Attached files
| file | filename |
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| EXCEL - IDEA: XBRL DOCUMENT - Cannabis Sativa, Inc. | Financial_Report.xls |
| EX-3.2 - EXHIBIT 3.2 - Cannabis Sativa, Inc. | ex32.htm |
| EX-31.1 - EXHIBIT 31.1 - Cannabis Sativa, Inc. | ex311.htm |
| EX-31.2 - EXHIBIT 31.2 - Cannabis Sativa, Inc. | ex312.htm |
| EX-32.2 - EXHIBIT 32.2 - Cannabis Sativa, Inc. | ex322.htm |
| EX-32.1 - EXHIBIT 32.1 - Cannabis Sativa, Inc. | ex321.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
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ACT OF 1934
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For the quarterly period ended: March 31, 2014
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
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ACT OF 1934
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For the transition period from: _____________ to _____________
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———————
Cannabis Sativa, Inc.
(Exact name of registrant as specified in its charter)
———————
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NEVADA
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000-53571
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20-1898270
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(State or Other Jurisdiction
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(Commission
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(I.R.S. Employer
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of Incorporation)
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File Number)
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Identification No.)
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1646 W. Pioneer Blvd., Suite 120, Mesquite, Nevada 89027
(Address of Principal Executive Office) (Zip Code)
(702) 346-3906
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
The number of shares of the issuer’s Common Stock outstanding as of May 16, 2014 is 11,714,071.
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PART I – FINANCIAL INFORMATION
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PART II – OTHER INFORMATION
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Item 1.
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Financial Statements.
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CANNABIS SATIVA, INC.
(A development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
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ASSETS
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March 31,
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December 31,
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2014
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2013
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(Unaudited)
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Current Assets
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Cash and cash equivalents
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$ | 52,939 | $ | 14,863 | |||||
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Accounts receivable
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1,130 | - | |||||||
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Due from related party
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2,000 | - | |||||||
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Employee advance
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250 | - | |||||||
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Inventory
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17,352 | 3,969 | |||||||
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Prepaids
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- | 1,784 | |||||||
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Total Current Assets
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73,671 | 20,616 | |||||||
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Property and equipment, net
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3,461 | 2,033 | |||||||
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Intangibles, net
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3,776 | 3,782 | |||||||
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Deposits
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1,031 | 881 | |||||||
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Total Assets
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$ | 81,939 | $ | 27,312 | |||||
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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Current Liabilities
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Accounts payable and accrued expenses
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$ | 22,335 | $ | 5,245 | |||||
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Derivative liability
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- | 32,309,105 | |||||||
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Due to related parties
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289,359 | 196,279 | |||||||
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Accrued interest
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5,667 | 4,319 | |||||||
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Total Current Liabilities
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317,361 | 32,514,948 | |||||||
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Related party convertible notes payable, net of discount
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- | 14,727 | |||||||
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Convertible notes payable, net of discount
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- | 2,162 | |||||||
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Total Liabilities
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317,361 | 32,531,837 | |||||||
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Stockholders' Equity (Deficit)
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Preferred stock, $.001 par value, 5,000,000 shares authorized,
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none issued or outstanding at March 31, 2014 and December 31, 2013, respectively
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- | - | |||||||
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Common stock, $.001 par value, 45,000,000 shares authorized,
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11,714,071 and 7,825,000 issued and outstanding
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at March 31, 2014 and December 31, 2013, respectively
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11,714 | 7,825 | |||||||
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Additional paid-in capital
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32,372,341 | 33,022 | |||||||
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Deficit accumulated during the development stage
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(32,619,477 | ) | (32,545,372 | ) | |||||
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Total Stockholders' Equity (Deficit)
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(235,422 | ) | (32,504,525 | ) | |||||
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Total Liabilities and Stockholders' Equity (Deficit)
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$ | 81,939 | $ | 27,312 | |||||
The Accompanying Notes are an Integral
Part of these Condensed Consolidated Financial Statements
(A development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2014
And From the Date of Inception (April 9, 2013) through March 31, 2014
(Unaudited)
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For the Three Months Ended March 31, 2014
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From Inception (April 9, 2013) through March 31, 2014
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Revenues
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$ | 1,445 | $ | 2,258 | ||||
