CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the three-month periods ended March 31, 2021 and 2020

1. Organization and Summary of Significant Accounting Policies

Nature of Business:

Cannabis Sativa, Inc. (the “Company,” “us”, “we” or “our”) was incorporated as Ultra Sun Corp. under the laws of Nevada in November 2004.  On November 13, 2013, we changed our name to Cannabis Sativa, Inc.  We operate through several subsidiaries including PrestoCorp, Inc. (“PrestoCorp”), iBudtender, Inc. (“iBudtender”), Wild Earth Naturals, Inc. (“Wild Earth”), Kubby Patent and Licenses Limited Liability Company, (“KPAL”), Hi Brands, International, Inc. (“Hi Brands”), GK Manufacturing and Packaging, Inc. (“GKMP”), and Eden Holdings LLC (“Eden”).  PrestoCorp and GK Manufacturing are both 51% owned subsidiaries and iBudtender is a 50.1% owned subsidiary. Wild Earth, KPAL, Hi Brands, and Eden are wholly owned subsidiaries. Currently, PrestoCorp, GKMP and iBudtender are operating subsidiaries, although iBudtender is not currently generating any revenue. The Company is reviewing opportunities for business development relating to Wild Earth, KPAL, and Hi Brands. Eden is not operating and had no activity for the three months ended March 31, 2021 and 2020.

Our primary operations in the three months ended March 31, 2021 were through PrestoCorp, which provides telemedicine online referral services for customers desiring medical marijuana cards in states where medical marijuana has been legalized. GKMP commenced operations during the second quarter of 2020. The Company is also actively seeking new business opportunities for acquisition and is continually reviewing opportunities for product and brand development through our Wild Earth, Hi Brands, and KPAL subsidiaries. iBudtender is also working to complete and commercialize an application (the iBudtender App) that will provide a convenient means for sharing information about cannabis products, patients and businesses.

Basis of Presentation

Operating results for the three months ended March 31, 2021, may not be indicative of the results expected for the full year ending December 31, 2021. For further information, refer to the financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The interim financial statements should be read in conjunction with audited financial statements and related footnotes set forth in our annual report filed on Form 10-K for the year ended December 31, 2020 as filed with the United States Securities and Exchange Commission on April 16, 2021.

In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of March 31, 2021, and its results of operations, cash flows, and changes in stockholders’ equity for the three months ended March 31, 2021. The financial statements do not include all of the information and notes required by GAAP for complete financial statements.

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

Principles of Consolidation:

The condensed consolidated financial statements include the accounts of Cannabis Sativa, Inc. (the “Company” or “CBDS”), and its wholly-owned subsidiaries; Wild Earth Naturals, Inc., Hi-Brands International, Inc., Eden Holdings LLC, our 50.1% ownership of iBudtender Inc., our 51% ownership of PrestoCorp, and our 51% ownership of GK Manufacturing Inc., (collectively referred to as the “Company”).  All significant inter-company balances have been eliminated in consolidation. We hold controlling interests in iBudTender, PrestoCorp and GK Manufacturing and exercise control through management practices and oversight by the Company’s Board of Directors.  GK Manufacturing was established in February 2020.

Going Concern:

The Company has an accumulated deficit of $77,448,329 at 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.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the Unites States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions by management affect the allowance for doubtful accounts, possible impairment of long-lived assets (including goodwill and intangible assets), the provision for income taxes and related deferred tax accounts, contingencies, and the value attributed to stock-based awards.

Inventories:

As of March 31, 2021 and December 31, 2020, the Company had $29,435 and $56,485, respectively, in inventory relating to GKMP which consists of the raw materials and packaging used to manufacture cannabidiol (“CBD”) infused products for our customers.

Net Loss per Share:

Net loss per share is computed by dividing net loss 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 the Company.  Potentially dilutive shares are excluded from the calculation of diluted net loss per share because the effect is anti-dilutive. At March 31, 2021 and 2020 the Company had 125,000 and 49,900 outstanding warrants, respectively, that would be dilutive to future periods net income. Also, at March 31, 2021 and 2020 the Company had 995,692 and

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

1,254,012 shares of convertible Series A preferred stock, respectively, that would be dilutive to future periods net income.

Revenue Recognition:

The Company currently operates two divisions, the telehealth business operated through PrestoCorp and the contract manufacturing business operated through GKMP.

