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

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

Registrant’s telephone number, including area code: (800) ~~805-3580~~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 x No o

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

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

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). o Yes x No

As of ~~November 5, 2018,~~July 29, 2019, the registrant had ~~48,272,311~~63,851,972 shares of common stock, $0.001 par value per share, outstanding.

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.

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

Jacksam Corporation
Consolidated Balance Sheets
(unaudited)

	June 30,			December 31,
	2019			2018
Assets

Current Assets:
Cash	$	1,229,893		$	1,074,105
Accounts receivable, net		102,224			25,485
Inventory, net		147,322			764,095
Prepaid expenses		34,805			37,500
Total Current Assets		1,514,244			1,901,185

Property and equipment, net		13,813			14,346
Right of-use asset - operating lease		27,176			-

Total Assets	$	1,555,233		$	1,915,531

Liabilities and Stockholders Deficit

Current Liabilities:
Accounts payable and accrued expenses	$	510,274		$	537,601
Deferred revenue		1,414,071			906,964
Convertible notes payable, current portion		53,524			3,218,500
Notes payable		-			70,912
Right of use liability - operaring lease		28,790			-
Derivative Liability		1,585,298			-
Accrued liabilities - other		1,642,118			1,642,118
Total Current Liabilities		5,234,075			6,376,095

Other long term liabilities		330,000			-
Total Liabilities		5,564,075			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, 61,751,972 and 48,272,311 shares issued and outstanding, respectively		61,752			48,272
Additional paid-in capital		3,226,676			10,661
Accumulated deficit		(7,297,270	)		(4,519,497	)
Total Stockholders' Deficit		(4,008,842	)		(4,460,564	)

Total Liabilities and Stockholders' Deficit	$	1,555,233		$	1,915,531

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

~~China Grand Resorts, Inc and Subsidiary~~

Jacksam Corporation

Consolidated Statements of Operations

For the three and six months ended June 30, 2019 and 2018

(unaudited)

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

~~China Grand Resorts, Inc and Subsidiary~~

Jacksam Corporation
Consolidated Statements of Stockholders' Deficit
For the three and six months ended June 30, 2019 and 2018
(unaudited)

	Common Stock, $.001 Par Value				Paid-In			Accumulated			Stockholders'
	Shares		Amount		Capital			Deficit			Deficit

Balance, December 31, 2017		41,828,952	$	41,829	$	1,883,656		$	(2,579,624	)	$	(654,139	)

Convertible debt imputed interest		-		-		25,332			-			25,332

Net loss		-		-		-			(139,406	)		(139,406	)

Balance, March 31, 2018		41,828,952	$	41,829	$	1,908,988		$	(2,719,030	)	$	(768,213	)

Convertible debt imputed interest		-		-		25,333			-			25,333

Exercise of stock options		3,171,048		3,171		(3,171	)		-			-

Net loss		-		-		-			(275,832	)		(275,832	)

Balance, June 30, 2018		45,000,000	$	45,000	$	1,931,150		$	(2,994,862	)	$	(1,018,712	)

Balance, December 31, 2018		48,272,311	$	48,272	$	10,661		$	(4,519,497	)	$	(4,460,564	)

Cumulative effect of ASU 2016-02		-		-		-			(2,407	)		(2,407	)

Common stock issued for debt coversion		10,579,661		10,580		3,192,920			-			3,203,500

Exercise of common stock warrant		2,000,000		2,000		-			-			2,000

Convertible debt imputed interest		-		-		22,945			-			22,945

Net loss		-		-		-			(669,243	)		(669,243	)

Balance, March 31, 2019		60,851,972	$	60,852	$	3,226,526		$	(5,191,147	)	$	(1,903,769	)

Exercise of common stock warrants		900,000		900		-			-			900

Convertible debt imputed interest		-		-		150			-			150

Net loss		-		-		-			(2,106,123	)		(2,106,123	)

Balance, June 30, 2019		61,751,972	$	61,752	$	3,226,676		$	(7,297,270	)	$	(4,008,842	)

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

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

~~China Grand Resorts, Inc. and Subsidiary~~

Jacksam Corporation
Consolidated Statements of Cash Flows
For the six months ended June 30, 2019 and 2018
(unaudited)

	2019			2018
Cash Flows from Operating Activities
Net loss	$	(2,775,366	)	$	(415,238	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		533			534
Imputed interest		23,095			50,665
Amortization of debt discount		38,524
Derivative loss		134,813			-
Inventory impairment		402,844			128,640
Net change in:
Accounts receivable		(76,739	)		(18,500	)
Inventory		213,929			(903,111	)
Prepaid expenses		1,902
Other assets					(25,439	)
Accounts payable and accrued expenses		(27,327	)		51,230
Other long-term liabilities		330,000
Deferred revenue		507,107			90,621

Net Cash used in operating activities		(1,226,685	)		(1,040,598	)

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		1,583,333			1,575,000
Payment of debt issuance costs		(132,848	)
Payments on notes payable		(70,912	)		(60,000	)
Proceeds from excersise of common stock warrants		2,900			-

Net cash provided by (used in) financing activities		1,382,473			1,515,000

Net Change in Cash and Cash Equivalents		155,788			474,402

Cash and Cash Equivalents, Beginning of Period		1,074,105			1,146,374

Cash and Cash Equivalents, End of Period	$	1,229,893		$	1,620,776

Cash Paid For:
Income Taxes	$	-		$	-
Interest	$	-		$	-

Non-cash transactions:
Common stock issued to settle convertible notes payable	$	3,203,500		$	-
Capitalization of right of use asset for operaring lease	$	44,138		$	-
Derivative Liability recognized at issuance of convertible debt	$	1,450,485		$	-
Common stock issued in exchange for marketable securities	$	-		$	-

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

~~China Grand Resorts, Inc.~~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 on November 16, 2009, the name was changed to China Grand Resorts Inc. Effective November 5, 2018, the name was changed to Jacksam Corporation. After the September 30, 2014 10Q filing, the management of the Company abandoned the Company and the subsidiaries were taken back by the PRC national companies in China who owned them. The remaining parent company, China Grand Resorts, Inc. became a dormant company until 2016 when a new shareholder acquired stock to become the majority shareholder and owner of the Company.

On September 14, 2018, the Company’s wholly-owned subsidiary, Jacksam Acquisition Corp., a corporation formed in the State of Nevada on September 11, 2018, or the Acquisition Sub, merged with and into Jacksam Corporation, a corporation incorporated in August 2013 in the State of Delaware, referred to herein as Jacksam. Pursuant to this transaction, or the Merger, Acquisition Sub was the surviving corporation, and changed its name to “Jacksam Corporation”.

