CPMD 10-Q
Cannapharmarx, Inc. (CPMD)
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
For the Quarter Ended
For the transition period from ___________ to ___________
Commission File Number:
(Exact name of small business issuer as specified in its charter)
| (State of other jurisdiction of incorporation) | (IRS Employer ID No.) |
(Address of principal executive offices)
(Issuer’s Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| OTC Pink Sheets |
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:
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act.
The number of shares of the registrant’s only class of common stock issued and outstanding as of October 13, 2023, was shares.
TABLE OF CONTENTS
| 2 |
Forward Looking Statements
This Report includes statements that are, or may be deemed to be, “forward-looking statements,” as defined in the Private Securities Reform Act of 1995. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “projects,” “expects,” “intends,” “may,” “will,” “seeks” or “should” or, in each case, their negative or other variations or comparable terminology, or in relation to discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this Quarterly Report and include statements regarding Issuer’s current intentions, beliefs or expectations concerning, among other things, the Issuer’s future plans for the Project, results of operations, financial condition, prospects, growth, strategies and the markets in which the Issuer intends to operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not an assurance of future performance. The Issuer’s actual results of operations and financial condition may differ materially from those suggested by the forward-looking statements contained in this document. In addition, even if the Issuer’s future results of operations and financial condition are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. The information in this Quarterly Report identifies important factors that could cause such differences (including, but not limited to, a change in overall economic conditions in the United States, a change in the Issuer’s financial condition, changes in tax law or the interpretation thereof, interest rate fluctuations and other market conditions, and the effect of new legislation or government directives).
Forward-looking statements include, but are not limited to, information concerning possible or assumed future results of the Issuer’s operations set forth under the section entitled “Business of the Issuer”. Such statements, estimates and projections reflect various assumptions by the Issuer concerning anticipated results and are subject to significant business, financing, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Issuer and are based upon assumptions with respect to future business decisions that are subject to change. Accordingly, there can be no assurance that such statements, estimates and projections will be realized or that actual results will not vary considerably from those anticipated, expected or projected. The Issuer, its accountants, its legal advisers and its agents or affiliates do not make any representations as to the accuracy or completeness of such statements, estimates and projections, or that any forecasts will be achieved.
The Issuer is not obliged to, and does not intend to, update or revise any forward-looking statements made in this Quarterly Report whether as a result of new information, future events or otherwise. All subsequent written forward-looking statements attributable to the Issuer, or persons acting on behalf of the Issuer, are expressly qualified in their entirety by the cautionary statements contained throughout this Quarterly Report. As a result of these risks, prospective investors of the Convertible Bonds should not place undue reliance on these forward-looking statements. Neither the forward-looking statements nor the underlying assumptions have been verified or audited by any third party.
| 3 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CANNAPHARMARX, INC.
CONSOLIDATED BALANCE SHEETS
| June 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| HST Receivable | ||||||||
| Prepaid expense | ||||||||
| Other assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Right of use building, net | ||||||||
| Investments | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES & STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Cash overdraft | ||||||||
| Accrued interest | ||||||||
| Accrued legal settlement | ||||||||
| Notes payable | ||||||||
| Convertible notes -net of discount | ||||||||
| Derivative liability | ||||||||
| Loan payable - related party | ||||||||
| Total current liabilities | ||||||||
| Liability for right of use building long-term | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' Equity | ||||||||
| Preferred stock, Series A, $ par value, shares authorized, and shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | ||||||||
| Preferred Stock Series B, $ par value, shares authorized, and shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | ||||||||
| Common stock, $ par value; shares authorized, and issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | ||||||||
| Treasury stock, and shares as of June 30, 2023 and December 31, 2022, respectively | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders (Deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders' (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
CANNAPHARMARX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months | Three Months | Six | Six | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Stock based compensation | ||||||||||||||||
| Rent | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Payroll and consulting fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain or (loss) on the extinguishment of debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Loss) on investments | ( | ) | ||||||||||||||
| Change in the fair value of derivative liability | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Loss) before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision (credit) for income tax | ||||||||||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted (loss) per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares outstanding | ||||||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| Comprehensive (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
CANNAPHARMARX, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
| Six Months | Six Months | |||||||
| Ended | Ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash provided by (used for) operating activities | ||||||||
| Stock-based compensation expense | ||||||||
| Loss on investments | ||||||||
| Common stock issued in connection with financing | ||||||||
| Amortization of debt discount | ||||||||
| Loss on the extinguishment of debt | ||||||||
| Change in the fair value of derivatives | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Cash overdraft | ||||||||
| HST Receivable | ( | ) | ( | ) | ||||
| Prepaids | ( | ) | ||||||
| Other assets | ||||||||
| Accrued interest | ||||||||
| Accrued expense related party | ||||||||
| Accounts payable and accrued expense | ||||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Right of use assets, net | ( | ) | ||||||
| Proceeds from related party notes, net of repayment | ||||||||
| Proceeds from convertible notes | ||||||||
| Proceeds from notes payable, net of repayment | ||||||||
| Proceeds from the sale of common stock in private placements | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rates on cash and cash equivalents | ( | ) | ||||||
| Net Increase (Decrease) In Cash | ( | ) | ( | ) | ||||
| Cash At The Beginning Of The Period | ||||||||
| Cash At The End Of The Period | $ | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Acquisition of right of use assets for lease obligations | $ | $ | ||||||
| Common stock issued as a financing expense on convertible notes | $ | $ | ||||||
| Common stock issued to convert convertible notes and accrued interest into equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
CANNAPHARMARX, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(Unaudited)
Preferred Stock Series A | Preferred Stock Series B | Common Stock | Treasury Stock | Paid in | Accumulated | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Income (Loss) | Deficit | |||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Net (loss) | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred to common stock | ( | ) | ( | ) | – | – | ||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes to common shares | – | – | – | |||||||||||||||||||||||||||||||||||||||||
| Sale of common stock in private placement | – | – | – | |||||||||||||||||||||||||||||||||||||||||
| Issuance of Series B shares for deposit on acquisition | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Commitment shares issued with convertible note | – | – | – | |||||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature of convertible notes | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to warrant issuances | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Net income (loss) | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes to common shares | – | – | – | |||||||||||||||||||||||||||||||||||||||||
| Sale of common stock in private placement | – | – | – | |||||||||||||||||||||||||||||||||||||||||
| Commitment shares issued with private placement | – | – | – | |||||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature of convertible notes | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to warrant issuances | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||
(continued)
| 7 |
| Preferred Stock Series A | Preferred Stock Series B | Common Stock | Treasury Stock | Paid in | Accumulated | Other Comprehensive | ||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Income (Loss) | Deficit | |||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Net (loss) | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Conversion of Series B Preferred to common stock | – | ( | ) | ( | ) | – | ||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes to common shares | – | – | – | |||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to warrant issuances | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||
| Net (loss) | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes to common shares | – | – | – | |||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to warrant issuances | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 8 |
CANNAPHARMARX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
| NOTE 1. | NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES |
We were originally incorporated in the State of Colorado in August 1998 under the name “Network Acquisitions, Inc.” We changed our name to Cavion Technologies, Inc. in February 1999 and subsequently to Concord Ventures, Inc. in October 2006.
