Cannabis Sativa, Inc. - Quarter Report: 2013 September (Form 10-Q)
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: September 30, 2013
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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)
Ultra Sun Corp.
(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.
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x
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Yes
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No
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| 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). | |||||||
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
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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 Act).
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Yes
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x
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No
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The number of shares of the issuer’s Common Stock outstanding as of November 12, 2013 is 7,825,000.
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Item 1.
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Financial Statements.
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CANNABIS SATIVA, INC. formerly ULTRA SUN CORP.
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
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ASSETS
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September 30,
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2013
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Current Assets
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(Unaudited)
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Cash and cash equivalents
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$ | 65,725 | |||
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Employee advance
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75 | ||||
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Inventory
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3,807 | ||||
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Prepaids
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1,388 | ||||
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Total Current Assets
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70,995 | ||||
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Property and equipment, net
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2,145 | ||||
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Intangibles, net
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509 | ||||
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Deposits
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3,609 | ||||
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Total Assets
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$ | 77,258 | |||
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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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$ | 73,208 | |||
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Convertible notes payable
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10,000 | ||||
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Due to related parties
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150,977 | ||||
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Accrued interest
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2,756 | ||||
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Total Current Liabilities
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236,941 | ||||
| Related party convertible notes payable | 68,112 | ||||
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Total Liabilities
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305,053 | ||||
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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 September 30, 2013 and December 31, 2012
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- | ||||
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Common stock, $.001 par value, 45,000,000 shares authorized, 7,825,000
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shares issued and outstanding at September 30, 2013
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7,825 | ||||
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Additional paid-in capital
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(84,178 | ) | |||
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Deficit accumulated during the development stage
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(151,442 | ) | |||
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Total Stockholders' Equity (Deficit)
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(227,795 | ) | |||
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Total Liabilities and Stockholders' Equity (Deficit)
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$ | 77,258 | |||
The Accompanying Notes are an Integral
Part of these Condensed Consolidated Financial Statements
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months Ended September 30, 2013
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From Inception (April 9, 2013) through September 30, 2013
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Revenues
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$ | 109 | $ | 109 | ||||
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General and administrative expenses
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88,349 | 123,671 | ||||||
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Loss from operations
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(88,240 | ) | (123,562 | ) | ||||
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Interest (expense)
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(1,600 | ) | (1,600 | ) | ||||
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Loss from continued operations
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(89,840 | ) | (125,162 | ) | ||||
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Income (loss) from discontinued operations
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(26,280 | ) | (26,280 | ) | ||||
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Income (loss) before income taxes
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(116,120 | ) | (151,442 | ) | ||||
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Income taxes
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- | - | ||||||
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Net Income (Loss)
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$ | (116,120 | ) | $ | (151,442 | ) | ||
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Loss per common share from continued operations
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Basic and diluted
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$ | (0.01 | ) | $ | (0.02 | ) | ||
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Income per common share from discontinued operations
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Basic and diluted
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$ | (0.00 | ) | $ | (0.00 | ) | ||
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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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7,825,000 | |||||||
The Accompanying Notes are an Integral
Part of these Condensed Financial Statements
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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From Inception (April 9, 2013) through September 30, 2013
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Cash flows from operating activities:
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Net loss
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$ | (151,442 | ) | |
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Adjustments to reconcile net (loss) income to net cash used by
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operating activities:
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Depreciation and amortization
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1,195 | |||
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Contributed capital
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9,300 | |||
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Changes in assets and liabilities:
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Employee advance
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(75 | ) | ||
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Inventory
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(2,295 | ) | ||
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Prepaids
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(1,388 | ) | ||
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Deposits
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(881 | ) | ||
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Accounts payable and accrued expenses
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54,212 | |||
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Accrued interest
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1,599 | |||
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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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(90,035 | ) | ||
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Cash flows from investing activities:
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Purchase of fixed assets and intangibles
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(3,404 | ) | ||
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Sale of fixed assets
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965 | |||
| Cash acquired in merger | 7,322 | |||
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Net cash provided by investing activities
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4,883 | |||
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Cash flows from financing activities:
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Proceeds from related parties
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150,877 | |||
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Net cash provided by financing activities
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150,877 | |||
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Net increase in cash and cash equivalents
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65,725 | |||
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Cash and cash equivalents at beginning of period
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- | |||
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Cash and cash equivalents at end of period
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$ | 65,725 | ||
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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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$ | - | ||
The Accompanying Notes are an Integral
Part of these Condensed Financial Statements
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 September 30, 2013, 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 September 30, 2013 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. formerly ULTRA SUN CORP.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 period ended September 30, 2013 and 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.
