DOGP 10-K
Dogecoin Cash, Inc. (DOGP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
(Mark One)
For the fiscal year ended
For the transition period from _______________________ to __________________________
Commission File Number
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.001
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
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 past 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
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Indicate by check mark whether the issuer is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes
If an emerging growth company, indicate by check mark 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.
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
The market value of the voting and non-voting common stock held by non-affiliates was $
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of April 4, 2022, there were
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).
None.
CANNABIS SATIVA, INC.
TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2021
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect the Company’s views with respect to future events based upon information available to it at this time. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from these statements. These uncertainties and other factors include but are not limited to: the ability of the Company to locate business opportunities for acquisition or participation by the Company; the terms of the Company’s acquisition of or participation in a business opportunity; the operating and financial performance of any business opportunity following its acquisition or participation by the Company and the risk factors described herein under the caption “Risk Factors.” The words “anticipates,” “believes,” “estimates,” “expects,” “plans,” “projects,” “targets” 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. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, changes in assumptions, future events or otherwise.
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Part I
Item 1. Description of Business
Company Background
Cannabis Sativa, Inc., formerly named Ultra Sun Corporation, was incorporated under laws of Nevada in November 2005. In 2020, we conducted our operations through our subsidiaries PrestoCorp, Inc. (“PrestoCorp”), a 51% owned Delaware corporation engaged in the telemedicine business. We also began the year with interests in GK Manufacturing and Packaging, Inc. (“GKMP”), a California corporation that serves as a contract manufacturer of products containing hemp-based CBD and i-Budtender (IBUD”), a Nevada corporation in the development stage for on-line referral business in the cannabis industry.
In April, 2021, we discontinued operations of GKMP and IBUD and sold our controlling interests in these subsidiaries. The operations of GKMP and IBUD for the years ended December 31, 2021 and 2020 are reported separately as discontinued operations.
We also own 100% of the following subsidiaries: Wild Earth Naturals, Inc. (“Wild Earth”), a Nevada corporation, Eden Holdings LLC (“Eden”), a Virginia limited liability company, Kubby Patent and Licenses, Limited Liability Company (“KPAL”), a Texas limited liability company and Hi Brands International Inc. (“Hi Brands”), a Nevada corporation. Wild Earth, Eden, KPAL, and Hi Brands are currently inactive, but fit into our business strategy as discussed below.
Our common stock is quoted for trading on the OTCQB Market under the symbol CBDS.
We currently maintain virtual principal executive offices with our staff and contractors located remotely and typically working out of their homes. Our mailing address is 450 Hillside Drive, #A224, Mesquite, Nevada 89027. Our telephone number is (
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Business Strategy
In 2022, we intend to focus on growth of our telemedicine business while seeking opportunities in brand development and marketing of products and services to the cannabidiol (“CBD”) and marijuana industries.
Telemedicine
PrestoCorp (“PrestoDoctor”), offers an online telemedicine platform providing customer access to knowledgeable physicians to obtain a medical marijuana recommendation. PrestoDoctor uses secure video conferencing technology (https://prestodoctor.com) to provide a safe and confidential forum for the Doctor patient interview in accordance with state regulations governing issuance of medical marijuana cards. Appointments through PrestoDoctor's website generally take 10-15 minutes and can be scheduled and completed in the same day. This convenience eliminates the need for patients to travel to a clinic. More than 100,000 users have registered to consult with PrestoDoctor's 15+ licensed physicians across the United States. PrestoDoctor currently offers services in California, Nevada, New York, Missouri, and Oklahoma, and is actively targeting expansion into multiple additional states in the coming months.
Management is currently evaluating opportunities to expand the platform for medical marijuana evaluations into other states and is reviewing other telemedicine applications. The COVID-19 pandemic has been a catalyst for expansion of telemedicine services across the United States, and our existing systems and infrastructure are well suited to providing other similar medical evaluations. The continuing growth of wearable devices and remote monitoring capabilities are further evidence that telemedicine will continue to grow in the coming periods. Growth of the platform to take advantage of these opportunities will require capital for development of new features and capabilities necessary to provide a new service, expansion of personnel and expansion of our contracted physician pool. No assurances can be given that our efforts to expand into new areas and/or provide new services will be successful.
Brand Development and Product Marketing
We have assembled a portfolio of brands, products, intangible assets, and expertise to allow research, development, acquisition and licensing of specialized cannabis and CBD related products, including cannabis and CBD formulas, edibles, topicals, strains, recipes and delivery systems. We plan to engage in marketing and branding within the cannabis and CBD spaces utilizing our existing brands, including our trademark pending "hi" brand, while also seeking out new opportunities for brand aggregation and marketing. In 2021, we were not able to focus on further development of these assets due to limitations on availability of capital and the need to devote our energies to growth in the telemedicine space.
In 2022, we hope to begin selling products through our existing online presence. Descriptions of the products/brands we intend to promote include:
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Wild Earth Naturals, Inc. Wild Earth Naturals, Inc. is an herbal skin care products formulation and marketing company that targets the growing natural health care products market in the United States and abroad. We intend to develop and manufacture high-quality, herbal based skin care products providing healthier choices to consumers. We use specialized ingredient mixing processes to produce plant glycerite/mineral herbal blends and oil extractions, which we believe will be unique to the natural health products industry. The ingredients for our products are selected to meet a number of criteria, including, but not limited to, safety, potency, purity, stability, bio-availability, and efficacy. We plan to control the quality of our products beginning at the formulation stage and continuing through controlled sourcing of raw ingredients, manufacturing, packaging, and labeling.
Hi Brands International Inc. On February 6, 2015, the Company formed Hi Brands International Inc., a Nevada Corporation and wholly owned subsidiary of the Company ("Hi Brands"). Hi Brands entered into a Purchase, Supply and Joint Venture Agreement (the "Agreement"), with Centuria Natural Foods, Inc. ("Centuria") to develop a supply of proprietary CBD (Cannabidiol) Rich Hemp Oil products, but the agreement was never implemented and no business was ever transacted. As a result, Hi Brands International, Inc. has been inactive for the last several years. Although the Hi Brands business has been inactive, the Company believes that there is value in the name and that it may afford a sound outlet for the Company’s products as we build work to build out our product portfolio.
In order to capitalize on the Hi Brands concept, the Company will require capital for a virtual storefront design, online web presence, virtual shopping cart and e-payment capabilities. The concept may also be an attractive base for physical locations, which would then require capital for facilities, physical storefront and interior design, staffing, inventory, and marketing. Until a suitable capital formation plan can be developed and funded, the Hi Brands concept is likely to remain inactive.
Other Opportunities. In addition to licensing, branding and technology, we have the ability to offer mainstream medical prescription discount cards, for which the Company will receive a small percentage on each product purchased. This concept has not yet been implemented but is being evaluated by our Telemedicine division for feasibility and return on investment.
The Company continues to seek the acquisition of companies, intellectual property and other assets that fit within the company's strategic plan of assembling a portfolio of cannabis industry related businesses that have a high growth potential and are accretive to shareholder value.
Perceived Cannabis Industry Trends
We believe the cannabis industry will be characterized by the following principal trends: an increased emphasis on high quality products; an increased emphasis on scientific validation for products in the market place; more liberal regulation in regard to cannabis, even under the current administration as states' rights continue to emerge; more consolidation, take-over, and buy-out of companies in the retail, wholesale, and supply side channels; more mainstream companies entering the marketplace; and more funded research on the potential long-term health benefits of cannabis as well as its potential curative properties.
Vision
Our vision is to become a highly visible, diversified business promoting superior quality branded products and services and offering effective customer service, fair compensation, sound management and a great working environment. Over time, we plan to expand our branding, research and development, intellectual properties and licensing activities to reach markets covering telemedicine and consumer education. In order to achieve this vision, we plan to develop brands and branded products which will distinguish our online presence as a source for innovative and effective medicinal cannabis products and cost-effective alternatives for customers seeking quality, affordable natural health products to aid in wellness and appearance.
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Through a long-term commitment to this vision, we hope to become known as a company that is committed to its customers, associates, and communities.
Products
Online Telemedicine. Through PrestoDoctor we provide access to knowledgeable physicians for a safe and confidential way to get a medical marijuana recommendation using secure video conferencing technology. Our online telemedicine generates over 95% of our revenues.
Consumer Products. Through December 31, 2021, the products discussed below in this section are conceptual and have produced no significant revenues. We had intended to pursue the strategy described below in 2021, but lack of capital largely shifted our strategic implementation plans to 2022. In the remainder of 2022, we expect to work on building a product catalogue as we begin testing the market through online sales of products, including:
| · | Lozenges, utilizing our proprietary formula, offer rapid relief of throat irritation. Based upon preliminary results, our lozenges generally take effect within a period of five to 15 minutes. In addition to the lozenges, we have other forms of edibles under consideration. |
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| · | Recover Deep Penetrating Healing Balm is a fast-acting organic anti-inflammatory pain reliever for sore muscles, joints, arthritic and back pain. |
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| · | Trauma Cream was developed with a blended infusion of cannabinoids and THC, including Arnica for its numbing effect. |
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| · | Face Garden is an antioxidant, moisturizing cream for the face. Face Garden is thought to firm the skin and reduce puffiness and wrinkles, while restoring the skins natural glow and supple appearance. |
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| · | Body Garden is a moisturizing body lotion designed to relieve itchy dry skin and protect against sun damage. |
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| · | Lip Garden is an emollient balm that we believe can assist with healing of the lips while keeping them supple and moist. |
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| · | Branded Clothing and Merchandise. We also intend to offer Wild Earth Naturals and "hi" branded men's and women's fashion tee shirts and sweatshirts from suppliers, as well as caps and coffee mugs through the Company's www.wildearthnaturals.com website. |
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Objectives
Our current strategy is to continue to promote and grow the telemedicine business under our PrestoDoctor brand, while also focusing on the start-up and ramp up of new branding, licensing and product sales opportunities, and we will seek strategic corporate and product acquisitions.
Marketing & Distribution
Market Conditions in the Cannabis Industry. Our target markets are located in states that have legalized the production and use of cannabis. Eighteen states plus the District of Columbia have approved measures to legalize cannabis for adult recreational use. Thirty-seven states, the District of Columbia and five US territories have legalized the use of cannabis for medical use in some form. However, it may take multiple years for a state to establish regulations and for cannabis businesses to begin generating revenue from operations in a given state.
