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, 2021

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, NV 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 15, 2021, is _________________.

 

 

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Attached after signature page.

 

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 and iBud Tender, Inc. (“iBud”). The discontinued operations of GKMP and iBud are reported separately, below. Discussion of results of operations includes the consolidated results of PrestoCorp.

 

Three Months Ended September 30, 2021, compared with the Three Months Ended September 30, 2020

 

 

 

Three Months Ended

 

 

 

A

 

 

B

 

 

A-B

 

 

 

September 30,

2021

 

 

September 30,

2020

 

 

Change

 

 

Change %

 

REVENUE

 

$ 463,040

 

 

$ 417,215

 

 

$ 45,825

 

 

 

11 %

Cost of revenues

 

 

174,814

 

 

 

158,360

 

 

 

16,454

 

 

 

10 %

Cost of sales % of total sales

 

 

38 %

 

 

38 %

 

 

0 %

 

 

 

 

Gross profit

 

 

288,226

 

 

 

258,855

 

 

 

29,371

 

 

 

11 %

Gross profit % of sales

 

 

62 %

 

 

62 %

 

 

0 %

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

132,315

 

 

 

132,439

 

 

 

(124 )

 

 

0 %

Depreciation and amortization

 

 

42,700

 

 

 

51,846

 

 

 

(9,146 )

 

 

-18 %

Wages and salaries

 

 

154,332

 

 

 

135,898

 

 

 

18,434

 

 

 

14 %

Advertising

 

 

47,044

 

 

 

106,236

 

 

 

(59,192 )

 

 

-56 %

General and administrative

 

 

259,451

 

 

 

231,380

 

 

 

28,071

 

 

 

12 %

Total operating expenses

 

 

635,842

 

 

 

657,799

 

 

 

(21,957 )

 

 

-3 %

NET LOSS FROM CONTINUING OPERATIONS

 

 

(347,616 )

 

 

(398,944 )

 

 

51,328

 

 

 

-13 %

 

Revenues increased 11% in the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily due to expansion of the states in which the Company offers its services of providing patients with a telehealth platform for seeking medical marijuana cards. Activity levels in specific states declined in third quarter of 2021 to more closely match pre-pandemic levels of activity, but this slow-down was offset by the expanded markets that the Company operates in. We no longer anticipate a significant spike in patients seeking our services due to pandemic effects, but the impact of other variants of the virus cannot be determined at this time.

 

 
2

 

 

Gross profit margins for our services remained constant in the quarter ended September 30, 2021, compared with the same quarter a year earlier. Maintaining the gross margin percentage in the third quarter of 2021 compared to the same period in 2020 is a reflection of the efficiency of our telehealth platform and our ability to hold down the costs of our service delivery process.

 

Net operating loss from operations for the three-month period ended September 30, 2021, decreased 7% compared to net loss for the three-month period ended September 30, 2020. We spent more on wages and salaries and general and administrative expenses in the three months ended September 30, 2021 when compared to the same period in 2020, but these increases were offset by decreases in advertising and depreciation. The reduction in advertising costs resulted from less need for an initial marketing push into new states and operations in our territories reached sustainable levels with regular recurring advertising expenditures.

 

Nine Months Ended September 30, 2021, compared with the Nine Months Ended September 30, 2020

 

 

 

Nine Months Ended

 

 

 

A

 

 

B

 

 

A-B

 

 

 

September 30,

2021

 

 

September 30,

2020

 

 

Change

 

 

Change %

 

REVENUE

 

$ 1,452,279

 

 

$ 1,603,032

 

 

$ (150,753 )

 

 

-9 %

Cost of revenues

 

 

553,236

 

 

 

607,837

 

 

 

(54,601 )

 

 

-9 %

Cost of sales % of total sales

 

 

38 %

 

 

38 %

 

 

0 %

 

 

 

 

Gross profit

 

 

899,043

 

 

 

995,195

 

 

 

(96,152 )

 

 

-10 %

Gross profit % of sales

 

 

62 %

 

 

62 %

 

 

0 %

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

453,236

 

 

 

621,701

 

 

 

(168,465 )

 

 

-27 %

Depreciation and amortization

 

 

128,463

 

 

 

155,996

 

 

 

(27,533 )

 

 

-18 %

Wages and salaries

 

 

491,730

 

 

 

443,439

 

 

 

48,291

 

 

 

11 %

Advertising

 

 

280,475

 

 

 

301,912

 

 

 

(21,437 )

 

 

-7 %

General and administrative

 

 

855,637

 

 

 

741,709

 

 

 

113,928

 

 

 

15 %

Total operating expenses

 

 

2,209,541

 

 

 

2,264,757

 

 

 

(55,216 )

 

 

-2 %

NET LOSS FROM CONTINUING OPERATIONS

 

 

(1,310,498 )

 

 

(1,269,562 )

 

 

(40,936 )

 

 

3 %

 

Revenues declined 9% in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Revenues in the nine months of 2021 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 2021 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, 2021, compared with the same period a year earlier. Holding our gross profit percentages unchanged despite a 9% decline in revenues is attributable to our efforts to control costs at all operating levels.

