The following information should be read in conjunction with our financial
statements and accompanying notes included in this Annual Report on Form 10-K.
Overview
We own and operate CNP Operating, a leading CBD manufacturer vertically
integrated with a 360 degree approach to the processing of high quality CBD
products designed for growers, pharmaceutical, wellness providers, and
retailers’ needs, and a cannabis industry focused sponsored content and
marketing business, or the CFN Business. Our ongoing operations currently
consist primarily of CNP Operating and the CFN Business and we will continue to
pursue strategic transactions and opportunities. We are currently in the process
of launching an e-commerce network focused on the sale of general wellness CBD
products.
CNP Operating provides toll processing services which includes extraction,
distillation, remediation, isolation and chromatography. CNP Operating has a
professional, organized and dedicated team with 30 years of combined experience.
CNP Operating’s state of the art facility has 30,000 square feet filled with
proprietary technology distillation equipment, in house lab testing,
distribution warehouse and white labelling product formulation and design.
The CFN Business generates revenue through sponsored content, including
articles, press releases, videos, podcasts, advertisements and other media,
email advertisements and other marketing campaigns run on behalf of public and
private companies in the cannabis industry, helping them reach accredited,
retail and institutional investors. Most revenue is generated through contracts
involving a monthly cash payment.
The CFN Business’ primary expenses come from advertising on platforms like
Twitter and Facebook and from employee salaries and contractor fees. The CFN
Business’ content is primarily produced by a team of freelance writers and video
content is produced through various vendors. The CFN Business also incurs
hosting and development costs associated with maintaining and improving its
website, web applications, and mobile applications. The CFN Business operates
several media platforms, including CannabisFN.com, the CannabisFN iOS app, the
CFN Media YouTube channel, the CFN Media podcast, and other venues. These
properties are designed to educate and inform investors interested in the
cannabis industry, as well as provide a platform for the clients of the CFN
Business to reach investors. The CFN Business distributes content across
numerous online platforms, including the CannabisFN.com website, press releases,
financial news syndicates, search engines, YouTube, iTunes, Twitter, Instagram,
Facebook, LinkedIn, and others.
The CFN Business targets the legal cannabis industry. According to
Research
2025, driven by the legalization of medical and adult-use cannabis across a
growing number of jurisdictions. According to the Marijuana Index, there are
approximately 400 public companies involved in the cannabis industry, which
represents the primary target market of the CFN Business. The CFN Business’
services are designed to help private companies prepare to go public and public
companies grow their shareholder base through sponsored content and marketing
outreach. The success of the CFN Business depends on the legal status of
cannabis, investor demand for cannabis investments, and numerous other external
factors.
The CFN Business competes with other public relations firms for clients, as well
as online publishers for investors. Public relations competition includes
investor awareness firms like
firms like
regulated by rules established by the
cannabis regulations.
15 Table of Contents Results of Operations
The following are the results of our operations for the year ended
2021
For the Year Ended December 31, December 31, 2021 2020 Change Net revenues$ 3,157,783 $ 506,490 $ 2,217,929 Cost of revenue 3,539,636 536,738 3,025,445 Gross loss (381,853 ) (30,248 ) (807,516 ) Operating expenses: Impairment charge 9,355,657 Selling, general and administrative 2,691,258 1,199,410 10,287,973 Total operating expenses 12,046,915 1,199,410 10,287,973 Loss from operations (12,428,768 ) (1,229,658 ) 11,095,488 Other income (expense): Loss on extinguishment of debt (172,500 ) (172,500 ) Unrealized gain (loss) on investments (45,658 ) (40,180 ) Forgiveness of SBA Loan 526,000 10,000 516,000 Interest expense (93,170 ) (51,615 ) (41,555 ) Interest income 10,001 19 9,992 Total other income (expense) 224,683 (41,596 ) (271,127 )
Net loss from continuing operations (12,204,085 ) (1,271,254 ) 10,824,361
Net Revenues
The Company’s revenues are generated from the sale of promotional service
packages to customers ranging from 3 to 6 months. The Company offers different
packages tailored to the type and stage of the potential customer, such as
public companies looking to increase their shareholder base, as well as private
companies potentially looking to go public and attract capital and publicity.
During the twelve months ended
of campaign revenue compared to
The Company’s subsidiary CNP Operating generated revenue of
the sale of products produced from hemp material and manufactured into CBD
distillate.
Our revenue for 2021 also included
e-commerce network focused on the sale of general wellness CBD products. This
network was launched during the fourth quarter of 2020 with revenue of
Costs of Revenue
The costs of revenue consist primarily of labor, fees paid for production of
content for clients and the costs of placement of the content on various
platforms. In 2021, the contracts required more production services and related
labor than the contracts in 2020. As a result, the cost of revenue in 2021 was
higher as a percentage of the revenue recognized during the year.
The Company’s cost of revenue for the year ended
than those in the corresponding year in 2020 due largely to the acquisition of
CNP Operating which represented approximately
which primarily represents the cost of hemp material, manufacturing material
such as solvent, fuel and equipment depreciation.
Operating Expenses
The Company’s operating expenses for the year ended
higher than those in the corresponding year in 2020 due largely to the
acquisition of CNP Operating which represented approximately
additional general and administrative expenses representing wages. In addition,
the Company wrote off goodwill of
asset.
Other income increased during the year ended
forgiveness of
received by East West for services were marked to market and resulted in an
unrealized loss of
debt incurred as it issued common stock in payment of interest payable and
extension of the maturity date on a note payable. The Company did not have a
similar loss during the year ended
16 Table of Contents
Liquidity and Capital Resources
On
a second PPP loan of
going concern includes raising additional capital in the form of debt or equity,
growing the business acquired under the Emerging Growth Agreement and managing
and reducing operating and overhead costs. We cannot provide any assurance that
unforeseen circumstances that could occur at any time within the next twelve
months or thereafter will not increase the need for us to raise additional
capital on an immediate basis.
These matters, among others, raise substantial doubt about our ability to
continue as a going concern. These financial statements do not include any
adjustments to the amounts and classification of assets and liabilities that may
be necessary should we be unable to continue as a going concern.
The following is a summary of our cash flows from operating, investing and
financing activities for the year ended
Year Ended December 31, December 31, 2021 2020 Cash flows used in operating activities$ (344,214 ) $ (483,522 ) Cash flows provided by (used in) investing activities$ 22,885 $ (206,634 ) Cash flows provided...
Read More: CFN ENTERPRISES INC. Management’s Discussion and Analysis of Financial Condition and