U.S. UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2018ended March 31, 2019

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to ___________________.

Commission file number: 0-27246File Number: 033-33263

CHINA GRAND RESORTS, INC.Jacksam Corporation

(NameExact name of Small Business Issuerregistrant as specified in its charter)

20 West Park Avenue, Suite 207, Long Beach, NY 11561

Address of registrant’s principal executive offices

(516) 442-1883

Issuer’sRegistrant’s telephone number,

_____________________________

(Former name, former address and former

fiscal year, if changed since last report) including area code: (800) 605-3580

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ¨Yes xNoo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x Yes   ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). xo Yes    ¨x No

At AugustAs of May 15, 2018 there were 33,272,3112019, the registrant had 60,851,972 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

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Item 1. Financial Statements.Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or this Report, contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Plan of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties.

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Jacksam Corporation

(FKA China Grand Resorts, Inc.)

Consolidated Balance Sheets

		As of				As of
		June 30, 2018 (Unaudited)				September 30, 2017 (Audited)
CURRENT ASSETS
Cash		$	-			$	-
Prepaid Expenses			-				5,000
TOTAL CURRENT ASSETS			-				5,000
TOTAL OTHER ASSETS			-				-
TOTAL ASSETS		$	-			$	5,000
LIABILITIES
CURRENT LIABILTIES
Accounts Payable			44,012				21,187
Accrued Interest on Loans from Related Parties			-				353,944
Loan from Related Parties			-				1,219,814
TOTAL CURRENT LIABILTIES			44,012				1,594,945
TOTAL LIABILITIES			44,012				1,594,945
COMMITMENTS AND CONTIGENCIES			-				-
STOCKHOLDER'S EQUITY
Common stock ($0.001 par value; 100,000,000 shares authorized; 33,272,311 shares issued and outstanding at June 30, 2018 and September 30, 2017)		$	33,272			$	33,272
Additional Paid in Capital			11,728,510				10,114,796
Accumulated Deficit			(11,805,794	)			(11,738,013	)
TOTAL STOCKHOLDER'S EQUITY (DEFICIT)			(44,012	)			(1,589,945	)
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY/(DEFICIT)		$	-			$	5,000

		(Unaudited)				(Audited)
		March 31,				December 31,
		2019				2018
Assets
Current Assets:
Cash		$	543,724			$	1,074,105
Accounts receivable, net			38,039				25,485
Inventory, net			589,620				764,095
Prepaid expenses			138,065				37,500
Total Current Assets			1,309,448				1,901,185
Property and equipment, net			14,080				14,346
Right of-use asset - operating lease			35,767				-
Other Assets			1,200				-
Total Assets		$	1,360,495			$	1,915,531
Liabilities and Stockholders Deficit
Current Liabilities:
Accounts payable and accrued expenses		$	407,127			$	537,601
Deferred revenue			1,096,572				906,964
Convertible notes payable, current portion			15,000				3,218,500
Notes payable			62,288				70,912
Right of use liability - operating lease			41,159				-
Accrued liabilities - other			1,642,118				1,642,118
Total Current Liabilities			3,264,264				6,376,095
Total Liabilities			3,264,264				6,376,095
Commitment
Stockholders' Deficit:
Preferred stock - 10,000,000 authorized, $0.001 par value, 0 shares issued and outstanding			-				-
Common stock - 90,000,000 authorized, $0.001 par value, 60,851,972 and 48,272,311 shares issued and outstanding, respectively			60,852				48,272
Additional paid-in capital			3,226,526				10,661
Accumulated deficit			(5,191,147	)			(4,519,497	)
Total Stockholders' Deficit			(1,903,769	)			(4,460,564	)
Total Liabilities, and Stockholders' Deficit		$	1,360,495			$	1,915,531

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

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Jacksam Corporation

(FKA China Grand Resorts, Inc.)

Consolidated Statements of Operations

(Unaudited)For the three months ended March 31, 2019 and 2018 

(unaudited)

		For the three months ending June 30,								For the nine months ending June 30,
		2018				2017				2018				2017
Sales		$	-			$	-			$	-			$	-
Total Revenue		$	-			$	-			$	-			$	-
EXPENSES:
Selling, General and Administrative			1,500				1,715				4,000				-
Professional Fees			726				-				39,434				2,800
Total Expense			2,226				1,715				43,434				2,800
Loss from operations		$	(2,226	)		$	(1,715	)		$	(43,434	)		$	(2,800	)
OTHER INCOME/(EXPENSES):
Interest Expense			-				(12,174	)			(24,348	)			(36,522	)
Total Other Net Income/(Expense)		$	-			$	(12,174	)		$	(24,348	)		$	(36,522	)
Loss Before Income tax		$	(2,226	)		$	(13,889	)		$	(67,782	)		$	(39,322	)
Provision for Income Taxes			-				-				-				-
Net Income/(Loss)		$	(2,226	)		$	(13,889	)		$	(67,782	)		$	(39,322	)
Weighted average common shares outstanding, basic and fully diluted			33,272,311				33,272,311				33,272,311				33,272,311
Basic and fully diluted net loss per common share:
Net Income/(Loss)		$	(0.000	)		$	(0.000	)		$	(0.002	)		$	(0.001	)

		March 31, 2019				March 31, 2018
Sales		$	1,624,254			$	1,310,856
Cost of Sales			1,130,620				734,005
Gross Profit			493,634				576,851
Operating Expenses
Salaries and wages (including contractors)			544,918				310,803
Other selling, general and administrative expenses			590,584				368,353
Total operating expenses			1,135,502				679,156
Loss from operations			(641,868	)			(102,305	)
Other Expense
Other expense			(2,548	)			(2,958	)
Interest expense			(24,827	)			(34,143	)
Total Other Expense			(27,375	)			(37,101	)
Net Loss		$	(669,243	)		$	(139,406	)
Net Loss Per Share
Basic and Diluted		$	(0.01	)		$	(0.00	)
Weighted average shares outstanding
Basic and Diluted			52,381,005				41,828,952

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

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Jacksam Corporation

(FKA China Grand Resorts, Inc.)

Consolidated Statements of Cash FlowsStockholders' Deficit 

(Unaudited)For the three months ended March 31, 2019 and 2018 

(unaudited)

		For the nine months ended June 30,
		2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(67,782	)		$	(39,322	)
Adjustments to reconcile net (loss) to net cash provided by (used in) operations:
Changes in Assets and Liabilities:
(Increase) decrease in Prepaid Expense			5,000				(5,000	)
Increase (decrease) Interest Expense for Loans from Related Parties			24,348				36,522
Increase (decrease) in Accounts Payable and Other Accruals			22,827				-
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			(15,607	)			(7,800	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			-				-
FINANCING ACTIVITIES
Capital Contributions			15,607				7,800
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			15,607				7,800
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS			-				-
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD			-				-
END OF THE PERIOD		$	-			$	-
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest		$	-			$	-
Taxes		$	-			$	-
Write-off of Related Party Loan and Accrued Interest		$	-			$	-

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

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NOTE A—BUSINESS ACTIVITYJacksam Corporation

(FKA China Grand Resorts, Inc.)