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Cost of goods sold
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716 | 1,585 | ||||||
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Gross profit
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729 | 673 | ||||||
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General and administrative expenses
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65,272 | 250,490 | ||||||
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Loss from operations
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(64,543 | ) | (249,817 | ) | ||||
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Interest (expense)
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(9,562 | ) | (28,377 | ) | ||||
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Loss on change in fair value of derivative instrument
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- | (32,309,105 | ) | |||||
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Loss from continued operations
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(74,105 | ) | (32,587,299 | ) | ||||
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Income (loss) from discontinued operations
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- | (32,178 | ) | |||||
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Income (loss) before income taxes
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(74,105 | ) | (32,619,477 | ) | ||||
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Income taxes
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- | - | ||||||
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Net Income (Loss)
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$ | (74,105 | ) | $ | (32,619,477 | ) | ||
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Loss per common share from continued operations
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Basic and diluted
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$ | (0.01 | ) | |||||
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Income per common share from discontinued operations
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Basic and diluted
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$ | - | ||||||
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Net loss per common share
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Basic and diluted
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$ | (0.01 | ) | |||||
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Weighted average common shares; basic and diluted
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8,299,651 | |||||||
The Accompanying Notes are an Integral
Part of these Condensed Financial Statements
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2014 and
From the Date of Inception (April 9, 2013) through March 31, 2014
(Unaudited)
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For the Three Months Ended March 31, 2014
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From Inception (April 9, 2013) through March 31, 2014
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Cash flows from operating activities:
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Net loss
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$ | (74,105 | ) | $ | (32,619,477 | ) | ||
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Adjustments to reconcile net loss to net cash used by
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operating activities:
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Depreciation and amortization
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554 | 1,863 | ||||||
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Contributed capital
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11,655 | 63,339 | ||||||
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Amortization of note discount
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5,559 | 18,225 | ||||||
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Loss on derivative liability
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- | 32,309,105 | ||||||
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Changes in assets and liabilities:
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Accounts receivable
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(1,130 | ) | (1,130 | ) | ||||
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Employee advance
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(250 | ) | (250 | ) | ||||
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Due from related party
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(2,000 | ) | (2,000 | ) | ||||
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Inventory
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(13,383 | ) | (15,840 | ) | ||||
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Prepaids
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1,783 | - | ||||||
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Deposits
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(150 | ) | 1,697 | |||||
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Accounts payable and accrued expenses
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17,090 | (56,760 | ) | |||||
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Accrued interest
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1,348 | 4,436 | ||||||
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Amortization of rent forgiveness
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- | (260 | ) | |||||
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Net cash used by operating activities
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(53,029 | ) | (297,052 | ) | ||||
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Cash flows from investing activities:
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Purchase of fixed assets and intangibles
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(1,975 | ) | (8,655 | ) | ||||
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Sale of fixed assets
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- | 965 | ||||||
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Cash acquired in merger
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- | 7,322 | ||||||
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Proceeds from sale of Sahara Sun
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- | 60,000 | ||||||
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Net cash provided by (used by) investing activities
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(1,975 | ) | 59,632 | |||||
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Cash flows from financing activities:
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Proceeds from related parties
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93,080 | 301,009 | ||||||
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Payments to related parties
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- | (11,650 | ) | |||||
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Proceeds from sale of common stock
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- | 1,000 | ||||||
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Net cash provided by financing activities
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93,080 | 290,359 | ||||||
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Net increase in cash
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38,076 | 52,939 | ||||||
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Cash at beginning of period
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14,863 | - | ||||||
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Cash at end of period
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$ | 52,939 | $ | 52,939 | ||||
The Accompanying Notes are an Integral
Part of these Condensed Financial Statements
CANNABIS SATIVA, INC.