On December 21, 2000, we filed for protection under Chapter 11 of the United States Bankruptcy Code. In connection with the filing, on February 16, 2001, we sold our entire business, and all of our assets, for the benefit of our creditors. After the sale, we still had liabilities of $8.4 million and were subsequently dismissed by the Court from the Chapter 11 reorganization, effective March 13, 2001, at which time the last of our remaining directors resigned. On March 13, 2001, we had no business or other source of income, no assets, no employees or directors, outstanding liabilities of approximately $8.4 million and had terminated our duty to file reports under securities law. In February 2008, we were re-listed on the OTC Bulletin Board.
In April 2010, we re-domiciled in Delaware under the name CCVG, Inc. (“CCVG”). Effective December 31, 2010, CCVG completed an Agreement and Plan of Merger and Reorganization (the “Reorganization") which provided for the merger of two of our wholly-owned subsidiaries. As a result of this reorganization, our name was changed to “Golden Dragon Inc.”, which became the surviving publicly quoted parent holding company.
On May 9, 2014, we entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with CannaPharmaRx, Inc., a Colorado corporation (“Canna Colorado”), and David Cutler, a former President, Chief Executive Officer, Chief Financial Officer and director of our Company. Under the Share Purchase Agreement, Canna Colorado purchased 1,421,120 shares of our common stock from Mr. Cutler and an additional 9,000,000 restricted common shares directly from us.
On May 15, 2014, as amended and effective January 29, 2015, we entered into an Agreement and Plan of Merger (the “Merger”) pursuant to which Canna Colorado became a subsidiary of our Company.
In October 2014, we changed our legal name to “CannaPharmaRx, Inc.”
Pursuant to the Merger all of the shares of our common stock previously owned by Canna Colorado were canceled. As a result of the aforesaid transactions, we became an early-stage pharmaceutical company whose purpose was to advance cannabinoid research and discovery using proprietary formulation and drug delivery technology then under development.
In April 2016, we ceased operations. Our then management resigned their respective positions with our Company with the exception of Mr. Gary Herick, who remained one of our officers and directors until April 23, 2019.
Effective December 31, 2018, the Company and Hanover CPMD Acquisition Corp. (“CPMD Hanover”) a newly formed, wholly-owned subsidiary, entered into a Securities Purchase Agreement with Alternative Medical Solutions, Inc., an Ontario, Canada corporation (“AMS”), its shareholders, wherein the Company acquired all of the issued and outstanding securities of AMS. AMS is a corporation organized under the laws of the Province of Ontario, Canada.
| 9 |
As a result of the completion of the acquisition of AMS on December 31, 2019, the Company no longer fit the definition of a “shell company,” as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. It filed the required disclosure on Form 8-K/A with the SEC on February 14, 2019, advising that it was no longer a shell company pursuant to the aforesaid Rule.
On January 6, 2021, the Company executed an Agreement of Purchase and Sale through AMS, its wholly-owned subsidiary, for the sale of the lands and premises located at Hanover, Ontario, Canada. The facility sold was a 48,750 square foot marijuana grow facility on a 6.7-acre parcel of land located in Hanover, Ontario, Canada. To point of sale, the exterior construction of the building had been completed, however, no interior construction had begun.
The price was $2,000,000 CAD. As a result, and in anticipation of the closing, the Company recorded an impairment of goodwill and fixed assets relating to the property of $7,962,694 at December 31, 2020. This property was security for a $1,000,000 US Note with Koze Investments LLC by way of a first ranking charge. This transaction closed on July 9, 2021 and the note was repaid in full as principal of $1,000,000 plus accrued interest of $124,735 and penalties of $475,265. The note was discharged accordingly.
Effective February 25, 2019, the Company acquired 3,936,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of Common Stock of GN Ventures, Ltd, Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of its Common Stock, from a former shareholder of GN who was formerly the Company’s President and CEO. In May 2020, the Company exchanged 5,507,400 of its shares for 3,671,597 shares of GN.
GN owns a 60,000 square foot cannabis cultivation and grow facility located on 38 acres in Stevensville, Ontario, Canada. Because the Company is a minority shareholder of GN and GN is a privately held company, the Company cannot confirm that the information it currently has on GN’s operations is complete or fully reliable. GN estimates annual total production capacity from the Stevensville facility of up to 12,500 kilograms of cannabis. Once completed the Stevensville facility and GN’s subsidiary, 9869247 Canada Limited, received a license to cultivate from the Canadian Ministry of Health on July 5, 2019. As a result, in October 2019, GN commenced cultivation activities and began generating revenues during the first calendar quarter of 2020.
