Certain statements in this Report constitute "forward-looking statements." Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause our actual results, performance, or achievements to
be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Factors that might
cause such a difference include, among others, uncertainties relating to general
economic and business conditions; industry trends; changes in demand for our
products and services; uncertainties relating to customer plans and commitments
and the timing of orders received from customers; announcements or changes in
our pricing policies or that of our competitors; unanticipated delays in the
development, market acceptance or installation of our products and services;
changes in government regulations; availability of management and other key
personnel; availability, terms, and deployment of capital; relationships with
third-party equipment suppliers; and worldwide political stability and economic
growth. The words "believe," "expect," "anticipate," "intend" and "plan" and
similar expressions identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date the statement was made.
Results of Operations
Three Months Ended March 31, 2022 compared with the Three Months Ended March 31,
2021
Prior to April 22, 2021, the Company operated two business segments: PrestoCorp,
Inc. ("PrestoCorp"), a telehealth business, and GK Manufacturing and Packaging,
Inc. ("GKMP"), a contract manufacturing business. On April 22, 2021, the Company
sold its controlling interest in GKMP and iBud Tender, Inc. ("iBud"). The
discontinued operations of GKMP and iBud are reported separately, below.
Discussion of results of operations includes the consolidated results of
PrestoCorp.
Three Months Ended
A B A-B
March 31, 2022 March 31, 2021 Change Change %
REVENUE $ 423,701 $ 482,350 $ (58,649 ) -12 %
Cost of revenues 158,689 183,503 (24,814 ) -14 %
Cost of sales % of total
sales 37 % 38 % -1 %
Gross profit 265,012 298,847 (33,835 ) -11 %
Gross profit % of sales 63 % 62 % 1 %
EXPENSES
Professional fees 121,906 119,739 2,167 2 %
Depreciation and
amortization 42,353 42,881 (528 ) -1 %
Wages and salaries 186,761 149,845 36,916 25 %
Advertising 16,221 92,635 (76,414 ) -82 %
General and
administrative 227,602 366,428 (138,826 ) -38 %
Total expenses 594,843 771,528 (176,685 ) -23 %
NET LOSS FROM CONTINUING
OPERATIONS (329,831 ) (472,681 ) 142,850 -30 %
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Revenues declined 12% in the three months ended March 31, 2022 compared to the
three months ended March 31, 2021 primarily due to the softening economy and
inflationary pressures that have increased costs of necessities and reduced
incomes of customers for more discretionary expenditures as provided by
PrestoCorp. While access to medical marijuana may be considered by some to be a
necessity, the costs are not generally covered by insurance and in the current
economic climate, our customers may choose not to pursue access to medical
marijuana until economic conditions improve. The need for access to medical
marijuana is also impacted by the growing number of states that have legalized
adult recreational use, thereby limiting the need in those states for the
medical marijuana cards available through the PrestoCorp services.
Net operating loss for the three-month period ended March 31, 2022 decreased 30%
in the current period compared to the prior period. The decrease in net loss is
a result of significant reductions in advertising and general and administrative
expenses. Total operating expenses decreased 23% in the current quarter. The
decrease in total operating costs was largely attributable to a significant
reduction of 82% in advertising and 38% in general and administrative costs,
partially offset by a 25% increase in wages and salaries resulting from annual
salary and wage increases for PrestoCorp personnel.
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 iBud through March 31,
2021 are provided below. There were no operations by either GKMP or iBud in the
three months ended March 31, 2022.
Three Months Ended
March 31, March 31,
Discontinued Operations 2022 2021
REVENUE - 74,973
Cost of revenues - 81,511
Cost of sales % of total sales - 109 %
Gross profit - (6,538 )
Gross profit % of sales - -9 %
OPERATING EXPENSES
Professional fees - -
Depreciation and amortization - 4,700
Wages and salaries - 58,617
Advertising - 998
General and administrative - 91,181
Interest expense - 2,144
Total operating expenses - 157,640
NET LOSS FROM DISCONTINUED OPERATIONS - (164,178 )
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Liquidity and Capital Resources
Net cash used in operating activities for the three-month period ended March 31,
2022, was $47,799. During the same period, our cash decreased by $41,459.
Financing activities generated $6,340 in the three months from related party
notes payable. We also reported stock-based compensation of $246,654 during the
three-month period from issuance of common and preferred stock as compensation
for services performed by officers, directors, and contractors. On March 31,
2022, our cash position was $152,601. Given the level of operations in our first
quarter, we expect that additional funds will be required.
The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the liquidation of liabilities in the normal
course of business. We incurred net losses attributable to Cannabis Sativa,
Inc. of $90,891 and $419,990 (including the loss of $164,178 attributable to
discontinued operations), respectively, for the three-month periods ended March
31, 2022 and 2021, and had an accumulated deficit of $79,566,859 as of March 31,
2022, which, among other factors, raises substantial doubt about the Company's
ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Company's ability to generate profitable
operations in the future and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations
when they are due.
Management is currently evaluating several fund-raising alternatives including
private placement of equity securities, a secondary public offering, and various
debt instruments. In addition, key members of management have indicated a
willingness to provide additional operating capital from time to time. We are
also currently selling a portion of our investment securities to generate cash
for operations. Based on all these considerations, we believe we will have
sufficient capital to operate the business for the next twelve months. It will
be important for the Company to be successful in its efforts to raise capital if
it is going to be able to further its business plan in an aggressive manner.
Raising capital in this manner will cause dilution to current shareholders.
On May 4, 2022, the Company signed a non-binding letter of intent to merge with
MJ Harvest, Inc. ("MJHI"), a company operating a vertically integrated cannabis
business covering growing operations, extraction, manufacturing operations, and
distribution of products through customer dispensaries. MJHI has one company
owned location in Colorado, is expected to close on a second facility in
California before the end of May 2022, and has a 25% investment in PPK,
Investment Group, Inc. ("PPK"). PPK has growing, manufacturing and distribution
operations in Oklahoma, South Dakota, and Arizona, and is in the process of
opening new locations in New York and Florida. Management expects that the
merger with MJHI will provide adequate cash flow and growth opportunities to
meet the Company's liquidity requirements in coming periods. No assurances can
be given that the merger will be consummated, or the combined companies'
operations will be sufficient to allow the Company to generate profitable
operations in the future and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations
when they are due.
COVID-19
The COVID-19 pandemic is continuing. The evolution of new variants and their
rapid spread around the world and throughout the United States has many
countries, including the United States, instituting continuing restrictions on
travel, public gatherings, and certain business operations. These restrictions
have significantly disrupted economic activity in the United States and
Worldwide. To date, the disruption has not materially impacted the Company's
financial statements. Initially, the pandemic had a positive impact on the
telehealth business, but this positive impact has lessened as COVID-19
restrictions have eased, but the risk remains for a new outbreak of a virulent
new strain to develop, and further disruptions are a continuing concern.
The effects of the continued outbreak of COVID-19 and related government
responses could include extended disruptions to supply chains and capital
markets, reduced labor availability and a prolonged reduction in economic
activity. These effects could have a variety of adverse impacts on the Company,
including our ability to operate our facilities. To date, there have been no
material adverse impacts to the Registrants' operations due to COVID-19.
In addition, the economic disruptions caused by COVID-19 could also adversely
impact the impairment risks for certain long-lived assets, equity method
investments and goodwill. Management evaluated these impairment considerations
and determined that no such impairments occurred through the date of this
report.
Off Balance Sheet Arrangements
None
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