Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014
[___] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 000-27055
CANNAPHARMARX, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 24-4635140
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1 COLLINS DRIVE, SALEM BUSINESS CENTER, CARNEYS POINT, NJ 08069-3640
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(Address of principal executive offices)
(720) 939-1133
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(Registrant's Telephone number)
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.
Yes[_X_] No[__]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes[_X_] No[___]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer [___] Accelerated filer [___]
Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes[__] No[_X_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of November 18, 2014, there were 17,504,407 shares of the registrant's common
stock, $0.0001 par value, issued and outstanding.
CANNAPHARMARX, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited) 4
Condensed Balance Sheets
As of September 30, 2014 (Unaudited) and December 31, 2013 5
Condensed Statements of Operations
For the Three and Nine Month Periods Ended September 30, 2014
and 2013 and the Period from Inception (January 1, 2011) Through
September 30, 2014 6
Condensed Statements of Cash Flows
For the Three and Nine Month Periods Ended September 30, 2014
and 2013 and the Period from Inception (January 1, 2011) Through
September 30, 2014 7
Condensed Statement of Stockholders' Deficit
For the period from Inception (January 1, 2011) Through
September 30, 2014 8
Notes to Unaudited Condensed Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults upon Senior Securities 19
Item 4. Mine Safety Disclosures 19
Item 5. Other Information 19
Item 6. Exhibits 19
SIGNATURES 20
-3-
PART I
ITEM 1. FINANCIAL STATEMENTS
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CANNAPHARMARX, INC.
BALANCE SHEETS
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
2014 2013
----------------- -----------------
ASSETS
CURRENT ASSETS
Cash $ 2,440,123 $ -
- -
----------------- -----------------
TOTAL CURRENT ASSETS 2,440,123 -
Fixed Assets
Furniture and Fixtures 12,339 -
----------------- -----------------
TOTAL ASSETS $ 2,452,462 $ -
================= =================
LIABILITIES & STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ - $ 52,206
Accrued interest payable - related party $ 25,894
Related party loan - 213,934
----------------- -----------------
TOTAL CURRENT LIABILTIES - 292,034
Notes payable - related party - -
----------------- -----------------
TOTAL LIABILITIES - 292,034
STOCKHOLDERS' EQUITY
Preferred Stock; $0.0001 par value, 10,000,000 shares
authorized no shares issued and outstanding - -
Common stock, $0.0001 par value;
100,000,000 shares authorized; 17,454,407 and 2,384,407
issued and outstanding respectively 1,745 238
Additional paid in capital 20,275,808 16,874,643
Retained deficit (17,825,091) (17,166,915)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 2,452,462 (292,034)
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,452,462 $ -
================= =================
The accompanying notes are an integral part of these financial statements.
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CANNAPHARMARX, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2014 2013 2014 2013
-------------- ------------- ------------- --------------
Revenue $ - $ - $ - $ -
Operating Expenses:
Advertising and promotion 90,922 - 103,766 -
Management consulting 259,243 - 345,628 -
Meeting expense 33,686 - 35,500 -
Professional fees 24,852 - 70,610 -
Travel 16,681 - 20,856 -
General and administrative 54,806 21,442 78,097 62,154
-------------- ------------- ------------- --------------
Total operating expenses 480,190 21,442 654,457 62,154
-------------- ------------- ------------- --------------
Income (loss) from operations (480,190) (21,442) (654,457) (62,154)
Other income (expense)
Interest income (expense) net 670 (3,735) (3,719) (10,014)
- - - -
-------------- ------------- ------------- --------------
Other income (expense) net 670 (3,735) (3,719) (10,014)
-------------- ------------- ------------- --------------
Income (loss) before provision (479,520) (25,177) (658,176) (72,168)
for income taxes
Provision (credit) for income tax - - - -
-------------- ------------- ------------- --------------
NET INCOME (LOSS) (479,520) (25,177) (658,176) (72,168)
-------------- ------------- ------------- --------------
NET INCOME (LOSS) PER SHARE
(Basic and fully diluted) $ (0.03) $ (0.01) $ (0.07) $ (0.03)
============== ============= ============= ==============
Weighted average number of
common shares outstanding 16,807,074 2,384,407 9,898,629 2,384,407
============== ============= ============= ==============
The accompanying notes are an integral part of these financial statements.
