(Unaudited) (unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

CANNAPHARMARX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)CASH FLOWS (unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

CANNAPHARMARX, INC.

CANNAPHARMARX, INC.NOTES TO FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)For the Three and Nine Month Interim Periods September 30, 2016 and 2015

The accompanying notes are an integral part of these unaudited consolidated financial statements.

CANNAPHARMARX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NATURE OF OPERATIONS

BUSINESS

CannaPharmaRx, Inc. (together with its consolidated subsidiaries, the “Company”(the “Company”) is a Delaware corporation whose shares are publicly quotedwere traded on the OTCQB.OTCQB during 2015. The Company began trading under its new stock ticker symbol “CPMD” effective as of March 21, 2015. The Company is an early-stage pharmaceutical company whose purpose is to advance cannabinoid research and discovery using proprietary formulation and drug delivery technology currently under development. It is also an aspect of the Company’s strategy to own and operate compounding and specialty pharmacies. The Company regularly engages in discussions to acquire such pharmacies and to finance such acquisitions, but to date, the Company has not completed any such acquisition.

HISTORY

The Company was originally incorporated as Golden Dragon Holding Co. in the State of DelawareColorado in December 2010 as a wholly-owned subsidiary ofAugust 1998 under the name “Network Acquisitions, Inc.” It changed its name to Cavion Technologies, Inc. in February 1999 and subsequently to Concord Ventures, Inc. in October 2006. On December 21, 2000, the Company filed for protection under Chapter 11 of the United States Bankruptcy Code. In connection with the filing, on February 16, 2001, the Company sold its entire business, and all of its assets, for the benefit of its creditors. After the sale, the Company still had liabilities of $8.4 million and was subsequently dismissed by the Court from the Chapter 11 reorganization, effective March 13, 2001, at which time the last of the Company’s then remaining directors resigned. On March 13, 2001, the Company had no business or other source of income, no assets, no employees or directors, outstanding liabilities of approximately $8.4 million and had terminated its duty to file reports under securities law. In February 2008, after filing of a Form 10 registration statement pursuant to the Securities Exchange Act of 1934, as amended, we were re-listed on the OTC Bulletin Board.

In April 2010, the Company re-domiciled in Delaware under the name CCVG, Inc. (“CCVG”).Effective December 31, 2010, the Company completed an Agreement and Plan of Merger and Reorganization (the “Reorganization") which provided for the merger of two of the Company’s wholly owned subsidiaries. As a result of this reorganization the Company’s name became “Golden Dragon Inc.,” which became the surviving publicly quoted parent holding company.

On May 9, 2014, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with CannaPharmaRX, Inc., a Colorado corporation (“Canna Colorado”), and David Cutler, thea former President, Chief Executive Officer, Chief Financial Officer and director of the Company. Under the Share Purchase Agreement, Canna Colorado purchased 1,421,120 restricted shares of the Company’s common stock from Mr. Cutler and an additional 9,000,000 restrictedcommon shares of the Company’s common stock directly from the Company. As a result of the Share Purchase Agreement, Canna Colorado became the Company’s largest stockholder.

On May 15, 2014, the Company entered into an Agreement and Plan of Merger (the “Plan of Merger”) pursuant to which Canna Colorado would become a subsidiary of the Company.

In October 2014, the Company changed its legal name to CannaPharmaRx,“CannaPharmaRx, Inc. During the fourth quarter of 2014, in light”

As a result of the Cohen litigation described in Note 6 (Litigation and Accrued Settlement Liabilities), the parties determined to delay the closing of the transaction contemplated by the original Plan of Merger. On March 30, 2015, the parties to the Cohen litigation entered into a full settlement and release of claims agreement. With the Cohen litigation matter settled, on April 21, 2015,aforesaid transactions, the Company entered intobecame an Amendedearly-stage pharmaceutical company whose purpose was to advance cannabinoid research and Restated Agreementdiscovery using proprietary formulation and Plan of Merger (the “Merger Agreement”) with Canna Colorado and CPHR Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary ofdrug delivery technology then under development.

In April 2016, the Company (“Acquisition Sub”), pursuant to which Acquisition Sub would mergeceased operations. The Company’s then management resigned their respective positions with and into Canna Colorado with Canna Colorado remaining as the surviving corporation and wholly-owned non-operating subsidiary of the Company, with the exception of Mr. Gary Herick, who remains as one of its officers and the outstanding shares of Canna Colorado would be converted into 9,750,000 shares ofdirectors.

As a result, the Company (the “Merger”). The Merger Agreement amended and restated in its entirety the Plan of Merger from May 2014.

On June 29, 2015, the Company closed the Merger Agreement, with 100% of the Canna Colorado shareholders exchanging, atis now considered a 1:1 exchange ratio, a total of 9,750,000 Canna Colorado shares in return for a total of 9,750,000 shares of the Company’s common stock. As such, prior to the closing of the Merger, and as a condition to the closing of the Merger, the Company issued 9,750,000 restricted shares of the Company’s common stock to the Canna Colorado shareholders. Additionally,“shell” company pursuant to the Merger, allSecurities Exchange Act of the shares of the Company previously owned by Canna Colorado were cancelled. Canna Colorado is now the wholly-owned subsidiary of the Company.1934, as amended.

BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Canna Colorado and 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 current presentation.

Operating results for the three and nine month period ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ended December 31, 2015. For more complete financial information, these unaudited consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2014 included in our Form 10-K filed with the SEC on March 31, 2015.

USE OF ESTIMATES

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 consolidated 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

The Company has acquired $102,800$102,799 in property and equipment, of which $100,721 was purchased during the year ended December 31, 2014, and another $2,078 purchased in the first quarter of 2015. Of this amount, $50,000 represents the capitalized cost of ourthe Company’s proprietary RECRUIT RegistryTMRegistry™ website development. This patient registry project was largely completed in the fourth quarter of 2014, although it is not currently operational, and the timing of the project launch is not certain at this time. Accordingly, no depreciation expense has been recorded against the capitalized cost of the RECRUIT Registry to date.

