Dogecoin Cash, Inc.: Form 10-Q for the period ended Mar 31, 2021

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

Results of Operations

Three Months Ended March 31, 2021 compared with the Three Months Ended March 31, 2020

The Company operates two business segments: PrestoCorp, Inc. (“PrestoCorp”), a telehealth business, and GK Manufacturing and Packaging, Inc. (“GKMP”), a contract manufacturing business. The results of PrestoCorp and GKMP are consolidated in the Company’s financial statements. Discussion of results of operations includes the consolidated results and the business segment results in the following sections.

Revenues grew 13% in the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Revenues in the first quarter of 2021 increased primarily due to growth in revenue of GKMP. GKMP began operations in the first quarter of 2020 and reported nominal revenues in that quarter. Revenues reported by GKMP were up 374% in the first quarter of 2021 compared the first quarter of 2020. GKMP operations however, has not achieved positive margins and the increase in revenue did not support the added cost of the contract manufacturing operations. As a result, margins decreased in the three months ended March 31, 2021 compared to the same period in 2020. See discussion under Business Segments, below.

Net operating loss for the three-month period ended March 31, 2021 was $634,715 compared to net loss of $672,775 for the three-month period ended March 31, 2020. Total operating expenses were $927,024 for the three-month period ended March 31, 2021 and $978,580 for the three-month period ended March 31, 2020. The decrease in total operating costs was largely attributable to a significant reduction of 57% in professional fees partially offset by a 22% increase in general and administrative expenses and a 13% increase in wages and salaries brought on by the addition of GKMP operations. The increase in general and administrative expenses was primarily the result of compensation paid to the principals of PrestoCorp.

Business Segment Results.

PrestoCorp revenues increase slightly in the first quarter of 2021 compared to the same period in 2020. The relatively flat change in sales was the result of a revenue spike in the first quarter of 2020 when the COVID 19 pandemic was starting, telehealth regulations had begun to ease, and the Company had expanded its market footprint. That rapid rise in 2020 was not sustained in 2021, primarily due to a leveling off of demand after the 2020 rush. Management expects that growth in demand for our services will be slower than in 2020 but we expect to see continued growth through the remainder of the year as we expand into new states that recently legalized medical marijuana and as consumers continue to be more accepting of telehealth services. Margins were consistent with prior periods at 62% of revenue.

GKMP was newly organized in the first quarter of 2020 and reported only nominal revenues in the three months ended March 31, 2020. While revenue grew by 374% in the first quarter of 2021, cost of sales increased by 2255% and GKMP generated negative gross margins. The Company experienced headwinds from the COVID 19 pandemic which were reflected in slow sales as customers delayed buying decisions while they assessed market demand for their products. As a result, GKMP has operated at a loss since inception and currently does not have sufficient business to achieve profitability.

While management of GKMP reports sales opportunities in 2021, they have yet to turn into firm orders and there is substantial uncertainty regarding the timing when GKMP will be able to achieve breakeven results. Management of CBDS is currently evaluating options, including sale of CBDS’s 51% ownership of GKMP to another public company, and it appears likely that this sale will occur in the second quarter 2021. If the discussions regarding sale of GKMP are finalized, CBDS will exit the contract manufacturing space.

In April 2021, the Company entered into discussions with THC Farmaceuticals, Inc. (“CBDG”) a company related to CBDS through interlocking ownership by David Tobias, president, regarding sale of CBDS’s majority ownership positions in GK Manufacturing and Packaging, Inc. and iBudtender Inc. The discussions were triggered by an interest on the part of CBDS management to refocus business efforts on growing PrestoCorp while simplifying the financial statements by eliminating assets that are no longer considered essential to the Company’s core focus. Management believes that the sale of GKMP and iBudtender will free up management time to seek other acquisitions that are more closely aligned with the PrestoCorp business model. The agreement with CBDG has not yet been finalized pending completion of additional due diligence review by both CBDS and CBDG, but it is likely that the sale will be finalized in the second quarter of 2021. Consideration for the sale of the majority interests will consist of 1,500,000 shares of CBDG preferred stock and 1,500,000 shares of CBDG common stock. The due diligence investigation on this sale is ongoing.

Liquidity and Capital Resources

Net cash used in operating activities for the three-month period ended March 31, 2021, was $87,217. During the same period, our cash decreased by $13,459. Financing activities generated $73,758 in the three months from advances from related parties totaling $48,258, from related party notes payable totaling $20,500, and from the sale of common stock totaling $5,000. We also reported stock-based compensation of $489,986 during the three-month period from issuance of common and preferred stock as compensation for services performed by officers, directors, and contractors. On March 31, 2021, our cash position was $308,648. Given the level of operations in our first quarter, we expect that additional funds will be required.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We incurred net losses attributable to Cannabis Sativa, Inc. of $419,990 and $616,407, respectively, for the three-month periods ended March 31, 2021 and 2020, and had an accumulated deficit of $77,448,329 as of March 31, 2021, which, among other factors, raises substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they are due.

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

COVID-19

COVID-19 has been declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention. Its rapid spread around the world and throughout the United States prompted many countries, including the United States, to institute restrictions on travel, public gatherings, and certain business operations. These restrictions significantly disrupted economic activity in the United States and Worldwide. To date, the disruption did not materially impact the Company’s financial statements. The pandemic has had a positive impact on the telehealth business, but this positive impact was partially offset by a negative impact on our start-up operations in GKMP. If the severity of the economic disruptions increase as the duration of the COVID-19 pandemic continues, the negative financial impact due to reduced demand could be significantly greater in future periods than in the first quarter.

The effects of the continued outbreak of COVID-19 and related government responses could also include extended disruptions to supply chains and capital markets, reduced labor availability and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts on the Company, including our ability to operate our facilities. To date, there have been no material adverse impacts to the Registrants’ operations due to COVID-19.

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

Off Balance Sheet Arrangements

None

Disclosure Controls and Procedures

Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective as it was determined that there were material weaknesses affecting our disclosure controls and procedures.

Management of the Company believes that these material weaknesses are due to the small size of the company’s accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of remediation. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As the Company grows, management expects to increase the number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.