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CANNAPHARMARX, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FROM INCEPTION (JANUARY 1, 2011) THROUGH SEPTEMBER 30, 2014 (Unaudited)
Common Stock
Amount Paid in Retained Stockholders'
Shares ($0.001 Par) Capital (Deficit) Equity (Deficit)
--------------- --------------- ---------------- ----------------- -----------------
Balance, January 1, 2011 2,384,407 $ 238 $ 16,874,643 $ (16,874,781) $ 100
Net Loss - - - (99,661) (99,661)
--------------- --------------- ---------------- ----------------- ----------------
Balance, December 31, 2011 2,384,407 238 16,874,643 (16,974,442) (99,561)
Net Loss - - - (98,067) (98,067)
--------------- --------------- ---------------- ----------------- ----------------
Balances at June 30, 2012 2,384,407 238 16,874,643 (17,072,509) (197,628)
Net Loss (94,406) (94,406)
--------------- --------------- ---------------- ----------------- ----------------
Balances, December 31, 2013 2,384,407 238 16,874,643 (17,166,915) (292,034)
CPHX acquisition 9,000,000 900 295,100 - 296,000
Debt relief in sale 71,672 - 71,672
Common stock sold 6,070,000 607 3,034,393 - 3,035,000
Net Loss (658,176) (658,176)
=============== =============== ================ ================= ================
Balances, September 30, 2014 17,454,407 $ 1,745 $ 20,275,808 $ (17,825,091) $ 2,452,462
The accompanying notes are an integral part of these financial statements.
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CANNAPHARMARX, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
2014 2013
----------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (658,176) $ (72,168)
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Compensatory loan increases/(decreases) (180,000) 45,000
Non cash write off of old debt 71,672 -
Changes in operating Assets & Liabilities
Increase/(Decrease) in Accounts Payable (52,206) 8,718
Increase/(Decrease) in Accrued Expenses (25,894) 9,714
----------------- ------------------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES (844,604) (8,736)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in fixed assets $ (12,339) $ -
- -
----------------- ------------------
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES (12,339) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase/(Decrease) in Related Party Loan (33,934) 8,711
Sales of common stock 3,331,000 -
----------------- ------------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 3,297,066 8,711
NET INCREASE (DECREASE) IN CASH 2,440,123 (25)
CASH AT THE BEGINNING OF THE PERIOD - 25
----------------- ------------------
CASH AT THE END OF THE PERIOD $ 2,440,123 $ -
================= ==================
SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Related party loans $ (71,672) $ 45,000
$ - $ -
SUPPLEMENTAL DISCLOSURE
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
The accompanying notes are an integral part of these financial statements.
-8-
CANNAPHARMARX, INC.
NOTES TO UNAUDITED CONDESED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
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NATURE OF OPERATIONS
BUSINESS
Golden Dragon Holding Co. ("Golden Dragon," "We" or "Us") is a publicly quoted
company seeking to create value for our shareholders by merging with another
entity with experienced management and opportunities for growth in return for
shares of our common stock. On May 9, 2014 we entered into a "Plan of
Reorganization" with CannaPharmaRX, Inc. which is not yet completed. There are
certain milestones to be met under the terms of this plan and as at the time of
this filing the requirements are in the process of being met.
HISTORY
Golden Dragon was incorporated in the State of Delaware in April 2010 as a
wholly owned subsidiary of Concord Ventures, Inc. ("Concord").
BASIS OF PRESENTATION
The accompanying unaudited financial statements of Golden Dragon have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In our opinion the financial statements include all
adjustments (consisting of normal recurring accruals) necessary in order to make
the financial statements not misleading.
Operating results for the three months ended September 30, 2014 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2014. For more complete financial information, these unaudited
financial statements should be read in conjunction with the audited financial
statements for the year ended December 31, 2013 included in our Form 10-K filed
with the SEC.
USE OF ESTIMATE
The preparation of our financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in these financial statements and
accompanying notes. Actual results could differ from those estimates. Due to
uncertainties inherent in the estimation process, it is possible that these
estimates could be materially revised within the next year.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid debt instruments
with original maturities of less than three months.
