10-Q
Dogecoin Cash, Inc. (DOGP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
|---|---|
| ACT OF 1934 | |
| For the quarterly period ended: March 31, 2021 | |
| or | |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
| ACT OF 1934 | |
| For the transition period from: _____________ to _____________<br><br><br><br><br><br>Commission File Number: 000-53571 |
Cannabis Sativa, Inc.
(Exact name of registrant as specified in its charter)
| NEVADA | 20-1898270 |
|---|---|
| (State or Other Jurisdiction | (I.R.S. Employer |
| of Incorporation) | Identification No.) |
450 Hillside Dr. #A224 , Mesquite, Nevada 89027
(Address of Principal Executive Office) (Zip Code)
(702) 762-3123
(Registrant's telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered. |
|---|---|---|
| None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
1
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 May 10, 2021, is 28,731,622.
2
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
Three Months Ended March 31, 2021 compared with the Three Months Ended March 31, 2020
The Company operates two business segments: PrestoCorp, Inc. (“PrestoCorp”), a telehealth business, and GK Manufacturing and Packaging, Inc. (“GKMP”), a contract manufacturing business. The results of PrestoCorp and GKMP are consolidated in the Company’s financial statements. Discussion of results of operations includes the consolidated results and the business segment results in the following sections.
| Three Months Ended | ||||
|---|---|---|---|---|
| A | B | A-B | ||
| March 31, 2021 | March 31, 2020 | Change | Change % | |
| REVENUE | $ 557,323 | $ 493,140 | $ 64,183 | 13% |
| Cost of revenues | 265,014 | 187,335 | 77,679 | 41% |
| Cost of sales % of total sales | 48% | 38% | 10% | |
| Gross profit | 292,309 | 305,805 | (13,496) | -4% |
| Gross profit % of sales | 52% | 62% | -10% | |
| OPERATING EXPENSES | ||||
| Professional fees | 119,739 | 279,086 | (159,347) | -57% |
| Depreciation and amortization | 47,582 | 51,635 | (4,053) | -8% |
| Wages and salaries | 208,462 | 184,909 | 23,553 | 13% |
| Advertising | 93,449 | 87,088 | 6,361 | 7% |
| General and administrative | 457,792 | 375,862 | 81,930 | 22% |
| Total operating expenses | 927,024 | 978,580 | (51,556) | -5% |
| NET LOSS FROM OPERATIONS | (634,715) | (672,775) | 38,060 | -6% |
Revenues grew 13% in the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Revenues in the first quarter of 2021 increased primarily due to growth in revenue of GKMP. GKMP began operations in the first quarter of 2020 and reported nominal revenues in that quarter. Revenues reported by GKMP were up 374% in the first quarter of 2021 compared the first quarter of 2020. GKMP operations however, has not achieved positive margins and the increase in revenue did not support the added cost of the contract manufacturing operations. As a result, margins decreased in the three months ended March 31, 2021 compared to the same period in 2020. See discussion under Business Segments, below.
3
Net operating loss for the three-month period ended March 31, 2021 was $634,715 compared to net loss of $672,775 for the three-month period ended March 31, 2020. Total operating expenses were $927,024 for the three-month period ended March 31, 2021 and $978,580 for the three-month period ended March 31, 2020. The decrease in total operating costs was largely attributable to a significant reduction of 57% in professional fees partially offset by a 22% increase in general and administrative expenses and a 13% increase in wages and salaries brought on by the addition of GKMP operations. The increase in general and administrative expenses was primarily the result of compensation paid to the principals of PrestoCorp.
Business Segment Results.
| Three months ended | ||||
|---|---|---|---|---|
| A | B | A-B | ||
| PRESTOCORP | March 31, 2021 | March 31, 2020 | Change | Change % |
| REVENUE | $ 482,350 | $ 478,231 | $ 4,119 | 1% |
| Cost of revenues | 183,503 | 183,874 | (371) | 0% |
| Cost of revenues % of total sales | 38% | 38% | 0% | |
| Gross profit | 298,847 | 294,357 | 4,490 | 2% |
| Gross profit % of sales | 62% | 62% | 0% |
PrestoCorp revenues increase slightly in the first quarter of 2021 compared to the same period in 2020. The relatively flat change in sales was the result of a revenue spike in the first quarter of 2020 when the COVID 19 pandemic was starting, telehealth regulations had begun to ease, and the Company had expanded its market footprint. That rapid rise in 2020 was not sustained in 2021, primarily due to a leveling off of demand after the 2020 rush. Management expects that growth in demand for our services will be slower than in 2020 but we expect to see continued growth through the remainder of the year as we expand into new states that recently legalized medical marijuana and as consumers continue to be more accepting of telehealth services. Margins were consistent with prior periods at 62% of revenue.