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2014 and
From the Date of Inception (April 9, 2013) through March 31, 2014 (Continued)
(Unaudited)
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For the Three Months Ended March 31, 2014
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From Inception (April 9, 2013) through March 31, 2014
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Supplemental disclosure of cash flow information:
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Cash paid during the period for:
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Interest
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$ | - | $ | - | ||||
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Taxes
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$ | - | $ | - | ||||
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Non-cash investing and financing activities:
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Conversion of debt to equity
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$ | 78,112 | $ | - | ||||
The Accompanying Notes are an Integral
Part of these Condensed Financial Statements
(A Devlopment Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2014 and
From the Date of Inception (April 9, 2013) through March 31, 2014
(Unaudited)
1. Summary of Significant Accounting Policies and Use of Estimates:
Presentation of Interim Information:
The condensed consolidated financial statements included herein have been prepared by Cannabis Sativa, Inc., formerly named Ultra Sun Corp. (“we”, “us”, “our” or “Company”), without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with the current report on Form 8-K filed with the SEC July 18, 2013. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures, which are made, are adequate to make the information presented not misleading. Further, the condensed financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at March 31, 2014, and the results of our operations and cash flows for the periods presented.
Interim results are subject to significant seasonal variations and the results of operations for the period ended March 31, 2014 are not necessarily indicative of the results to be expected for the full year.
Nature of Corporation:
The Company was incorporated under the laws of the State of Nevada on November 5, 2004 under the name Ultra Sun Corp. The Company’s previous operations were in operating a tanning salon business. The Company sold its tanning salon business on September 30, 2013 and plans to conduct all business through its subsidiary Wild Earth Naturals Inc. (“Wild Earth”). On November 13, 2013, the Company filed a Certificate of Amendment to its Articles of Incorporation to change its name to “Cannabis Sativa, Inc.,” effective November 18, 2013.
Wild Earth was incorporated under the laws of the State of Nevada on April 9, 2013 for the purpose of operating an herbal products’ business.
On July 12, 2013, the Company, Ultra Merger Corp., a Nevada corporation (“Merger Corp.”) and Wild Earth entered into an Agreement and Plan of Reorganization dated as of July 12, 2013 (the “ Reorganization Agreement”) pursuant to which the Company formed Merger Corp. as a new, wholly-owned subsidiary of the Company, Merger Corp. was merged into Wild Earth with Wild Earth continuing as the surviving corporation, and the Company issued 6,500,000 shares of its restricted common stock to the stockholders of Wild Earth in exchange for all the issued and outstanding shares of Wild Earth capital stock (the “Reorganization”). As a result of the Reorganization, Wild Earth became a wholly owned subsidiary of the Company and the Company had a total of 7,825,000 shares of common stock outstanding of which 6,500,000 or 83.1% were issued to the Wild Earth stockholders. The Reorganization resulted in a change in control of the Company. In connection with the closing of the Reorganization, the Company entered into a consulting agreement with Neil Blosch, the former president of the Company, pursuant to which he was to continue to manage the tanning salon operations and assist the Company in selling the tanning salon prior to the expiration of the tanning salon lease on September 30, 2013.
The transaction has been treated as a recapitalization of the Company and its subsidiaries, with the Company (the legal acquirer of Wild Earth and its subsidiaries) considered the accounting acquiree, and Wild Earth, whose management took control of the Company (the legal acquiree of the Company) considered the accounting acquirer. The Company did not recognize goodwill or any intangible assets in connection with the transaction. All costs related to the transaction are being charged to operations as incurred. The 6,500,000 shares of common stock issued in conjunction with the Reorganization have been presented as outstanding for all periods. The historical consolidated financial statements include the operations of the accounting acquirer for all periods presented.
CANNABIS SATIVA, INC.
(A Devlopment Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2014 and
From the Date of Inception (April 9, 2013) through March 31, 2014
(Unaudited)
On September 30, 2013, the Company completed the sale of all the assets and business known as “Sahara Sun Tanning” located at 87 E. State Road 73, Saratoga Springs, Utah, to LST Utah, LLC (“LST”), an unrelated third party, for a cash purchase price of $60,000. The Company paid a broker’s fee of $10,000 to Coldwell Banker Commercial, which represented the Company in connection with the sale of the tanning salon business and the transaction with LST. In connection with the transaction, LST acquired all the assets of the tanning salon business, including inventory and entered into a new lease with the landlord for the premises in which the business is located. The Company has presented the tanning salon business statements of operations as discontinued operations for all periods.