In addition to the investment in ourthe Company’s patient registry, another $52,800 has been invested in office and computer equipment, primarily incurred since the November 2014 establishment of the Company’s new headquarters in Carneys Point, New Jersey. Accumulated depreciation to date totals $12,540 against these fixed assets. Depreciation expenses total $3,192During the current year ended December 31, 2015 the Company has added $2,078 in additional office and $-0-computer equipment.

As of December 31, 2015, the Company had ceased using the offices that were rented and the related assets were disbursed with no accounting for their disposition. With this development, the quarters ended September 30, 2015 and September 30, 2014, respectively, and were $9,520 and $-0- respectivelyCompany recorded a loss on the disposal of the assets in the nine month periods ended September 30, 2015 and 2014.amount of $87,748.

Depreciation expenses have been calculated using the straight linestraight-line method over the estimated useful lives of the respective assets, ranging from three to seven years. As of September 30, 2016, the Company had no fixed assets on hand. Depreciation expense for the periods ended September 30, 2016 and September 30, 2015 was $-0- and $9,520 respectively.

DEFERRED COSTS AND OTHER OFFERING COSTS

All costs with respect to raising capital in the two private placements of the Company’s common stock were expensed by the Company both in 2014 and 2015. These costs were applied as internal operational expenses. The Company had no deferred costs or other stock offering costs as of either September 30, 20152016 or December 31, 2014.2015. The Company has not raised any capital since 2015.

Future costs associated with raising capital, be it debt or equity, may more likely be incurred as a direct variable cost with third parties. Our intent is to initially defer these costs and ultimately offset them against the proceeds from these capital or financial transactions if successful or expensed if the proposed financial transaction proves unsuccessful.

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 will be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset will be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value will be required. The Company had no intangible assets at September 30, 20152016 or December 31, 2014.2015.

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.

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. As of September 30, 20152016 and December 31, 2014,2015, the Company does not have any assets or liabilities which are considered Level 2 or 3 in the hierarchy.

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the periods ended September 30, 2015,2016, nor December 31, 2014.2015.

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 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.

ADVERTISING COSTS

Advertising and promotional costs are expensed as incurred. Advertising and promotional expenses totaled $138 and $25,735 in the three-month and nine-month periods ended September 30, 2015 respectively, compared to $69,990 and $81,218 for the three- and nine-month periods ended September 30, 2014.

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 have been no differences between our comprehensive loss and net loss. Our comprehensive loss was identical to our net loss for the three and nine month periods ended September 30, 2015 and 2014.

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 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.

Stock options outstanding at September 30, 20152016 to purchase 4,675,000750,000 shares of common stock are excluded from the calculations of diluted net loss per share since their effect is antidilutive.

STOCK-BASED COMPENSATION

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 the 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.

Effective November 1, 2014, the Company granted options to purchase shares of the

BUSINESS SEGMENTS

The Company’s common stock to each of its employees for a total of 5,000,000 options granted. Including the November 1, 2014 grant and all subsequent option grants, the Company has granted a total of 6,075,000 options at exercise prices ranging from $1.00 to $3.25. As a result of forfeitures, 4,675,000 options remain outstanding as of September 30, 2015.

On June 25, 2015, the Company issued 100,000 shares of the Company’s common stock to a financial services firm as consideration for advisory and capital raising services. These shares were valued at an aggregate of $350,000 based on the trading average of the Company’s stock over the ten days preceding issuance of those shares and such amount was expensed to stock-based compensation costsactivities during the period.

Stock-based compensation expenses totaled $1,095,760 and $-0- for the three monthssix month period ended September 30, 20152016 and September 30, 2014, respectively. On athe year to date basis, stock-based compensation expenses totaled $5,171,296 and $-0- for the nine months ended September 30, 2015 and September 30, 2014, respectively.

BUSINESS SEGMENTS

Our activities during the nine months ended September 30,December 31, 2015 comprised a single segment.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On June 10, 2014, the FASB issued update ASU 2014-10,Development Stage Entities(Topic 915). Among other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and stockholders’ equity, (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015. However, entities are permitted to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued. The Company has elected to early adopt these amendments, and accordingly, has not labeled the financial statements as those of a development stage entity and has not presented inception-to-date information on the respective financial statements.

The Company has reviewedimplemented all other recently issued, but not yet effective,new accounting pronouncements that are in effect and dothat may impact its financial statements and does not believe the future adoption ofthat there are any suchother new pronouncements may be expected to causethat have been issued that might have a material impact on ourits financial conditionposition or the results of our operations.

The Company had $-0- cash on hand of $201,025 as of September 30, 2015, but2016 and no revenue-producing business or other sources of income. Additionally, as of September 30, 20152016, the Company had outstanding liabilities totaling $527,995$925,613 and a stockholders’ deficit of $204,824.$921,447. The Company had a working capital deficit of $285,083$921,447 at September 30, 2015.2016.

In ourthe Company’s financial statements for the fiscal years ended December 31, 20142015 and 2013,2014, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. 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 our current financial projections, we believe we do not have sufficient existing cash resources to fund our current limited operations through November 2015. However, current revenue growth expectations are not sufficient to sustain operations beyond that date.operations.

It is ourthe 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 usthe Company to successfully implement these plans would have a material adverse effect on ourits business, including the possible inability to continue operations.

NOTE 3.

ASSETS

As of September 30, 2015,2016, the Company had $232,912$4,167 in current assets (comprisedcomprised of $201,025 in cash on deposit in a bank and $31,887$4,167 in prepaid expenses) and $90,259 in furniture and fixtures, net of $12,540 in accumulated depreciation.expenses.

As of September 30, 2016 and December 31, 2015, the balance of accounts payable and accrued expenses was $337,995,$565,855 and $456,601, respectively, which is primarily comprised of trade payables and accrued salaries and wages and legal fees.