| Three months ended | ||||
|---|---|---|---|---|
| A | B | A-B | ||
| GKMP | March 31, 2021 | March 31, 2020 | Change | Change % |
| REVENUE | $ 74,973 | $ 15,830 | $ 59,143 | 374% |
| Cost of revenues | 81,511 | 3,461 | 78,050 | 2255% |
| Cost of revenues % of total sales | 109% | 22% | 87% | |
| Gross profit (loss) | (6,538) | 12,369 | (18,907) | -153% |
| Gross profit % of sales | -9% | 78% | -87% |
GKMP was newly organized in the first quarter of 2020 and reported only nominal revenues in the three months ended March 31, 2020. While revenue grew by 374% in the first quarter of 2021, cost of sales increased by 2255% and GKMP generated negative gross margins. The Company experienced headwinds from the COVID 19 pandemic which were reflected in slow sales as customers delayed buying decisions while they assessed market demand for their products. As a result, GKMP has operated at a loss since inception and currently does not have sufficient business to achieve profitability.
While management of GKMP reports sales opportunities in 2021, they have yet to turn into firm orders and there is substantial uncertainty regarding the timing when GKMP will be able to achieve breakeven results. Management of CBDS is currently evaluating options, including sale of CBDS’s 51% ownership of GKMP to another public company, and it appears likely that this sale will occur in the second quarter 2021. If the discussions regarding sale of GKMP are finalized, CBDS will exit the contract manufacturing space.
In April 2021, the Company entered into discussions with THC Farmaceuticals, Inc. (“CBDG”) a company related to CBDS through interlocking ownership by David Tobias, president, regarding sale of CBDS’s majority ownership positions in GK Manufacturing and Packaging, Inc. and iBudtender Inc. The discussions were triggered by an interest on the part of CBDS management to refocus business efforts on growing PrestoCorp while simplifying the financial statements by eliminating assets that are no longer considered essential to the Company’s core focus. Management believes that the sale of GKMP and iBudtender will free up management time to seek other acquisitions that are more closely aligned with the PrestoCorp business model. The agreement with CBDG has not yet been finalized pending completion of additional due diligence review by both CBDS and CBDG, but it is likely that the sale will be finalized in the second quarter of 2021. Consideration for the sale of the majority interests will consist of 1,500,000 shares of CBDG preferred stock and 1,500,000 shares of CBDG common stock. The due diligence investigation on this sale is ongoing.
4
Liquidity and Capital Resources
Net cash used in operating activities for the three-month period ended March 31, 2021, was $87,217. During the same period, our cash decreased by $13,459. Financing activities generated $73,758 in the three months from advances from related parties totaling $48,258, from related party notes payable totaling $20,500, and from the sale of common stock totaling $5,000. We also reported stock-based compensation of $489,986 during the three-month period from issuance of common and preferred stock as compensation for services performed by officers, directors, and contractors. On March 31, 2021, our cash position was $308,648. Given the level of operations in our first quarter, we expect that additional funds will be required.
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 $419,990 and $616,407, respectively, for the three-month periods ended March 31, 2021 and 2020, and had an accumulated deficit of $77,448,329 as of March 31, 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.
Management is currently evaluating several 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. 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.
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. To date, the disruption did not materially impact the Company’s financial statements. The pandemic has had a positive impact on the telehealth business, but this positive impact was partially offset by a negative impact on our start-up operations in GKMP. 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 than in the first quarter.
The effects of the continued outbreak of COVID-19 and related government responses could also include extended disruptions to supply chains and capital markets, reduced labor availability and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts on the Company, including our ability to operate our facilities. To date, there have been no material adverse impacts to the Registrants’ operations due to COVID-19.
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.
Off Balance Sheet Arrangements
None
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required.
5
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 March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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 March 31, 2021, the board of directors issued 669,301 shares of unregistered common stock and 73,530 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 209,701 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 dates the shares became issuable. The company also issued 10,466 shares to one individual pursuant to their investment in a private offering. 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.
6
Item 6. Exhibits.
The following documents are included as exhibits to this report:
(a) Exhibits
| Exhibit<br><br><br>Number | SEC Reference Number | Title of Document | Notes |
|---|---|---|---|
| 3.1 | 3 | Articles of Incorporation | (1) |
| 3.2 | 3 | Bylaws | (1) |
| 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 | (2) | |
| 101.SCH | XBRL Taxonomy Extension Schema | (2) | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | (2) | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | (2) | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | (2) | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | (2) |
(1)Incorporated by reference to Exhibits 3.01 and 3.02 of the Company's Registration Statement on Form 10 filed January 28, 2009.
