CONSOLIDATEDUNAUDITED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)CONSOLIDATED CASH FLOWS

(Unaudited)

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

CANNAPHARMARX, INC.

CANNAPHARMARX, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)STOCKHOLDERS EQUITY(DEFICIT)

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

CANNAPHARMARX, INC.

CANNAPHARMARX, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)For the Three and Six Month, Interim Periods Ended June 30, 2019 and 2018

NATURE OF OPERATIONS

BUSINESSNature of Operations

CannaPharmaRx, Inc. (together with its consolidated subsidiaries, the “Company”(the “Company”) is a Delaware corporation whose sharescorporation. As of the date of this Report, the Company intends to become a national or internationally branded cannabis cultivation company, or otherwise engage in the cannabis industry. The Company owns the following cannabis cultivation operations, all of which are publicly quotedlocated in Canada and which were acquired by the Company on the OTCQB. dates indicated;

The Company began trading under its new stock ticker symbol “CPMD” effective asfacility is a 48,750 square foot marijuana grow facility built on a 6.7-acre parcel 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 aspectland located in Hanover, Ontario Canada.  To date, exterior construction of the Company’s strategybuilding has been completed, however, no interior construction has begun. Upon full completion, the facility will contain up to own and operate compounding and specialty pharmacies. The Company regularly engages in discussions20 separate growing rooms which we believe will provide an annual production capacity of 9,500 kilos of marijuana (20,900 lbs.). Completion of the build-out of the facility is expected to acquire such pharmacies andtake an estimated 20 weeks. Together with the remaining equipment needed to finance such acquisitions, but to date,complete the grow the Company has notestimates that it will require approximately CAD$20.0 million in additional financing which it will seek to raise via equity and debt. There can be no assurances that the Company will successfully raise the financing required to complete construction of the facility and begin cultivation;

GN owns a 60,000 square foot cannabis cultivation and grow facility located on 38 acres in Stevensville, Ontario, Canada. Once completed, any such acquisition.GN estimates annual total production capacity from the Stevensville facility of up to 12,500 kilograms of cannabis. On July 5, 2019, Great Northern’s subsidiary, “9869247 Canada Limited”, received a license to cultivate from the Canadian Ministry of Health. GN believes it will begin cultivation activities and generate its initial harvest during the fourth quarter of 2019. and

HISTORY

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 litigationaforesaid transactions, the Company became an early-stage pharmaceutical company whose purpose was to advance cannabinoid research and discovery using proprietary formulation and drug delivery technology then under development.

In April 2016, the Company ceased operations. Its then management resigned their respective positions with the Company, with the exception of Mr. Gary Herick, who remained as the Company’s sole officer and director. As a result, the Company has thereafter been considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended.

As a result of the completion of the acquisition of AMS described above and in Note 6, (Litigation and Accrued Settlement Liabilities),below, the parties determined to delayCompany believes that it no longer fits the closingdefinition of a shell company, as defined in Rule 405 of the transaction contemplated by the original Plan of Merger. On March 30, 2015, the parties to the Cohen litigation entered into a full settlementSecurities Act 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 subsidiaryRule 12b-2 of the Company (“Acquisition Sub”), pursuant to which Acquisition Sub would merge with and into Canna Colorado with Canna Colorado remaining asExchange Act. It filed 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,required disclosure pursuant to the Merger, allaforesaid Rule with the SEC in February 2019 and believes that it will no longer be considered a shell company on February 13, 2020.

Management’s Representation of the shares of the Company previously owned by Canna Colorado were cancelled. Canna Colorado is now the wholly-owned subsidiary of the Company.Interim Financial Statements

BASIS OF PRESENTATION

The accompanying unaudited interimconsolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include the accountsall of the Companyadjustments, which in the opinion of management are necessary to a fair presentation of financial position and its wholly-owned subsidiary Canna Coloradoresults of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2018, and 2017, as presented in the Company’s Form 10-K filed on April 3, 2019, with the SEC.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States. Certain amounts in prior periods have been reclassified to conform to the current presentation.

Operating results for the three and nine month period ended September 30, 2015

All figures are not necessarily indicativein U.S. dollars unless indicated otherwise.

Use 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 principlesUS GAAP requires management to make estimates and assumptions that affect the reported amounts reported in these consolidatedof liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and accompanying notes.the reported assets and expenses during the reporting period. The most significant estimates relate to investments, purchase price allocation of acquired assets, impairment of long-lived assets, intangibles and goodwill. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from thosethese estimates. Due

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to uncertainties inherent inbe cash equivalents. At June 30, 2019, and December 31, 2018, the estimation process, it is possible that these estimates could be materially revised within the next year.

