10-Q: Jacksam Corporation Reports Q1 2024 Results: Revenue Declines Amid Strategic Shifts

Sentiment:

Quarterly Report (Form 10-Q) 17 May 2024 4:00 PM

Jacksam Corporation's Q1 2024 revenue decreased compared to Q1 2023, with a net loss reported despite efforts to streamline operations and secure financing.

Capital raiseThe company anticipates needing additional financing to continue as an ongoing entity over the next 12 months.The company may raise additional capital by retaining net earnings or through future private offerings of the Company's stock or through loans from private investors.

Worse than expectedThe company's revenue decreased significantly compared to the same period last year.The company reported a net loss compared to a net income in the same period last year.The company's operating expenses increased significantly compared to the same period last year.

Summary

Jacksam Corporation, operating as Convectium, reported its financial results for the quarter ended March 31, 2024.
Revenue for Q1 2024 was $295,333, a decrease from $628,425 in Q1 2023.
The company experienced a net loss of $546,899 for Q1 2024, compared to a net income of $55,429 in Q1 2023.
Operating expenses increased to $563,932, including a one-time non-cash equity compensation expense of $437,765.
The company's cash and cash equivalents totaled $104,425 as of March 31, 2024.
The company is in a pending lawsuit with a previous supplier regarding defected cartridges.
The company has a line of credit with a principal amount of $50,000, which was drawn in full as of March 31, 2024 and is currently in default.
The company entered into a Security Purchase Agreement with Think Capital Partners, LLC, resulting in a convertible promissory note with a principal value of $755,333.
The company issued 3,000,000 shares of common stock to Think Capital Partners as part of the Exchange.
The company issued 9,888,888 restricted shares of the company's common stock to four consultants to build a new distribution business, Catalyst Distribution.
The company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs, raising substantial doubt about the company's ability to continue as a going concern.

Sentiment

Score: 3

Explanation: The document presents a concerning financial picture with declining revenue, a net loss, and a statement raising substantial doubt about the company's ability to continue as a going concern. While there are some positive developments like the Security Purchase Agreement, the overall sentiment is negative due to the significant financial challenges.

Positives

The company entered into a Security Purchase Agreement with Think Capital Partners, LLC, resulting in a convertible promissory note with a principal value of $755,333.
The company issued 9,888,888 restricted shares of the company's common stock to four consultants to build a new distribution business, Catalyst Distribution.

Negatives

Q1 2024 revenue decreased to $295,333 from $628,425 in Q1 2023.
The company reported a net loss of $546,899 for Q1 2024, compared to a net income of $55,429 in Q1 2023.
Operating expenses increased to $563,932, including a $437,765 one-time non-cash equity compensation expense.
Cash and cash equivalents decreased to $104,425 as of March 31, 2024.
The company is in default of a line of credit agreement with a principal amount of $50,000.
The company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs, raising substantial doubt about the company's ability to continue as a going concern.

Risks

The company's ability to continue as a going concern is dependent on its ability to successfully execute its business plan and attain profitable operations.
The company may experience a cash shortfall and be required to raise additional capital, and there is no assurance that it will be able to obtain such financing.
The company is involved in a pending lawsuit with a previous supplier regarding defected cartridges, the impact of which is not reasonably estimable.
The company is in default of a line of credit agreement with a principal amount of $50,000.
The company's operations are subject to financial, operational, regulatory, and other risks, including the potential risk of business failure.

Future Outlook

The company anticipates needing additional financing to continue as an ongoing entity over the next 12 months, but there is no assurance that it will be able to obtain such financing.

Management Comments

Management believes that our assumptions are based upon reasonable data derived from and known about our business and operations.
No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

Industry Context

The company operates in the cannabis, hemp, and CBD industries, which are subject to evolving regulations and market dynamics. The decrease in revenue may reflect increased competition or changing market conditions within these sectors.

Comparison to Industry Standards

It's difficult to provide a precise comparison to industry standards without specific competitor data.
However, companies like KushCo Holdings (now part of Greenlane Holdings) and Agrify Corporation operate in related spaces.
KushCo focuses on providing ancillary products and services to the cannabis and hemp industries, while Agrify specializes in vertical farming solutions.
Comparing Jacksam's financial performance and strategic direction to these companies could provide a broader industry context.

Legal Proceedings

The Company has a pending lawsuit with one of its previous suppliers regarding defected cartridges.

Related Party Transactions

Mark Adams, CEO, invested $250,000 in the June 2019 Notes and converted his debt during the year ended December 31, 2020 into shares of common stock of 1,388,885, which have yet to be issued for a conversion value of $277,778.
The Companys former VP of sales also invested $100,000 in the June 2019 Notes and converted his debt during the year ended December 31, 2020 into shares of common stock of 555,556, which have yet to be issued for a conversion value of $111,111.

Stakeholder Impact

Shareholders may be concerned about the declining revenue, net loss, and the company's ability to continue as a going concern.
Employees may be affected by potential cost-cutting measures or restructuring if the company's financial situation does not improve.
Customers may be concerned about the company's ability to fulfill orders and provide ongoing support if it faces financial difficulties.
Creditors may be at risk of not being repaid if the company is unable to generate sufficient cash flow.

Next Steps

The company needs to successfully execute its business plan and attain profitable operations to continue as a going concern.
The company may need to raise additional capital to fund its operations.
The company needs to resolve the pending lawsuit with a previous supplier regarding defected cartridges.
The company needs to address the default of a line of credit agreement with a principal amount of $50,000.

Key Dates

Date	Description
1989-09-21	Company incorporated in the State of Nevada as Fulton Ventures, Inc.
2018-09-14	Merger closed, current management took control and continued the business of Jacksam Corporation.
2020-06-02	Company received $150,000 under the Small Business Administrations Economic Injury Disaster Loan.
2021-09-29	Company entered into a Revenue Loan and Security Agreement with an investor for up to a total amount of $1,000,000.
2022-02-02	Company entered into a lease agreement for office space.
2023-03-30	Company entered into a line of credit agreement with a principal amount of $50,000.
2023-10-20	Company entered into an additional amendment with the remaining outstanding note holder of the June 2019 Notes, which resulted in the maturity date of the note being extended to September 30, 2024.
2024-01-05	Company and Think Capital Partners, LLC entered into a Security Purchase Agreement.
2024-01-09	The company issued 9,888,888 restricted shares of the company's common stock to four consultants to build a new distribution business, Catalyst Distribution.
2024-03-18	Company issued 685,713 shares of common stock to the holder of a convertible promissory note related to the October 2023 modification of the note payable and the exercise of those warrants.
2024-03-31	End of the quarterly period.
2024-05-15	As of this date, the registrant had 94,663,320 shares of common stock outstanding.
2024-05-16	Management has evaluated events through this date, the date these financial statements were available for issuance, and noted no events requiring disclosures.
2024-05-17	Date of report.

Keywords

Jacksam Corporation, Convectium, financial results, Q1 2024, revenue, net loss, convertible notes, cannabis industry, vaporizer cartridges, going concern

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