 

Total operating costs decreased slightly in the first nine months of 2021 compared to the same period in 2020. We substantially reduced professional fees, depreciation and amortization, and advertising but these decreases were offset by increases in wages and salaries, and general and administrative costs. The cost increases were primarily the result of our research into the operating requirements of new regions, and the costs to support general operational levels while pursuing funding efforts for targeted acquisition activities. Our targeted acquisition activities have not resulted in operational improvements to date, largely as a result of limited capital.

 

Net operating loss for the nine-month period ended September 30, 2021 increased 5% compared to net loss for the nine-month period ended September 30, 2020. The increase in our net operating loss was primarily the result of declines in revenue that were not offset by corresponding declines in cost structure. While management remains focused on keeping costs to manageable levels, we do not expect to see significant operating cost reductions in coming periods as we continue to seek other opportunities for expansion.

 

 
3

 

 

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 PrestoCorp 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.

 

 

 

Three Months

 

 

Three Months

 

 

Nine Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

 

Ended

 

 

Ended

 

DISCONTINUED OPERATIONS OF GKMP

 

September 30,

2021

 

 

September 30,

2020

 

 

September 30,

2021

 

 

September 30,

2020

 

REVENUE

 

$ -

 

 

$ 42,569

 

 

$ 75,866

 

 

$ 70,989

 

Cost of revenues

 

 

-

 

 

 

70,329

 

 

 

91,316

 

 

 

90,470

 

Cost of sales % of total sales

 

 

0 %

 

 

165 %

 

 

120 %

 

 

127 %

Gross profit

 

 

-

 

 

 

(27,760 )

 

 

(15,450 )

 

 

(19,481 )

Gross profit % of sales

 

 

0 %

 

 

-65 %

 

 

-20 %

 

 

-27 %

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

-

 

 

 

4,449

 

 

 

5,526

 

 

 

4,449

 

Wages and salaries

 

 

-

 

 

 

79,475

 

 

 

106,224

 

 

 

120,737

 

Advertising

 

 

-

 

 

 

2,697

 

 

 

1,693

 

 

 

19,501

 

General and administrative

 

 

-

 

 

 

151,332

 

 

 

104,177

 

 

 

361,547

 

Total operating expenses

 

 

-

 

 

 

237,953

 

 

 

217,620

 

 

 

506,234

 

NET LOSS FROM OPERATIONS

 

 

-

 

 

 

(265,713 )

 

 

(233,070 )

 

 

(525,715 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DISCONTINUED OPERATIONS OF IBUD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

-

 

 

 

251

 

 

 

335

 

 

 

753

 

General and administrative

 

 

-

 

 

 

1,692

 

 

 

800

 

 

 

5,075

 

Total operating expenses

 

 

-

 

 

 

1,943

 

 

 

1,135

 

 

 

5,828

 

NET LOSS FROM OPERATIONS

 

 

-

 

 

 

(1,943 )

 

 

(1,135 )

 

 

(5,828 )

Aggregate net loss from discontinued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

operations

 

 

-

 

 

 

(267,656 )

 

 

(234,205 )

 

 

(531,543 )

Gain on sale of discontinued operations

 

 

-

 

 

 

-

 

 

 

164,736

 

 

 

-

 

TOTAL GAIN (LOSS) ON DISCONTINUED OPERATIONS

 

$ -

 

 

$ (267,656 )

 

$ (69,469 )

 

$ (531,543 )

 

GKMP and iBud generated losses from operations during the periods they were operated by the Company. In the third 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 will now allow management to devote more resources to PrestoCorp.

 

 
4

 

  

Liquidity and Capital Resources

 

Net cash used in operating activities for the nine-month period ended September 30, 2021 was $180,849. During the same period, our cash position decreased by $57,070. Financing activities generated $101,083 in the nine months from the following sources:

 

 

·

advances from related parties totaling $48,083,

 

·

related party notes payable totaling $48,000, and

 

·

sale of common stock totaling $5,000.

  

We also reported stock-based compensation of $1,197,390 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, 2021, our cash position was $265,037. The sale of GKMP and iBud has reduced our net operating loss and negative cash flows, and our remaining operating subsidiary, PrestoCorp, is profitable. 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 2021, we expect that additional funds will be required. In the remainder of 2021, we expect to generate additional capital primarily from issuances of stock as compensation for services.

 

Management is currently evaluating fund-raising alternatives including private placement of equity securities, a secondary public offering, and various debt instruments. We have filed documents with the Securities and Exchange Commission for an offering of securities under Regulation A, but the offering has not been approved and the amount that may be raised when the offering is approved is uncertain. 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.

 

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 $1,151,572 and $2,032,070, respectively, for the nine-month periods ended September 30, 2021 and 2020, and had an accumulated deficit of $79,060,409 as of September 30, 2021. 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.

 

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, 2021 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.

 

During the fiscal quarter ended September 30, 2021, the board of directors issued 442,711 shares of unregistered common stock, and 78,126 shares of unregistered preferred stock to seven persons/entities in exchange for services rendered to the Company. These unregistered shares were in addition to an aggregate of 127,318 common shares that were registered for resale on Form S-8. The unregistered shares were valued at the closing price of the shares in the OTCQB Market on the date the shares became issuable which $0.48 per share. The Company also issued 127,994 shares of common stock on conversion of 127,994 shares of preferred stock. The issuances of the unregistered shares were exempt from the registration requirements of Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of the Act since the recipients of the shares were persons closely associated with the Company and/or the issuance of the shares did not involve any public offering.

