UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

———————

FORM 10-Q

———————

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended: September 30, 2022

or

 

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from: _____________ to _____________

 

Commission File Number: 000-53571

 

 

Cannabis Sativa, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

20-1898270

(State or Other Jurisdiction

 

(I.R.S. Employer

of Incorporation)

 

Identification No.)

 

450 Hillside Dr. #A224, Mesquite, Nevada 89027

(Address of Principal Executive Office) (Zip Code)

 

(702) 762-3123

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address, and former fiscal year, if changed since last report)

———————

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered.

None

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated Filer

☐

Smaller reporting company

☒

Emerging growth company

☒

 

 

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

 

The number of shares of the issuer’s Common Stock outstanding as of November 11, 2022, is 44,870,655.

 

 

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

CANNABIS SATIVA, INC.

 

Contents

  

 

 

Page

 

FINANCIAL STATEMENTS (Unaudited)  – for the three and nine months ended September 30, 2022 and 2021:

 

 

 

 

 

 

 

Condensed consolidated balance sheets

 

FS - 2

 

 

 

 

 

Condensed consolidated statements of operations     

 

FS - 3

 

 

 

 

 

Condensed consolidated statements of changes in stockholders’ equity

 

FS - 4

 

 

 

 

 

Condensed consolidated statements of cash flows

 

FS - 5

 

 

 

 

 

Notes to condensed consolidated financial statements

 

FS – 6 through FS – 13

 

 

 
FS - 1

Table of Contents

 

CANNABIS SATIVA, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$214,530

 

 

$194,060

 

Investment in equity securities, at fair value

 

 

613,477

 

 

 

208,540

 

 

 

 

 

 

 

 

 

 

Total Current Assets

 

 

828,007

 

 

 

402,600

 

 

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

 

 

Right of use asset

 

 

43,485

 

 

 

—

 

Property and equipment, net

 

 

2,777

 

 

 

1,974

 

Intangible assets, net

 

 

196,864

 

 

 

320,806

 

Goodwill

 

 

1,837,202

 

 

 

1,837,202

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$2,908,335

 

 

$2,562,582

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$142,052

 

 

$95,031

 

Operating lease liability, current

 

 

28,263

 

 

 

—

 

Accrued interest - related parties

 

 

16,324

 

 

 

204,613

 

Convertible note payable

 

 

104,250

 

 

 

—

 

Notes payable to related parties

 

 

87,540

 

 

 

1,218,038

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

 

378,429

 

 

 

1,517,682

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

Operating lease liability, long term

 

 

15,222

 

 

 

—

 

Stock payable

 

 

206,946

 

 

 

—

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

600,597

 

 

 

1,517,682

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Notes 6 and 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock $0.001 par value; 5,000,000 shares authorized;

 

 

 

 

 

 

 

 

 695,708 and 777,654 issued and outstanding, respectively

 

 

696

 

 

 

778

 

Common stock $0.001 par value; 495,000,000 shares authorized;

 

 

 

 

 

 

 

 

 44,870,655 and 30,746,865 shares issued and outstanding, respectively

 

 

44,871

 

 

 

30,748

 

Additional paid-in capital

 

 

80,905,557

 

 

 

79,151,240

 

Accumulated deficit

 

 

(79,984,982)

 

 

(79,475,968)

 

 

 

 

 

 

 

 

 

Total Cannabis Sativa, Inc. Stockholders’ Equity (Deficit)

 

 

966,142

 

 

 

(293,202)

 

 

 

 

 

 

 

 

 

Non-Controlling Interests

 

 

1,341,596

 

 

 

1,338,102

 

 

 

 

 

 

 

 

 

 

Total Stockholders’ Equity

 

 

2,307,738

 

 

 

1,044,900

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

 

$2,908,335

 

 

$2,562,582

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
FS - 2

Table of Contents

 

CANNABIS SATIVA, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$383,079

 

 

$463,040

 

 

$1,262,868

 

 

$1,452,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenues

 

 

149,943

 

 

 

174,814

 

 

 

479,173

 

 

 

553,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

233,136

 

 

 

288,226

 

 

 

783,695

 

 

 

899,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

208,515

 

 

 

132,315

 

 

 

419,923

 

 

 

453,236

 

Depreciation and amortization

 

 

39,440

 

 

 

42,700

 

 

 

124,147

 

 

 

128,463

 

Wages and salaries

 

 

188,622

 

 

 

179,136

 

 

 

559,533

 

 

 

516,534

 

Advertising

 

 

1,599

 

 

 

47,044

 

 

 

33,128

 

 

 

280,475

 

General and administrative

 

 

177,658

 

 

 

259,451

 

 

 

534,022

 

 

 

855,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

 

615,834

 

 

 

660,646

 

 

 

1,670,753

 

 

 

2,234,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

 

(382,698)

 

 

(372,420)

 

 

(887,058)

 

 

(1,335,302)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Income) and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (gain) loss on investment

 

 

(300,295)

 

 

758,340

 

 

 

(404,937)

 

 

532,855

 

(Gain) loss on sale of investment securities

 

 

—

 

 

 

237

 

 

 

—

 

 

 

(8,793)

Interest expense

 

 

4,228

 

 

 

17,854

 

 

 

23,399

 

 

 

49,884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Other (Income) Expenses, Net

 

 

(296,067)

 

 

776,431

 

 

 

(381,538)

 

 

573,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss Before Income Taxes

 

 

(86,631)

 

 

(1,148,851)

 

 

(505,520)

 

 

(1,909,248)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Taxes

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss From Continuing Operations

 

 

(86,631)

 

 

(1,148,851)

 

 

(505,520)

 

 

(1,909,248)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) from Discontinued Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss on discontinued operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(234,205)

Gain on sale of subsidiaries

 

 

—

 

 

 

—

 

 

 

—

 

 

 

164,736

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) from Discontinued Operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(69,469)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(86,631)

 

 

(1,148,851)

 

 

(505,520)

 

 

(1,978,717)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss attributable to non-controlling interest - GK Manufacturing

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(114,467)

Loss attributable to non-controlling interest - iBudTender

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,614)

Income (loss) attributable to non-controlling interest - PrestoCorp

 

 

(19,073)

 

 

2,721

 

 

 

3,494

 

 

 

169,434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss for the Period Attributable To Cannabis Sativa, Inc.