CASH AND CASH EQUIVALENTS

CashCompany’s cash and cash equivalents consisttotaled $131,850 and $464,118, respectively.

Comprehensive Gain or Loss

ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of June 30, 2019, and December 31, 2018, the Company determined that it had items that represented components of comprehensive income and, therefore, has included a statement of comprehensive income in the financial statements.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible and highly liquidother promissory notes are reviewed to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results.

Beneficial Conversion Features

In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with original maturitiesthe convertible security, the proceeds are allocated among the different components. The portion of lessthe proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security.

Foreign Currency Translation

The functional currency and the reporting currency of the Company’s US operations is United States dollars, (“USD”). The functional currency of the Company’s Canadian operations is Canadian dollars (“CAD”), Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses.

Transactions denominated in currencies other than three months.the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

PROPERTY AND EQUIPMENT

Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity. 

Harmonized Sales Tax

The Harmonized Sales Tax (“HST”) is a combination of the Canadian Goods and Services Tax (“GST”) and Provincial Sales Tax (“PST”) that is applied to taxable goods and services. By fusing sales tax at the federal level with sales tax at the provincial level, the participating provinces harmonized both taxes into a single federal-provincial sales tax. HST is a consumption tax paid by the consumer at the point of sale (POS). The vendor or seller collects the tax proceeds from consumers by adding the HST rate to the cost of goods and services. They then remit the total collected tax to the government at the end of the year.

The HST is in effect in five of the ten Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. The HST is collected by the Canada Revenue Agency (CRA), which remits the appropriate amounts to the participating provinces. The HST may differ across these five provinces, as each province will set its own PST rates within the HST. In provinces and territories which have not enacted the HST, the CRA collects only the 5% goods and services tax. The current rate in Ontario is 13%.

Capital Assets- Construction In Progress

As of June 30, 2019, and December 31, 2018, the Company had $1,666,875 and $1,563,260 in construction in progress, respectively, comprised entirely of the construction in progress relating to the building acquired with the acquisition of AMS.

Depreciation expenses total $-0- and $-0- for the periods ended June 30, 2019, and December 31, 2018, respectively.

Stock Purchase Warrants

The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity.

Stock-Based Compensation

The Company has acquired $102,800adopted 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 propertyASC Topic 718, the cost of stock options and equipment,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 which $100,721stock warrants was purchased duringdetermined at the year ended December 31, 2014,date of grant using the Black-Scholes option-pricing model. The Black-Scholes option model requires management to make various estimates and another $2,078 purchased inassumptions, including expected term, expected volatility, risk-free rate, and dividend yield. Stock options and warrants outstanding shares of common stock are excluded from the first quartercalculations of 2015. Of this amount, $50,000diluted net loss per share since their effect is anti-dilutive.

Goodwill and Intangible Assets

Goodwill represents the capitalized costfuture economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of our proprietary RECRUIT RegistryTM website development. This patient registry project was largely completed inthe potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of a marijuana license with a useful life of 15 years. 

Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of 2014, although iteach year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is not currently operational,a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the project launch is not certain at this time. Accordingly, no depreciation expense has been recorded againstrisk-free interest rate, the capitalized costrate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the RECRUIT Registryreporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to date.

measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In additionthis step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the investmentexcess.

Determining the fair value of a reporting unit is judgmental in our patient registry, another $52,800 has been invested in officenature and computer equipment, primarily incurred sincerequires the November 2014 establishmentuse of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the Company’s new headquarters in Carneys Point, New Jersey. Accumulated depreciationgoodwill impairment testing will prove to date totals $12,540 against these fixed assets. Depreciation expenses total $3,192 and $-0- for the quarters ended September 30, 2015 and September 30, 2014, respectively, and were $9,520 and $-0- respectively in the nine month periods ended September 30, 2015 and 2014.

Depreciation expenses have been calculated using the straight line method over the estimated useful livesbe accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests.

The Company performed its annual fair value assessment on December 31, 2018, on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets ranging from three to seven years.

DEFERRED COSTS AND OTHER OFFERING COSTS

All costswhenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with respect to raising capital inother assets at the two private placementslowest level for which identifiable cash flows are largely independent of the Company’s common stock were expensed bycash flows of other groups of assets and liabilities. If 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 assum of either September 30, 2015 or December 31, 2014.

