Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes a number of forward-looking
statements that reflect management's current views with respect to future events
and financial performance. Forward-looking statements are projections in respect
of future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements include statements regarding the intent, belief or
current expectations of us and members of our management team, as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks set forth in the section
entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2019 as filed with the U.S. Securities and Exchange
Commission (the "SEC") on May 27, 2020 any of which may cause our company's or
our industry's actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity,
performance or achievements expressed or implied in our forward-looking
statements. These risks and factors include, by way of example and without
limitation:
· our ability to successfully commercialize our products and services on a
large enough scale to generate profitable operations;
· our ability to maintain and develop relationships with customers and
suppliers;
· our ability to successfully integrate acquired businesses or new brands;
· the impact of competitive products and pricing;
· supply constraints or difficulties;
· the retention and availability of key personnel;
· general economic and business conditions;
· substantial doubt about our ability to continue as a going concern;
· our need to raise additional funds in the future;
· our ability to successfully recruit and retain qualified personnel in
order to continue our operations;
· our ability to successfully implement our business plan;
· our ability to successfully acquire, develop or commercialize new products
and equipment;
· intellectual-property claims brought by third parties; and
· the impact of any industry regulation.
27
During the three and nine month period ending September 30, 2020 the Company had
no revenues from operations. Loss from operations for the three months ended
September 30, 2020 was $1,312,790 compared with a loss in the prior year of
$6,356,998, for a net loss of $2,652,790 for the most recent quarter, compared
with a prior year loss of $9,320,537.
The Company reported a loss from operations for the nine month period ended
September 30, 2020 of $4,670,284 compared with a loss during the prior year of
$7,992,785 with a net loss of $8,340,088 compared with the prior year loss of
$11,137,286.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, or performance. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
Readers are urged to carefully review and consider the various disclosures made
by us in this report and in our other reports filed with the SEC. We undertake
no obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes in the future
operating results over time except as required by law. We believe that our
assumptions are based upon reasonable data derived from and known about our
business and operations. No assurances are made that actual results of
operations or the results of our future activities will not differ materially
from our assumptions.
As used in this Quarterly Report on Form 10-Q and unless otherwise indicated,
the terms "CannaPharmaRx," "Company," "we," "us," and "our" refer to
CannaPharmaRx, Inc. and our wholly-owned subsidiaries. Unless otherwise
specified, all dollar amounts are expressed in United States dollars.
The following discussion should be read in conjunction with our financial
statements and notes thereto included herein. In connection with, and because we
desire to take advantage of, the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, we caution readers regarding certain
forward-looking statements in the following discussion and elsewhere in this
report and in any other statement made by, or on our behalf, whether or not in
future filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties, and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward-looking
statements made by, or on our behalf. We disclaim any obligation to update
forward looking statements.
Overview and History
We were originally incorporated in the State of Colorado in August 1998 under
the name "Network Acquisitions, Inc." We changed our name to Cavion
Technologies, Inc. in February 1999 and subsequently to Concord Ventures, Inc.
in October 2006.
On December 21, 2000, we filed for protection under Chapter 11 of the United
States Bankruptcy Code. In connection with the filing, on February 16, 2001, we
sold our entire business, and all of our assets, for the benefit of our
creditors. After the sale, we still had liabilities of $8.4 million and were
subsequently dismissed by the Court from the Chapter 11 reorganization,
effective March 13, 2001, at which time the last of our remaining directors
resigned. On March 13, 2001, we had no business or other source of income, no
assets, no employees or directors, outstanding liabilities of approximately $8.4
million and had terminated our duty to file reports under securities law. In
February 2008, we were re-listed on the OTC Bulletin Board.
In April 2010, we re-domiciled in Delaware under the name CCVG, Inc. ("CCVG").
Effective December 31, 2010, CCVG completed an Agreement and Plan of Merger and
Reorganization (the "Reorganization") which provided for the merger of two of
our wholly-owned subsidiaries. As a result of this reorganization our name was
changed to "Golden Dragon Inc.," which became the surviving publicly quoted
parent holding company.