In accordance with the terms of the Exchange Agreement, and in connection with the completion of the acquisition, on the Closing Date the Company issued 45,000,000 shares of common stock, par value $0.001 per share to the Jacksam shareholders in exchange for all of the issued and outstanding Jacksam. In addition, the previous owners of China Grand Resorts, Inc. returned 30,000,000 shares of common stock to the treasury of the Company. Following the acquisition there was a total of 48,272,311 shares of common stock issued and outstanding of which 3,272,311 are held by shareholders of the Company prior to the merger. In connection with the above transaction $340,000 was paid to the former controlling shareholder related to the return of 30,000,000 shares of common stock.

As a result of the Merger, we acquired the business of Jacksam and will continue the existing business operations of Jacksam as our wholly-owned operating subsidiary under the name Jacksam Corporation.

In accordance with “reverse merger” or “reverse acquisition” accounting treatment, the China Grand Resorts, Inc. 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 ~~Corp. (“Jacksam”)~~ is a technology company focused on developing and commercializing products utilizing a proprietary technology platform. The Company services the medical cannabis, hemp and CBD segments of the larger e-cigarette and vaporizer markets with oil vaporizer focused products. ~~As of December 31, 2017, the~~The Company ~~had~~has two principal product lines consisting of vape cartridges and batteries and a filling machine. 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.

The interim unaudited ~~condensed~~ consolidated financial statements as of ~~September~~June 30, ~~2018,~~2019, and for the ~~three and nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, have been prepared in accordance with accounting principles generally accepted in the United States ~~(GAAP)~~ 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 ~~Jacksam Corporation’s~~Company’s audited financial statements and notes filed with the SEC ~~on September 17, 2018 on Form 8-K~~ for the year ended December 31, ~~2017.~~2018.

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.

~~At September~~The June 30, ~~2018~~2019 and December 31, ~~2017, the Company had $739,095 and $124,121 in inventory, respectively. The September 30,~~ 2018 ~~and December 31, 2017~~ inventory consisted entirely of finished goods. 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 ~~September~~June 30, ~~2018,~~2019, and December 31, ~~2017,~~2018, the Company has determined that anno allowance ~~of $0 and $0~~ is required. During the three months ended June 30, 2019, the Company recognized a write-off of inventory of $402,844, recorded as a component of cost of sales on the consolidated statement of operations.

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.

	o-	Identification of the contract with a customer

	o-	Identification of the performance obligations in the contract

	o-	Determination of the transaction price

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

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

On January 1, 2017, the Company adopted the new accounting standard ASC 606, “Revenue from Contracts with Customers” and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting standards under Topic 605. The adoption has had an immaterial impact to the Company’s comparative net income and as such comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new standard to be immaterial to the Company’s net income on an ongoing basis.

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 June 30, 2019, none of the Company’s contracts contained a significant financing component.

The ~~Company's~~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.

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 performance obligation is considered complete. At June 30, 2019, $1,414,071 in revenue is expected to be recognized in the future 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 the next twelve months.

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services.

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.

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

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 six months ended June 30, 2019 and 2018, 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 Company had 11,388,887 and 15,654,660 potentially dilutive securities that have been excluded from the computation of diluted weighted-average shares outstanding as of June 30, 2019 and December 31, 2018, as they would be anti-dilutive.

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute the business plan and attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.

Historically, 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 the Company’s stock 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 adverse effect upon it and its shareholders.

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 three and nine months ended September 30, 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 Company had 5,000,000 and 3,171,048 potentially dilutive securities that have been excluded from the computation of diluted weighted-average shares outstanding as of September 30, 2018 and 2017, as they would be anti-dilutive.

~~The Company accounts for stock-based compensation in accordance with the Financial~~Recently Issued Accounting ~~Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718,~~ ~~Stock Compensation~~ ~~(“ASC 718”), which requires that stock-based compensation be measured and recognized as an expense in the financial statements and that such expense be measured at the grant date fair value.~~

For awards that vest based on service conditions, the Company uses the straight-line method to allocate compensation expense to reporting periods. The grant date fair value of options granted is calculated using the Black-Scholes option pricing model, which requires the use of subjective assumptions including volatility, expected term and the fair value of the underlying common stock, among others.

The Company periodically issues performance-based awards. For these awards, vesting will occur upon the achievement of certain milestones. When achievement of the milestone is deemed probable, the Company expenses the compensation of the respective awards over the implicit service period.

~~Stock awards to non-employees are accounted for in accordance with ASC 505-50,~~ ~~Equity-Based Payments to Non-Employees~~ (“ASC 505-50”). The measurement date for non-employee awards is generally the date performance of services required from the non-employee is complete. For non-employee awards that vest based on service conditions, the Company expenses the value of the awards over the related service period, provided they expect the service condition to be met. The Company records the expense of services rendered by non- employees based on the estimated fair value of the stock option using the Black-Scholes option pricing model over the contractual term of the non-employee. The fair value of unvested non-employee awards is remeasured at each reporting period and expensed over the vesting term of the underlying stock options on a straight-line basis. The Company adopted ASU No. 2016-09 ~~Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ ~~during the year ended December 31, 2017.~~

The stock-based compensation plans provide that grantees may have the right to exercise an option prior to vesting. Shares purchased upon the exercise of unvested options will be subject to the same vesting schedule as the underlying options and are subject to repurchase at the original exercise price by the Company should the grantee discontinue providing services to the Company for any reason, prior to becoming fully vested in such shares.

The Company allocates issuance costs between the individual freestanding instruments identified on the same basis as proceeds were allocated. Issuance costs associated with the issuance of stock or equity contracts (i.e., equity-classified warrants and convertible preferred stock) are recorded as a charge against the gross proceeds of the offering. Any issuance costs associated with the issuance of liability-classified warrants are expensed as incurred. Issuance costs associated with the issuance of debt (i.e., convertible debt) is recorded as a direct reduction of the carrying amount of the debt liability but limited to the notional value of the debt. The Company accounts for debt as liabilities measured at amortized cost and amortizes the resulting debt discount to interest expense using the effective interest method over the expected term of the notes pursuant to ASC 835, ~~Interest~~ ~~("ASC 835"). To the extent that the reduction from issuance costs of the carrying amount of the debt liability would reduce the carrying amount below zero, such excess is recorded as interest expense.~~

The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options.” Under the ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for our convertible debt instruments is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on the consolidated balance sheets and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we are required to record non-cash interest expense as a result of the amortization of the discounted carrying value of the convertible debt to their face amount over the term of the convertible debt. We report higher interest expense in our financial results because ASC 470-20 requires interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest.

