0001683168-18-002736.txt : 20180914 0001683168-18-002736.hdr.sgml : 20180914 20180914074247 ACCESSION NUMBER: 0001683168-18-002736 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 38 CONFORMED PERIOD OF REPORT: 20161231 FILED AS OF DATE: 20180914 DATE AS OF CHANGE: 20180914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANNAPHARMARX, INC. CENTRAL INDEX KEY: 0001081938 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 274635140 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27055 FILM NUMBER: 181070065 BUSINESS ADDRESS: STREET 1: 2 PARK PLAZA, STE. 1200-B CITY: IRVINE STATE: CA ZIP: 92614 BUSINESS PHONE: 949-652-6838 MAIL ADDRESS: STREET 1: 2 PARK PLAZA, STE. 1200-B CITY: IRVINE STATE: CA ZIP: 92614 FORMER COMPANY: FORMER CONFORMED NAME: GOLDEN DRAGON HOLDING CO. DATE OF NAME CHANGE: 20110125 FORMER COMPANY: FORMER CONFORMED NAME: CCVG, INC. DATE OF NAME CHANGE: 20101117 FORMER COMPANY: FORMER CONFORMED NAME: CONCORD VENTURES, INC. DATE OF NAME CHANGE: 20071003 10-K 1 cannapharmarx_10k-123116.htm FORM 10-K

Table of Contents

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

__________________

 

FORM 10-K

 

__________________

 

(Mark one)

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
   
o TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ________________ to________________________.

 

Commission File Number: 000-27055

 

CANNAPHARMARX, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   27-4635140
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)
     

2 Park Plaza

Suite 1200B

Irvine, CA

92614 (949) 652-6838
(Address of principal executive office) (Zip Code) (Registrant’s telephone number, Including area code)

  

Securities registered pursuant to Section 12(b) of the Act: None.

 

Securities registered pursuant to Section 12(g) of the Act:  Common Stock.

 

Title of each class   Name of each exchange on which registered
Common Stock, $0.0001 par value   OTC Pink Sheets

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x No

 

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. o Yes x No

 

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). o Yes x No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Yes x No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one)

 

Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller Reporting Company x
Emerging growth company x  

 

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 Act). x Yes   o  No

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter on June 30, 2016 was $8,397,371.

 

As of September 14, 2018, the Registrant had 17,960,741 shares of Common Stock issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

None

 

 

 

   

 

 

 

TABLE OF CONTENTS

 

    Page No.
PART I    
Item 1. Business 3
Item 1A. Risk Factors 4
Item 1B. Unresolved Staff Comments 4
Item 2 Properties 4
Item 3. Legal Proceedings 5
Item 4. Mine Safety Disclosures 5
     
PART II    
Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities 6
Item 6. Selected Financial Data 8
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 8
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure 13
Item 9A. Controls and Procedures 14
Item 9B. Other Information 15
     
PART III    
Item 10. Directors, Executive Officers and Corporate Governance 16
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 20
Item 13. Certain Relationships and Related Transactions, and Director Independence 20
Item 14. Principal Accounting Fees and Services 21
     
PART IV    
Item 15. Exhibits, Financial Statement Schedules 22
     
  Signatures 23

 

 

 

 

 2 

 

 

FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The statements regarding Capital Art, Inc. contained in this Report that are not historical in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “likely,” “expects,” “anticipates,” “estimates,” “believes” or “plans,” or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements.

 

Important factors known to us that could cause such material differences are identified in this Report. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any future disclosures we make on related subjects in future reports to the SEC.

 

PART I

 

Item 1. Business.

 

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 y (the “Reorganization") which provided for the merger of two of our wholly owned subsidiaries. As a result of this reorganization our name was changes to “Golden Dragon Inc.”, which became the surviving publicly quoted parent holding company.

 

On May 9, 2014, 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.

 

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.

 

In April 2016, we ceased operations. Our then management resigned their respective positions with our Company, with the exception of Mr. Gary Herick, who remains as one of our officers and directors.

 

 

 

 3 

 

 

As a result, we are now considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended.