Reclassifications:
Certain balances in the accompanying financial statements were reclassified to conform to the current period’s presentation. The reclassifications were necessary to present discontinued operations and assets held for sale and did not result in a change to the net loss reported.
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:
Inventory is stated at the lower of cost determined by the first-in first-out (FIFO) method or market. 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. For the periods ended September 30, 2013, all potentially dilutive securities are anti-dilutive due to the Company’s losses from continued operations.
CANNABIS SATIVA, INC. formerly ULTRA SUN CORP.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revenue Recognition:
The Company recognizes revenue from product sales at the time the purchase is made.
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 period ended September 30, 2013 and 2012 differed from the statutory rate, due primarily to net operating losses incurred by the Company in the respective period. For the period ended September 30, 2013 a tax benefit of approximately $56,586 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 September 30, 2013 the Company had net operating losses of approximately $151,000 resulting in a deferred tax asset of approximately $59,000.
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. As of September 30, 2013, accrued interest related to the above mentioned notes was $2,756.
3. Due to Related Parties
During the period ended September 30, 2013 the Company received several short-term advances from related parties and officers of the Company to cover operating expenses. As of September 30, 2013, net advances to the Company were $150,977.
CANNABIS SATIVA, INC. formerly ULTRA SUN CORP.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Sahara Sun Sale
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”), to 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 sale was effected pursuant to an Offer for Purchase and Sale of Business and Assets (the “Sale Agreement”) made by LST on August 18, 2013, as amended by a counteroffer dated August 27, 2013 and Addendum No. 2 to the Sale Agreement dated September 30, 2013. In connection with the transaction the parties entered into a mutual indemnification agreement dated as of September 27, 2013, and the Company and its president, David Tobias, entered into a five-year non-competition agreement with LST with respect to the counties of Davis, Salt Lake, Summit and Wasatch, Utah.
As previously reported in the current report on Form 8-K filed July 18, 2013, the Company entered into a consulting agreement dated as of July 12, 2013 with Neil Blosch, its former president, pursuant to which Mr. Blosch agreed 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. Among other terms, the consulting agreement provided that upon the sale of the tanning salon, the proceeds from such sale would be applied first to pay Mr. Blosch an incentive bonus in the amount of $50,000; second to hold for the benefit of the Company the amount of any net loss incurred by the tanning salon (that is, operating costs the tanning salon was not able to pay from its income in its ordinary course of business) during the period from April 1, 2013 through the date of sale; third to pay the promissory note dated July 12, 2013 to Mr. Blosch and two former stockholders of the Company in the principal amount of $7,100 (the “July Note”); and fourth to pay 50% of the remaining sales proceeds (up to a maximum of an additional $25,000) to Mr. Blosch as an additional incentive bonus. The consulting agreement provided that in the event the sales proceeds from the tanning salon were not adequate to pay the amounts listed above, the proceeds would be applied in the order of priority set forth above until they had been exhausted. Pursuant to the terms of the consulting agreement, Mr. Blosch was paid an incentive bonus in the amount of $50,000, the amount of the net proceeds from the sale of the tanning salon, and the July Note was terminated in accordance with its terms and the principal amount of such note was treated as a contribution to capital by the note holders.