The telehealth division generates revenue based on a per telehealth visit for clients looking to obtain a permit to use marijuana for medical purposes in states that have legalized medical marijuana. Revenues are recognized when the Company satisfies its performance obligation to provide telehealth services upon a referral to a contracted physician. The obligation to perform the referral and the referral are automated and occur at the same time an online client subscribes for the visit and gains access to our network of health care professionals. Recognition of revenue is not dependent on the issuance of a marijuana card since issuance of the card is dependent on health and other factors beyond our control. This initial service is a one-time referral to a physician. Clients may return for other telehealth consultations, typically regarding product recommendations, and such additional physician referrals are provided at an additional cost. The billing and payment processes for each physician referral are automated through our online platform. Revenue is recognized in an amount that reflects the consideration that is received in exchange for each physician referral provided to the client.

The contract manufacturing division recognizes revenue from manufacturing operations when the products are shipped to the customer. In some instances, customers provide inventory for the manufacturing process and GKMP provides labor, supplies and manufacturing operations to mix and package the products.  Revenues are recognized when the manufacturing and packaging process are completed and the goods have been shipped to the customer.  In other instances, the Company acquires inventory and manufactures products for customers and/or to hold in inventory for later sale to customers through the GKMP on-site dispensary, through the GKMP online store, or to independent distributors. In these instances, revenue is recognized when the product is shipped to the customer or distributor.  Shipment terms are FOB origination.

Provision for sales incentives, discounts and returns and allowances, if applicable, are accounted for as reductions of revenue in the period the related sales are recorded. The Company had no warranty costs associated with the sales of its products.

Intangible Assets and Goodwill:

Intangible asset amounts represent the acquisition date fair values of identifiable intangible assets acquired. The fair values of the intangible assets were determined by using the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment. The rates used to discount projected future cash flows reflected a weighted average cost of capital based on our industry, capital structure and risk premiums including those reflected in the current market capitalization. Definite-lived intangible assets are amortized over their useful lives, which have historically ranged from 5 to 10 years. The carrying

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

amounts of our definite-lived intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that the entity may be unable to recover the asset’s carrying amount.   At March 31, 2021 and December 31, 2020, we do not have any indefinite-lived intangible assets.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. To assess impairment, the fair value of the reporting unit is evaluated on qualitative factors.  If the qualitative factors indicate a likelihood of impairment, we then evaluate carrying value of the reporting unit based on quantitative factors using the income approach. A goodwill impairment loss is recognized for the excess of the carrying value of goodwill for the reporting unit over its implied fair value.

Recent Accounting Pronouncements:

Accounting Standards Updates Adopted

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update contains a number of provisions intended to simplify the accounting for income taxes. Adoption of this update on January 1, 2021 had no  impact on the Company’s condensed consolidated financial statements.

Accounting Standards Updates to Become Effective in Future Periods

In August 2020, the FASB issued ASU No. 2019-12 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and with early adoption permitted. Management is evaluating the impact of this update on the Company’s condensed consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

2.  Property and Equipment

Property and equipment consistedof the following at March 31, 2021 and December 31, 2020:

Depreciation expense for the three months ended March 31, 2021 and 2020 was $14,226 and $317, respectively.

3.  Intangibles and Goodwill

All of the Company’s intangibles are definite-lived assets with lives of 5 to 10 years. Intangibles consisted of the following at March 31, 2021 and December 31, 2020:

Amortization expense for the three months ended March 31, 2021 and 2020 was $42,285 and $51,318, respectively.

Amortization of intangibles for each of the next five years is:

Goodwill in the amount of $3,010,202 was recorded as part of the acquisition of PrestoCorp that occurred on August 1, 2017.  Cumulative impairment of the PrestoCorp goodwill totals $1,173,000 as of March 31, 2021 and December 31, 2020. The balance of goodwill at March 31, 2021 and December 31, 2020 was $1,837,202 and $1,837,202, respectively.

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

There were no additions, deletions, and impairments recognized in the three months ended March 31, 2021 and 2020. The Company considered the impact of COVID-19 on intangible assets at March 31, 2021 and December 31, 2020 and concluded that annual impairment analysis is not necessary.