On May 9, 2014, we entered into a Share Purchase Agreement (the "Share Purchase
Agreement") with CannaPharmaRx, Inc., a Colorado corporation ("Canna Colorado"),
and David Cutler, a former President, Chief Executive Officer, Chief Financial
Officer and director of our Company. Under the Share Purchase Agreement, Canna
Colorado purchased 1,421,120 shares of our common stock from Mr. Cutler and an
additional 9,000,000 restricted common shares directly from us.
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On May 15, 2014, as amended and effective January 29, 2015, we entered into an
Agreement and Plan of Merger (the "Merger") pursuant to which Canna Colorado
became a subsidiary of our Company. In October 2014, we changed our legal name
to "CannaPharmaRx, Inc."
Pursuant to the Merger, all of the shares of our common stock previously owned
by Canna Colorado were cancelled. As a result of the aforesaid transactions we
became an early-stage pharmaceutical company whose purpose was to advance
cannabinoid research and discovery using proprietary formulation and drug
delivery technology then under development.
Our executive offices are located at Suite 3600, 888 3rd Street SW, Calgary,
Alberta Canada, T2P 5C5 phone (949) 652-6838. Our website address is
www.cannapharmarx.com.
We have not generated any revenues during the past five years. Following is our
current Plan of Operation.
PLAN OF OPERATION
We are involved in the cannabis industry in Canada and are reviewing
opportunities in other jurisdictions where cannabis has been legalized,
including the US. Our principal business activities to date have been to
negotiate, acquire and develop various cannabis cultivation projects throughout
Canada. As of the date of this Report we do not own or operate any businesses in
the US.
Our activities to date have centered around four projects, including (i) the
Hanover Project; (ii) the Great Northern Project; (iii) the acquisition of
Sunniva Medical, Inc.; and (iv) the acquisition of Ramon Road Production Campus
LLC.
On June 8, 2020, we received a notice of termination of the relevant Purchase
Agreement with Sunniva.
Following is a description of the projects we are pursuing as of the date of
this Report:
Hanover
Effective November 19, 2018, we entered into a Securities Purchase Agreement
with Alternative Medical Solutions, Inc., an Ontario, Canada corporation
("AMS"), its shareholders and Hanover CPMD Acquisition Corp., wherein we
acquired all of the issued and outstanding securities of AMS. As part of the
material terms of this transaction, we also agreed to acquire all of the
outstanding shareholder loans held by the principal shareholder of AMS. The
purchase price was CAD$12,700,000, of which CAD$1,012,982 was paid at closing
and we assumed debt of approximately CAD$650,000. The principal shareholders of
AMS elected to receive 971,765 shares of our Common Stock in lieu of CAD$985,000
in additional cash. We granted the holders of these shares "piggyback"
registration rights but we have not yet filed a registration statement to cause
us to register these shares with the SEC. The balance of approximately
CAD$10,000,000 is to be paid pursuant to the terms of a relevant subordinated
non-interest bearing promissory note, secured only by the shares acquired in AMS
Principal payments under the Promissory Note, are due quarterly and are computed
based upon 50% of AMS' cash flow, defined as EBITDA less all capital
expenditures, taxes incurred, non-recurring items and other non-cash items for
the relevant fiscal quarter, including the servicing of all senior debt payment
obligations of the company. The Promissory Note matures the earlier of two years
from the date AMS receives a license to cultivate or December 31, 2021. As of
the date of this report, we are not producing any cannabis on this property. We
are currently reviewing our proposed activities on this project.
Relevant thereto, in January 2019 we also entered into a two-year Consulting
Agreement with Stephen Barber, a founder and principal shareholder of AMS, to
assist us in our ongoing discussions and negotiations with various governmental
agencies, including the City of Hanover and Province of Ontario, whereby we
agreed to pay (i) a consulting fee of US$225,000, payable on or before April 30,
2019, along with a monthly fee of CAD$1,500 and (ii) an option to purchase up to
500,000 shares of our common stock at an exercise price of USD$1.00 per share,
which option shall expire November 19, 2020. Further, we agreed to repurchase
45,000 shares of the stock issued to him as part of the AMS acquisition for
CAD$33,750 (USD$0.75 per share) on or before April 30, 2019. As of September 30,
2020, per the terms of these agreements we owed the balance of $$237,409 to Mr.