Additionally, the current portion of accrued legal settlements payable in cash over the next 12 months total $180,000 as of September 30, 2016 and December 31, 2015 total $190,000 as of December 31, 2015, as discussed in Note 6 (Litigation and Accrued Settlement Liabilities).

OPERATING LEASE

The Company hashad a non-cancellable operating lease for its headquarters located in Carneys Point, New Jersey. The term of this lease extends untilended April 30, 2016. The remaining lease commitment totals $26,419 asAs of September 30, 2015.2016 the Company owed $12,360 on this lease and had not made any new commitments for office space.

On October 30, 2014, Gary M. Cohen (“Cohen”), former President, Chief Operating Officer and a board member of Canna Colorado, filed a lawsuit against Canna Colorado and an individual officer and board member, Gary Herick.Herick, who is currently an officer and director of the Company. On November 26, 2014, Cohen filed an amended complaint naming the Company and Gerald Crocker, James Smeeding, Robert Liess and Mathew Sherwood, each of whom was a member of the Company’s board of directors at that time, as defendants. In his amended complaint, Cohen alleged various employment- related contract and wrongful termination claims, as well as claims alleging breach of fiduciary duty, misappropriation of assets, violations of corporate law regarding his access to internal corporate information, and alleged violations of U.S. federal securities laws, the Sarbanes- Oxley Act of 2002 and the U.S. Internal Revenue Code. Cohen’s claims arose out of the removal of Cohen as an officer and board member of Canna Colorado, which occurred on or about October 23, 2014. The defendants successfully removed Cohen’s lawsuit from state court in Hillsborough County, Florida—where it was filed originally—to the U.S. District Court in Tampa, Florida.

On November 11, 2014, the Company, under its former name Golden Dragon Holding Co., sued Cohen in U.S. District Court in New Jersey for libel and tortious interference.

On March 30, 2015, the Company executed a Confidential Settlement and Release of Claims Agreement dated March 30, 2015, by and between the Company, Canna Colorado, Cohen and the other individuals named above (the “Settlement Agreement”). Pursuant to the terms of the Settlement Agreement, the lawsuit filed in Florida on October 30, 2014 against the Company, Canna Colorado, Herick, Crocker, Smeeding, Sherwood and Liess by Cohen has been resolved and dismissed. The parties amicably resolved their differences before any discovery occurred or before any decision by the court on the merits of any claims. The Company and all the individuals who had been sued categorically denied of all Mr. Cohen’s claims and allegations, maintained that the allegations were false and were prepared to assert counterclaims of their own. As part of the parties’ resolution, Cohen retracted his allegations.

As part of the Settlement Agreement, the Company agreed to purchase all of Mr. Cohen’s 2,250,000 shares of Canna Colorado for a purchase price of $350,000, with $85,000 payable up front and the remainder payable in equal installments of $15,000 per month over the next 17 months, and a payment of $10,000 in the eighteenth month. In addition, on May 4, 2015, the Company issued 600,000 unregistered restricted shares of its common stock to Mr. Cohen as part of the Settlement Agreement. The Company valued those shares at $1,597,500 based on the trading average of the Company’s stock over the ten days preceding entry into the Settlement Agreement and recorded an expense in such amount during the period ended December 31, 2014. Pursuant to the Settlement Agreement, $160,000 has been paid to Mr. Cohen in cash through September 30, 2015 in accordance with the settlement payment terms, leaving a remaining liability of $190,000 as of September 30,December 31, 2015 to be paid in cash in the future.future, since no payments were made subsequent to September 30, 2015.

In addition, the Company and Cohen have resolved their differences in the Company’s lawsuit filed against Cohen on November 11, 2014 in New Jersey. The Company has dismissed its claims against Cohen of libel and tortious interference.

NOTE 7.

STOCKHOLDERS’ EQUITY

PREFERRED STOCK

The Company is authorized without further action by the stockholders, to issue up to 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 stockholder 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 as of September 30, 2015.2016 and December 31, 2015, respectively.

COMMON STOCK

The Company is authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share. As of September 30, 2016 and December 31, 2015, 17,959,62117,960,741 shares of common stock were issued and outstanding.

RECENT ISSUANCES OF COMMON STOCK

In March 2015, the Company began offering in a private placement of shares of its unregistered restricted common stock to accredited investors at $1.50 per share (the “Private Placement”). Through September 30,December 31, 2015 the Company issued a total of 536,334556,334 shares in exchange for $804,500$804,550 of gross proceeds.

On June 25, 2015, the Company issued 100,000 shares of the Company’s common stock to Benjamin & Jerold Brokerage I, LLC, an Illinois limited liability company (“B&J”), which had provided advisory and capital raising services to the Company. These shares were expensed to stock-based compensation costs during the period and were valued at $350,000 based on the trading average of the Company’s stock over the ten days preceding issuance of those shares.

No common shares have been issued subsequent to June 25, 2015.

WARRANTS

On January 20, 2015, the Company issued a 3-year warrant (the “First Warrant”) to Viridian Capital & Research, LLC (“VCR”) as compensation for the services rendered by VCR in connection with the delivery of a company report describing the business, technology and products, markets, growth strategy and financial aspects of the Company. The First Warrant is exercisable for 244,283 of the Company’s fully-diluted common shares at an exercise price equal to the price per share of the Company’s common stock on the 10 days preceding January 20, 2015 or $2.90. The First Warrant has a 3-year life, a cashless exercise provision and is fully transferable with the Company’s approval, which may not be unreasonably withheld. The First Warrant is callable on 60 days’ notice if (i) the Company’s common stock trades on the NASDAQ and (ii) the Company’s common stock trades at three times the exercise price of the First Warrant for 20 consecutive trading days. These warrants were valued at $630,067 using the Black-Scholes method of valuation.

