Certain statements in this Report constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, among others, uncertainties relating to general economic and business conditions; industry trends; changes in demand for our products and services; uncertainties relating to customer plans and commitments and the timing of orders received from customers; announcements or changes in our pricing policies or that of our competitors; unanticipated delays in the development, market acceptance or installation of our products and services; changes in government regulations; availability of management and other key personnel; availability, terms, and deployment of capital; relationships with third-party equipment suppliers; and worldwide political stability and economic growth. The words "believe," "expect," "anticipate," "intend" and "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.





Results of Operations

Prior to April 22, 2021, the Company operated two business segments: PrestoCorp, Inc. ("PrestoCorp"), a telehealth business, and GK Manufacturing and Packaging, Inc. ("GKMP"), a contract manufacturing business. On April 22, 2021, the Company sold its controlling interest in GKMP. The discontinued operations of GKMP are reported separately, below. Discussion of results of operations includes the consolidated results of PrestoCorp.





Three Months Ended September 30, 2022, compared with the Three Months Ended
September 30, 2021



                                                         Three Months Ended
                                           A               B                    A-B
                                       September       September
                                       30, 2022        30, 2021        Change        Change %
REVENUE                               $   383,079     $   463,040     $ (79,961 )          -17 %
Cost of revenues                          149,943         174,814       (24,871 )          -14 %
Cost of sales % of total sales                 39 %            38 %           1 %
Gross profit                              233,136         288,226       (55,090 )          -19 %
Gross profit % of sales                        61 %            62 %          -1 %
OPERATING EXPENSES
Professional fees                         208,515         132,315        76,200             58 %
Depreciation and amortization              39,440          42,700        (3,260 )           -8 %
Wages and salaries                        188,622         179,136         9,486              5 %
Advertising                                 1,599          47,044       (45,445 )          -97 %
General and administrative                177,658         259,451       (81,793 )          -32 %
Total operating expenses                  615,834         660,646       (44,812 )           -7 %
NET LOSS FROM CONTINUING OPERATIONS      (382,698 )      (372,420 )     (10,278 )            3 %

Revenues declined 17% in the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Revenues in our fiscal third quarter decreased primarily due to a slow-down in the number of patients seeking medical marijuana cards when compared to year earlier period which saw a significant uptick in activity due to the pandemic. Activity levels in the third quarter of 2022 more closely matched our historic operating levels. We do not anticipate a significant spike in patients seeking our services due to pandemic effects, but the impact of the delta and other variants of the virus cannot be determined at this time.






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Gross profit margins for our services, as a percentage of sales, were essentially unchanged in the three months ended September 30, 2022, compared with the same period a year earlier. Holding our gross profit percentages unchanged despite an 17% decline in revenues is attributable to our efforts to control costs at all operating levels.

Total operating costs decreased significantly in the third quarter of 2022 compared to the same period in 2021. We substantially reduced advertising, and general and administrative costs. The cost decreases were primarily the result of our efforts to limit losses while exploring acquisition and growth activities. Our targeted acquisition activities did not result in consummated transactions in the three months ended September 30, 2022, but the Company did sign a letter of intent to Merge with MJ Harvest, Inc. on April 29, 2022, and the Company signed the definitive Merger Agreement on August 8, 2022. The Merger is expected to be completed early in the fourth quarter and, if completed, will provide new business opportunities for the Company.

Net operating loss for the three-month period ended September 30, 2022 increased 3% compared to net loss for the three-month period ended September 30, 2021. The increase in our net operating loss was primarily the result of the decrease in sales.





Nine Months Ended September 30, 2022, compared with the Nine Months Ended
September 30, 2021



                                                       Nine Months Ended
                                       A                 B                      A-B
                                   September       September 30,
                                    30, 2022           2021            Change        Change %
REVENUE                           $  1,262,868     $   1,452,279     $ (189,411 )          -13 %
Cost of revenues                       479,173           553,236        (74,063 )          -13 %
Cost of sales % of total sales              38 %              38 %            0 %
Gross profit                           783,695           899,043       (115,348 )          -13 %
Gross profit % of sales                     62 %              62 %            0 %
OPERATING EXPENSES
Professional fees                      419,923           453,236        (33,313 )           -7 %
Depreciation and amortization          124,147           128,463         (4,316 )           -3 %
Wages and salaries                     559,533           516,534         42,999              8 %
Advertising                             33,128           280,475       (247,347 )          -88 %
General and administrative             534,022           855,637       (321,615 )          -38 %
Total operating expenses             1,670,753         2,234,345       (563,592 )          -25 %
NET LOSS FROM CONTINUING
OPERATIONS                            (887,058 )      (1,335,302 )      448,244            -34 %

Revenues declined 13% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Revenues in the first nine months of 2022 decreased primarily due to a slow-down in the number of patients seeking medical marijuana cards when compared to year earlier period which saw a significant uptick in activity due to the pandemic. Activity levels in the first nine months of 2022 more closely matched our historic operating levels. We do not anticipate a significant spike in patients seeking our services due to pandemic effects, but the impact of the delta and other variants of the virus cannot be determined at this time.

Gross profit margins for our services, as a percentage of sales, were essentially unchanged in the nine months ended September 30, 2022, compared with the same period a year earlier. Holding our gross profit percentages unchanged despite an 13% decline in revenues is attributable to our efforts to control costs at all operating levels.