(2)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 or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.
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: May 17, 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 months ended March 31, 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<br> through <br>FS – 20 |
FS - 1
CANNABIS SATIVA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS – UNAUDITED
| March 31, | December 31, | |
|---|---|---|
| 2021 | 2020 | |
| ASSETS | ||
| Current Assets | ||
| Cash | $308,648 | $322,107 |
| Accounts receivable, net | 2,495 | 2,495 |
| Inventories | 29,435 | 56,485 |
| Investment in equity security, at fair value | 346,000 | 195,000 |
| Other current assets | 61,132 | 55,199 |
| Total Current Assets | 747,710 | 631,286 |
| Other Assets | ||
| Property and equipment, net | 184,895 | 199,120 |
| Intangible assets, net | 447,661 | 489,946 |
| Deposits and other assets | 9,250 | 9,250 |
| Right to use asset | 43,796 | 47,312 |
| Goodwill | 1,837,202 | 1,837,202 |
| Total Assets | $3,270,514 | $3,214,116 |
| LIABILITIES AND STOCKHOLDERS EQUITY | ||
| Current Liabilities | ||
| Accounts payable | $198,116 | $179,200 |
| Accrued interest - related parties | 158,875 | 144,024 |
| Advances from related parties | 67,058 | 18,800 |
| Notes payable to related parties | 1,181,520 | 1,161,020 |
| Customer deposits | - | 25,545 |
| Operating lease liability - current | 35,672 | 31,891 |
| Total Current Liabilities | 1,641,241 | 1,560,480 |
| Long-Term Liabilities | ||
| Operating lease liability - long term | 8,124 | 15,421 |
| Total Liabilities | 1,649,365 | 1,575,901 |
| Commitments and contingencies (Notes 7 and 9) | ||
| Stockholders' Equity: | ||
| Preferred stock $0.001 par value; 5,000,000 shares authorized;<br>995,692 and 1,090,128 issued and outstanding, respectively | 996 | 1,090 |
| Common stock $0.001 par value; 45,000,000 shares authorized;<br>28,455,056 and 27,453,178 shares issued and outstanding, respectively | 28,455 | 27,455 |
| Additional paid-in capital | 78,134,094 | 77,660,014 |
| Accumulated deficit | (77,448,329) | (77,028,339) |
| Total Cannabis Sativa, Inc. Stockholders' Equity | 715,216 | 660,220 |
| Non-Controlling Interests | 905,933 | 977,995 |
| Total Stockholders' Equity | 1,621,149 | 1,638,215 |
| Total Liabilities and Stockholders' Equity | $3,270,514 | $3,214,116 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FS - 2
CANNABIS SATIVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
| For the three months ended March 31, | 2021 | 2020 |
|---|---|---|
| Revenues | $557,323 | $493,140 |
| Cost of Revenues | 265,014 | 187,335 |
| Gross Profit | 292,309 | 305,805 |
| Operating Expenses | ||
| Professional fees | 119,739 | 279,086 |
| Depreciation and amortization | 47,582 | 51,635 |
| Wages and salaries | 208,462 | 184,909 |
| Advertising | 93,449 | 87,088 |
| General and administrative | 457,792 | 375,862 |
| Total Operating Expenses | 927,024 | 978,580 |
| Loss from Operations | (634,715) | (672,775) |
| Other (Income) and Expenses | ||
| Unrealized gain on investment | (151,000) | (19,000) |
| Interest expense | 8,337 | 13,552 |
| Total Other (Income) Expenses, Net | (142,663) | (5,448) |
| Loss Before Income Taxes | (492,052) | (667,327) |
| Income Taxes | — | — |
| Net Loss for the period | (492,052) | (667,327) |
| Loss attributable to non-controlling interest - GK Manufacturing | (79,495) | (54,353) |
| Loss attributable to non-controlling interest - iBudTender | (970) | (969) |
| Income attributable to non-controlling interest - PrestoCorp | 8,403 | 4,402 |
| Net Loss for the Period Attributable To Cannabis Sativa, Inc. | $(419,990) | $(616,407) |
| Net Loss for the Period per Common Share: | ||
| Basic & Diluted | $(0.02) | $(0.03) |
| Weighted Average Common Shares Outstanding: | ||
| Basic & Diluted | 27,988,129 | 23,510,224 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FS - 3
CANNABIS SATIVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2021 AND 2020 - UNAUDITED
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Non-<br>controlling <br>Interest - | Non-<br>controlling <br>Interest | Non<br>-controlling Interest - GK | ||||