Consolidated Statements of Cash Flows 

For the three months ended March 31, 2019 and 2018 

(unaudited) 

		2019				2018
Cash Flows from Operating Activities
Net loss		$	(669,243	)		$	(139,406	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			266				265
Imputed interest			22,945				25,332
Net change in:
Accounts receivable			(12,554	)			-
Inventory			174,475				(108,833	)
Prepaid expenses			(100,565	)			(25,000	)
Other assets			1,785				-
Accounts payable and accrued expenses			(130,474	)			(533	)
Deferred revenue			189,608				(144,061	)
Net Cash used in operating activities			(523,757	)			(392,236	)
Cash Flows from Investing Activities
Purchase of property and equipment			-				-
Net Cash used in investing activities			-				-
Cash Flows from Financing Activities
Proceeds from convertible notes payable			-				1,575,000
Payments on notes payable			(8,624	)			(20,000	)
Proceeds from exercise of common stock warrants			2,000				-
Net cash provided by (used in) financing activities			(6,624	)			1,555,000
Net Change in Cash and Cash Equivalents			(530,381	)			1,162,764
Cash and Cash Equivalents, Beginning of Period			1,074,105				1,146,374
Cash and Cash Equivalents, End of Period		$	543,724			$	2,309,138
Cash Paid For:
Income Taxes		$	-			$	-
Interest		$	-			$	-
Non-cash transactions:
Common stock issued to settle convertible notes payable		$	3,203,500			$	100,000
Capitalization of right of use asset for operating lease		$	44,138			$	-
Common stock issued in exchange for marketable securities		$	-			$	200,004

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

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Jacksam Corporation (FKA China Grand Resorts, Inc.)

Notes to the Financial Statements

(unaudited)

Note 1: Organization and Nature of Operations

Jacksam Corporation (the “Company” or “Jacksam”) was organized under the laws of the State of Nevada on September 21, 1989 under the name Fulton Ventures, Inc. Effective onFrom  November 16, 2009, through November 5, 2018, the name was changed to China Grand Resorts Inc.  AfterThe Company went dormant following its filing of Form 10Q for the period ended September 30, 2014 10Q filing,2018, and remained dormant through September 14, 2018. 

Effective September 14, 2018, the managementCompany’s wholly-owned subsidiary merged with and into Jacksam Corporation, a Delaware corporation incorporated in August 2013 (the “Merger”).  Effective November 5, 2018, the Company merged with its operating subsidiary in a short form merger and changed its name to “Jacksam Corporation.”

As a result of the Merger, we acquired and have since been operating the pre-merger business of Jacksam.

In accordance with “reverse merger” or “reverse acquisition” accounting treatment, the Company’s historical financial statements as of period ends, and for periods ended, prior to the Merger will be replaced with the historical financial statements of Jacksam, prior to the Merger, in all future filings with the SEC.

Jacksam is a technology company focused on developing and commercializing products utilizing a proprietary technology platform. The Company abandonedservices the medical and recreational cannabis, hemp and CBD segments of the larger e-cigarette and vaporizer markets with oil vaporizer focused products. The Company has two principal product lines consisting of vape cartridges, batteries, and other consumables, coupled with filling and capping machines. Customers are primarily businesses operating in jurisdictions that have some form of cannabis legalization. These businesses include medical and recreational dispensaries, large and small scale processors and growers, and distributors. The Company expects continued growth as they take measures to invest in their own molds and intellectual property. The Company operates and sells products from the website www.Convectium.com.

Note 2: Significant Accounting Policies

Basis of Preparation

The interim unaudited consolidated financial statements as of March 31, 2019, and for the three months ended March 31, 2019 and 2018, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. They do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes filed with the SEC for the year ended December 31, 2018.

Inventory

Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) method or net realizable value. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand.

The March 31, 2019 and December 31, 2018 inventory consisted entirely of finished goods, $589,620 and $764,095, respectively. The Company will maintain an allowance based on specific inventory items that have shown no activity over a 24-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of March 31, 2019, and December 31, 2018, the Company has determined that no allowance is required.

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Revenue Recognition

The Company derives revenues from the sale of machines and product income.  Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services.

Revenue is recognized based on the following five step model:

-          Identification of the contract with a customer

-          Identification of the performance obligations in the contract

-          Determination of the transaction price

-          Allocation of the transaction price to the performance obligations in the contract

-          Recognition of revenue when, or as, the Company satisfies a performance obligation

Performance Obligations

Sales of machines and consumable products are recognized when all the following criteria are satisfied: (i) a contract with an end user exists which has commercial substance; (ii) it is probable the Company will collect the amount charged to the end user; and (iii) the Company has completed its performance obligation whereby the end user has obtained control of the product. A contract with commercial substance exists once the Company receives and accepts a purchase order or once it enters into a contract with an end user. If collectability is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of products typically transfers when title and risk of ownership of the product has transferred to the customer. The customer has a 10 day period to inspect the equipment and may return the product if it does not meet the agreed-upon specifications. For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. Historically the Company’s contracts have not had multiple performance obligations. The large majority of the Company’s performance obligations are recognized at a point in time related to the sale of machines and consumable products.

Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. Payment terms between invoicing and when payment is due is less than one year. As of March 31, 2019, none of the Company’s contracts contained a significant financing component.

The Company elected the practical expedient to not adjust the amount of revenue to be recognized under a contract with an end user for the effects of time value of money when the timing difference between receipt of payment and recognition of revenue is less than one year.

The majority of the Company’s contracts offer an assurance-type warranty of the products at no additional cost for a period of 3 years. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation. At the time a sale is recognized, the Company estimated future warranty costs, which were trivial.

Transaction Price Allocated to the Remaining Performance Obligations

At a given point in time, the Company may have collected payment for future sales of product to begin production. These transactions are deferred until the product transfers to the customer and the subsidiaries were taken back byperformance obligation is considered complete. At March 31, 2019, $1,096,572 in revenue is expected to be recognized in the PRC national companiesfuture related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The Company expects to recognize all of our unsatisfied (or partially unsatisfied) performance obligations as revenue in China who owned them. The remaining parent company, China Grand Resorts, Inc. becamethe next twelve months.

Contract Costs

Costs incurred to obtain a dormant company until 2016 when a new shareholder acquired stockcustomer contract are not material to become the majority shareholder and owner of the Company. The Company’s fiscalCompany elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year end is September 30^th.or less, which are expensed and included within cost of goods and services.

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NOTE B—GOING CONCERNCritical Accounting Estimates

Estimates are used to determine the amount of variable consideration in contracts, the standalone selling price among separate performance obligations and the measure of progress for contracts where revenue is recognized over time. The Company reviews and updates these estimates regularly.

Disaggregation of Revenue

All machine sales and most consumable products sales are completed in North America.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Potential common stock equivalents are determined using the treasury stock method. For diluted net loss per share purposes, the Company excludes stock options and other stock-based awards, including shares issued as a result of option exercises but which are subject to repurchase by the Company, whose effect would be anti-dilutive from the calculation. During the years ended December 31, 2018 and 2017, common stock equivalents were excluded from the calculation of diluted net loss per common share, as their effect was anti-dilutive due to the net loss incurred. Therefore, basic and diluted net loss per share was the same in all periods presented.

The accompanyingCompany had 3,075,000 and 15,654,660 potentially dilutive securities that have been excluded from the computation of diluted weighted-average shares outstanding as of March 31, 2019 and December 31, 2018, as they would be anti-dilutive.