For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount. When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt.

~~On July 1, 2017, the Company early adopted ASU 2017-11, “~~~~Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),~~” which addresses the complexity of accounting for certain financial instruments with down round features. The Company has concluded that the retroactive provisions of ASU 2017-11 had no impact on the accounting for the Company’s previously outstanding warrant which had been issued to the warrantholder as stock compensation.

ASU 2017-11 changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. ASU 2017-11 also clarifies existing disclosure requirements for equity- classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, “Debt—Debt with Conversion and Other Options”), including related EPS guidance (ASC 260). Part II of ASU 2017-11 recharacterize the indefinite deferral of certain provisions of ASC 480 that now are presented as pending content in the ASC, to a scope exception. Those amendments do not have an accounting effect.

Prior to the early adoption of ASU 2017-11, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in ASC 480 is evaluated under the guidance in ASC 815, “Derivatives and Hedging,” to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.

ASU 2017-11 revises the guidance for instruments with down round features in ASC 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity,” which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in ASC 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.

For entities that present EPS in accordance with ASC 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by ASU 2017-11.

Part I of ASU 2017-11 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. ASU 2017-11 Part 1 should be applied retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs ASC 250-10-45-5 through 45-10.

The Company has determined that there were no previously outstanding financial instruments that fall under the scope of ASU 2017-11. Therefore, the Company has not determined and has not recorded a cumulative-effect adjustment to the balance sheet.

~~ASU 2017-11 Part II does not require any transition guidance because those amendments do not have an accounting effect.~~

The Company considered the impact of Part 1 of ASU 2017-11 and determined the Company had no financial instruments previously carried as derivative liabilities that were deemed to be such on the basis of embedded features containing down round provisions, resulting in the strike price being reduced on the basis of the pricing of ~~future equity offerings. As a result, upon the early adoption provisions of ASU 2017-11, the Company did not record any adjustment to its books to account for any transition accounting issues.~~

The Company evaluates events occurring after the date of its consolidated balance sheet for potential recognition or disclosure in its consolidated financial statements. There have been no subsequent events that occurred through the date the Company issued its consolidated financial statements that require disclosure in or adjustment to its consolidated financial statements.

The accompanying consolidated financial statements include the accounts of China Grand Resorts, Inc. and its wholly owned subsidiary. All intercompany transactions and balances are eliminated in consolidation.

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 May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”),~~ ~~Revenue from Contracts with Customers~~~~, which supersedes the revenue recognition requirements in ASC Topic 605,~~ ~~Revenue Recognition~~, and most industry-specific guidance. The new standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB approved a one-year deferral of the effective date of this standard to annual reporting periods, and interim reporting periods within those years, beginning after December 15, 2017. The Company adopted this standard effective January 1, 2018 using the modified retrospective method. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.

~~In July 2015, the FASB issued ASU No. 2015-11,~~ ~~Simplifying the Measurement of Inventory~~ (“ASU 2015- 11”). ASU 2015-11, which simplifies the measurement of inventories valued under most methods, including the Company’s inventories valued under FIFO — the first-in, first-out cost method. Inventories valued under LIFO — the last-in, first-out method — are excluded. Under this new guidance, inventories valued under these methods would be valued at the lower of cost and net realizable value, with net realizable value defined as the estimated selling price less reasonable costs to sell the inventory. This guidance is effective for annual reporting beginning after December 15, 2016, including interim periods within the year of adoption, with early application permitted. The Company adopted this standard on January 1, 2017. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.

~~In January 2016, the FASB issued ASU No. 2016-01, "~~~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~," which addresses the recognition, measurement, presentation and disclosure of financial assets and liabilities. This ASU primarily affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, this ASU clarifies the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This standard became effective on January 1, 2018. This standard did not have a material impact on our consolidated financial statements and related disclosures for the six months ended June 30, 2018.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose 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 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 provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, ~~or ASU 2016-02. ASU 2016-02 requires that lessees recognize in~~which permitted the ~~statement~~Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of ~~financial position~~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 ~~all~~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 the exception of short-term leases)~~with a lease ~~liability, which is a lessee’s obligation~~term of 12 months or less, the Company will not recognize ROU assets or lease liabilities.

Depreciation expense amounted to ~~make lease payments arising from a lease, measured on a discounted basis,~~$268 and ~~a right-of-use asset, which is an asset representing the lessee’s right to use the underlying asset~~$533 for the ~~lease term. ASU 2016-02 is effective~~three and six months ended June 30, 2019, respectively, and $269 and $534 for ~~fiscal years beginning after December 15,~~the three and six months ended June 30, 2018, including interim periods within those fiscal years, with early adoption permitted. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. The adoption of this guidance is not expected to have a significant impact on our consolidated financial statements.respectively.

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”). ASU 2016-09 will simplify the income tax consequences, accounting for forfeitures and classification on the statements of consolidated cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The Company elected to adopt ASU 2016-09 in the first quarter of 2017 retrospectively to January 1, 2017. As a result of adopting ASU No. 2016-09 during the year ended December 31, 2017, the Company adjusted its accumulated deficit related to the accounting policy election to recognize the impact of share-based award forfeitures only as they occur rather than by applying an estimated forfeiture rate as previously required. ASU No. 2016-09 requires that this change be applied using a modified-retrospective transition method by means of a cumulative-effect adjustment to accumulated deficit as of the beginning of the fiscal year in which the guidance is adopted. As a result of this adoption, the Company recorded a decrease to accumulated deficit of approximately $28 thousand with an offset to Additional Paid-in Capital as of January 1, 2017.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)~~, or ASU 2016-15. The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under FASB Accounting Standards Codification 230, ~~Statement of Cash Flows~~. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. We have evaluated the impact of ASU No. 2016-15 and noted it had no impact on our consolidated financial statements for the six months ended June 30, 2018.

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issue Task Force)~~, or ASU 2016-18. This new standard addresses the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within the year of adoption, with early adoption permitted. Our consolidated financial statements reflect this standard for the six months ended June 30, 2018 and 2017.