Barber, which is past due as of the date of this Report. However, we are
currently reviewing whether Mr. Barber has performed pursuant to the terms of
the Consulting Agreement. See "Part II, Item 1, Legal Proceedings" below.
29
The AMS cultivation facility is a 48,750 square foot cannabis grow facility
built on a 6.7-acre parcel of land located in Hanover, Ontario Canada. To date,
exterior construction of the building has been completed; however, no interior
construction has begun. Upon full completion, the facility will contain up to 20
separate growing rooms which we believe will provide annual production capacity
of 9,500 kilos of cannabis (20,900 lbs.). Together with the remaining equipment
needed to complete the grow facility we estimate that we will require
approximately CAD$20 million in additional financing which we will seek to raise
via equity and debt. While no definitive decision has been made, as of the date
of this Report we are considering converting the building to a cannabis
extraction facility or sell the property.
Great Northern
In early 2019, we retained new members of management who are actively engaged in
the Canadian cannabis industry, including former management of GN Ventures, Ltd,
Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. ("GN"). Not coincidentally,
effective February 25, 2019, we acquired 3,712,500 shares and 2,500,000 Warrants
to purchase 2,500,000 shares of Common Stock of GN in exchange for an aggregate
of 7,988,963 shares of our Common Stock, from our current CEO, who is a former
shareholder of GN. We believe this is the initial step in our efforts to acquire
all of the issued and outstanding stock of GN. Based upon various discussions
that have taken place we anticipate making additional purchases of stock from
other shareholders of GN during 2020 but there are no assurances this will
occur.
GN owns a 60,000 square foot cannabis cultivation and grow facility located on
38 acres in Stevensville, Ontario, Canada. Because we are minority shareholders
of GN and GN is a privately held company, we cannot confirm that the information
we currently have on their operations is complete or fully reliable. GN
estimates annual total production capacity from the Stevensville facility of up
to 12,500 kilograms of cannabis. GN advised that the Stevensville facility is
complete, and GN's subsidiary, 9869247 Canada Limited, received a license to
cultivate from the Canadian Ministry of Health on July 5, 2019. As a result, in
October 2019 GN commenced cultivation activities, with the initial harvest in
the first quarter of 2020. Additionally, it is our current understanding that GN
intends to increase cannabis production by building additional cannabis
cultivation facilities on the excess land presently owned adjacent to the
existing Stevensville facility, provided that additional funding can be obtained
on commercially reasonable terms. Neither we nor GN have any firm commitment to
provide any of the funds necessary for expansion as of the date of this report.
We cannot state any definitive information concerning Great Northern because it
is a privately held Canadian company who is keeping its business activities
confidential. We expect that we will obtain additional information on the
business activities of GN as we renew discussions to acquire additional
interests and can perform our due diligence.
On May 8, 2020, we agreed to acquire an additional 3,671,597 shares of GN common
stock in exchange for an aggregate of 5,507,400 shares of our Common Stock. We
presently own 7,384,097 shares of GN common stock which we believe, based on
information provided by the management of GN, equals approximately 10% of the
total issued and outstanding shares of GN common stock. Additionally, we own
Warrants to purchase an additional 2,500,000 shares of GN common stock with each
Warrant having an exercise price of CAD$1.00 per share. We intend to continue to
acquire the common stock of GN in one or multiple additional transactions.
Ramon Road Production Campus
On June 26, 2020, the Company signed a Purchase Agreement with Bristol Capital
Investors, LLC to acquire all of their membership interests in Ramon Road
Production Campus LLC. This LLC owns the Cathedral City Cannabis Campus, located
in Coachella Valley, California, a state-of-the-art cannabis cultivation and
production facility consisting of 325,599 square feet situated on nearly 20
acres, designed with long term automation methodologies, efficiency and a focus
on sustainability of cannabis production. The sale of this property is being
made on an "as is, where is" basis. The purchase price is $10 million. We have
no commitment from any financing source to provide this funding as of the date
of this Report. In addition, we would require an additional $20 million of
financing to complete construction and place the facility into operational
status. As of the date of this filing, we continue to negotiate this transaction
with the relevant parties.