Development Stage Activities and Operations:
Wild Earth has been in its initial stages of formation and for the three months ended March 31, 2014 had minimal revenues. A development stage activity is one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Inventory:
The Company calculates inventory using the average cost method to value inventory. Inventory cost includes those costs directly attributable to the product before sale.
Fair Value of Financial Instruments:
The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of accounts payable, accrued liabilities, and notes payable approximate fair value given their short term nature or effective interest rates.
Cash and Cash Equivalents:
For financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments purchased with an initial maturity of three (3) months or less.
Earnings per Share:
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period and contains no dilutive securities. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. As of March 31, 2014, the Company has no outstanding potentially dilutive securities.
Revenue Recognition:
The Company recognizes revenue from product sales at the time the purchase is made.
CANNABIS SATIVA, INC.
(A Devlopment Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2014 and
From the Date of Inception (April 9, 2013) through March 31, 2014
(Unaudited)
Income Taxes:
The Company estimates the annual tax rate based on projected taxable income for the full year and records a quarterly income tax provision in accordance with the anticipated annual rate. As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results. This continual estimation process can result in a change to the expected effective tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate. Significant judgment may be required in determining the Company’s effective tax rate and in evaluating our tax positions.
The effective income tax rate of 0% for the periods ended March 31, 2014 differed from the statutory rate, due primarily to net operating losses incurred by the Company in the respective periods. For the three months ended March 31, 2014 a tax benefit of approximately $25,000 would have been generated. However, all benefits have been fully offset through an allowance account due to the uncertainty of the utilization of the net operating losses. As of March 31, 2014 the Company had net operating losses of approximately $255,000 resulting in a deferred tax asset of approximately $87,000.
The Company has established a valuation allowance in the full amount of the deferred tax asset due to the uncertainty of the utilization of operating losses in future periods.
Pending Accounting Pronouncements:
There have been no recent accounting pronouncements issued which are expected to have a material effect on the Company’s financial statements.
2. Convertible Notes Payable – Related Party and Non-Related Party
In connection with the Reorganization as noted above, the Company amended and consolidated its outstanding promissory notes having an outstanding balance of principal and accrued interest in the amount of $78,112 as of April 22, 2013. The Company issued new convertible promissory notes to the holders in exchange for their old notes which included the accrued and unpaid interest on the old notes through April 22, 2013 in the principal balance of the new notes. In addition, the notes were amended to extend the maturity date from December 31, 2013 to May 31, 2016, provide that the principal (but not the interest) of the new notes is convertible into shares of the Company’s common stock at the rate 4.25% of the then issued and outstanding shares of the Company’s common stock for each $10,000 in principal converted, provide that the notes may not be prepaid, and make other changes as set forth in the new notes. No payments were made by the Company or the note holders in connection with the amendment and consolidation of the old notes. In connection with the Reorganization, the note holders of the Company sold convertible promissory notes having an aggregate principal balance of $68,112 as of April 22, 2013 to certain stockholders of Wild Earth in private transactions.
At April 22, 2013 the principal balance was convertible into 658,533 shares of the Company’s common stock. This conversion feature resulted in a beneficial conversion value of $475,055 and a corresponding note discount in the full value of the principal amounts of the notes. The note discount is being amortized over the remaining life of the notes. Amortization of the note discount for the three months ended March 31, 2014 totaled $5,559 and is included in interest expense for the period presented.
During the quarter ended March 31, 2014, the holders of these convertible notes converted the entire outstanding principal balance of $78,112 into 3,889,071 shares of the Company’s common stock. The conversion resulted in the extinguishment of the Company’s $32,309,105 derivative liability outstanding at December 31, 2013 and the remaining unamortized note discount of $55,664.
CANNABIS SATIVA, INC.