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 futureprojected undiscounted cash flows associated withis less than the asset will be comparedcarrying value of the assets, the assets are written down to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value will be required. estimated fair value.

The Company had no intangibleevaluated the recoverability of its long-lived assets at Septemberon June 30, 2015 or2019, and at December 31, 2014.2018, respectively on its subsidiaries with material amounts on their respective balance sheets and determined that no impairment exists. 

FAIR VALUES OF ASSETS AND LIABILITIES

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, 2015 and December 31, 2014, 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 the application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the periods ended SeptemberJune 30, 2015, nor2019, or December 31, 2014.2018.

FINANCIAL INSTRUMENTS

Financial Instruments

The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involvedinvolve 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

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

AdvertisingCost Method Investment

Our cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating 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 $81,218financial activities. The investment is tested for the three- and nine-month periods ended September 30, 2014.impairment quarterly.

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

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, 2015 to purchase 4,675,000 shares of common stock are excluded from the calculations of diluted net loss per share since their effect is antidilutive.

Business Segments

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 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 costs during the period.

Stock-based compensation expenses totaled $1,095,760 and $-0- for the three months ended September 30, 2015 and September 30, 2014, respectively. On a 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 monthssix-month period ended SeptemberJune 30, 20152019, and the year ended December 31, 2018, comprised a single segment.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On June 10, 2014,Recently Issued Accounting Pronouncements

In February 2016, the FASB issued update ASU 2014-10,Development Stage Entities(Topic 915)No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Among other things, the amendments in this update removed the definition of development stageASU 2016-02 requires an entity to recognize assets and liabilities arising from Topic 915, thereby removing the distinction between development stage entitiesa lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other reporting entities from U.S. GAAP. In addition,financial statement users better understand the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statementsamount, timing, and uncertainty 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 entityarising from leases. ASU 2016-02 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 periodsfiscal years beginning after December 15, 2015. However, entities are permitted2018, with early adoption permitted. As an emerging growth company, the Company has until December 15, 2019, to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued.ASC 842. The Company has elected to early adopt these amendments, and accordingly, has not labeledis currently evaluating the financial statements as those of a development stage entity and has not presented inception-to-date informationimpact on the respectiveits consolidated financial statements.

The Company

Management has reviewed all other 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.

The

As of June 30, 2019, and December 31, 2018, the Company had $131,850 and $464,118 in cash on hand of $201,025 as of September 30, 2015, butrespectively, and no revenue-producing business or other sources of income. Additionally, as of SeptemberJune 30, 20152019, the Company had outstanding liabilities totaling $527,995$9,282,469 and stockholders’ deficit of $204,824. The Company had a working capital deficit of $285,083 at September 30, 2015.$131,850 in short term liquid assets.

In ourthe Company’s financial statements for the fiscal years ended December 31, 20142018, and 2013,2017, 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.

The following table sets forth the components of Septemberthe Company’s prepaid expenses at June 30, 2015, the Company had $232,912 in current assets (comprised of $201,025 in cash on deposit in a bank2019, and $31,887 in prepaid expenses) and $90,259 in furniture and fixtures, net of $12,540 in accumulated depreciation.December 31, 2018:

As

On February 25, 2019, the Company acquired 3,712,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of September 30, 2015,common stock at a price of CAD$1.00 of GN Ventures, Ltd, Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of the Company’s Common Stock from a former shareholder of GN. These shares and warrants, when exercised, will represent 18% and 11%, respectively, of the issued and outstanding stock of GN. On the date of the purchase, the Company’s Common Stock was trading at $1.41 which values the purchase at $11,264,438. For balance sheet purposes the Company has treated this purchase using the cost method because the purchase consists of accounts payablean investment in a private company in which the Company does not have the ability to exercise significant influence over GN’s operating and accrued expenses was $337,995, which is primarily comprised of trade payables and accrued salaries and wages and legal fees.financial activities.

Additionally, the current portion of accrued legal settlements payable in cash over the next 12 months total $180,000 as of SeptemberCompany conducted an impairment test at June 30, 2015, as discussed in Note 6 (Litigation2019, and Accrued Settlement Liabilities).determined that no impairment existed.

OPERATING LEASE

As of June 30, 2019 and December 31, 2018, the Company had $1,666,875 and $1,563,260 respectively, in construction in progress. The facility acquired as part of the AMS acquisition is a 48,750 square foot marijuana grow facility built on a 6.7-acre parcel of land located in Hanover, Ontario, Canada. To date, exterior construction of the building has been completed, however, no interior construction has begun.  Upon full completion, the facility will contain up to 20 separate growing rooms which the Company believes will provide an annual production capacity of 9,500 kilos of marijuana (20,900 lbs.).