|---|---|---|---|---|---|---|---|---|---|---|
| Shares | Amount | Shares | Amount | Capital | Deficit | Prestocorp | iBudTender | Manufacturing | Total | |
| 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 | (80,337) | (80) | 80,337 | 80 | — | — | — | — | — | — |
| Acquisition of GKMP assets | — | — | 100,000 | 100 | 108,900 | — | — | — | 104,725 | 213,725 |
| Shares issued for services | 89,286 | 89 | 973,380 | 973 | 591,013 | — | — | — | — | 592,075 |
| Shares issued for stock payable | 223,214 | 223 | 963,238 | 963 | 639,499 | — | — | — | — | 640,685 |
| Net income (loss) for the period | — | — | — | — | — | (616,407) | 4,402 | (969) | (54,353) | (667,327) |
| Balance - March 31, 2020 | 1,254,012 | 1,253 | 24,341,154 | 24,342 | 76,173,444 | (75,471,554) | 1,111,882 | 50,173 | 50,372 | 1,939,912 |
| 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 | (167,966) | (167) | 167,966 | 167 | — | — | — | — | — | — |
| Cash proceeds from sale of stock | — | — | 10,466 | 10 | 4,990 | — | — | — | — | 5,000 |
| Shares issued for services | 73,530 | 73 | 879,002 | 880 | 489,033 | — | — | — | — | 489,986 |
| Shares cancelled | — | — | (55,556) | (57) | (19,943) | — | — | — | — | (20,000) |
| Net income (loss) for the period | — | — | — | — | — | (419,990) | 8,403 | (970) | (79,495) | (492,052) |
| Balance - March 31, 2021 | 995,692 | $996 | 28,455,056 | $28,455 | $78,134,094 | $(77,448,329) | $1,202,201 | $46,294 | $(342,562) | $1,621,149 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FS - 4
CANNABIS SATIVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
| For the three months ended March 31, | 2021 | 2020 |
|---|---|---|
| Cash Flows from Operating Activities: | ||
| Net loss | $(492,052) | $(667,327) |
| Adjustments to reconcile net loss to net cash <br>provided (used) by operating activities: | ||
| Unrealized gain on investment | (151,000) | (19,000) |
| Cancellation of shares for services | (20,000) | — |
| Depreciation and amortization | 47,582 | 51,635 |
| Depreciation included in cost of revenues | 8,929 | — |
| Stock issued for services | 489,986 | 592,075 |
| Changes in Assets and Liabilities: | ||
| Accounts receivable | — | (30) |
| Inventories | 27,050 | (16,905) |
| Prepaid consulting and other current assets | (5,933) | (5,824) |
| Deposits and other assets | — | (53,000) |
| Accounts payable and accrued expenses | 18,915 | 10,979 |
| Accrued interest - related parties | 14,851 | 12,788 |
| Customer deposits | (25,545) | — |
| Net Cash Used by Operating Activities | (87,217) | (94,609) |
| Cash Flows from Investing Activities: | ||
| Purchase of fixed assets | — | (11,867) |
| Advance to GK settled with asset acquisition | — | 50,000 |
| Net Cash Used in Investing Activities | — | 38,133 |
| Cash Flows from Financing Activities: | ||
| Proceeds from sale of stock | 5,000 | — |
| Proceeds from advances from related parties | 48,258 | — |
| Proceeds from related parties notes payable, net | 20,500 | 65,500 |
| Net Cash Provided by Financing Activities | 73,758 | 65,500 |
| NET CHANGE IN CASH | (13,459) | 9,024 |
| CASH AT BEGINNING OF PERIOD | 322,107 | 336,107 |
| CASH AT END OF PERIOD | $308,648 | $345,131 |
| 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 liablility from acquiring right to use asset | $— | $21,120 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FS - 5
CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the three-month periods ended March 31, 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. (“iBudtender”), 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”), and Eden Holdings LLC (“Eden”). PrestoCorp and GK Manufacturing are both 51% owned subsidiaries and iBudtender is a 50.1% owned subsidiary. Wild Earth, KPAL, Hi Brands, and Eden are wholly owned subsidiaries. Currently, PrestoCorp, GKMP and iBudtender are operating subsidiaries, although iBudtender is not currently generating any revenue. The Company is reviewing opportunities for business development relating to Wild Earth, KPAL, and Hi Brands. Eden is not operating and had no activity for the three months ended March 31, 2021 and 2020.