 

Item 3. Defaults Upon Senior Securities. None.

 

Item 4. Mine Safety Disclosures. Not applicable.

 

Item 5. Other Information. None.

 

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

 

(a) Exhibits

 

Exhibit Number

 

SEC Reference Number

 

Title of Document

31.1

 

31

 

Section 302 Certification of Principal Executive Officer

31.2

 

31

Section 302 Certification of Principal Financial Officer

32.1

 

32

 

Section 1350 Certification of Principal Executive Officer

32.2

 

32

Section 1350 Certification of Principal Financial 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

 

 
7

 

   

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 15, 2021

 

By: /s/ David Tobias

 

David Tobias, Chief Executive Officer

 

 

 

By: /s/ Brad E. Herr

 

Brad E. Herr, Chief Financial Officer and

 

Principal Accounting Officer

 

 

 
8

 

 

CANNABIS SATIVA, INC.

 

Contents

  

 

 

 

 

Page

 

 

 

 

 

 

 

FINANCIAL STATEMENTS (Unaudited) – for the three and nine months ended September 30, 2021 and 2020:

 

 

 

 

 

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 – 14

 

 

 
FS - 1

Table of Contents

  

CANNABIS SATIVA, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

ASSETS

 

Current Assets

 

 

 

 

 

 

Cash

 

$ 265,037

 

 

$ 322,107

 

Accounts receivable, net

 

 

—

 

 

 

2,495

 

Inventories

 

 

—

 

 

 

56,485

 

Investment in equity security, at fair value

 

 

226,920

 

 

 

195,000

 

Other current assets

 

 

—

 

 

 

55,199

 

Total Current Assets

 

 

491,957

 

 

 

631,286

 

 

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

2,388

 

 

 

199,120

 

Intangible assets, net

 

 

363,091

 

 

 

489,946

 

Deposits and other assets

 

 

—

 

 

 

9,250

 

Right to use asset

 

 

—

 

 

 

47,312

 

Goodwill

 

 

1,837,202

 

 

 

1,837,202

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$ 2,694,638

 

 

$ 3,214,116

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ 112,614

 

 

$ 179,200

 

Accrued interest - related parties

 

 

189,374

 

 

 

144,024

 

Advances from related parties

 

 

—

 

 

 

18,800

 

Notes payable to related parties

 

 

1,198,878

 

 

 

1,161,020

 

Customer deposits

 

 

—

 

 

 

25,545

 

Operating lease liability - current

 

 

—

 

 

 

31,891

 

Total Current Liabilities

 

 

1,500,866

 

 

 

1,560,480

 

 

 

 

 

 

 

 

 

 

Long-Term Liabilities

 

 

 

 

 

 

 

 

Operating lease liability - long term

 

 

—

 

 

 

15,421

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

1,500,866

 

 

 

1,575,901

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Notes 6 and 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

824,989 and 1,090,128 issued and outstanding, respectively

 

 

825

 

 

 

1,090

 

Common stock $0.001 par value; 45,000,000 shares authorized;

 

 

 

 

 

 

 

 

29,860,912 and 27,453,178 shares issued and outstanding, respectively

 

 

29,861

 

 

 

27,455

 

Additional paid-in capital

 

 

78,860,263

 

 

 

77,660,014

 

Accumulated deficit

 

 

(79,060,409 )

 

 

(77,028,339 )

 

 

 

 

 

 

 

 

 

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

 

 

(169,460 )

 

 

660,220

 

 

 

 

 

 

 

 

 

 

Non-Controlling Interests

 

 

1,363,232

 

 

 

977,995

 

 

 

 

 

 

 

 

 

 

Total Stockholders' Equity

 

 

1,193,772

 

 

 

1,638,215

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

 

$ 2,694,638

 

 

$ 3,214,116

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these 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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$ 463,040

 

 

$ 417,215

 

 

$ 1,452,279

 

 

$ 1,603,032

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenues

 

 

174,814

 

 

 

158,360

 

 

 

553,236

 

 

 

607,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

288,226

 

 

 

258,855

 

 

 

899,043

 

 

 

995,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

132,315

 

 

 

132,439

 

 

 

453,236

 

 

 

621,701

 

Depreciation and amortization

 

 

42,700

 

 

 

51,846

 

 

 

128,463

 

 

 

155,996

 

Wages and salaries

 

 

179,136

 

 

 

135,898

 

 

 

516,534

 

 

 

443,439

 

Advertising

 

 

47,044

 

 

 

106,236

 

 

 

280,475

 

 

 

301,912

 

General and administrative

 

 

259,451

 

 

 

231,380

 

 

 

855,637

 

 

 

741,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

 

660,646

 

 

 

657,799

 

 

 

2,234,345

 

 

 

2,264,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss from Operations

 

 

(372,420 )

 

 

(398,944 )

 

 

(1,335,302 )

 

 