Effective June 11, 2019, the Company entered into a Securities Purchase Agreement with Sunniva, Inc, a British Columbia, Canada corporation (“Sunniva”) wherein the Company agreed to acquire all of the issued and outstanding securities of Sunniva’s wholly-owned subsidiaries Sunniva Medical Inc. (“SMI”) and 1167025 B.C. LTD (“1167025”) for CAD $16.0 million in cash and a note in the principal amount of CAD $4.0 million. These companies were the owners of the Sunniva Canada Campus, which included construction assets for a planned 759,000 square-foot greenhouse located on an approximately 114-acre property in Okanagan Falls, British Columbia.
On June 8, 2020, the Company received a notice of termination of this Purchase Agreement, as amended, from Sunniva. As a result, the Company incurred a charge of $1,881,126 due to the write-off of its deposit to Sunniva, banking fees and prepaid expenses associated with the failed acquisition of Sunniva.
Description of Current Business
We are involved in the cannabis industry in Canada. Our principal business activities to date have been to evaluate, negotiate, acquire, and develop cannabis cultivation projects in Canada. As of the date of this report we do not own or operate any businesses in the US.
On January 6, 2022 the Company entered into a 20 year operating lease with Formosa Mountain Ltd. The leased facility is located in Cremona, Alberta, Canada. It was built in 2015 and was previously operating as a cannabis production facility. It was decommissioned and the license was cancelled by the previous owner making it ready for sale in 2020.
| 10 |
CannaPharmaRx recommissioned the facility into a new indoor cannabis farm during 2022. It is a 55,000 square foot facility with 11 growing rooms and 10 drying and packing rooms. The Company received an Operating License from Health Canada on December 9, 2022, and a Cannabis License from the Canada Revenue Agency on December 22, 2022.
On February 21, 2023, the Company entered into a Supply Agreement with Y.S.A. Holdings Ltd (“Y.S.A.), an Israeli corporation. The Company will supply 450kg of cannabis biomass in the form of dried flowers and dried trim per annum, over a two year period. No supplies have been delivered to Y.S.A as of the date of this Report.
Sales from this facility are anticipated in Q4 of 2023. The date of the first harvest, under the new license, was on or about August 10th, 2023 with the second harvest on September 11, 2023. The harvests yielded approximately 75 kilograms and 120 kilograms (“kg”) respectively, of saleable cannabis flower product.
Preliminary discussions with export partners, would set conditional per gram pricing at approximately $3.30 CDN/gr. This pricing matrix would be based on achieving satisfactory test results associated to tetrahydrocannabinol “THC” and cannabidiol “CBD” content of the dried flower. Expected revenues for both harvests, if sold in their entirety, would be forecasted at $643,000 CDN. A third and fourth harvest are planned in Q4 with similarly forecasted revenues. There can be no assurances that our third and fourth crops will be successfully harvested, or that we can sell any of the harvests; and if we are able to sell the harvest, that we can do so at the price/s we expect to receive.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States. Certain amounts in prior periods have been reclassified to conform to the current presentation.
All figures are in U.S. dollars unless indicated otherwise.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates relate to purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid temporary
cash investments with an original maturity of the year or less to be cash equivalents. On June 30, 2023, and December 31, 2022, the Company
had a cash overdraft and cash equivalents of $(
| 11 |
Comprehensive Gain or Loss
ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of June 30, 2023, and December 31, 2022, the Company determined that it had items that represented components of comprehensive income and, therefore, has included a statement of comprehensive income in the financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings and financial position.
Leases
The Company recognizes right of use assets and corresponding liabilities for leases with terms greater than 12 months or leases that contain a purchase option that is reasonably certain to be exercised. Each lease is classified as either finance or operating. This classification determines the presentation of corresponding expenses over the lifetime of the lease. The Company records long-term leases as liabilities at the present value of the minimum lease payments not yet paid. The Company’s incremental borrowing rate is used to determine the present value of the leases when the implicit rate is not readily determinable. Certain lease contracts contain non-lease components such as maintenance, utilities, fuel and other services. The Company recognizes both the lease and non-lease component for each right of use asset.
Short-term leases (that have an initial term less than 12 months or that are cancellable by the lessor and lessee without significant penalties) are expensed on a straight-line basis over the lease term.
Derivative Financial Instruments
The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risk. Terms of convertible and other promissory notes are reviewed to determine
whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded
on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding
changes in fair value recorded in the current period operating results. These derivative liabilities arose due to the issuance of variably
priced convertible notes. For the periods ended June 30, 2023 and December 31, 2022, the Company had derivative liabilities of $
Foreign Currency Translation
The functional currency and the reporting currency of the Company’s US operations is United States dollars, (“USD”). The functional currency of the Company’s Canadian operations in Canadian dollars (“CAD”), Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses.
| 12 |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.
Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity.
Harmonized Sales Tax
The Harmonized Sales Tax (“HST”) is a combination of the Canadian Goods and Services Tax (“GST”) and Provincial Sales Tax (“PST”) that is applied to taxable goods and services. By fusing sales tax at the federal level with sales tax at the provincial level, the participating provinces harmonized both taxes into a single federal-provincial sales tax. HST is a consumption tax paid by the consumer at the point of sale (POS). The vendor or seller collects the tax proceeds from consumers by adding the HST rate to the cost of goods and services. They then remit the total collected tax to the government periodically.
The HST is in effect in five of the ten Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. The HST is collected by the Canada Revenue Agency (CRA), which remits the appropriate amounts to the participating provinces. The HST may differ across these five provinces, as each province will set its own PST rates within the HST. In provinces and territories which have not enacted the HST, the CRA collects only the 5% of goods and services tax. The current rate in Ontario is 13%.
The Company has adopted ASC Topic 718, (Compensation—Stock Compensation), which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option-pricing model. The resulting amount is charged to expense on a straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The fair value of stock warrants was determined at the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield. The Company had no stock options outstanding at June 30, 2023.
Goodwill and Intangible Assets
Goodwill represents the future economic benefit
arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the
Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible
assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of customer relationships
and non-compete agreements. Their useful lives range from
| 13 |
Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures, and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess.
Determining the fair value of a reporting unit is judgmental and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for the purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test before scheduled annual impairment tests.
Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value.
| 14 |
Fair Values of Assets and Liabilities
The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value.
| Level 1: | Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. | ||
| Level 2: | Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. | ||
| Level 3: | Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. | ||
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Financial Instruments
The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involve uncertainties and could not be determined with exact precision. The fair value of the Company’s financial instruments, which include cash, prepaid expenses, accounts payable, and the related party loan, each approximate their carrying value due either to their short length to maturity or interest rates that approximate prevailing market rates.
Income Taxes
The Company accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
| 15 |
Income (loss) per share is presented in accordance with Accounting Standards Update (“ASU”), Earning per Share (Topic 260) which requires the presentation of both basic and diluted earnings per share (“EPS”) on the income statements. Basic EPS would exclude any dilutive effects of options, warrants, and convertible securities but does include the restricted shares of common stock issued. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock. Basic EPS calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted EPS calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
Recently Issued Accounting Pronouncements
In August 2020, FASB issued ASU 2020-06 Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity, and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The Company adopted this guidance on January 1, 2023.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. The Company adopted ASC 842 on January 1, 2019. However, the adoption of the standard had no impact on the Company’s financial statements since all Company leases are month to month or short-term rental.
| NOTE 2. | GOING CONCERN AND LIQUIDITY |
As of June 30, 2023 and December 31, 2022, the
Company had a cash overdraft of $(
These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on its current financial projections, the Company believes it does not have sufficient existing cash resources to fund its current limited operations. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.
It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations.
| 16 |
| NOTE 3. | INVESTMENT |
As of June 30, 2023, and December 31, 2022, the
balance of investments was $-
On October 6, 2020, the Company invested $
On January 15, 2021, the Company invested an additional
$
During the three months ended March 31, 2023,
the Company determined that its investment in Klonetics had no value and wrote off its entire investment to zero. As a result the Company
recorded a loss on investment of $
| NOTE 4. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Accounts payable are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability.
The following table sets forth the components of the Company’s accrued liabilities on June 30, 2023, and December 31, 2022.
June 30, 2023 | December 31, 2022 | |||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued interest (a) | ||||||||
| Accrued legal settlement (b) | ||||||||
| Total accounts payable and accrued liabilities | $ | $ | ||||||
| (a) | |
| (b) |
| 17 |
| NOTE 5. | RELATED PARTY TRANSACTIONS |
The following table sets forth the components of the Company’s related party liabilities on June 30, 2023 and December 31, 2022.
June 30, 2023 | December 31, 2022 | |||||||
| Loan payable, related parties (a) | $ | $ | ||||||
| Total loan payable, related parties | $ | $ | ||||||
| (a) |
Effective January 1, 2022, the Company entered
into a lease agreement with Formosa Mountain Ltd to lease a cannabis production facility in Cremona, Alberta, Canada. The facility is
a 55,000 square foot, 6,000 kg per year plant, built in 2015. Rent is $82,500 CAD per month, and will increase by 5% each year. This
lease has a 20 year term. The principal shareholder of Formosa Mountain is also the principal shareholder of Koze Investments. As of
June 30, 2023 the Company was in arrears of $
| NOTE 6. | CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES |
The following tables set forth the components of the Company’s, convertible debentures as of June 30, 2023, and December 31, 2022:
| June 30, 2023 | December 31, 2022 | |||||||
| Principal value of convertible notes | $ | $ | ||||||
| Note discount | ( | ) | ||||||
| Total convertible notes, net current | $ | $ | ||||||
During the six months ended June 30, 2023, and
June 30, 2022, the Company received proceeds from convertible notes of $
| 18 |
June 30, 2023 Activity
During the six months ended June 30, 2023, the
Company received proceeds from convertible notes of $
During the six months ended June 30, 2023 the
Company recorded $
During the six months ended June 30, 2023, the
Company issued common shares upon the conversion of $
June 30, 2022 Activity
During the three months ended June 30, 2022, the
Company received proceeds from convertible notes of $
During the three months ended June 30, 2022, the
Company recorded $
During the three months ended June 30, 2022, the
Company issued common shares upon the conversion of $
As of June 30, 2023 and December 31, 2023, the
balances of derivative liabilities $
| June 30, 2023 | ||||
| Exercise Price | ||||
| Stock Price | $ | |||
| Risk-free interest rate | ||||
| Expected volatility | ||||
| Expected life (in years) | ||||
| Expected dividend yield | ||||
| Fair Value | $ |
|||
| 19 |
The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility of its common stock. The expected life of the conversion feature of the notes was based on the remaining term of the notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.
| NOTE 7. | NOTES PAYABLE |
The following tables set forth the components of the Company’s, convertible debentures as of June 30, 2023, and December 31, 2022:
| June 30, 2023 | December 31, 2022 | |||||||
| Principal value of Promissory Notes | $ | $ | ||||||
| Promissory Note | ||||||||
Pursuant to the terms of the Securities Purchase
Agreement with AMS, the Company issued a non-interest-bearing CAD $
The Company performed a valuation study as part
of the AMS acquisition. The valuation study determined that the Promissory Note should be valued at $
On July 3, 2019, the Company entered into a 12%
$
| 20 |
On April 21, 2020, the Company received a loan
from the Government of Canada under the Canada Emergency Business Account program (CEBA). This loan was in the amount of $
During the year ended December 31, 2021, the Company
entered into Note Agreements with secured investors amounting to $
| NOTE 8. | INCOME TAXES |
As of December 31, 2022, the Company has approximately
$
The tax years from 2014 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities. Since the company has never been profitable, the Company has established a full valuation allowance against the deferred tax asset associated with the NOLS.
| NOTE 9. | COMMITMENTS AND CONTINGENCIES |
Effective February 1, 2023, the Company entered into a lease agreement to lease one office at 520 -5th Avenue SW, Calgary, Alberta, Canada, T2P 3R7. The lease may be terminated by either party on 30 days’ notice. The rent is $500 CAD per month. This space was provided by a company to which Mr. Orman, one of the Company’s directors, serves as a Director.