The table below represents the assets which were sold in the Sahara Sun sale and the resulting gain on the sale:
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September 30, 2013
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(Unaudited)
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Sales Price:
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$ | 60,000 | ||
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Inventory
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1,018 | |||
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Property and equipment, net
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964 | |||
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Total assets sold
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1,982 | |||
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Gain on sale of assets
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$ | 58,018 | ||
The Company has presented the tanning salon business statements of operations as discontinued operations. The table below shows the results of discontinued operations related to the Tanning business and are included in the accompanying statement of operations for the three and nine months ended September 30, 2013.
CANNABIS SATIVA, INC. formerly ULTRA SUN CORP.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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Three and Nine Months Ended September 30, 2013
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Revenue
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$ | 21,710 | ||
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Cost of revenue
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1,494 | |||
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Gross profit
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20,216 | |||
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Operating expenses
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104,514 | |||
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Other income (expenses)
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Gain on sale of assets
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58,018 | |||
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Income (loss) from discontinued operations
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$ | (26,280 | ) | |
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 $151,442. At September 30, 2013, the Company had total assets of $77,258 and liabilities totaling $305,053, and a working capital deficit of $234,058.
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. Subsequent Events
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Recent Events
Agreement and Plan of Reorganization with Wild Earth Naturals, Inc.
As reported in our current report on Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC) on July 18, 2013, on July 12, 2013, Cannabis Sativa, Inc., formerly named Ultra Sun Corporation, a Nevada corporation (the “Company” or the “Registrant”), Ultra Merger Corp., a Nevada corporation (“Merger Corp.”) and Wild Earth Naturals, Inc., a Nevada corporation (“Wild Earth”) entered into an Agreement and Plan of Reorganization (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 accordance with the terms of the Reorganization Agreement, at the closing of the Reorganization the members of the Company’s former management resigned and the persons designated by Wild Earth were appointed as the new officers and directors of the Company with the resignation and appointments of certain director positions becoming effective after compliance with rule 14f-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The Reorganization Agreement provided that Wild Earth would assume and be responsible for the Company’s operating expenses from and after April 1, 2013 and also provided that at closing certain of the Company’s stockholders would loan the Company the amount of $7,100 as payment of operating losses incurred by the Company during the first quarter of 2013, which would only be repaid under certain circumstances. As reported herein, those circumstances did not occur, the Company has no further obligation with respect to repayment of the loan and the amount of the loan has been treated as a contribution to capital.
The foregoing summary of the Reorganization Agreement is qualified in its entirety by reference to the complete copy of the Reorganization Agreement which is included as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 18, 2013.
In connection with the Reorganization, on July 12, 2013 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 interest calculation date. 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 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.
Wild Earth and the persons designated as the new officers and directors of the Registrant by Wild Earth determined that the Registrant’s tanning salon business was not complementary to or consistent with Wild Earth’s herbal skin care products’ business and determined that the tanning salon business should be discontinued.
As reported in our current report on Form 8-K filed with the SEC on October 25, 2013, on September 30, 2013, the Registrant 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 Registrant paid a broker’s fee of $10,000 to Coldwell Banker Commercial, which represented the Registrant 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 sale was effected pursuant to an Offer for Purchase and Sale of Business and Assets (the “Sale Agreement”) made by LST on August 18, 2013, as amended by a counteroffer dated August 27, 2013 and Addendum No. 2 to the Sale Agreement dated September 30, 2013. In connection with the transaction the parties entered into a mutual indemnification agreement dated as of September 27, 2013, and the Registrant and its president, David Tobias, entered into a five-year non-competition agreement with LST with respect to the counties of Davis, Salt Lake, Summit and Wasatch, Utah.