 

Our executive offices are located at Our principal place of business is located at 2 Park Plaza, Suite 1200B, Irvine, CA, 92614, phone (949) 652-6838. Our website address is www.cannapharmarx.com.

 

Employees

 

During 2016 and as of the date of this report we have no employees except our current management. See “Part III, Item 10, Management” below.

 

Competition

 

We are competing with other publicly held companies who are also seeking to acquire or otherwise consolidate with an existing business. We believe that the only thing that may separate us from these competitors is our interest in the cannabis industry, but there are no assurances that this provides any competitive edge. Most of our competitors have greater resources, both financial and otherwise, than the resources presently available to us.

 

Intellectual Property

 

We currently do not hold any patents or patent applications. We hold one registered trademark, RECRUIT Registry. This report contains additional trademarks, service marks, or trade names of others. Our use or display of other parties’ trademarks, service marks or trade names is not intended to imply and does not imply a relationship with, or endorsement of, such parties. We seek to protect our proprietary information, including our trade secrets and proprietary know-how, by requiring our employees, consultants and other advisors to execute confidentiality agreements upon the commencement of their employment or engagement. These agreements generally provide that all confidential information developed or made known during the course of the relationship with us be kept confidential and not be disclosed to third parties except in specific circumstances. In the case of our employees, the agreements also typically provide that all inventions resulting from work performed for us, utilizing our property or relating to our business and conceived or completed during employment shall be our exclusive property to the extent permitted by law. Where appropriate, agreements we obtain with our consultants also typically contain similar assignment of invention provisions. Further, we generally require confidentiality agreements from business partners and other third parties that receive our confidential information.

 

Item 1A. Risk Factors.

 

We are a smaller reporting company and not required to include this disclosure in our Form 10-K annual report.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

Item 2. Properties.

 

During our fiscal year ended December 31, 2016, Mr. Herick provided office space at his home at no cost to the Company.

 

On April 1, 2018 we changed our principal place of business to 2 Park Plaza, Suite 1200 – B. Irvine, CA. 92614, phone: 949-652-6838. This space is provided to us on a twelve month term by a company to which Mr. Nicosia, one of our directors, serves as Chief Executive Officer. Our monthly rent is $1,000, however, as of the date of this filing, we have not made any rent payments and continue to accrue those amounts as accounts payable. We believe this location will be sufficient for our current business purposes until such time an acquisition is consummated.

 

 

 

 

 4 
 

 

 

Item 3. Legal Proceedings.

 

On October 30, 2014, Gary M. Cohen (“Mr. Cohen”), former president, Chief Operating Officer and board member of CannaRx, filed a lawsuit against CannaRx in the Circuit Civil Court of the Thirteenth Judicial District in and for Hillsborough County, Florida, in Division T. On November 11, 2014, we sued Mr. Cohen in the U.S. District Court for the District of New Jersey, alleging tortious interference with business relationships and defamation due to publishing fake press releases on the Internet concerning his lawsuit against us.

 

On March 25, 2015, we reached an agreement with Mr. Cohen in principle to the terms of a settlement agreement that resolved the aforementioned lawsuits. As part of that agreement in principle we agreed to purchase all of Mr. Cohen’s 2,250,000 shares for a purchase price of $350,000, with $85,000 payable up front and the remainder payable in equal installments of $15,000 per month over the next 17 months, and a final payment of $10,000 in the eighteenth month. In addition to this $350,000 cash expense, we issued Mr. Cohen 600,000 restricted shares of our common stock.

 

FINRA Action

 

On January 29, 2015, we received a deficiency notice from the Financial Industry Regulatory Authority (“FINRA”), stating that FINRA would not process our name change from October 2014 due to questions about our ownership raised in the Cohen litigation described above. We appealed the notice, arguing among other things that the ownership of our Company was not at issue in the Cohen litigation. On March 20, 2015, FINRA reversed the deficiency notice and subsequently processed ours request to change our name and trading symbol.