On February 23, 2015, the Company issued another 3-year warrant (the “Second“Second Warrant,,” and together with the First Warrant, the “VCR Warrants”“VCR Warrants”) to VCR as compensation for VCR’s services in managing and implementing investor relations strategies with the U.S. investment community and industry. The Second Warrant is exercisable for 244,283 of the Company’s fully-diluted common shares at an exercise price equal to the price per share of the Company’s common stock on the 10 days preceding February 23, 2015 or $2.50. The Second Warrant has a 3-year life, a cashless exercise provision and is fully transferable with the Company’s approval, which may not be unreasonably withheld. The Second Warrant is callable on 60 days’ notice if (i) the Company’s common stock trades on the NASDAQ and (ii) the Company’s common stock trades at three times the exercise price of the Second Warrant for 20 consecutive trading days./

The Company has not issued any warrants since February 23^rd 2015.

STOCK OPTIONS

To date, the following stock options were issued and outstanding to employees and members of the Board of Directors, which were not issued pursuant to a formal equity compensation plan:

Effective November 1, 2014, the Company issuedgranted options to purchase 5,000,000 shares at an exercise price of $1.00 per share. In February 2015,the Company’s common stock to each of its employees for a total of 4,800,000 options granted. Including the November 1, 2014 grant and all subsequent option grants, the Company issued additionalhas granted a total of 6,075,000 options to purchase 675,000 shares to newly hired employees and to two new independent members of the board of directors at an average weighted exercise price of $3.00 per share. In April 2015, the Company issued additional options to purchase 150,000 shares to three new members of the Board of Directors at an average weighted exercise price of $2.85 per share. In August 2015, the Company issued additional options to purchase 50,000 shares to one original member of the Board of Directors at an average weighted exercise price of $3.25 per share and revised a November 2014 option grant to one employee to grant additional options to purchase 200,000 shares dated as of the original grant date on November 1, 2014. The Board of Directors subsequently ratified the issuances of the November 2014, February 2015, April 2015 and August 2015 options during the quarter ended September 30, 2015. The exercise prices of all options issued with 2015 effective dates were determined based on the closing stock price quoted on the day priorranging from $1.00 to their issuance. The options vest over a three-year period from the date of issuance, one-third at each anniversary date.$3.25.

Effective June 26, 2015, Mr. Gary Herick, our formerthe Company’s current Chief Financial Officer, entered into a consulting agreement with the Company. That consulting agreement provided for the full and immediate vesting of any unvested stock options held by Mr. Herick as of the date of the agreement, which totaled options to purchase 750,000 shares of common stock at an exercise price of $1.00.$1.00 The Company recorded an option acceleration modification charge of $1,718,946$2,205,000 in the three months ended June 30, 2015. Mr. Herick has until November 1, 2024 to exercise his options.

As a result of all stock option activity to date, the Company has recorded aggregate stock-based compensation charges of $4,821,296 during$728,125 for the nine monthnine-month period ended September 30, 2015.

Stock-based compensation charges remaining to be amortized total $7,970,851 at September 30, 2015. These remaining stock-based compensation charges will be amortized to expense over2016 and $7,435,004 during the remaining vesting period through August 2018 in accordance with their vesting schedules.

The Company has had losses since its inception and therefore has not been subject to federal or state income taxes.year ended December 31, 2015. As of September 30, 2015,2016, 750,000 options were outstanding, all of which belonged to Mr. Herick and all had been fully expensed.

As of September 30, 2016 the Company has approximately $4,004,000 and $3,964,000$6,281,000 of federal and state net operating loss carryforwards, respectively. The federal net operating loss carryforwards begin to expire in 2030 and the state2030. State net operating loss carryforwards begin to expire in 2034. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carry forwards could be subject to annual limitations against taxable income in future periods, which could substantially limit the eventual utilization of such carry forwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carry forward is subject to any Internal Revenue Code Section 382 limitation. To the extent there is a limitation, there could be a substantial reduction in the deferred tax asset with an offsetting reduction in the valuation allowance. As of September 30, 2016, the Company has no unrecognized income tax benefits.

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.

Management

In April 2018, the Company issued 60,000 shares of its Series A Convertible Preferred Stock at $1.00 per share to its current management, all of whom are accredited investors. 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:

In July 2018, the Company commenced an offering of up to $2MM of convertible notes.  The notes carry an interest rate of 12% and are convertible into shares of the Company’s common stock at the lesser of $0.40 or 50% discount to the market price on the date of conversion.  The term of the notes is for one year and they must be converted upon closing a financing, acquisition or other form of business combination in an amount greater than $5 million. As of the date of this report the Company has evaluated subsequent events throughaccepted aggregate subscriptions of $640,000 in this Offering, none of which has been converted. The offering remains open as of the date of this Report.

On April 1, 2018, the Company changed its principal place of business to 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space is provided on a twelve-month term by a public company that employs Mr. Nicosia, one of the Company’s directors, as its CEO. Monthly rent is $1,000, however, as of the date of this filing the Company has not made any rent payments and note there have been no events that would require disclosure in this report.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YouThe 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 analysis of our financial condition and results of operations together with our Annual Report on Form 10-K for the year ended December 31, 2014 and the unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition toreport 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 this discussion contains forward-lookingand which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that involve risksare inherently subject to significant business, economic and uncertainties. We believe thatcompetitive uncertainties and contingencies, many of which are beyond our expectations are based on reasonable assumptions within the boundscontrol and many of our knowledge of ourwhich, with respect to future business and operations: However, there can be no assurance that actual results will not differ materially from our expectations. Such forward-looking statementsdecisions, are subject to riskschange. These uncertainties and uncertainties thatcontingencies can affect actual results and could cause actual results to differ materially from those anticipated. These risks and uncertainties include, but are not limited to,expressed in any forward looking statements made by, or on our ability to raise debt and/or equity to meet ongoing operating expenses, our ability to identify, negotiate, finance and consummate acquisitions of revenue-producing specialty pharmaceutical businesses in accordance with our strategic plans, as well as other risks set forth in this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in “Part II. Item 1A. Risk Factors.” You are urged to carefully consider these factors, as well as other information contained in this Annual Report onForm 10-K and in our other periodic reports and documents filed with the Securities and Exchange Commission (the “SEC”).