Non-Infused Products and Merchandise. We launched our www.wildearthnaturals.com website in August 2013 but the site has been largely dormant for several years. In 2022, we intend to use social media, primarily Facebook, to drive traffic to our websites. Our online stores at www.wildearthnaturals.com are not producing revenue at this time, but the website is active and ready to process sales orders once the Company rolls out the brand development and product marketing plan for our consumer products lines.
During 2022, we plan to utilize direct business to business sales, internet advertising, social media marketing, and trade show participation to generate sales leads, orders and to entry into leading retailers and wholesalers throughout the U.S. No assurances can be given that we will be successful in such efforts.
Infused Products. For cannabis infused products, we intend to develop our customer base through licensing agreements with third parties manufacturers who are compliant with state cannabis laws in the states in which they conduct business.
We plan to build brand awareness by utilizing a mix of social media, trade shows, education efforts, and direct marketing to targeted businesses.
Geographic Presence. We plan to build brand awareness for our products in states where medical cannabis is legal, and to sell non-infused products throughout the United States.
Competition
Cannabis Industry. While we do not currently sell products regulated as cannabis (containing THC), we expect to license our brands and products to businesses that will sell cannabis in states where medicinal or recreational cannabis is legal. Therefore, we look to the participants in the medical and recreational cannabis markets for information on competition.
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We believe the competition in the cannabis market will include numerous cannabis product companies that are fragmented in terms of geographic market coverage, distribution channels and product categories, with many companies taking a state-by-state approach. We believe that competition is principally based upon price, quality, efficacy of products, branding, marketing, customer service, and trade support. We anticipate that large pharmaceutical companies will eventually begin to more aggressively compete in the cannabis product market. These companies and certain larger entities may have broader product lines and/or larger sales volumes than companies such as ours. Larger entities entering this market may have significantly greater financial and other resources available to them and possess extensive manufacturing, distribution and marketing capabilities. We anticipate that many of the larger competitors will be able to compete more effectively due to a greater extent of vertical integration. The entry of larger competitors could have a material adverse effect on our results of operations and financial condition.
Skin Care. Our competition includes numerous skin care companies that are highly fragmented in terms of geographic market coverage, distribution channels, and product categories. In addition, large pharmaceutical companies compete with us in the skin care market. These larger companies have broader product lines and more substantial sales volumes, greater financial and other resources available to them, and possess extensive manufacturing, distribution and marketing capabilities. Among our more prominent competitors are: Earthly Body, Burt's Bees, Melaleuca and Clarins, all of which have substantially longer track records and greater financial resources and operating efficiencies than we will be able to develop in the near term. As a company with limited capital resources, we believe we will be at a competitive disadvantage until such time as we develop a broad portfolio of products that are known and accepted in the industry, and we are able to demonstrate a history of financial stability. There can be no assurance that we will be able to compete effectively in the market.
Raw Materials and Suppliers
Our products are produced using ingredients that we believe to be readily available from several sources. Our suppliers purchase raw materials from a number of different vendors. While we expect the raw materials we use to be readily available in normal times, the current COVID-19 pandemic and the current conflict between Russia and Ukraine have and are expected to continue to disrupt elements of the supply chain. At this time, we cannot determine the effect such disruptions may have on the availability of raw materials in future periods or the impact of such disruptions on our business development strategies.
Intellectual Property
We hold certain intellectual property (the "IP") consisting of recipes and process/methods to maximize the cannabinoid concentrations used for manufacture of medical marijuana edibles, including our proprietary lozenge. We also hold rights to a proprietary recipe and process/method to maximize the cannabinoid concentrations to be used to make a salve/ointment containing CBD and Arnica Montana.
We are also the patent holder for a CTA strain of cannabis. We are continuing to pursue commercialization of the CTA strain, but no assurances can be given that the patented strain will result in development of any commercial products.
The Company intends to use or license the "hi" brand for skin care products, edibles (infused and non-infused), apparel and branded merchandise. We also hold a Federal trademark on the name and stylized branding of "Wild Earth Naturals".
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We have acquired registered U.S. Trademarks for Cannabis*Sativa(R), DISPENSARxY(R), and CannaRx(R). The IP identifiers are Cannabis*Sativa(R), Registration Number 4,868,622, DISPENSARxY(R), Registration Number 4,642,830 and CannaRx(R), Registration Number 4,725,687. The Marks are registered in CL 35 under Goods and Services. No assurance can be given that these marks will have any commercial value, or that they will offer any protection against potential competitors should they be commercialized.
Effect of Existing or Probable Governmental Regulations on the Business
Currently, our products consist of telemedicine services and we are developing and implementing a business strategy to sell products derived from cannabis plants or products containing THC. Accordingly, while the following discussion on governmental regulation is not directly applicable to the Company today, we may become subject to these regulations in the near future.
The United States federal government regulates drugs in large part through the Controlled Substances Act, or CSA. Marijuana, which is a form of cannabis, is classified as a Schedule I controlled substance. As a Schedule I controlled substance, the federal Drug Enforcement Agency, or DEA, considers marijuana to have a high potential for abuse with no currently accepted medical use in treatment in the United States (except as disclosed below for epilepsy and related syndromes) and a lack of accepted safety for use of the drug under medical supervision. According to the U.S. federal government, cannabis having a concentration of tetrahydrocannabinol, or THC, greater than 0.3% is marijuana. Cannabis with a THC content below 0.3% is classified as hemp. The scheduling of marijuana as a Schedule I controlled substance is inconsistent with what we believe to be widely accepted medical uses for marijuana by physicians, researchers, patients, and others. Moreover, as of November 30, 2020 and despite the clear conflict with U.S. federal law, 35 states and the District of Columbia have legalized marijuana for medical use, while 15 of those states and the District of Columbia have legalized the adult-use of cannabis for recreational purposes. In November 2020, voters in Arizona, Montana, New Jersey and South Dakota voted by referendum to legalize marijuana for adult use, and voters in Mississippi and South Dakota voted to legalized marijuana for medical use. As further evidence of the growing conflict between the U.S. federal treatment of cannabis and the societal acceptance of cannabis, the FDA on June 25, 2018 approved Epidiolex. Epidiolex is an oral solution with an active ingredient derived from the cannabis plant for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older. This is the first FDA-approved drug that contains a purified substance derived from the cannabis plant. In this case, the substance is cannabidiol, or CBD, a chemical component of marijuana that does not contain the psychoactive properties of THC.
Marijuana is largely regulated at the state level in the United States. State laws regulating marijuana are in conflict with the CSA, which makes marijuana use and possession federally illegal. Although certain states and territories of the United States authorize medical or adult-use marijuana production and distribution by licensed or registered entities, under United States federal law, the possession, use, cultivation, and transfer of marijuana and any related drug paraphernalia is illegal. Although our activities currently do not involve any products that contain THC and we are compliant with the applicable state and local laws in states where we do business, should we enter into a new area that involves THC products, strict compliance with state and local laws with respect to cannabis may neither absolve us of liability under United States federal law nor provide a defense to any federal criminal action that may be brought against us.
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In 2013, as more and more states began to legalize medical and/or adult-use marijuana, the federal government attempted to provide clarity on the incongruity between federal law and these state-legal regulatory frameworks. Until 2018, the federal government provided guidance to federal agencies and banking institutions through a series of DOJ memoranda. The most notable of this guidance came in the form of a memorandum issued by former U.S. Deputy Attorney General James Cole on August 29, 2013, which we refer to as the Cole Memorandum.
The Cole Memorandum offered guidance to federal agencies on how to prioritize civil enforcement, criminal investigations and prosecutions regarding marijuana in all states and quickly set a standard for marijuana-related businesses to comply with. The Cole Memorandum put forth eight prosecution priorities:
| 1. | Preventing the distribution of marijuana to minors; |
| 2. | Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels; |
| 3. | Preventing the diversion of marijuana from states where it is legal under state law in some form to other states; |
| 4. | Preventing the state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; |
| 5. | Preventing violence and the use of firearms in the cultivation and distribution of marijuana; |
| 6. | Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; |
| 7. | Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and |
| 8. | Preventing marijuana possession or use on federal property. |
On January 4, 2018, former United States Attorney General Sessions rescinded the Cole Memorandum by issuing a new memorandum to all United States Attorneys, which we refer to as the Sessions Memo. Rather than establishing national enforcement priorities particular to marijuana-related crimes in jurisdictions where certain marijuana activity was legal under state law, the Sessions Memo simply rescinded the Cole Memorandum and instructed that “[i]n deciding which marijuana activities to prosecute... with the [DOJ’s] finite resources, prosecutors should follow the well-established principles that govern all federal prosecutions.” Namely, these include the seriousness of the offense, history of criminal activity, deterrent effect of prosecution, the interests of victims, and other principles.
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Under President Biden, Merrick Garland serves as Attorney General in his administration. It is not yet known whether the Department of Justice under President Biden and Attorney General Garland will re-adopt the Cole Memorandum or announce a substantive marijuana enforcement policy.
Nonetheless, there is no guarantee that state laws legalizing and regulating the sale and use of marijuana will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to marijuana (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law. Currently, in the absence of uniform federal guidance, as had been established by the Cole memorandum, enforcement priorities are determined by respective United States Attorneys.
We are not aware of other specific governmental regulations that impact our business. We do, however, utilize Chinese vendors for manufacturing a significant portion of the products we sell. To the extent that tariffs are imposed on imported goods manufactured in China, our pricing structure and acceptance in the marketplace may be affected. We currently stock our products through distributors in foreign countries when appropriate and ship direct from our manufacturer to the foreign distributor when such can be done at a cost savings. We intend to continue to explore ways that we can hold our costs down on the products we sell in order to minimize price sensitivity concerns with our customers.
COVID-19
COVID-19 was 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. In retrospect, the pandemic did have a negative impact on the contract manufacturing business start-up (primarily delay) and had a positive impact on our telehealth business through loosening of regulations allowing telehealth services and an increase in persons seeking telehealth services to avoid in person visits to doctors offices. The COVID-19 disruption did not materially impact the Company’s financial statements and may have had a positive on the telehealth market. It now appears that the impacts from COVID are lessening, and we anticipate that any positive impact on the telehealth sector may soften in the coming periods.
Environmental Laws
We are not aware of any environmental laws that would limit our ability to conduct our current sales and distribution activities in their present form or as we envision them in the near future. As we expand our operations to participate more directly in the cannabis and hemp industries as a distributor of cannabis and hemp products, we may become subject to environmental laws relating to water usage, recycling, waste disposal, and similar regulations that will vary depending on the location of our operations. We intend to address the impact of such environmental regulations when we have a specific use case to evaluate.