 

In addition to the above-mentioned matters, we may be subject, from time to time, to various legal proceedings and claims. Any such claims, whether with or without merit, could be time-consuming and expensive to defend and could divert management’s attention and resources. We cannot assure that the outcome of all current or future litigation will not have a material adverse effect on us and our results of operation.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

 

 

 5 

 

 

PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

Our common stock is quoted on the over the counter pink sheets under the trading symbol “CPMD.” Trading volume in our Common Stock is very limited. As a result, the trading price of our Common Stock is subject to significant fluctuations.

 

There can be no assurance that a liquid market will develop in the foreseeable future.

 

Transfer of our common stock may also be restricted under the securities or blue sky laws of certain states and foreign jurisdictions. Consequently, investors may not be able to liquidate their investments and should be prepared to hold the common stock for an indefinite period of time.

 

The following table sets forth the high and low bid quotations for our Common Stock as reported on the on the pink sheets for the periods indicated.

 

   High   Low 
Fiscal 2015  $   $ 
         
First Quarter   2.50    3.45 
Second Quarter   3.60    3.00 
Third Quarter   3.50    1.60 
Fourth Quarter   3.00    1.10 
           
Fiscal 2016          
           
First Quarter   2.00    0.40 
Second Quarter   0.55    0.40 
Third Quarter   0.90    0.20 
Fourth Quarter   0.70    0.35 

 

As of September 11, 2018, the closing price of our Common Stock was. $0.50 per share.

 

The Securities Enforcement and Penny Stock Reform Act of 1990

 

The Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

 

As of the date of this Report, our Common Stock is defined as a “penny stock” under the Securities and Exchange Act. It is anticipated that our Common Stock will remain a penny stock for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.

 

 

 

 6 

 

 

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the Commission, which:

 

  · contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

 

  · contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities Act of 1934, as amended;

 

  · contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the bid and ask price;

 

  · contains a toll-free telephone number for inquiries on disciplinary actions;

 

  · defines significant terms in the disclosure document or in the conduct of trading penny stocks; and

 

  · contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation.

 

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:

 

  · the bid and offer quotations for the penny stock;

 

  · the compensation of the broker-dealer and its salesperson in the transaction;

 

  · the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and

 

  · monthly account statements showing the market value of each penny stock held in the customer's account.

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities.

 

Holders

 

As of December 31, 2016, there were 17,960,741 shares of our common stock issued and outstanding, which were held by 205 stockholders of record, not including those persons holding shares in “street name.” As of the date of this Report there were 17,960,741 Common Shares issued and outstanding, held by 205 holders of record, not including those persons holding shares in “street name.”

 

 

 

 7 

 

 

Stock Transfer Agent

 

Our stock transfer agent for our securities is Mountain Share Transfer, Inc., 2030 Powers Ferry Road SE, Suite 212, Atlanta, GA 30339. Their telephone number is (303) 460-1149.

 

Dividends

 

We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.

 

Reports

 

We are subject to certain reporting requirements and furnish annual financial reports to our stockholders, certified by our independent accountants, and furnish unaudited quarterly financial reports in our quarterly reports filed electronically with the SEC. All reports and information filed by us can be found at the SEC website, www.sec.gov. As of the date of this report we need to file quarterly and annual reports for 2016, 2017 and 2018 which we intend to file in the near future.

 

Item 6.  Selected Financial Data.

 

As a smaller reporting company, we are not required to provide this information.

 

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion should be read in conjunction with our audited 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 changes to “Golden Dragon Inc.”, which became the surviving publicly quoted parent holding company.

 

 

 

 8 

 

 

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.

 

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.

 

In April 2016, we ceased operations. Our then management resigned their respective positions with our Company, with the exception of Mr. Gary Herick, who remains as one of our officers and directors.

 

As a result, we are now considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended.

 

Our executive offices are located at Our principal place of business is located at 2 Park Plaza, Suite 1200B, Irvine, CA, 92614, phone (949) 652-6838. Our website address is www.cannapharmarx.com.

 

Because we have not generated any revenues during our prior two years, following is our Plan of Operation.