Our primary operations in the three months ended March 31, 2021 were through PrestoCorp, which provides telemedicine online referral services for customers desiring medical marijuana cards in states where medical marijuana has been legalized. GKMP commenced operations during the second quarter of 2020. The Company is also 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. iBudtender is also working to complete and commercialize an application (the iBudtender App) that will provide a convenient means for sharing information about cannabis products, patients and businesses.
Basis of Presentation
Operating results for the three months ended March 31, 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 March 31, 2021, and its results of operations, cash flows, and changes in stockholders’ equity for the three months ended March 31, 2021. The financial statements do not include all of the information and notes required by GAAP for complete financial statements.
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 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; Wild Earth Naturals, Inc., Hi-Brands International, Inc., Eden Holdings LLC, our 50.1% ownership of iBudtender Inc., our 51% ownership of PrestoCorp, and our 51% ownership of GK Manufacturing Inc., (collectively referred to as the “Company”). All significant inter-company balances have been eliminated in consolidation. We hold controlling interests in iBudTender, PrestoCorp and GK Manufacturing and exercise control through management practices and oversight by the Company’s Board of Directors. GK Manufacturing was established in February 2020.
Going Concern:
The Company has an accumulated deficit of $77,448,329 at March 31, 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 accounting principles generally accepted in the Unites States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions by management affect the allowance for doubtful accounts, possible impairment of long-lived assets (including goodwill and intangible assets), the provision for income taxes and related deferred tax accounts, contingencies, and the value attributed to stock-based awards.
Inventories:
As of March 31, 2021 and December 31, 2020, the Company had $29,435 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. At March 31, 2021 and 2020 the Company had 125,000 and 49,900 outstanding warrants, respectively, that would be dilutive to future periods net income. Also, at March 31, 2021 and 2020 the Company had 995,692 and
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
1,254,012 shares of convertible Series A preferred stock, respectively, that would be dilutive to future periods net income.
Revenue Recognition:
The Company currently operates two divisions, the telehealth business operated through PrestoCorp and the contract manufacturing business operated through GKMP.
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 recognizes revenue from manufacturing operations when the products are shipped to the customer. In some instances, customers provide inventory for the manufacturing process and GKMP provides labor, supplies and manufacturing operations to mix and package the products. Revenues are recognized when the manufacturing and packaging process are completed and the goods have been shipped to the customer. In other instances, the Company acquires inventory and manufactures products for customers and/or to hold 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 is recognized when the product is shipped to the customer or distributor. Shipment terms are 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.
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
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
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. At March 31, 2021 and December 31, 2020, we do not have any indefinite-lived intangible assets.
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. To assess impairment, the fair value of the reporting unit is evaluated on qualitative factors. 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. A goodwill impairment loss is recognized for the excess of the carrying value of goodwill for the reporting unit over its implied fair value.
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.
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
2. Property and Equipment
Property and equipment consisted **** of the following at March 31, 2021 and December 31, 2020:
| March 31, 2021 | December 31, 2020 | |
|---|---|---|
| Furniture and Equipment | $225,629 | $225,629 |
| Leasehold Improvements | 17,315 | 17,315 |
| 242,944 | 242,944 | |
| Less: Accumulated Depreciation | (58,049) | (43,824) |
| Net Property and Equipment | $184,895 | $199,120 |
Depreciation expense for the three months ended March 31, 2021 and 2020 was $14,226 and $317, respectively.
3. Intangibles and Goodwill
All of the Company’s intangibles are definite-lived assets with lives of 5 to 10 years. Intangibles consisted of the following at March 31, 2021 and December 31, 2020:
| March 31, 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 | (1,087,749) | (1,045,464) |
| Net Intangible Assets | $447,661 | $489,946 |
Amortization expense for the three months ended March 31, 2021 and 2020 was $42,285 and $51,318, respectively.
Amortization of intangibles for each of the next five years is:
| 2022 | $169,142 |
|---|---|
| 2023 | 157,501 |
| 2024 | 116,115 |
| 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 March 31, 2021 and December 31, 2020. The balance of goodwill at March 31, 2021 and December 31, 2020 was $1,837,202 and $1,837,202, respectively.
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
There were no additions, deletions, and impairments recognized in the three months ended March 31, 2021 and 2020. The Company considered the impact of COVID-19 on intangible assets at March 31, 2021 and December 31, 2020 and concluded that annual impairment analysis is not necessary.