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Number of Total Employees and Number of Full Time Employees
As of March 31, 2022, we have no employees in Cannabis Sativa, Inc. During the year ended December 31, 2021, the Company had independent contractor arrangements with five officers and directors, and eight outside service providers. PrestoCorp has six employees, including two officers of PrestoCorp. Our employees are not represented by unions, and we consider our relationship with our employees to be good. The Company also has relationships with several independent contractors who provide services to the Company on a regular and on-going basis.
Facilities
During all of 2021, CBDS operated out of virtual offices maintained by our officers, directors and contractors.
Our subsidiary PrestoDoctor leases an office in New York on a month-to-month basis for $2,444 per month.
Prior to April 2021, our subsidiary, GKMP, operated out of leased premises in Anaheim, California. We discontinued the operations of GKMP in April 2021, and sold our interest in the subsidiary.
Item 1A. Risk Factors
Not required.
Item 1B. Unresolved Staff Comments.
None
Item 3. 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 4. Mine Safety Disclosures.
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our shares of common stock are quoted on the OTCQB Market operated by the OTC Markets Group Inc. of the Financial Industry Regulatory Authority, Inc. (“FINRA”) under the symbol “CBDS”.
Holders of Record
On April 12, 2022, there were 66 holders of record of our common stock, as reported by the Company’s transfer agent. In computing the number of holders of record, each broker-dealer and clearing corporation holding shares on behalf of its customers is counted as a single stockholder.
No Dividends
No dividends have ever been paid on our securities, and we have no current plans to pay dividends in the foreseeable future.
Equity Compensation Plan
During 2017, the Company adopted the Cannabis Sativa, Inc. 2017 Stock Plan which authorized the board of directors to issue up an aggregate of 3,000,000 shares of common stock to allow the Company to compensate employees and consultants from time to time by issuing them shares of Company common stock in return for services provided to the Company rather than paying for the services in cash thereby depleting the cash assets of the Company. As of April 1, 2021, the Company had issued 3,000,000 shares under the 2017 Stock Plan, leaving no shares available for future issuance under the 2017 Plan.
On September 25, 2020, the Company adopted the Cannabis Sativa 2020 Stock Plan which authorized the Company to utilize common stock to compensate employees, officers, directors, and independent contractors for services provided to the Company. By resolution dated September 25, 2020, the Company authorized up to 1,000,000 shares of common stock to be issued pursuant to the 2020 Stock Plan. This amount was subsequently increased to 2,000,000 shares on January 27, 2021, and all shares under the 2020 Stock Plan were registered with the Securities & Exchange Commission on Form S-8 on January 29, 2021. Registration of the shares in the 2020 Stock Plan allows immediate sale of the shares by the recipient of such shares. As of April 4, 2022, the Company has issued 649,333 shares under the 2020 Plan and has 1,350,667 shares available for future issuance under the 2020 Plan.
Transfer Agent
Colonial Stock Transfer Co., Inc., 66 Exchange Place, Suite 100, Salt Lake City, Utah 84111, telephone (801) 355-5740, serves as the transfer agent and registrar for our common stock.
Recent Sales of Unregistered Securities
During the year ended December 31, 2021, the Company issued 10,466 shares of restricted common stock for private investment of $5,000. The Company also issued 310,171 shares of preferred stock valued at $150,000 to one of our officers for compensation and 2,716,132 shares of common stock valued at $1,359,207 to various officers and consultants for compensation. Of the common shares issued during the year, 832,908 valued at $417,461 were issued to officers and directors of the Company.
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During the year ended December 31, 2020, the Company issued 50,000 shares of restricted common stock for private investment of $25,000. The Company also issued 100,000 shares for acquisition of assets from GK Manufacturing and Packaging, Inc. The Company also issued 571,960 shares of preferred stock to one of our officers for stock payable and compensation and 4,575,298 shares of common stock to various officers and consultants for stock payable and compensation. Aggregate stock payable and compensation paid in stock for officers, directors and consultants totaled $2,697,278 for the year.
Special Sales Practice Requirements with Regard to “Penny Stocks”
To protect investors from patterns of fraud and abuse that have occurred in the market for low priced securities commonly referred to as “penny stocks,” the SEC has adopted regulations that generally define a “penny stock” to be any equity security having a market price (as defined) less than $5.00 per share, or an exercise price of less than $5.00 per share, subject to certain exceptions. Our stock is subject to the “penny stock” regulations during periods in which the price is below $5.00 per share. During any such periods, broker-dealers selling our common stock are subject to additional sales practices when they sell our stock to persons other than established clients and “accredited investors.” For transactions covered by these rules, before the transaction is executed, the broker-dealer must make a special customer suitability determination, receive the purchaser’s written consent to the transaction and deliver a risk disclosure document relating to the penny stock market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative taking the order, current quotations for the securities and, if applicable, the fact that the broker-dealer is the sole market maker and the broker-dealer’s presumed control over the market. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Such “penny stock” rules may restrict trading in our common stock and may deter broker-dealers from effecting transactions in our common stock.
Item 6. Selected Financial Data
Not Applicable. The Company is a “smaller reporting company” and not subject to the Selected Financial Data requirement of Item 6.
Item 7. 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.
| 15 |
| Table of Contents |
Results of Operations
Fiscal year ended December 31, 2021 compared with fiscal year ended December 31, 2020
The narrative comparison of the results of operations for the periods ended December 31, 2021 and 2020 are based on the following table.
|
| Years Ended |
|
|
|
|
| |||||||||
|
| A |
|
| B |
|
| A-B |
| |||||||
|
| December 31, 2021 |
|
| December 31, 2020 |
|
| Change |
|
| Change % |
| ||||
REVENUE |
| $ | 1,841,558 |
|
| $ | 1,940,731 |
|
| $ | (99,173 | ) |
|
| -5 | % |
Cost of revenues |
|
| 699,378 |
|
|
| 740,645 |
|
|
| (41,267 | ) |
|
| -6 | % |
Cost of sales % of total sales |
|
| 38 | % |
|
| 38 | % |
|
| 0 | % |
|
|
|
|
Gross profit |
|
| 1,142,180 |
|
|
| 1,200,086 |
|
|
| (57,906 | ) |
|
| -5 | % |
Gross profit % of sales |
|
| 62 | % |
|
| 62 | % |
|
| 0 | % |
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees |
|
| 581,660 |
|
|
| 750,030 |
|
|
| (168,370 | ) |
|
| -22 | % |
Depreciation and amortization |
|
| 171,163 |
|
|
| 207,866 |
|
|
| (36,703 | ) |
|
| -18 | % |
Wages and salaries |
|
| 711,872 |
|
|
| 596,262 |
|
|
| 115,610 |
|
|
| 19 | % |
Advertising |
|
| 344,904 |
|
|
| 467,918 |
|
|
| (123,014 | ) |
|
| -26 | % |
General and administrative |
|
| 1,078,204 |
|
|
| 971,598 |
|
|
| 106,606 |
|
|
| 11 | % |
Total operating expenses |
|
| 2,887,803 |
|
|
| 2,993,674 |
|
|
| (105,871 | ) |
|
| -4 | % |
NET LOSS FROM CONTINUING OPERATIONS |
|
| (1,745,623 | ) |
|
| (1,793,588 | ) |
|
| 47,965 |
|
|
| -3 | % |
Revenue for the fiscal year ended December 31, 2021 decreased 5% compared to the period ended December 31, 2020. Cost of revenues as a percentage of sales was constant at 38% between the periods. The decrease in revenues in 2021 is primarily a result of the lessening impact COVID-19 as we progressed into 2021. In 2020, COVID-19 and the associated concerns with in-person visits to doctors’ offices caused a surge in the use of telemedicine in general and the Company benefitted from this with an increase in customers seeking medical marijuana cards through telemedicine. In 2021, as the public grew more accustomed to the pandemic, and as vaccinations and booster shots became widely available, the demand for remote visits with physicians for medical marijuana cards decreased. We expect that this softening in the demand for our service will continue in 2022. The softening of demand in 2021 was partially offset by expansion into new territories, focused advertising and marketing efforts, and a continuing focus on customer service and word of mouth referrals of our services.
Total operating expenses decreased 4% in 2021 compared with 2020 which was in line with the decrease in revenue in the current period. Decreases in professional fees, depreciation and amortization, and advertising were offset by increases in wages and salaries and general and administrative expenses. Professional fees decreased with continuing efforts at cost reduction. Depreciation and amortization decreased in part due to the discontinuation of GKMP and IBUD, as reflected below. Advertising costs were reduced by taking a more focused approach to our target markets. Wages and salaries increased with the addition of personnel in our telemedicine business relating to increased selling efforts as we expand to new markets. General and administrative expenses increased primarily due to the addition of a brand ambassador and costs associated with our continuing business development efforts.
| 16 |
| Table of Contents |
Discontinued Operations.
In April 2021, the Company entered into discussions with THC Farmaceuticals, Inc. (“CBDG”) regarding sale of CBDS’s controlling interest positions in GKMP and iBudtender Inc. (iBud”). The discussions were triggered by an interest on the part of CBDS management to refocus business efforts on growing PrestoCorp while streamlining financial reporting and management processes by eliminating assets that are no longer considered essential to the Company’s core focus. The sale was completed on April 22, 2021. Management believes that the sale of GKMP and iBud will free up management time and resources to seek other acquisitions that are more closely aligned with the PrestoCorp business model. Consideration for the sale of the controlling interests consisted of 1,500,000 shares of CBDG common stock and 1,500,000 shares of CBDG preferred stock valued at $600,000 on the date of the acquisition. iBud had no revenues in the periods presented. Summaries of the discontinued operations of GKMP and the operations of iBud through April 22, 2021 are provided below.
|
| Year |
|
| Year |
| ||
|
| Ended |
|
| Ended |
| ||
DISCONTINUED OPERATIONS OF GKMP AND IBUD |
| December 31, 2021 |
|
| December 31, 2020 |
| ||
REVENUE |
| $ | 75,866 |
|
| $ | 94,552 |
|
Cost of revenues |
|
| 91,316 |
|
|
| 152,837 |
|
Cost of sales % of total sales |
|
| 120 | % |
|
| 162 | % |
Gross profit |
|
| (15,450 | ) |
|
| (58,285 | ) |
Gross profit % of sales |
|
| -20 | % |
|
| -62 | % |
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 5,526 |
|
|
| 8,898 |
|
Wages and salaries |
|
| 106,224 |
|
|
| 213,765 |
|
Advertising |
|
| 1,693 |
|
|
| 36,056 |
|
General and administrative |
|
| 104,177 |
|
|
| 433,592 |
|
Total operating expenses |
|
| 217,620 |
|
|
| 692,311 |
|
NET LOSS FROM OPERATIONS |
|
| (233,070 | ) |
|
| (750,596 | ) |
|
|
|
|
|
|
|
|
|
DISCONTINUED OPERATIONS OF IBUD |
|
|
|
|
|
|
|
|
REVENUE |
| $ | - |
|
| $ | - |
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 1,135 |
|
|
| 1,004 |
|
Total operating expenses |
|
| 1,135 |
|
|
| 1,004 |
|
NET LOSS FROM OPERATIONS |
|
| (1,135 | ) |
|
| (1,004 | ) |
Aggregate net loss from discontinued operations |
|
| (234,205 | ) |
|
| (751,600 | ) |
Gain on sale of discontinued operations |
|
| 164,736 |
|
|
| - |
|
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS |
|
| (69,469 | ) |
|
| (751,600 | ) |
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 will now allow management to devote more resources to PrestoCorp.