 

PLAN OF OPERATION

 

As of the date of this Report we intend to engage in what we believe to be synergistic acquisitions or joint ventures with a company or companies that we believe will enhance our business plan. Ultimately, our intent is to become a national or internationally branded cannabis cultivation company, or otherwise engage in the cannabis industry. However, if an opportunity in another industry arises we will review that opportunity as well. One of the benefits to our being a reporting and publicly traded company, is to allow us to utilize our securities as consideration for some, or all of the purchase price of these potential acquisitions. There are no assurances we will be able to consummate any acquisitions using our securities as consideration, or at all.

 

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

 

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

 

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

 

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

 

 

 

 9 

 

 

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

 

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

 

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

 

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

 

  ·  increased visibility in the financial community;
  ·  increased valuation;
  ·  greater ease in raising capital;
  ·  compensation of key employees through stock options for which there may be a market valuation; and
  ·  enhanced corporate image.

 

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

 

  · required publication of corporate information;
  · required filings of periodic and episodic reports with the Securities and Exchange Commission.

 

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

 

  · a company for which a primary purpose of becoming public is the use of its securities for the acquisition of assets or businesses;
  · a company which is unable to find an underwriter of its securities or is unable to find an underwriter of securities on terms acceptable to it;
  · a company which wishes to become public with less dilution of its securities than would occur upon an underwriting;
  · a company which believes that it will be able to obtain investment capital on more favorable terms after it has become public;
  · a foreign company which may wish an initial entry into the United States securities market;
  · a special situation company, such as a company seeking a public market to satisfy redemption requirements under a qualified Employee Stock Option Plan;
  · a company seeking one or more of the other perceived benefits of becoming a public company.

 

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

 

 

 

 10 

 

 

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

 

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

 

(1) No or nominal operations; and

(2) Either:

(i) No or nominal assets;

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

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

 

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

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of December 31, 2016, we had no cash or cash equivalents.

 

In March 2015, we commenced a private placement of our common stock to accredited investors at $1.50 per share. Through September 30, 2015, we issued an aggregate of 536,334 shares and received $804,500 in gross proceeds.

 

We have no revenue-producing operations or other source of income as of the date of this Report, nor have we had any revenue during the past 3 years. See “Plan of Operation” above herein for an explanation of our current business activities.

 

It is our current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to us. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by us to successfully implement these plans would have a material adverse effect on our business, including the possible inability to continue operations.

 

Subsequent Events – Recent Financings

 

Also in April 2018, we issued 60,000 shares of our Series A Convertible Preferred Stock at a price of $1.00 per share to our current management, all of whom are accredited investors. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of common stock and vote on an as converted basis. The rights and designations of these Preferred Shares include the 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.

 

 

 

 11 

 

 

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

 

We must raise additional funds to support our expected operating plan and our continued operations. We cannot provide any assurances that we will be able to raise such funds or whether we would be able to raise such funds on terms that are favorable to us. We may seek to borrow monies from lenders at commercial rates, but such lenders will probably be at higher than bank rates, which higher rates could, depending on the amount borrowed, render the net operating income of any of our planned profitable businesses insufficient to cover the interest burden.

 

Currently, we have no committed source for any funds as of the date hereof. No representation is made that 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 and could fail in business as a result of these uncertainties.

 

Inflation

 

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the year ended December 31, 2016.

 

Critical Accounting Policies and Estimates

 

Critical Accounting Estimates

 

Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended December 31, 2014 in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

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

 

Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

 

 

 

 12 

 

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

Item 7a. Quantitative And Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide this information.

 

Item 8. Financial Statements And Supplementary Data

 

The financial statements and supplementary financial information required by this Item are set forth immediately following the signature page and are incorporated herein by reference.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

On June 11, 2018, we engaged BF Borgers CPA PC as our independent registered public accounting firm, and effective June 11, 2018, we dismissed KLJ & Associates, LLP (“KLJ”), as our independent registered public accounting firm. The decision to dismiss KLJ and to appoint BF Borgers CPA PC was approved by our board of directors. No audit or audit related services were performed between us and Borgers prior to their appointment. 

 

KLJ’s report on our financial statements for either of the two fiscal years ended December 31, 2014 and 2013 did not contain an adverse opinion or disclaimer of opinion, or qualification or modification as to uncertainty, audit scope, or accounting principles, except that such report on our financial statements contained an explanatory paragraph in respect to the substantial doubt about our ability to continue as a going concern.