 

$(67,558)

 

$(1,151,572)

 

$(509,014)

 

$(2,032,070)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss for the Period per Common Share: Basic & Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From continuing operations

 

$(0.00)

 

$(0.04)

 

$(0.01)

 

$(0.07)

From discontinued operations

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

Total

 

$(0.00)

 

$(0.04)

 

$(0.01)

 

$(0.07)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic & Diluted

 

 

44,787,896

 

 

 

29,685,756

 

 

 

35,674,130

 

 

 

28,880,938

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
FS - 3

Table of Contents

 

CANNABIS SATIVA, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 and 2021- UNAUDITED

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional Paid-In

 

 

Accumulated

 

 

Non-controlling Interest -

 

 

Non-

controlling

Interest -

 

 

Non-controlling Interest - GK

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Prestocorp

 

 

iBudTender

 

 

Manufacturing

 

 

Total

 

Balance - July 1, 2021

 

 

926,957

 

 

$927

 

 

 

29,110,789

 

 

$29,112

 

 

$78,549,797

 

 

$(77,908,837)

 

$1,360,511

 

 

$—

 

 

$—

 

 

$2,031,510

 

Conversion of Preferred to Common

 

 

(180,094)

 

 

(180)

 

 

180,094

 

 

 

180

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Shares issued for services

 

 

78,126

 

 

 

78

 

 

 

570,029

 

 

 

569

 

 

 

310,466

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

311,113

 

Net loss for the period

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,151,572)

 

 

2,721

 

 

 

—

 

 

 

—

 

 

 

(1,148,851)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - September 30, 2021

 

 

824,989

 

 

$825

 

 

 

29,860,912

 

 

$29,861

 

 

$78,860,263

 

 

$(79,060,409)

 

$1,363,232

 

 

$—

 

 

$—

 

 

$1,193,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - July 1, 2022

 

 

815,884

 

 

$816

 

 

 

44,750,479

 

 

$44,751

 

 

$80,905,557

 

 

$(79,917,424)

 

$1,360,669

 

 

$—

 

 

$—

 

 

$2,394,369

 

Conversion of preferred to common (1:1)

 

 

(120,176)

 

 

(120)

 

 

120,176

 

 

 

120

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Net income (loss) for the period

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(67,558)

 

 

(19,073)

 

 

—

 

 

 

—

 

 

 

(86,631)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - September 30, 2022

 

 

695,708

 

 

$696

 

 

 

44,870,655

 

 

$44,871

 

 

$80,905,557

 

 

$(79,984,982)

 

$1,341,596

 

 

$—

 

 

$—

 

 

$2,307,738

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - January 1, 2021

 

 

1,090,128

 

 

$1,090

 

 

 

27,453,178

 

 

$27,455

 

 

$77,660,014

 

 

$(77,028,339)

 

$1,193,798

 

 

$47,264

 

 

$(263,067)

 

$1,638,215

 

Conversion of preferred to common

 

 

(468,166)

 

 

(468)

 

 

468,166

 

 

 

468

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Cash proceeds from sale of stock

 

 

—

 

 

 

—

 

 

 

10,466

 

 

 

10

 

 

 

4,990

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,000

 

Shares issued for services

 

 

203,027

 

 

 

203

 

 

 

1,984,658

 

 

 

1,984

 

 

 

1,215,203

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,217,390

 

Cancellation of shares issued for services

 

 

—

 

 

 

—

 

 

 

(55,556)

 

 

(56)

 

 

(19,944)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(20,000)

Sale of non controlling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(45,650)

 

 

377,534

 

 

 

331,884

 

Net income (loss) for the period

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,032,070)

 

 

169,434

 

 

 

(1,614)

 

 

(114,467)

 

 

(1,978,717)

Balance - September 30, 2021

 

 

824,989

 

 

$825

 

 

$29,860,912

 

 

$29,861

 

 

$78,860,263

 

 

$(79,060,409)

 

$1,363,232

 

 

$—

 

 

$—

 

 

$1,193,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - January 1, 2022

 

 

777,654

 

 

$778

 

 

 

30,746,865

 

 

$30,748

 

 

$79,151,240

 

 

$(79,475,968)

 

$1,338,102

 

 

$—

 

 

$—

 

 

$1,044,900

 

Conversion of preferred to common (1:1)

 

 

(252,056)

 

 

(252)

 

 

252,056

 

 

 

252

 

 

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Conversion of preferred to common (19:1)

 

 

(288,223)

 

 

(288)

 

 

5,476,237

 

 

 

5,476

 

 

 

(5,188)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Shares issued for services

 

 

458,333

 

 

 

458

 

 

 

1,306,242

 

 

 

1,306

 

 

 

348,743

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

350,507

 

Shares issued in consideration of notes and accrued interest payable

 

 

—

 

 

 

—

 

 

 

7,089,255

 

 

 

7,089

 

 

 

1,410,762

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,417,851

 

Net income (loss) for the period

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(509,014)

 

 

3,494

 

 

 

—

 

 

 

—

 

 

 

(505,520)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - September 30, 2022

 

 

695,708

 

 

$696

 

 

 

44,870,655

 

 

$44,871

 

 

$80,905,557

 

 

$(79,984,982)

 

$1,341,596

 

 

$—

 

 

$—

 

 

$2,307,738

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
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Table of Contents

 

CANNABIS SATIVA, INC.

