10-Q: Jacksam Corporation Reports Q3 2024 Results with Revenue Decline and Increased Net Loss

Jacksam Corporation's Q3 2024 results show a decrease in revenue and an increased net loss compared to the same period last year, alongside a material weakness in internal controls.

Summary

• Jacksam Corporation reported a net loss of $167,633 for the three months ended September 30, 2024, compared to a net income of $1,050,657 for the same period in 2023.
• The company's revenue decreased to $151,432 in Q3 2024 from $190,747 in Q3 2023.
• For the nine months ended September 30, 2024, the net loss was $659,201, compared to a net loss of $539,260 for the same period in 2023.
• Revenue for the nine months ended September 30, 2024, was $583,077, down from $1,221,782 in the same period of 2023.
• The company's operating expenses decreased in Q3 2024 to $75,993 from $111,839 in Q3 2023, but increased to $552,632 for the nine months ended September 30, 2024, from $497,812 in the same period of 2023.
• The company has a material weakness in internal control over financial reporting as of September 30, 2024.
• As of September 30, 2024, the company had cash and cash equivalents of $1,737.

Sentiment

Score: 2

Explanation: The document indicates a significant decline in financial performance, a material weakness in internal controls, and a very low cash position, all of which are major concerns for investors. The company also states it needs to raise capital to continue as a going concern.

Positives

• Operating expenses decreased in Q3 2024 to $75,993, compared to $111,839 in Q3 2023.
• Cost of revenue decreased to $159,540 in Q3 2024 from $440,000 in Q3 2023.

Negatives

• The company experienced a significant decrease in revenue for both the three and nine-month periods ended September 30, 2024, compared to the same periods in 2023.
• The company's net loss increased for both the three and nine-month periods ended September 30, 2024, compared to the same periods in 2023.
• The company has a material weakness in internal control over financial reporting.
• The company's cash and cash equivalents are very low at $1,737 as of September 30, 2024.

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.
• There is no assurance that the company will be able to obtain additional financing on favorable terms, or at all.
• The company is involved in a pending lawsuit with a previous supplier regarding defective cartridges, the outcome of which is uncertain.
• The company has negative working capital and recurring losses.

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 its assumptions are based upon reasonable data derived from and known about its business and operations.
• Management concluded there was a material weakness in our internal control over financial reporting as of September 30, 2024.

Industry Context

The company operates in the cannabis industry, which is subject to regulatory changes and market volatility. The company's performance is affected by the demand for its products in the medical and recreational cannabis, hemp, and CBD industries.

Comparison to Industry Standards

• It is difficult to make a direct comparison to industry standards without specific data on competitors in the cannabis automation equipment sector.
• However, the significant decrease in revenue and increase in net loss compared to the previous year suggests that Jacksam is underperforming compared to its own recent history.
• The company's low cash position of $1,737 is a significant concern and is likely below the average for companies in the sector, especially those with similar operating expenses.
• The material weakness in internal controls is also a significant concern and is not typical for publicly traded companies.

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 company's 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 are negatively impacted by the decreased revenue, increased net loss, and material weakness in internal controls.
• Employees may be impacted by the company's financial instability and potential need for cost-cutting measures.
• Customers may be concerned about the company's ability to fulfill orders and provide ongoing support.
• Suppliers may be concerned about the company's ability to pay its debts.

Next Steps

• The company needs to secure additional financing to continue operations.
• The company needs to address the material weakness in internal control over financial reporting.
• The company needs to resolve the pending lawsuit with the previous supplier.

Key Dates

Keywords

cannabis, vaporizer, cartridge filling, capping machines, pre-roll filling, automation systems, financial results, revenue, net loss, internal controls, going concern