Given these risks and uncertainties, readers are cautioned not to put undue reliance onbehalf. We disclaim any forward-looking statements. Forward-looking statements contained in this quarterly report speak only as of the date of this quarterly report. We undertake no obligation to update any forward-looking statement as a result of new information, events, circumstances or other factors arising or coming to our attention after the date hereof.forward looking statements.

In this quarterly report, “CannaPharmaRx,” the “Company,” “we,” “us”

Overview and “our” refer to CannaPharmaRx, Inc. and its consolidated subsidiary.History

HISTORY

The Company was

We were originally incorporated as Golden Dragon Holding Co. in the State of DelawareColorado in December 2010 as a wholly-owned subsidiary ofAugust 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 y (the “Reorganization") which provided for the merger of two of our wholly owned subsidiaries. As a result of this reorganization our name was changes to “Golden Dragon Inc.”, which became the surviving publicly quoted parent holding company.

On May 9, 2014, the Companywe entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with CannaPharmaRX, Inc., a Colorado corporation (“Canna Colorado”), and David Cutler, thea former President, Chief Executive Officer, Chief Financial Officer and director of theour Company. Under the Share Purchase Agreement, Canna Colorado purchased 1,421,120 restricted shares of the Company’sour common stock from Mr. Cutler and an additional 9,000,000 restricted shares of the Company’s common stockshares directly from the Company. As a result of the Share Purchase Agreement, Canna Colorado was the Company’s largest stockholder.us.

On May 15, 2014, the Companyas amended and effective January 29, 2015, we entered into an Agreement and Plan of Merger (the “Plan of Merger”) pursuant to which Canna Colorado would becomebecame a subsidiary of theour Company. In October 2014, the Companywe changed itsour legal name to CannaPharmaRx,“CannaPharmaRx, Inc. During the fourth quarter of 2014, in light of the Cohen litigation described in “Part II. Item 1. Legal Proceedings,” the parties determined to delay the closing of the transaction contemplated by the original Plan of Merger. On March 30, 2015, the parties to the Cohen litigation entered into a full settlement and release of claims agreement. With the Cohen litigation matter settled, on April 21, 2015, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Canna Colorado and CPHR Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company (“Acquisition Sub”), pursuant to which Acquisition Sub would merge with and into Canna Colorado with Canna Colorado remaining as the surviving corporation and wholly-owned non-operating subsidiary of the Company and the outstanding shares of Canna Colorado would be converted into 9,750,000 shares of the Company (the “Merger”). The Merger Agreement amended and restated in its entirety the Plan of Merger from May 2014.

On June 29, 2015, the Company closed the Merger Agreement, with 100% of the Canna Colorado shareholders exchanging, at a 1:1 exchange ratio, a total of 9,750,000 Canna Colorado shares in return for a total of 9,750,000 shares of the Company’s common stock. As such, prior to the closing of the Merger, and as a condition to the closing of the Merger, the Company issued 9,750,000 restricted shares of the Company’s common stock to the Canna Colorado shareholders. Additionally, pursuant

Pursuant to the Merger, all of the shares of our common stock previously owned by Canna Colorado were cancelled. Canna Colorado is now the wholly-owned subsidiaryAs a result of the Company.

BUSINESS OF OUR COMPANY

We intend to become aaforesaid transactions we became an early-stage pharmaceutical company whose purpose iswas to advance cannabinoid discovery. Cannabinoids are a class of chemicals active in the endocannabinoid system. We intend to advance endocannabinoid science and research and developmentdiscovery using proprietary formulation and to work to bring novel prescription, personal care,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 remains as one of our officers and veterinary cannabinoid-based products to market indirectors.

As a result, we are now considered a “shell” company as defined under the U.S. and worldwide. We intend to focus our operations on endocannabinoid research; product development and packaging; distribution channel development and management; and information technology data and registry.Securities Exchange Act of 1934, as amended.

We intend to operate our operations in compliance with all applicable federal laws and regulations, including those enforced by the U.S. Drug Enforcement Administration, Department of Agriculture, Food and Drug Administration and Federal Trade Commission. We are NOT a marijuana industry-related marketing or service company attempting to operate outside of federal marijuana prohibitions.

Our management understands the wide rangeexecutive offices are located at Our principal place of efficacies that the cannabis plant possesses, andbusiness is applying the pharmaceutical research, manufacturing and the distribution system thatlocated at 2 Park Plaza, Suite 1200B, Irvine, CA, 92614, phone (949) 652-6838. Our website address is already in place to provide novel treatments to patients who can benefit from cannabinoid therapies.www.cannapharmarx.com.

We intend to serve the marketplace for drug products in the following therapeutic categories: schizophrenia and other psychotic disorders, oncology, infectious disease, pain management, multiple sclerosis, inflammatory disease, gastrointestinal disorders and ophthalmology.

It is also an aspect of our strategy to own and operate compounding and specialty pharmacies. We regularly engage in discussions to acquire such pharmacy companies and to finance acquisitions. To date,Because we have not completedgenerated any suchrevenues during our prior two years, following is our Plan of Operation.

PLAN OF OPERATION

As of the date of this Report we intend to engage in what we believe to be synergistic acquisitions and there can be no assurance that an agreement will be reached to acquire any such pharmacy,or joint ventures with a company or companies that we could obtain necessary acquisition financingbelieve will enhance our business plan. Ultimately, our intent is to become a national or internationally branded cannabis cultivation company, or otherwise engage in the cannabis industry. However, if an opportunity in another industry arises we will review that an acquisition will be completed.