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

 

For the nine months ended September 30,

 

2022

 

 

2021

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss for the period

 

$(505,520)

 

$(1,978,717)

Adjustments to reconcile net loss for the period to net cash used in operating activities:

 

 

 

 

 

 

 

 

Unrealized (gain) loss on investment

 

 

(404,937)

 

 

532,855

 

Gain on sale of investment securities

 

 

—

 

 

 

(8,793)

Gain on sale of subsidiaries

 

 

—

 

 

 

(164,736)

Depreciation and amortization

 

 

124,147

 

 

 

145,415

 

Stock issued for services

 

 

350,507

 

 

 

1,197,390

 

Stock payable for services

 

 

206,946

 

 

 

—

 

Note payable issued for services

 

 

45,000

 

 

 

—

 

Write off of abandoned equipment

 

 

583

 

 

 

—

 

Changes in Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

—

 

 

 

(6,447)

Inventories

 

 

—

 

 

 

27,499

 

Prepaid consulting and other current assets

 

 

—

 

 

 

(4,933)

Accounts payable and accrued expenses

 

 

47,020

 

 

 

32,927

 

Accrued interest - related parties

 

 

15,524

 

 

 

45,350

 

Customer deposits

 

 

—

 

 

 

1,341

 

Net Cash Used in Operating Activities

 

 

(120,730)

 

 

(180,849)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Cash purchase of equipment

 

 

(1,590)

 

 

—

 

Cash transferred on sale of non-controlling interest

 

 

—

 

 

 

(21,321)

Proceeds from sale of subsidiaries

 

 

—

 

 

 

44,017

 

Net Cash Provided by (Used in) Investing Activities

 

 

(1,590)

 

 

22,696

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from sale of stock

 

 

—

 

 

 

5,000

 

Proceeds from advances from related parties

 

 

—

 

 

 

48,083

 

Proceeds from related parties notes payable, net

 

 

38,540

 

 

 

48,000

 

Proceeds from convertible note payable

 

 

104,250

 

 

 

—

 

Net Cash Provided by Financing Activities

 

 

142,790

 

 

 

101,083

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

20,470

 

 

 

(57,070)

 

 

 

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

 

 

194,060

 

 

 

322,107

 

 

 

 

 

 

 

 

 

 

CASH AT END OF PERIOD

 

$214,530

 

 

$265,037

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Non Cash Activities:

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Shares issued in consideration of notes and interest payable

 

$1,417,851

 

 

$—

 

Operating lease liability from acquiring right to use asset

 

$56,595

 

 

$—

 

Sale of Minority Interests Stock Received

 

$—

 

 

$600,000

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
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Table of Contents

 

CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

 

1. Organization and Summary of Significant Accounting Policies

 

Nature of Business:

 

Cannabis Sativa, Inc. (the “Company,” “us”, “we” or “our”) was incorporated as Ultra Sun Corp. under the laws of Nevada in November 2004. On November 13, 2013, we changed our name to Cannabis Sativa, Inc. We operate through several subsidiaries including:

 

 

·

PrestoCorp, Inc. (“PrestoCorp”)

 

·

Wild Earth Naturals, Inc. (“Wild Earth”)

 

·

Kubby Patent and Licenses Limited Liability Company (“KPAL”)

 

·

Hi Brands, International, Inc. (“Hi Brands”)

 

·

Eden Holdings LLC (“Eden”).

 

·

iBudtender, Inc. (“iBud”) – through April 2021

 

·

GK Manufacturing and Packaging, Inc. (“GKMP”) - through April 2021

 

PrestoCorp is a 51% owned subsidiary and until April 22, 2021, GKMP and iBud were 51% and 50.1% owned subsidiaries. Wild Earth, KPAL, Hi Brands, and Eden are wholly owned subsidiaries. At December 31, 2021, PrestoCorp is the sole operating subsidiary. Until sale of the Company’s interest in April 2021, GKMP and iBud tender were operating subsidiaries although iBud was not generating any revenue.

 

Our primary operations for the years ended December 31, 2021 and through September 30, 2022 were through PrestoCorp, which provides telemedicine online referral services for customers desiring medical marijuana cards in states where medical marijuana has been legalized. The Company is actively seeking new business opportunities for acquisition and is continually reviewing opportunities for product and brand development through our Wild Earth, Hi Brands, and KPAL subsidiaries.

 

Basis of Presentation

 

Operating results for the three and nine months ended September 30, 2022 may not be indicative of the results expected for the full year ending December 31, 2022. For further information, refer to the financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

The interim financial statements should be read in conjunction with audited financial statements and related footnotes set forth in our annual report filed on Form 10-K for the year ended December 31, 2021, as filed with the United States Securities and Exchange Commission on April 14, 2022.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of September 30, 2022, and its results of operations, cash flows, and changes in stockholders’ equity for the three and nine months ended September 30, 2022. The financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States (‘GAAP”) for complete financial statements.

 

Principles of Consolidation:

 

The condensed consolidated financial statements include the accounts of Cannabis Sativa, Inc. (the “Company” or “CBDS”), and its wholly-owned subsidiaries and PrestoCorp, a 51% owned subsidiary. On April 22, 2021, we sold our interests in two companies in which the Company had majority control, iBud and GKMP. These condensed consolidated financial statements include operations of iBud and GKMP through April 22, 2021. All significant inter-company balances have been eliminated in consolidation.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

 

Going Concern:

 

The Company has an accumulated deficit of $79,984,982 at September 30, 2022, which, among other factors, raises substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they are due.

 

Use of Estimates:

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates and assumptions by management affect the allowance for doubtful accounts, the carrying value of long-lived assets (including goodwill and intangible assets), the provision for income taxes and related deferred tax accounts, certain accrued liabilities, revenue recognition, contingencies, and the value attributed to stock-based awards.

 

Net Loss per Share:

 

Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period and contains no dilutive securities. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the Company. Potentially dilutive shares are excluded from the calculation of diluted net loss per share because the effect is anti-dilutive. For the three and nine months ended September 30, 2022 and 2021, the Company had 175,000 and 175,000 outstanding warrants, respectively, and 695,708 and 824,989 shares of convertible preferred stock, respectively, that would be dilutive to future periods net income if converted.

