| SEGMENT INFORMATION |
The Company
operates in two distinct business segments: a consumer product segment in manufacturing, marketing and selling plant-based CBD
products to a range of market sectors; and, a specialty pharmaceutical segment focused on developing and commercializing novel
therapeutics utilizing synthetic CBD. The Company’s segments maintain separate financial information for which operating
results are evaluated on a regular basis by the Company’s senior management in deciding how to allocate resources and in
assessing performance. The Company evaluates its consumer product segment based on net product sales, gross profit and operating
income or loss. The Company currently evaluates its specialty pharmaceutical segment based on the progress of its clinical development
programs.
The following
table presents information by reportable operating segment for the three and nine months ended September 30, 2018 and 2017:
| |
|
Consumer
Products Segment |
|
|
Specialty
Pharmaceutical Segment |
|
|
Consolidated
Totals |
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
| Product sales, net |
|
$ |
13,600,881 |
|
|
$ |
– |
|
|
$ |
13,600,881 |
|
| Gross profit |
|
|
9,945,423 |
|
|
|
– |
|
|
|
9,945,423 |
|
| Selling, general and administrative expense |
|
|
(5,869,762 |
) |
|
|
(20,570 |
) |
|
|
(5,890,332 |
) |
| Research and development
expense |
|
|
(170,466 |
) |
|
|
(359,096 |
) |
|
|
(529,562 |
) |
| Operating income (loss) |
|
$ |
3,905,195 |
|
|
$ |
(379,666 |
) |
|
$ |
3,525,529 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
| Product sales, net |
|
$ |
5,591,210 |
|
|
$ |
– |
|
|
$ |
5,591,210 |
|
| Gross profit |
|
|
3,997,649 |
|
|
|
– |
|
|
|
3,997,649 |
|
| Gain on change in derivative liabilities |
|
|
10,987 |
|
|
|
– |
|
|
|
10,987 |
|
| Selling, general and administrative expense |
|
|
(4,259,725 |
) |
|
|
(51,353 |
) |
|
|
(4,311,078 |
) |
| Research and development
expense |
|
|
(76,520 |
) |
|
|
(102,818 |
) |
|
|
(179,338 |
) |
| Operating loss |
|
$ |
(327,609 |
) |
|
$ |
(154,171 |
) |
|
$ |
(481,780 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
| Product sales, net |
|
$ |
34,020,341 |
|
|
$ |
– |
|
|
$ |
34,020,341 |
|
| Gross profit |
|
|
24,567,402 |
|
|
|
– |
|
|
|
24,567,402 |
|
| Selling, general and administrative expense |
|
|
(15,914,882 |
) |
|
|
(35,647 |
) |
|
|
(15,951,529 |
) |
| Research and development
expense |
|
|
(362,933 |
) |
|
|
(762,337 |
) |
|
|
(1,125,270 |
) |
| Operating income (loss) |
|
$ |
8,289,587 |
|
|
$ |
(797,984 |
) |
|
$ |
7,490,603 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
| Product sales, net |
|
$ |
13,437,233 |
|
|
$ |
– |
|
|
$ |
13,437,233 |
|
| Gross profit |
|
|
9,275,111 |
|
|
|
– |
|
|
|
9,275,111 |
|
| Gain on change in derivative liabilities |
|
|
248,875 |
|
|
|
– |
|
|
|
248,875 |
|
| Royalty buy-out |
|
|
– |
|
|
|
(2,432,000 |
) |
|
|
(2,432,000 |
) |
| Selling, general and administrative expense |
|
|
(11,312,687 |
) |
|
|
(200,873 |
) |
|
|
(11,513,560 |
) |
| Research and development
expense |
|
|
(181,509 |
) |
|
|
(392,192 |
) |
|
|
(573,701 |
) |
| Operating loss |
|
$ |
(1,970,210 |
) |
|
$ |
(3,025,065 |
) |
|
$ |
(4,995,275 |
) |
|