Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Unless otherwise specified our financial statements are expressed in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.
As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our" and "our company" mean First Colombia Development Corp., a company incorporated under the laws of the state of Nevada, and our current wholly-owned subsidiary, First Colombia Devco SAS, a Colombian company, unless otherwise indicated.
General Overview
We were incorporated under the laws of the state of Nevada on May 10, 2011. Our fiscal year end is December 31. Our business offices are currently located at 3020 Bridgway, Ste 505, Sausalito, CA 94965. The address of agent for service in Nevada and registered corporate office is c/o National Registered Agents, Inc. of Nevada, 100 East William Street, Suite 204, Carson City, NV, 89701. Our telephone number is (415) 729-1747.
In April 2018 we effected a forward stock split of our authorized and issued and outstanding shares of common stock on a one (1) old for two (2) new basis. Upon effect of the forward split, our authorized capital increased from 250,000,000 shares of common stock to 500,000,000 shares of common stock and correspondingly, our issued and outstanding shares of common stock increased from 34,760,008 to 73,520,016 shares of common stock, all with a par value of $0.001. Certificate of Change and Articles of Merger to effect the forward split and the merger and change of name to First Colombia Development Corp. were filed with the Nevada Secretary of State on April 12, 2018, with an effective date of April 26, 2018. The name change and reverse stock split were subsequently reviewed and approved by the Financial Industry Regulatory Authority (FINRA) with an effective date of April 26, 2018.
Our Current Business
Effective May 10, 2018, we executed and closed a purchase agreement with Grupo Jaque Ltd. and First Colombia Devco SAS whereby we acquired the issued and outstanding share capital of First Colombia Devco SAS, a Colombian company, from its sole shareholder, Grupo Jaque Ltd. The consideration for the purchase was $100,000, which represented a reimbursement of the vendor’s costs to capitalize and establish the Colombian company, and the costs of establishing the company’s Colombian head offices.
On April 26, 2019, the Company began repositioning itself through the disposal of the Colombian assets and to develop a nationwide network of medical marijuana dispensaries and related businesses in the United States, where legally permitted, with a focus on both THC-dominant and CBD-dominant cannabis manufacturing, distribution and sales. On May 14, 2019, we announced a non-binding letter of intent with Critical Mass Industries LLC dba GoodMeds ("GoodMeds") pursuant to which the Company will acquire the management assets related to dispensing, cultivation, and extraction, as well as the brand assets of GoodMeds, which includes BOSM Labs, in exchange for US$1,999,770 and 15,053,233 shares of common stock. GoodMeds was founded in Denver in 2009 by John Knapp. As a pioneering company in a fully-regulated cannabis marketplace, GoodMeds operates two storefronts and a 90,000 square foot cultivation and extraction facility, producing world-class Medical and Adult Use products. On May 14, 2019, the Company also entered into a non-binding letter of intent to acquire General Extract LLC dba General Extract ("General Extract"). General Extract was founded in 2015 as an importer, distributor, broker and postprocessor of hemp and hemp derivatives. As an intermediary in the global supply of cannabis products, General Extract is closely aligned with both the upstream and downstream cannabis leaders.
The GoodMeds transaction closed on August 7, 2019 on substantially the same terms as indicated in the Letter of Intent dated May 14, 2019. The General Extract
transaction is expected to close in the third quarter..
Cash Requirements
Based on our current planned expenditures, we will require approximately $5,000,000 over the next 12 months. In order to provide funds, on August 5, 2019, we completed the non-brokered private placement we previously announced in which we received gross proceeds of $7,736,730. Should we require more funds and are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.
We have not investigated the availability of commercial loans or other debt financing to supplement or meet our cash requirements. In the uncertain event that any such debt financing alternatives were available to us on acceptable terms, they would increase our liabilities and future cash commitments.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Results of Operations
The following summary of our results of operations should be read in conjunction with our financial statements for the three and six months ended June 30, 2019, which are included herein.
Three Months Ended June 30, 2019 and June 30, 2018
Our operating results for the three months ended June 30, 2019 and June 30, 2018 are summarized as follows:
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
Cost of sales
|
|
-
|
|
|
-
|
|
Selling, marketing and administraitve
|
|
(218,680
|
)
|
|
(54,785
|
)
|
Bank charges
|
|
(3,558
|
)
|
|
(456
|
)
|
Total operating expenses
|
|
(222,238
|
)
|
|
(55,241
|
)
|
Net loss from continuing operations
|
|
(222,222
|
)
|
|
(58,006
|
)
|
Net loss from discontinued operations
|
|
991
|
|
|
(27,628
|
)
|
Net loss
|
$
|
(221,231
|
)
|
$
|
(85,634
|
)
|
|
|
|
|
|
|
|
Net loss per common share from continuing operations - basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
Net income (loss) per common share from discontinued operations - basic and diluted
|
|
0.00
|
|
|
(0.00
|
)
|
Net loss per common share from discontinued operations - basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
Revenue and Cost of Sales
We had no revenues and did not engage in any sales activities during the three-month periods ended June 30, 2019 and June 30, 2018.