30
Sunniva Medical
Effective June 11, 2019, we along with a wholly-owned subsidiary of our Company
entered into a Securities Purchase Agreement with Sunniva, Inc, a British
Columbia, Canada corporation ("Sunniva") wherein we have agreed to acquire all
of the issued and outstanding securities of Sunniva's wholly-owned subsidiaries
Sunniva Medical Inc. ("SMI") and 1167025 B.C. LTD ("1167025").SMI and 1167025
are owners of real estate on properties that are subject to late-stage marijuana
licensed producer applications in Canada. We entered into various amendments to
the Securities Purchase Agreement, however, on June 8, 2020 we received notice
from Sunniva, Inc. of its exercise of its rights to terminate that Purchase
Agreement dated June 11, 2019, as amended, wherein we had agreed to purchase
Sunniva's wholly-owned subsidiaries Sunniva Medical Inc. and 1167025 B.C. LTD.
We recently filed an application to list our Common Stock for trading on the
OTCQB. We also intend to dual list our Common Stock for trading on the Canadian
Securities Exchange ("CSE") as a condition of consummating a transaction with
GN. We anticipate filing our initial listing application with the CSE in the
near future and, while no assurances can be provided, we anticipate receiving
approval for trading during the fourth quarter of 2020.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2020, we had $243,314 in cash.
In April 2018, we issued 60,000 shares of our Series A Convertible Preferred
Stock at a price of $1.00 per share. Each share of Series A Convertible
Preferred Stock is convertible into 1,250 shares of common stock and vote on an
as-converted basis. The rights and designations of these Preferred Shares
include the following:
· entitles the holder thereof to 1,250 votes on all matters submitted to a
vote of the shareholders;
· The holders of outstanding Series A Convertible Preferred Stock shall only
be entitled to receive dividends upon declaration by the Board of
Directors of a dividend payable on our Common Stock whereupon the holders
of the Series A Convertible Preferred Stock shall receive a dividend on
the number of shares of Common Stock in to which each share of Series A
Convertible Preferred Stock is convertible;
· Each Series A Preferred Share is convertible into 1,250 shares of Common
Stock; and
· not redeemable.
During 2018 we conducted a private offering of 12% Convertible Debentures where
we accepted subscriptions in the aggregate amount of $2,072,000 from 35
accredited investors, as that term is defined in Rule 501 of Regulation D. Each
Convertible Debenture is convertible into shares of our Common Stock at the
lesser of $0.40 or a 50% of the closing market price on the date a business
combination valued at greater than $5,000,000 is completed. We relied upon the
exemption from registration provided by Rule 506 of Regulation D to issue the
Convertible Debentures. We used the proceeds from this offering for the purchase
of AMS, as well as working capital, including costs associated with the
preparation of over three years of reports that had not been filed with the SEC.
During the initial calendar quarter of 2019 we entered into a Qualified
Financing with our minority purchase of GN stock and warrants described in Note
6, "Investment" to our Notes to our Financial Statements include herein. This
offering closed in January 2019. On March 31, 2019, the convertible notes
amounting to $2,072,000 along with $130,212 of accrued interest were converted,
pursuant to the automatic conversion terms included in the Convertible
Debentures, to shares of our Common Stock at a price of $0.40 per share, or a
total of 5,505,530 shares.
In the first quarter of 2019 we commenced a private offering of Units to
accredited investors only at a price of $1.00 per Unit, each Unit consisting of
one share of Series B Convertible Preferred Stock convertible into one share of
our Common Stock and one Common Stock Purchase Warrant exercisable to purchase
one share of our Common Stock at an exercise price of $2.00. In August 2019 we
closed this offering after accepting aggregate subscriptions totaling $475,000.
The Units were offered in reliance upon the exemption from registration provided
by Rule 506 of Regulation D. We use these funds for working capital purposes.