PROPERTY AND EQUIPMENT
We acquired $12,339 in property and equipment during the three months ended
September 30, 2014. Since the property was acquired after the midmonth of
September 2014 we recorded no depreciation expense during the three months ended
September 30, 2014. We owned no property at the end of September 30, 2013 and
consequently recorded no depreciation expense for the period ended September 30,
2013.
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CANNAPHARMARX, INC.
NOTES TO UNAUDITED CONDESED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(UNAUDITED)
DEFERRED COSTS AND OTHER OFFERING COSTS
Costs with respect to issue of common stock, warrants or options by us were
initially deferred and ultimately offset against the proceeds from these equity
transactions if successful or expensed if the proposed equity transaction is
unsuccessful. We had no deferred costs and other offering costs as at September
30, 2014 or 2013.
IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS
In the event that facts and circumstances indicated that the cost of long-lived
and intangible assets may be impaired, an evaluation of recoverability was
performed. If an evaluation was required, the estimated future undiscounted cash
flows associated with the asset were compared to the asset's carrying amount to
determine if a write-down to market value or discounted cash flow value was
required.
FINANCIAL INSTRUMENTS
The estimated fair value for financial instruments was determined at discrete
points in time based on relevant market information. These estimates involved
uncertainties and could not be determined with precision. The fair value of
accounts payable and related party loan approximate to their carrying value due
to the short maturities of these financial instruments.
INCOME TAXES
We account 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.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising costs of $90,922 were
incurred during the three months ended September 30, 2014, there were no
advertising costs for the three months ended September 30, 2013.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income is defined as all changes in stockholders' equity
(deficit), exclusive of transactions with owners, such as capital investments.
Comprehensive income includes net income or loss, changes in certain assets and
liabilities that are reported directly in equity such as translation adjustments
on investments in foreign subsidiaries and unrealized gains (losses) on
available-for-sale securities. From our inception there were no differences
between our comprehensive loss and net loss.
Our comprehensive loss was identical to our net loss for the three months ended
September 30, 2014 and 2013.
INCOME (LOSS) PER SHARE
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 consolidated 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 would reflect the potential dilution that would occur
if securities of 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
-10-
CANNAPHARMARX, INC.
NOTES TO UNAUDITED CONDESED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(UNAUDITED)
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.
Basic and diluted EPS were identical for the three months ended September 30,
2014 and 2013 as we had no stock options, warrants or convertible debt issued or
outstanding during those periods.
STOCK-BASED COMPENSATION
We have adopted ASC Topic 718, "Accounting for Stock-Based 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 the straight-line basis over the period in which we expect 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.
No stock based compensation was issued or outstanding during the three months
ended September 30, 2014 or 2013.
BUSINESS SEGMENTS
We believe that our activities during the three months ended September 30, 2014
and 2013 comprised a single segment.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We have reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on our financial condition or the
results of our operations.
2. GOING CONCERN AND LIQUIDITY
------------------------------
At September 30, 2014, we had $2,440,000 in cash assets but no operating
business or other source of income, outstanding liabilities totaling $0 and a
stockholders' equity of $2,452,462.
In our financial statements for the fiscal years ended December 31, 2013 and
2012, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern.
Our unaudited financial statements for the three months ended September 30, 2014
and 2013 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.
We had working capital of $2,440,000 and reported an accumulated equity since
Inception (January 1, 2011) of $2,452,000 as at September 30, 2014.
It is our current intention to seek to raise debt and, or, equity financing to
fund our ongoing operating expenses and attempt to complete the "Plan of
Reorganization" in order to create value for our shareholders. There is no
assurance that this series of events will be satisfactorily completed.
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CANNAPHARMARX, INC.
NOTES TO UNAUDITED CONDESED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(UNAUDITED)
3. ASSETS
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As at September 30, 2014 we had $2,440,000 in current assets and $12,300 in
fixed assets compared to December 31, 2013, where we had no assets
4. ACCOUNTS PAYABLE
-------------------
As at September 30, 2014, the balance of accounts payable was zero.