~~In July 2017, the FASB issued ASU 2017-11,~~ ~~“Earnings Per Share (ASC 260) Distinguishing Liabilities from Equity (ASC 480) Derivatives and Hedging (ASC 815),”~~ which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of ASU 2017-11 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has chosen to early adopt this standard on April 1, 2018 with retroactive restatement of comparative periods. The Company has concluded that the retroactive provisions of ASU 2017-11 had no impact on the accounting for the Company’s previously outstanding warrant which had been issued to the warrantholder as stock compensation.

~~Depreciation expense amounted to $534 and $800 for the nine months ended September 30, 2018 and 2017, respectively.~~

	September 30, 2018		December 31, 2017		June 30, 2019		December 31, 2018

Accounts payable	$	36,187	$	102,249	$	217,300	$	456,163
Credit cards payable		12,999		5,398		-		24,517
Accrued interest		473		16,766		1,556		1,049
Sales tax payable		30,071		7,147		108,647		54,272
Accrued severance						23,396		-
Accrued officer consulting cost						144,375		-
Other		1,276		1,600		15,000		1,600
Total Accounts payable and Accrued expenses	$	81,006	$	133,160	$	510,274	$	537,601

As of ~~September~~June 30, ~~2018~~2019, and December 31, ~~2017,~~2018, accrued interest on these ~~loans~~loan outstanding balances for ~~$473~~$1,556 and ~~$16,766,~~$1,049, respectively. During the six months ended June 30, 2019, the note payable was paid in full.

In December 2017, the Company issued non-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 $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 determined that no beneficial conversion feature existed on the issuance dates. ~~Imputed interest~~During the quarter ended March 31, 2019 the Company issued 8,517,500 shares of ~~$51,222 was calculated and accrued at 4% and recorded~~common stock to ~~additional paid in capital.~~convert $1,718,500 of these notes payable. As of June 30, 2019, the remaining outstanding balance of these notes is $15,000.

In March 2018, the Company issued non-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 Company’s common stock at a per share price of $0.90 at any time subsequent to the issuance date. Upon either the maturity date or a 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. ~~Imputed~~During the quarter ended March 31, 2019 the Company issued 2,062,161 shares of common stock to convert these notes in full.

In June 2019, the Company issued convertible notes to 8 investors with a principal amount of $2,111,111, receiving $1,583,333 in net cash proceeds (the “June 2019 Notes). The June 2019 Notes had an original issue discount of $211,111, and the Company incurred an interest charge deducted from the gross proceeds of ~~$31,890~~$316,667, based on a 15% stated rate. The total of $527,778 was ~~calculated~~recorded as debt discount. Additionally, the Company paid $132,848 of financing costs, which were recorded as a reduction of the carrying value of the debt. The deferred financing costs and ~~accrued~~debt discounts are being amortized using the effective interest method through the maturity of the June 2019 Notes. The June 2019 Notes mature on March 25, 2020 and are convertible into the Company’s common stock at ~~4% and recorded~~a per share price of $0.35 at any time subsequent to ~~additional paid~~the issuance date. The June 2019 Notes contain a down round feature, whereby any sale of common stock or common stock equivalent at a price per share lower than the conversion price of the June 2019 Notes will result in ~~capital.~~the conversion price being lowered to the new price. As of June 30, 2019, the June 2019 Notes are convertible into 6,031,745 shares of common stock. The note holders also received warrants to purchase a total of 3,257,142 shares of the Company’s common stock at an exercise price of $0.35 per share for a term of five years. The warrants contain the same down round feature as the notes.

The Company evaluated the embedded conversion feature and the warrants, and determined that the conversion option and the warrants should be accounted for as derivative liabilities. A total of $1,450,485 was recorded as additional debt discount at the issuance of the June 2019 Notes for the conversion option and warrants, based on the estimate fair value of the liabilities noted below, resulting in a day one loss of $63,341. The fair values of the conversion option and the attached warrants were estimated using a binomial model with the following assumptions:

The Company recognized a total derivative loss of $134,813 during the three and six months ended June 30, 2019, consisting of the $63,341 day one loss, and a gain of $71,472 for changes in the estimate fair value through June 30, 2019.

As of June 30, 2019, unamortized deferred finance costs totaled $130,041, and unamortized debt discount totaled $1,942,547.

Subsequent to June 30, 2019, the Company received $208,333 of funding on $277,778 of additional convertible notes with the same terms as described above. These notes were issued with a total of 428,572 attached warrants.

As of June 30, 2019, the authorized capital stock of the Company consists of 100,000,000 shares, of which 90,000,000 shares are designated as common stock and 10,000,000 shares of preferred stock.

~~Prior to~~For the Merger, China Grand Resorts, Inc., recorded various liabilities that were incurred by former related parties. Management believes the relevant statute of limitations has passed and that no enforceable legal claim exists in relation to these liabilities. However, 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.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018 prior~~2019, the Company had convertible debentures with a 0% stated interest rate outstanding. As a result, imputed interest was calculated based on a 4% rate and recorded to ~~our reverse merger we advanced major shareholder and Chairman, Mr. Davis $25,000.~~ equity in the amount of $23,095.

During 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.

During the three months ended June 30, 2019, the Company received $900 related to the exercise of 900,000 stock warrants.

The ~~advance was repaid in full by Mr. Davis~~weighted average remaining contractual life is approximately 3.6 years for stock warrants outstanding with a total intrinsic value of $880,221 on ~~April 2, 2018.~~June 30, 2019. All of the above warrants were fully vested.

Mark Adams, CEO, and David Hall, EVP of Sales invested in the 2019 Convertible Notes. Mr. Hall’s investment was made post quarter-end. Mr. Adams and Mr. Hall contributed $250,000 and $100,000 respectively.

In ~~March~~December 2017, the Company entered into an employment agreement with Daniel Davis and Mark Adams. As of the Effective Date, and for one year of the date therefrom, the Executive’s annual salary shall be equal 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 merit and general increases in amounts determined by the Board.

Performance Bonus. In addition to the Annual Salary, the Executive is eligible to earn an annual bonus of up to thirty percent (30%) of Executive’s Annual Salary (the “Performance Bonus”). The amount of the Performance Bonus will be determined in good faith by the Board, based upon the following factors:

(a)	Fifty percent (50%) of the Performance Bonus shall be based upon the achievement of the Executive’s individual objectives, as defined in writing and presented to Executive annually by the Board.

(b)	Fifty percent (50%) of the Performance Bonus shall be based upon the achievement of Company objectives – which shall include specifically, meeting or exceeding the revenue targets and other objectives as determined by the 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.

Executive. 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 affect the foregoing.