(1,269,562 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Income) and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (gain) loss on investment

 

 

758,340

 

 

 

(3,000 )

 

 

532,855

 

 

 

(33,000 )

(Gain) loss on sale of investment securities

 

 

237

 

 

 

—

 

 

 

(8,793 )

 

 

—

 

Interest expense

 

 

17,854

 

 

 

14,142

 

 

 

49,884

 

 

 

39,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Other (Income) Expenses, Net

 

 

776,431

 

 

 

11,142

 

 

 

573,946

 

 

 

6,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Before Income Taxes

 

 

(1,148,851 )

 

 

(410,086 )

 

 

(1,909,248 )

 

 

(1,275,706 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Taxes

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss from Continuing Operations

 

 

(1,148,851 )

 

 

(410,086 )

 

 

(1,909,248 )

 

 

(1,275,706 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) from Discontinued Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss on discontinued operations

 

 

—

 

 

 

(267,656 )

 

 

(234,205 )

 

 

(531,543 )

Gain on sale of subsidiaries

 

 

—

 

 

 

—

 

 

 

164,736

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) from Discontinued Operations

 

 

—

 

 

 

(267,656 )

 

 

(69,469 )

 

 

(531,543 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss for the Period

 

 

(1,148,851 )

 

 

(677,742 )

 

 

(1,978,717 )

 

 

(1,807,249 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss attributable to non-controlling interest - GK Manufacturing

 

 

—

 

 

 

(130,200 )

 

 

(114,467 )

 

 

(257,600 )

Loss attributable to non-controlling interest - iBudTender

 

 

—

 

 

 

(970 )

 

 

(1,614 )

 

 

(2,909 )

Income attributable to non-controlling interest - PrestoCorp

 

 

2,721

 

 

 

11,952

 

 

 

169,434

 

 

 

118,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$ (1,151,572 )

 

$ (558,524 )

 

$ (2,032,070 )

 

$ (1,665,037 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss for the Period per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic & Diluted

 

$ (0.04 )

 

$ (0.02 )

 

$ (0.07 )

 

$ (0.07 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic & Diluted

 

 

29,685,756

 

 

 

25,462,962

 

 

 

28,880,938

 

 

 

24,801,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these 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, 2021 and 2020 - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Non-controlling

 

 

Non-controlling

 

 

Non-controlling

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Interest -

 

 

Interest -

 

 

Interest - GK

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Prestocorp

 

 

iBudTender

 

 

Manufacturing

 

 

Total

 

Balance - July 1, 2020

 

 

1,073,543

 

 

$ 1,074

 

 

 

25,319,538

 

 

$ 25,321

 

 

$ 76,664,109

 

 

$ (75,961,660 )

 

$ 1,213,825

 

 

$ 49,203

 

 

$ (22,675 )

 

$ 1,969,197

 

Shares issued for services

 

 

67,312

 

 

 

67

 

 

 

647,337

 

 

 

647

 

 

 

470,954

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

471,668

 

Cash proceeds from sale of stock

 

 

—

 

 

 

—

 

 

 

50,000

 

 

 

50

 

 

 

24,950

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

25,000

 

Net income (loss) for the period

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(558,524 )

 

 

11,952

 

 

 

(970 )

 

 

(130,200 )

 

 

(677,742 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - September 30, 2020

 

 

1,140,855

 

 

$ 1,141

 

 

 

26,016,875

 

 

$ 26,018

 

 

$ 77,160,013

 

 

$ (76,520,184 )

 

$ 1,225,777

 

 

$ 48,233

 

 

$ (152,875 )

 

$ 1,788,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 income (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 - January 1, 2020

 

 

1,021,849

 

 

$ 1,021

 

 

 

22,224,199

 

 

$ 22,226

 

 

$ 74,834,032

 

 

$ (74,855,147 )

 

$ 1,107,480

 

 

$ 51,142

 

 

$ —

 

 

$ 1,160,754

 

Conversion of Preferred to Common

 

 

(340,172 )

 

 

(340 )

 

 

340,172

 

 

 

340

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Acquisition of GK Manufacturing

 

 

—

 

 

 

—

 

 

 

100,000

 

 

 

100

 

 

 

108,900

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

104,725

 

 

 

213,725

 

Cash proceeds from sale of stock

 

 

—

 

 

 

—

 

 

 

50,000

 

 

 

50

 

 

 

24,950

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

25,000

 

Shares issued for services

 

 

235,964

 

 

 

237

 

 

 

2,339,266

 

 

 

2,339

 

 

 

1,552,632

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,555,208

 

Shares issued for stock payable

 

 

223,214

 

 

 

223

 

 

 

963,238

 

 

 

963

 

 

 

639,499

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

640,685

 

Net income (loss) for the period

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,665,037 )

 

 

118,297

 

 

 

(2,909 )

 

 

(257,600 )

 

 

(1,807,249 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - September 30, 2020

 

 

1,140,855

 

 

$ 1,141

 

 

 

26,016,875

 

 

$ 26,018

 

 

$ 77,160,013

 

 

$ (76,520,184 )

 

$ 1,225,777

 

 

$ 48,233

 

 

$ (152,875 )