 

Recent Accounting Pronouncement:

 

Accounting Standards Updates Adopted

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and with early adoption permitted. Early adoption of this update had no impact on the Company’s consolidated financial statements.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

 

2. Intangibles and Goodwill

 

The Company considers all intangibles to be definite-lived assets with lives of 5 to 10 years. Intangibles consisted of the following at September 30, 2022 and December 31, 2021:

 

 

 

September 30,

 

 

December 31,

 

 

2022

 

2021

 

CBDS.com website (Cannabis Sativa)

 

$13,999

 

 

$13,999

 

Intellectual Property Rights (PrestoCorp)

 

 

240,000

 

 

 

240,000

 

Patents and Trademarks (KPAL)

 

 

1,281,411

 

 

 

1,281,411

 

Total Intangibles

 

 

1,535,410

 

 

 

1,535,410

 

Less: Accumulated Amortization

 

 

(1,338,546)

 

 

(1,214,604)

Net Intangible Assets

 

$196,864

 

 

$320,806

 

 

Amortization expense for each of the three and nine months ended September 30, 2022 and 2021 were $39,372 (2021: $42,285) and $123,942 (2021: $126,855), respectively.

 

Amortization of intangibles through 2027 is:

 

October 1, 2022 to September 30, 2023

 

$151,686

 

October 1, 2023 to September 30, 2024

 

 

40,742

 

October 1, 2024 to September 30, 2025

 

 

932

 

October 1, 2025 to September 30, 2026

 

 

932

 

October 1, 2026 to September 30, 2027

 

 

932

 

 

Goodwill in the amount of $3,010,202 was recorded as part of the acquisition of PrestoCorp that occurred on August 1, 2017. Cumulative impairment of the PrestoCorp goodwill totals $1,173,000 as of September 30, 2022 and December 31, 2021. The balance of goodwill at September 30, 2022 and December 31, 2021 was $1,837,202.

 

3. Sale of Majority Owned Subsidiaries and Discontinued Operations

 

On April 22, 2021, the Company sold its majority interests in GKMP (51%) and iBud (50.1%) to THC Farmaceuticals, Inc. (“CBDG”). In consideration of the transaction, the Company received 1,500,000 shares of CBDG common stock and 1,500,000 shares of CBDG preferred stock. The Company’s Chief Executive Officer and Chairman of the Board, David Tobias is a Director of CBDG. Shares of CBDG common stock are traded on the OTC Pink Sheets Market.

 

The sale of the Company’s majority interests was undertaken to allow the Company to focus on its other operating subsidiary, PrestoCorp, to focus on capital formation for expansion of PrestoCorp, and to pursue other opportunities. At the time of the sale, iBud was inactive and GKMP had not yet achieved positive cash flow from operations.

 

On the closing date of the sale, CBDG common shares closed at $0.20 per share, for a fair value of $300,000. The CBDG preferred stock received is convertible into CBDG common stock on a one for one basis and has no other rights or preferences that distinguish it from the common stock and are convertible at any time by the Company. Management determined that the shares of preferred stock received are equivalent to CBDG’s common stock and valued the preferred shares at the same rate. In the aggregate, the total shares of CBDG stock received were valued at $600,000 on the date of the sale.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

 

During the nine months ended September 30, 2021, the Company recognized a gain on sale of subsidiaries of $164,470 which represented the value of the consideration received consisting of the value of CBDG’s shares plus the carrying value of the subsidiaries’ non-controlling interest reduced by the net asset of each subsidiary:

 

Consideration received:

 

 

 

Common stock of CBDG, fair value

 

$300,000

 

Preferred stock of CBDG, fair value

 

 

300,000

 

Total consideration

 

 

600,000

 

 

 

 

 

 

Non-controlling interests

 

 

(331,884 )

 

 

 

 

 

Net assets of subsidiaries on date of disposition:

 

 

 

 

GKMP

 

 

112,350

 

iBud

 

 

(8,970 )

Net assets

 

 

103,380

 

Gain on sale of subsidiaries

 

$164,736

 

 

As a result of the sale, the Company has discontinued its operations for both subsidiaries. Summaries of the discontinued operations of GKMP and iBud for the period January 1, 2021 to September 30, 2021 are provided below.

 

 

 

January 1 to

 

 

 

September 30,

 

Discontinued Operations

2021

 

REVENUE

 

 

75,866

 

Cost of revenues

 

 

91,316

 

Gross profit

 

 

(15,450)

EXPENSES

 

 

 

 

Depreciation and amortization

 

 

5,861

 

Wages and salaries

 

 

106,224

 

Advertising

 

 

1,693

 

General and administrative

 

 

102,833

 

Interest expense

 

 

2,144

 

Total expenses

 

 

218,755

 

NET LOSS FROM DISCONTINUED OPERATIONS

 

 

(234,205)

 

GKMP and iBud generated losses from operations during the periods they were operated by the Company. The sale of our interests in GKMP and iBud was to allow management to devote more resources to PrestoCorp. 

 

4. Related Party Transactions

 

In addition to items disclosed in Notes 3 and 7, the Company had additional related party transactions during the three and nine months ended September 30, 2022 and 2021.

 

The Company has received funds from borrowings on notes payable and advances from related parties and officers of the Company to cover operating expenses. Related parties include the officers and directors of the Company and a significant shareholder holding in excess of 10% of the Company’s outstanding shares.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

 

During the nine months ended September 30, 2022, David Tobias loaned $38,540 cash to the Company for notes payable bearing interest at the rate of 5% per annum due on December 31, 2022. In the nine months ended September 30, 2022, the Company and Cathy Carroll, director, entered into a note payable for $45,000 for compensation due her for services. Ms. Carroll’s note bears interest at 5% per annum and is due December 31, 2022.

 

During the three and nine months ended September 30, 2022 and 2021, the Company recorded interest expense related to notes payable to related parties at the rates between 5% and 8% per annum in the amounts of $4,228 (2021: $17,854) and $23,399 (2021: $49,884), respectively.

 

The following tables reflect the related party notes payable balances. 

 

 

 

Related party notes

 

 

Accrued interest

 

 

Total

 

 

 

September 30, 2022

 

David Tobias, CEO & Director

 

$38,540

 

 

$12,482

 

 

$51,022

 

New Compendium, greater than 10% Shareholder

 

 

-

 

 

 

1,906

 

 

 

1,906

 

Cathy Carroll, Director

 

 

45,000

 

 

 

986

 

 

 

45,986

 

Other Affiliates

 

 

4,000

 

 

 

950

 

 

 

4,950

 

Totals

 

$87,540

 

 

$16,324

 

 

$103,864

 

 

 

 

Related party notes

 

 

Accrued interest

 

 

Total

 

 

 

December 31, 2021

 

David Tobias, CEO & Director

 

$986,538

 

 

$169,057

 

 

$1,155,595

 

New Compendium, greater than 10% Shareholder

 

 

152,500

 

 

 

27,688

 

 

 

180,188

 

Cathy Carroll, Director

 

 

75,000

 

 

 

7,068

 

 

 

82,068

 

Other Affiliates

 

 

4,000

 

 

 

800

 

 

 

4,800

 

Totals

 

$1,218,038

 

 

$204,613

 

 

$1,422,651

 

 

During the nine months ended September 30, 2022, the Company issued 7,089,255 shares of common stock in settlement of $1,214,038 in related party notes payable and $203,813 in accrued interest attributable to these notes. The fair value of the shares issued approximated the carrying value of the notes and interest payable.

 

In the three and nine months ended September 30, 2022 and 2021, the Company incurred approximately $-0- (2021: $27,778) and $26,389 (2021: $83,334), respectively, for consulting services from a nephew of the Company’s president. The services for the three and nine months ended September 30, 2022 and 2021 were paid in shares of the Company’s common stock. These amounts are included in the statements of operations in general and administrative expenses.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

 

 

5. Investments

 

At September 30, 2022 and December 31, 2021, the Company owns 8,238,769 shares respectively, of common stock of Medical Cannabis Payment Solutions (ticker: REFG). At September 30, 2022 and December 31, 2021, the fair value of the investment in REFG was $16,477 and $25,540, respectively. The Company recognized a gain (loss) on the change in fair value of $3,295 (2021: ($71,940)) and ($9,063) (2021: ($83,155)) during the three and nine months ended September 30, 2022 and 2021, respectively.

 

In 2021, the Company received 1,500,000 shares of common stock and 1,500,000 shares of preferred stock of THC Pharmaceuticals Inc. (ticker: CBDG). The CBDG shares were received as consideration for the sale of the Company’s majority interest in iBud and GKMP in the year ended December 31, 2021. On the date of sale, the shares were valued at fair value which was $0.20 per share or 600,000 in the aggregate. See Note 4. The Company’s Chief Executive Officer and Chairman of the Board, David Tobias is a Director of CBDG.

 

The Company’s investment in CBDG represents 15% of CBDG’s voting shares on a fully diluted basis which, coupled with Mr. Tobias’ position as a director and his individual investment in CBDG, results in the Company having significant influence over CBDG. The Company elected to account for its investment in CBDG at fair value because the Company does not intend to hold the investment for a long period of time and the shares are readily marketable. The fair value of the Company’s investment at September 30, 2022 and December 31, 2021 was $597,000 and $183,000 resulting in a gain (loss) of $297,000 (2021: ($686,400)) and $414,000 (2021: ($213,000)) for the change in fair value during the three and nine months ended September 30, 2022 and 2021, respectively.

 

6. Convertible Note Payable

 

On August 25, 2022, the Company entered into an agreement with 1800 Diagonal Lending, LLC (“Diagonal”) whereby the Company issued convertible note to Diagonal with a principal amount of $104,250. The note bears interest at 10% and has a term of one year when payment of principal and interest is due. After 180 days, the note is convertible into shares of the Company’s common stock the number of which is determined by dividing the principal balance outstanding by 65% of the lowest trading price of the Company’s stock during the five previous trading days before the date of the conversion.

 

7. Stockholders’ Equity

 

Change in Authorized Shares

 

The Company increased the number of authorized common shares the Company is authorized to issue to 495,000,000. This change in capital structure was approved without a meeting by the consent of the shareholders holding a majority of the common stock outstanding and Articles of Amendment were filed with the State of Nevada on August 8, 2022.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

 

Securities Issuances

 

During the nine months ended September 30, 2022, shares of common stock and preferred stock were issued to related and non-related parties for the purposes indicated, as follows:

 

 

 

Share Issuances in the Nine Months Ended September 30, 2022

 

Services

 

 Common

 

 

 Preferred

 

 

 Value

 

Related Parties

 

 

 

 

 

 

 

 

 

David Tobias, Officer, Director

 

 

-

 

 

 

458,333

 

 

$90,000

 

Brad Herr, Officer, Director

 

 

458,333

 

 

 

-

 

 

 

90,000

 

Robert Tankson, Director

 

 

28,646

 

 

 

-

 

 

 

5,625

 

Trevor Reed, Director

 

 

28,646

 

 

 

-

 

 

 

5,625

 

Total related party issuances

 

 

515,625

 

 

 

458,333

 

 

 

191,250

 

 Non-related party issuances

 

 

790,617

 

 

 

-

 

 

 

159,257

 

Total shares for services

 

 

1,306,242

 

 

 

458,333

 

 

 

350,507

 

Shares issued in consideration of notes and accrued interest - related parties

 

 

7,089,255

 

 

 

-

 

 

 

1,417,851

 

Conversion of preferred to common (1:1)

 

 

252,056

 

 

 

(252,056)

 

 

-

 

Conversion of preferred to common (19:1)

 

 

5,476,237

 

 

 

(288,223)

 

 

-

 

Aggregate Totals

 

 

14,123,790

 

 

 

(81,946)

 

$1,768,358

 

 

During the nine months ended September 30, 2021, shares of common stock and preferred stock were issued to related and non-related parties for the purposes indicated, as follows:

 

 

 

Share Issuances in the Nine Months Ended September 30, 2021

 

Services

 

 Common

 

 

 Preferred

 

 

 Value

 

Related Parties

 

 

 

 

 

 

 

 

 

David Tobias, Officer, Director

 

 

-

 

 

 

203,027

 

 

$112,500

 

Brad Herr, Officer, Director

 

 

338,376

 

 

 

-

 

 

 

187,500

 

Robert Tankson, Director

 

 

43,378

 

 

 

-

 

 

 

23,711

 

Cathy Carroll, Director

 

 

203,027

 

 

 

 

 

 

 

112,500

 

Trevor Reed, Director

 

 

33,838

 

 

 

-

 

 

 

18,750

 

Total related party issuances

 

 

618,619

 

 

 

203,027

 

 

 

454,961

 

 Non-related party issuances

 

 

1,366,039

 

 

 

-

 

 

 

762,429

 

Total shares for services

 

 

1,984,658

 

 

 

203,027

 

 

 

1,217,390

 

Preferred stock converted to common

 

 

468,166

 

 

 

(468,166)

 

 

-

 

Issuance for cash

 

 

10,466

 

 

 

-

 

 

 

5,000

 

Shares cancelled

 

 

(55,556)

 

 

-

 

 

 

(20,000)

Aggregate Totals

 

 

2,407,734

 

 

 

(265,139)

 

$1,202,390

 

 

During the nine months ended September 30, 2021, the Company cancelled shares that had been returned after it was determined the shares have been erroneously issued to a vendor in 2020.