 

During the two fiscal years ended December 31, 2014 and 2013 and in the subsequent interim period through the date of dismissal, there were no disagreements, resolved or not, with KLJ on any matter of accounting principles or practices, financial statement disclosure, or audit scope and procedures, which disagreement(s), if not resolved to the satisfaction of KLJ, would have caused KLJ to make reference to the subject matter of the disagreement(s) in connection with its report. During our two most recent fiscal years ended December 31, 2014 and 2013 and in the subsequent interim period through the date of dismissal, there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K.

 

The audit report of KLJ on our financial statements as of and for the years ended December 31, 2014 and 2013 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, except relevant to the audit reports for the years ended December 31, 2014 and 2013, which stated as follows:

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company, has suffered net losses and has had negative cash flows from operating activities during the years ended December 31, 2014 and 2013. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

 

Borgers has been retained to audit our financial statement for our fiscal years ending December 31, 2015, 2016 and 2017, and have included the 2015 report as part of this annual report on Form 10-K for our fiscal year ending December 31, 2015.

 

 

 

 13 

 

 

Item 9A. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Disclosure Controls and Procedures–Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report.

 

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO/CFO to allow timely decisions regarding required disclosure.

 

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of December 31, 2016, at reasonable assurance levels.

 

We believe that our financial statements presented in this annual report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

 

Inherent Limitations – Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

 

Changes in Internal Control over Financial Reporting – There were no changes in our internal control over financial reporting during our fiscal year ended December 31, 2016, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

 

 

 

 14 

 

 

Management Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act. Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

  · Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
  · Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and
  · Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, our management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Based on its assessment, management has concluded that as of December 31, 2016, our disclosure controls and procedures and internal control over financial reporting were ineffective, based in part on the issues discussed above.

 

Item 9b. Other Information

 

None.

  

 

 

 

 15 

 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

The following table sets forth information concerning management of our Company as of the date of filing of this report.

 

Name  Age   Position
Dominick Colvin   51   Chief Executive Officer, President, director
Gary Herick   55   Chief Financial Officer, director
Matt Nicosia   44   director
Jim Samuelson   48   director

 

Dominick Colvin, 51, was appointed as our Chief Executive Officer, President and a director in April 2018. In addition to his positions with our Company, since June 2007 Mr. Colvin has been President of PLC International Investments, Inc., a private held Canadian company engaged in power production, oil and coal mining.

 

Gary Herick, 55, was appointed as our Chief Financial Officer in April 2018. Since April 2016, he had been our President and CEO, as well as a director, a position he has retained. In addition to his positions with our Company, Mr. Herick has been President of Arrowhead Consulting, LLC, Edwards, Colorado, a general business consulting company. From May 2011 through August 2017 he was also Director of Finance for Hinto Energy Inc., a public reporting company until 2017 that was engaged in the oil and gas industry. In August 2017, a petition to place Hinto Energy in involuntary bankruptcy was filed. As of the date of this report no final adjudication of this matter has occurred.

 

Matthew Nicosia 44, was appointed as a director of our Company in April 2018. Since November 2006, Mr. Nicosia has also been the Chairman and CEO of Vivakor Inc., a Nevada corporation based in Irvine, CA, whose common stock trades on the OTC Markets, which is an asset acquisition company focused on the natural resources and precious metals industry. In addition, from January 2011 through March 2012, Mr. Nicosia was founder, Chairman and CEO of Regeneca, Inc. a Southern California-based skin care company, which produced consumer, prescription and OTC products distributed through plastic surgeons and dermatologists as well as through retail and other mass-marketing channels. Mr. Nicosia received his Bachelor of Arts degree in International Relations and Portuguese from Brigham Young University in 1997 and an MBA from Pepperdine University in 2002.  Mr. Nicosia is fluent in Portuguese and Spanish.