(A Devlopment Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2014 and
From the Date of Inception (April 9, 2013) through March 31, 2014
(Unaudited)
As of March 31, 2014 accrued interest on the convertible notes totaled $5,667 and remains unpaid.
3. Due to Related Parties
During the three months ended March 31, 2014 the Company received additional short-term advances from related parties and officers of the Company to cover operating expenses. As of March 31, 2014, net advances to the Company were $289,359. These advances are non-interest bearing in nature. The Company has imputed interest on these sums at the rate of 5% per annum and has recorded interest expense related to these balances in the amount of $2,655. Because the related parties do not expect the imputed interest to be repaid, the interest has been recorded as a contribution of capital at March 31, 2014.
5. Going Concern Considerations
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred net losses since inception. As reported in the financial statements, the Company has an accumulated deficit of $32,619,477. At March 31, 2014, the Company had total assets of $81,939 and liabilities totaling $317,361, and a working capital deficit of $243,690, all of which 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 its ability to raise adequate capital to fund operating losses until it is able to engage in profitable business operations. To the extent financing is not available, the Company may not be able to, or may be delayed in, developing its services and meeting its obligations. The Company will continue to evaluate its projected expenditures relative to its available cash and to evaluate additional means of financing in order to satisfy its working capital and other cash requirements. The accompanying financial statements do not reflect any adjustments that might result from the outcome of these uncertainties.
6. Memorandum of Agreement
The Company previously entered into a Memorandum of Binding Agreement (the “Memorandum”) with Steven Kubby (“Kubby”) and Kush, Inc. (“Kush”), dated as of January 1, 2014, which generally provided that: (i) the Company’s board of directors would appoint Kubby as CEO of the Company for a salary of $5,000 per month for a minimum period of three years and a signing bonus of $60,000 payable no later than February 1, 2014 by the issuance of three post-dated checks; and (ii) Kush would grant the Company an exclusive license to a pending patent application for what Kush believes to be a unique strain of cannabis known as the CTA strain (the “CTA Strain”) for a period of 50 years in consideration for the issuance of shares of the Company’s common stock having a value of $1,000,000 (valued at $1.25 per share). In addition the Company would have the option to acquire 100% of Kush in exchange for additional shares of the Company’s common stock having a value of $1,000,000 (based on the value of the stock at the last trade at closing on the date Kush supplied audited financial statements to the Company); (iv) the Company would pay all expenses associated with the prosecution of the patent application and use its best efforts to obtain revenues from the CTA Strain; (v) the net income generated by the Company from the exclusive use of the CTA Strain would be shared among Kush and the Company with 30% allocated to Kush and 70% allocated to the Company, and (vi) at the request of either party, the parties would enter into mutually acceptable sub-agreements with respect to the subject matter of the Memorandum. The foregoing summary of the Memorandum is qualified in its entirety by reference to the Memorandum.
The Company is continuing its negotiations with Kubby and Kush, Inc. However, to date it has not entered into any definitive agreements and Kubby has not been appointed as an officer of the Company. No assurances can be given that the transactions contemplated by the Memorandum will be consummated or that a patent for the CTA Strain will ever be issued.
CANNABIS SATIVA, INC.
(A Devlopment Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2014 and
From the Date of Inception (April 9, 2013) through March 31, 2014
(Unaudited)
If the Company should be successful in acquiring a license for the CTA Strain and/or in acquiring ownership of Kush, it is anticipated that we would encounter a complex web of Federal and state regulations that are evolving at a rapid rate. Marijuana is currently classified as a Schedule I controlled substance under the Controlled Substances Act (U.S.C. Section 811) which generally means that Congress has determined that marijuana is a dangerous drug and that the illegal distribution and sale of marijuana is a serious crime. The Controlled Substances Act does not recognize the differences between medical and recreational uses of marijuana and all uses are prohibited. On the other hand several states have legalized various aspects of marijuana manufacture and distribution, although such activities are subject to stringent licensing and regulation which vary from state to state. In many states there exists a clear conflict between Federal and state law which has yet to be resolved. As a result of the foregoing, there can be no assurance that a patent for the CTA strain will ever be issued, that the Company will ever become licensed to grow or manufacture the CTA Strain or that it will ever be able to generate income from the sale of products derived from the CTA Strain.
7. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued, and determined there are no additional events that require disclosure.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
The following is management’s discussion and analysis of certain significant factors affecting the Company’s financial position and operating results during the periods included in the accompanying condensed financial statements. Except for the historical information contained herein, the matters set forth in this discussion are forward-looking statements.
Overview
We are in the business of developing, manufacturing, and selling plant-derived lotions, creams, and other formulations for human consumption. The Company's market will include direct selling to retailers and consumers, and also to other companies under terms of licensing rights to product formulas. We are in the development stage and have just begun our principal business operations.
Results of Operation
|
Three Months Ended March 31, 2014
|
From the Date of Inception (April 9, 2013) through March 31, 2014
|
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| (Unaudited) | ||||||||
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Revenue
|
$ | 1,445 | $ | 2,258 | ||||
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Cost of goods sold
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716 | 1,585 | ||||||
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Gross profit
|
729 | 673 | ||||||
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General and administrative expenses
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65,272 | 250,490 | ||||||
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Interest expense
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9,562 | 28,377 | ||||||
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Loss on change in fair value of derivative
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- | 32,309,105 | ||||||
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Loss from continued operations
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(74,105 | ) | (32,587,299 | ) | ||||
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Loss from discontinued operations
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- | (32,178 | ) | |||||
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Net Loss
|
$ | (74,105 | ) | $ | (32,619,477 | ) | ||
Comparative financial data for three months ended March 31, 2013 is not included in this report because the Company was only recently incorporated in April 2013.
Revenue – The Company had immaterial revenues related to its ongoing operations for the periods ended March 31, 2014.
Cost of Goods Sold – The Company had immaterial cost of goods sold for the periods ended March 31, 2014.
General and Administrative Expenses – The Company had general and administrative expenses of $65,272 for the three months ended March 31, 2014 and general and administrative expenses of $250,490 for the period from the date of inception (April 9,2013) through March 31, 2014. General and administrative expenses consisted primarily of professional fees, consulting expenses, payroll expenses, rent and transfer agent fees.
Interest Expense – The Company had interest expenses of $9,562 for the three months ended March 31, 2014 and $28,377 for the period from the date of inception (April 9, 2013) through March 31, 2014. Interest expense for the periods ended March 31, 2014 was primarily related to the Company’s convertible notes and the corresponding note discount amortization related to the notes. The Company also imputed interest on its advances from related parties.
Loss on change in fair value of derivative instrument – For the three months ended March 31, 2014, the Company’s derivative liability was extinguished as a result of the Company’s conversion of $78,112 principal value notes into 3,889,071 shares of common stock.
Loss from Discontinued Operations – The Company generated a loss from discontinued operations of $0 for the three months ended March 31, 2014 and a loss from discontinued operations of $32,178 for the period from the date of inception (April 9, 2013) through March 31, 2014. This activity relates to the Company’s tanning salon business which was sold on September 30, 2013.
Liquidity and Capital Resources
There have been significant changes in our business and financial condition as a result of the Reorganization with Wild Earth Naturals. We anticipate that we will require significant additional debt or equity capital in order to continue our operations and implement Wild Earth’s business plan. We have not entered into any agreement or arrangement for the provision of such financing and no assurances can be given that such financing will be available to us on acceptable terms or at all.
We have had to rely on short-term funding from management or shareholders to cover ongoing expenses. There can be no assurance that management and shareholders will continue to loan the Company funds.
Forward-Looking Statements
We have made forward-looking statements, within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, in this quarterly report on Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include the information concerning our possible or assumed search for new business opportunities and future costs of operations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. These uncertainties and other factors include, but are not limited to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2013 in Part I, Item 1A under the caption “Risk Factors.” Actual results may differ materially from those expressed in the forward-looking statements. You should understand that many important factors could cause our results to differ materially from those expressed in the forward-looking statements. These factors include, without limitation, Wild Earth as a development stage business, the Company’s need for additional capital, our regulatory environment, our limited operating history, our ability to implement our growth strategy, our ability to integrate acquired companies and their assets and personnel into our business, our obligations to pay professional fees, and other economic conditions and increases in corporate maintenance and reporting costs. Unless legally required, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Off Balance Sheet Arrangements
None
Not required.
|
Item 4.
