PotNetwork Holdings, Inc. (OTC PINK:POTN) filed its 2019 Annual Report and reported that its revenues fell 41% to $15 million versus $25.5 million in 2018. The company attributed the drop in revenue to “distribution contraction as a result of the FDA Warning Letter, along with the paring and streamlining of the product lines in mid-2019.”
The company received an FDA warning letter from the U.S. Food and Drug Administration on March 28, 2019, related to the marketing of CBD products by Diamond CBD, a subsidiary of the company. Diamond CBD removed all claims from the website that were referenced in the Warning Letter. Specifically, claims that included references to clinical studies on CBD demonstrating health benefits for patients with certain diseases, including Alzheimer’s and diabetes. Based on those claims, the FDA considered the products to be unapproved new drugs in violation of the FDCA.
The net loss for 2019 was $(3,367,831) versus 2018’s net profit of $242,634 and was attributable to the decrease in gross profit. The gross profit from the sale of all products in 2019 was $4,816,604, a drop of 46% from 2018’s $8,959,433.
Operating expenses for the nine-month period ended September 30, 2019, compared to September 30, 2018, decreased to $5,736,099 as compared to $7,325,012, a decrease of 21.7% attributable to a decrease in sales and marketing expense from $6,615,125 in the first nine months of 2018 to $5,108,343 during the same period in 2019. Total expenses for the year ended December 31, 2019, were $8,184,434 with interest expense being $334,139 compared to $8,716,799 with interest expense of $10,560 for the comparable period of 2018.
Kevin Hagen, President, CEO said, “We are pleased to announce that the Company has now filed its 2019 Annual Report with the SEC, reporting sales for calendar 2019 in excess of $15,000,000. This filing will be followed within the next few weeks by the filing of our 2020 First Quarterly Report, and shortly thereafter, we will file our 2020 Second Quarterly Report for the period ended June 30th, so that the Company will then be current with its filings with the SEC.” He added, “Sales for the first half of 2020 have remained strong despite the global COVID-19 business interruptions, and we anticipate a strong revenue finish for the year.”