4. Related Party Transactions
The Company has received funds from borrowings on notes payable and advances from related parties and officers 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 months ended March 31, 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 $8,337 and $13,552, 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 three months ended March 31, 2021, David Tobias advanced $20,500 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 $48,258. At March 31, 2021, the Company owed the principals of GKMP an aggregate of $67,058. These advances were not pursuant to notes payable and are expected to be repaid in 2021. These advances are not interest bearing.
At March 31, 2021 and December 31, 2020, the Company had a note payable to the founder of iBudtender of $10,142 and $10,142, respectively. The note earns interest at 0% and was due on December 2019. The note has not yet been paid pending further review of the iBudtender business and adjustment of the agreements between the parties.
The following tables reflect the related party advance and note payable balances.
| Advances from<br>related parties | Notes payable to <br>related parties | Accrued interest - related parties | |
|---|---|---|---|
| March 31, 2021 | |||
| David Tobias, CEO & Director | $- | $964,878 | $132,201 |
| New Compendium, Affiliate | - | 152,500 | 21,969 |
| Keith Hyatt, Affiliate (GKMP) | 46,682 | - | - |
| Jason Washington, Affiliate (GKMP) | 20,376 | - | - |
| Chris Cope, Affilitate (iBudtender) | - | 10,142 | - |
| Cathy Carroll, Director | - | 50,000 | 4,055 |
| Other Affiliates | - | 4,000 | 650 |
| Totals | $67,058 | $1,181,520 | $158,875 |
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
| Advances from <br>related parties | Notes payable to <br>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, Affilitate (iBudtender) | - | 10,142 | - |
| Cathy Carroll, Director | - | 50,000 | 3,068 |
| Other Affiliates | - | 4,000 | 600 |
| Totals | $18,800 | $1,161,020 | $144,024 |
In the three months ended March 31, 2021 and 2020, the Company incurred approximately $28,000 and $45,000 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.
5. Investments
The Company owns 10,000,000 shares of common stock of Medical Cannabis Payment Solutions (ticker: REFG). At March 31, 2021, the fair value of the investment in REFG was adjusted to $346,000 based on the closing price of the stock on that date, which resulted in an unrealized gain on investment of $151,000 during the three month period ended March 31, 2021.
6. Stockholders’ Equity
Securities Issuances
During the three months ended March 31, 2021 and 2020, shares of common stock and preferred stock were issued to related and non-related parties for the purposes indicated as follows:
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
| Three months ended March 31, 2021 | Common Shares | Preferred Shares | Value |
|---|---|---|---|
| Related party issuances | |||
| David Tobias, Officer, Director | - | 73,530 | $37,500 |
| Brad Herr, Officer, Director | 122,550 | - | 62,500 |
| Robert Tankson, Director | 54,203 | - | 28,482 |
| Cathy Carroll, Director | 73,530 | - | 37,500 |
| Trevor Reed, Director | 12,255 | - | 6,250 |
| Keith Hyatt, President GKMP | 35,404 | - | 18,056 |
| Kyle Powers, CEO PrestoCorp | 167,790 | - | 88,929 |
| Total related party issuances | 465,732 | 73,530 | 279,217 |
| Non-related party issuances | 413,270 | - | 210,769 |
| Total shares for services | 879,002 | 73,530 | 489,986 |
| Issuance for cash | 10,466 | - | 5,000 |
| Preferred stock converted to common | 167,966 | (167,966) | - |
| Shares cancelled | (55,556) | - | (20,000) |
| Aggregate totals | 1,001,878 | (94,436) | $474,986 |
| Three months ended March 31, 2020 | Common Shares | Preferred Shares | Value |
| --- | --- | --- | --- |
| Related Party issuances | |||
| David Tobias, Officer, Director | - | 89,286 | $42,857 |
| Brad E. Herr, CFO | 131,964 | - | 63,342 |
| Robert Tankson, Director | 84,326 | - | 40,476 |
| Cathy Carroll, Director | 89,286 | - | 42,857 |
| Trevor Reed, Director | 14,881 | - | 7,142 |
| Keith Hayatt, President GKMP | 37,616 | - | 18,056 |
| Kyle Powers, President PrestoCorp | 92,593 | - | 44,444 |
| Total related party issuances | 450,666 | 89,286 | 259,174 |
| Total unrelated party issuances | 522,714 | - | 332,901 |
| Total shares for services | 973,380 | 89,286 | 592,075 |
| Preferred stock converted to common | 80,337 | (80,337) | - |
| Acquisition of GKMP assets, see Note 7 | 100,000 | - | 109,000 |
| Shares issued for stock payable | 963,238 | 223,214 | 640,685 |
| Aggregate Totals | 2,116,955 | 232,163 | $1,341,760 |
During the three months ended March 31, 2021 and 2020, David Tobias, Chief Executive Officer and Director, converted 167,966 and 80,337 shares of preferred stock into common stock in accordance with the terms of the preferred stock, respectively.