5. ACCRUED EXPENSES
-------------------
As at September 30, 2014, the balance of accrued expenses was zero (See Note
6.).
6. RELATED PARTY LOAN
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At June 30, 2014, the related party loan was released (as of May 9, 2014) by Mr.
David J. Cutler, our sole officer, a director and majority shareholder. This
loan was retired and settled in the initial transaction where CannaPharmaRX
acquired 9,000,000 shares of the Company in exchange for $296,000.
7. COMMITMENTS:
---------------
CAPITAL AND OPERATING LEASES
We had no capital or operating leases outstanding as at September 30, 2014.
LITIGATION
No legal proceedings are currently pending or threatened to the best of our
knowledge.
8. RELATED PARTY TRANSACTIONS
-----------------------------
As of May 9, 2014, Mr. Cutler our former officer and a director to whom we owed
$234,981 released all claims to this debt.
9. STOCKHOLDERS' EQUITY:
------------------------
PREFERRED STOCK
We were authorized, without further action by the shareholders, to issue
10,000,000 shares of one or more series of preferred stock, at a par value of
$0.0001, all of which is nonvoting. The Board of Directors may, without
shareholder approval, determine the dividend rates, redemption prices,
preferences on liquidation or dissolution, conversion rights, voting rights and
any other preferences.
No shares of preferred stock were issued or outstanding during the three month
periods ended September 30, 2014 and 2013.
COMMON STOCK
We are authorized to issue 100,000,000 shares of common stock, par value $0.0001
per share.
On April 29, 2008, we held our annual meeting of stockholders at which meeting
the majority of stockholders approved, an up to 3 for 1 reverse split of our
shares of common stock. No such reverse split has been effected as yet.
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CANNAPHARMARX, INC.
NOTES TO UNAUDITED CONDESED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(UNAUDITED)
RECENT ISSUANCES
There were 9,000,000 shares issued on May 9, 2014 to CannaPharmaRX in exchange
for $296,000. There were 6,070,000 shares issued during the six month period
ended September 30, 2014 in exchange for $3,035,000. These shares were placed
through a Private Placement Memorandum offered to accredited investors only.
WARRANTS
No warrants were issued or outstanding during the three months ended September
30, 2014 or 2013.
STOCK OPTIONS
Effective March 19, 1999, we adopted a stock option plan (the "Plan"). The Plan
provides for grants of incentive stock options, nonqualified stock options and
restricted stock to designated employees, officers, directors, advisors and
independent contractors. The Plan authorized the issuance of up to 75,000 shares
of Class A Common Stock. Under the Plan, the exercise price per share of a
non-qualified stock option must be equal to at least 50% of the fair market
value of the common stock at the grant date, and the exercise price per share of
an incentive stock option must equal the fair market value of the common stock
at the grant date.
No stock options were issued or outstanding during the three months ended
September 30, 2014 or 2013.
10. INCOME TAXES
----------------
We have had losses since our Inception (January 1, 2011), and therefore have not
been subject to federal or state income taxes since our Inception.
Following our reorganization into a holding company structure and the sales of
our subsidiary company, CCAPS, we disposed of the majority of our brought
forward net operating losses.
Consequently, effective September 30, 2014, we had NOLS of approximately
$797,000, which expire in 2031 and 2033.
11. SUBSEQUENT EVENTS
---------------------
We have evaluated subsequent events through the date of this filing and note
there has been no events that would require disclosure in this report.
-13-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto and the other financial information
included elsewhere in this report. This discussion contains forward-looking
statements that involve risks and uncertainties. We believe that our
expectations are based on reasonable assumptions within the bounds of our
knowledge of our business and operations: there can be no assurance that actual
results will not differ materially from our expectations. Such forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated, including but not limited
to, our ability to raise debt and, or, equity to fund our ongoing operating
expenses and to create value for our shareholders by merging with another entity
with experienced management and opportunities for growth in return for shares of
our common stock. You are urged to carefully consider these factors, as well as
other information contained in the Annual Report on Form 10-K and in our other
periodic reports and documents filed with the SEC.