We haveopportunity as well. One of the benefits to our being a limited operating history inreporting and publicly traded company, is to allow us to utilize our proposed business and have never generated operating revenue. We makesecurities as consideration for some, or all of the purchase price of these potential acquisitions. There are no representation, and can provide no assurance, that our Companyassurances we will be able to successfully operateconsummate any acquisitions using our securities as consideration, or at all.

There are numerous things that will need to occur in order to allow us to implement this aspect of our business plan and there are no assurances that any of these developments will occur, or if they do occur, that we intendwill be successful in fully implementing our plan.

Management will seek out and evaluate businesses for acquisition. The integrity and reputation of any potential acquisition candidate will first be thoroughly reviewed to ensure it meets with management’s standards. Once targeted as a potential acquisition candidate, we will enter into negotiations with the potential candidate and commence due diligence evaluation, including its financial statements, cash flow, debt, location and other material aspects of the candidate’s business. If we are successful in our attempts to acquire a company or companies utilizing our securities as part or all of the consideration to raisebe paid, our current shareholders will incur dilution.

In implementing a structure for a particular acquisition, we may become a party to a merger, consolidation, reorganization, joint venture, asset purchase, or licensing agreement with another corporation or entity. We may also acquire stock or assets of an existing business. Upon the consummation of a transaction, it is likely that our present management and shareholders will no longer be in control of our Company.

As part of our investigation, our officers and directors will meet personally with management and key personnel, may visit and inspect material facilities, obtain independent analysis of verification of certain information provided, check references of management and key personnel, and take other reasonable investigative measures, to the extent of our limited financial resources and management expertise. The manner in which we participate in an acquisition will depend on the nature of the opportunity, the respective needs and desires of us and other parties, the management of the acquisition candidate and our relative negotiation strength.

We will participate in an acquisition only after the negotiation and execution of appropriate written agreements. Although the terms of such agreements cannot be predicted, generally such agreements will require some specific representations and warranties by all of the parties thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by each of the parties prior to and after such closing, will outline the manner of bearing costs, including costs associated with our attorneys and accountants, will set forth remedies on default and will include miscellaneous other terms.

Depending upon the nature of the acquisition, including the financial condition of the acquisition company, as a reporting company under the Securities Exchange Act of 1934 (“34 Act “), it will be necessary for such acquisition candidate to provide independent audited financial statements. We will not acquire any entity which cannot provide independent audited financial statements within a reasonable period of time after closing of the proposed transaction. If such audited financial statements are not available at closing, or within time parameters necessary to insure our compliance with the requirements of the 34 Act, or if the audited financial statements provided do not conform to the representations made by the candidate to be acquired in the closing documents, the closing documents will provide that the proposed transaction will be voidable, at the discretion of our present management. If such transaction is voided, the agreement will also contain a provision providing for the acquisition entity to reimburse us for all costs associated with the proposed transaction.

As of the date of this Report we are engaged in discussions with various companies but there are no assurances that these discussions will result in any definitive agreement. There is no significant material acquisition that is probable to be consummated and there are no assurances that any such acquisition will occur in the future.

We believe there are certain perceived benefits to being a public company whose securities are publicly traded, including the following:

There are also certain perceived disadvantages to being a trading company including the following:

Business entities, if any, which may be interested in a combination with us may include the following:

A business combination with a private company will normally involve the transfer to the private company of the majority of our issued and outstanding common stock and the substitution by the private company of its own management and board of directors.

The proposed business activities described herein classify us as a “shell company. The Securities and Exchange Commission and certain states have enacted statutes, rules and regulations regarding the sales of securities of shell companies, as well as limitations on a shareholder’s ability to sell their “restricted” securities. Rule 144 is not available to a shareholder of a shell company unless and until the Company files a registration statement with the SEC that includes certain specific information about existing business operations of a registrant and thereafter must wait an additional one year to take advantage of that exemption from registration.

Rule 12b-2 of the 34 Act defines a shell company as a company that has:

(1) No or nominal operations; and

(2) Either:

(i) No or nominal assets;

(ii) Assets consisting solely of cash and cash equivalents; or

(iii) Assets consisting of any amount of cash and cash equivalents and nominal other assets.

We will continue to file all reports required of us under the Exchange Act until a business combination has occurred, or we organically build our business from cash raised from investors. A business combination will normally result in a change in control and management of our Company. Since a principal benefit of a business combination with us would normally be considered our status as a reporting company, it is anticipated that we will continue to conduct such operations.file reports under the Exchange Act following a business combination. No assurance can be given that this will occur or, if it does, for how long.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2015, the Company had total assets of $323,171 including $201,025 in cash, $31,887 in other prepaid expenses, and $90,259 in fixed and other long term assets. On September 30, 2015, the Company also had outstanding liabilities totaling $527,995.

As of September 30, 2015,2016, we had no cash or cash equivalents.

Net cash provided by financing activities was $19,758 during the Company had a stockholders’ deficitnine months ended September 30, 2016, compared to $0 in the comparable period in 2015. We have no revenue-producing operations or other source of $204,824 and a working capital deficitincome as of $285,083.the date of this Report, or during 2016 or 2015.

In March 2015, the Company began offering inwe commenced a private placement of shares of its unregistered restrictedour common stock to accredited investors at $1.50 per share (the “Private Placement”)share). Through September 30, 2015, the Companywe issued a totalan aggregate of 536,334 shares in exchange forand received $804,500 ofin gross proceeds.

The Company has

We have no revenue-producing operations or other source of income at this time.

In our financial statements for the fiscal years ended December 31, 2014 and 2013, the Reportsas of the Independent Registered Public Accounting Firm includedate of this Report, nor have we had any revenue during the past 3 years. See “Plan of Operation” above herein for an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realizationexplanation of assets and the settlement of liabilities and commitments in the normal course of business. To preserve liquidity, effective October 2015, we took certain steps to manage and reduce our operating costs and based on our current financial projections, we believe we have sufficient existing cash resources to fund current operations into November 2015. However, current revenue growth expectations are not sufficient to sustain operations.business activities.