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
7. Acquisition of GK Manufacturing and Packaging, Inc.
In the year ended December 31, 2020, the Company acquired assets and established GK Manufacturing and Packaging, Inc. (“GKMP”) to conduct contract manufacturing operations for customers seeking to obtain CBD infused products, including salves, tinctures, edibles, and other products containing CBD. In connection with the acquisition, the Company issued two key individuals an aggregate of 100,000 shares of common stock with a fair value of $109,000 for a 51% interest in GKMP. The 49% non-controlling interest is considered a related party to the Company because the non-controlling interest is owned, in part, by the president of GKMP.
Employment Agreements. Upon completion of the acquisition of assets for GKMP, GKMP entered into employment agreements with the two key individuals. The employment agreements are terminable at any time with or without cause, but in the event of termination without cause, the salary will continue for six months. Salary for the president of GKMP is set at $65,000 per annum and salary for the Vice President – Sales and Marketing is set at $50,000 per annum. The agreements also provide the individuals with expense reimbursements and other employee benefits comparable to those being offered to the other employees of the Company. Currently, GKMP has not established any other employee benefit programs.
Contingent Consideration. In connection with the GKMP asset acquisition, the Company agreed to pay additional consideration to the two key individuals employed by GKMP upon achievement of certain performance goals. If GKMP net revenues exceed $3,000,000 and net income exceeds 25% of net revenues in the year ended December 31, 2020, an additional $1,000,000 in consideration would be due to the key individuals. If GKMP net revenues exceed $6,000,000 and net income exceeds 25% of net revenues in the year ended December 31, 2020, an additional $500,000 in consideration would be due to the key individuals ($1,500,000 in the aggregate). The additional consideration amounts, if any, would be payable in stock at the average closing price of the shares in the five trading days prior to the date of payment. During the year ended December 31, 2020, GKMP had net revenues of approximately $95,000 and no additional consideration was paid under this provision.
Working Capital Obligation. In connection with the GKMP asset acquisition, the Company agreed to provide up to an additional $500,000 in working capital to GKMP. The full amount of the working capital commitment to GKMP was funded in the year ended December 31, 2020.
8. Business Segments and Revenues
The Company is currently organized and managed in two segments which represent our operating units: PrestoCorp and GKMP. PrestoCorp is a telehealth business and GKMP is a contract manufacturing business. General corporate activities not associated with these segments are presented as “other.” Other income (expense) items are considered general corporate items and are not allocated to our segments.
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
| Property and equipment, net | March 31, 2021 | December 31, 2020 |
|---|---|---|
| PrestoCorp | $2,618 | 3,148 |
| GKMP | 180,239 | 193,616 |
| Other | 2,038 | 2,356 |
| Total | $184,895 | $199,120 |
| Capital expenditures | Three months ended | Three months ended |
| --- | --- | --- |
| March 31, 2021 | March 31, 2020 | |
| PrestoCorp | $- | $2,660 |
| GKMP | - | 9,207 |
| Total | $- | $11,867 |
Financial information for each operating segment is as follows:
| Three months ended | Three months ended | |
|---|---|---|
| March 31, 2021 | March 31, 2020 | |
| PrestoCorp | ||
| Revenue | $482,350 | $478,231 |
| Cost of revenue | 183,503 | 183,874 |
| Gross profit | 298,847 | 294,357 |
| Depreciation and amortization | $530 | $- |
| GKMP | ||
| Revenue | 74,973 | 15,830 |
| Cost of revenue | 81,511 | 3,461 |
| Gross profit (loss) | (6,538) | 12,369 |
| Depreciation and amortization | $13,378 | $- |
| OTHER | ||
| Revenue | - | 79 |
| Depreciation and amortization | $42,603 | $51,635 |
| Total | ||
| Revenue | 557,323 | 494,140 |
| Cost of revenue | 265,014 | 187,335 |
| Gross profit | $292,309 | $306,805 |
| Depreciation and amortization | $56,511 | $51,635 |
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CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
Revenues from major customers by operating segments are as follows:
| Three months ended | Three months ended | |
|---|---|---|
| Customer Concentrations | March 31, 2021 | March 31, 2020 |
| PrestoCorp | ||
| Total PrestoCorp concentrations | $- | $- |
| % of PrestoCorp revenues | 0% | 0% |
| GKMP | ||
| Customer A | - | 11,950 |
| Customer B | - | 3,000 |
| Customer C | 35,503 | - |
| Customer D | 6,962 | - |
| Total GKMP conentrations | 42,465 | 14,950 |
| % of GKMP revenues | 57% | 94% |
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 months ended March 31, 2021 and 2020 was $4,888 and $7,322, respectively.