Operating Expenses and Net Loss
We incurred a net loss of $221,231 for the three months ended June 30, 2019 compared to $85,634 during the three months ended June 30, 2018. The increase was primarily due to an increase in consulting fees, legal costs, travel and other selling, marketing and administrative expenses driven by increased management oversight at the parent company level due to the planned shift in operations. This increase was partially offset by lower operations and net loss from our discontinued operations.
Six Months Ended June 30, 2019 and June 30, 2018
Our operating results for the six months ended June 30, 2019 and June 30, 2018 are summarized as follows:
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
$
|
-
|
|
$
|
-
|
|
Cost of sales
|
|
-
|
|
|
-
|
|
Selling, marketing and administraitve
|
|
(266,193
|
)
|
|
(69,434
|
)
|
Bank charges
|
|
(3,667
|
)
|
|
(222
|
)
|
Total operating expenses
|
|
(269,860
|
)
|
|
(69,656
|
)
|
Net loss from continuing operations
|
|
(270,290
|
)
|
|
(108,053
|
)
|
Net income (loss) from discontinued operations
|
|
(22,279
|
)
|
|
(27,628
|
)
|
Net loss
|
$
|
(292,569
|
)
|
$
|
(135,681
|
)
|
|
|
|
|
|
|
|
Net loss per common share from continuing operations - basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
Net income (loss) per common share from discontinued operations - basic and diluted
|
|
(0.00
|
)
|
|
(0.00
|
)
|
Net loss per common share - basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
Revenue and Cost of Sales
We had no revenues and did not engage in any sales activities during the six-month periods ended June 30, 2019 and June 30, 2018.
Operating Expenses and Net Loss
We incurred a net loss of $292,569 for the six months ended June 30, 2019 compared to $135,681 during the six months ended June 30, 2018. The increase was primarily due to an increase in consulting fees, legal costs, travel and other selling, marketing and administrative expenses driven by increased management oversight at the parent company level due to the planned shift in operations.
Liquidity and Financial Condition
Working Capital
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Current assets
|
$
|
3,174,160
|
|
$
|
246,200
|
|
Current liabilities
|
|
172,679
|
|
|
57,029
|
|
Working capital
|
$
|
3,001,481
|
|
$
|
189,171
|
|
As of June 30, 2019, we had current assets of $3,174,160 (consisting of cash, prepaid expenses and advances and current assets held for sale of $48,452), current liabilities of $172,678 (including accounts payable and accrued liabilities, due to related party and current liabilities held for sale of $23,123), and working capital of $3,001,482.
As of December 31, 2018, we had current assets of $246,200 (including reclassified current assets held for sale of $48,238), current liabilities of $57,029 (including reclassified current liabilities held for sale of $25,860), and working capital of $189,171.
The increase in working capital is primarily due to proceeds from our sale of common stock, and common stock subscribed, in June 2019.
Cash Flows
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Net cash used in operating activities
|
$
|
(192,330
|
)
|
$
|
(213,772
|
)
|
Net cash used in investing activities
|
|
-
|
|
|
(152,287
|
)
|
Net cash provided by financing activities
|
|
3,109,776
|
|
|
964,787
|
|
Net increase in cash during the period
|
$
|
2,917,446
|
|
$
|
598,728
|
|
Operating Activities
Net cash used in operating activities was $192,330 during the
six months ended June 30, 2019, primarily due to our net loss of $292,569,
partially offset by an increase in accounts payable and accrued liabilities of
$118,261.
Net cash used in operating activities was $213,772 during the six months ended June 30, 2018, primarily due to our net loss of $135,681 and in increase in accounts payable and accrued liabilities of $89,931.
Investing Activities
There were no investing activities for the six months ended June 30, 2019. Net cash used in investing activities was $152,287 during the six months ended June 30, 2018, due to cash paid for our subsidiary of $54,793 and purchase of property and equipment by Devco of $94,494.
Financing Activities
Net cash provided by financing activities was $3,109,776
during the six months ended June 30, 2019, primarily due to $3,156,900 in
proceeds received from the sale of our common stock and common stock subscribed
in June 2019, minus equity issuance costs of $47,250.
Net cash provided by financing activities was $964,787 during the six months ended June 30, 2018, primarily due to $965,000 in proceeds received from the sale of our common stock and common stock subscribed in February 2018.
Going Concern
As of June 30, 2019, we had an accumulated deficit of $1,133,225. During the six months ended June 30, 2019, we incurred a net loss of $292,569 and used $192,330 of net cash in operating activities. We expect to continue to generate operating losses for the foreseeable future. As of June 30, 2019, we had cash of $3,120,845.
Based on our current operating plan, we expect that our cash will be sufficient to fund its operating expenses and debt service requirements for at least 12 months from the issuance date of these interim condensed consolidated financial statements. Based on this, we have determined there is not substantial doubt about our ability to continue as a going concern. The future viability of the Company beyond that point is dependent on our ability to raise additional capital to finance its operations. Although we has been successful in raising capital in the past, there is no assurance that we will be successful in obtaining such additional financing on terms acceptable to the Company, if at all.
Critical Accounting Policies
These financial statements and related notes are expressed in US dollars. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, First Colombia Devco SAS. All inter-company accounts and transactions have been eliminated. The Company’s fiscal year-end is December 31.