| NOTE 10. | STOCKHOLDERS’ EQUITY |
Preferred Stock
The Company is authorized to issue up to shares of one or more series of Preferred Stock, par value of $ per share. The Board of Directors may, without stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights, voting rights, and any other preferences.
| 21 |
Series A Preferred Stock
In April 2018, the Company issued shares of its Series A Convertible Preferred Stock for $ per share to certain investors who then became members of management and the board of directors. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of Common Stock and vote on an as-converted basis. The rights and designations of these Preferred Shares include the following:
| · | entitles the holder thereof to 1,250 votes on all matters submitted to a vote of the shareholders: | |
| · | The holders of outstanding Series A Convertible Preferred Stock shall only be entitled to receive dividends upon declaration by the Board of Directors of a dividend payable on the Company’s Common Stock, whereupon the holders of the Series A Convertible Preferred Stock shall receive a dividend on the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock is convertible; | |
| · | Each Series A Preferred Share is convertible into 1,250 shares of Common Stock; | |
| · | not redeemable. |
The beneficial conversion (“BCF”) feature attributed to the purchase of Preferred Stock was deemed to have no value on the date of purchase because there was no public trading market for the Convertible Preferred Stock, and none is expected to develop in the future. Therefore, the BCF related to the Preferred Shares was considered to have no value on the date of issuance.
There were and shares of Series A Preferred Stock issued and outstanding as of June 30, 2023, and December 31, 2022, respectively.
Series B Preferred Stock / Common Stock
In February 2019, the Company commenced an offering of up to $3 million in principal amount of Units at a price of $1.00 per Unit, each Unit consisting of one share of Series “B” Convertible Preferred Stock, each Convertible Preferred Share convertible into one share of the Company’s Common Stock at the election of the holder and one Common Stock Purchase Warrant exercisable to purchase one share of Common Stock at an exercise price of $2.00 per share, which offering is to be offered only to “accredited investors,” as that term is defined in Rule 501 of Regulation D. This Offering was closed at the end of August 2019. As of December 31, 2020, the Company had accepted $475,000 in subscriptions in this offering.
There were and shares of Series B Convertible Preferred Stock issued and outstanding as of June 30, 2023, and December 31, 2022, respectively.
Common stock
The Company is authorized to issue shares of Common Stock, par value $ per share. As of June 30, 2023, and December 31, 2022, there were and shares of Common Stock were issued and outstanding, respectively.
| 22 |
Stock Options
During the period ended June 30, 2023, and December 31, 2022, the Company did not record any stock-based compensation expense related to stock options, as there were none outstanding.
Stock Purchase Warrants
As of June 30, 2023 there were
During the six months ended June 30, 2023 and 2022, the Company recorded $ in stock based compensation related to prior warrants issued being amortized over a five year period.
The value of the stock purchase warrants for the periods ended June 30, 2023, and June 30, 2022, was determined using the following Black-Scholes methodology:
| Expected dividend yield (1) | ||||
| Risk-free interest rate range (2) | ||||
| Volatility range | ||||
| Expected life (in years) |
_____________
| (1) | The Company has no history or expectation of paying cash dividends on its Common Stock. |
| (2) | The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. |
| NOTE 11. | RIGHT OF USE ASSET |
The majority of our lease obligations are finance leases for the buildings from which we conduct our business. For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on the Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists.
Finance lease assets represent the right to use an underlying asset for the lease term, and finance lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We use a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. We update the incremental borrowing rate in the event of a lease modification such as a renewal or option that adds time and payments to a lease. Our lease terms generally do not include options to extend or terminate the lease unless there is a reasonable certainty that the options will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the expense related to finance leases using the effective interest rate method from the commencement date to the end of the lease term.
| 23 |
Leases with an initial term of 12 months or less are not recorded on our Condensed Consolidated Balance Sheets. We recognize lease expense for these leases using the straight-line method over the lease term.
The weighted average remaining lease term is
The Company’s right of use assets as of June 30, 2023 were as follows:
| June 30, 2023 | ||||||||||||
| Gross Carrying Amount | Accumulated Depreciation | Net Book Value | ||||||||||
| Right of Use Buildings | $ | ( | ) | |||||||||
Supplementary information on the Company’s lease liabilities as of June 30, 2023 included the following:
| June 30, 2023 | ||||
| Interest | $ | |||
| Amortization and depreciation | ||||
| Finance lease related expenses | $ | |||
| Finance lease related payments | $ | |||
Future lease payments under our non-cancellable finance leases as of June 30, 2023 were as follows:
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total Undiscounted Cashflows | ||||
| Imputed Interest | ( | ) | ||
| Lease Liability | ||||
| NOTE 12. | SUBSEQUENT EVENTS |
The first harvest at the Company’s Cremora facility took place on August 10th, 2023, and resulted in over 75 kilograms (kg) of hand trimmed, saleable cannabis flower. That harvest is currently awaiting final results through a certified laboratory to produce the Certificate of Analysis to confirm results on THC, CBD and Terpenes. The second room harvested on September 11, 2023 yielded 120 kg. of flower. The third room was harvested on October 6, 2023.
| 24 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management's current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 14, 2021 any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:
| · | our ability to successfully commercialize our products and services on a large enough scale to generate profitable operations; | |
| · | our ability to maintain and develop relationships with customers and suppliers; | |
| · | our ability to successfully integrate acquired businesses or new brands; | |
| · | the impact of competitive products and pricing; | |
| · | supply constraints or difficulties; | |
| · | the retention and availability of key personnel; | |
| · | general economic and business conditions; | |
| · | substantial doubt about our ability to continue as a going concern; | |
| · | our need to raise additional funds in the future; | |
| · | our ability to successfully recruit and retain qualified personnel in order to continue our operations; | |
| · | our ability to successfully implement our business plan; | |
| · | our ability to successfully acquire, develop or commercialize new products and equipment; | |
| · | intellectual-property claims brought by third parties; and | |
| · | the impact of any industry regulation. |
| 25 |
During the six month period ending June 30, 2023 the Company had no revenues from operations. Loss from operations for the six months ended June 30, 2023 was $3,292,157 compared with a loss in the prior year of 3,578,311. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.