GKMP leases a facility in Anaheim California where its operations are based. The Anaheim lease includes approximately 16,000 square feet of combined office, manufacturing, and warehouse space. Rent expense for the three months ended March 31, 2021 and 2020 was $67,119 and $24,740, respectively.
GKMP leases a commercial printer and a bottle filling line, both of which are used in its manufacturing and packaging operations. For the three months ended March 31, 2021 and 2020, the Company recognized $6,872 and nil, respectively, in lease expense on these two items. Lease expense is reported as cost of goods sold in the consolidated statements of operations. At March 31, 2021, the remaining lease term is 27 months on the printer and 12 months on the bottle filling line. The lessors hold deposits of $1,250 on the printer lease and $8,500 on the bottle filling line. Future minimum lease payments over the remaining term are as follows:
| From April 1, 2021 to March 31, 2022 | $ 31,473 |
|---|---|
| From April 1, 2022 to March 31, 2023 | 14,473 |
| From April 1, 2023 to March 31, 2024 | 4,095 |
| Total | 50,041 |
| Less imputed interest | (6,245) |
| Net lease liability | 43,796 |
| Current portion | (35,672) |
| Long term | $ 8,124 |
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
FS - 16
CANNABIS SATIVA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
For the Three Months Ended March 31, 2021 and 2020
intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject us to litigation. As of March 31, 2021, one claim was pending or threatened relating to general business disputes and accounts payable for services. Management believes the outcome of currently pending claim is not likely to have a material effect on our consolidated financial position and results of operations.
Shares in Escrow. At March 31, 2021 and December 31, 2020, the Company has 209,738 and 419,475, respectively, shares of common stock in escrow as part of the acquisition of PrestoCorp. These shares are issuable in certain circumstances to the principals of PrestoCorp based on performance of the PrestoCorp business. The escrowed shares are not counted in the outstanding stock of the Company and will be considered compensation to the principals if and when issued. 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 three month period ended March 31, 2021. The escrow account includes 500 shares of PrestoCorp common stock which is distributable either back to the principals of PrestoCorp or to the Company depending on certain minimum performance requirements which extend into 2021. If all of the PrestoCorp shares are ultimately distributed to the Company, the shares would have the effect of increasing the Company’s ownership of PrestoCorp to 61% from the current level of 51%.
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 through the date of the discussions. The principals of PrestoCorp have requested adjustment of their compensation and bonus structure retroactive back to January 1, 2021 and have requested the right to earn back the 500 shares of PrestoCorp common stock over a three-year period ending on December 31, 2023 based on future performance. The Company is still in discussions with the principals of PrestoCorp regarding repayment of advances made to PrestoCorp by CBDS for operating expenses and compensation. Management believes this remaining issue will be amicably resolved in the second quarter, at which point the disagreement will be fully resolved. No contingent liability has been established for this disagreement. Management does not believe the outcome of this matter will have a material impact on the financial statements or the results of operations even if the matter required a more formal dispute resolution process and the PrestoCorp principals prevail on their claims.
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.
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Exhibit 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David Tobias, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, of Cannabis Sativa, Inc., (the “Registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and 5.The Registrant’s other certifying officer(s) and I have disclosed to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: | May 17, 2021 | By: | /s/ David Tobias |
|---|---|---|---|
| Principal, Principal Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brad E. Herr, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, of Cannabis Sativa, Inc., (the “Registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and 5.The Registrant’s other certifying officer(s) and I have disclosed to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: | May 17, 2021 | By: | /s/ Brad E. Herr |
|---|---|---|---|
| Brad E. Herr, Principal Financial Officer |
Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Cannabis Sativa, Inc. (the "Registrant") on Form 10-Q for the quarter ended March 31, 2021, as filed with the Commission on the date hereof (the "Quarterly Report"), I, David Tobias, Principal Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
| Dated: May 17, 2021 |
|---|
| /s/ David Tobias |
| David Tobias |
| Principal Executive Officer |
Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Cannabis Sativa, Inc. (the "Registrant") on Form 10-Q for the quarter ended March 31, 2021, as filed with the Commission on the date hereof (the "Quarterly Report"), I, Brad E. Herr, Principal Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
| Dated: May 17, 2021 |
|---|
| /s/ Brad E. Herr |
| Brad E. Herr |
| Principal Financial Officer |