ 3,711,801  
Cost of Goods Sold     3,765,215       -       46,223       3,811,438  
      (69,702 )     -       (29,935 )     (99,637 )
Selling, general and administrative expenses     416,372       -       3,475,705       3,892,077  
Loss from operations     (486,074 )     -       (3,505,640 )     (3,991,714 )
                                 
Other Income (Expenses)                                
Loss from derivatives issued with debt greater than debt carrying value     -       -       (1,346,000 )     (1,346,000 )
Gain (Loss) on fair market valuation of derivatives     -       -       1,017,000       1,017,000  
Interest Income (Expense)     864       -       (235,227 )     (234,363 )
Total Other Income (Expense)     864       -       (564,227 )     (563,363 )
Loss before Provision of Income Taxes   $ (485,210 )   $ -     $ (4,069,867 )   $ (4,555,077 )

 

    6 Months Ended June 30, 2015  
    Hydroponic     Cannabis     Eliminations        
    Produce     Products     and Other     Total  
Total Revenues   $ 5,235,427     $ 431,772     $ 120,444     $ 5,787,643  
Cost of Goods Sold     4,896,054       279,161       121,099       5,296,314  
      339,373       152,611       (655 )     491,329  
Selling, general and administrative expenses     932,799       556,134       4,204,198       5,693,131  
Loss from operations     (593,426 )     (403,523 )     (4,204,853 )     (5,201,802 )
                                 
Other Income (Expenses)                                
Amortization of debt discount     -       -       (265,855 )     (265,855 )
Loss from derivatives issued with debt greater than debt carrying value     -       -       (561,000 )     (561,000 )
Gain (Loss) on fair market valuation of derivatives     -       -       1,407,200       1,407,200  
Interest Income (Expense)     -       -       (318,230 )     (318,230 )
Total Other Income (Expense)     -       -       262,115       262,115  
Loss before Provision of Income Taxes   $ (593,426 )   $ (403,523 )   $ (3,942,738 )   $ (4,939,687 )
                                 
Total assets at June 30, 2015   $ 5,658,584     $ 761,330     $ 2,473,138     $ 8,893,052  

 

    6 Months Ended June 30, 2014  
    Hydroponic     Cannabis     Eliminations        
    Produce     Products     and Other     Total  
Total Revenues   $ 4,153,336     $ -     $ 118,784     $ 4,272,120  
Cost of Goods Sold     4,241,354       -       128,313       4,369,667  
      (88,018 )     -       (9,529 )     (97,547 )
Selling, general and administrative expenses     682,616       -       5,413,266       6,095,882  
Loss from operations     (770,634 )     -       (5,422,795 )     (6,193,429 )
                                 
Other Income (Expenses)                                
Loss from derivatives issued with debt greater than debt carrying value     -       -       (2,560,000 )     (2,560,000 )
Gain (Loss) on fair market valuation of derivatives     -       -       (267,825 )     (267,825 )
Interest Income (Expense)     2,601       -       (452,916 )     (450,315 )
Total Other Income (Expense)     2,601       -       (3,280,741 )     (3,278,140 )
Loss before Provision of Income Taxes   $ (768,033 )   $ -     $ (8,703,536 )   $ (9,471,569 )
                                 
Total assets at June 30, 2014   $ 5,191,176     $ -     $ 3,682,980     $ 8,874,156