The Company may terminate Executive’s employment for Cause immediately upon Notice from the Company to Executive. For purposes of this Agreement, “Cause” shall mean the occurrence 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 shall provide to the Executive:

	(a)	A lump sum payment equal to the greater of (i) twelve (12) months’ Annual Salary at the Executive’s then- current rate, or (ii) Executive’s Annual Salary for the remainder of the Term;

	(b)	if applicable, to the extent permitted by the Company’s group insurance carrier and applicable law, continued group insurance benefits coverage, together with reimbursement of the 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)	any 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 of termination.

If 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 date the Change of Control occurs.

On May 31, 2019, the Company entered into a consulting agreement with Daniel Davis related to his departure from employment with the Company. The agreement requires Mr. Davis to provide limited consulting services to the Company for a period of up to three years beginning May 1, 2019 in exchange for $165,000 per year. The Company has recorded a current liability of $165,000, included in accounts payable and accrued expenses on the consolidated balance sheet, and a long-term liability of $330,000, included in other long-term liabilities on the consolidated balance sheet. Total expense associated with the agreement of $495,000 is included in salaries and wages expense on the consolidated statement of operations. The Company made payments of $20,625 through June 30, 2019, leaving a balance of $144,375 in accounts payable and accrued expenses. In addition, the Company entered into a lock up agreement with Mr. Davis which restricts the number of shares Mr. Davis can otherwise publicly sell for a period of up to three years to one third of the volume limits set forth under SEC Rule 144. Mr. Davis also agreed to a standstill agreement that provides that for a period of up to three years Mr. Davis will not seek to influence the governance of the Company, including by participation in any solicitation of other shareholders, promotion of any extraordinary transaction, nomination of any candidate to the board or by seeking the removal of any existing directors

The Company has a single operating lease for an office lease ~~located~~ in ~~Racho~~Rancho Santa Margarita, California with an initial term of 37 months. Base monthly rent is approximately $3,200 per month plus net operating expenses. A deposit equal to one-month rent was paid and the commencement of the lease. The lease can be extended for a two-year period at the then fair market value. The lease contains variable lease payments for non-rental occupancy expenses. These non-lease components were not included in the determination of the right of use asset and lease liability as part of the transition to ASC 842 due to the practical expedients elected by the Company. The Company utilizes 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 liability.

The Company has right-of-use assets of $27,176 and operating lease liabilities of $28,790 as of June 30, 2019. Operating lease expense for the three and six months ended June 30, 2019 was $9,463 and $18,926, respectively. The company had cash used in operating activities related to leases of $19,719 during the six months ended June 30, 2019. The lease has a remaining term of nine months.

The following table provides the maturities of lease liabilities at June 30, 2019:

Minimum lease ~~payment~~payments under ~~this arrangement~~the Company’s operating lease under ASC 840 as of December 31, 2018 for ~~2018 (October – December),~~ 2019 and 2020 ~~is $14,554,~~were $48,968 and $20,600, respectively.

~~Operating lease expenses~~The Company also maintains short-term rental agreements for certain storage facilities. Total rent expense for these rentals was $15,965 and $21,913 for the ~~nine~~three and six months ended ~~September~~June 30, 2019, respectively. Total rent expense for the six months ended June 30, 2018 ~~and 2017 were $47,785 and $43,109, respectively.~~was $25,680.

~~As of September 30, 2018, the authorized capital stock of the Company consists of 100,000,000 shares, of which 100,000,000 shares are designated as common stock.~~

In accordance with the terms of the Exchange Agreement, and in connection with the completion of the acquisition, on the Closing Date the Company issued 45,000,000 shares of common stock, par value $0.001 per share to the Jacksam shareholders in exchange for all of the issued and outstanding Jacksam common stock. In addition, the previous majority shareholder of China Grand Resorts, Inc. returned 30,000,000 shares of common stock to the treasury of the Company. Following the acquisition there was a total of 48,272,311 shares of common stock issued and outstanding of which 3,272,311 are held by shareholders of the Company prior to the merger.

The weighted average remaining contractual life is approximately 2.2 years for stock options and warrants outstanding on September 30, 2018. All of the above options and warrants were fully vested at the time of issuance. Stock based compensation is related to the above issuances.

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 that 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.

The following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this Report. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. 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 the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in this Report that could cause actual results or events to 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 as a result of 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.

OnEffective September 14, 2018, ~~our~~the Company’s wholly-owned subsidiary ~~Jacksam Acquisition Corp., a corporation formed in the State of Nevada on September 11, 2018, or the Acquisition Sub,~~ 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 ~~the State of Delaware, referred~~a short form merger and changed its name to ~~herein as Jacksam. Pursuant to this transaction, or the Merger, Acquisition Sub was the surviving corporation and became our wholly-owned subsidiary.~~“Jacksam Corporation.”

Prior to the Merger, we were a dormant company without any active operations. As a result of the Merger, we acquired and have since been operating the pre-merger business of ~~Jacksam and will continue the existing business operations of Jacksam as our wholly-owned subsidiary.~~Jacksam.

As the result of the Merger and the change in business and operations of the Company, a discussion of the past financial results of the Company is not pertinent, and under applicable accounting principles the historical financial results of Jacksam, the accounting acquirer, prior to the Merger are considered the historical financial results of the Company.

The following discussion highlights Jacksam’s results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements 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 this Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

The unaudited consolidated condensed financial statements of Jacksam for three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 contained herein include a summary of our significant accounting policies and should be read in conjunction with the discussion 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.

Product revenue consists of sales of consumer vaporizers and of the 710 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 ~~30%~~50% deposit from the customer. 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 710 Captain capping machine, training is coordinated with the customers in accordance with their availability but generally completed within a week or two of the shipment. Standard warranties are offered at no cost to customers to cover parts (3 years), labor and maintenance for one year for product defects.

Product cost of revenue primarily consists of the cost of materials, labor and overhead associated with the manufacture of our vaporizers and both our 710 Shark filling machine and 710 Captain capping machine.

We expect our cost of revenue per unit to decrease as we continue to scale our operations, improve product designs and work with our third-party suppliers to lower costs.

Sales and Marketing. Sales and marketing expenses consist primarily of compensation and related costs for personnel, employee benefits and travel associated with our 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 expand 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 increase in absolute dollars following the consummation of the Merger due to additional legal, accounting, insurance, investor relations and other costs associated with being a public company, as well as other costs associated with growing our business.

