As a smaller reporting company, we are not required to provide the information required by this item.
We use GAAP financial measures in the section of this annual report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All of the GAAP financial measures used by us in this report relate to the inclusion of financial information.
We had revenue of $169,940 for the year ended December 31, 2018. Comparatively, we had revenue of $204,303 for the year ended December 31, 2017.
Costs of sales was $89,881 for the year ended December 31, 2018 or 53% of revenues. The cost of sales was $107,199, or 53% of revenues for the year ended December 31, 2017. Cost of sales includes the costs directly attributable to revenue recognition, such as equipment costs, purchased costs, and payments to vendors.
We had operating expenses of $1,194,150 for the year ended December 31, 2018 compared to operating expenses of $4,228,850 during the year ended December 31, 2017. The significant decrease resulted primarily from a decrease in professional fees from $3,179,336 in 2017 to $467,410 in 2018. In 2017, the Company issued 100 Series A preferred shares of stock for services relating to The Exchange of Stock between the Company and GHM totaling $2,811,782.
The Company’s revenue is primarily derived from the sale of coffee, tea and accessories. Sales are recorded once an order has been received from the customer (contract), the price is determined and allocated, the goods sold passes to customers, based on shipping terms, which generally occurs when the product is shipped to the customer and collectability is reasonably assured. Sales are presented net of discounts and allowances. Discounts and allowances are determined when a sale is negotiated. The Company does not grant price adjustments after a sale is complete.
The Company’s current cash on hand is not sufficient to meet our working capital requirements for the next twelve-month period. We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) increased production; (ii) advertisement expenses; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and potentially debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or debt securities could potentially result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock.
The Report of Independent Registered Public Accounting Firm issued by MaloneBailey, LLP for the audited financial statements for year ended December 31, 2018 are included herein immediately preceding the audited financial statements.