OVERVIEW
CannaPharmaRx, Inc. (the "Company") fka Golden Dragon Holding Co. is a publicly
quoted shell company seeking to create value for our shareholders by merging
with another entity with experienced management and opportunities for growth in
return for shares of our common stock. On May 9, 2014 the Company entered into a
"Plan of Reorganization" with CannaPharmaRX, Inc., a Colorado corporation. This
plan requires certain events to take place and both companies are engaged in
monitoring the progress of these events.
HISTORY
The Company was incorporated as Golden Dragon Holding Co. in the State of
Delaware in April 2010 as a wholly owned subsidiary of Concord Ventures, Inc.
("Concord"). In late October 2014, the Company filed with Delaware and changed
its name to CannaPharmaRx, Inc.
PLAN OF OPERATIONS
GENERAL BUSINESS PLAN
HISTORY IF CANNAPHARMARX, INC., A COLORADO CORPORATION, OUR SUBSIDIARY
BUSINESS OF OUR COMPANY
We intend to operate our business through our subsidiary.
Our subsidiary, CannaPharmaRX, Inc., a Colorado corporation, is dedicated to
advancing endo-cannabinoid science, research, and discovery in the US and
worldwide and to work collaboratively to bring novel cannabinoid based products
to market in the US and worldwide.
CannaPharmaRX, Inc. ("CannaPharmaRX" or "Company" or "we") was incorporated on
April 22, 2014 in the State of Colorado for the purpose to engage in any lawful
activity for which corporations may be formed. CannaPharmaRX is dedicated to
advancing endo-cannabinoid science, research, and discovery in the US and
worldwide and to work collaboratively to bring novel cannabinoid based products
to market in the US and worldwide. Upon completion of our Agreement and Plan of
Merger with Golden Dragon Holding Co. CannaPharmaRX shall be merged into our
wholly-owned subsidiary, CPHR Acquisition Co.
CANNAPHARMARX, INC. OVERVIEW
We have no operating history in our proposed business and no representation is
made, nor is there any assurance that our Company will be able to successfully
raise the necessary capital.
-14-
CannaPharmaRX management understands the wide range of efficacies that the
cannabinoid plant possesses, and is applying pharmaceutical research,
manufacturing and the distribution system that is already in place to provide
novel treatments to patients who can benefit from cannabinoid therapies.
CannaPharmaRX intends to serve the following marketplaces: Oncology, Infectious
Disease, Pain, Multiple Sclerosis, Inflammatory disease, Gastrointestinal, and
Ophthalmology.
Phase I
Compounding Pharmacies - CannaPharmaRX intends to acquire multiple licensed
pharmacy compounding centers. Each center will compound sterile, standardized
and labeled products.
Phase II
Once enough clinical and safety data is amassed, and CannaPharmaRX understands
the consumer needs, it intends to outsource, build, acquire or partner with a
pharmaceutical manufacturing facility for product development. This will further
ensure consistency of product quality, as well as bring cost for manufacturing
down due to scalable economies.
PRODUCT PORTFOLIO
CannaPharmaRX intends to develop a diverse line of cannabinoid based products
that will meet the need of the healthcare provider serving the various patient
populations needs. Products will be labeled for medical indications, strengths,
dosing, safety, as well as route of administration.
FORMULARY DEVELOPMENT
CannaPharmaRX intends to develop and maintain a compendium for product usage,
supported by real world evidence from our data gathering through our monitoring.
INVESTMENT COMPANY ACT 1940
Although we will be subject to regulation under the Securities Act of 1933, as
amended, and the 1934 Act, we believe we will not be subject to regulation under
the Investment Company Act of 1940 (the "1940 Act") insofar as we will not be
engaged in the business of investing or trading in securities. In the event we
engage in business combinations that result in us holding passive investment
interests in a number of entities, we could be subject to regulation under the
1940 Act. In such event, we would be required to register as an investment
company and incur significant registration and compliance costs. We have
obtained no formal determination from the SEC as to our status under the 1940
Act and, consequently, any violation of the 1940 Act would subject us to
material adverse consequences. We believe that, currently, we are exempt under
Regulation 3a-2 of the 1940 Act.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2014, we had assets of $2,440,000 in cash and $12,300 in fixed
assets, no operating business or other source of income, outstanding liabilities
totaling $0 and a stockholders' equity of $2,452,000.