Comparison for the three-month periods ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:

Total revenue during the three months ended September 30, 2018 increased to $1,613,419 compared to the three months period ended September 30, 2017 which produced sales of $467,089. Sales of growth of $1,146,330 or 345% was primarily driven by the increased sales of the Shark 710 filling machines, 710 capping machines and sales of proprietary cartridges

Total cost of revenue increased to $1,232,217 during the three months ended September 30, 2018 compared to the three months ended September 30, 2017 which had costs of revenues of $516,270. The gross margin percentage increased from -11% to 24%.

~~The 2017 period had a negative gross margin due to a high return of products including cartridges that could not be resold. Management cancelled all future production of cartridges from that vendor.~~

In the 2018 quarter, the Company had a lower than expected gross margin, 24%, and total sales number. The total sales and gross margin amounts were lower than expected, because the Company’s Cove cartridges had a manufacturing problem. The cartridges appeared to be less than full, due to an over absorption of the oil in the wick, which was caused by the amount and thickness of the cotton in the wick. This issue led to a decrease in sales and an increase in product returns.

The Company worked with the contract manufacturer and extensively tested changes to the Cove cartridges. We believe that the changes have resolved the issue, which should allow for increased sales and decreased returns in subsequent periods. An additional factor affecting the 2018 margin was the introduction of the United States 25% import tariff on Chinese products in July of 2018. The majority of our products, are manufactured in China and subjected to the tariff. The majority of the tariff is passed along to our customers, but not all.

We expect that the cost of revenue on current orders will show improvements from historic costs due to increased pricing, cost improvements from R&D, and increasing our production efficiencies. The overall margin may not improve as we expect lower margin cartridge sales to be a larger percentage of overall sales going forward.

Total revenue during the three months ended June 30, 2019 decreased to $1,326,421 (comprised of machine sales of $578,451 and consumable product sales of $747,970) compared to the three months ended June 30, 2018 which produced sales of $2,041,371 (comprised of machine sales of $1,357,140 and consumable product sales of $684,231). The sales decrease of $714,950 or 35% was due to ongoing quality issues with proprietary products. The company is now focused on filling machine and capping machine sales and has adopted an “open source” model for other consumables with leading market share.

Returns products related to the quality issues, reduced revenues in the quarter by $226,211 or 15%.

During the quarter, the Board of Directors decided to make a change, removing the Company founder and head of product development.

Other contributing factors, were the delay in delivery of the U.S. made 710 Shark filling machine, which has started to ship in the third quarter, and Capital constraints, which were alleviated, by the closing of financing at the end of the second quarter.

Total cost of revenue increased to $1,392,021 during the three months ended June 30, 2019 compared to the three months ended June 30, 2018 which had costs of revenues of $1,378,433. The increase in cost of revenue was directly attributable to an inventory write down of $402,844 (Cost of revenue, without the write down would have been $989,177). The inventory write down consisted of mainly cartridges, which was a significant factor in the personnel and strategy changes undertaken in the quarter.

The gross margin percentage decreased from 32% to -4.9%. Without the inventory write down and returned product the quarter would have yielded a 36% gross margin.

Sales, Marketing and General and Administrative. Sales, Marketing and General and Administrative expenses during the three months ended ~~September~~June 30, ~~2018~~2019 increased to ~~$946,053~~$1,850,942 (comprised of Salaries of $1,159,078 and other SG&A expenses of $691,864) compared to the three months ended ~~September~~June 30, ~~2017~~2018 which produced ~~$242,377~~$905,264 in ~~expenses.~~expenses (comprised of $549,014 in salaries and other SG&A expenses of $356,250). The ~~$703,676~~$945,678 increase was primarily attributed to one-time charges.

Salaries increased ~~employee count~~$610,064, of which $594,000 was related to settlement agreements with the founder and ~~hiring an outsourced marketing agency.~~another former employee.

Other SG&A expenses increased by $335,614, which was comprised primarily of the following; increased legal spending related to the settlement agreements (approximately $90,000), and research and development expenses, related to new cartridge and other consumable testing, as well as costs related to the U.S. made 710 shark (approximately $100,000).

If these one-time charges were not incurred, SG&A expenses for the quarter would have been $1,066,942. Another factor was increased insurance costs of approximately $45,000 related to the establishment of a D&O policy.

Total loss from operations was ~~$564,851~~$1,916,542 during the three months ended ~~September~~June 30, ~~2018~~2019 compared to ~~$291,558~~$242,326 for the three months ended ~~September~~June 30, ~~2017.~~2018.

The increased loss was aprimarily the result of ~~increased staff,~~the one-time charges and inventory write down, as well as the ~~Cove cartridge manufacturing issues and the onset of the tariff as~~revenue reduction described above.

Interest expense during the three months ended ~~September~~June 30, ~~2018~~2019 increased to ~~$35,174~~$42,950 compared to ~~$10,408~~$32,185 for the three months ended ~~September~~June 30, ~~2017,~~2018, due to ~~new debt assumed.~~the issuance of the 2019 notes.

Total revenue during the nine months ended September 30, 2018 increased to $4,965,646 compared to the nine months period ended September 30, 2017 which produced sales of $1,317,946. Sales of growth of $3,647,700 or 377% was primarily driven by the increased sales of the Shark 710 filling machines, 710 capping machines and sales of proprietary cartridges.

Total cost of revenue increased to $3,344,655 during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 which had costs of revenues of $904,739. The cost of revenue coupled with the revenues led to an increase in the gross margin percentage from 31% to 33% for the nine months ended September 30, 2018. This was primarily attributable to less returns on a percentage basis in 2018 than in 2017.

~~Sales, Marketing and General and Administrative.~~ Sales, Marketing and General and Administrative expenses during the nine months ended September 30, 2018 increased to $2,534,752 compared to the nine months ended September 30, 2017, which produced $764,496 in expenses. The $1,770,256 increase was primarily attributed to increased employee count and hiring an outsourced marketing agency.

~~Total loss from operations was $913,761 during the nine months ended September 30, 2018 compared to $351,289 for the nine months ended September 30, 2017.~~

~~Interest expense during the nine months ended September 30, 2018 increased to $101,502 versus $59,115 at September 30, 2017, due to new debt assumed.~~

Total revenue during the six months ended June 30, 2019 decreased to $2,950,675 (comprised of machine sales of $1,162,346 and consumable product sales of $1,788,329) compared to the six-month period ended June 30, 2018 which produced sales of $3,352,227 (comprised of machine sales of $2,130,545 and consumable product sales of $1,221,682). The sales decrease of $401,552 or 12% was primarily driven by quality issues with proprietary products as described above.

Total cost of revenue increased to $2,522,641 compared to the six months ended June 30, 2018 which had costs of revenues of $2,112,438. The gross margin percentage decreased from 37% to 15%.

