| 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 years ended December 31, 2017 and 2016:
| |
|
Consumer
Products Segment |
|
|
Specialty
Pharmaceutical Segment |
|
|
Consolidated
Totals |
|
| Years Ended |
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
| Product sales,
net |
|
$ |
20,679,239 |
|
|
$ |
– |
|
|
$ |
20,679,239 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
$ |
14,488,664 |
|
|
$ |
– |
|
|
$ |
14,488,664 |
|
| Loss on extinguishment of debt |
|
|
(188,822 |
) |
|
|
– |
|
|
|
(188,822 |
) |
| Gain on change in derivative liability |
|
|
248,875 |
|
|
|
– |
|
|
|
248,875 |
|
| Royalty buy-out |
|
|
(2,432,000 |
) |
|
|
– |
|
|
|
(2,432,000 |
) |
| Selling, general and administrative |
|
|
(16,016,615 |
) |
|
|
(235,761 |
) |
|
|
(16,252,376 |
) |
| Research and development |
|
|
(251,134 |
) |
|
|
(473,195 |
) |
|
|
(724,329 |
) |
| Operating loss |
|
$ |
(4,151,032 |
) |
|
$ |
(708,956 |
) |
|
$ |
(4,859,988 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
| Product sales, net |
|
$ |
11,060,636 |
|
|
$ |
– |
|
|
$ |
11,060,636 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
$ |
6,997,635 |
|
|
$ |
– |
|
|
$ |
6,997,635 |
|
| Gain on collection of related party notes receivable |
|
|
379,486 |
|
|
|
– |
|
|
|
379,486 |
|
| Gain on change of derivative liability |
|
|
147,200 |
|
|
|
– |
|
|
|
147,200 |
|
| Impairment of inventory |
|
|
(3,562,459 |
) |
|
|
– |
|
|
|
(3,562,459 |
) |
| Impairment of PhytoSPHERE goodwill and intangible
assets |
|
|
(2,746,512 |
) |
|
|
– |
|
|
|
(2,746,512 |
) |
| Selling, general and administrative |
|
|
(12,741,211 |
) |
|
|
(388,739 |
) |
|
|
(13,129,950 |
) |
| Research and development |
|
|
(834,963 |
) |
|
|
(324,046 |
) |
|
|
(1,159,009 |
) |
| Operating loss |
|
$ |
(12,360,824 |
) |
|
$ |
(712,785 |
) |
|
$ |
(13,073,609 |
) |
|