The Company does not have any other property or equipment.

For construction in-progress assets, no depreciation is recorded until the asset is placed in service. When construction is completed, the asset should be reclassified as building, building improvements, or land improvement and should be capitalized and depreciated. Construction in progress includes all costs related to the construction of a medical cannabis facility. Cost also includes soft costs such as loan fees and interest and consulting fees and related expenses. The facility is not available for use and therefore not being amortized.

Description of acquisition

On November 19, 2018, the Company entered into a Securities Purchase Agreement with AMS, wherein effective December 31, 2018, the Company acquired all of the issued and outstanding securities of AMS.

Fair Value of Consideration Transferred and Recording of Assets Acquired

The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed including an amount for goodwill:

As of June 30, 2019 and December 31, 2018, the Company had $6,065,014 in goodwill and $1,885,413 in intangible assets, compared to $6,065,014 and $1,871,000 respectively. The goodwill and intangible assets arose as a result of the acquisition of AMS. Based on a valuation study performed on the acquisition, the Company determined that the marijuana license in process at AMS had a value of $1,871,000 which will be amortized over a fifteen-year period or approximately $124,733 per year.

The Company has recorded amortization expense of $63,787 and $-0- respectively, for the periods ended June 30, 2019, and December 31, 2018.

Accounts payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability.

The following table sets forth the components of the Company’s accrued liabilities at June 30, 2019, and December 31, 2018.

The following table sets forth the components of the Company’s related party liabilities at June 30, 2019, and December 31, 2018.

Accrued expense related parties of $473,771 is comprised of bonuses and fees to current and former directors and officers of the Company. As of December 31, 2018, there was $150,000 due to claims received from two former directors, which was purported to be accrued salaries arising out of services provided in 2015 and 2016. Management is in the process of reviewing these claims.

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 to the Company on a non-cancellable operating lease for its headquarters located in Carneys Point, New Jersey. Thetwelve-month term by a company to which Mr. Nicosia, one of the Company’s directors, serves as Chief Executive Officer. Monthly rent is $1,000, however, as of the date of this report, the Company has not made any rent payments and continues to accrue those amounts as accounts payable.

Effective on March 2019, the Company changed its principal place of business to Suite 206 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which the Company has rented pursuant to an oral sublease from PLC International Investments Inc, a company owned and controlled by Dominic Colvin, the Company’s current CEO, President and a director. This location consists of approximately 500 sq. feet. The Company paid a monthly rent of $1,500 (CAD).

Effective March 22, 2019, the Company entered into a lease extends until Aprilagreement to lease three offices at 888 3 St SW, Calgary, Alberta, Canada, T2P 5C5. The lease may be terminated by either party on 30 2016. The remaining lease commitment totals $26,419days’ notice. Rent is $4,000 CAD per month. This space was provided by a company to which, Mr. Orman, one of the Company’s directors, serves as a Director

On May 17, 2019, a Director of Septemberthe Company provided an interest-free short term loan to the Company which is included in accounts payable and loan payable related party of $163,293 for the period ended June 30, 2015.2019.

On October

As of June 30, 2014, Gary M. Cohen2019, and December 31, 2018, the balance of convertible notes was $-0- and $2,072,000, respectively.

In July 2018, the Company commenced an offering of up to $2 million of one-year maturity convertible notes (“Cohen”Notes”), former President, Chief Operating Officer and. The maximum amount under the Offering was subsequently increased to $2,500,000 These Notes carried both a board member of Canna Colorado, filed a lawsuit against Canna Coloradovoluntary conversion feature and an individual officerautomatic conversion feature. The Notes carried an interest rate of 12% and board member, Gary Herick. 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 memberare convertible into shares of the Company’s boardCommon Stock.

Through the period ended December 31, 2018, the Company had received $2,072,000 in proceeds from the sale of directorsconvertible notes to 35 accredited investors. No proceeds were received from convertible notes during the three and six month periods ended June 30, 2019.

Automatic conversion feature

If the Company issues equity securities (“Equity Securities”) in a transaction or series of related transactions resulting in aggregate gross proceeds to the Company of 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 outleast $5,000,000, including conversion of the removalNotes and any other indebtedness, or issuance of Cohen as an officerEquity Securities in connection with any business combination, including a merger or acquisition (a “Qualified Financing”), then the Notes, 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—any accrued but unpaid interest thereon, will automatically convert into the equity securities issued pursuant to the U.S. District CourtQualified Financing at a conversion price equal to the lesser of (i) 50% of the per-share price paid by the purchasers of such equity securities in Tampa, Florida.the Qualified Financing or (ii) $0.40 per share.