As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “CannaPharmaRx,” “Company,” “we,” “us,” and “our” refer to CannaPharmaRx, Inc. and our wholly-owned subsidiaries. Unless otherwise specified, all dollar amounts are expressed in United States dollars.
The following discussion should be read in conjunction with our financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
Overview and History
We were originally incorporated in the State of Colorado in August 1998 under the name “Network Acquisitions, Inc.” We changed our name to Cavion Technologies, Inc. in February 1999 and subsequently to Concord Ventures, Inc. in October 2006.
On December 21, 2000, we filed for protection under Chapter 11 of the United States Bankruptcy Code. In connection with the filing, on February 16, 2001, we sold our entire business, and all of our assets, for the benefit of our creditors. After the sale, we still had liabilities of $8.4 million and were subsequently dismissed by the Court from the Chapter 11 reorganization, effective March 13, 2001, at which time the last of our remaining directors resigned. On March 13, 2001, we had no business or other source of income, no assets, no employees or directors, outstanding liabilities of approximately $8.4 million and had terminated our duty to file reports under securities law. In February 2008, we were re-listed on the OTC Bulletin Board.
In April 2010, we re-domiciled in Delaware under the name CCVG, Inc. (“CCVG”). Effective December 31, 2010, CCVG completed an Agreement and Plan of Merger and Reorganization (the “Reorganization") which provided for the merger of two of our wholly-owned subsidiaries. As a result of this reorganization, our name was changed to “Golden Dragon Inc.”, which became the surviving publicly quoted parent holding company.
| 26 |
On May 9, 2014, we entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with CannaPharmaRX, Inc., a Colorado corporation (“Canna Colorado”), and David Cutler, a former President, Chief Executive Officer, Chief Financial Officer and director of our Company. Under the Share Purchase Agreement, Canna Colorado purchased 1,421,120 shares of our common stock from Mr. Cutler and an additional 9,000,000 restricted common shares directly from us.
On May 15, 2014, as amended and effective January 29, 2015, we entered into an Agreement and Plan of Merger (the “Merger”) pursuant to which Canna Colorado became a subsidiary of our Company. In October 2014, we changed our legal name to “CannaPharmaRx, Inc.”
Pursuant to the Merger, all of the shares of our Common Stock previously owned by Canna Colorado were canceled. As a result of the aforesaid transactions, we became an early-stage pharmaceutical company whose purpose was to advance cannabinoid research and discovery using proprietary formulation and drug delivery technology then under development.
In April 2016, we ceased operations. Our then management resigned their respective positions with our Company, with the exception of Mr. Gary Herick, who remained as one of our officers and directors until March 2019.
Effective December 31, 2018, the Company and Hanover CPMD Acquisition Corp. (“CPMD Hanover”) a newly formed, wholly-owned subsidiary, entered into a Securities Purchase Agreement with Alternative Medical Solutions, Inc., an Ontario, Canada corporation (“AMS”), its shareholders, wherein the Company acquired all of the issued and outstanding securities of AMS. AMS is a corporation organized under the laws of the Province of Ontario, Canada. As a result of the completion of the acquisition of AMS on December 31, 2019, the Company no longer fits the definition of a “shell company,” as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. It filed the required disclosure on Form 8-K/A with the SEC on February 14, 2019, advising that it was no longer a shell company pursuant to the aforesaid Rule.
On January 6, 2021, the Company executed an Agreement of Purchase and Sale through its wholly owned subsidiary, AMS for the sale of the lands and premises located at Hanover, Ontario, Canada. The price was $2,000,000 CAD and the closing of this transaction occurred on July 9, 2021. As a result, and anticipation of the closing, the Company recorded an impairment of goodwill and fixed assets relating to the property of $7,962,694 during the year ended December 31, 2020. This property is security for a $1,000,000 US note with Koze Investments, LLC by way of a first charge ranking. At closing, the note was retired with the proceeds from the sale by repayment of the principal of $1,000,000, accrued interest of $124,735, and penalties of $475,265. This note was discharged on July 13, 2021.
Effective February 25, 2019, the Company acquired 3,936,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of Common Stock of GN Ventures, Ltd, Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of its Common Stock, from a former shareholder of GN. While no assurances can be provided, the Company believes this is the initial step in its efforts to acquire all or a significant portion of the issued and outstanding stock of GN. In May 2020, the Company exchanged 5,507,400 of its shares for 3,671,597 shares of GN.
| 27 |
GN owns a 60,000 square foot cannabis cultivation and grow facility located on 38 acres in Stevensville, Ontario, Canada. Because the Company is a minority shareholder of GN and GN is a privately held company, the Company cannot confirm that the information it currently has on GN’s operations is complete or fully reliable. GN estimates annual total production capacity from the Stevensville facility of up to 12,500 kilograms of cannabis. GN believes the Stevensville facility to be complete, and GN’s subsidiary, 9869247 Canada Limited, received a license to cultivate from the Canadian Ministry of Health on July 5, 2019. As a result, in October 2019, GN commenced cultivation activities and began generating revenues during the first calendar quarter of 2020. The Company expects that it will obtain additional information on the business activities of GN as it has renewed discussions to acquire additional interests and is performing its due diligence procedures.
Effective June 11, 2019, the Company entered into a Securities Purchase Agreement with Sunniva, Inc, a British Columbia, Canada corporation (“Sunniva”) wherein the Company agreed to acquire all of the issued and outstanding securities of Sunniva’s wholly-owned subsidiaries Sunniva Medical Inc. (“SMI”) and 1167025 B.C. LTD (“1167025”) for CAD $16.0 million in cash and a note in the principal amount of CAD $4.0 million. These companies are the current owners of the Sunniva Canada Campus, which includes construction assets for a planned 759,000 square-foot greenhouse located on an approximately 114-acre property in Okanagan Falls, British Columbia.