 

$ 1,788,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 
FS - 4

Table of Contents

 

CANNABIS SATIVA, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

 

For the nine months ended September 30,

 

2021

 

 

2020

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss for the period

 

$ (1,978,717 )

 

$ (1,275,706 )

Adjustments to reconcile net loss for the period to net cash

 

 

 

 

 

 

 

 

provided (used) by operating activities:

 

 

 

 

 

 

 

 

Unrealized (gain) loss on investment

 

 

532,855

 

 

 

(33,000 )

Gain on sale of investment securities

 

 

(8,793 )

 

 

—

 

Gain on sale of subsidiaries

 

 

(164,736 )

 

 

—

 

Depreciation and amortization

 

 

145,415

 

 

 

164,924

 

Shares issued for services

 

 

1,197,390

 

 

 

1,555,208

 

Changes in Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(6,447 )

 

 

(360 )

Inventories

 

 

27,499

 

 

 

(14,248 )

Prepaid consulting and other current assets

 

 

(4,933 )

 

 

(13,932 )

Deposits and other assets

 

 

—

 

 

 

(50,269 )

Accounts payable and accrued expenses

 

 

32,927

 

 

 

86,711

 

Accrued interest - related parties

 

 

45,350

 

 

 

41,292

 

Customer deposits

 

 

1,341

 

 

 

—

 

Net Cash Provided by (Used in) Operating Activities

 

 

(180,849 )

 

 

460,620

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Cash transferred on sale of subsidiaries

 

 

(21,321 )

 

 

—

 

Proceeds from sale of investment securities

 

 

44,017

 

 

 

—

 

Purchase of fixed assets

 

 

—

 

 

 

(57,180 )

Advance to GK settled with asset acquisition

 

 

—

 

 

 

50,000

 

Net Cash Provided by (Used in) Investing Activities

 

 

22,696

 

 

 

(7,180 )

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from sale of common stock

 

 

5,000

 

 

 

25,000

 

Proceeds from advances from related parties

 

 

48,083

 

 

 

—

 

Proceeds from related parties notes payable, net

 

 

48,000

 

 

 

145,500

 

Net Cash Provided by Financing Activities

 

 

101,083

 

 

 

170,500

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

(57,070 )

 

 

623,940

 

 

 

 

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

 

 

322,107

 

 

 

336,107

 

 

 

 

 

 

 

 

 

 

CASH AT END OF PERIOD

 

$ 265,037

 

 

$ 960,047

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Non Cash Activities:

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Net asset acquisition acquired with shares of common stock

 

$ —

 

 

$ 213,725

 

Common stock issued from stock payable

 

$ —

 

 

$ 640,685

 

Operating lease liability from acquiring right to use asset

 

$ —

 

 

$ 61,367

 

Investment in equity securities received in exchange for sale of controlling interest in subsidiaries

 

$ 600,000

 

 

$ —

 

 

 

 

 

 

 

 

 

 

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

 

 
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Table of Contents

 

CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

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”)

•

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

•

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

•

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

•

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

•

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

•

Eden Holdings LLC (“Eden”).

 

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 September 30, 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 three and nine months ended September 30, 2021 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, 2021, may not be indicative of the results expected for the full year ending December 31, 2021. 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, 2020.

 

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, 2020, as filed with the United States Securities and Exchange Commission on April 16, 2021.

 

In the opinion of management, the accompanying unaudited 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, 2021, and its results of operations, cash flows, and changes in stockholders’ equity for the three and nine months ended September 30, 2021. 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.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

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 a company in which the Company owns 51% and has majority control, PrestoCorp. 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.

 

Going Concern:

 

The Company has an accumulated deficit of $79,060,409 at September 30, 2021, 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.

 

Accounts Receivable:

 

We estimate credit loss reserves for accounts receivable on an individual receivable basis. A specific allowance reserve is established based on expected future cash flows and the financial condition of the debtor. We charge off customer balances in part or in full when it is more likely than not that we will not collect that amount of the balance due. We consider any balance unpaid after the contract payment period to be past due.

 

Inventories:

 

As of September 30, 2021 and December 31, 2020, the Company had $-0- and $56,485, respectively, in inventory relating to GKMP which consists of the raw materials and packaging used to manufacture cannabidiol (“CBD”) infused products for our customers.

 

Net Loss per Share:

 

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 periods ended September 30, 2021 and 2020, the Company had 175,000 and 49,900 outstanding warrants, respectively, and 824,989 and 1,090,128 shares of convertible Series A preferred stock, respectively, that would be dilutive to future periods net income if converted.

 

Revenue Recognition:

 

The Company operated two divisions, the telehealth business operated through PrestoCorp and the contract manufacturing business operated through GKMP. The contract manufacturing business was sold on April 22, 2021, and the Company now operates only the telehealth division.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

The telehealth division generates revenue based on a per telehealth visit for clients looking to obtain a permit to use marijuana for medical purposes in states that have legalized medical marijuana. Revenues are recognized when the Company satisfies its performance obligation to provide telehealth services upon a referral to a contracted physician. The obligation to perform the referral and the referral are automated and occur at the same time an online client subscribes for the visit and gains access to our network of health care professionals. Recognition of revenue is not dependent on the issuance of a marijuana card since issuance of the card is dependent on health and other factors beyond our control. This initial service is a one-time referral to a physician. Clients may return for other telehealth consultations, typically regarding product recommendations, and such additional physician referrals are provided at an additional cost. The billing and payment processes for each physician referral are automated through our online platform. Revenue is recognized in an amount that reflects the consideration that is received in exchange for each physician referral provided to the client.