The increase in cost of revenue and decrease in margin were primarily related to factors which occurred in the second quarter of 2019, and are described above.

Sales, Marketing and General and Administrative. Sales, Marketing and General and Administrative expenses during the six months ended June 30, 2019 increased to $2,986,444 (comprised of Salaries of $1,703,996 and other SG&A expenses of $1,282,448) compared to the six months ended June 30, 2018 which produced $1,584,420 in expenses (comprised of $859,817 in salaries and other SG&A expenses of $724,603). The $1,402,024 increase was primarily attributed to the one-charges described above and increased employee count and related expenses. No other expenses were greater than 10% of the total.

Total loss from operations was $2,558,410 during the six months ended June 30, 2019 compared to $344,631 for the six months ended June 30, 2018.

The increased loss was a result of one-time expense charges described above, coupled with the inventory write down, and the revenue reduction related to the proprietary product quality issues

Interest expense during the six months ended June 30, 2019 increased to $67,777 compared to $66,328 for the six months ended June 30, 2018, due to the issuance of the 2019 notes.

At ~~September~~June 30, ~~2018,~~2019, we had cash and cash equivalents of ~~$988,379.~~$1,229,893. To date, we have financed our operations principally through borrowing on credit facilities, debt of $594,000, issuance of equity of $457,500, issuances of Convertible Debt of ~~$3,813,500~~$5,924,611 and receipts of customer deposits for new orders and payments from customers for Shark 710 machines, 710 Captain capping machines and cartridges.

The only capital commitment that Jacksam has currently is the lease at 30191 Avenida de las Banderas in Rancho Santa Margarita, California for $51,600 annually through April of 2020.

We anticipate that we will need additional financing to continue as an ongoing entity over the next 12 months. Our future capital requirements and the adequacy of available funds will depend on many factors. There can be no assurance we will be able to obtain additional financing on favorable terms, or at all. If we are unable to obtain additional financing, our financial results and business prospects may be materially adversely affected.

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 net cash used in operating activities primarily results from our operating losses combined with changes in working capital components 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 activities 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 vendors for purchased components. Our cash flows from operating activities will continue to be affected principally by our working capital requirements and the extent to which we build up our inventory balances and increase spending on personnel and other operating activities as our business grows.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, operating activities used ~~$1,511,024~~$1,226,685 in cash, an increase of ~~$1,333.673~~$186,087 from cash used in the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 of ~~$177,351.~~$1,040,598.

The Company ~~raised $193,500 through the sale of marketable securities~~had no investing activities in ~~the third quarter of 2018.~~either period.

During the ~~nine~~six months ended ~~September~~June 30, 2019, the Company received $1,583,333 in proceeds from convertible debt, a $2,900 payment related to the exercise of 2,900,000 warrants, paid down $70,912 of Notes payable, and made $132,848 of payments for debt issuance costs. During the six months ended June 30, 2018, the Company received $1,575,000 of cash provided by ~~financing activities was from~~ the issuance of convertible debt ~~and the issuance of equity~~ from ~~Company’s~~Company investors. The Company also made ~~$75,471 of~~ payments ~~to pay down~~on notes payable ~~and $340,000 related to the reverse acquisition and re-purchase~~ of ~~shares .~~$60,000.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 and the ~~Company made $102,184 of payments to pay down notes payable, received $100,000 of proceeds from the issuance of convertible notes payable and received $200,000 from the sale of common stock.~~

~~During the nine months ended September 30, 2018 and years~~year ended December 31, ~~2017 and 2016,~~2018, we did not have any off-balance sheet arrangements as defined by applicable SEC regulations.

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.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end 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 that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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.

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

On October 24, 2018, we filed Articles of Merger with the Nevada Secretary of State whereby, effective November 5, 2018, our wholly-owned subsidiary, Jacksam Corporation, will merge with and into us (the “Short-Form Merger”) and will cease any independent existence. In connection with the Short-Form Merger, our name will change to Jacksam Corporation, also effective November 9, 2018. No shares or other consideration were issued in connection with the Short-Form Merger.None

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.

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

Nevada		~~16-0383696~~62-1407521
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

30191 Avenida De Las Banderas Suite B Rancho Santa Margarita, CA		92688
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	o	¨	Accelerated filer	o¨
Non-accelerated filer	o	~~(Do not check if a smaller reporting company)~~x	Smaller reporting company	x
			Emerging ~~growth company~~Growth Company	x

		Page

PART I — FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements		3

Item 1.	Financial Statements
~~Item 1.~~	~~Financial Statements~~Unaudited Consolidated Balance Sheets at June 30, 2019 and December 31, 2018	4
	Unaudited ~~Condensed Consolidated Balance Sheets at September 30, 2018 and December 31, 2017~~	4
	~~Unaudited Condensed~~ Consolidated Statements of Operations and Comprehensive Loss for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	5
	Unaudited ~~Condensed~~ Consolidated Statements of Cash Flows for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	67
	Notes to Unaudited Condensed Consolidated Financial Statements	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1518

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1822

Item 4.	Controls and Procedures	1822

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	1923

Item 1A.	Risk Factors	1923

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1923

Item 3.	Defaults Upon Senior Securities	1923

Item 4.	Mine Safety Disclosures	1923

Item 5.	Other Information	1923

Item 6.	Exhibits	2024

Signatures		2125

	Three Months ended						Nine Months ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017

Sales	$	1,613,419		$	467,089		$	4,965,646		$	1,317,946

Cost of Sales		1,232,217			516,270			3,344,655			904,739

Gross Profit (Loss)		381,202			(49,181	)		1,620,991			413,207

Operating Expenses
Salaries and wages (including Contractors)		477,212			82,408			1,169,856			257,326
Other Selling, general and administrative expenses		468,841			159,969			1,364,896			507,170
Total operating expenses		946,053			242,377			2,534,752			764,496

Loss from operations		(564,851	)		(291,558	)		(913,761	)		(351,289	)

Other Expense
Other Expense		(6,503	)		-			(6,503	)		-
Interest expense		(35,174	)		(10,408	)		(101,502	)		(59,115	)
Total Other Expense		(41,677	)		(10,408	)		(108,005	)		(59,115	)

Net Loss	$	(606,528	)	$	(301,966	)	$	(1,021,766	)	$	(410,404	)

Net Loss Per Share
Basic and Diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.01	)

Weighted average shares outstanding
Basic and Diluted		45,575,351			50,236,238			43,575,351			40,169,806