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Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2014, the end of the period covered by this report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports it files under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding disclosure. Based on this evaluation, management concluded that as of March 31, 2014 our disclosure controls and procedures were not effective due to material weaknesses in our internal control over financial reporting, which is described below. It should be noted that a controls system cannot provide absolute assurance that the objectives of the controls systems 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.
As disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2013, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, previously evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. In making this evaluation, our management used the COSO framework (1992), an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that as of December 31, 2013, the Company’s internal control over financial reporting was not effective due to a material weakness in our identification and valuation of convertible securities and a lack of segregation of duties. Remedial actions have been and are being implemented to address these controls, including improving processes and communications involving convertible securities, supplementing the technical competence of our accounting staff with contract resources and improving the documentation of the review of the accounting, presentation and disclosure of such securities. As disclosed in the 2013 Form 10-K, we also separated the positions of Chief Executive Officer and Chief Financial Officer, which positions were held by the same person during a portion of 2013.
Changes in Internal Control over Financial Reporting
Except as described above, there were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
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Item 1.
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The Company is not a party to any material pending legal proceedings and, to the best of its knowledge, its properties are not the subject of any such proceedings.
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Item 1A.
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See the risk factors discussed in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2013, and in Item 2.01 of our current report on Form 8-K filed with the Securities and Exchange Commission on July 18, 2013.
During the quarter ended March 31, 2014, we issued an aggregate of 3,889,071 shares of common stock in relation to the conversion of $78,112 principal balance convertible notes. The shares were issued without registration under the Securities Act, in reliance on exemptions from the registration requirements of the Securities Act. The certificates representing the shares were imprinted with customary restricted stock legends.
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Item 3.
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None.
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Item 4.
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None.
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Item 5.
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None.
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Item 6.
|
The following documents are included as exhibits to this report:
(a) Exhibits
|
Exhibit
Number
|
SEC Reference Number
|
Title of Document
|
Location
|
|||
|
3.1
|
3
|
Articles of Incorporation
|
Incorporated by Reference(1)
|
|||
|
3.2
|
3
|
Certificate of Amendment to Articles of Incorporation
|
This Filing
|
|||
|
3.3
|
3
|
Bylaws
|
Incorporated by Reference(1)
|
|||
|
31.1
|
31
|
Section 302 Certification of Principal Executive Officer
|
This Filing
|
|||
|
31.2
|
31
|
Section 302 Certification of Principal Financial Officer
|
This Filing
|
|||
|
32.1
|
32
|
Section 1350 Certification of Principal Executive Officer
|
This Filing
|
|||
|
32.2
|
32
|
Section 1350 Certification of Principal Financial Officer
|
This Filing
|
|||
|
101.INS(2)
|
XBRL Instance Document
|
This Filing
|
||||
|
101.SCH(2)
|
XBRL Taxonomy Extension Schema
|
This Filing
|
||||
|
101.CAL(2)
|
XBRL Taxonomy Extension Calculation Linkbase
|
This Filing
|
||||
|
101.DEF(2)
|
XBRL Taxonomy Extension Definition Linkbase
|
This Filing
|
||||
|
101.LAB(2)
|
XBRL Taxonomy Extension Label Linkbase
|
This Filing
|
||||
|
101.PRE(2)
|
XBRL Taxonomy Extension Presentation Linkbase
|
This Filing
|
||||
(1)Incorporated by reference to Exhibits 3.01 and 3.02 of the Company’s Registration Statement on Form 10 filed January 28, 2009.
(2)XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cannabis Sativa, Inc.
Date: May 16, 2014
By: David Tobias
David Tobias, President
(Principal Executive Officer)
By: Catherine Carroll
Catherine Carroll, Chief Financial Officer
(Principal Financial and Accounting Officer)