Going Concern

The Company’s financial statements have beenare prepared onusing accounting principles generally accepted in the United States of America applicable to a going concern, basis, which assumescontemplates the Company will realize itsrealization of assets and discharge itsliquidation of liabilities in the normal course of business. As reflected in the accompanying financial statements,However, the Company has negative working capital, recurring losses, and does not have a deficit accumulatedsource of $11,805,794 and cash used in operations of $15,607 at June 30, 2018.revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability of the Company to continue as a going concern is dependent upon its ability to generate futuresuccessfully execute the business plan and attain profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern.operations. The accompanying financial statements do not include any adjustments that might arise because of this uncertainty.may be necessary if the Company is unable to continue as a going concern.

To address these aforementioned, management has undertakenIn the following initiatives: 1) enter into discussions to secure additional equity funding from current or new shareholders; 2) undertake a program to continue to monitorcoming year, the Company’s ongoing working capitalforeseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and minimum expenditure commitments; 3) continue their focus on maintaining an appropriate level of corporate overhead in linemaking the requisite filings with the Company’s availableSecurities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash resources.shortfall and be required to raise additional capital.

NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BasisHistorically, it has mostly relied upon convertible notes payable and cash flows from operations to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future private offerings of Presentation- The financial statements included herein were prepared under Generally Accepted Accounting Principles (GAAP).

All adjustments have been made which in the opinion of management are necessary for presentation.

Interim filings should be read in conjunction with the Company’s annual report as of September 30, 2017.

Cashstock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and Cash Equivalents- For purposes of the Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.

Management’s Use of Estimates- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The financial statements above reflect all of the costs of doing business.

Revenue Recognition- The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue whenadverse effect upon it is realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all the following criteria are met:

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NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONT’D

Emerging Growth Company Critical Accounting Policy Disclosure: We qualify as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. (See ASU 2014-09)

Comprehensive Income (Loss)- The Company reports Comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the financial statements.

Net Income per Common Share- Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding as of June 30, 2018 and 2017.

Deferred Taxes- The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

Fair Value of Financial Instruments- The carrying amounts reported in the balance sheet for cash, accounts receivable and payable approximate fair value based on the short-term maturity of these instruments.

Accounts Receivable- Accounts deemed uncollectible are written off in the year they become uncollectible. As of June 30, 2018 and September 30, 2017, the balance in Accounts Receivable was $0 and $0, respectively.

Impairment of Long-Lived Assets- The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during the periods ended June 30, 2018 and 2017.

Stock-Based Compensation- The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.shareholders.

 

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NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONT’D

Fair Value for Financial Assets and Financial Liabilities- The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

The carrying amounts of the Company’s financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity of these instruments. The Company’s note payable approximates the fair value of such instrument based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at June 30, 2018 and 2017.

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at June 30, 2018, nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the periods ended June 30, 2018 and 2017.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases, amending the existing accounting standards for lease accounting, including requiring lessees (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity is required to recognize most leasesright-of-use assets and lease liabilities on theirits balance sheetssheet and making targeted changesdisclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to lessor accounting.disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, The Company adopted this standard on January 1, 2019 using the modified retrospective method. The new standard requiresprovides a modified retrospective transition approach for all leases existing at, or entered into after, the datenumber of initial application, with an option to use certain transition relief. The guidance will be effectiveoptional practical expedients in the first quarter of 2019 and allows for early adoption.transition. The Company is assessing whetherelected the ‘package of practical expedients’, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of the new standard’s available transition practical expedients.

On adoption, the Company recognized a right of use asset of $44,138, operating lease liabilities of $46,545 with a cumulative effect adjustment to accumulated deficit of $2,407, based on the present value of the remaining minimum rental payments under current leasing standards for its existing operating lease.

The new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will have a material effectnot recognize ROU assets or lease liabilities.

Note 3: Property and equipment

Property and equipment consisted of the following:

Depreciation expense amounted to $265 and $265 for the three months ended March 31, 2019 and 2018, respectively.

Note 4: Accounts payable and accrued expenses

Accounts payable and accrued expenses consist of the following:

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Note 5: Notes Payable

A summary of Notes Payable are as follows:

As of March 31, 2019 and December 31, 2018, accrued interest on its financial position or results of operations.these loan outstanding balances for $1,566 and $1,049, respectively. 

Note 6: Convertible Notes Payable

In August 2016,December 2017, the FASBCompany issued ASU 2016-15, Statementnon-interest bearing convertible debentures to 36 investors in exchange for $1,643,500 (the “2017 Notes”). The 2017 Notes have a three-year term and are convertible into the Company’s common stock at a per share price of Cash Flows (Topic 230), Classification of Certain Cash Receipts$0.20 at any time subsequent to the issuance date. On the maturity date, if not previously converted, the 2017 Notes are subject to a mandatory conversion to the Company’s common stock. In January 2018, the Company issued non-interest bearing convertible notes with the same terms as the 2017 Notes in exchange for an additional $75,000. The Company determined that the 2017 Notes qualified as conventional convertible instruments. The Company evaluated the conversion feature and Cash Payments (a consensus of the Emerging Issues Task Force),determined that clarifies how certain cash receipts and cash payments should be classifiedno beneficial conversion feature existed on the statementissuance dates.  During the quarter ended March 31, 2019 the Company issued 8,517,500 shares of cash flows. This ASU addresses eight specific cash flow issues withcommon stock to convert $1,703,500 of these notes payable.  As of March 31, 2019, the objectiveremaining outstanding balance of reducing the existing diversity in practice. The guidancethese notes is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company does not expect there to be a material impact from adopting this new guidance.$15,000.

In January 2017,March 2018, the FASBCompany issued ASU 2017-01, Clarifyingnon-interest bearing convertible notes to two investors in exchange for $1,500,000 (the “2018 Notes”). The 2018 Notes have a one-year term and are convertible into the DefinitionCompany’s common stock at a per share price of $0.73 at any time subsequent to the issuance date. Upon either the maturity date or a Business,successful financing involving the Company’s common stock or a financial instrument convertible into common stock at a valuation of $45,000,000 or more, the 2018 Notes are subject to mandatory conversion to the Company’s common stock, if not previously converted. The Company determined that the 2018 Notes qualified as conventional convertible instruments.  Further the Company evaluated the conversion feature and determined that there was no beneficial conversion feature or derivative liabilities.  During the quarter ended March 31, 2019 the Company issued 2,062,161 shares of common stock to convert these notes in full.

Note 7: Equity

Common Stock

As of March 31, 2019, the authorized capital stock of the Company consists of 100,000,000 shares, of which revises90,000,000 shares are designated as common stock and 10,000,000 shares of preferred stock.

For the definition ofthree months ended March 31, 2019:

During the three months ended March 31, 2019, the Company had convertible debentures with a business0% stated interest rate outstanding. As a result, imputed interest was calculated based on a 4% rate and assistsrecorded to equity in the evaluationamount of when a set of transferred assets and activities is a business. ASU 2017-01 is effective for interim and annual reporting periods beginning after December 15, 2017 and should be applied prospectively. Early adoption is permitted under certain circumstances. The Company does not expect the adoption of this guidance will have a material impact on its financial statements.$22,945.