	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018

Sales	$	1,326,421		$	2,041,371		$	2,950,675		$	3,352,227

Cost of Sales		1,392,021			1,378,433			2,522,641			2,112,438

Gross Profit		(65,600	)		662,938			428,034			1,239,789

Operating Expenses
Salaries and wages (including contractors)		1,159,077			549,014			1,703,995			859,817
Other selling, general and administrative expenses		691,865			356,250			1,282,449			724,603
Total operating expenses		1,850,942			905,264			2,986,444			1,584,420

Loss from operations		(1,916,542	)		(242,326	)		(2,558,410	)		(344,631	)

Other Expense
Other expense		(11,818	)		(1,321	)		(14,366	)		(4,279	)
Derivative gain (loss)		(134,813	)		-			(134,813	)		-
Interest expense		(42,950	)		(32,185	)		(67,777	)		(66,328	)
Total Other Expense		(189,581	)		(33,506	)		(216,956	)		(70,607	)

Net Loss	$	(2,106,123	)	$	(275,832	)	$	(2,775,366	)	$	(415,238	)

Net Loss Per Share
Basic and Diluted	$	(0.03	)	$	(0.01	)	$	(0.04	)	$	(0.01	)

Weighted average shares outstanding
Basic and Diluted		61,591,972			41,828,952			61,732,593			41,828,952

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

	September 30,			December 31,
	2018			2017
Assets

Current Assets:
Cash	$	988,379		$	1,146,374
Accounts receivable, net		53,700			-
Inventory, net		739,095			124,121
Marketable securities		-			200,004
Total Current Assets		1,781,174			1,470,499

Property and Equipment, net		14,879			15,413
Other Assets		36,672			2,461

Total Assets	$	1,832,725		$	1,488,373

Liabilities and Stockholders (Deficit)

Current Liabilities:
Accounts Payable and Accrued Expenses		81,006			133,160
Deferred Revenue		376,483			200,852
Convertible notes payable, current portion		1,500,000			-
Notes Payable		89,529			165,000
Accrued liabilities - other		1,642,118			-
Total Current Liabilities		3,689,136			499,012

Long-Term Liabilities:
Convertible Notes Payables		1,718,500			1,643,500
Total Long-Term Liabilities		1,718,500			1,643,500

Total Liabilities		5,407,636			2,142,512

Stockholders' Deficit:
Common Stock - 100,000,000 authorized, $0.001 par value, 48,272,311 and 41,828,952 shares issued and outstanding, respectively		48,272			41,829
Additional Paid-In Capital		(21,793	)		1,883,656
Accumulated Deficit		(3,601,390	)		(2,579,624	)
Total Stockholders' Deficit		(3,574,911	)		(654,139	)

Total Liabilities, and Stockholders' Deficit	$	1,832,725		$	1,488,373

	Three Months Ended June 30, 2019		Three Months Ended June 30, 2018		Six Months Ended June 30, 2019		Six Months Ended June 30, 2018
Machine sales	$	578,451	$	1,357,140	$	1,162,346	$	2,130,545
Consumable product sales		747,970		684,231		1,788,329		1,221,682
Total sales	$	1,326,421	$	2,041,371	$	2,950,675	$	3,352,227

	June 30, 2019			December 31, 2018
Furniture and Fixtures	$	10,425		$	10,425
Equipment		7,579			7,579
Trade Show Display		2,640			2,640
Total		20,644			20,644
Less: Accumulated Depreciation		(6,831	)		(6,298	)
Property and Equipment net	$	13,813		$	14,346

	September 30, 2018		December 31, 2017
Note payable dated August 22, 2016, bearing interest at 12% per annum, due November 22, 2016, past due at year end, paid in full July 2018	$	-	$	75,000

Note payable dated November 21, 2016, bearing interest at 12% per annum, due February 21, 2017, currently past due		89,529		90,000

Total notes payable		89,529		165,000
Less: current portion		89,529		165,000
Long term portion of notes payable	$	-	$	-

	At Debt Issuance						As of June 30, 2019
	Conversion Option			Warrants			Conversion Option			Warrants
Volatility		95.36	%		69.74	%		98.29	%	69.74		%
Dividend Yield		0	%		0	%		0	%		0	%
Risk-free rate		1.93	%		1.73	%		1.92	%		1.76	%
Expected term	0.76 years			5 years			0.75 years			4.99 years
Stock price	$	0.40		$	0.40		$	0.378		$	0.378
Exercise price	$	0.35		$	0.35		$	0.35		$	0.35
Derivative Liability fair value	$	937,142		$	576,684		$	866,246		$	719,052

	Aggregate Number			Aggregate Exercise Price		Weighted Average Exercise Price
Outstanding at December 31, 2018		5,000,000		$	5,000	$	0.001
Granted		3,257,142			1,140,000		0.35
Exercised		(2,900,000	)		2,900		0.001
Forfeited and cancelled		-			-		-
Outstanding at June 30, 2019		5,357,142		$	1,143,000	$	0.2132

Maturity of Lease Liabilities at June 30, 2019
2019	$	30,003
2020		-
2021		-
2022		-
2023		-
2024 and thereafter		-
Total future undiscounted lease payments		30,003
Less: Interest		(1,213	)
Present value of lease liabilities	$	28,790

	Aggregate Number			Aggregate Exercise Price		Exercise Price Range		Weighted Average Exercise Price
Outstanding at December 31, 2017		8,171,048		$	5,743	$	0.0007	$	0.0007
Granted		-			-		-		-
Exercised		(3,171,048	)		743		0.0002		0.0002
Forfeited and cancelled		-			-		-		-
Outstanding at September 30, 2018		5,000,000		$	5,000	$	0.001	$	0.001

Exhibit Number		Exhibit Description

~~2.1~~31.1		~~Articles of Merger as filed with the Nevada Secretary of State on October 24, 2018, merging Jacksam Corporation with and into China Grand Resorts Inc. effective November 9, 2018~~

~~31.1~~		Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2018~~March 31, 2019

31.2		Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2018~~March 31, 2019

32.1*32.1		Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

101		Interactive data files pursuant to Rule 405 of Regulation S-T

	~~CHINA GRAND RESORTS, INC~~JACKSAM CORPORATION

Dated: ~~November 5, 2018~~August 2, 2019	By:	/s/ Mark Adams
		Mark Adams
		Chief Executive Officer

Dated: ~~November 5, 2018~~August 2, 2019	By:	/s/ Michael Sakala
		Michael Sakala
		Chief Financial Officer