On June 8, 2020, the Company received a notice of termination of this Purchase Agreement, as amended, from Sunniva. As a result, the Company incurred a charge of $1,881,126 due to the write-off of its deposit to Sunniva, banking fees and prepaid expenses associated with the failed acquisition of Sunniva. The Company is in discussions with Sunniva, as well as an investment banker who received deposits from the Company, about recovering all or a portion of its deposits, banking fees, and prepaid expenses. The accompanying financial statements as of December 31, 2022, do not reflect potential recovery amounts related to Sunniva and other parties, if any.
On January 6, 2022, the Company entered into a 20-year operating lease with Formosa Mountain Ltd., for a cannabis production facility in Cremona, Alberta, Canada. The facility is a 55,000 square foot plant, built in 2015. Production and sales from, this facility are anticipated in Q3 of 2023.
CannaPharmaRx recommissioned the facility into a new indoor cannabis farm during 2022. It is a 55,000 square foot facility with 11 growing rooms and 10 drying and packing rooms. The Company received an Operating License from Health Canada on December 9, 2022, and a Cannabis License from the Canada Revenue Agency on December 22, 2022.
Production and sales from this facility are anticipated in Q4 of 2023. The expected date of the first harvest, under the new license, is on or about August 10th, 2023 with the second harvest occurred on September 11th, 2023 Both harvests combined are expected to yield around 195KG of saleable cannabis flower product.
Preliminary discussion with export partners, would set conditional per gram pricing at approximately $3.30 CDN/gr. This pricing matrix would be based on achieving satisfactory test results associated to THC and CBD content of the dried flower. Expected revenues for both harvests, if sold in their entirety, would be forecasted at $643,000.00 CDNA third and fourth harvest are planned in Q4 with similarly forecasted revenues. A portion of the proceeds, if the cannabis is sold, will go to pay down existing debt.
Our principal place of business is located at 3600 888-3rd Street SW, Calgary, Alberta, Canada, phone 949-652-6838. Our website address is www.cannapharmarx.com.
Because we have not generated any revenues during our prior two years, the following is our Plan of Operation.
| 28 |
PLAN OF OPERATION
See Note 1 above for a detailed discussion of our current business activities and plan of operation, the contents of which are incorporated herein as if set forth.
Going Concern
Substantial doubt exists as to our ability to continue as a going concern based on the fact that we do not have adequate working capital to finance our day-to-day operations. The Company did not have any revenues for the six months ended June 30, 2023 and 2022. The Company’s operating deficit of $3,292,157 as of June 30, 2023 indicates substantial uncertainty about the Company’s ability to continue as a going concern. Management’s plans include engaging in further research and development and raising additional capital in the short term to fund such activities through sales of its common stock. Management’s ability to implement its plans and continue as a going concern may be dependent upon raising additional capital. Our continued existence depends on the success of our efforts to raise additional capital necessary to meet our obligations as they come due and to obtain sufficient capital to execute our business plan. We may obtain capital primarily through issuances of debt or equity or entering into collaborative arrangements with corporate partners. There can be no assurance that we will be successful in completing additional financing or collaboration transactions or, if financing is available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we may be required to further scale down or perhaps even cease the operation of our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. Our financial statements do not include adjustments that might result from the outcome of this uncertainty.
Results of Operations for the Six Months Ended June 30, 2023
The Company does not currently sell or market any products and did not have any sales in the six months ended June 30, 2023 or 2022.
Costs of Goods Sold
The Company did not have sales for the six months ended June 30, 2023 or 2022 and, accordingly, there were no cost of goods sold.
Gross Profit and Gross Margin
For the six months ended June 30, 2023 and 2022, the Company had no gross profit or gross margin.
Operating Expenses
Our operating expenses consist primarily of general and administrative expenses, which include salaries, stock-based compensation expense and legal and professional fees associated with the costs for services or employees in finance, accounting, sales, administrative activities and the formation and compliance of a public company.
Overall operating expenses in six months ended June 30 2023 was $1,613,216 compared to $1,419,698 for the six months ended June 30, 2022. The increase in of $193,518 in operating expenses in the 2023 period is primarily due to an increase of approximately $211,000 in G&A expense, an increase of approximately $133,000 in payroll due to activity at the Cremora facility, partially offset by a decrease of approximately $146,000 in professional fees.
| 29 |
Other income (expense)
Other expense was $1,678,941 for the six months ended June 30, 2023, compared to other expense of $2,158,613 in the comparable six month period in 2022, a decrease of $479,673. The decrease is primarily attributable in 2023 due to the change in fair value of the derivative liability of $290,356, a decrease in the loss from the extinguishment of debt of 81,184 and a decrease in interest expense $186,891, partially offset by a loss of invest in 2023 of $78,760 compared to zero in the prior 2022 period.
Net (Loss)
As a result of the foregoing, the Company had a net loss of $3,292,157 and a net loss of $3,578,311 for the periods ended June 30, 2023, and June 30, 2022, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2023, we had a cash overdraft of $39,686 as compared to cash on hand of $2,317 at December 31, 2022.
Cash flows from operating activities
The Company used $1,093,908 in operating activities for the six months ended June 30, 2023 as compared to $685,226 during the prior year comparable quarter. The difference in cash used in operating activities is attributable to changes in operating assets and liabilities in 2023 compared to 2022.
Cash flows from investing activities
The Company used $74,700, during the six months ended June 30, 2023 in investing activities as compared to using $60,698 during the six-month period ended June 30, 2022. The difference is attributable to an increase in the purchase of plant equipment during the six months ended June 30, 2023 compared to 2022.
Cash flows from financing activities
During the six months ended June 30, 2023, $953,908 was provided from financing activities, including $213,750 from convertible loans and $740,158 from related party notes payable. During the prior year’s quarter, the Company received $476,250 and notes payable and $40,015 from the sale of common stock.
In general, based on historical losses, the Company will be required to continue raising operating capital through debt and equity.
Currently, we have no committed source for any funds to allow us to complete any of our proposed acquisitions or projects, however, the Company is continually seeking forms of committed capital to pursue its growth and expansion plans.. No representation is made that any funds will be available when needed. In the event funds cannot be raised if and when needed, we may not be able to carry out our business plan. Our inability to obtain funding for our projects will have a negative impact on our anticipated results of operations.
| 30 |
Inflation
Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the six-month period ended June 30, 2023.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures - Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report.