On November 11, 2014,

Voluntary conversion feature

If these Notes have not been previously converted pursuant to a Qualified Financing, then, upon Holders election prior to the Maturity Date or effective upon the Maturity Date, the Holder may elect to convert their Notes into shares of the Company’s Common Stock at a conversion price equal to the lesser of (i) 50% of the market price for the Company’s Common Stock as of the Maturity Date or (ii) $0.40 per share.

During the three month period ended March 31, 2019, the Company underentered into a Qualified Financing with its former name Golden Dragon Holding Co., sued Cohenminority purchase of GN stock and warrants described in U.S. District Court in New Jersey for libel and tortious interference.Note 4 “Investment”. As a result on March 31, 2019, the convertible notes amounting to $2,072,000 along with $130,212 of accrued interest were converted, pursuant to the automatic conversion terms described above, to equity at a price of $0.40 per share, or a total of 5,505,530 shares.

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 SettlementSecurities Purchase Agreement the lawsuit filed in Florida on October 30, 2014 againstwith AMS 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 decisionissued a non-interest bearing CAD $10,000,000 ($7,330,000 USD) promissory note secured only by the court onshares acquired in AMS. Principal payments under the meritsPromissory Note are due quarterly commencing upon AMS receiving a license to cultivate and are computed based upon 50% of any claims. AMS' cash flow, defined as EBITDA less all capital expenditures, taxes incurred, non-recurring items and other non-cash items for the relevant fiscal quarter, including the servicing of all senior debt payment obligations of the company. The Promissory Note matures the earlier of two years from the date AMS receives a license to cultivate or December 31, 2021, whichever is later.

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. Asperformed a valuation study as part of the parties’ resolution, Cohen retracted his allegations.AMS acquisition. The valuation study determined that the Promissory Note should be valued at $6,632,917 since it was non-interest bearing. As a result, the Company recorded a note discount of $697,083. The note discount will be amortized to interest expense over the three-year term of the Promissory Note. During the six months ended June 30, 2019, the Company has recorded $118,827 in interest expense related to the amortization of the note discount. No interest expense was recorded in 2018 since the acquisition occurred on December 31, 2018.

The following tables set forth the components of the Company’s secured note as of June 30, 2019, and December 31, 2018:

As partof June 30, 2019, the Company has approximately $9,846,000 of federal net operating loss carryforwards. The federal net operating loss carryforwards begin to expire in 2030. State net operating loss carryforwards begin to expire in 2034. Due to the change in ownership provisions of the SettlementInternal Revenue Code, the availability of the Company’s net operating loss carryforwards could be subject to annual limitations against taxable income in future periods which could substantially limit the eventual utilization of such carryforwards. 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 carryforward 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 June 30, 2019, 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.

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 company to which Mr. Nicosia, one of the Company’s directors, serves as Chief Executive Officer. Monthly rent is $1,000, however, as of the date of this filing, the Company has not made any rent payments and continues to accrue those amounts as accounts payable.

In March 2019, the Company temporarily moved its principal place of business to Suite 206 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which the Company rented pursuant to an oral sublease from PLC International Investments Inc, a company owned and controlled by Dominic Colvin, the Company’s current CEO, President and a director. This location consisted of approximately 500 sq. feet. The Company paid a monthly rent of $1,500 (CAD).

Effective March 22, 2019, the Company entered into a lease agreement to lease three offices at 888 3 St SW, Calgary, Alberta, Canada, T2P 5C5. The lease may be terminated by either party on 30 days’ notice. Rent is $4,000 CAD per month. This space was provided by a company to which, Mr. Orman, one of the Company’s directors, serves as a Director.

Effective June 11, 2019, the Company entered into a Securities Purchase Agreement with Sunniva, Inc, a British Columbia, Canada corporation (“Sunniva”) wherein the Company agreed to purchaseacquire all of Mr. Cohen’s 2,250,000 sharesthe issued and outstanding securities of Canna Colorado for aSunniva’s wholly-owned subsidiaries Sunniva Medical Inc. (“SMI”) and 1167025 B.C. LTD (“1167025”). The purchase price is CAD$20,000,000 of $350,000, with $85,000which CAD$1,000,000 was payable up fronton or before June 21, 2019, and CAD$19,000,000 payable at closing. The CAD $1,000,000 was not made on June 21, 2019; however, the remainder payablePurchase Agreement was still in equal installments of $15,000 per month over the next 17 months, and a payment of $10,000effect (and not 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 $190,000default) as of SeptemberJune 30, 2015 to be paid in cash in the future.2019.