 

James Samuelson, 48, was appointed as a director of our Company in April 2018. Since June 2017, Mr. Samuelson has served as a consultant to Vivakor, Inc., a Nevada corporation based in Irvine, CA, whose common stock trades on the OTC Markets which is an asset acquisition company focused on the natural resources and precious metals industry. From January 2006 to June 2016, Mr. Samuelson served as CEO and President of Mid-America Renewable Fuels, Inc., a privately held company engaged in the development and acquisition of renewable energy facilities. Prior to 2006, Mr. Samuelson served as the Chief Financial Officer of a publicly traded technology company headquartered in Berlin, Germany and worked as an investment banker in Paris, France and Vienna, Austria. Mr. Samuelson received a B.S.B.A. in 1992 and a MBA in 1996, both from Creighton University.

 

The following person was our sole director and executive officer as of December 31, 2016.


Name

  Age   Position
Gary Herick(2)   55   Director

 

 

 

 16 

 

 

Director Independence

 

During 2016 our Board was composed of one member. As of the date of this Report, it consists of four members. Our Common Stock is not currently listed for trading on a national securities exchange and, as such, we are not subject to any director independence standards. No member of our Board of Directors is considered an independent director. We evaluated independence in accordance with the rules of The New York Stock Exchange, Inc., which generally provides that a director is not independent if: (i) the director is, or in the past three years has been, an employee of ours; (ii) a member of the director’s immediate family is, or in the past three years has been, an executive officer of ours; (iii) the director or a member of the director’s immediate family has received more than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (iv) the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (v) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation committee; or (vi) the director or a member of the director’s immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three years, exceeds the greater of $1,000,000 or 2% of that other company’s gross revenues.

 

Board Committees

 

As of the date of this report we do not have any committees of our Board of Directors. We expect to form an Audit Committee, a Compensation Committee, a Corporate Governance Committee, and a Nominating Committee in the near future. Thus, there is a potential conflict of interest in that our directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or directors.

 

There are no family relationships among any of our officers or directors.

 

Involvement in Certain Legal Proceedings

 

To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:

 

  1. any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer, with the exception of Gary Herick who served as an officer of Hinto Energy which is subject to an involuntary bankruptcy proceeding, either at the time of the bankruptcy or within two years prior to that time;
     
  2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
     
  3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; 
     
  4. being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
     
  5. being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
     
  6. being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

 

 

 17 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section16(a) of the Securities Exchange Act of 1934 (the “34 Act”) requires our officers and directors and persons owning more than ten percent of the Common Stock, to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Additionally, Item 405 of Regulation S-K under the 34 Act requires us to identify in our Form 10-K and proxy statement those individuals for whom one of the above referenced reports was not filed on a timely basis during the most recent year or prior years. To the best of our knowledge, all required reports were filed, but filed late. Relevant to our new management, as of the date of this report we are in the process of obtaining the personal codes of new management. Once done all reports are expected to be filed.

 

CODE OF ETHICS

 

A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:

 

  · Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

  · Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by an issuer;

 

  · Compliance with applicable governmental laws, rules and regulations;

 

  · The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

 

  · Accountability for adherence to the code.

 

In 2014, we adopted a corporate Code of Business Conduct and Ethics (our “Code of Ethics”) that applies to our principal executive officer, principal accounting officer, and all persons performing similar functions, and we distributed this document to all employees then. We now ask all new employees to acknowledge in writing their receipt and understanding of this document as part of the hiring process. Our Code of Ethics is publicly available on our Internet website at http://cannapharmarx.com/wp-content/uploads/2014/12/Business_Code_of_Conduct.pdf.

 

Item 11. Executive Compensation.

 

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our CEO and our most highly compensated executive officers in 2016 and 2015. We did not then have an established policy to provide compensation to members of our Board of Directors for their services in that capacity, although we may choose to adopt a policy in the future.