 

The contract manufacturing division recognized revenue from manufacturing operations when the products are shipped to the customer. In some instances, customers provided inventory for the manufacturing process and GKMP provided labor, supplies and manufacturing operations to mix and package the products. Revenues were recognized when the manufacturing and packaging process were completed, and the goods were shipped to the customer. In other instances, the Company acquired inventory and manufactured products for customers and/or to be held in inventory for later sale to customers through the GKMP on-site dispensary, through the GKMP online store, or to independent distributors. In these instances, revenue was recognized when the product was shipped to the customer or distributor. Shipment terms were FOB origination.

 

Provision for sales incentives, discounts and returns and allowances, if applicable, are accounted for as reductions of revenue in the period the related sales are recorded. The Company had no warranty costs associated with the sales of its products.

 

Investments

 

Investments in equity securities are generally measured at fair value. Unrealized gains and losses for equity securities resulting from changes in fair value are recognized in current earnings. At the end of each reporting period, unrealized gains and losses resulting from changes in fair value are recognized in current earnings. Upon sale of an equity security, the realized gain or loss is recognized in current earnings.

 

Intangible Assets and Goodwill:

 

Intangible asset amounts represent the acquisition date fair values of identifiable intangible assets acquired. The fair values of the intangible assets were determined by using the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment. The rates used to discount projected future cash flows reflected a weighted average cost of capital based on our industry, capital structure and risk premiums including those reflected in the current market capitalization. Definite-lived intangible assets are amortized over their useful lives, which have historically ranged from 5 to 10 years. The carrying amounts of our definite-lived intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that the entity may be unable to recover the asset’s carrying amount. We do not have any indefinite-lived intangible assets recorded from acquisitions.

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. The fair value of the reporting unit is evaluated on qualitative factors to determine if the reported value may be impaired. If the qualitative factors indicate a likelihood of impairment, we then evaluate carrying value of the reporting unit based on quantitative factors using the income approach. An impairment charge is recognized for the excess of the carrying value of goodwill for the reporting unit over its implied fair value.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

Recent Accounting Pronouncements:

 

Accounting Standards Updates Adopted

 

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update contains a number of provisions intended to simplify the accounting for income taxes. Adoption of this update on January 1, 2021, had no impact on the Company’s condensed consolidated financial statements.

 

Accounting Standards Updates to Become Effective in Future Periods

 

In August 2020, the FASB issued 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, 2021, including interim periods within those fiscal years and with early adoption permitted. Management is evaluating the impact of this update on the Company’s condensed 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.

 

2. Property and Equipment

 

Property and equipment consisted of the following at September 30, 2021 and December 31, 2020:

 

 

 

September 30,

2021

 

 

December 31,

2020

 

Furniture and Equipment

 

$ 15,052

 

 

$ 225,629

 

Leasehold Improvements

 

 

2,500

 

 

 

17,315

 

Total Property and Equipment

 

 

17,552

 

 

 

242,944

 

Less: Accumulated Depreciation

 

 

(15,164 )

 

 

(43,824 )

Net Property and Equipment

 

$ 2,388

 

 

$ 199,120

 

 

Depreciation expense for the three and nine months ended September 30, 2021 and 2020 were $415 (2020: $14,155) and $18,558 (2020: 16,172), respectively.

 

3. 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, 2021 and December 31, 2020:

 

 

 

September 30,

2021

 

 

December 31,

2020

 

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

 

 

(1,172,319 )

 

 

(1,045,464 )

Net Intangible Assets

 

$ 363,091

 

 

$ 489,946

 

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

Amortization expense for the three and nine months ended September 30, 2021 and 2020 were $42,285 (2020: $51,318) and $126,855 (2020: $153,954), respectively.

 

Amortization of intangibles through 2026 is:

 

Remainder of 2021

 

$ 42,285

 

2022

 

 

161,865

 

2023

 

 

151,686

 

2024

 

 

3,051

 

2025

 

 

932

 

2026

 

 

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, 2021 and December 31, 2020. The balance of goodwill at September 30, 2021 and December 31, 2020 was $1,837,202 and $1,837,202, respectively.

 

There were no additions, deletions, and impairments recognized in the three and nine months ended September 30, 2021 and 2020. The Company considered the impact of COVID-19 on intangible assets at September 30, 2021 and December 31, 2020 and concluded that impairment analysis is not necessary.

 

4. Sale of Majority Owned Subsidiaries

 

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 trade on the OTC Pink 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.

 

The Company recognized a gain on sale of subsidiaries of $164,736 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.

 

As a result of the sale, the Company has discontinued its operations for both subsidiaries. See Note 5 - Discontinued Operations.

