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CANA > SEC Filings for CANA > Form 10-Q on 20-May-2014All Recent SEC Filings

Show all filings for CANNABIS-RX INC.

Form 10-Q for CANNABIS-RX INC.


20-May-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements." These forward-looking statements generally are identified by the words "believes," "project," "expects," "anticipates," "estimates," "intends," "strategy," "plan," "may," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to:
changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Company Overview

We were incorporated on July 5, 2011 in the State of Delaware. We have accumulated an inventory of real property assets but has not generated revenues from our business operations. Our original business plan was to develop an "L-3" stretching apparatus to be used by gym enthusiasts for their exercise activities.

On July 3, 2013, we changed our name to Longview Real Estate, Inc. in connection with the pursuit of a new business plan. We are now engaged in the business of acquiring a portfolio of distressed properties in certain strategic areas at deep discounts, rehabilitating these properties and selling or leasing them for the quickest and highest return possible.

On January 30, 2014, we changed our name to Cannabis-Rx, Inc. Accordingly, in additional to acquiring and selling/leasing real estate assets, we have decided to expand our business and cater to the real estate needs of the regulated cannabis industry, in states and other locations where such business is licensed and permitted. In this niche market, we plan to purchase real estate assets and lease growing space and related facilities to licensed marijuana growers and dispensary owners for their operations.

We also intend to expand our business in the next twelve months to provide financing and consulting services to the cannabis industry in addition to our commercial real estate solutions. The extent of our pursuit into this new line of business is still under consideration, and we are considering services including regulatory compliance and license application. We believe there is a significant amount of business in this space and we have changed our name to better reflect our business direction.

We have raised $16,000,000 through the sale of unsecured promissory notes and we recently signed a secured drawdown agreement providing us access to an additional $14,000,000. We intend to deploy these funds into business operations that we believe best suited in the cannabis industry, as well as continue to pursue our real estate activities.

During 2013 and through March 31, 2014, we have acquired 37 properties for a total cost of $11,094,641. Six of the 37 properties have been rehabilitated and sold or are under contract for sale. Five of the 37 properties have been rehabilitated and are listed for sale. The remaining 26 properties are in the process of rehabilitation. As of March 31, 2014 we now own three classes of real estate: single family, multi-family and commercial, all of which are located in Florida, Illinois, California and Washington. Some of these properties are held by us and some are held in our wholly-owned subsidiary, Praetorian Capital, LLC, a Florida limited liability company formed on October 22, 2013.

Table of Contents

Results of Operations for the three months ended March 31, 2014 and 2013

Revenues

We generated sales of $853,500 for the three months ended March 31, 2014, our first quarter to post revenues. We achieved a gross profit of $91,167 for the three months ended March 31, 2014. We expect our revenues to climb in 2014 as we dispose of the properties that we have previously acquired.

Operating Expenses

Operating expenses decreased to $48,404 for the three months ended March 31, 2014 from $64,844 for the three months ended March 31, 2013. Our operating expenses for the three months ended March 31, 2014 consisted of management fees of $18,750, consulting fees of $11,500, professional fees of $8,294 and general and administrative expenses of $9,860. In comparison, our operating expenses for the three months ended March 31, 2013 consisted of professional fees in the amount of $22,310, management fees of $21,000, consulting fees of $12,080, travel expenses of $5,191 and general and administrative expenses of $4,263.

We anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to administrative and operating costs associated with our new cannabis related activities, the acquisition, renovation and sale of residential properties and the professional fees associated with our reporting obligations under the Securities Exchange Act of 1934.

Interest Expenses

Interest expenses increased to $158,959 for the three months ended March 31, 2014 from $3,674 for the three months ended March 31, 2013. The increase is attributable to the increase in long-term promissory notes.

Net Loss

We incurred a net loss of $116,196 for the three months ended March 31, 2014, compared to a net loss of $68,518 for the three months ended March 31, 2013. We have experienced an accumulated net loss of $484,937 from our inception to March 31, 2014.

Liquidity and Capital Resources

As of March 31, 2014, we had total current assets of $16,060,230, consisting of cash, a receivable from Berkshire Homes, Inc. and our real property inventory. We had current liabilities of $8,617,810 as of March 31, 2014. Accordingly, we had working capital of $7,442,420 as of March 31, 2014.

Operating activities used $6,485,837 in cash for the three months ended March 31, 2014, as compared with $86,011used for the three months ended March 31, 2013. Our negative operating cash flow for March 31, 2014 was mainly a result of the increase in our real property inventory along with our net loss for the period.

Financing activities for the three months ended March 31, 2014 generated $8,002,000 in cash, as compared with cash flows provided by financing activities of $150,000 for the three months ended March 31, 2013. Our positive cash flow from financing activities for the three months ended March 31, 2014 was the result of proceeds from the issuance of promissory notes.

We have raised $16,000,000 through the sale of unsecured promissory notes and we recently signed a secured drawdown agreement providing us access to an additional $14,000,000. We intend to deploy these funds into business operations that we believe best suited in the cannabis industry, as well as continue to pursue our real estate activities.

We have enough available capital to operate our business for the next 12 months.

Table of Contents

Going Concern

The accompanying financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. We have incurred losses since inception resulting in an accumulated deficit of $484,937 as of March 31, 2014 and further losses are anticipated in the development of our business raising substantial doubt about our ability to continue as a going concern. The ability to continue as a going concern is dependent upon generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management anticipates financing operating costs over the next twelve months with loans and/or private placement of common stock. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most "critical accounting polices" in the Management Discussion and Analysis. The SEC indicated that a "critical accounting policy" is one which is both important to the portrayal of a company's financial condition and results, and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We do not believe that any accounting policies currently fit this definition.

Recently Issued Accounting Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

Off Balance Sheet Arrangements

As of March 31, 2014, there were no off balance sheet arrangements.

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