Annual report pursuant to Section 13 and 15(d)

SEGMENT INFORMATION

v3.8.0.1
SEGMENT INFORMATION
 12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
NOTE 20. 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.

 

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 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 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 and adult use marijuana retail dispensaries, medical and adult use 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 offer a broad selection of medical cannabis products including flowers, concentrates and edibles while our dispensaries in Nevada offer a broad selection of medical and adult use 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 asset amounts at December 31, 2017, 2016 and 2015 exclude intercompany receivable balances eliminated in consolidation.

 

    For the Year Ended December 31, 2017  
    Herbs and Produce Products     Cannabis Dispensary, Cultivation and Production     Eliminations and Other     Total  
                         
Total Revenues   $ 5,701,233     $ 30,031,046     $ 68,565     $ 35,800,844  
Cost of Goods Sold     5,211,658       25,112,113       -       30,323,771  
                                 
Gross Profit     489,575       4,918,933       68,565       5,477,073  
                                 
Selling, General and Administrative Expenses     3,123,037       10,843,210       11,390,844       25,357,091  
                                 
Loss from Operations     (2,633,462 )     (5,924,277 )     (11,322,279 )     (19,880,018 )
                                 
Other Income (Expense):                                
Amortization of Debt Discount     -       -       (2,138,762 )     (2,138,762 )
Impairment of Property     -       -       (138,037 )     (138,037 )
Impairment of Intangibles     (757,467 )     -       -       (757,467 )
(Loss) Gain on Extinguishment of Debt     (18 )     187       (7,144,457 )     (7,144,288 )
Loss on Fair Market Valuation of Derivatives     -       -       (3,494,550 )     (3,494,550 )
Interest (Expense) Income     -       110       (542,774 )     (542,664 )
Gain on Settlement of Contingent Consideration     -       4,991,571       -       4,991,571  
Loss on Fair Market Valuation of Contingent Consideration     -       (4,426,047 )     -       (4,426,047 )
                                 
Total Other Income (Expense)     (757,485 )     565,821       (13,458,580 )     (13,650,244 )
                                 
Loss Before Provision for Income Taxes   $ (3,390,947 )   $ (5,358,456 )   $ (24,780,859 )   $ (33,530,262 )
                                 
Total Assets at December 31, 2017   $ 5,847,286     $ 69,844,546     $ 22,495,967     $ 98,187,799  

  

    For the Year Ended December 31, 2016  
    Herbs and Produce Products     Cannabis Dispensary, Cultivation and Production     Eliminations and Other     Total  
                         
Total Revenues   $ 12,000,423     $ 13,207,327     $ 120,013     $ 25,327,763  
Cost of Goods Sold     11,021,449       11,664,737       68,894       22,755,080  
                                 
Gross Profit     978,974       1,542,590       51,119       2,572,683  
                                 
Selling, General and Administrative Expenses     2,520,061       5,729,884       12,470,589       20,720,534  
                    .          
Loss from Operations     (1,541,087 )     (4,187,294 )     (12,419,470 )     (18,147,851 )
                                 
Other Income (Expense):                                
Amortization of Debt Discount     -       -       (1,414,202 )     (1,414,202 )
Loss on Extinguishment of Debt     -       -       (5,382,813 )     (5,382,813 )
Loss from Derivatives Issued with Debt Greater than Debt Carrying Value     -       -       (1,487,500 )     (1,487,500 )
Loss on Fair Market Valuation of Derivatives     -       -       (1,844,500 )     (1,844,500 )
Interest Expense     -       -       (377,349 )     (377,349 )
Gain on Fair Market Valuation of Contingent Consideration     -       -       668,694       668,694  
                                 
Total Other Income (Expense)     -       -       (9,837,670 )     (9,837,670 )
                                 
Loss Before Provision for Income Taxes   $ (1,541,087 )   $ (4,187,294 )   $ (22,257,140 )   $ (27,985,521 )
                                 
Total Assets at December 31, 2016   $ 7,064,697     $ 12,516,441     $ 56,597,592     $ 76,178,730  

 

    For the Year Ended December 31, 2015  
    Herbs and Produce Products      Cannabis Dispensary, Cultivation and Production      Eliminations and Other      Total   
                         
Total Revenues   $ 8,633,538     $ 1,207,424     $ 134,384     $ 9,975,346  
Cost of Goods Sold     7,771,039       1,078,852       108,584       8,958,475  
                                 
Gross Profit     862,499       128,572       25,800       1,016,871  
                                 
Selling, General and Administrative Expenses     1,910,375       763,728       7,159,543       9,833,646  
                    .          
Loss from Operations     (1,047,876 )     (635,156 )     (7,133,743 )     (8,816,775 )
                                 
Other Income (Expense):                                
Amortization of Debt Discount     -       -       (696,180 )     (696,180 )
Loss on Extinguishment of Debt     -       -       (619,444 )     (619,444 )
Loss from Derivatives Issued with Debt Greater than Debt Carrying Value     -       -       (561,000 )     (561,000 )
Gain on Fair Market Valuation of Derivatives     -       -       1,800,100       1,800,100  
Interest Expense     -       -       (469,576 )     (469,576 )
                                 
Total Other Income (Expense)     -       -       (546,100 )     (546,100 )
                                 
Loss Before Provision for Income Taxes   $ (1,047,876 )   $ (635,156 )   $ (7,679,843 )   $ (9,362,875 )
                                 
Total Assets at December 31, 2015   $ 5,383,659     $ 1,671,966     $ 2,109,414     $ 9,165,039