It is our 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.us. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by us to successfully implement these plans would have a material adverse effect on our business, including the possible inability to continue operations.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2015 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2014

RevenueSubsequent Events – Recent Financings

During

Also in April 2018, we issued 60,000 shares of our Series A Convertible Preferred Stock at a price of $1.00 per share to our current management, all of whom are accredited investors. 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 three months ended September 30, 2015following:

In July 2018, we commenced a private offering of up to $2,000,000 of 12% Convertible Debentures. Each Convertible Debenture is convertible into shares of our common stock at the lesser of $0.40 or a 50% of the closing market price on the date a business combination valued at great than $5,000,000 is completed. See “Part I, Item 1, Business.” To date, we have received $640,000 in subscriptions under this offering. The Convertible Debenture is being offered in reliance upon Rule 506 of Regulation D. We intend to use the proceeds from this offering on working capital.

We must raise additional funds to support our expected operating plan and 2014our continued operations. We cannot provide any assurances that we did not recognize any revenues from our activities. We do not anticipate recognizing revenues in the near future. Though we are currently in discussions about acquiring a revenue-producing specialty pharmacy, no assurance can be provided that an agreement will be reachedable to acquireraise such funds or whether we would be able to raise such funds on terms that are favorable to us. We may seek to borrow monies from lenders at commercial rates, but such lenders will probably be at higher than bank rates, which higher rates could, depending on the amount borrowed, render the net operating income of any such pharmacy,of our planned profitable businesses insufficient to cover the interest burden.

Currently, we have no committed source for any funds as of the date hereof. No representation is made that we could obtain necessary acquisition financing or that an acquisitionany funds will be completed.

Researchavailable when needed. In the event funds cannot be raised if and Development Expenses

During the three months ended September 30, 2015,when needed, we incurred $750,304may not be able to carry out our business plan and could fail in total research and development (“R&D”) expenses, including $145,821 in cash-based expenses and $604,483 in stock-based compensation. These figures compare to $135,120 in total R&D expenses, all cash-based, incurred during the three month period ended September 30, 2014. R&D cash based expenses in both years consist mainly of salaries and fringe benefits, and consulting fees. The Company first issued stock options to the R&D staff and all others on November 1, 2014, with no stock-based compensation expense provision being necessary until the fourth quarter 2014.

Effective October 2015, the Company took certain measures to manage and reduce cash-based compensation expenses, which are expected to result in lower compensation expenses in the fourth quarter.

General and Administrative Expenses

For the three months ended September 30, 2015, we incurred $955,876 in general and administrative expenses (“G&A”), compared to $345,070 incurred in G&A expenses for the three-month period ended September 30, 2014, an increase of $610,806 period over period. This increase is largely attributable to $491,277 of non-cash, stock-based compensation expenses recognized in the third quarter 2015 on outstanding stock options held by employees and directors, first issued on November 1, 2014, and requiring no expense provision ($-0-) during the three month period ending September 30, 2014.

During the three months ended September 30, 2015, the Company’s G&A cash–based expenses totaled $464,599. Cash expenses primarily consist of $179,526 in salaries and fringe benefits for our employees, and $126,423 incurred for all outside professional fees, including legal fees of $67,032 and $59,391 incurred for other consultants, including accounting fees. The Company also incurred $21,543 in SEC filing fees, $12,622 in rent and utilities, and $44,440 in all promotional costs in ongoing efforts to raise capital and gain exposure for the Company. Effective October 2015, the Company took certain measures to manage and reduce cash-based compensation expenses, which are expected to result in lower compensation expenses in the fourth quarter.

During the three months ended September 30, 2014, the Company’s G&A expenses totaled $345,070, consisting primarily of salaries, wages or management fees paid to staff totaling $165,183, as well as promotional and marketing costs totaling $84,990. Third quarter 2014 G&A costs also include $71,695 of travel related expenses incurred primarily in raising capital and in gaining initial exposure for the Company. Professional fees totaling $16,852 during the three months ended September 30, 2014, including legal and accounting fees primarily to maintain our public reporting status and in connection with entering into the Share Purchase Agreement and the original Plan of Merger.

Operating Loss

For the three months ended September 30, 2015, we recognized an operating loss of $1,706,698, compared to an operating loss of $479,400 for the three months ended September 30, 2014, an increase of $1,227,298 primarily due to $1,095,760 of non-cash stock-based compensation charges on stock options which had not yet been granted as of September 30, 2014.

Interest and Other Income (Expenses) Net

For the three months ended September 30, 2015, we incurred net interest expense of $518business as a result of financing the Company’s annual insurance premiums. The Company earned $790 in interest income forthese uncertainties.

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 three monthsand nine month periods ended September 30, 2014. 2016.

Critical Accounting Estimates

The net differencediscussion and analysis of $1,308our financial condition and results of operations are based upon our financial statements, which have been prepared in net interest expense period-over-period largely reflects the interest earned on excess cash positionsaccordance with accounting principles generally accepted in the third quarterUnited States. The preparation of 2014, whilethese financial statements requires us to make estimates and judgments that affect the three months ended September 30, 2015 reflectsamounts 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 financingcircumstances, the results of which form the Company’s annual insurance premiums.

Loss before Income Taxes

Forbasis for making judgments about the three months ended, September 30, 2015,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 recognized a loss before income taxes of $1,706,698 compared to a loss before taxes of $479,400 forbelieve are the three months ended September 30, 2014, an increase of $1,227,298, duemost important to the factors discussed above.

Provision for Income Taxes

No provision for income taxes was recorded in either quarter ended September 30, 2015portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or 2014 due to our taxable losses in both periods.

Net Loss

For the three months ended September 30, 2015, we recognized a net loss of $1,706,698, compared to a net loss of $479,400 for the three months ended September 30, 2014, an increase of $1,227,298 due to the factors discussed above.