31
On July 8, 2019, we commenced a private offering of Units at a price of $50,000
per Unit, each Unit consisting of 50,000 shares of our Common Stock and one
$50,000 unsecured Convertible Note (a "Convertible Note"), which mature one year
from the date of issuance and accrue interest at 5% per annum. These Convertible
Notes are convertible into shares of our Common Stock at a conversion price of
$1.00 per share. During the year ended December 31, 2019, we issued 31 Units in
this Offering for net proceeds of $1,550,000 to six accredited investors. Since
our stock price exceeded the conversion feature of the Convertible Notes and was
immediately exercisable, we recorded a beneficial conversion feature ("BCF") and
expense of $1,550,000 which was charged to interest expense with an offset to
paid-in capital.
The 5,505,530 million shares of Common Stock included in the Units were valued
at $5,075,000. The excess above the $1,550,000 face value of the Convertible
Notes, or $3,525,000, was charged to interest expense with an offset to paid-in
capital. The remaining $1,550,000 was recorded as a Note discount of $1,550,000
to be amortized over the three year period from the date of the Note to the
maturity date. We recorded $552,602 in interest expense related to the
amortization of note discount during the year ended December 31, 2019.
We estimate that in order to complete development of the cultivation facilities
we presently own located in Hanover, Ontario, we would require approximately CAD
$20 million However, our ability to arrange such financing has been
significantly impaired by the collapse of the cannabis sector in late 2019 in
addition to the arrival of the COVD19 Pandemic in 2020. While no decision
whether to proceed or not has been made, we will either elect to sell this
property, or if it makes economic sense, develop an extraction facility.
As disclosed above, in June 2019 we executed an SPA with Sunniva in
consideration for the payment of CAD $20 million. In order to fully develop this
property we would need to raise both the purchase price, plus approximately CAD
$225 million to complete the development of this property.
On July 3, 2019, we entered into a 12% $1,000,000 Loan Agreement with Koze
Investments LLC ("Koze"), payable in full on June 28, 2020. Under the terms of
the 12% Note, Koze took a first security interest against our Hanover, Ontario
cannabis facility in progress and required us to pay off the existing mortgage
of approximately CAD $650,000. Additionally, we agreed to pay a 3% origination
fee, prepay six months of interest ($60,000) and to issue to Koze five-year
warrants to purchase 1,001,000 shares of our Common Stock at an exercise price
$1.00 per share. After paying the origination fees, the prepayment and paying
off the original mortgage, we used a portion of the remaining proceeds as
payment against the SMI purchase price of CAD $1,000,000. We are currently in
discussion with Koze to extend the maturity date of the Note. As of the date of
this Report, Koze has not asserted that a default has occurred and we believe we
will be successful in extending the maturity date; however there can be no
assurance.
In May 2019, a director loaned us the principal amount of $75,000. In October
2019, our Chief Executive Officer extended a loan to us in the principal amount
of $250,000. Subsequent partial repayments have reduced the $250,000 loan
balance to $220,000 as of September 30, 2020. Both of these loans are
non-interest bearing and are due upon demand.
On January 8, 2020, we issued two $100,000 Senior OID Convertible Promissory
Notes ("OID Notes) to two accredited investors ("Holders") and received $190,000
in proceeds. Under the provisions of the OID Notes, each Holder was granted the
right at their sole discretion to fund up to another $150,000 each under the
same terms. The maturity date for each additional tranche of these OID Notes
funded shall be twelve (12) months from the date of funding. One of these
debentures, $100,000 with accrued interest, was converted into common shares of
the Company, 30,000 Common Shares were issued on July 28, 2020 and 105,000
Common Shares were issued on August 24th to retire this debenture.
These Notes were issued with a one-year maturity date, an 8% interest rate. The
OID Notes are convertible into our Common Stock at a price equivalent to the
lower of $1.25/share at any time after 180 days, or 75% times the lowest closing
price of Common Stock for 20 consecutive trading days prior to conversion. In
the event of a change of control, the conversion price is 75% of the closing
price. We have the right to redeem these Notes at any time prior to maturity at
110% multiplied by the principal plus accrued interest plus outstanding accrued
interest plus default interest if any. These OID Notes, which also include
anti-dilution features, are senior obligations with priority over future debt,
excluding mortgage debt.
On February 27, 2020, we issued another OID Note for $160,000 to a third
accredited investor under comparable terms and received proceeds of $152,000.