 

During the nine months ended September 30, 2022, two preferred shareholders agreed to convert an aggregate of 288,223 shares of preferred stock into 5,476,237 shares of common stock. The Company requested the shareholders to convert to simplify its capital structure in contemplation of a proposed merger (see Note 9, Other Matters - Merger). The conversion rate was determined on various factors, including recent market price of the Company’s common stock and the proposed merger. The conversion rate differed from the original conversion rate resulting in a deemed dividend to the preferred shareholders of $25,940 which is the fair value of the common stock issued less the carrying value of the preferred shares that were converted. The dividend had $nil impact on net loss per share for the three and nine months ended September 30, 2022.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

 

 

Stock payable at September 30, 2022 consists of 475,737 preferred shares and 535,205 common shares owed to members of the board of directors for directors fees and contract services.  These shares were valued at $85,000 based on the market price of the Company’s common stock at the date of board authorization.  An additional 1,482,044 common shares were owed to various non-related vendors at September 30, 2022 valued at $121,946 based on the market price of the Company’s common stock at the date of board authorization.

 

8. Commitments and Contingencies

 

Leases.

 

PrestoCorp leased office space through WeWork in New York on a month-to-month arrangement. On April 12, 2022, PrestoCorp signed a new lease in New York with Spaces for a two-year term at $2,590 per month expiring in April 2024. Rent expense for the three months ended September 30, 2022 and 2021 was $-0- and $10,739, respectively, and for the nine months ended September 30, 2022 and 2021 was $21,325 and $20,219, respectively. Upon signing the lease with Spaces, the Company recognized a lease liability and a right of use asset of $56,595 using a discount rate of 10%. The future lease payments under the new lease are as follows:

 

From October 1, 2022 to September 30, 2023

 

$31,080

 

From October 1, 2023 to September 30, 2024

 

 

15,540

 

Less imputed interest

 

 

(3,135)

Net lease liability

 

 

43,485

 

Current Portion

 

 

(28,263)

Long-term portion

 

$15,222

 

 

Litigation.

 

In the ordinary course of business, we may face various claims brought by third parties and we may, from time to time, make claims or take legal actions to assert our rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject us to litigation. As of September 30, 2022, no claims are outstanding.

 

9. Other Matters - Merger

 

On August 8, 2022, the Company entered into a Merger Agreement (the “Merger Agreement”) with MJ Harvest, Inc. (“MJHI”). Pursuant to the Merger Agreement, MJHI will merge with and into the Company and the Company will be the surviving corporation in the Merger. The Merger is expected to be consummated once the shareholders of the Company and the shareholders of MJHI approve the Merger which management expects will be completed early in the fourth quarter of calendar year 2022. The terms of the Merger Agreement are summarized below:

 

 

·

The name of the surviving company in the Merger will be Cannabis Sativa, Inc.

 

·

Each share of MJHI common stock outstanding on the effective date of the Merger will be converted into 2.7 shares of CBDS Common Stock.

 

·

The Merger is subject to majority approval of the shareholders of both MJHI and CBDS.

 

·

The shareholders of MJHI and CBDS will have rights to dissent from the Merger, and, if the notice of dissent is properly given, the dissenting shareholders may be paid fair value for such dissented shares.

 

·

The Board of Directors of the surviving company following the Merger is intended to consist of Patrick Bilton, Brad Herr, Randy Lanier, Clinton Pyatt, and David Tobias.

 

·

The Executive Officers of the Company following the Merger are intended to include Patrick Bilton - Chief Executive Officer and Clinton Pyatt - Chief Operating Officer.

 

·

The Merger Agreement includes representations and warranties, covenants, and conditions for MJHI and CBDS as are customary for transactions of this nature.

 

·

No brokerage fees are payable in connection with the Merger.

 

·

If majority shareholder approval of the merger is not obtained, the Merger will not occur, and the Merger Agreement will be terminated.

 

·

All costs and expenses in connection with the Merger transactions will be borne by CBDS, except that MJHI will be responsible for expenses of its own legal counsel and auditing costs.

 

 
FS - 13

Table of Contents

 

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

 

Certain statements in this Report constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, among others, uncertainties relating to general economic and business conditions; industry trends; changes in demand for our products and services; uncertainties relating to customer plans and commitments and the timing of orders received from customers; announcements or changes in our pricing policies or that of our competitors; unanticipated delays in the development, market acceptance or installation of our products and services; changes in government regulations; availability of management and other key personnel; availability, terms, and deployment of capital; relationships with third-party equipment suppliers; and worldwide political stability and economic growth. The words “believe,” “expect,” “anticipate,” “intend” and “plan” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

 

Results of Operations

 

Prior to April 22, 2021, the Company operated two business segments: PrestoCorp, Inc. (“PrestoCorp”), a telehealth business, and GK Manufacturing and Packaging, Inc. (“GKMP”), a contract manufacturing business. On April 22, 2021, the Company sold its controlling interest in GKMP. The discontinued operations of GKMP are reported separately, below. Discussion of results of operations includes the consolidated results of PrestoCorp.