In our financial statements for the fiscal years ended December 31, 2013 and
2012, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern.
Our unaudited financial statements for the three months ended September 30, 2014
and 2013 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.
We had a working capital surplus of $2,440,000 and reported stockholders' equity
since Inception (January 1, 2011) of $2,452,000 as at September 30, 2014.
-15-
It is our current intention to seek to raise debt and, or, equity financing to
fund our ongoing operating expenses and pursue the Plan of Reorganization as
previously noted. There is no assurance that this series of events will be
satisfactorily completed.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2014 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2013
REVENUE
During the three months ended September 30, 2014 and 2013, we did not recognize
any revenues and do not anticipate having revenue generating activities in the
near future.
GENERAL AND ADMINISTRATIVE EXPENSES
During the three months ended September 30, 2014, we incurred $54,806 in general
and administrative expenses compared to $21,442 in the three months ended
September 30, 2013, an increase of $33,364. The increase was due to increase
organization and marketing activities. Advertising expenses were $90,922 in the
current quarter as compared to none in the comparable quarter. Management
consulting was $259,243 in the current quarter compared to none the prior
comparable quarter. Professional fees were $24,852 in the current quarter
compared to none in the prior comparable quarter. Travel expenses were $16,681
in the current quarter and none in the comparable prior quarter. All of these
variances are attributable to the efforts of the new management team to
effectively carry out the "Plan of Reorganization" with CannaPharmaRX in an
expeditious manner.
INTEREST EXPENSE
We recognized interest income of $670 during the three months ended September
30, 2014, compared to an expense of $3,735 during the three months ended
September 30, 2013, a difference of $3,065. This interest difference relates to
the interest accrued on the loans made to us by one of our prior directors. The
decrease in the amount of interest between the two periods reflects the fact
that the loan was retired in May 2014 with the stock purchase effected by
CannaPharmaRX.
PROFIT / (LOSS) BEFORE INCOME TAX
In the three months ended September 30, 2014, we recognized a loss before income
tax of ($479,520) compared to a loss before income tax of ($25,177) in the three
months ended September 30, 2013, an increase of $454,343 due to the factors
discussed above.
PROVISION FOR INCOME TAXES
No provision for income taxes was required in the three months ended September
30, 2014 or 2013 as we generated tax losses both periods.
NET PROFIT / (LOSS) AND COMPREHENSIVE PROFIT / (LOSS)
In the three months ended September 30, 2014, we recognized a net loss of
($479,520) compared to net a loss of ($25,177) in the three months ended
September 30, 2013, an increase of $454,343 due to the factors discussed above.
The comprehensive loss was identical to the net loss in both the three months
ended September 30, 2014 and 2013.
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NINE MONTHS ENDED SEPTEMBER 30, 2014 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2013
REVENUE
During the nine months ended September 30, 2014 and 2013, we did not recognize
any revenues and do not anticipate having revenue generating activities in the
near future.
During the nine months ended September 30, 2014, we incurred $78,097 in general
and administrative expenses compared to $62,154 in the nine months ended
September 30, 2013, an increase of $15,943. The increase was due to a
reclassification of expense categories in the current quarter. Advertising
expenses were $103,766 in the current nine months as compared to none in the
prior comparable nine months. Management consulting was $345,628 in the current
nine months compared to none the prior comparable nine months. Professional fees
were $70,610 in the current nine months compared to none in the prior comparable
nine months. Travel expenses were $20,856 in the current nine months and none in
the comparable prior nine months. All of these variances are attributable to the
efforts of the new management team to effectively carry out the "Plan of
Reorganization" with CannaPharmaRX in an expeditious manner.
INTEREST EXPENSE
We recognized interest income of $811 and interest expense of $4,530 during the
nine months ended September 30, 2014, compared to an expense of $10,014 during
the nine months ended September 30, 2013, a difference of $6,295. This interest
difference relates to the interest accrued on the loans made to us by one of our
prior directors. The decrease in the amount of interest between the two periods
reflects the fact that the loan was retired in May 2014 with the stock purchase
affected by CannaPharmaRX.