NINE MONTHS ENDED SEPTEMBER 30, 2015 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2014

Revenue

During the nine months ended September 30, 2015 and 2014 we did not recognize any revenues from our activities. We do not anticipate recognizing revenues in the near future. Though we are currently in discussions about acquiring a revenue-producing specialty pharmacy, no assurance can be provided that an agreement will be reached to acquire any such pharmacy, that we could obtain necessary acquisition financing or that an acquisition will be completed.

Research and Development Expenses

During the nine months ended September 30, 2015, we incurred $1,887,712 in total research and development (“R&D”) expenses, including $468,383 in cash-based expenses and $1,419,329 in stock-based compensation. These figures compare to $172,321 in total R&D expenses, all cash-based, incurred in the nine month period ended September 30, 2014. Non-cash R&D stock-based compensation expenses were $0 through September 30, 2014, as the first employee stock options were not granted or effective until November 1, 2014.

In the nine month year-to-date period ended September 30, 2015, cash-based R&D expenses of $468,383 cover a full nine months of active operations; whereas the $172,321 incurred on R&D cash-based expenses for the 2014 year-to-date period were largely accumulated over only four and half months of active operations between mid-May 2014 and September 30, 2014. Cash-based R&D expenses in both years consist mainly of salaries with associated fringe benefits and consulting fees. Effective October 2015, the Company took certain measures to manage and reduce compensation expenses, which are expected to result in lower compensation expenses in the fourth quarter.

General and Administrative Expenses

For the nine months ended September 30, 2015, we incurred $5,601,472 in total G&A expenses, compared to $482,136 incurred on G&A in the nine-month period ended September 30, 2014, an increase of $5,119,336 in the comparable year-over-year periods. This increase is primarily attributable to $3,751,967 of non-cash, stock-based compensation expenses recognized on outstanding stock options held by employees and directors, all of which were issued after September 30, 2014, thus requiring no expense provision until the fourth quarter of 2014. Additionally, 2015 cash-based G&A expenses of $1,849,505 cover a full nine months of active operations; whereas G&A cash-based expenses for the 2014 year-to-date period totaled just $482,936 but were largely accumulated over only four and half months of active operations between mid-May 2014 and September 30, 2014.

Stock-based compensation expenses incurred through September 30, 2015 total $3,751,967 and include $1,683,021 of normal amortization on outstanding stock options held by employees and directors, as well as $1,718,946 of amortization in connection with the acceleration of vesting of stock options held by the Company’s former chief financial officer. The remaining $350,000 of 2015 stock-based compensation expenses represent the value of 100,000 shares of the Company’s common stock issued to Benjamin & Jerold, as disclosed in the prior quarter.

Cash-based G&A expenses totaled $1,849,505 during the nine months ended September 30, 2015 primarily consisting of $586,338 in salaries and fringe benefits to our employees and $454,910 in legal, accounting and other professional fees, including fees related to certain legal proceedings resolved during 2015. Other noteworthy expenses included in the 2015 G&A expense total include $143,547 in legal and other fees related to a potential acquisition, $148,161 in insurance expenses, $71,074 in SEC filing expenses, $38,428 in rent and utilities, and $204,569 in promotional costs primarily incurred in ongoing efforts to raise capital and gain exposure for the Company. Effective October 2015, the Company took certain measures to manage and reduce compensation expenses, which are expected to result in lower compensation expenses in the fourth quarter.

Over the nine months ended September 30, 2014, the Company’s G&A expenses totaled $482,136 but were largely incurred during the four and a half month period between mid-May and September 30, 2014. These 2014 expenses consisted primarily of salaries, wages or management fees paid to staff totaling $232,683, as well as promotional and marketing costs totaling $98,333. Other noteworthy 2014 G&A expenses include $83,219 of travel related expenses incurred primarily in raising capital and in gaining initial exposure for the Company. Professional fees also totaled $58,950 during the nine months ended September 30, 2014, including all legal and accounting fees in connection with entering into the Share Purchase Agreement and to maintain our public reporting status.

Operating Loss

For the nine months ended September 30, 2015, we recognized an operating loss of $7,489,184, compared to an operating loss of $654,457 for the nine months ended June 30, 2014, an increase of $6,834,727 due to the factors discussed above.

Interest and Other Income (Expenses) Net

For the nine months ended September 30, 2015, we incurred net interest expense of $2,071complex judgments, often as a result of the financingneed to make estimates about the effects of the Company’s annual insurance premiums. The Company incurred $3,719 in net interest expense for the nine months ended September 30, 2014 on the Company’s obligation under a note payable to the former majority stockholder. The decrease of $1,648 in interest expense year over year reflects the termination in May 2014 of the Company’s obligation under the note payable to the former majority stockholder, offset by the added interest associated with financing the annual insurance premiums.

Loss before Income Taxes

For the nine months ended September 30, 2015, we recognized a loss before income taxes of $7,491,255, compared to loss before taxes of $658,176 for the nine months ended September 30, 2014, an increase of $6,833,079, due to the factors discussed above.

Provision for Income Taxes

No provision for income taxes was recorded in either nine-month periods ended September 30, 2015 or 2014 due to our taxable losses in both periods.

Net Loss

For the nine months ended September 30, 2015, we recognized a net loss of $7,491,255 compared to a net loss of $658,176 for the comparable nine month period ended September 30, 2014, an increase of $6,833,079, due to the factors discussed above.

CRITICAL ACCOUNTING POLICIES

Recent Accounting Pronouncements

See Note 1 to our unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” for more information.matters that are inherently uncertain.

As

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a “smallersmaller reporting company” as defined by Item 10 of Regulation S-K, the Company iscompany and are not required to provide the information required byunder this Item.item pursuant to Regulation S-K.

Evaluation of ITEM 4. CONTROLS AND PROCEDURES.