| Note 18. 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:
| |
· |
Hydroponic
Products |
| |
|
|
| |
· |
Cannabis
Products |
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 year 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") has begun reviewing
results and managing and allocating resources between these two strategic business groupings, and has begun budgeting using these
business segments. The Company's segment information for the six months ended June 30, 2016 has been reclassified to conform to
its current presentation.
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 sales 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 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 Financial
Statements.
Hydroponic
Products The Company's locally grown hydroponic products, which include produce, herbs, and floral products, are
started from seed and are grown in environmentally controlled greenhouses. When harvested, the products are sold through retailers
targeted to customers seeking produce, herbs, or floral products locally grown using environmentally sustainable methods.
Cannabis
Products The Company currently operates or plans to operate medical marijuana cultivation, production, and dispensary
facilities in California and Nevada through its subsidiaries, Black Oak Gallery, MediFarm, MediFarm I, and MediFarm II. The Company
was granted eight provisional permits in Nevada and have received approval from the local authorities with respect to all of the
permits. IVXX's cannabis products are currently produced in the Company's supercritical Co2 lab in California and are
sold in select dispensaries throughout California.
Summarized
financial information concerning the Company's reportable segments is shown in the following tables. Total asset amounts at June
30, 2016 and 2015 exclude intercompany receivable balances eliminated in consolidation.
| |
|
3
Months Ended June 30, 2016 |
|
| |
|
Hydroponic |
|
|
Cannabis |
|
|
Eliminations |
|
|
|
|
| |
|
Produce |
|
|
Products |
|
|
and
Other |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total
Revenues |
|
$ |
5,873,418 |
|
|
$ |
3,768,977 |
|
|
$ |
57,514 |
|
|
$ |
9,699,909 |
|
| Cost
of Goods Sold |
|
|
5,414,082 |
|
|
|
2,596,035 |
|
|
|
39,848 |
|
|
|
8,049,965 |
|
| |
|
|
459,336 |
|
|
|
1,172,942 |
|
|
|
17,666 |
|
|
|
1,649,944 |
|
| Selling,
general and administrative expenses |
|
|
859,375 |
|
|
|
1,649,452 |
|
|
|
2,958,494 |
|
|
|
5,467,321 |
|
| Loss
from operations |
|
|
(400,039 |
) |
|
|
(476,510 |
) |
|
|
(2,940,828 |
) |
|
|
(3,817,377 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other
Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization
of debt discount |
|
|
- |
|
|
|
- |
|
|
|
(218,126 |
) |
|
|
(218,126 |
) |
| Loss
on extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Loss
from derivatives issuance |
|
|
- |
|
|
|
- |
|
|
|
(488,000 |
) |
|
|
(488,000 |
) |
| Gain
(Loss) on fair market valuation of derivatives |
|
|
- |
|
|
|
- |
|
|
|
(206,000 |
) |
|
|
(206,000 |
) |
| Interest
Income (Expense) |
|
|
- |
|
|
|
250 |
|
|
|
(60,815 |
) |
|
|
(60,565 |
) |
| Total
Other Income (Expense) |
|
|
- |
|
|
|
250 |
|
|
|
(972,941 |
) |
|
|
(972,691 |
) |
| Loss
before Provision of Income Taxes |
|
$ |
(400,039 |
) |
|
$ |
(476,260 |
) |
|
$ |
(3,913,769 |
) |
|
$ |
(4,790,068 |
) |
| |
|
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 |
) |
| |
|
6
Months Ended June 30, 2016 |
|
| |
|
Hydroponic |
|
|
Cannabis |
|
|
Eliminations |
|
|
|
|
| |
|
Produce |
|
|
Products |
|
|
and
Other |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total
Revenues |
|
$ |
7,274,861 |
|
|
$ |
3,899,180 |
|
|
$ |
74,035 |
|
|
$ |
11,248,076 |
|
| Cost
of Goods Sold |
|
|
6,615,014 |
|
|
|
2,809,296 |
|
|
|
39,848 |
|
|
|
9,464,158 |
|
| |
|
|
659,847 |
|
|
|
1,089,884 |
|
|
|
34,187 |
|
|
|
1,783,918 |
|
| Selling,
general and administrative expenses |
|
|
1,378,027 |
|
|
|
1,851,588 |
|
|
|
4,284,054 |
|
|
|
7,513,669 |
|
| Loss
from operations |
|
|
(718,180 |
) |
|
|
(761,704 |
) |
|
|
(4,249,867 |
) |
|
|
(5,729,751 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other
Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization
of debt discount |
|
|
- |
|
|
|
- |
|
|
|
(312,532 |
) |
|
|
(312,532 |
) |
| Loss
on extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
(920,797 |
) |
|
|
(920,797 |
) |
| Loss
from derivatives issuance |
|
|
- |
|
|
|
- |
|
|
|
(488,000 |
) |
|
|
(488,000 |
) |
| Gain
(Loss) on fair market valuation of derivatives |
|
|
- |
|
|
|
- |
|
|
|
(1,366,700 |
) |
|
|
(1,366,700 |
) |
| Interest
Income (Expense) |
|
|
- |
|
|
|
250 |
|
|
|
(116,810 |
) |
|
|
(116,560 |
) |
| Total
Other Income (Expense) |
|
|
- |
|
|
|
250 |
|
|
|
(3,204,839 |
) |
|
|
(3,204,589 |
) |
| Loss
before Provision of Income Taxes |
|
$ |
(718,180 |
) |
|
$ |
(761,454 |
) |
|
$ |
(7,454,706 |
) |
|
$ |
(8,934,340 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
assets at June 30, 2016 |
|
$ |
6,834,863 |
|
|
$ |
57,142,755 |
|
|
$ |
2,784,814 |
|
|
$ |
66,762,432 |
|
| |
|
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 |
|
|