 

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NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONT’DDuring the three months ended March 31, 2019, the Company issued 10,579,661 shares of common stock related to the conversion of $3,203,500 of Convertible Notes Payable.

During the three months ended March 31, 2019, the Company received $2,000 related to the exercise of 2,000,000 stock warrants.

Stock Warrants

A summary of stock warrant information is as follows:

The weighted average remaining contractual life is approximately 1.9 years for stock warrants outstanding with a total intrinsic value of $4,947,000 on March 31, 2019. All of the above warrants were fully vested.

Note 8: Commitments

Employment Agreements

In JanuaryDecember 2017, the FASB issued ASU 2017-04, Intangibles - GoodwillCompany entered into employment agreement with each of Daniel Davis and Other: Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates step twoMark Adams. As of the goodwill impairment testEffective Date, and specifies that goodwill impairment shouldfor one year of the date therefrom, the Executive’s annual salary shall be measuredequal to $180,000 and $120,000, respectively, per annum (the “Annual Salary”). The Annual Salary shall be paid to the Executive in equal installments in accordance with the Company’s usual payroll practices.

Executive’s Annual Salary shall increase automatically at the rate of five percent (5%) per year for four years, beginning on the anniversary date of the Effective Date. In addition to the automatic raises set forth above, the Annual Salary may also be increased from time to time by comparingmerit and general increases in amounts determined by the fair valueBoard.

Performance Bonus. In addition to the Annual Salary, the Executive is eligible to earn an annual bonus of a reporting unit with its carrying amount. Additionally, theup to thirty percent (30%) of Executive’s Annual Salary (the “Performance Bonus”). The amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019; early adoption is permitted. We currently anticipate that the adoption of ASU 2017-04 will not have a material impact on our financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment awarded require an entity to apply modification accounting. ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The amendments in ASU 2017-09 are to be applied prospectively to an award modified on or after the adoption date; consequently, the impactPerformance Bonus will be dependent on whether we modify any share-based payment awards anddetermined in good faith by the nature of such modifications. The adoption of this standard is not expected to have a material impact on our financial statements.

NOTE D—SEGMENT REPORTING

The Company followsBoard, based upon the guidance set forth by section 280-10 of the FASB Accounting Standards Codification for reporting and disclosure on operating segments of the Company. It also requires segment disclosures about products and services, geographic areas, and major customers. The Company determined that it did not have any separately reportable operating segments as of June 30, 2018 and 2017.following factors:

NOTE E—WRITE-OFF OF RELATED PARTY TRANSACTIONS AND ACCRUED INTEREST OCCURRING PRIOR TO THE COMPANY ABANDONMENT

Related Party Transactions and Accrued Interest prior to the Company being Abandoned consist of the following:

	(a)	From June 2009 through December 2009,Fifty percent (50%) of the Company received loans from Redrock Capital Venture Limited (“Redrock”) for working capital purpose. The loans are unsecured, due on demand,Performance Bonus shall be based upon the achievement of the Executive’s individual objectives, as defined in writing and without formal writing loan agreements. The loans amountedpresented to $100,281 as of December 31, 2009 and remainedExecutive annually by the same amount prior to the write-off.Board.
	(b)	Commencing in October 2009,Fifty percent (50%) of the Performance Bonus shall be based upon the achievement of Company began receiving loans from time to time from Beijing Hua Hei Hengye Investment Limited (“Hua Hui”), our largest shareholder atobjectives – which shall include specifically, meeting or exceeding the time, for working capital purposes. As of June 30, 2018, the amount due to Hua Hui is $1,119,533 which is due on demandrevenue targets and bears interest at the prevailing rate chargedother objectives as determined by the PRC Central Bank. The interest accrued prior to the write-off amounted to approximately $378,292 and the interest rate of the loans was 4.35%. The agreements for the aforementioned loans are not formal agreements and current Management has obtained the interest rates from the prior filings.Board.

The initial set of performance objectives, both for Executive individually and for the Company, will be reasonably established by the Board within sixty (60) days of the Effective Date of this Agreement. Subsequent performance objectives, both for Executive individually and for the Company, will be reasonably established by the Board within sixty (60) days of the beginning of the calendar year to which the Performance Bonus relates. The Performance Bonus shall be paid to Executive in the first regular payroll period after the Board makes a good faith determination that such Performance Bonus has been earned, but in no event shall the Performance Bonus be paid later than March 1 of the calendar year immediately following the calendar year in which the bonus was earned.

 

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NOTE E—WRITE-OFF OF PAYABLES, RELATED PARTY TRANSACTIONS AND ACCRUED INTEREST OCCURRING PRIOR TO THE COMPANY ABANDONMENT – CONT’DExecutive. In addition to salary, the agreement provided for the option of 1,000,000 common shares of the Company, which shall vest at a rate of 28,000 share for each full one-month period worked from the effective date. If this Agreement is terminated pursuant to written notice by company to executive on or before the date that is one year after the Effective Date, all the options shall vest and the Executive shall retain the options subject to their terms and the terms hereof. The options may contain terms providing the issuer the right to accelerate vesting and/or require the exercise of options prior to the initial public offering and listing of the issuer. The Company may arrange for the grant of additional options to the Executive from time to time based on the Executive’s performance and other relevant factors as the Board may determine in its discretion.

All options to purchase Holdings Shares granted to the Executive shall be subject to the terms of the stock option agreement pursuant to which they are granted and the terms of the stock option plan under which they are granted in effect from time to time. Shares issuable on exercise of the options shall be subject to any escrow, trading restriction, or other requirement imposed by any stock exchange or securities regulatory authority upon initial public offering or listing of the shares. The Executive shall take such steps and execute and deliver such documents as may be required to effect the foregoing.

The Company has determinedmay terminate Executive’s employment for Cause immediately upon Notice from the Company to write offExecutive. For purposes of this Agreement, “Cause” shall mean the loans madeoccurrence of any of the following: (i) Executive’s conviction of or plea of nolo contendere to any felony crime involving fraud, dishonesty, or moral turpitude; (ii) Executive’s commission of, or participation in, a fraud against the Company. In the event Executive’s employment is terminated for Cause, the Company shall have no further obligations to Executive other than to pay all compensation and expense reimbursements owing for services rendered and reasonable business expenses incurred by Executive prior to the effective date of such termination.

Upon termination of this Agreement pursuant, the Company by Hua Hui and Redrock (together, the “Related Party Loans”) on the basis that the statute of limitations with respectshall provide to the Related Party Loans has expired and the lenders are barred from pursuing a claim against the Company for repayment of the amount loaned. Under the Nevada Revised Statutes, an action upon a contract, obligation or liability not founded upon an instrument in writing may only be commenced within four years of the date that the action accrues. Since all credit comprising the Related Party Loans was extended to the Company prior to June 30, 2014, as disclosed in the periodic reports filed by the Company with the SEC (“Periodic Reports”), the four-year period in which to bring a claim for payment of such debt expired as of June 30, 2018.

