Quarterly report pursuant to Section 13 or 15(d)

SEGMENT INFORMATION

v3.8.0.1
SEGMENT INFORMATION
 9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
NOTE 15. SEGMENT INFORMATION

The Company’s operating and reportable segments are currently organized around the following products that it offers as part of its core business strategy:

 

  · Herbs and Produce Products – Includes herbs and leafy greens that are grown using classic Dutch hydroponic farming methods.
     
  · Cannabis Dispensary, Cultivation and Production – Includes cannabis-focused retail, cultivation and production.

 

These two reportable segments, which are described in greater detail below, had previously been reported on a combined basis as they had been operated and evaluated as one operating segment. The Company experienced significant growth over the last few years in most of our product areas. As the Company has grown organically, and as the Company previously added to its capabilities through acquisitions, its products have increased in scale and become more strategically important and distinctly organized and managed under these two groupings. In addition, Derek Peterson, the Company’s Chief Operating Decision Maker (“CODM”), reviews results, manages and allocates resources between these two strategic business groupings, and budgets using these business segments. The Company’s 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 goods sold in the “Eliminations and Other” column. The “Eliminations and Other” column also includes various income and expense items that the Company does not allocate to its operating segments. These income and expense amounts include the results of the Company’s 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 the Company has not identified a reasonable basis for allocation. The accounting policies of the reportable segments are the same as those described in “Note 2 - Summary of Significant Accounting Policies” of the notes to unaudited consolidated financial statements.

 

Herbs and Produce Products

 

Either independently or in conjunction with third parties, the Company is a wholesale seller of locally grown hydroponic herbs, produce, and floral products, which are distributed through major grocery stores throughout the East and Midwest regions of the U.S.

 

Cannabis Dispensary, Cultivation and Production

 

Either independently or in conjunction with third parties, the Company operates medical marijuana retail dispensaries, medical marijuana cultivation and production facilities in California and Nevada. The Company owns real property in Nevada on which the Company plans to build a medical marijuana grow facility. All of our retail dispensaries in California and Nevada offer a broad selection of medical cannabis products including flowers, concentrates and edibles. The Company also produces and sells a line of medical cannabis flowers, as well as a line of medical cannabis-extracted products, which include concentrates, cartridges, vape pens and wax products.

 

Summarized financial information concerning the Company’s reportable segments is shown in the following tables. Total assets at September 30, 2017 and 2016 exclude intercompany receivable balances eliminated in consolidation.

 

    For the Three Months Ended September 30, 2017  
   

Herbs

and

Produce

Products

    Cannabis Dispensary, Cultivation and Production    

Eliminations

and

Other

    Total  
                         
Total Revenues   $ 1,432,500     $ 8,673,560     $ 15,315     $ 10,121,375  
Cost of Goods Sold     1,192,251       6,594,186       -       7,786,437  
                                 
Gross Profit     240,249       2,079,374       15,315       2,334,938  
                                 
Selling, General and Administrative Expenses     874,141       2,822,488       2,541,481       6,238,110  
                    .          
Loss from Operations     (633,892 )     (743,114 )     (2,526,166 )     (3,903,172 )
                                 
Other Income (Expense):                                
Amortization of Debt Discount     -       -       (490,068 )     (490,068 )
Impairment of Property     -       -       (138,037 )     (138,037 )
Loss on Extinguishment of Debt     -       -       (1,373,538 )     (1,373,538 )
Loss on Fair Market Valuation of Derivatives     -       -       (1,475,900 )     (1,475,900 )
Interest (Expense) Income     -       51       (119,701 )     (119,650 )
                                 
Total Other Income (Expense)     -       51       (3,597,244 )     (3,597,193 )
                                 
Loss Before Provision for Income Taxes   $ (633,892 )   $ (743,063 )   $ (6,123,410 )   $ (7,500,365 )
                                 
Total Assets at September 30, 2017   $ 6,914,892     $ 68,290,922     $ 12,151,701     $ 87,357,515  

 

    For the Three Months Ended September 30, 2016  
   

Herbs

and

Produce

Products

    Cannabis Dispensary, Cultivation and Production    

Eliminations

and

Other

    Total  
                         
Total Revenues   $ 2,138,260     $ 4,769,912     $ 42,193     $ 6,950,365  
Cost of Goods Sold     1,921,093       3,747,841       25,355       5,694,289  
                                 