 

Three Months Ended September 30, 2022, compared with the Three Months Ended September 30, 2021

 

 

 

Three Months Ended

 

 

 

A

 

 

B

 

 

A-B

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

Change

 

 

Change %

 

REVENUE

 

$383,079

 

 

$463,040

 

 

$(79,961)

 

 

-17%

Cost of revenues

 

 

149,943

 

 

 

174,814

 

 

 

(24,871)

 

 

-14%

Cost of sales % of total sales

 

 

39%

 

 

38%

 

 

1%

 

 

 

 

Gross profit

 

 

233,136

 

 

 

288,226

 

 

 

(55,090)

 

 

-19%

Gross profit % of sales

 

 

61%

 

 

62%

 

 

-1%

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

208,515

 

 

 

132,315

 

 

 

76,200

 

 

 

58%

Depreciation and amortization

 

 

39,440

 

 

 

42,700

 

 

 

(3,260)

 

 

-8%

Wages and salaries

 

 

188,622

 

 

 

179,136

 

 

 

9,486

 

 

 

5%

Advertising

 

 

1,599

 

 

 

47,044

 

 

 

(45,445)

 

 

-97%

General and administrative

 

 

177,658

 

 

 

259,451

 

 

 

(81,793)

 

 

-32%

Total operating expenses

 

 

615,834

 

 

 

660,646

 

 

 

(44,812)

 

 

-7%

NET LOSS FROM CONTINUING OPERATIONS

 

 

(382,698)

 

 

(372,420)

 

 

(10,278)

 

 

3%

 

Revenues declined 17% in the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Revenues in our fiscal third quarter decreased primarily due to a slow-down in the number of patients seeking medical marijuana cards when compared to year earlier period which saw a significant uptick in activity due to the pandemic. Activity levels in the third quarter of 2022 more closely matched our historic operating levels. We do not anticipate a significant spike in patients seeking our services due to pandemic effects, but the impact of the delta and other variants of the virus cannot be determined at this time.

 

 
2

 

 

Gross profit margins for our services, as a percentage of sales, were essentially unchanged in the three months ended September 30, 2022, compared with the same period a year earlier. Holding our gross profit percentages unchanged despite an 17% decline in revenues is attributable to our efforts to control costs at all operating levels.

 

Total operating costs decreased significantly in the third quarter of 2022 compared to the same period in 2021. We substantially reduced advertising, and general and administrative costs. The cost decreases were primarily the result of our efforts to limit losses while exploring acquisition and growth activities. Our targeted acquisition activities did not result in consummated transactions in the three months ended September 30, 2022, but the Company did sign a letter of intent to Merge with MJ Harvest, Inc. on April 29, 2022, and the Company signed the definitive Merger Agreement on August 8, 2022. The Merger is expected to be completed early in the fourth quarter and, if completed, will provide new business opportunities for the Company.

 

Net operating loss for the three-month period ended September 30, 2022 increased 3% compared to net loss for the three-month period ended September 30, 2021. The increase in our net operating loss was primarily the result of the decrease in sales.

 

Nine Months Ended September 30, 2022, compared with the Nine Months Ended September 30, 2021

 

 

 

Nine Months Ended

 

 

 

A

 

 

B

 

 

A-B

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

Change

 

 

Change %

 

REVENUE

 

$1,262,868

 

 

$1,452,279

 

 

$(189,411)

 

 

-13%

Cost of revenues

 

 

479,173

 

 

 

553,236

 

 

 

(74,063)

 

 

-13%

Cost of sales % of total sales

 

 

38%

 

 

38%

 

 

0%

 

 

 

 

Gross profit

 

 

783,695

 

 

 

899,043

 

 

 

(115,348)

 

 

-13%

Gross profit % of sales

 

 

62%

 

 

62%

 

 

0%

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

419,923

 

 

 

453,236

 

 

 

(33,313)

 

 

-7%

Depreciation and amortization

 

 

124,147

 

 

 

128,463

 

 

 

(4,316)

 

 

-3%

Wages and salaries

 

 

559,533

 

 

 

516,534

 

 

 

42,999

 

 

 

8%

Advertising

 

 

33,128

 

 

 

280,475

 

 

 

(247,347)

 

 

-88%

General and administrative

 

 

534,022

 

 

 

855,637

 

 

 

(321,615)

 

 

-38%

Total operating expenses

 

 

1,670,753

 

 

 

2,234,345

 

 

 

(563,592)

 

 

-25%

NET LOSS FROM CONTINUING OPERATIONS

 

 

(887,058)

 

 

(1,335,302)

 

 

448,244

 

 

 

-34%

 

Revenues declined 13% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Revenues in the first nine months of 2022 decreased primarily due to a slow-down in the number of patients seeking medical marijuana cards when compared to year earlier period which saw a significant uptick in activity due to the pandemic. Activity levels in the first nine months of 2022 more closely matched our historic operating levels. We do not anticipate a significant spike in patients seeking our services due to pandemic effects, but the impact of the delta and other variants of the virus cannot be determined at this time.

 

Gross profit margins for our services, as a percentage of sales, were essentially unchanged in the nine months ended September 30, 2022, compared with the same period a year earlier. Holding our gross profit percentages unchanged despite an 13% decline in revenues is attributable to our efforts to control costs at all operating levels.

 

 
3

 

 

Total operating costs decreased significantly in the first nine months of 2022 compared to the same period in 2021. We substantially reduced professional fees, advertising, and general and administrative costs. The cost decreases were primarily the result of our efforts to limit losses while exploring acquisition and growth activities. Our targeted acquisition activities did not result in consummated transactions in the nine-month period ended September 30, 2022, but the Company did sign a letter of intent to Merge with MJ Harvest, Inc. on April 29, 2022 and the Company signed the definitive Merger Agreement on August 8, 2022. The Merger is expected to be completed early in the fourth quarter and, if completed, will provide new business opportunities for the Company.

 

Net operating loss for the nine-month period ended September 30, 2022 decreased 34% compared to net loss for the nine-month period ended September 30, 2021. The decrease in our net operating loss was primarily the result of cost containment efforts pending completion of the Merger with MJ Harvest, Inc.

 

Discontinued Operations.