This Note is convertible into shares of our Common Stock at a price equivalent
to: the lower of $1.25/share for the first 180 days from issuance, seventy-five
percent (75%) of the lowest closing price of our Common Stock during the twenty
(20) trading days immediately preceding Conversion Date. At issuance, we
delivered a stock certificate representing half the purchase price in a
restricted form (the "Returnable Shares") in the name of the investor (153,940
shares based on the low closing price of $0.812). The Returnable Shares will
only be returned to our treasury if the Note is prepaid in full within the
initial 180 days after issuance. This note was repaid in full with interest on
September 3, 2020 and 153,940 shares were returned.
32
On March 25, 2020, we issued an OID Note for $78,000 to an accredited investor
and received proceeds of $75,000. The Note was issued with a one-year maturity
date and a 10% interest rate. The OID Note is convertible into shares of our
Common Stock at a price equal to 61% multiplied by the Market Price/share (the
lowest closing price of our Common Stock form 20 consecutive trading days prior
to conversion) at any time after 180 days. The borrower has the right to
prepayment up to 180 days at a premium of between 115% and 135%.
On April 21, 2020, we received a loan from the Government of Canada under the
Canada Emergency Business Account program (CEBA). This loan was in the amount of
$40,000 CAD (USD $29,352 ). These funds are interest-free until December 31,
2022, at which time the remaining balance will convert to a 3-year term loan at
an interest rate of 5% per annum. If the Company repays the loan prior to
December 31, 2022, there will be loan forgiveness of 25% or $10,000 CAD.
On May 11, 2020, we issued another OID note for $53,000 from an accredited
investor (March 25, 2020 above) and received $50,000 in proceeds. This note has
a maturity date of May 11, 2021, an interest rate of 10% and conversion at any
time after 180 days at 61% multiplied by the lowest market price during the
preceding 20 trading days.
On June 4, 2020, we issued another OID note for $43,000 from an accredited
investor (March 25, 2020 above) and received $40,000 in proceeds. This note has
a maturity date of June 4, 2021, an interest rate of 10% and conversion at any
time after 180 days at 61% multiplied by the lowest market price during the
preceding 20 day trading period.
On May 22, 2020, we paid a fee of CAD $30,000 to InSpire Capital relating to a
Letter of Interest to provide financing for the purchase of the Sunniva
property. As the SPA to acquire Sunniva was terminated on June 8, 2020 as
discussed above, we did not proceed with this financing.
On May 25, 2020, we received $26,000 in proceeds in aggregate from non-interest
bearing promissory notes from three officers of the Company on an interest-free
basis. These notes are payable on demand, with no fixed payment terms.
On June 26, 2020, the Company engaged Teneo Securities to raise capital to
finance current acquisition targets with a closing date on any such financing on
September 15, 2020. The Company has paid a retainer of $25,000, with an
additional $25,000 fee per month going forward to act as the Company's financial
advisor.
Between July 8, 2020 and October 22, 2020, a series of convertible debentures
totaling $1,550,000 reached their maturity dates. These notes remain outstanding
and we continue to accrue the required interest on the principal balance. As of
the date of this Report, the noteholders have not asserted that a default has
occurred and, while there can be no assurance, we believe we will be successful
in extending the maturity dates of these notes.
On August 17, 2020, we issued a $157,500 8% convertible debenture to an
accredited investor for proceeds of $150,000. This note matures on August 17,
2021 and converts at 55% of lowest trading price 20 days prior to conversion.
On August 25, 2020, we issued 25,000 common shares on conversion of warrants at
$0.40 per common share for proceeds of $10,000.
On September 1, 2020, we issued a $220,000 10% convertible debenture to an
accredited investor for proceeds of $200,000. This note matures June 1, 2021
with 5 equal principal/interest repayments of $48,400 between February 1 and
June 1, 2021. Conversion is at $0.75 per share.
On September 3, 2020, we issued a $43,500 10% convertible debenture to an
accredited investor for proceeds of $40,000. This note matures September 3, 2021
and converts at any time after 180 days. Conversion price is the variable
conversion price of 61% multiplied by the lowest market price during the 20 day
trading period prior to conversion.