In support of this position, management of the Company has determined that:Executive:

	·(a)	the last date on which cash was made availableA lump sum payment equal to the Company undergreater of (i) twelve (12) months’ Annual Salary at the Related Party Loans occurred prior to June 30, 2014, more than four years prior toExecutive’s then- current rate, or (ii) Executive’s Annual Salary for the closeremainder of the period covered by the current financial statements, and beyond the statute of limitations under Nevada law;Term;
	·(b)	there are no written agreements or instruments evidencingif applicable, to the Related Party Loansextent permitted by the Company’s group insurance carrier and no such agreements or instruments have been filed as exhibits to anyapplicable law, continued group insurance benefits coverage, together with reimbursement of the Periodic Reports;individual life insurance premium for the period of time equal to the number of months in respect of which payment is due pursuant and
	·(c)	sinceany other amounts (including but not limited to any earned Performance Bonus during Executive’s active employment that may be payable pursuant to this Agreement) accrued and earned by Executive prior to the effective date current management assumed control of the Company in April 2016, the Company has not received any written or oral demand for payment of the Related Party Loans.termination.

Therefore, commencingIf a Change of Control occurs and the Executive is not offered continued employment on a comparable basis after the Change of Control, the Executive shall be entitled to receive, within thirty (30) days after the Change of Control, a sum equivalent to twelve (12) months’ Annual Salary, plus an additional 4% of Annual Salary in lieu of benefits, and any Performance Bonus that has been earned by Executive prior to the effective date of the Executive’s termination from the Company. Thereafter, the Company shall have no further obligations to the Executive under this Agreement other than payment of any other amounts accrued as owing to the Executive under this Agreement as of the period ended June 30, 2018,date the Company has written off the Related Party Loans and removed the sumChange of $1,598,106 from the balance sheet in the Company’s financial statements for the period then ended and will not report the amounts due under the Related Party Loans as outstanding liabilities in any future period. The amounts were written off against additional paid in capital—per ASC Section 470-50-40. ASC Section 470-50-40 (Debt Modification and Extinguishments), considers Related Party Transactions to be capital transactions and the extinguishment of the debt is in effect a capital transaction and it is not a gain or loss recognition event and should be excluded from the determination of net income.Control occurs.

NOTE F—EQUITYLeases

The Company has a single operating lease for an office lease in Rancho Santa Margarita, California with an initial term of 37 months. Base monthly rent is authorizedapproximately $3,200 per month plus net operating expenses. A deposit equal to issue 100,000,000 Common Sharesone-month rent was paid and the commencement of the lease. The lease can be extended for a two-year period at $.001 par value per share.

In April 2016, 30,000,000 sharesthe then fair market value. The lease contains variable lease payments for non-rental occupancy expenses. These non-lease components were issuednot included in the determination of the right of use asset and lease liability as part of the transition to new owner, Bryan Glass at par.

Total issued and outstanding shares as of June 30, 2018 were 33,272,311.

To date,ASC 842 due to the majority shareholder, Bryan Glass contributed $31,363 for expenses and fees to reinstatepractical expedients elected by the Company. This money is booked as a capital contribution.

NOTE G—INCOME TAX

The Company provides for income taxes under (now included under Accounting Standards Codification (ASC), 740), Accounting for Income Taxes. ASC 740 requiresutilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company used an estimated incremental borrowing rate of 10% to estimate the present value of the right of use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse.liability.

 

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NOTE G—INCOME TAX-CONT’D

ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all the deferred tax assets will not be realized. For Federal income tax purposes, the Company has net operating loss carry forwards that expire through 2030. The net operating loss carryforward as of June 30, 2018 is approximately $11,805,000 and as of June 30, 2017 is $11,700,000 approximately. The total deferred tax asset is approximately $2,361,000 and $2,340,000 for the periods June 30, 2018 and June 30, 2017, respectively.

No tax benefit has been reported in the financial statements because after evaluating our own potential tax uncertainties, the Company has determined that there are no material uncertain tax positions that have a greater than 50% likelihood of reversal if the Company were to be audited.

The Company is not obligatedhas right-of-use assets of $35,767 and operating lease liabilities of $41,159 as of March 31, 2019.  Operating lease expense for the three months ended March 31, 2019 was $9,463. The company had cash used in operating activities related to pay state income taxes because it isleases of $6,479 during the three months ended March 31, 2019. The lease has a Nevada corporation.remaining term of 1 year.

NOTE I—MATERIAL EVENTSThe following table provides the maturities of lease liabilities at March 31, 2019:

Minimum lease payments under the Company’s operating lease under ASC 840 as of December 31, 2018 for 2019 and 2020 were $48,968 and $20,600, respectively

The Company also maintains short-term rental agreements for certain storage facilities. Total rent expense for these rentals was $5,948 for the three months ended March 31, 2019. Total rent expense for the three months ended March 31, 2018 was $15,789.

AmendedNote 9: Accrued Liabilities – Other

Prior to the Merger, China Grand Resorts, Inc., recorded various liabilities that were incurred by former related parties. The current management team is not aware of any written agreements in place governing the terms of the loans nor have they been in contact with the debt holders however recognizes that China Grand Resorts, Inc. previously reported these amounts as liabilities of the Company. In accordance with ASC 405-20-40 the liabilities may only be removed from the Company’s financial statements if they are paid, formally settled or judicially released. Management believes the relevant statute of limitations has passed and Restated Bylawsthat no enforceable legal claim exists in relation to these liabilities of $1,642,118 but does not believe that is sufficient to remove the liability from the financial statements. Management does not intend to remove these liabilities, $1,642,118, from the Company’s financial statements until such time that the liability is formally settled or judicially released in accordance with ASC 405-20-40. Due to the lack of written agreements and other factors noted above management concluded to no longer accrue interest on these loans.

Note 10: Subsequent Events

Subsequent to quarter-end, on April 24, 2019, the Company terminated Daniel Davis as an Officer, Director and employee.

On October 24, 2017,April 3, 2019, 2,000,000 shares were issued, for the board of directors of the Company adopted Amended and Restated Bylaws to replace the prior bylaws in their entirety. The Amended and Restated Bylaws are intended to reflect the existing status of Nevada corporate law as of the date of their adoption and replace outdated provisions includedwarrants exercised in the Company’s original bylaws.quarter, see note 7.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations

Statements, other thanThe following management’s discussion and analysis should be read in conjunction with the historical facts,financial statements and the related notes thereto contained in this Quarterly Report on Form 10-Q, includingReport. The management’s discussion and analysis contains forward-looking statements, such as statements of potential acquisitionsour plans, objectives, expectations and our strategies, plansintentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and objectives, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), and Section 21Eor similar expressions, identify certain of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although we believe that our forward looking statements are based on reasonable assumptions, we caution that suchthese forward-looking statements. These forward-looking statements are subject to a wide range of risks trends and uncertainties, including those under “Risk Factors” in this Report that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are important factors that could cause actual results to differ materially from the forward looking statements, including, but not limited to; the time management devotes to identifying a target business; management’s ability to consummate a business combination; the financial condition of the target company with which we may enter a business combination; the effect of existing and future laws; governmental regulations; the political and economic climate of the United States; and conditions in the capital markets. We undertake no duty to update or revise these forward-looking statements.

When used in this Form 10-Q, the words, “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar expressions are intendedevents to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by the forward-looking statements. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements foras a numberresult of important reasons.several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report.