Gross Profit     217,167       1,022,071       16,838       1,256,076  
                                 
Selling, General and Administrative Expenses     642,441       1,920,468       3,379,727       5,942,636  
                    .          
Loss from Operations     (425,274 )     (898,397 )     (3,362,889 )     (4,686,560 )
                                 
Other Income (Expense):                                
Amortization of Debt Discount     -       -       (610,089 )     (610,089 )
Loss from Derivatives Issued with Debt Greater than  Debt Carrying Value     -       -       (867,000 )     (867,000 )
Gain on Fair Market Valuation of Derivatives     -       -       771,000       771,000  
Interest Expense     -       (250 )     (159,383 )     (159,633 )
                                 
Total Other Income (Expense)     -       (250 )     (865,472 )     (865,722 )
                                 
Loss Before Provision for Income Taxes   $ (425,274 )   $ (898,647 )   $ (4,228,361 )   $ (5,552,282 )
                                 
Total Assets at September 30, 2016   $ 6,725,967     $ 2,390,233     $ 60,849,033     $ 69,965,233  

 

 

    For the Nine Months Ended September 30, 2017  
   

Herbs

and

Produce

Products

    Cannabis Dispensary, Cultivation and Production    

Eliminations

and

Other

    Total  
                         
Total Revenues   $ 4,126,710     $ 20,609,917     $ 52,077     $ 24,788,704  
Cost of Goods Sold     3,487,795       17,100,535       -       20,588,330  
                                 
Gross Profit     638,915       3,509,382       52,077       4,200,374  
                                 
Selling, General and Administrative Expenses     2,389,203       7,659,968       8,604,526       18,653,697  
                    .          
Loss from Operations     (1,750,288 )     (4,150,586 )     (8,552,449 )     (14,453,323 )
                                 
Other Income (Expense):                                
Amortization of Debt Discount     -       -       (1,616,338 )     (1,616,338 )
Impairment of Property     -       -       (138,037 )     (138,037 )
Loss on Extinguishment of Debt     -       -       (4,052,133 )     (4,052,133 )
Gain on Fair Market Valuation of Derivatives     -       -       1,122,050       1,122,050  
Interest (Expense) Income     -       51       (408,044 )     (407,993 )
Loss on Fair Market Valuation of Contingent Consideration     -       (4,426,047 )     -       (4,426,047 )
Gain on Settlement of Contingent Consideration     -       4,991,571       -       4,991,571  
                                 
Total Other Income (Expense)     -       565,575       (5,092,502 )     (4,526,927 )
                                 
Loss Before Provision for Income Taxes   $ (1,750,288 )   $ (3,585,011 )   $ (13,644,951 )   $ (18,980,250 )
                                 
Total Assets at September 30, 2017   $ 6,914,892     $ 68,290,922     $ 12,151,701     $ 87,357,515  

 

    For the Nine Months Ended September 30, 2016  
   

Herbs

and

Produce

Products

    Cannabis Dispensary, Cultivation and Production    

Eliminations

and

Other

    Total  
                         
Total Revenues   $ 9,413,121     $ 8,669,092     $ 116,228     $ 18,198,441  
Cost of Goods Sold     8,758,524       6,557,137       65,203       15,380,864  
                                 
Gross Profit     654,597       2,111,955       51,025       2,817,577  
                                 
Selling, General and Administrative Expenses     1,798,051       3,772,056       7,663,781       13,233,888  
                    .          
Loss from Operations     (1,143,454 )     (1,660,101 )     (7,612,756 )     (10,416,311 )
                                 
Other Income (Expense):                                
Amortization of Debt Discount     -       -       (922,621 )     (922,621 )
Loss on Extinguishment of Debt     -       -       (920,797 )     (920,797 )
Loss from Derivatives Issued with Debt Greater than Debt Carrying Value     -       -       (1,355,000 )     (1,355,000 )
Loss on Fair Market Valuation of Derivatives     -       -       (595,700 )     (595,700 )
Interest Expense     -       -       (276,193 )     (276,193 )
                                 
Total Other Income (Expense)     -       -       (4,070,311 )     (4,070,311 )
                                 
Loss Before Provision for Income Taxes   $ (1,143,454 )   $ (1,660,101 )   $ (11,683,067 )   $ (14,486,622 )
                                 
Total Assets at September 30, 2016   $ 6,725,967     $ 2,390,233     $ 60,849,033     $ 69,965,233