On September 25, 2020, we issued a $250,000 10% convertible debenture to an
accredited investor for proceeds of $235,000. This note matures June 25, 2021
and converts at any time after 180 days. Conversion price is 60% multiplied by
the lowest trading price during the preceding 20 day trading period.
During the three months ended September 30, 2020, we recorded $52,767 in
interest expense on these Notes and amortized $306,183 of note discount which
was charged to interest expense.
Currently, we have no committed source for any funds to allow us to complete any
of our proposed acquisitions or projects. No representation is made that any
funds will be available when needed. In the event funds cannot be raised if and
when needed, we may not be able to carry out our business plan. Our inability to
obtain funding for our projects will have a negative impact on our anticipated
results of operations.
33
Subsequent Events
On October 1, 2020, $35,000 of a convertible debenture was converted at $0.3172
into 110,340 common shares of the Company and the remainder of this $78,000
debenture was repaid in full with interest on October 6, 2020 in the amount of
$64,669.87.
The Company entered into a cooperation agreement with Klonetics Plant Science
Inc., a Company that engages in the business of genetic research and
development, tissue culture propagation, plantlet production, ready to flower
production within the cannabis industry throughout the world. The parties
consider it advantageous to pool their respective experience, expertise, knowhow
and capabilities in the area of land acquisition, financing, development,
operations, and respective areas of industry focus. The parties wish to commence
their intended long-term cooperation by pursuing projects in selected areas of
focus initially before extending it to a larger scale merger between the
parties, which may be discussed at a later date with terms to be determined and
agreed by the parties. CannapharmaRx will invest up to a maximum percentage of
Thirty Percent (30%) of the issued and outstanding shares of Klonetics. On
October 6, 2020, CannapharmaRx Inc invested $50,000 CAD in exchange for 83,333
Class A Common Shares at $0.60 CAD per share.
On October 21, 2020, we executed a Common Stock Purchase Agreement with Granite
Global Value Investments Ltd. ("Granite") whereby Granite would agree to
purchase $4,000,000 of our Common Stock at a price equal to 80% of the lowest
trading price of the prior ten trading days. Granite would purchase shares of
our Common Stock in tranches of between $25,000 and $250,000. In order to
consummate this financing, we will be required to file, and have declared
effective, a Registration Statement on Form S-1 with the Securities and Exchange
Commission.
On October 10, 2020, the Herick Parties filed a Motion to Dismiss the Fourth and
Fifth Claims for Relief. On October 30, 2020, the Parties filed a Stipulated
Motion for an Extension of Time, through and including November 16, 2020, for us
to respond to the Herick Parties' Motion to Dismiss the Fourth and Fifth
Claims for Relief. We and the Herick Parties are currently in active settlement
negotiations which we believe are likely to result in a written settlement
agreement and dismissal of all claims. The Parties currently anticipate
completion of such settlement agreement on or before November 16, 2020.
On October 15, 2020 the Company entered into a convertible debenture with an
accredited investor in the amount of $110,000 with a $10,000 OID. This debenture
bears 10% interest and is convertible into common shares at 40% of the lowest
closing price during the previous 20 trading days to the date of conversion.
Prepayment of this note is authorized at 0-60 days at 115%, 61-90 days at 125%,
91-120 days at 130%, 121-150 days at 135%, 151-180 days at 140% and after 180
days at 145%. In the event of default interest increases to 18%.
On October 23, 2020, the Company entered into a convertible debenture with an
accredited investor in the amount of $82,500 with a $3,750 OID and 12 months of
prepaid interest at $3,750 or 5%. This debenture is convertible into common
shares at 70% of the lowest closing price during the previous 25 trading days
prior to conversion date. Prepayment is authorized at 0-60 days at 115%, 61-180
days at 130%. No prepayment after 180 days. Interest increases to 24% if default
occurs.
Inflation
Although our operations are influenced by general economic conditions, we do not
believe that inflation had a material effect on our results of operations during
the three-month period ended September 30, 2020.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions. The following represents a summary of our critical
accounting policies, defined as those policies that we believe are the most
important to the portrayal of our financial condition and results of operations
and that require management's most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effects of matters
that are inherently uncertain.
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