Liquidity and Capital Resources
Cash used by operating activities was $245,986 in 2021 compared $191,756 in 2020. In 2021, financing activities provided $95,243, consisting of proceeds from sales of restricted stock in the amount of $5,000 and from proceeds from related party advances and notes payable in the amount of $90,243. We ended 2021 with $194,060 in cash on hand.
| 17 |
| Table of Contents |
The accompanying 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 of $2,419,406 and $2,458,544, respectively, for the years ended December 31, 2021 and 2020 and had an accumulated deficit of $79,475,968 as of December 31, 2021. The Company may seek to raise money for working capital purposes through a public offering of its equity capital or through a private placement of equity capital or convertible debt. It will be important for the Company to be successful in its efforts to raise capital in this manner 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.
As of April 8, 2022, the Company had cash on hand of approximately $200,000. This amount does not provide sufficient liquidity to meet all of the immediate needs of our current operations. Cash represents cash deposits held at financial institutions. Cash is held at major financial institutions and insured by the Federal Deposit Insurance Corporation (FDIC) up to federal insurance limits.
Off Balance Sheet Arrangements
None
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Not Applicable. The Company is a “smaller reporting company.”
Item 8. Financial Statements
The following financial statements are being filed with this report and are located immediately following the signature page.
Financial Statements, December 31, 2021 and 2020
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets, December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Changes in Stockholders’ Equity from January 1, 2020 through December 31, 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020
Notes to the Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounts and Financial Disclosure
None
| 18 |
| Table of Contents |
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable and not absolute assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures, including controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management (including our CEO and CFO), were effective as of December 31, 2021 and that material information required to be disclosed in this report has been properly recorded, processed, summarized and reported in a timely manner. In making this determination, we reviewed the material weaknesses in internal control over financial reporting and concluded that the direct involvement of the CFO in all aspects of financial reporting addressed this concern.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Under the supervision of and with the participation of our CEO and our CFO and with the oversight of the Board of Directors, our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“2013 Framework”).
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A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We identified material weaknesses in our internal controls over period end cut-off for recording payables, and communications between accounting personnel and management concerning related party and inter-company transactions.
Based on our evaluation under the framework described above, our management concluded that, due to the material weakness, our internal control over financial reporting was not effective as of December 31, 2021 in accordance with Item 308(a)(3) of Regulation S-K.
Remedial Actions
Management is committed to maintaining a strong internal control environment. We plan to address the material weaknesses identified by adding additional accounting personnel and functions, and by designing additional controls over the documentation and application of technical accounting guidance to our business. We are also reviewing our period end cut-off procedures and reconciliation procedures to strengthen our controls in these areas, and we are focused on improving our communications to deliver information where and when needed.
Management believes that the remediation efforts to be undertaken will effectively address the material weaknesses. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. We cannot assure you, however, when we will remediate such weaknesses, nor can we be certain of whether additional actions will be required or the costs of any such actions.
Changes in Internal Controls
Other than the identification and assessment of the material weaknesses described above, there was no change in our internal control over financial reporting during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
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| Table of Contents |
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The following table indicates the name, age, term of office and position held by each of our executive officers and directors. The term of office for each officer position is for one year or until his or her successor is duly elected and qualified by the board of directors. The term of office for a director is for one year or until his or her successor is duly elected and qualified by the stockholders.
Name |
| Age |
| Incumbency |
| Positions Held |
Catherine Carroll |
| 81 |
| 2014 |
| Treasurer, Director |
Brad E. Herr |
| 67 |
| 2020 |
| CFO, Director |
Trevor Reed |
| 58 |
| 2016 |
| Director |
Robert N. Tankson III |
| 35 |
| 2020 |
| Director |
David Tobias |
| 71 |
| 2014 |
| CEO, Secretary and Director |
Certain biographical information with respect to our executive officers and directors.
David Tobias. Mr. Tobias has served as President of Wild Earth Naturals, Inc. since May, 2013. He also served as the President of Hemp, Inc. from August 2011 to January 9, 2014. Prior to that, from October 2009 until May 2011, Mr. Tobias held the position of Vice President at Medical Marijuana Inc. where he was instrumental in bringing forward and culminating the merger between CannaBank and Medical Marijuana, Inc. He was earlier Sales Manager for Tulsa custom builder Xcite Homes, from October 2008 to August 2009. Among other qualifications, Mr. Tobias brings to the Board executive leadership experience, including his service as a president of a public company, along with extensive entrepreneurial experience. Mr. Tobias also has a keen sense of the social, political, and economic environment in which the company operates. On January 1, 2019, Mr. Tobias was appointed CEO as a result of the resignation of the former CEO.
Catherine Carroll. Ms. Carroll has been self-employed since 1984. Ms. Carroll brings an extensive background in accounting, tax preparation, IRS audits, and tax appeals to the company. The Board believes that her insights gained from teaching basic tax preparation classes for 15 years, being an expert witness in tax court; along with her “Life Time Limited Services” teacher’s credential in accounting at Delta College in Stockton, CA for 6 years brings the company a valuable perspective. Ms. Carroll had been serving as the CFO, Director and as the Treasurer of the Company since July of 2013. Effective January 30, 2017, she no longer serves as the Company’s CFO and will focus her efforts on her positions as Treasurer and Director and keeping the books of the Company.
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| Table of Contents |
Trevor Reed. Mr. Reed has experience as a contractor, builder and cannabis producer. Mr. Reed started his first company 1989, a hardwood flooring company in Santa Fe, New Mexico. That experience led 15-year career as a custom builder of spec homes in New Mexico. Mr. Reed also engaged in small scale land development and commercial construction in New Mexico. In 2008, Trevor moved to Bend, Oregon to be closer to family. During his time in Oregon, Mr. Reed began to learn about the cannabis business and started growing cannabis. Mr. Reed then returned to New Mexico where he became one of the twenty-five licensed producers of cannabis in the State of New Mexico. Mr. Reed’s curiosity and tenacity have led him to be the number one cannabis producer in the State of New Mexico for three years in a row. Mr. Reed has also consulted with State regulatory authorities regarding the development of their state cannabis programs. Under Mr. Reed’s direction Natural Rx in New Mexico was the first dispensary to become a United Food and Commercial Workers International Union (UFCW) cannabis division member company in 2014. In 2015, Mr. Reed (with partners) established several cannabis dispensaries and cannabis farms in the State of Oregon.
Brad Herr. Mr. Herr is a Principal of Nexit Opportunities LLC, a financial consulting firm, and also serves as CFO for MJ Harvest, Inc., a publicly traded company providing agricultural and horticultural tools and supplies to the marijuana and hemp industries. Brad graduated from the University of Montana with a Bachelor of Science Degree in Business Accounting in 1977 and a Juris Doctorate in 1983. In 2005, Mr. Herr received an MBA from Gonzaga University.
Brad practiced law for 13 years focusing primarily on business representation and securities law. In 1996, Brad left the practice of law to pursue a career in business. Brad participated as legal counsel or principal in private and public offerings raising more than $75 million over his career.
Brad has served in a number of increasingly responsible management positions over his career. Brad was Director of Finance, Vice-President of Business Development and later President of AC Data Systems, Inc., in Post Falls, Idaho. AC Data is a privately held manufacturing business engaged in the design, manufacture and sale of surge suppression products marketed primarily to the telecommunications industry. In 2006, Brad left AC Data to join Command Center, Inc., a publicly traded temporary labor business as Chief Financial Officer. Command Center operated 80 offices in 20 states with annual revenues of nearly $100 million. In 2009, Brad joined Echelon LLC as Chief Financial Officer and was promoted to President of Echelon in May of 2010. Echelon was a tribal entity operated under the auspices of the Coeur d’Alene Tribe in Northern Idaho. Echelon manufactured fuel tanks for the US Government and designed and manufactured a line of portable and expandable shipping containers to serve as military facilities including laboratories, field hospitals, and data centers. In 2010, Brad joined Spur Industries, a metals manufacturing firm with a proprietary bonding system for dissimilar metals. In 2012, Brad resigned from Spur to form a small private equity firm and provide consulting services to clients. The consulting services led to the positions as fractional CFO for MJ Harvest, Inc. and the Company and those positions are continuing.
Brad brings a diverse business development, accounting and legal background to his current positions.
Robert Tankson. Mr. Tankson worked for Google from 2011 through 2012. After leaving Google in 2012, to pursue his passion for business finance and technology, Rob saw an opportunity in the cannabis space to develop a telemedicine platform. This led to the cofounding of PrestoCorp. The PrestoCorp platform, known as PrestoDoctor, is an online medical cannabis evaluation service that connects patients with cannabis friendly doctors in California, Nevada, New York, Oklahoma and Missouri, with more states in the pipeline. As an executive of PrestoCorp, Rob directed the search for a business partner and ultimately the acquisition of 51% of PrestoCorp by Cannabis Sativa, Inc., in August 2017. Rob continues as an executive of PrestoCorp and is now helping to direct the rapid expansion of the PrestoDoctor platform in the rapidly changing world during and after the Covid-19 pandemic.
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| Table of Contents |
The following is a brief description of the specific experience and qualifications, attributes or skills of each director that led to the conclusion that such person should serve as a director of the Company.
Mr. David Tobias’ knowledge regarding the business of Wild Earth and the implementation of its business plan, provides a critical link between management and the board, enabling the board to provide its oversight function with the benefit of management’s perspective of the business.