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. As of the result of the late filing of our December 31, 2022 Form 10-K and March 31, 2023 10-Q along with this Report which is late, our common stock was downgraded by the OTC Markets Group to the “Expert Market”.
Based on this evaluation, and evidenced by our late filings, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of June 30, 2023 at the reasonable assurance level. We believe that our financial statements presented in this Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.
| 31 |
Inherent Limitations - Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
Changes in Internal Control over Financial Reporting – Other than an emphasis on timely filing, there were no changes in our internal control over financial reporting during the period ended June 30, 2023, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 32 |
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As part of our acquisition of AMS, we assumed an action filed against AMS by Ataraxia Canada, Inc., alleging breach of contract, specifically, breach of a nonbinding term sheet providing for Ataraxia to acquire controlling interest in AMS and they are seeking $15 million in damages. A Statement of Claim was prepared by Ataraxia Canada, Inc., as plaintiff, and circulated to Alternative Medical Solutions Inc., as defendant, on August 2, 2018, under the Ontario Superior Court of Justice (Court file no. CV-17-580157). The parties have engaged in discussions with respect to a potential settlement of this matter. Counsel has advised that it believes it is premature to speculate on any outcome of this litigation, including the likelihood of a settlement or any potential liability at this time.
Our agreement to acquire AMS contained a provision requiring us to diligently defend against the claims brought forth in, and assume full and complete control of, the Ataraxia litigation, provided that we shall not enter into any compromise or settlement in respect of the Ataraxia litigation without the prior written consent of the sellers, which consent is not to be unreasonably withheld, conditioned or delayed. The sellers are obligated to cooperate fully and make available to us all pertinent information and witnesses under their control, make such assignments and take such other steps as in the opinion of our counsel are reasonably necessary to enable us to defend against the claims brought forth in the Ataraxia litigation.
We are currently reviewing two separate situations with our legal counsel in order to ascertain whether we have claims against Steven Barber arising out of his default of the Consulting Agreement we entered into as part of the AMS acquisition more fully described in” Part I, Item 1,” Business, above and various claims against Gary Herick, a former officer and director. In January 2020, we received correspondence from counsel for Mr. Barber demanding payment on amounts purported to be due pursuant to his Consulting Agreement with us. We are currently reviewing whether Mr. Barber has performed pursuant to the terms of the Consulting Agreement.
No decision on whether to proceed on either of these situations has been reached as of the date of this Report.
On July 9, 2020, we filed a lawsuit in the United States District Court for the District of Colorado (1:20-cv-01999-RM-GPG) against Gary Herick, Arrowhead Consulting, LLC, Whitemoon Energy LLC., Jamie Huttrer a/k/a Jamie Huttrer-Herick, and ZeroRMW, LLC (collectively, the “Herick Parties”). The lawsuit alleges, among other things, the Herick Parties engaged in various legal violations including breach of fiduciary duty, common law fraud, conversion, usurpation of corporate opportunities, securities violations pursuant to Section 10b-5 of the Securities Exchange Act of 1934, and civil conspiracy. Mr. Herick was a former officer and director of the Company. On September 8, the Herick Parties filed a Motion to Dismiss the Sixth Claim for Relief (§ 10b-5 Federal Securities Law). On September 28, 2020, we filed a First Amended Complaint. On October 10, 2020, the Herick Parties filed a Motion to Dismiss the Fourth and Fifth Claims for Relief. On October 30, 2020, the Parties filed a Stipulated Motion for an Extension of Time, through and including November 16, 2020, for us to respond to the Herick Parties’ Motion to Dismiss the Fourth and Fifth Claims for Relief.
On July 9, 2020, we made a demand of the “Herick Parties seeking the return of profits made between the period of August 2018, to January 2019. During this period, Gary Herick was the Chief Financial Officer and Director of the Company. Gary Herick was also the owner of approximately twenty-six percent (26%) of our common stock. Pursuant to the Securities Exchange Act of 1934, §16(b), 15 U.S.C.S. § 78p(b), an issuer may recover any profits realized by a beneficial owner from the sale of the issuer's equity securities within a six (6) month period. All unlawful profits must be returned to the Company on or before Tuesday, September 8, 2020.
On February 17, 2021, a Settlement Agreement and Release together with a Lock Up Agreement were signed by all parties to the lawsuit. As a result, the litigation has been discontinued.
| 33 |
On April 15, 2021, Bristol Capital Investors, LLC (BCI) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles against CannaPharmaRx Inc. and Does 1 – 50, inclusive (Case No. 21st CV1 3696). The lawsuit alleges that CannaPharmaRx Inc. (CPMD) breached the Amended and Restated Limited Liability Company Membership Purchase Agreement it had entered into with Bristol Capital Investors, LLC (BCI) to purchase BCI’s interest in Ramon Road Production Campus, LLC (RRPC), a single asset entity which owned an improved property, known as the Glass House, located in Cathedral City, California. BCI alleges causes of action for Fraud, Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, and Negligent Misrepresentation, and seeks compensatory and consequential damages in the amount of $10.5 millions dollars plus attorneys’ fees and costs. CPMD intends to vigorously defend against BCI’s lawsuit, going forward. The parties conducted a court-ordered mediation and the parties are engaging in on-going discussions.
We are not a party to any other legal proceeding or aware of any other threatened action as of the date of this Report.
ITEM 1A. RISK FACTORS
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2023 we issued 6,097,561 common shares pursuant to conversions of convertible debt to common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable
ITEM 5. OTHER INFORMATION
None
| 34 |
ITEM 6. EXHIBITS
| Exhibit No. | Description | |
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). | |
| 35 |
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on October 13, 2023.
| CannaPharmaRx, Inc. | ||
| By: | /s/ Dean Medwid | |
| Dean Medwid, | ||
| Principal Executive Officer | ||
| By: | /s/ John Cassels | |
|
John Cassels, Principal Financial Officer and | ||
| Principal Accounting Officer | ||
| 36 |