As previously reported in the current report on Form 8-K filed with the SEC July 18, 2013, the Registrant entered into a consulting agreement dated as of July 12, 2013 with Neil Blosch, its former president, pursuant to which Mr. Blosch agreed to manage the tanning salon operations and assist the Registrant in selling the tanning salon prior to the expiration of the tanning salon lease on September 30, 2013. Among other terms, the consulting agreement provided that upon the sale of the tanning salon, the proceeds from such sale would be applied first to pay Mr. Blosch an incentive bonus in the amount of $50,000; second to hold for the benefit of the Registrant the amount of any net loss incurred by the tanning salon (that is, operating costs the tanning salon was not able to pay from its income in its ordinary course of business) during the period from April 1, 2013 through the date of sale; third to pay the promissory note dated July 12, 2013 to Mr. Blosch and two former stockholders of the Registrant in the principal amount of $7,100 (the “July Note”); and fourth to pay 50% of the remaining sales proceeds (up to a maximum of an additional $25,000) to Mr. Blosch as an additional incentive bonus. The consulting agreement provided that in the event the sales proceeds from the tanning salon were not adequate to pay the amounts listed above, the proceeds would be applied in the order of priority set forth above until they had been exhausted. Pursuant to the terms of the consulting agreement, subsequent to September 30, 2013, Mr. Blosch was paid an incentive bonus in the amount of $50,000, the amount of the net proceeds from the sale of the tanning salon, and the July Note was terminated in accordance with its terms and the principal amount of such note was treated as a contribution to capital by the note holders.
Name Change
On November 13, 2013, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State to change its name to “Cannabis Sativa, Inc.,” effective November 18, 2013. The action was described in the Schedule 14C Definitive Information Statement filed with the SEC on October 22, 2013.
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 not yet begun our principal business operations.
Results of Operation
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Three Months Ended September 30, 2013
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From the Date of Inception (April 9, 2013) through September 30, 2013
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|||||||
| (Unaudited) | ||||||||
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Revenue
|
$ | 109 | $ | 109 | ||||
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General and Administrative Expenses
|
(88,349 | ) | (123,671 | ) | ||||
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Interest Expense
|
(1,600 | ) | (1,600 | ) | ||||
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Loss from continued operations
|
(89,840 | ) | (125,162 | ) | ||||
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Loss from discontinued operations
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(26,280 | ) | (26,280 | ) | ||||
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Net Loss
|
$ | (116,120 | ) | $ | (151,442 | ) | ||
Comparative financial data for three and nine month periods ended September 30, 2012 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 September 30, 2013.
General and Administrative Expenses – The Company had general and administrative expenses of $88,349 for the three months ended September 30, 2013 and general and administrative expenses of $123,671 for the period from the date of inception (April 9,2013) through September 30, 2013. General and administrative expenses consisted primarily of legal, accounting, rent and transfer agent fees.
Loss from Discontinued Operations – The Company generated a loss from discontinued operations of $26,280 for the periods ended September 30, 2013. This activity relates to the Company’s tanning salon business which was sold on September 30, 2013 as discussed above.
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, 2012 in Part I, Item 1A under the caption “Risk Factors” and in our current report on Form 8-K filed on July 18, 2013 in Item 2.01 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
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Quantitative and Qualitative Disclosures About Market Risk.
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Not required.
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Controls and Procedures.
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Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“the Exchange Act”) as of September 30, 2013, the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as a result of our failure to timely file a current report on Form 8-K our disclosure controls and procedures as of September 30, 2013 were not effective such that the information required to be disclosed by us in reports filed 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 our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
Subsequent to September 30, 2013, we established additional procedures to strengthen our disclosure controls and procedures, including the implementation of additional procedures to identify the actions that require disclosure on Form 8-K and the notification of our outside consultants before the actions are taken. We believe these enhanced procedures will be adequate to cure the deficiencies in our disclosure controls and procedures that existed as of September 30, 2013. A controls system cannot provide absolute assurance, however, that the objectives of the controls system 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.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
|
Legal Proceedings.
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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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Risk Factors.
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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.