PROFIT / (LOSS) BEFORE INCOME TAX
In the nine months ended September 30, 2014, we recognized a loss before income
tax of ($658,176) compared to a loss before income tax of ($72,168) in the nine
months ended September 30, 2013, an increase of $586,008 due to the factors
discussed above.
NET PROFIT / (LOSS) AND COMPREHENSIVE PROFIT / (LOSS)
In the nine months ended September 30, 2014, we recognized a net loss of
($658,176) compared to net a loss of ($72,168) in the nine months ended
September 30, 2013, an increase of $586,008 due to the factors discussed above.
The comprehensive loss was identical to the net loss in both the nine month
periods ended September 30, 2014 and 2013.
CASH FLOW INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2013
At September 30, 2014, we had assets of $2,440,000 in cash and $12,300 in fixed
assets, no operating business or other source of income, outstanding liabilities
totaling $0 and stockholders' equity of $2,452,000.
In our financial statements for the fiscal years ended December 31, 2013 and
2012, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern.
Our unaudited financial statements for the nine months ended September 30, 2014
and 2013 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.
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We had a working capital surplus of $2,440,000 and reported an accumulated
equity since Inception (January 1, 2011) of $2,452,000 as at September 30, 2013.
It is our current intention to continue to seek to raise debt and, or, equity
financing to fund our ongoing operating expenses and pursue the "Plan of
Reorganization" with CannaPharmaRX as previously noted. There is no assurance
that this series of events will be satisfactorily completed.
Net cash used in operations for the nine months ended September 30, 2014 was
$844,604 compared to $8,736 in the nine months ended September 30, 2013, an
increase of $835,868.
In the nine months ended September 30, 2014, our net losses were $658,176 and
debt retirement of $292,034.
Cash was used in the acquisition of office equipment of $12,339 during the nine
months ended September 30, 2014 with no expenditures as at September 30, 2013.
During the nine months ended September 30, 2014, the Company received $3,331,000
from its financing activities by way of sales of common stock to CannaPharmaRX
and investors through a private placement. The Company also retired a related
party loan in the amount of $33,934.This was compared to an increase in a loan
from a related party in the amount of $8,711 in the nine months ended September
30, 2013.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the
Company is not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------------
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) under the Securities Exchange Act of 1934, as amended
the "Exchange Act")) that are designed to ensure that information required to be
disclosed in our reports under the Exchange Act, is recorded, processed,
summarized and reported within the time periods required under the SEC's rules
and forms and that the information is gathered and communicated to our Chief
Executive Officer and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer and Principal
Financial Officer carried out an evaluation under the supervision and with the
participation of our management, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 15d-14 as of the end of the period covered by this report.
Based on the foregoing evaluation, our Chief Executive Officer and Principal
Financial Officer have concluded that our disclosure controls and procedures are
effective in timely alerting them to material information required to be
included in our periodic SEC filings and to ensure that information required to
be disclosed in our periodic SEC filings is accumulated and communicated to our
management, including our Chief Executive Officer and Principal Financial
Officer, to allow timely decisions regarding required disclosure.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended September 30, 2014, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
We were not subject to any legal proceedings during the three months ended
September 30, 2014 or 2013.
ITEM 2. CHANGES IN SECURITIES
-----------------------------
There were no changes in our securities in the three months ended September 30,
2014 or 2013.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
None.
ITEM 4. MINE SAFETY DISCLOSURES
-------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
-------------------------
None.
ITEM 6. EXHIBITS
----------------
EXHIBITS. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act.
Exhibit 101.INS XBRL Instance Document (1)
Exhibit 101.SCH XBRL Taxonomy Extension Schema Document (1)
Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1)
Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1)
Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)
Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)
------------------
(1) Pursuant to Rule 406T of Regulation S-T, this interactive data file is
deemed not filed or part of a registration statement or prospectus for
purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not
filed for purposes of section 18 of the Securities Exchange Act of 1934,
and otherwise is not subject to liability under these sections.
-19-
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.
CannaPharmaRX, Inc.
Date: November 19, 2014 By: /s/ Gerry Crocker
--------------------------------------
Gerry Crocker
Chief Executive Officer
By: /s/ Gary Herick
--------------------------------------
Gary Herick
Chief Financial Officer
(Principal Accounting Officer)
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