4.  Related Party Transactions

The Company has received funds from borrowings on notes payable and advances from related parties and officers to cover operating expenses. Related parties include the officers and directors of the Company and a significant shareholder holding in excess of 10% of the Company’s outstanding shares. During the three months ended March 31, 2021 and 2020, the Company recorded interest expense related to these advances at the rates between 5% and 8% per annum and in the amounts of $8,337 and $13,552, respectively.

In 2020, the Company converted all of the outstanding advances at December 31, 2019 into one year notes due on December 31, 2020 bearing interest at 5%. New borrowings on notes payable in the year ended December 31, 2020 were $142,500. In April 2021 the notes were extended to December 31, 2021. The Company is currently in discussions with the note holders to covert these notes into long-term obligations, but the terms have not been finalized.

In the three months ended March 31, 2021, David Tobias advanced $20,500 to the Company for notes payable bearing interest at the rate of 5% per annum due on December 31, 2021.

In three months ended March 31, 2021, the Company received short-term advances from the principals of GKMP in the amounts of $48,258. At March 31, 2021, the Company owed the principals of GKMP an aggregate of $67,058.  These advances were not pursuant to notes payable and are expected to be repaid in 2021. These advances are not interest bearing.

At March 31, 2021 and December 31, 2020, the Company had a note payable to the founder of iBudtender of $10,142 and $10,142, respectively. The note earns interest at 0% and was due on December 2019. The note has not yet been paid pending further review of the iBudtender business and adjustment of the agreements between the parties.

The following tables reflect the related party advance and note payable balances.

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

In the three months ended March 31, 2021 and 2020, the Company incurred approximately $28,000 and $45,000 respectively, for consulting services from a nephew of the Company’s president. These services were paid in shares of the Company’s common stock. These amounts are included in the statements of operations in general and administrative expenses.

5.  Investments

The Company owns 10,000,000 shares of common stock of Medical Cannabis Payment Solutions (ticker:  REFG). At March 31, 2021, the fair value of the investment in REFG was adjusted to $346,000 based on the closing price of the stock on that date, which resulted in an unrealized gain on investment of $151,000 during the three month period ended March 31, 2021.

6.  Stockholders’ Equity

Securities Issuances

During the three months ended March 31, 2021 and 2020, shares of common stock and preferred stock were issued to related and non-related parties for the purposes indicated as follows:

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

During the three months ended March 31, 2021 and 2020, David Tobias, Chief Executive Officer and Director, converted 167,966 and 80,337 shares of preferred stock into common stock in accordance with the terms of the preferred stock, respectively.

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

7.  Acquisition of GK Manufacturing and Packaging, Inc.

In the year ended December 31, 2020, the Company acquired assets and established GK Manufacturing and Packaging, Inc. (“GKMP”) to conduct contract manufacturing operations for customers seeking to obtain CBD infused products, including salves, tinctures, edibles, and other products containing CBD. In connection with the acquisition, the Company issued two key individuals an aggregate of 100,000 shares of common stock with a fair value of $109,000 for a 51% interest in GKMP.  The 49% non-controlling interest is considered a related party to the Company because the non-controlling interest is owned, in part, by the president of GKMP.

Employment Agreements.  Upon completion of the acquisition of assets for GKMP, GKMP entered into employment agreements with the two key individuals. The employment agreements are terminable at any time with or without cause, but in the event of termination without cause, the salary will continue for six months. Salary for the president of GKMP is set at $65,000 per annum and salary for the Vice President – Sales and Marketing is set at $50,000 per annum.  The agreements also provide the individuals with expense reimbursements and other employee benefits comparable to those being offered to the other employees of the Company. Currently, GKMP has not established any other employee benefit programs.

Contingent Consideration.  In connection with the GKMP asset acquisition, the Company agreed to pay additional consideration to the two key individuals employed by GKMP upon achievement of certain performance goals. If GKMP net revenues exceed $3,000,000 and net income exceeds 25% of net revenues in the year ended December 31, 2020, an additional $1,000,000 in consideration would be due to the key individuals. If GKMP net revenues exceed $6,000,000 and net income exceeds 25% of net revenues in the year ended December 31, 2020, an additional $500,000 in consideration would be due to the key individuals ($1,500,000 in the aggregate). The additional consideration amounts, if any, would be payable in stock at the average closing price of the shares in the five trading days prior to the date of payment.  During the year ended December 31, 2020, GKMP had net revenues of approximately $95,000 and no additional consideration was paid under this provision.