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 7.14.

STOCKHOLDERS’ EQUITY

PREFERRED STOCK

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 aPreferred Stock, par value of $0.0001 all of which is nonvoting.per share. The Board of Directors may, without stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights, voting rights, and any other preferences. No

Series A Preferred Stock

In April 2018, the Company issued 60,000 shares of preferred stockits Series A Convertible Preferred Stock at a price of $1.00 per share to certain investors who then became members of management and the board of directors. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of Common Stock and vote on an as-converted basis. The rights and designations of these Preferred Shares include the following:

The beneficial conversion (“BCF”) feature attributed to the purchase of Preferred Stock was deemed to have no value on the date of purchase for the following reasons:

Therefore, therefore the BCF related to the Preferred Shares was considered to have no value on the date of issuance.

There were 60,000 shares of Series A Preferred Stock issued orand outstanding as of SeptemberJune 30, 2015.2019, and December 31, 2018, respectively.

COMMON STOCK

Series B Preferred Stock / Common Stock

In February 2019, the Company commenced an offering of up to $3 million in principal amount of Units at a price of $1.00 per Unit, each Unit consisting of one share of Series “B” Convertible Preferred Stock, each Convertible Preferred Share convertible into one share of the Company’s Common Stock at the election of the holder and one Common Stock Purchase Warrant exercisable to purchase one share of Common Stock at an exercise price of $2.00 per share, which offering is to be offered only to “accredited investors,” as that term is defined in Rule 501 of Regulation D. As of June 30, 2019, the Company had accepted $288,000 in subscriptions in this offering.

There were 288,000 and -0- shares of Series B Convertible Preferred Stock issued and outstanding as of June 30, 2019, and December 31, 2018, respectively.

The Company is authorized to issue 100,000,000300,000,000 shares of common stock,Common Stock, par value $0.0001 per share. As of SeptemberJune 30, 2015, 17,959,6212019, and December 31, 2018, 32,436,999 and 18,942,506 shares of Common Stock were issued and outstanding, respectively.

In January 2019, the Company closed a private offering of 12% Convertible Debentures where it accepted subscriptions in the aggregate amount of $2,072,000 from 35 accredited investors, as that term is defined in Rule 501 of Regulation D. Each Convertible Debenture is convertible into shares of common stock were issued and outstanding.

RECENT ISSUANCES OF COMMON STOCK

Inat the lesser of $0.40 or 50% of the closing market price on the date a business combination valued at greater than $5,000,000 is completed., The Company used the proceeds from this offering for the purchase of AMS, as well as working capital, including costs associated with the preparation of over three years of reports that had not been filed with the SEC. During the three month period ended March 2015,31, 2019, the Company began offeringentered into a Qualified Financing with its minority purchase of GN stock and warrants described in Note 4 “Investment”. As a private placementresult on March 31, 2019, the convertible notes amounting to $2,072,000 along with $130,212 of sharesaccrued interest were converted, pursuant to the automatic conversion terms described above, to equity at a price of its unregistered restricted common stock to accredited investors at $1.50$0.40 per share, (the “Private Placement”). Through September 30, 2015 the Company issuedor a total of 536,334 shares in exchange5,505,530 shares.

Shares Reserved for $804,500Issuance

As of gross proceeds.

On June 25, 2015,30, 2019, the Company issued 100,000had 77,176,000 Common Shares reserved for issuance. These shares are comprised of 75,000,000 Common Shares issuable upon the conversion of the Series A Preferred Stock; 288,000 Common Shares issuable upon the conversion of Series B Preferred Stock; 750,000 Common Shares upon the exercise of stock options, and 1,138,000 Common Shares issuable upon the exercise of warrants. None of these shares were used in the calculation of earnings per share because their inclusion would be anti-dilutive since the Company is operating at a loss.

Stock Options

During the period ended June 30, 2019, and December 31, 2018, the Company did not record any stock-based compensation expense related to stock options. As of June 30, 2019, there were options outstanding to purchase 750,000 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.

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.

On February 23, 2015, the Company issued another 3-year warrant (the “Second Warrant,” and together with the First Warrant, the “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./

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: