PotNetwork Holdings, Inc. (POTN) CEO, Kevin Hagen, Issues Mid-Year Letter to Shareholders

PotNetwork Holdings, Inc. (OTC Pink: POTN) (“the Company”) released today an open “Letter to Shareholders” from its President and Chief Executive Officer, Kevin Hagen, providing an update on results and events year-to-date. The letter follows:

Dear Shareholders,
Following my last letter detailing the various successes of the Company, I am writing to provide you with a further update on 2019.

POTN: A Fully Reporting SEC Company 
We are delighted to report that we are now a fully reporting SEC company. This accomplishment means that our business has been fully audited for two full years, 2017 and 2018, and will be fully audited each year-end hereafter and have its financial statements reviewed quarterly by a PCAOB auditor. All our various public SEC filings are now, and will be, easily accessible anytime on the SEC’s Edgar website under “PotNetwork Holdings, Inc.”

Having achieved this new status, we will now complete our application to OTC markets to uplist to the OTCQB market tier for the benefit of our shareholders and Company alike. This move is more than symbolic, as it requires broader expansion of our board of directors and the fulfilling of additional beneficial requirements mandated in the public interest that accompany the uplisting. All of which we are ready to embrace as we work to continue to expand and grow the Company.

2019 Business Results Year-to-Date
It is no secret that the Company’s business results are concentrated in, and essentially reflect, those of our Diamond CBD subsidiary, which remains the Company’s primary source of revenue as our media division, the publisher of our informational website, PotNetwork.com and the PotNetwork Magazine, implement and develop their revenue models.

With regard to our CBD business during the first quarter, our management team became increasingly aware of new competition as acceptance and consumer demand for CBD products has grown. As a result of the increased competition, we experienced an increase in wholesale price pressure on popular products. To meet the challenge, our sales team became more aggressive in its pricing to distribution resulting in reduced margins.

Separately, ever on the cutting edge of innovation in our industry, we find ourselves frequently in the role of innovators and pioneers in the use of CBD in consumer products sold into traditional markets. Sometimes this means that we are figuratively too far ahead of the curve. For example, since March, in response to governmental concerns about the safety of CBD in general as an additive to common consumables, we have decreased our sales focus on certain CBD-containing edibles, thereby truncating their initial sales growth on which we had depended for short term incremental growth.

To help offset the economic impact of all these developments, throughout this year we increased our vigilance in the management of our general cost structure, and our costs paid to our supply chain. As a result, from April to June, we reduced total operating expenses to be in line with our projected gross profit for the period, such that percentagewise our net profit before tax and accrued interest would be essentially unchanged year-over-year.

When the period ended, revenues from January through June 30, 2019, were $10,528,121 versus $12,044,028 for a year ago. A difference of 12.6%, with a net profit (before tax and interest expense) of $284,161 versus $324,556 in 2018, a slight decline of 12.5%.

Additionally, in October 2018, to expand our Diamond CBD business we embarked on the first of two financing agreements with an unaffiliated lender capable of providing us with the funds needed (beyond our usual cashflow) to sustain our competitive advantage and grow our business significantly. The agreements are at reasonable commercial interest rates, and mature long term, providing the Company with the option of retiring the debt for cash or shares of its stock over time. Of course, any such financing carries with it the monthly burden of the cost of the interest which is charged on the P&L. Yet, no actual interest payments are required to be remitted; rather interest accrues, unpaid, until maturity. Importantly, such a structure means these agreements do not create immediate payables that would negatively affect our monthly cashflow. Perhaps needless to say, financing is essential to any growing business and especially so for one in a rapidly growing market, because without it, the upside growth potential is limited to the reinvestment of profits earned.