Working Capital Obligation. In connection with the GKMP asset acquisition, the Company agreed to provide up to an additional $500,000 in working capital to GKMP.  The full amount of the working capital commitment to GKMP was funded in the year ended December 31, 2020.

8.  Business Segments and Revenues

The Company is currently organized and managed in two segments which represent our operating units: PrestoCorp and GKMP.  PrestoCorp is a telehealth business and GKMP is a contract manufacturing business. General corporate activities not associated with these segments are presented as “other.” Other income (expense) items are considered general corporate items and are not allocated to our segments.

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

Financial information for each operating segment is as follows:

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

Revenues from major customers by operating segments are as follows:

9.  Commitments and Contingencies

Leases.

PrestoCorp leases office space through WeWork in New York for $2,444 per month on a month to month arrangement. Rent expense for the three months ended March 31, 2021 and 2020 was $4,888 and $7,322, respectively.

GKMP leases a facility in Anaheim California where its operations are based.  The Anaheim lease includes approximately 16,000 square feet of combined office, manufacturing, and warehouse space.  Rent expense for the three months ended March 31, 2021 and 2020 was $67,119 and $24,740, respectively.

GKMP leases a commercial printer and a bottle filling line, both of which are used in its manufacturing and packaging operations. For the three months ended March 31, 2021 and 2020, the Company recognized $6,872 and nil, respectively, in lease expense on these two items. Lease expense is reported as cost of goods sold in the consolidated statements of operations.  At March 31, 2021, the remaining lease term is 27 months on the printer and 12 months on the bottle filling line.  The lessors hold deposits of $1,250 on the printer lease and $8,500 on the bottle filling line.  Future minimum lease payments over the remaining term are as follows:

Litigation.  In the ordinary course of business, we may face various claims brought by third parties and we may, from time to time, make claims or take legal actions to assert our rights, including

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CANNABIS SATIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

For the Three Months Ended March 31, 2021 and 2020

intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject us to litigation. As of March 31, 2021, one claim was pending or threatened relating to general business disputes and accounts payable for services. Management believes the outcome of currently pending claim is not likely to have a material effect on our consolidated financial position and results of operations.

Shares in Escrow.  At March 31, 2021 and December 31, 2020, the Company has 209,738 and 419,475, respectively, shares of common stock in escrow as part of the acquisition of PrestoCorp. These shares are issuable in certain circumstances to the principals of PrestoCorp based on performance of the PrestoCorp business.  The escrowed shares are not counted in the outstanding stock of the Company and will be considered compensation to the principals if and when issued.  The escrow account originally contained 629,213 shares of common stock but 209,738 shares were cancelled in 2018 when the performance requirements related to those shares were not met.  Another 209,738 shares were released to the principals in January 2021 upon satisfaction of performance requirements for which compensation expense of $111,161 was recognized during the three month period ended March 31, 2021.  The escrow account includes 500 shares of PrestoCorp common stock which is distributable either back to the principals of PrestoCorp or to the Company depending on certain minimum performance requirements which extend into 2021.  If all of the PrestoCorp shares are ultimately distributed to the Company, the shares would have the effect of increasing the Company’s ownership of PrestoCorp to 61% from the current level of 51%.

In August 2020, the Company entered into discussions with the principals of PrestoCorp regarding the escrowed shares and various compensation matters relating to their work for the Company through the date of the discussions. The principals of PrestoCorp have requested adjustment of their compensation and bonus structure retroactive back to January 1, 2021 and have requested the right to earn back the 500 shares of PrestoCorp common stock over a three-year period ending on December 31, 2023 based on future performance. The Company is still in discussions with the principals of PrestoCorp regarding repayment of advances made to PrestoCorp by CBDS for operating expenses and compensation. Management believes this remaining issue will be amicably resolved in the second quarter, at which point the disagreement will be fully resolved.   No contingent liability has been established for this disagreement. Management does not believe the outcome of this matter will have a material impact on the financial statements or the results of operations even if the matter required a more formal dispute resolution process and the PrestoCorp principals prevail on their claims.

10.   COVID- 19:

The outbreak of COVID-19, the coronavirus, has grown both in the United States and globally, and related government and private sector responsive actions have adversely affected the Company’s business operations. The World Health Organization has declared Covid-19 to be a global pandemic, resulting in an economic downturn and changes in global economic policy that will reduce demand for the Company’s products and may have an adverse impact on the Company’s business, operating results and financial condition.

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