 

5. Discontinued Operations

 

As stated in Note 4, during the quarter ended June 30, 2021, the Company sold its majority interest in GKMP and Ibud. As a result of the sale, the net income (loss) from both subsidiaries is presented as Discontinued Operations in the statements of operations for all periods presented.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

6. Related Party Transactions

 

In addition to items disclosed in Notes 4 and 7, the Company had additional related party transactions during the periods presented.

 

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. During the three and nine months ended September 30, 2021 and 2020, the Company recorded interest expense related to these advances at the rates between 5% and 8% per annum and in the amounts of $17,854 (2020: $14,142) and $49,884 (2020: $39,144), respectively.

 

In 2020, the Company converted all of the outstanding advances at December 31, 2019 into one year notes due on December 31, 2020 bearing interest at 5%. New borrowings on notes payable in the year ended December 31, 2020 were $142,500. In April 2021, the notes were extended to December 31, 2021. The Company is currently in discussions with the note holders to covert these notes into long-term obligations, but the terms have not been finalized.

 

In the nine months ended September 30, 2021, David Tobias loaned $48,000 to the Company for notes payable bearing interest at the rate of 5% per annum due on December 31, 2021.

 

In three months ended March 31, 2021, the Company received short-term advances from the principals of GKMP in the amounts of $48,083 bringing the balance due to $67,058. These advances are not interest bearing. The advances were assumed by the acquirer of GKMP and are no longer an obligation of the Company. See Note 4.

 

At December 31, 2020, the Company had a note payable to the founder of iBud of $10,142. This note was assumed by the acquirer of IBud and is no longer an obligation of the Company. See Note 4.

 

The following tables reflect the related party advance and note payable balances.

 

 

 

Notes payable to
related parties

 

 

Accrued interest -related parties

 

 

 

September 30, 2021

 

David Tobias, CEO & Director

 

$ 992,378

 

 

$ 156,783

 

New Compendium, Affiliate

 

 

152,500

 

 

 

25,781

 

Cathy Carroll, Director

 

 

50,000

 

 

 

6,060

 

Other Affiliates

 

 

4,000

 

 

 

750

 

Totals

 

$ 1,198,878

 

 

$ 189,374

 

 

 

 

Advances from
related parties

 

 

Notes payable to
related parties

 

 

Accrued interest -related parties

 

 

 

December 31, 2020

 

David Tobias, CEO & Director

 

$ —

 

 

$ 944,378

 

 

$ 120,293

 

New Compendium, Affiliate

 

 

—

 

 

 

152,500

 

 

 

20,063

 

Keith Hyatt, Affiliate (GKMP)

 

 

13,100

 

 

 

—

 

 

 

—

 

Jason Washington, Affiliate (GKMP)

 

 

5,700

 

 

 

—

 

 

 

—

 

Chris Cope, Affiliate (iBudtender)

 

 

—

 

 

 

10,142

 

 

 

—

 

Cathy Carroll, Director

 

 

—

 

 

 

50,000

 

 

 

3,068

 

Other Affiliates

 

 

—

 

 

 

4,000

 

 

 

600

 

Totals

 

$ 18,800

 

 

$ 1,161,020

 

 

$ 144,024

 

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

In the three months and nine months ended September 30, 2021 and 2020, the Company incurred approximately $27,778 (2020: $39,160) and $83,334 (2020: $127,535), respectively, for consulting services from a nephew of the Company’s president. These services were paid in shares of the Company’s common stock. These amounts are included in the statements of operations in general and administrative expenses.

 

7. Investments

 

At September 30, 2021 and December 31, 2020, the Company owns 8,238,769 shares and 10,000,000 shares, respectively, of common stock of Medical Cannabis Payment Solutions (ticker: REFG). At September 30, 2021, the fair value of the investment in REFG was adjusted to its fair value of $76,620 based on the closing price of the stock on that date. The Company recognized unrealized gains (losses) on investment of $(83,155) and $33,000 during the nine month periods ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2021, the Company sold 1,761,231 shares for proceeds of $44,017 and recognized a gain on sale of these shares of $8,793 which is included on the statement of operations.

 

The Company also owns 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. The Company’s Chief Executive Officer and Chairman of the Board, David Tobias is a Director of CBDG. On the date of the sale, the shares were valued at $0.20 per share or $600,000 in the aggregate. See Note 4.

 

At September 30, 2021, the fair value of the investment in CBDG was adjusted to its fair value $150,300 based on the closing price of the stock on that date. The Company recognized unrealized loss on this investment of $449,700 during the nine-month period ended September 30, 2021.