Ms. Carroll’s knowledge regarding the history, operations and financial condition of Wild Earth provides a critical link between management and the board, enabling the board to provide its oversight function with the benefit of management’s perspective of the business.
Mr. Reed’s knowledge of the cannabis industry and his work with state regulators in connection with cannabis legislation brings valuable insight regarding the emerging cannabis industry and regulation to the board of directors.
Mr. Herr’s experience as an attorney and CPA along with his extensive experience advising boards of directors of public and private companies will assist the board in evaluating opportunities, following best corporate governance practices, and providing oversight to the officers of the company and its subsidiaries as they execute the strategic business plan.
Mr. Tankson’s experience in the telemedicine space and his position as an executive of PrestoCorp will provide the Board with insights into the company’s attempts to grow the telemedicine business as telemedicine becomes an ever more important aspect of life after the COVID-19 pandemic abates.
Family Relationships
There are no family relationships between any of our officers and directors.
Term of Office
The term of office of each director is one year and until his or her successor is elected at the annual stockholders' meeting and is qualified, subject to removal by the stockholders. The term of office for each officer is for one year and until his or her successor is elected at the annual meeting of the board of directors and is qualified, subject to removal by the board of directors. David Tobias was appointed President of the Company on March 29, 2016, and CEO of the Company on January 9, 2019. Cathy Carroll joined the Board in 2013 and also serves as Treasurer of the Company. Trevor Reed joined the Board in 2017. Brad E. Herr was appointed CFO and Director on January 2, 2020. Robert Tankson joined the Board on January 31, 2020.
| 23 |
| Table of Contents |
Board of Directors
Our board of directors consists of five persons. One director, Trevor Reed, is "independent" within the meaning of Rule 5605(a)(3) of the NASDAQ Marketplace. The four that are not independent are officers of the Company or a subsidiary.
Our board of directors designated an audit committee to be comprised of two independent directors. At this time, the Company only has one independent director. The board also does not have an independent "financial expert" to serve on the audit committee. As a result, the Company is not able to designate an audit committee and the function of the audit committee is currently being performed by the entire Board.
The board of directors has designated a compensation committee comprised of two independent directors. At this time, the Company only has one independent director. As a result, the Company is not able to designate a compensation committee and the function of the compensation committee is currently being performed by the entire Board.
The Company's Board of Directors also performs the functions that would customarily be performed by a nominating committee. The Board of Directors does not believe a separate nominating committee is required at this time due to the limited resources of the Company. The Board of Directors has not established policies with regard to the consideration of director candidates recommended by security holders or the minimum qualifications of such candidates.
Director Meetings
In 2021, the Company’s Board of Directors meetings were held as needed via remote conference call. As a matter of convenience, many of the actions requiring Board approval are conducted telephonically and then documented as consent minutes. All minutes approved by consent require signatures from all directors. Most Board meetings are attended by all of the Directors, and absences, if any, are noted in the minutes. In 2022, meetings will be held at least once quarterly and more often if needed. Actions may also be taken in 2022 without formal meeting by consent signed by each of the directors.
Communications with Directors
Stockholders may communicate with the Board of Directors by sending written communications addressed to the Board of Directors, or any individual director, to: Cannabis Sativa, Inc., Attention: Corporate Secretary, 450 Hillside Dr., #A224, Mesquite, NV 89027. All communications will be compiled by the corporate secretary and forwarded to the Board of Directors or any individual director, as appropriate. In order to facilitate a response to any such communication, the Company’s Board of Directors suggests, but does not require, that any such submission include the name and contact information of the shareholder submitting the communication.
Code of Ethics
We have adopted a Code of Ethics and Business Conduct Policy that applies to our executive officers, including our principal executive, financial and accounting officers.
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| Table of Contents |
During the past ten years none of our directors, executive officers, promoters, or control persons was:
| 1. | the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| 2. | convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or |
| 4. | found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10 percent of a registered class of our equity securities to file reports of securities ownership and changes in such ownership with the SEC. Officers, directors, and greater than ten percent shareholders also are required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) reports they file. Based solely on a review of the copies of such reports furnished to us, we believe that one of our directors needs to file a Form 3.
Item 11. Executive Compensation
The following table sets forth certain information regarding the annual compensation paid to our principal executive officer and principal financial officer in all capacities for the fiscal years ended December 31, 2021 and 2020. No other person served as an executive officer of the Company or received total annual compensation from the Company in excess of $100,000 other than Mr. Tobias, Ms. Carroll, and Mr. Herr as set forth in the table.
Summary Compensation Table
Name and Position |
| Year |
| Salary ($) |
|
| Stock Awards |
|
| Total ($) |
| |||
|
| 2020 |
| $ | -- |
|
| $ | 175,964 |
|
| $ | 175,964 |
|
David Tobias, President, Sec., Director |
| 2021 |
| $ | -- |
|
| $ | 150,000 |
|
| $ | 150,000 |
|
|
| 2020 |
| $ | -- |
|
| $ | 250,201 |
|
| $ | 250,201 |
|
Brad E. Herr, CFO, Director |
| 2021 |
| $ | -- |
|
| $ | 250,000 |
|
| $ | 250,000 |
|
|
| 2020 |
| $ | -- |
|
| $ | 175,964 |
|
| $ | 175,964 |
|
Catherine Carroll, Treasurer, Director (1) |
| 2021 |
| $ | -- |
|
| $ | 112,500 |
|
| $ | 112,500 |
|
1. | Catherine Carroll serves as Treasurer and Director of the Company and also keep the books of the Company. |
| 25 |
| Table of Contents |
We do not have any retirement, pension or profit-sharing plans covering our officers or directors, and we are not contemplating implementing any such plans at this time.
Director Compensation
Our directors are issued shares of common stock quarterly for their service on the board of directors. In January 2020, the compensation for directors was $5,000 of shares quarterly. The 2020 Directors compensation level has been continued for 2021. On January 2022, the compensation of Directors was changed to $2,500 of shares quarterly.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth as of April 4, 2022, the number of shares of our common stock, par value $0.001, owned of record or beneficially by each person known to be the beneficial owner of 5% or more of our issued and outstanding shares of common stock, and by each of our officers and directors, and by all officers and directors as a group. On such date, there were 30,746,865 shares of our common stock issued and outstanding. As of such date, we had 777,654 shares of preferred stock issued and outstanding that are convertible into shares of common stock on a share for share basis. For purposes of the ownership table, the Preferred Shares are considered equivalent to the Common Shares and are included on an “as if” converted basis. Total shares outstanding at April 1, 2022 on an “as if” converted basis would be 31,524,519.
Unless indicated otherwise, the address for any shareholder is the same as the address of the Registrant.
SHARE OWNERSHIP
Name and Address of Beneficial Owner |
| Amount of Direct Ownership |
|
| Amount of Indirect Ownership |
|
| Total Beneficial |
|
|
|
| ||||||||||||
Principal Stockholders |
| Common |
|
| Preferred |
|
| Common |
|
| Preferred |
|
| Ownership |
|
| Percentage |
| ||||||
Sadia Barrameda (1) |
|
| 661,046 |
|
|
| - |
|
|
| 2,194,402 |
|
|
| 151,884 |
|
|
| 3,007,332 |
|
|
| 9.5 | % |
New Compendium Corp. (2) |
|
| 2,194,402 |
|
|
| 151,884 |
|
|
| 661,046 |
|
|
| - |
|
|
| 3,007,332 |
|
|
| 9.5 | % |
David Tobias |
|
| 3,075,529 |
|
|
| 489,431 |
|
|
| - |
|
|
| - |
|
|
| 3,564,960 |
|
|
| 11.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers and Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Tobias (3) |
|
| 3,075,529 |
|
|
| 489,431 |
|
|
| - |
|
|
| - |
|
|
| 3,564,960 |
|
|
| 11.3 | % |
Catherine Carroll (4) |
|
| 705,299 |
|
|
| - |
|
|
| 136,068 |
|
|
| - |
|
|
| 841,367 |
|
|
| 2.7 | % |
Brad E. Herr (5) |
|
| - |
|
|
| - |
|
|
| 401,292 |
|
|
| - |
|
|
| 401,292 |
|
|
| 1.3 | % |
Trevor Reed |
|
| 186,884 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 186,884 |
|
|
| 0.6 | % |
Robert Tankson |
|
| 49,305 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 49,305 |
|
|
| 0.2 | % |
All Officers and Directors as a Group |
|
| 4,017,017 |
|
|
| 489,431 |
|
|
| 537,360 |
|
|
| - |
|
|
| 5,043,808 |
|
|
| 16.0 | % |
(1) | Ms. Barrameda is deemed to be the beneficial owner of the 2,194,402 Common Shares and 151,884 Preferred shares owned by New Compendium Corporation as a result of her status as an officer, director and significant shareholder of New Compendium. Ms. Barrameda’s address is P.O. Box 1363, Discovery Bay, CA 94505. |
|
|
(2) | New Compendium Corp. is deemed the beneficial owner of 661,046 Common Shares owned by Sadia Barrameda. Ms. Barrameda is an affiliate of New Compendium Corp. New Compendium’s address is P.O. Box 1363, Discovery Bay, CA 94505. |
| 26 |
| Table of Contents |
(3) | Mr. Tobias’ address is 450 Hillside Drive, #A224, Mesquite, NV 89027. |
|
|
(4) | Ms. Carroll is deemed to be the beneficial owner of 136,068 Common Shares owned by Carroll’s Consulting LLC, and company wholly owned by Ms. Carroll. Ms. Carroll’s address is 450 Hillside Drive, #A224, Mesquite, NV 89027. |
|
|
(5) | Brad E. Herr is deemed to be the beneficial owner of 401,292 Common Shares owned by Nexit, Inc., a corporation solely owned by Mr. Herr. Mr. Herr’s address is PO Box 30417, Spokane, WA 99223 |
Item 13. Certain Relationships and Related Transactions, and Director Independence
During the year ended December 31, 2021 the Company received short-term advances and proceeds from notes payable from related parties and officers of the Company, including David Tobias and Cathy Carroll, to cover operating expenses.
The notes payable bear interest at rates between 5% and 8% per annum. Total notes payable amount to $1,218,038 and the Company recorded interest expense related to these balances in the amount of $66,872 during 2021. Aggregate accrued interest on the notes payable at December 31, 2021 is $204,613. The notes are due December 31, 2022.
Approval of Related Party Transactions
Related party transactions are reviewed and approved or denied by the board of directors of the Company. If the related party to a transaction is a member of the board of directors, the transaction must be approved by a majority of the board that does not include the related party.