General BackgroundEffective September 14, 2018, the Company’s wholly-owned subsidiary merged with and into Jacksam Corporation, a Delaware corporation incorporated in August 2013 (the “Merger”).  Effective November 5, 2018, the Company merged with its operating subsidiary in a short form merger and changed its name to “Jacksam Corporation.”

Prior to the Merger, we were a dormant company without any active operations. As a result of the Registrant

China Grand Resorts, Inc. (“we,” “us,” “our” or the “Company”) was incorporated in the State of Nevada on September 21, 1989 under the name Fulton Ventures, Inc. On September 19, 2002, we changed our name to Asia Premium Television Group, Inc. to more accurately reflect our business at the time. Effective November 16, 2009, we changed our name to China Grand Resorts, Inc. to more accurately reflect its new business efforts. Commencing in 2002,Merger, we acquired and sold a serieshave since been operating the pre-merger business of subsidiary entities that were incorporated in various foreign jurisdictions, includingJacksam. 

As the People’s Republicresult of China, or PRC, Macau, Hong Kongthe Merger and the British Virgin Islands. Through 2009, these subsidiaries engagedchange in a variety of businesses, including, principally, marketing, brand management, advertising, media planning, public relationsbusiness and direct marketing services to clients in the PRC.

The Company discontinued filing periodic reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after it filed a quarterly report on Form 10-Q for the period ended June 30, 2014 (the “June 2014 10-Q”) on August 14, 2014. As reported in the Company’s annual report on Form 10-K for the year ended September 20, 2013 (the last periodic report filed under the Exchange Act with which the Company furnished audited financial statements) and the June 2014 10-Q, the Company was engaged, through its subsidiaries, in the provision of mobile phone based services in the PRC through Sun New Media Transaction Services Ltd., a Hong Kong corporation, and real estate investment in the PRC through Key Proper Holdings Limited, a British Virgin Islands corporation.

Since the filing of the June 2014 10-Q, current management is not aware of any contact between the Company and incumbent management as of the filing of the June 2014 10-Q, which we refer to as “former management,” nor does current management have any knowledge or information relating to the business operations conducted by the Company or its subsidiaries as of that date, other than as reported in the periodic reports it filed with the SEC. Current management does not have in its possession any records of the Company, prior to its taking operational controla discussion of the past financial results of the Company in April 2016, other than documents filed with or furnishedis not pertinent, and under applicable accounting principles the historical financial results of Jacksam, the accounting acquirer, prior to the SEC.

On April 4, 2016, Bryan Glass was appointed to serve asMerger are considered the custodian of the Company pursuant to an order of the District Court of Clark County Nevada and was authorized to take any action on behalf of the Company for the benefit of the Company and otherwise to reinstate the Company’s corporate existence in Nevada and convene a shareholders’ meeting to elect directorshistorical financial results of the Company.

On April 5, 2016,The following discussion highlights Jacksam’s results of operations and the Company entered into a consulting agreement with Mr. Glass under which he agreed to take allprincipal factors that have affected our financial condition as well as our liquidity and capital resources for the steps reasonably necessary, beyond reinstatementperiods described, and provides information that management believes is relevant for an assessment and understanding of the corporationstatements of financial condition and results of operations presented herein. The following discussion and analysis are based on Jacksam’s audited and unaudited financial statements contained in Nevadathis Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and holding a shareholders meeting, to create an operating entity, in consideration for which servicesanalysis together with such financial statements and the Company issued to Mr. Glass 30 million sharesrelated notes thereto.

Basis of common stock.Presentation

The Company heldunaudited consolidated condensed financial statements of Jacksam for three months ended March 31, 2019 and 2018 contained herein include a shareholders meeting on May 4, 2016 at which Mr. Glass was elected assummary of our significant accounting policies and should be read in conjunction with the sole directordiscussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such unaudited interim periods have been included in these unaudited financial statements. All such adjustments are of a normal recurring nature.

Components of Statements of Operations

Revenue

Product revenue consists of sales of consumer vaporizers and of the Company710 Shark filling machine, 710 Shark Captain capping machine, Cove, Riptide and other cartridges, accessories, warranty, service and freight charges, net of returns, discounts and allowances. Once a sales order is negotiated and received by a sales representative, we generally collect a 50% deposit from the shareholders adoptedcustomer. When the product is ready to be shipped, the customer will generally pay the remaining balance. Revenue is realized once the product has been shipped to the customer.

For the 710 Shark filling machine and approved Amended and Restated Articles of Incorporation After Issuance of Stock. As710 Captain capping machine, training is coordinated with the customers in accordance with their availability but generally completed within a week or two of the date hereof, Mr. Glass, who we refershipment. Standard warranties are offered at no cost to as management, serves as our only directorcustomers to cover parts (3 years), labor and officer.maintenance for one year for product defects.

 

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Business ObjectivesCost of Revenue

Product cost of revenue primarily consists of the Registrant

Ascost of materials, labor and overhead associated with the date of this report, we have no current operations. Management has determined to direct our efforts and limited resources to pursue potential new business opportunities through a combination with an operating or development stage company or an acquisition of assets. We do not intend to limit ourselves to a particular industry and we have not established any particular criteria upon which we shall consider and proceed with a business opportunity. We expect to utilize our capital stock, debt or a combination of capital stock and debt, in effecting a business transaction. It may be expected that entering into a business transaction will involve the issuance of restricted shares of capital stock. The issuance of additional sharesmanufacture of our capital stock:

Similarly, if we issued debt securities, it could result in:

Based onvaporizers and both our current business activities, we are a “shell company” as defined under the Exchange Act because we have no operations710 Shark filling machine and nominal assets consisting solely of cash and/or cash equivalents. We are also a “blank check” company as defined under the Exchange Act because we are a development stage company that is issuing a “penny stock” (as defined under the Exchange Act) and have no specific business plan or purpose other than to merge with an unidentified company or companies. Our status as a blank check company and a shell company will impact our company and shareholders in many ways, including:

Further, the Company’s financial condition, including current liabilities as of $44,012 at June 30, 2018 and $1,594,945 at September 30, 2017 may be a significant impediment to identifying and consummating a business transaction.

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Our management has broad discretion with respect to identifying and selecting a prospective business opportunity. We have not established any specific attributes or criteria (financial or otherwise) for a business opportunity and we may enter into a business combination with a development stage company, a distressed company or a foreign company engaged in any industry or we may purchase raw assets. Our management has never served in any capacity as management of a development stage public company that has consummated a business transaction such as that contemplated by us. Accordingly, our management may not successfully identify a prospective business opportunity or conclude a business transaction. In addition, our management engages in other business activities and is not obligated to devote any specific number of hours to our matters. Management intends to devote only as much time as it deems necessary to our affairs.710 Captain capping machine.

We anticipate that the selectionexpect our cost of an appropriate business opportunity will be complexrevenue per unit to decrease as we continue to scale our operations, improve product designs and extremely risky and we cannot assure you that we will be successful in concluding a transaction or if we do, that we will be successful thereafter. Our lack of financial and personnel resources may negatively impactwork with our abilitythird-party suppliers to consummate an attractive transaction or cause us to discontinue operations before we enter such a transaction.lower costs.

