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: 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)
evada 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 iler ☐ 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
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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
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CANNABIS SATIVA, INC .
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 and 2021- UNAUDITED
Non-
controlling
Preferred Stock Common Stock Additional Paid-In Accumulated Non-controlling Interest - 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.
FS - 4
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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.
FS - 5
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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
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.
FS - 6
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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 , the Company had additional related party transactions during the three and months ended 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.
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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.
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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.
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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.
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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.
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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.
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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)
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