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Unregistered Sales of Equity Securities and Use of Proceeds.
|
In connection with the Reorganization with Wild Earth, on July 12, 2013, we issued an aggregate of 6,500,000 shares of our common stock to the eight stockholders of Wild Earth in exchange for their shares of Wild Earth common stock pursuant to the Reorganization Agreement. Each of the stockholders represented that they were accredited investors or were sophisticated investors with sufficient experience in business and financial matters that they were capable of evaluating the merits and risks of an investment in the Registrant and that they could sustain the risk of loss of their entire investment. No underwriter was involved in the foregoing transaction and the shares were issued by the Registrant directly to the Wild Earth stockholders. The shares were issued without registration under the Securities Act, in reliance on the exemption from such registration requirements provided by Section 4(2) of the Securities Act for transactions not involving any public offering and on Rule 506 of Regulation D. The shares were sold without general advertising or solicitation, the stockholders acknowledged that they were acquiring restricted securities that had not been registered under the Securities Act and that were subject to certain restrictions on resale, and the certificates representing the shares were imprinted with the usual and customary restricted stock legend. We filed a notice on Form D in connection with the issuance of shares in the Reorganization.
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Defaults Upon Senior Securities.
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None.
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Mine Safety Disclosures.
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None.
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Other Information.
|
On November 13, 2013, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State to change its name to “Cannabis Sativa, Inc.,” effective November 18, 2013. The action was described in the Schedule 14C Definitive Information Statement filed with the SEC on October 22, 2013.
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Exhibits.
|
The following documents are included as exhibits to this report:
(a) Exhibits
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Exhibit
Number
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SEC Reference Number
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Title of Document
|
Location
|
|
2.1
|
2
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Agreement and Plan of Reorganization among Ultra Sun Corp., Ultra Merger Corp. and Wild Earth Naturals dated as of July 12, 2013
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Incorporated by Reference(2)
|
|||
|
2.2
|
2
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Articles of Merger among Ultra Merger Corp. and Wild Earth Naturals, Inc. dated as of July 12, 2013
|
Incorporated by Reference(2)
|
|||
|
2.3
|
2
|
Plan of Merger among Ultra Merger Corp. and Wild Earth Naturals, Inc. dated as of July 12, 2013
|
Incorporated by Reference(2)
|
|
3.1
|
3
|
Articles of Incorporation
|
Incorporated by Reference(1)
|
|||
|
3.2
|
3
|
Bylaws
|
Incorporated by Reference(1)
|
|||
|
10.1
|
10
|
Consulting Agreement dated July 12, 2013 between Ultra Sun
Corporation and Neil Blosch
|
Incorporated by Reference(2)
|
|||
|
10.2
|
10
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Promissory Note dated July 12, 2013
|
Incorporated by Reference(2)
|
|
10.3
|
10
|
Form of Convertible Promissory Notes dated as of April 22,
2013 and Schedule of Notes Beneficially Owned by Officers,
Directors and Principal Stockholders as of July 15, 2013
|
Incorporated by Reference(2)
|
|||
|
10.4
|
10
|
Offer for Purchase and Sale of Business and Assets Between LST Utah, LLC and the Registrant dated August 23, 2013 and related agreements
|
Incorporated by Reference(3)
|
|||
|
10.5
|
10
|
Noncompetition Agreement among the Registrant, David Tobias and LST Utah, LLC dated as of September 27, 2013.
|
Incorporated by Reference(3)
|
|||
|
31.1
|
31
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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**
|
XBRL Instance Document
|
This Filing
|
||||
|
101.SCH**
|
XBRL Taxonomy Extension Schema
|
This Filing
|
||||
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase
|
This Filing
|
||||
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase
|
This Filing
|
||||
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase
|
This Filing
|
||||
|
101.PRE**
|
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)Incorporated by reference to Exhibits 2.1 through 2.3 and 10.1 through 10.3 of the Company’s current report on Form 8-K filed July 18, 2013.
(3)Incorporated by reference to Exhibits 10.1 through 10.2 of 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.
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: November 19, 2013
By: David Tobias
David Tobias, President
(Principal Executive Officer)
By: Catherine Carroll
Catherine Carroll, Chief Financial Officer
(Principal Financial and Accounting Officer)