Item 14. Principal Accounting Fees and Services
The following table presents aggregate fees that were billed or expected to be billed for the fiscal years ended December 31, 2021, and 2020, for professional services rendered by Assure CPA LLC.
|
| 2021 |
|
| 2020 |
| ||
Audit Fees |
| $ | 80,309 |
|
| $ | 77,750 |
|
Audit-Related Fees |
|
| 7,062 |
|
|
| 2,750 |
|
Tax Fees |
|
| - |
|
|
| - |
|
Other Fees |
|
| - |
|
|
| - |
|
Total |
| $ | 87,371 |
|
| $ | 80,500 |
|
“Audit Fees” represents fees for professional services provided in connection with the audit of our annual financial statements, review of financial statements included in our quarterly reports and related services normally provided in connection with statutory and regulatory filings and engagements and consents.
“Audit-Related Fees” represent fees for professional services provided in connection with the audit of the financial statements of Presto Corp.
| 27 |
| Table of Contents |
“Tax Fees” consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.
“Other Fees” consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit Fees,” “Audit-Related Fees,” or “Tax Fees” above.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
It is the policy of the Company for all work performed by our principal accountant to be approved in advance by our audit committee. Currently the audit committee does not have the requisite number of independent Board Members. Accordingly, the functions of the audit committee are now being performed by the Full Board. All of the services described above in this Item 14 were approved in advance by our Board of Directors.
| 28 |
| Table of Contents |
Item 15. Exhibits, Financial Statement Schedules.
The following documents are included as exhibits to this report.
(a) Exhibits
Exhibit Number |
| SEC Reference Number |
| Title of Document |
| Location |
|
|
| Incorporated by Reference(1) | |||
|
| Articles of Merger among Ultra Merger Corp. and Wild Earth Naturals dated as of July 12, 2013 |
| Incorporated by Reference(1) | ||
|
| Plan of Merger among Ultra Merger Corp. and Wild Earth Naturals dated as of July 12, 2013 |
| Incorporated by Reference(1) | ||
|
|
| Incorporated by Reference(2) | |||
|
|
| Incorporated by Reference(2) | |||
|
| Consulting Agreement dated July 12, 2013 between Ultra Sun Corporation and Neil Blosch |
| Incorporated by Reference(1) | ||
|
|
| Incorporated by Reference(1) | |||
|
|
| Incorporated by Reference(3) | |||
|
|
| Incorporated by Reference(3) |
| 29 |
| Table of Contents |
Exhibit Number |
| SEC Reference Number |
| Title of Document |
| Location |
|
|
| This Filing | |||
|
|
| This Filing | |||
|
|
| This Filing | |||
|
|
| This Filing | |||
101.INS(4) |
|
|
| XBRL Instance Document |
|
|
101.SCH(4) |
|
|
| XBRL Taxonomy Extension Schema |
|
|
101.CAL(4) |
|
|
| XBRL Taxonomy Extension Calculation Linkbase |
|
|
101.DEF(4) |
|
|
| XBRL Taxonomy Extension Definition Linkbase |
|
|
101.LAB(4) |
|
|
| XBRL Taxonomy Extension Label Linkbase |
|
|
101.PRE(4) |
|
|
| XBRL Taxonomy Extension Presentation Linkbase |
|
|
* | The exhibits and schedules to the Agreement and Plan of Reorganization are not included in the foregoing exhibit. The Registrant undertakes to furnish the Commission with supplemental copies of any omitted items on request. |
(1) | Incorporated by reference to the Company’s current report on Form 8-K report filed July 18, 2013. |
(2) | Incorporated by reference to Exhibits 3(i) and 3(ii) of the Company’ s registration statement on Form 10-12G, filed with the SEC on January 28, 2009. |
(3) | Incorporated by reference to the Company’s current report on Form 8-K filed October 25, 2013. |
(4) | 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. These files will be added by amendment. |
[SIGNATURES ON NEXT PAGE]
| 30 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. |
| |
| (Registrant) |
| |
|
|
|
|
Dated: April 14, 2022 | By: | /s/ David Tobias |
|
| David Tobias |
| |
| Chief Executive Officer and Director |
| |
| (Principal Executive Officer) |
| |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ David Tobias |
|
Dated: April 14, 2022 | David Tobias |
|
| Chief Executive Officer and Director |
|
| (Principal Executive Officer) |
|
|
|
|
| /s/ Brad E. Herr |
|
Dated: April 14, 2022 | Brad E. Herr |
|
| Chief Financial Officer and Director |
|
| (Principal Financial Officer) |
|
| (Principal Accounting Officer) |
|
|
|
|
| /s/ Catherine Carroll |
|
Dated: April 14, 2022 | Catherine Carroll |
|
| Director |
|
|
|
|
| /s/ Trevor Reed |
|
Dated: April 14, 2022 | Trevor Reed |
|
| Director |
|
|
|
|
| /s/ Robert N. Tankson III |
|
Dated: April 14, 2022 | Robert N. Tankson III |
|
| Director |
|
| 31 |
| Table of Contents |
CANNABIS SATIVA, INC. |
|
Contents |
|
| Page |
|
|
|
|
|
FINANCIAL STATEMENTS for the years ended December 31, 2021 and 2020: |
|
|
|
|
|
|
|
| FS - 3 |
| |
|
|
|
|
| FS - 4 |
| |
|
|
|
|
| FS - 5 |
| |
|
|
|
|
| FS - 6 |
| |
|
|
|
|
| FS – 7 through FS – 19 |
|
| F-1 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the stockholders and the board of directors of Cannabis Sativa, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Cannabis Sativa, Inc. the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has negative working capital and accumulated deficit. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
PCAOB ID:
April 14, 2022
We have served as the Company's independent auditor since 2019.
| F-2 |
| Table of Contents |
CANNABIS SATIVA, INC.
CONSOLIDATED BALANCE SHEETS |
December 31, |
| 2021 |
|
| 2020 |
| ||
ASSETS | ||||||||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Inventories |
|
|
|
|
|
| ||
Investment in equity securities, at fair value |
|
|
|
|
|
| ||
Other current assets |
|
|
|
|
|
| ||
Total Current Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Other Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
| ||
Intangible assets, net |
|
|
|
|
|
| ||
Deposits and other assets |
|
|
|
|
|
| ||
Right to use asset |
|
|
|
|
|
| ||
Goodwill |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total Assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ |
|
| $ |
| ||
Accrued interest - related parties |
|
|
|
|
|
| ||
Advances from related parties |
|
|
|
|
|
| ||
Notes payable to related parties |
|
|
|
|
|
| ||
Customer deposits |
|
|
|
|
|
| ||
Operating lease liability - current |
|
|
|
|
|
| ||
Total Current Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Long-Term Liabilities |
|
|
|
|
|
|
|
|
Operating lease liability - long term |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Notes 6 and 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit): |
|
|
|
|
|
|
|
|
Preferred stock $ |
|
|
|
|
|
| ||
Common stock $ |
|
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Total Cannabis Sativa, Inc. Stockholders' Equity (Deficit) |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Non-Controlling Interests |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
CANNABIS SATIVA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS |
For the years ended December 31, |
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Revenues |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Cost of Revenues |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Professional fees |
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
|
|
|
| ||
Wages and salaries |
|
|
|
|
|
| ||
Advertising |
|
|
|
|
|
| ||
General and administrative |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
|
Gain (loss) on investment in equity securities |
|
| ( | ) |
|
|
| |
Gain on forgiveness of CAREs Act Loan |
|
|
|
|
|
| ||
Interest expense - related parties |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Total Other Income (Expenses), Net |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Net Loss Before Income Taxes |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Income Taxes |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net Loss from Continuing Operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net Income (Loss) from Discontinued Operations |
|
|
|
|
|
|
|
|
Operating loss on discontinued operations |
|
| ( | ) |
|
| ( | ) |
Gain on sale of subsidiaries |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net Income (Loss) from Discontinued Operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net Loss |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Loss attributable to non-controlling interest - GK Manufacturing |
|
| ( | ) |
|
| ( | ) |
Loss attributable to non-controlling interest - iBudTender |
|
| ( | ) |
|
| ( | ) |
Income attributable to non-controlling interest - PrestoCorp |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net Loss Attributable To Cannabis Sativa, Inc. |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Net Loss per Common Share: Basic and diluted |
|
|
|
|
|
|
|
|
From continuing operations |
| $ | ( | ) |
|
| ( | ) |
From discontinued operations |
|
| ( | ) |
|
| ( | ) |
Total |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding: |
|
|
|
|
|
|
|
|
Basic & Diluted |
|
|
|
|
|
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
CANNABIS SATIVA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
| Non-controlling |
|
| Non-controlling |
|
| Non-controlling |
|
|
| ||||||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Paid-In |
|
| Accumulated |
|
| Interest - |
|
| Interest - |
|
| Interest - GK |
|
|
| |||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Prestocorp |
|
| iBudTender |
|
| Manufacturing |
|
| Total |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance - January 1, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Conversion of Preferred to Common |
|
| ( | ) |
|
| ( | ) |
|
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| ||||||||
Acquisition of GK Manufacturing |
|
| — |
|
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| |||||||||
Cash proceeds from sale of stock and warrants |
|
| — |
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Shares issued for services |
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| ||||||||||
Shares issued for stock payable |
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| ||||||||||
Net income (loss) for the year |
|
| — |
|
|
|
|
|
| — |
|
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|
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|
| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) | ||||
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Balance - December 31, 2020 |
|
|
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| $ |
|
|
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|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
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| $ | ( | ) |
| $ |
| ||||||||
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Balance - January 1, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||||||
Conversion of Preferred to Common |
|
| ( | ) |
|
| ( | ) |
|
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| ||||||||
Cash proceeds from sale of stock |
|
| — |
|
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| |||||||||
Shares issued for services |
|
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| ||||||||||
Cancellation of shares issued for services |
|
| — |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
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|
|
|
|
|
|
| ( | ) | |||||
Sale of non-controlling interests |
|
| — |
|
|
|
|
|
| — |
|
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|
|
|
|
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|
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| ( | ) |
|
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| |||||||
Net income (loss) for the year |
|
| — |
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | ||||
Balance - December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
CANNABIS SATIVA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the years ended December 31, |
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash provided (used) by operating activities: |
|
|
|
|
|
|
|
|
(Gain) loss on investment in equity securities |
|
|
|
|
| ( | ) | |
Gain on sale of subsidiaries |
|
| ( | ) |
|
|
| |
Depreciation and amortization |
|
|
|
|
|
| ||
Gain on forgiveness of CARES Act Loan |
|
| ( | ) |
|
|
| |
Shares issued for services |
|
|
|
|
|
| ||
Note payable issued for services |
|
|
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|
|
| ||
Changes in Assets and Liabilities: |
|
|
|
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|
|
|
|
Inventories |
|
|
|
|
| ( | ) | |
Other current assets |
|
| ( | ) |
|
| ( | ) |
Deposits and other assets |
|
|
|
|
| ( | ) | |
Accounts payable and accrued expenses |
|
|
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|
| ||
Accrued interest - related parties |
|
|
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|
| ||
Customer deposits |
|
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|
| ||
Net Cash Used in Operating Activities |
|
| ( | ) |
|
| ( | ) |
|
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|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Cash transferred on sale of subsidiaries |
|
| ( | ) |
|
|
| |
Proceeds from sale of equity securities |
|
|
|
|
|
| ||
Purchase of property and equipment |
|
|
|
|
| ( | ) | |
Advance to GK settled with asset acquisition |
|
|
|
|
|
| ||
Net Cash Provided by (Used in) Investing Activities |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of common stock and warrants |
|
|
|
|
|
| ||
Proceeds from advances from related parties, net |
|
|
|
|
|
| ||
Proceeds from related parties notes payable |
|
|
|
|
|
| ||
Net Cash Provided by Financing Activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF YEAR |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
CASH AT END OF YEAR |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Non Cash Activities: |
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
Net asset acquisition acquired with shares of common stock |
| $ |
|
| $ |
| ||
Common stock issued from stock payable |
| $ |
|
| $ |
| ||
Operating lease liability from acquiring right to use asset |
| $ |
|
| $ |
| ||
Advances from related parties exchanged for notes payable related parties |
| $ |
|
| $ |
| ||
Investment in equity securities received in exchange for sale of controlling interest in subsidiaries controlling interest in subsidiaries |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 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. (“iBud”) – through April 2021 |
· | Wild Earth Naturals, Inc. (“Wild Earth”) |
· | Kubby Patent and Licenses Limited Liability Company (“KPAL”) |
· | Hi Brands, International, Inc. (“Hi Brands”) |
· | GK Manufacturing and Packaging, Inc. (“GKMP”)- through April 2021 |
· | Eden Holdings LLC (“Eden”). |
PrestoCorp is a
Our primary operations for the years ended December 31, 2021 and 2020 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.
