You should read the following discussion and analysis of financial condition and results of operations in conjunction with the consolidated financial statements and related notes contained elsewhere in this report.
We were originally incorporated into
We provide armed protection and transportation, banking, compliance and training services to businesses engaged in the legal cannabis industry. In the three months ended
It is estimated that the total market for marijuana, legal or not, will exceed the economic value of corn and wheat combined. Marijuana is widely considered the biggest cash crop
Cultivation facilities are the producers of legal cannabis that eventually make it to consumers. Producer operations typically cover a large geographic footprint, making them vulnerable to theft, as do grower shipments to testing labs or retail dispensaries. Additionally, due to the current federal marijuana legislation and banking environment, growers are finding it increasingly difficult to secure their money, purchase equipment, and secure financing for expansion.
Dispensaries are the face of the legal cannabis industry. All legal sales of cannabis products are made through state-licensed dispensaries. To maintain their licenses, dispensaries must comply with various state-mandated reporting requirements, including reporting every gram of cannabis entering and leaving the store. Dispensaries also face financial and banking challenges similar to those faced by producers.
We do not grow, test, transport or sell marijuana.
Armed protection and transport
Protecting products and money throughout the distribution channel is fundamental to the legal cannabis industry. Growers ship product from their grow facilities to independent labs where it is tested for compliance with state-mandated parameters. From the labs, the product is then delivered to retail dispensaries, where it is sold to the public.
Due to the current banking and regulatory environment, payments between each stage of the distribution network are made in cash: from the customer to the producer. Therefore, these companies are forced to carry bags of cash between growers and dispensaries and their own vaults or storage facilities.
The risk of cash and product theft is present at every stage, even when not in transit. Therefore, all cannabis businesses need security measures to prevent theft, mitigate risk to employees, and maintain regulatory compliance.
We started our security and protection operations in
4 Results of Operations Material changes in line items in our Statement of Operations for the three months ended
March 31, 2022as compared to the same period last year, are discussed below: Increase (I) or Item Decrease (D) Reason Revenue (D) Accrual of revenue Interest expense (D) Decrease in borrowings Loss on change in fair value of (D) Decrease in Company's derivative securities stock price
Capital resources and liquidity
Our material sources and
2022 2021 Cash provided (used) by operations
$ 238,938 $ 323,694Purchase of equipment - - Loan proceeds - - Loan payments <309,329> <39,371>
Except as disclosed in this Section 2, we do not anticipate material capital requirements for the three months ending
Apart from what is described above, we are not aware of any:
? trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way; or ? any significant changes in our expected sources and uses of cash.
We have no commitment or arrangement from anyone to provide us with equity.
Over the next twelve months, we expect to hire approximately
Off-balance sheet arrangements
We have not entered into any off-balance sheet arrangements.
Critical accounting policies
Management considers the following policies to be essential because they are both important to the representation of our financial condition and results of operations, and they require management to make judgments and estimates on matters that are inherently uncertain .
Accounts Receivable. Accounts receivable are shown at the amount we expect to collect from outstanding balances and do not bear interest. We provide for probable uncollectible amounts through an allowance for doubtful accounts, if an allowance is deemed necessary. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable; however, changes in the status of accounts receivable could result in the need for additional provisions in the future. Periodically, management assesses our accounts receivable and determines the requirement for an allowance for doubtful accounts based on its assessment of the current and recoverable status of individual accounts with balances that are more than 90 days past due. Account balances are charged to the allocation once all collection efforts have been exhausted and the potential for collection is considered low.
Revenue recognition. In
We adopted these standards at the beginning of the first quarter of fiscal 2018 using the modified retrospective method. The adoption of these standards had no impact on our statements of earnings for the three months ended
Stock-based compensation. We account for stock-based compensation in accordance with the guidance in ASC Sections 505 and 718, which require us to record expenses related to the fair value of our employees’ stock option awards. This eliminates accounting for stock-based compensation transactions using intrinsic value and instead requires such transactions to be accounted for using a fair value-based method. We accrue the cost of all equity-based awards using a phased vesting method over the award’s vesting period.
Equity instruments. We account for equity instruments issued in exchange for the receipt of goods or services from non-employees in accordance with FASB ASC 718-10. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliable. The value of equity instruments issued for consideration other than employee services is determined at the earlier of a performance commitment or performance completion by the provider of goods or services as defined by FASB ASC 718 -10.
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