 

8. Stockholders’ Equity

 

Securities Issuances

 

During the nine months ended September 30, 2021 and 2020, shares of common stock and preferred stock were issued to related and non-related parties for the purposes indicated, as follows:

 

Nine months ended September 30, 2021

 

 

 

 

 

 

 

 

 

Related Parties

 

Common

 

 

Preferred

 

 

Value

 

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 for related parties 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

 

Issuance for cash

 

 

10,466

 

 

 

—

 

 

 

5,000

 

Preferred stock converted to common

 

 

468,166

 

 

 

(468,166 )

 

 

—

 

Shares cancelled

 

 

(55,556 )

 

 

—

 

 

 

(20,000 )

Aggregate Totals

 

 

2,407,734

 

 

 

—

 

 

 

1,202,390

 

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

Nine months ended September 30, 2020

 

 

 

 

 

 

 

 

 

Related Parties

 

Common

 

 

Preferred

 

 

Value

 

David Tobias, Officer, Director

 

 

—

 

 

 

235,964

 

 

$ 136,490

 

Brad Herr, Officer, Director

 

 

335,543

 

 

 

—

 

 

 

193,034

 

Robert Tankson, Director

 

 

108,773

 

 

 

—

 

 

 

56,082

 

Cathy Carroll, Director

 

 

235,964

 

 

 

—

 

 

 

136,490

 

Kyle Powers, CEO Presto

 

 

92,593

 

 

 

—

 

 

 

44,444

 

Keith Hyatt, President GKMP

 

 

164,932

 

 

 

—

 

 

 

100,580

 

Trevor Reed, Director

 

 

39,328

 

 

 

—

 

 

 

22,749

 

Total for related parties issuances

 

 

977,133

 

 

 

235,964

 

 

 

689,869

 

Non-related party issuances

 

 

1,362,133

 

 

 

—

 

 

 

865,339

 

Total shares for services

 

 

2,339,266

 

 

 

235,964

 

 

 

1,555,208

 

Preferred stock converted to common

 

 

340,172

 

 

 

(340,172 )

 

 

—

 

Acquisition of GKMP assets, see Note 7

 

 

100,000

 

 

 

—

 

 

 

109,000

 

Shares issued for stock payable

 

 

963,238

 

 

 

223,214

 

 

 

640,685

 

Issuance for cash

 

 

50,000

 

 

 

—

 

 

 

25,000

 

Aggregate Totals

 

 

3,792,676

 

 

 

119,006

 

 

$ 2,329,893

 

 

During the nine months ended September 30, 2021 and 2020, David Tobias, Chief Executive Officer and Director, converted 468,166 and 340,172 shares of preferred stock into common stock in accordance with the terms of the preferred stock, respectively.

 

9. Commitments and Contingencies

 

Leases.

 

PrestoCorp leases office space through WeWork in New York for $2,444 per month on a month to month arrangement. Rent expense for the three and nine months ended September 30, 2021 and 2020 was $10,739 (2020: $7,332) and $20,219 (2020: $25,451), respectively.

 

GKMP leased a facility in Anaheim California where its operations are based. The Anaheim lease included approximately 16,000 square feet of combined office, manufacturing, and warehouse space. Rent expense for the three and nine months ended September 30, 2021 and 2020 was $10,000 (2020: $8,647) and $77,119 (2020: $17,566), respectively.

 

GKMP also leased a commercial printer and a bottle filling line, both of which are used in its manufacturing and packaging operations. For the three and nine month periods ended September 30, 2021 and 2020, the Company recognized $683 and 7,555, respectively, in lease expense on these two items. Lease expense is reported as cost of goods sold in the consolidated statements of operations.

 

On April 22, 2021, the Company sold its majority interest in GKMP and these lease obligations were assumed by the acquirer of GKMP and are no longer an obligation of the Company. See Note 4.

 

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, 2021, no claims are outstanding.

 

Shares in Escrow. At September 30, 2021 and December 31, 2020, the Company has -0- and 419,475, respectively, shares of common stock in escrow as part of the acquisition of PrestoCorp. These shares were issuable in certain circumstances to the principals of PrestoCorp based on performance of the PrestoCorp business. The escrow account originally contained 629,213 shares of common stock but 209,738 shares were cancelled in 2018 when the performance requirements related to those shares were not met. Another 209,738 shares were released to the principals in January 2021 upon satisfaction of performance requirements for which compensation expense of $111,161 was recognized during the nine month period ended September 30, 2021.

 

 
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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

 

In August 2020, the Company entered into discussions with the principals of PrestoCorp regarding the escrowed shares and various compensation matters relating to their work for the Company. On May 31, 2021, the Company and the Principals of PrestoCorp entered into a comprehensive settlement agreement providing for:

 

 

•

Cancellation of 162,037 shares held in escrow

•

Release of 47,700 shares held in escrow as additional compensation to the principals of PrestoCorp in the amount of $24,804 based on the closing price of the common stock on the date of the settlement.

•

Return of the 500 escrowed shares of PrestoCorp to PrestoCorp, subject to adjustment if the principals of PrestoCorp terminate their employment prior to expiration of the three-year term.

•

Extension of employment agreements for the principals of PrestoCorp for three years at adjusted salary levels to reflect current market rates.

•

Conversion of advances to the Company from PrestoCorp into a intercompany note payable of $318,155 bearing interest at 4% payable over a 60-month term at monthly payments of $5,840.

 

10. COVID- 19:

 

The outbreak of COVID-19, the coronavirus, has grown both in the United States and globally, and related government and private sector responsive actions have adversely affected the Company’s business operations. The World Health Organization has declared Covid-19 to be a global pandemic, resulting in an economic downturn and changes in global economic policy that will reduce demand for the Company’s products and may have an adverse impact on the Company’s business, operating results and financial condition.

 

 
FS - 14

 

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