We cannot assure you that we will be successful in concluding a business transaction. We will not realize any revenues or generate any income unless and until we successfully merge with or acquire an operating business that is generating revenues and otherwise is operating profitably. Moreover, we can offer no guarantee that we will achieve long-term or immediate short-term earnings from any business transaction.Operating Expenses

Any entitySales and Marketing. Sales and marketing expenses consist primarily of compensation and related costs for personnel, employee benefits and travel associated with whichour direct sales force, project managers and sales management. Sales and marketing expenses also include costs associated with our support of business development efforts with distributors and partners and costs related to trade shows and marketing program. We expense sales and marketing costs as incurred. We expect sales and marketing expenses to increase in future periods as we enter into a business transaction will be subjectexpand our sales force and our marketing organization and increase our participation in global trade shows and marketing programs, including consumer marketing.

General and Administrative. Our general and administrative expenses consist primarily of compensation and related costs for personnel, employee benefits and travel. In addition, general and administrative expenses include, third-party consulting, legal, audit, accounting services, and allocations of overhead costs, such as rent, facilities and information technology. We expect general and administrative expenses to numerous risksincrease in connection with its operations. Toabsolute dollars following the extent we affect a business transaction with a financially unstable company or an entity in its early stage of development or growth, including entities without established records of sales or earnings, we may be affected by numerous risks inherent in the business and operations of such companies. If we consummate a business transaction with a foreign entity, we will be subject to allconsummation of the risks attendantMerger due to foreign operations. Althoughadditional legal, accounting, insurance, investor relations and other costs associated with being a public company, as well as other costs associated with growing our management will endeavor to evaluate the risks inherent in a particular opportunity, we cannot assure you that we will properly ascertain or assess all significant risk factors.business.

Our management anticipates that our Company likely will affect only one business transaction, dueInterest Expense

Interest expense consists primarily to our limited financial resources and the dilution of interest for present and prospective stockholders, which is likelyfrom notes due to occur as a result of our management’s plan to offer a controlling interest to a target in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us because it will not permit us to offset potential losses from one venture against potential gains from another.

Our common stock has been subject to quotation on the pink sheets under the symbol “CGND.” There is currently no active trading market in our shares nor do we believe that any active trading market has existed for the last 3 years. There can be no assurance that there will be an active trading market for our securities following the date hereof. In the event that an active trading market commences, there can be no assurance as to the market price of our shares of common stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained.

Write Off of Debt

During the period 2009 through June 2014, the Company obtained loans to fund its operations from Beijing Hua Hei Hengye Investment Limited (“Hua Hui”) and Redrock Capital Venture Limited (“Redrock”) (together, the “Related Party Loans”). Both Hua Hui and Redrock were affiliates (as defined under the Exchange Act) of the Company during the time the Related Party Loans were made to the Company. In the case of Hua Hui, it was an affiliate by virtue of its ownership of 84.8% of the outstanding shares of common stock and the fact that the chief executive officer of the Company also was the chief executive officer and the sole shareholder of Hua Hui. In the case of Redrock, it was an affiliate by virtue of its ownership of 5.8% of the outstanding shares of common stock. (The percentages of common stock held by these stockholders is as was reported in the Company’s Annual Report on Form 10-K for the period ended September 30, 2013, the last 10-K filed by former management (the “2013 10-K”).)

The Related Party Loans have been disclosed in the periodic reports that the Company files with the SEC under the Exchange Act since the date the Company incurred the debt and have been carried as liabilities on the Company’s balance sheets in such periodic reports (the “Periodic Reports”). Current management of the Company is not aware of any written agreements or instruments evidencing the Related Party Loans and no such agreements or instruments have been filed as exhibits to any of the Periodic Reports. Moreover, since the date current management assumed control of the Company in April 2016, the Company has not received any written or oral demand for payment of the Related Party Loans.

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At June 30, 2018, the Company was indebted under the Related Party Loans in the aggregate amount of $1,598,106, including accrued interest, of which the Company was indebted to Hua Hui in the amount of $1,497,825, including accrued interest, and was indebted to Redrock in the sum of $100,281, including accrued interest, as reported in the Company’s quarterly report on Form 10-Q it filed with the SEC for the period then ended.

The Company has determined to write off the Related Party Loans on the basis that the statute of limitations with respect to the Related Party Loans has expired and the lenders are barred from pursuing a claim against us for repayment of the amount loaned. Under the Nevada Revised Statutes, an action upon a contract, obligation or liability not founded upon an instrument in writing may only be commenced within four years of the date that the action accrues. Since all credit comprising the Related Party Loans was extended to the Company prior to June 30, 2014, as disclosed in the Periodic Reports, the four-year period in which to bring a claim for payment such debt expired as of June 30, 2018.

Accordingly, commencing as of the period ended June 30, 2018, the Company has written off the Related Party Loans and removed the sum of $1,598,106 from the balance sheet in the Company’s financial statements for the period then ended and will not report the amounts due under the Related Party Loans as outstanding liabilities in any future period. The amounts were written off against additional paid in capital—per ASC Section 470-50-40. ASC Section 470-50-40 (Debt Modification and Extinguishments), considers Related Party Transactions to be capital transactions and the extinguishment of the debt is in effect a capital transaction and it is not a gain or loss recognition event and should be excluded from the determination of net income.debtholders.

Results of Operations – Three Month Periods

Results of OperationsComparison for the three-month periods ended March 31, 2019 and 2018:

Revenue

Total revenue during the three months ended June 30,March 31, 2019 increased to $1,624,254 (comprised of machine sales of $643,002 and consumable product sales of $981,252) compared to the three months period ended March 31, 2018 which produced sales of $1,310,856 (comprised of machine sales of $773,405 and consumable product sales of $537,451). Sales of growth of $313,398 or 24% was primarily driven by the increased sales of consumable products, such as cartridges, batteries, and disposable pens.

Cost of Revenue

Total cost of revenue increased to $1,130,620 during the three months ended March 31, 2019 compared to the three months ended June 30, 2017March 31, 2018 which had costs of revenues of $734,005. The gross margin percentage decreased from 44% to 30%.

DuringThe decline in gross margin was primarily caused by a larger percentage of consumable product sales in the 2019 period versus the 2018 period. Machine sales have a higher margin than consumable products. 

Operating Expenses

Sales, Marketing and General and Administrative. Sales, Marketing and General and Administrative during the three months ended June 30, 2018, the Company did not generate any revenue, incurredMarch 31, 2019 increased to $1,135,502 (comprised of Salaries of $544,918 and other SG&A expenses of $2,226, including $726 of professional fees, and suffered a net loss of $2,226, as$590,584) compared to the three months ended June 30, 2017March 31, 2018 which produced $679,156 in which the Company did not generate any revenue, incurredexpenses (comprised of $310,803 in salaries and other SG&A expenses of $13,889, including $1,715$368,353). The $456,346 increase was primarily attributed to increased employee count and related expenses. No other expenses were greater than 10% of professional fees, and $12,174 of interest expense, and suffered a net loss of $13,889.the total.

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Results of OperationsIncome (loss) from operations

Total loss from operations was $641,868 during the three months ended March 31, 2019 compared to $102,305 for the ninethree months ended June 30, 2018March 31, 2018.

The increased loss was a result of increased staff, as well as the lower margin realized related to the product sales mix.