3

Total operating costs decreased significantly in the first nine months of 2022 compared to the same period in 2021. We substantially reduced professional fees, advertising, and general and administrative costs. The cost decreases were primarily the result of our efforts to limit losses while exploring acquisition and growth activities. Our targeted acquisition activities did not result in consummated transactions in the nine-month period ended September 30, 2022, but the Company did sign a letter of intent to Merge with MJ Harvest, Inc. on April 29, 2022 and the Company signed the definitive Merger Agreement on August 8, 2022. The Merger is expected to be completed early in the fourth quarter and, if completed, will provide new business opportunities for the Company.

Net operating loss for the nine-month period ended September 30, 2022 decreased 34% compared to net loss for the nine-month period ended September 30, 2021. The decrease in our net operating loss was primarily the result of cost containment efforts pending completion of the Merger with MJ Harvest, Inc.





Discontinued Operations.

In April 2021, the Company entered into discussions with THC Farmaceuticals, Inc. ("CBDG") regarding sale of CBDS's controlling interest positions in GKMP and iBudtender Inc. (iBud"). The discussions were triggered by an interest on the part of CBDS management to refocus business efforts on growing PrestoCorp while streamlining financial reporting and management processes by eliminating assets that are no longer considered essential to the Company's core focus. The sale was completed on April 22, 2021. Management believes that the sale of GKMP and iBud will free up management time and resources to seek other acquisitions that are more closely aligned with the Company's business model. Consideration for the sale of the controlling interests consisted of 1,500,000 shares of CBDG common stock and 1,500,000 shares of CBDG preferred stock valued at $600,000 on the date of the acquisition. iBud had no revenues in the periods presented. Summaries of the discontinued operations of GKMP and the operations of iBud through April 22, 2021 are provided below.





                                         Period Ended
Discontinued Operations                 April 22, 2021
REVENUE                                          75,866
Cost of revenues                                 91,316
Cost of sales % of total sales                      120 %
Gross profit                                    (15,450 )
Gross profit % of sales                             -20 %
OPERATING EXPENSES
Depreciation and amortization                     5,861
Wages and salaries                              106,224
Advertising                                       1,693
General and administrative                      102,833
Interest expense                                  2,144
Total operating expenses                        218,755

NET LOSS FROM DISCONTINUED OPERATIONS (234,205 )

GKMP and iBud generated losses from operations during the periods they were operated by the Company. In the second quarter of 2021, management determined that the time and effort required to turn these businesses around would be a significant drain on resources and would limit expansion of our PrestoCorp operations. The sale of our interests in GKMP and iBud eliminates this concern.

Liquidity and Capital Resources

Net cash used in operating activities for the nine-month period ended September 30, 2022, was $120,730. During the same period, our cash position increased by $20,470. Financing activities generated $142,790 in the nine months from related party notes payable.






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We also reported stock-based compensation of $350,507 during the nine-month period from issuance of common stock and preferred stock as compensation for services performed by officers, directors, and contractors. On September 30, 2022, our cash position was $214,530. The overhead related to our status as a public company and our continuing efforts to acquire businesses that will supplement the operations of PrestoCorp will continue to generate consolidated losses from operations in the coming periods. Given our level of operations in the first nine months of 2022, we expect that additional funds will be required. In the remainder of 2022, we expect to generate additional capital primarily from issuances of stock as compensation for services.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We incurred net losses attributable to Cannabis Sativa, Inc. of $505,520 and $1,978,717, respectively, for the nine-month periods ended September 30, 2022 and 2021, and had an accumulated deficit of $79,984,982 as of September 30, 2022. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they are due.

Management is currently evaluating fund-raising alternatives including private placement of equity securities, a secondary public offering, and various debt instruments. In addition, key members of management have indicated a willingness to provide additional operating capital from time to time. We are also currently selling a portion of our investment securities to generate cash for operations, and we have restructured our intercompany loans to PrestoCorp with a monthly amortization schedule and required monthly payments that will begin to address ongoing operating expenses that must be paid in cash. Based on all these considerations, we believe we will have sufficient capital to operate the business for the next twelve months. It will be important for the Company to be successful in its efforts to raise capital if it is going to be able to further its business plan in an aggressive manner. Raising capital in this manner will cause dilution to current shareholders.

In the event the Company consummates the Merger with MJ Harvest, Inc., it is expected that the nature of the business, the cash flow, and access to additional operating capital, will change. The effect of the of the change and the impact on future operations cannot be determined at this time.





COVID-19

COVID-19 has been declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention. Its rapid spread around the world and throughout the United States prompted many countries, including the United States, to institute restrictions on travel, public gatherings, and certain business operations. These restrictions significantly disrupted economic activity in the United States and Worldwide. The Delta variant of the COVID-19 virus now appears to be creating another wave of infections and concerns about the virus' impact on business operations continues. To date, the disruption did not materially impact the Company's financial statements. The pandemic has had a positive impact on the telehealth business. If the severity of the economic disruptions increase as the duration of the COVID-19 pandemic continues, the negative financial impact due to reduced demand could be significantly greater in future periods.

In addition, the economic disruptions caused by COVID-19 could also adversely impact the impairment risks for certain long-lived assets, equity method investments and goodwill. Management evaluated these impairment considerations and determined that no such impairments occurred through the date of this report.






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Off Balance Sheet Arrangements

None

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