 

In April 2021, the Company entered into discussions with THC Farmaceuticals, Inc. (“CBDG”) regarding sale of CBDS’s controlling interest positions in GKMP and iBudtender Inc. (iBud”). The discussions were triggered by an interest on the part of CBDS management to refocus business efforts on growing PrestoCorp while streamlining financial reporting and management processes by eliminating assets that are no longer considered essential to the Company’s core focus. The sale was completed on April 22, 2021. Management believes that the sale of GKMP and iBud will free up management time and resources to seek other acquisitions that are more closely aligned with the Company’s business model. Consideration for the sale of the controlling interests consisted of 1,500,000 shares of CBDG common stock and 1,500,000 shares of CBDG preferred stock valued at $600,000 on the date of the acquisition. iBud had no revenues in the periods presented. Summaries of the discontinued operations of GKMP and the operations of iBud through April 22, 2021 are provided below.

 

 

 

Period Ended

 

Discontinued Operations

 

April 22, 2021

 

REVENUE

 

 

75,866

 

Cost of revenues

 

 

91,316

 

Cost of sales % of total sales

 

 

120%

Gross profit

 

 

(15,450)

Gross profit % of sales

 

 

-20%

OPERATING EXPENSES

 

 

 

 

Depreciation and amortization

 

 

5,861

 

Wages and salaries

 

 

106,224

 

Advertising

 

 

1,693

 

General and administrative

 

 

102,833

 

Interest expense

 

 

2,144

 

Total operating expenses

 

 

218,755

 

NET LOSS FROM DISCONTINUED OPERATIONS

 

 

(234,205)

 

GKMP and iBud generated losses from operations during the periods they were operated by the Company. In the second quarter of 2021, management determined that the time and effort required to turn these businesses around would be a significant drain on resources and would limit expansion of our PrestoCorp operations. The sale of our interests in GKMP and iBud eliminates this concern.

 

Liquidity and Capital Resources

 

Net cash used in operating activities for the nine-month period ended September 30, 2022, was $120,730. During the same period, our cash position increased by $20,470. Financing activities generated $142,790 in the nine months from related party notes payable.

 

 
4

 

 

We also reported stock-based compensation of $350,507 during the nine-month period from issuance of common stock and preferred stock as compensation for services performed by officers, directors, and contractors. On September 30, 2022, our cash position was $214,530. The overhead related to our status as a public company and our continuing efforts to acquire businesses that will supplement the operations of PrestoCorp will continue to generate consolidated losses from operations in the coming periods. Given our level of operations in the first nine months of 2022, we expect that additional funds will be required. In the remainder of 2022, we expect to generate additional capital primarily from issuances of stock as compensation for services.

 

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We incurred net losses attributable to Cannabis Sativa, Inc. of $505,520 and $1,978,717, respectively, for the nine-month periods ended September 30, 2022 and 2021, and had an accumulated deficit of $79,984,982 as of September 30, 2022. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they are due.

 

Management is currently evaluating fund-raising alternatives including private placement of equity securities, a secondary public offering, and various debt instruments. In addition, key members of management have indicated a willingness to provide additional operating capital from time to time. We are also currently selling a portion of our investment securities to generate cash for operations, and we have restructured our intercompany loans to PrestoCorp with a monthly amortization schedule and required monthly payments that will begin to address ongoing operating expenses that must be paid in cash. Based on all these considerations, we believe we will have sufficient capital to operate the business for the next twelve months. It will be important for the Company to be successful in its efforts to raise capital if it is going to be able to further its business plan in an aggressive manner. Raising capital in this manner will cause dilution to current shareholders.

 

In the event the Company consummates the Merger with MJ Harvest, Inc., it is expected that the nature of the business, the cash flow, and access to additional operating capital, will change. The effect of the of the change and the impact on future operations cannot be determined at this time.

 

COVID-19

 

COVID-19 has been declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention. Its rapid spread around the world and throughout the United States prompted many countries, including the United States, to institute restrictions on travel, public gatherings, and certain business operations. These restrictions significantly disrupted economic activity in the United States and Worldwide. The Delta variant of the COVID-19 virus now appears to be creating another wave of infections and concerns about the virus’ impact on business operations continues. To date, the disruption did not materially impact the Company’s financial statements. The pandemic has had a positive impact on the telehealth business. If the severity of the economic disruptions increase as the duration of the COVID-19 pandemic continues, the negative financial impact due to reduced demand could be significantly greater in future periods.

 

In addition, the economic disruptions caused by COVID-19 could also adversely impact the impairment risks for certain long-lived assets, equity method investments and goodwill. Management evaluated these impairment considerations and determined that no such impairments occurred through the date of this report.

 

 
5

 

 

Off Balance Sheet Arrangements

 

None

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not required.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures

 

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective as it was determined that there were material weaknesses affecting our disclosure controls and procedures.

 

Management of the Company believes that these material weaknesses are due to the small size of the company’s accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of remediation. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As the Company grows, management expects to increase the number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
6

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings. We are not a party to any material legal proceedings, and, to the best of our knowledge, no such legal proceedings have been threatened against us.

 

Item 1A. Risk Factors. Not required.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None.

 

Item 3. Defaults Upon Senior Securities. None.

 

Item 4. Mine Safety Disclosures. Not applicable.

 

Item 5. Other Information. None.

 

 
7

 

 

Item 6. Exhibits. The following documents are included as exhibits to this report:

 

(a) Exhibits

 

Exhibit Number

SEC Reference Number

 

Title of Document

3.1

3

 

Articles of Incorporation

3.2

3

Bylaws

31.1

31

 

Section 302 Certification of Principal Executive Officer

32.1

32

 

Section 1350 Certification of Principal Executive Officer

101.INS

 

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema

101.CAL

 

 

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase

101.LAB

 

 

XBRL Taxonomy Extension Label Linkbase

101.PRE

 

 

XBRL Taxonomy Extension Presentation Linkbase

 

XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement, prospectus or other document to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.

 

 
8

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Cannabis Sativa, Inc. 

 

Date: November 14, 2022

 

By:

/s/ David Tobias

 

 

David Tobias, CEO

 

 

(Principal Executive, Financial and Accounting Officer)

 

 

 
9

 

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