Principles of Consolidation:
The 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 consolidated financial statements include operations of iBud and GKMP through April 22, 2021. All significant inter-company balances have been eliminated in consolidation.
Non-controlling Interests:
Non-controlling interests are portions of entities included in the condensed consolidated financial statements that are not attributable to the Company. Non-controlling interest are identified separately from the Company’s stockholders’ equity and its net income (loss). Non-controlling interest equity balances include the non-controlling entity’s initial contribution at the date of the original acquisition, ongoing contributions, distributions, and percentage share of earnings since inception. The non-controlling interests are calculated based on percentages of ownership.
| F-7 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
Going Concern:
The Company has an accumulated deficit of $
Use of Estimates:
Inventories:
As of December 31, 2021 and 2020, the Company had $-
Property and Equipment:
Property and equipment are recorded at cost. Depreciation is provided for on the straight-line method over the estimated useful lives of the assets. The average lives range from five (
Fair Value of Financial Instruments:
Cash:
Cash is held at major financial institutions and insured by the Federal Deposit Insurance Corporation (FDIC) up to federal insurance limits. The Company considers all highly liquid investments purchased with an original maturity of three months or less when acquired to be cash equivalents.
Net Loss per Share:
| F-8 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
Investments:
Equity securities of investments in which the Company owns less than 20% and/or has no significant influence are generally measured at fair value with changes in fair value recognized in earnings. Upon sale of an equity security, the realized gain or loss is recognized in earnings.
Investments in companies in which the Company owns more than 20% and has the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting. In determining whether significant influence exists, the Company will consider its participation in policy-making decisions and representation on governing bodies. Under the equity method of accounting, the Company’s share of the net earnings or losses of the investee are included in earnings. The Company may elect to account for certain equity method investments at fair value whereby the carrying value of the investment is adjusted to fair value at the end of each period and the related change in fair value is recognized in earning. For these investments, the Company’s share of the net earnings or losses of the investee are not included in earnings.
Companies in which the Company holds investments amounting to more than 50% of the voting interests, but less than 100%, and in which the Company has significant influence, are consolidated and other investor interests are presented as non-controlling.
Revenue Recognition:
In the years ending December 31, 2021 and 2020, the Company operated two divisions, the telehealth business operated through PrestoCorp and the contract manufacturing business operated through GKMP. The contract manufacturing business was sold on April 22, 2021, and the Company now operates only the telehealth division.
The telehealth division generates revenue based on a per telehealth visit for clients looking to obtain a permit to use marijuana for medical purposes in states that have legalized medical marijuana. Revenues are recognized when the Company satisfies its performance obligation to provide telehealth services upon a referral to a contracted physician. The obligation to perform the referral and the referral are automated and occur at the same time an online client subscribes for the visit and gains access to our network of health care professionals. Recognition of revenue is not dependent on the issuance of a marijuana card since issuance of the card is dependent on health and other factors beyond our control. This initial service is a one-time referral to a physician. Clients may return for other telehealth consultations, typically regarding product recommendations, and such additional physician referrals are provided at an additional cost. The billing and payment processes for each physician referral are automated through our online platform. Revenue is recognized in an amount that reflects the consideration that is received in exchange for each physician referral provided to the client.
The contract manufacturing division recognized revenue from manufacturing operations when the products are shipped to the customer. In some instances, customers provided inventory for the manufacturing process and GKMP provided labor, supplies and manufacturing operations to mix and package the products. Revenues were recognized when the manufacturing and packaging process were completed, and the goods were shipped to the customer. In other instances, the Company acquired inventory and manufactured products for customers and/or to be held in inventory for later sale to customers through the GKMP on-site dispensary, through the GKMP online store, or to independent distributors. In these instances, revenue was recognized when the product was shipped to the customer or distributor. Shipment terms were FOB origination. The Company sold its interest in GKMP during 2021 and no longer recognizes revenue from the contract manufacturing division.
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.
| F-9 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
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
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. The fair value of the reporting unit is evaluated on qualitative factors to determine if the reported value may be impaired. If the qualitative factors indicate a likelihood of impairment, we then evaluate carrying value of the reporting unit based on quantitative factors using the income approach. An impairment charge is recognized for the excess of the carrying value of goodwill for the reporting unit over its implied fair value.
Advertising Expense:
Advertising costs are expensed as incurred and are broken out separately in the accompanying consolidated statements of operations.
Stock-Based Compensation:
Stock-based payments to employees and non-employees are recognized at their fair values. Compensation expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Transactions in which goods or services are received for the issuance of shares of the Company’s preferred or common stock are accounted for based on the fair value of the common stock issued. The Company currently recognizes compensation costs immediately as our awards are 100% vested at the time of issuance. Forfeitures are recognized upon occurrence.
Income Taxes:
The Company utilizes the liability method of accounting for income taxes which requires that deferred tax assets and liabilities be recorded to reflect the future tax consequences of temporary differences between the book and tax basis of various assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Additionally, deferred tax assets are evaluated, and a valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. There can be no assurance that the Company’s future operations will produce sufficient earnings so that the deferred tax asset can be fully utilized. The Company currently maintains a full valuation allowance against net deferred tax assets.
Leases:
The Company determines if an arrangement is a lease, or contains a lease, at the inception of an arrangement. If the Company determines that the arrangement is a lease, or contains a lease, at lease inception, it then determines whether the lease is an operating lease or finance lease. Operating and finance leases result in recording a right-to-use (“RTU”) asset and lease liability on the consolidated balance sheets. RTU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease RTU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease RTU assets and operating lease liabilities, the Company uses the non-cancellable lease term plus options to extend that it is reasonably certain to exercise. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company has elected not to recognize RTU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset. The Company has elected not to separate lease and non-lease components for any class of underlying asset.
| F-10 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
Fair Value Measurements:
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. We measure our investment in equity securities at fair value on a recurring basis. The Company’s equity securities are valued using inputs observable in active markets and are therefore classified as Level 1 within the fair value hierarchy.
Contingencies:
In determining accruals and disclosures with respect to loss contingencies, the Company evaluates such accruals and contingencies for each reporting period. Estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred, and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.
Recent Accounting Pronouncement:
Accounting Standards Updates Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 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 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.
| F-11 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
2. Property and Equipment
Property and equipment consisted of the following at December 31, 2021 and 2020:
|
| 2021 |
|
| 2020 |
| ||
Furniture and Equipment |
| $ |
|
| $ |
| ||
Leasehold Improvements |
|
|
|
|
|
| ||
Total Property and Equipment |
|
|
|
|
|
| ||
Less: Accumulated Depreciation |
|
| ( | ) |
|
| ( | ) |
Net Property and Equipment |
| $ |
|
| $ |
| ||
Depreciation expense for the years ended December 31, 2021 and 2020 was $
3. Intangibles and Goodwill
The Company considers all intangibles to be definite-lived assets with lives of
|
| 2021 |
|
| 2020 |
| ||
CBDS.com website (Cannabis Sativa) |
| $ |
|
| $ |
| ||
Intellectual Property Rights (PrestoCorp) |
|
|
|
|
|
| ||
Patents and Trademarks (KPAL) |
|
|
|
|
|
| ||
Total Intangibles |
|
|
|
|
|
| ||
Less: Accumulated Amortization |
|
| ( | ) |
|
| ( | ) |
Net Intangible Assets |
| $ |
|
| $ |
| ||
Amortization expense for the years ended December 31, 2021 and 2020 was $
Amortization of intangibles through 2026 is:
2022 |
| $ |
| |
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
|
Goodwill in the amount of $
There were no additions, deletions, and impairments recognized in the years ended December 31, 2021 and 2020. The Company considered the impact of COVID-19 on intangible assets at December 31, 2021 and 2020 and concluded that impairment analysis is not necessary.