Interest Expense

Interest expense during the three months ended March 31, 2019 decreased to $24,827 compared to $34,143 for the ninethree months ended June 30, 2017

During the nine months ended June 30,March 31, 2018, the Company did not generate any revenue, incurred operating expenses of $67,782, including $39,433 of professional fees in connection with the preparation of reports and financial statements required to be filed with the SEC; $4,000 of selling, general and administrative expenses; and $24,348 of interest expense, and suffered a net loss of $67,782, as compareddue to the nine months ended June 30,conversion of the 2017 the Company did not generate any revenue, incurred operating expenses of $39,322, including $2,800 of professional fees, and $36,522 of interest expense, and suffered a net loss of $39,322.notes.

Liquidity and Capital Resources

At June 30, 2018, the CompanyMarch 31, 2019, we had no assetscash and total current liabilitiescash equivalents of $44,012, after giving effect to the write off$543,724. To date, we have financed our operations principally through borrowing on credit facilities, debt of the Related Party equal to $$1,598,106, as described above. At September 30, 2017, the Company had no assets$594,000, issuance of equity of $457,500, issuances of Convertible Debt of $3,813,500 and total liabilitiesreceipts of $1,594,945, comprising $1,573,758 of loans payable to parties related to prior management (including interest accrued thereon)customer deposits for new orders and $21,187 of other payables.payments from customers for Shark 710 machines, 710 Captain capping machines and cartridges.

Prior to June 2014,The only capital commitment that Jacksam has currently is the Company funded its operations from the proceedslease at 30191 Avenida de las Banderas in Rancho Santa Margarita, California for $51,600 annually through April of loans received from a party related to prior management. The Company has no present sources of capital or liquidity.

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2020.

We do not expect to engage in any substantive activities unless and until such time asanticipate that we enter into a business transaction, if ever. We are dependent upon interim funding provided by current management to pay the cost associated with being a public company, among other fees and expenses. Our current management has agreed orally to provide funding as may be required to pay for accounting fees and other administrative expenses of the Company until the Company enters into a business combination. The Company would be unablewill need additional financing to continue as a going concern without interim financing provided by management. If we require additional financing, we cannot predict whether equity or debt financing will become available at terms acceptable to us, if at all. The Company depends upon services provided by management to fulfill its filing obligations under the Exchange Act. At present, the Company has no financial resources to pay for such services and may be required to issue stock in lieu of cash or, in the alternative, issue debt instruments evidencing financial obligations if and when they arise. Any funds advanced by management will be advanced as loans that will bear interest at the rate of 8% per year and which shall mature on the closing of a business transaction.

Duringan ongoing entity over the next twelve months, we anticipate incurring costs related to:

These costs are difficult to quantify given the multitudeadequacy of variables associated with such activities. Our ongoing expensesavailable funds will result in continued net operating losses that will increase until wedepend on many factors. There can consummate a business combination with a profitable operating company, if ever. We estimate that these costs will be in the range of to six to eight thousand dollars per year, and thatno assurance we will be able to meet these costs as necessary through the extension of credit advancedobtain additional financing on favorable terms, or at all. If we are unable to us by management.obtain additional financing, our financial results and business prospects may be materially adversely affected.

Going ConcernOperating Activities

We have historically experienced negative cash outflows as we developed and sold our 710 Shark Filling machines, 710 Captain Capping machines, and cartridges, pens and accessories. Our negativenet cash used in operating activities primarily results from our operating losses combined with changes in working capital continuingcomponents as we have grown our business and is influenced by the timing of cash payments for inventory purchases and cash receipts from our customers. Our primary source of cash flow from operating losses, failureactivities is cash down payments and final payments for our machines. Our primary uses of cash from operating activities are employee-related expenditures and amounts due to generate revenuesvendors for purchased components. Our cash flows from operating activities will continue to be affected principally by our working capital requirements and lackthe extent to which we build up our inventory balances and increase spending on personnel and other operating activities as our business grows.

During the three months ended March 31, 2019, operating activities used $523,757 in cash, an increase of operating capital create substantial doubt about$131,521 from cash used in the Company’s ability to continue as a going concern. three months ended March 31, 2018 of $392,236.

Investing Activities

The ability ofCompany had no investing activities in either period.

Financing Activities

During the three months ended March 31, 2019, the Company received a $2,000 payment related to continue as a going concern is dependent on its ability to obtain capital from our affiliates to fund our operations, generatethe exercise of $2,000,000 warrants and paid down $8,624 of Notes payable. During the three months ended March 31, 2018, $1,575,000 of cash provided by financing activities was from the saleissuance of its securities and attain future profitable operations. Management’s plans include selling its equity securities and obtainingconvertible debt financingfrom Company investors. The Company also made $20,000 of payments to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.pay down notes payable.

Off-Balance Sheet Arrangements

The Company doesDuring the three months ended March 31, 2019 and the year ended December 31, 2018, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Contractual Obligations

As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.applicable SEC regulations.

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Item 3. Quantitative and Qualitative Disclosures aboutDisclosure About Market Risk.Risk

Not applicable.We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents. We consider investments that, when purchased, have a remaining maturity of ninety (90) days or less to be cash equivalents. We do not believe that a notional or hypothetical 10% change in interest rates would have a material impact on our interest income.

Item 4. Controls and Procedures.Procedures

This report includesManagement’s Evaluation of Disclosure Controls and Procedures

Under the certificationssupervision and with the participation of our Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14 underafter evaluating the Securities Exchange Acteffectiveness of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

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Evaluation of Disclosure Controls and Procedures

Disclosureour disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under) as of the Exchange Act) are designedend of the period covered by this Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports filedthat we file or submittedsubmit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SECthe SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Principal Executive Officerour principal executive and the Principal Financial Officer,principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, our management, under the supervision and with participation of our Principal Executive Officer and Principal Financial Officer (the “Certifying Officers”) conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2018. Based on that evaluation, our management concluded that there are material weaknesses in our disclosure controls and procedures over financial reporting, including:

A material weakness is a deficiency, or a combination of control deficiencies, in disclosure control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We believe that the weaknesses in our disclosure controls and procedures and ICFR are a direct consequence of our size, available resources and the nature of our business. We are a “shell company,” as defined under the Securities Act, in that we have no operations and no revenues and only nominal assets. Further, we have no full-time employees. As a result, we are constrained by our lack of resources to take the types of corrective actions that would be necessary to remediate the material weaknesses, including, for example, engaging additional accounting personnel and adopting an audit committee charter and seating an audit committee with at least one independent member who qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.

The Company believes that management of the Company after a business transaction will implement plans to remediate weaknesses in our internal controls. This does not include an evaluation by the Company’s registered public accounting firm regarding the Company’s internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.Proceedings

There are presently no material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

Item 1A. Risk Factors.Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds

None.

Item 3. Defaults Upon Senior Securities.Securities

None.Not applicable.

Item 4. Mine Safety Disclosures.Disclosures

N/ANot applicable.

Item 5. Other Information.Information

None.None

 

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Item 6. Exhibits.Exhibits

___________

* Pursuant to Commission Release No. 33-8238, this certification will be treated as “accompanying” this Quarterly Report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of Section 18 of the Securities Exchange Act of 1934, as amended, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

  

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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