10-Q: Cannabis Sativa Inc. Reports 27% Revenue Drop in Q2 2024 Amidst Increased Competition

Cannabis Sativa Inc. experienced a 27% decrease in revenue for the second quarter of 2024 compared to the same period last year, primarily due to heightened competition in the cannabis telemedicine market.

Summary

• Cannabis Sativa Inc. reported a 27% decrease in revenue for the three months ended June 30, 2024, compared to the same period in 2023, with revenue falling from $323,197 to $234,391.
• The company's cost of revenues also decreased by 30% during the same period.
• Gross profit decreased by 26%, from $202,589 to $150,289.
• Total operating expenses decreased by 31%, from $507,406 to $348,234.
• The net loss from continuing operations improved by 35%, decreasing from $304,817 to $197,945.
• For the six months ended June 30, 2024, revenue decreased by 31% compared to the same period in 2023, from $668,565 to $459,522.
• The company's cost of revenues as a percentage of sales increased by 6% during the six-month period.
• The net loss from continuing operations improved by 11%, decreasing from $417,178 to $372,736.
• Cash used in operating activities was $62,809 for the six months ended June 30, 2024, and the company had $61,193 in cash on hand at the end of the quarter.
• The company has an accumulated deficit of $82,659,595 as of June 30, 2024.
• Management has identified material weaknesses in the company's disclosure controls and procedures due to the small size of the accounting staff.

Sentiment

Score: 3

Explanation: The document indicates significant revenue declines and a substantial accumulated deficit, coupled with material weaknesses in internal controls. While there are some improvements in net loss, the overall financial health and operational challenges suggest a negative outlook.

Positives

• The company's net loss from continuing operations improved by 35% in Q2 2024 compared to Q2 2023.
• Total operating expenses decreased by 31% in Q2 2024 compared to Q2 2023.
• The net loss from continuing operations improved by 11% for the six months ended June 30, 2024 compared to the same period in 2023.
• The company is actively seeking new business opportunities for acquisition and is continually reviewing opportunities for product and brand development.

Negatives

• Revenue decreased by 27% in Q2 2024 compared to Q2 2023.
• Revenue decreased by 31% for the six months ended June 30, 2024 compared to the same period in 2023.
• The company has an accumulated deficit of $82,659,595 as of June 30, 2024.
• The company's cash on hand is only $61,193, which is not sufficient to meet immediate operational needs.
• Material weaknesses were identified in the company's disclosure controls and procedures due to the small size of the accounting staff.

Risks

• The company faces significant competition in the cannabis telemedicine industry, which is impacting revenue.
• The company's current cash position is insufficient to meet immediate operational needs.
• The company has a substantial accumulated deficit, raising concerns about its ability to continue as a going concern.
• Material weaknesses in disclosure controls and procedures could lead to inaccurate financial reporting.
• The company may need to raise capital through public or private offerings, which could dilute current shareholders.

Future Outlook

The company may seek to raise money for working capital purposes through a public offering of its equity capital or through a private placement of equity capital or convertible debt. It will be important for the Company to be successful in its efforts to raise capital in this manner 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.

Management Comments

• The decrease in revenues is primarily a result of the significant increase in competition for market share in the cannabis tele-medicine industry.
• Professional fees decreased with continuing efforts at cost reduction.
• PrestoDoctor management salaries also decreased in the three and six months ended June 30, 2024.
• Management of the Company believes that these material weaknesses are due to the small size of the companys accounting staff.
• 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.

Industry Context

The report indicates that the cannabis telemedicine industry is becoming increasingly competitive, which is impacting Cannabis Sativa's revenue. This suggests a broader trend of market saturation and increased competition within the sector, requiring companies to adapt their strategies to maintain market share.

Comparison to Industry Standards

• The 27% decrease in revenue for Cannabis Sativa in Q2 2024 is a significant drop, suggesting the company is underperforming compared to industry averages, especially considering the growth in the broader cannabis market.
• Companies like Teladoc Health, while not directly comparable due to their broader telemedicine focus, have shown more stable revenue trends, indicating that Cannabis Sativa's challenges are specific to its market segment or business model.
• Other cannabis-focused telemedicine companies, such as those operating in more established markets, may be experiencing less severe revenue declines, suggesting that Cannabis Sativa's issues are not solely due to industry-wide factors.
• The company's high accumulated deficit of $82,659,595 is also concerning when compared to more established players in the cannabis industry, who often have stronger balance sheets and more diversified revenue streams.

Related Party Transactions

• During the six months ended June 30, 2024 and 2023, David Tobias, the company's chief executive officer and director, loaned $10,240 and $22,721, respectively to the company for notes payable bearing interest at the rate of 5% per annum due on December 31, 2024.
• During the six months ended June 30, 2024, the company and Cathy Carroll, director, entered into a note payable for $15,000 for compensation due her for services.
• The company also has an outstanding loan in the amount of $4,000 to a director of the company.
• On May 22, 2024, the company paid off this loan and the accrued interest with stock.

Stakeholder Impact

• Shareholders may experience dilution if the company raises capital through equity offerings.
• Employees may be affected by cost reduction efforts and potential changes in operations.
• Customers may be impacted by the company's ability to maintain service quality amidst financial challenges.
• Creditors may be concerned about the company's ability to repay debts given its financial situation.

Next Steps

• The company is actively seeking new business opportunities for acquisition.
• The company is continually reviewing opportunities for product and brand development.
• The company is evaluating whether to acquire a cyber liability insurance policy.
• The company may seek to raise capital through public or private offerings.

Key Dates

Keywords

Cannabis Sativa, telemedicine, revenue, net loss, financial results, cannabis, competition, operating expenses, disclosure controls, going concern