4. Sale of Majority Owned Subsidiaries and Discontinued Operations
On April 22, 2021, the Company sold its majority interests in GKMP (
| F-12 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
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 $
The Company recognized a gain on sale of subsidiaries of $
Consideration received: |
|
|
| |
Common stock of CBDG, fair value |
| $ |
| |
Preferred stock of CBDG, fair value |
|
|
| |
Total consideration |
|
|
| |
|
|
|
|
|
Non-controlling interests |
|
| ( | ) |
|
|
|
|
|
Net assets of subsidiaries on date of disposition: |
|
|
|
|
GKMP |
|
|
| |
iBud |
|
| ( | ) |
Net assets |
|
|
| |
Gain on sale of subsidiaries |
| $ |
| |
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 April 22, 2021 (date of disposition) and the year ended December 31, 2020 are provided below.
|
| Period |
|
| Year |
| ||
|
| Ended |
|
| Ended |
| ||
DISCONTINUED OPERATIONS OF GKMP |
| January 1 to April 22, 2021 |
|
| December 31, 2020 |
| ||
REVENUE |
| $ |
|
| $ |
| ||
Cost of revenues |
|
|
|
|
|
| ||
Gross profit |
|
| ( | ) |
|
| ( | ) |
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
| ||
Wages and salaries |
|
|
|
|
|
| ||
Advertising |
|
|
|
|
|
| ||
General and administrative |
|
|
|
|
|
| ||
Total operating expenses |
|
|
|
|
|
| ||
NET LOSS FROM OPERATIONS |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
DISCONTINUED OPERATIONS OF IBUD |
|
|
|
|
|
|
|
|
REVENUE |
| $ |
|
| $ |
| ||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
| ||
Total operating expenses |
|
|
|
|
|
| ||
NET LOSS FROM OPERATIONS |
|
| ( | ) |
|
| ( | ) |
Aggregate net loss from discontinued operations |
|
| ( | ) |
|
| ( | ) |
Gain on sale of discontinued operations |
|
|
|
|
|
| ||
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS |
|
| ( | ) |
|
| ( | ) |
| F-13 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
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 will now allow management to devote more resources to PrestoCorp.
5. Related Party Transactions
In addition to items disclosed in Notes 4 and 7, the Company had additional related party transactions during 2021 and 2020.
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.
In 2020, the Company converted all of the outstanding advances into one-year notes due on December 31, 2020 bearing interest at
During the year ended December 31, 2021, David Tobias loaned $
During the years ended December 31, 2021 and 2020, the Company recorded interest expense related to these notes payable at the rates between
In 2021, the Company received short-term advances from the principals of GKMP in the amounts of $
At December 31, 2020, the Company had a note payable to the founder of iBud of $
The following tables reflect the related party advance and note payable balances.
|
| Notes payable to related parties |
|
| Accrued interest -related parties |
| ||
|
| December 31, 2021 |
| |||||
David Tobias, CEO & Director |
| $ |
|
| $ |
| ||
New Compendium, greater than 10% Shareholder |
|
|
|
|
|
| ||
Cathy Carroll, Director |
|
|
|
|
|
| ||
Other Affiliates |
|
|
|
|
|
| ||
Totals |
| $ |
|
| $ |
| ||
|
| Advances from related parties |
|
| Notes payable to related parties |
|
| Accrued interest -related parties |
| |||
|
| December 31, 2020 |
| |||||||||
David Tobias, CEO & Director |
| $ |
|
| $ |
|
| $ |
| |||
New Compendium, Affiliate |
|
|
|
|
|
|
|
|
| |||
Keith Hyatt, Affiliate (GKMP) |
|
|
|
|
|
|
|
|
| |||
Jason Washington, Affiliate (GKMP) |
|
|
|
|
|
|
|
|
| |||
Chris Cope, Affiliate (iBudtender) |
|
|
|
|
|
|
|
|
| |||
Cathy Carroll, Director |
|
|
|
|
|
|
|
|
| |||
Other Affiliates |
|
|
|
|
|
|
|
|
| |||
Totals |
| $ |
|
| $ |
|
| $ |
| |||
In the years ended December 31, 2021 and 2020, the Company incurred approximately $
| F-14 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
6. Investments
At December 31, 2021 and 2020, the Company owns
In 2021, the Company received
The Company’s investment in CBDG represents
7. Stockholders’ Equity
Securities Issuances
Share Issuances |
|
|
| |||||||||
Services |
| Common |
|
| Preferred |
|
| Value |
| |||
Related Party issuances |
|
|
|
|
|
|
|
|
| |||
David Tobias, Officer, Director |
|
| - |
|
|
|
|
| $ |
| ||
Brad Herr, Officer, Director |
|
|
|
|
| - |
|
|
|
| ||
Robert Tankson, Director |
|
|
|
|
| - |
|
|
|
| ||
Cathy Carroll, Director |
|
|
|
|
| - |
|
|
|
| ||
Trevor Reed, Director |
|
|
|
|
| - |
|
|
|
| ||
Total related party issuances |
|
|
|
|
|
|
| $ |
| |||
Non-related party issuances |
|
|
|
|
| - |
|
| $ |
| ||
Total shares for services |
|
|
|
|
|
|
| $ |
| |||
Issuance for cash |
|
|
|
|
|
|
|
|
|
| ||
Preferred stock converted to common |
|
|
|
|
| ( | ) |
|
|
| ||
Shares cancelled |
|
| ( | ) |
|
| - |
|
| $ | ( | ) |
Aggregate totals |
|
|
|
|
| ( | ) |
| $ |
| ||
| F-15 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
During the year ended December 31, 2021, the Company cancelled shares that had been returned after it was determined the shares have been erroneously issued to a vendor in 2020.
Share Issuances |
|
| ||||||||||
Shares issued for stock payable |
| Common |
|
| Preferred |
|
| Value |
| |||
Related party issuance |
|
|
|
|
|
|
| $ |
| |||
Non-related party issuance |
|
|
|
|
| - |
|
|
|
| ||
Total shares for stock payable |
|
|
|
|
|
|
| $ |
| |||
Conversion of preferred stock |
|
|
|
|
| ( | ) |
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
Related party issuances |
|
|
|
|
|
|
|
|
|
|
|
|
David Tobias, Officer, Director |
|
| - |
|
|
|
|
| $ |
| ||
Brad Herr, Officer, Director |
|
|
|
|
| - |
|
|
|
| ||
Robert Tankson, Director |
|
|
|
|
| - |
|
|
|
| ||
Cathy Carroll, Director |
|
|
|
|
| - |
|
|
|
| ||
Trevor Reed, Director |
|
|
|
|
| - |
|
|
|
| ||
Keith Hyatt, President GKMP |
|
|
|
|
| - |
|
|
|
| ||
Kyle Powers, CEO PrestoCorp |
|
|
|
|
| - |
|
|
|
| ||
Total related party issuances |
|
|
|
|
|
|
|
|
| |||
Non-related Party issuances |
|
|
|
|
| - |
|
|
|
| ||
Total shares for services |
|
|
|
|
|
|
| $ |
| |||
Issuance for Cash |
|
|
|
|
| - |
|
| $ |
| ||
Issuance for acquisitions |
|
|
|
|
| - |
|
| $ |
| ||
Aggregate totals |
|
|
|
|
|
|
| $ |
| |||
During the years ended December 31, 2021 and 2020, David Tobias, Chief Executive Officer and Director, converted
In the year ended December 31, 2020, the Company acquired a
Stock Compensation Plans
2017 Stock Plan
On July 28, 2017, the Company adopted the Cannabis Sativa 2017 Stock Plan which authorized the Company to utilize common stock to compensate employees, officers, directors, and independent contractors for services provided to the Company. The Company authorized up to
2020 Stock Plan
On September 25, 2020, the Company adopted the Cannabis Sativa 2020 Stock Plan which authorized the Company to utilize common stock to compensate employees, officers, directors, and independent contractors for services provided to the Company. By resolution dated September 25, 2020, the Company authorized up to
| F-16 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
Warrants
During the year ended December 31, 2020,
Shares |
|
| Exercise Price |
|
| Expiration Date | |||
|
|
| $ |
|
| ||||
|
|
| $ |
|
| ||||
|
|
|
|
|
|
|
| ||
8. Commitments and Contingencies
Leases.
PrestoCorp leases office space through WeWork in New York for $
GKMP leased a facility in Anaheim California where its operations are based. The Anaheim lease included approximately 16,000 square feet of combined office, manufacturing, and warehouse space. Rent expense for the years ended December 31, 2021 and 2020 was $
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 December 31, 2021, no claims are outstanding.
Shares in Escrow. At December 31, 2021 and 2020,
| F-17 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
9. Income Taxes
The Company did not recognize a tax provision or benefit for the years ended December 31, 2021 and 2020 due to ongoing net losses and a valuation allowance. At December 31, 2021 and 2020, the Company had net deferred tax assets which will not be realized and are fully reserved by valuation allowances.
At December 31, 2021 and 2020, the Company had net deferred tax assets principally arising from net operating loss carryforward for income tax purposes and differences in the carrying values of goodwill and intangibles between the Company’s financial statements and its income tax returns. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax assets, a valuation allowance equal to 100% of the net deferred tax asset exists at December 31, 2021 and 2020.
The components of the Company’s net deferred tax assets at December 31, 2021 and 2020 are as follows:
|
| 2021 |
|
| 2020 |
| ||
Deferred tax asset: |
|
|
|
|
|
| ||
Net operating loss carryforwards |
| $ |
|
| $ |
| ||
Intangibles and goodwill |
|
|
|
|
|
| ||
Investments |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
Total deferred tax assets |
|
|
|
|
|
| ||
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax assets |
| $ |
|
| $ |
| ||
At December 31, 2021 the Company had net operating loss carry forwards of approximately $
The reconciliation of the federal income tax rate and the Company’s tax provision (benefit) at December 31, 2021 is as follows:
|
| 2021 |
|
| 2020 |
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Less non-controlling interest net loss |
|
|
|
|
|
| ||
Net loss attributable to CBDS |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Provision (benefit) computed using the statutory rate: |
| $ | ( | ) |
| $ | ( | ) |
Permanent differences |
|
|
|
|
|
| ||
Change in estimate |
|
| ( | ) |
|
|
| |
Change in valuation allowance |
|
|
|
|
|
| ||
Total income tax provision (benefit) |
| $ |
|
| $ |
| ||
| F-18 |
| Table of Contents |
CANNABIS SATIVA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2021 and 2020 |
The Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns and found no positions that would require a liability for uncertain income tax benefits to be recognized. The Company is subject to possible tax examinations for the fiscal years 2018 through 2021. Prior year tax attributes could be adjusted by taxing authorities. If applicable, the Company will deduct interest and penalties as interest expense on the financial statements.
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.
| F-19 |