 

 

 

 18 

 

 

SUMMARY COMPENSATION TABLE

 

Name and Position   Year  

Salary

($)

   

Bonus

($)

    Option
awards
($)(1)
    All other
compensation
($)
   

Total

(S)

 
Gerald E. Crocker, CEO   2016                              
    2015     150,000                   34,476       184,476  
                                             
Gary Herick, CFO (2)   2016     92,459 (2)                       92,459  
    2015     77,624                         77,624  
                                             
James Smeeding, President (3)   2016     50,000                         50,000  
    2015     123,886                         123,886  
                                             
Mathew Sherwood, VP of R&D (3)   2016     50,000                         50,000  
    2015     128,829                         128,829  

_______________________

(1) Each of these directors also served as executives and officers with the Company in 2014. As such, each were issued 750,000 options subject to vesting over three years, one-third for each year of service, exercisable at an exercise price of $3.78 per share granted on November 1, 2014. Valuation of options awards was based on Black-Scholes modeling, as discussed in Note 1 to the Company’s financial statements included with this report. 
(2) Mr. Herick resigned as Chief Financial Officer effective February 9, 2015 and was appointed again as our CFO in April 2016. All of his 2016 compensation has been accrued.

 

There were no employment or other agreements with our executive officers, and no salaries were paid as such in 2016 and 2015.

 

Outstanding Equity Awards at Fiscal Year-End

 

Our officers and directors do not have unexercised options, stock that has not vested, or equity awards. There were no outstanding equity awards to our named executive officers as of December 31, 2016 or 2015.

 

Mr. Herick was granted stock options to purchase an aggregate of 750,000 common shares at an exercise price of $1.00. These options expire November 1, 2024 if not exercised.

 

Director Compensation

 

No compensation was paid to Mr. Herick, the Company’s only director in 2016. 

 

Other than as disclosed herein, our directors did not receive any compensation during the years ended December 31, 2016 and 2015, in consideration for their services rendered in their capacity as directors and no arrangements are presently in place regarding compensation to directors for their services as directors or for committee participation or special assignments. We did not pay any directors fees for meeting attendance.

 

We do not believe risks arising from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect upon us

 

Equity Compensation Plans

 

As of the date of this report, we do not have any equity compensation plan but may adopt one or more in the future.

 

 

 

 19 

 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth certain information regarding the ownership of Common Stock as of the date of this Report, by (i) each person known to us to own more than 5% of our outstanding Common Stock as of the date of this Report, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group.  Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power. The address for each Beneficial Owner named is the address of our principal executive office. The percentage of ownership is based upon 17,960,741 Common Shares and 60,000,000 Series A Convertible Preferred Shares issued and outstanding as of the date of this Report.

 

Title of Class   Name of Beneficial Owner   Amount and Nature Of Beneficial Ownership     Percent Of Class  
Common and Series A Preferred  

Gary Herick(1)

2 Park Plaza

Suite 1200B

Irvine, CA 92614

    26,166,000       28.1%  
Series A Preferred  

James Samuelson(1)

2 Park Plaza

Suite 1200B

Irvine, CA 92614

    25,000,000       26.9%  
Series A Preferred  

Matt Nicosia(1)

2 Park Plaza

Suite 1200B

Irvine, CA 92614

    25,000,000       26.9%  
Common and Series A Preferred   All Officers and Directors as a Group (4 person)     76,166,000       81.9%  

_______________________

(1) Officer and/or Director of our Company.
  (2) Includes 20,000 shares of Series A Convertible Preferred Share will entitle the holder thereof to 1,250 votes on all matters submitted to a vote of the shareholders.
  (3) Includes 826,000 shares of our Common Stock owned by companies owned and controlled by Mr. Herick, as well as family members. Mr. Herick disclaims ownership of 300,000 of these shares.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

On May 9, 2014, Mr. Cutler, our former Officer and a director, to whom we owed $234,981 on a related-party loan, released all claims as to this debt. This loan was retired and settled in the share purchase transaction where CannaRx acquired 9,000,000 shares of our common stock in exchange for $296,000. Mr. Cutler’s interest in this transaction was $146,000. Additionally, on May 9, 2014, CannaRx also acquired 1,421,120 shares directly from Mr. Cutler in exchange for $54,000. In total, on May 9, 2014, Mr. Cutler received $200,000 in full payment of both his related-party loan and for 1,421,120 shares of Golden Dragon Holding Co. During 2014, the largest amount of principal outstanding on the loan was $234,981. The rate of interest payable on the loan was 8%. All related-party debt, including all accrued interest, was relieved in the May 9, 2014 Share Purchase Agreement among Golden Dragon Holding Co, David J. Cutler and CannaRx.

 

On May 15, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CannaRx and CPHR Acquisition Corp., a newly-formed and wholly owned subsidiary of the Company (“CPHR”), pursuant to which CPHR would be merged with and into CannaRx, resulting in CPHR ceasing its corporate existence and CannaRx becoming a subsidiary of the Company. In light of the Cohen litigation described in Item 3 (Legal Proceedings) of this report, the parties determined to abandon the Merger Agreement.

 

 

 

 20 

 

 

In the fourth quarter of 2014, we authorized the entrance into an exchange agreement and representations with certain shareholders of CannaRx. The form of that exchange agreement and representations (the “Exchange Agreement”) is attached to this Annual Report on Form 10-K as Exhibit 10.2. Pursuant to the Exchange Agreement, each CannaRx shareholder party agreed to exchange his or her shares of CannaRx on a one-for-one basis in exchange for shares of our Common Stock. The parties subsequently decided to terminate the Exchange Agreement.

 

As of December 31, 2016 and December 31, 2015, there were no receivable due from related parties. As of December 31, 2016, there was $150,000 due to two former directors, which was accrued salaries arising out of services provided in 2015 and 2016. We are currently in discussions with these individuals to settle this obligation.

 

Subsequent Events

 

On April 1, 2018 we changed our principal place of business to 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space is provided to us on a twelve month term by a company to which Mr. Nicosia, one of our directors, serves as Chief Executive Officer. Our monthly rent is $1,000, however, as of the date of this filing, we have not made any rent payments and continue to accrue those amounts as accounts payable.

 

Item 14. Principal Accounting Fees and Services.

 

B F Borgers CPA PC was appointed as our independent auditor in June 2018, to audit our financial statements for the fiscal years ended December 31, 2015, 2016 and 2017. The following table reflects the fees paid or accrued to our independent auditor in the years ended December 31, 2015 and 2016:

 

   December 31, 2016   December 31, 2015 
Audit Fees  $9,500   $5,000 
Tax Fees  $   $ 
All Other Fees  $   $ 

 

 

 

 

 

 

 21 

 

 

PART IV

 

Item 15. Exhibits, Financial Statements Schedules.

 

The following exhibits are included with this report:

 

Exhibit Number   Description
     
31.1   Certification of Chief Executive Officer required by Rule 13a-14(a) under the Exchange Act (filed herewith).
     
31.2   Certification of Chief Financial Officer required by Rule 13a-14(a) under the Exchange Act (filed herewith).
     
32   Certification of Principal Executive, Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (filed herewith).

 

 

 

 

 

 

 

 

 

 

 22 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunder duly authorized.

 

  CANNAPHARMARX, INC.  
       
Dated: September 14, 2018 By: /s/ Dominic Colvin  
   

Dominic Colvin,

Principal Executive Officer

 
       
       
  By: /s/ Gary Herick  
   

Gary Herick,

Principal Financial and Accounting Officer

 
       

 

In accordance with the Exchange Act, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on September 14, 2018.

 

s/ Dominic Colvin

Dominic Colvin, Director

 

s/ Gary Herick

Gary Herick, Director

 

s/ Matt Nicosia

Matt Nicosia, Director

 

s/ James Samuelson

James Samuelson, Director

 

 

 

 

 

 23 

 

 

INDEX TO FINANCIAL STATEMENTS

 

    Page
     
Report of Independent Registered Accounting Firm   F-2
     
Audited Financial Statements:    
     
Balance Sheets as of December 31, 2016 and 2015   F-3
     
Statements of Operations for the Years ended December 31, 2016 and 2015   F-4
     
Statement of Changes in Shareholders’ Equity (Deficit) for the years ended December 31, 2016 and 2015   F-5
     
Statements of Cash Flows for the years ended December 31, 2016 and 2015   F-6
     
Notes to the Financial Statements   F-7

 

 

 

 

 

 

 

 

 

 

 F-1 

 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of CannaPharmaRx, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of CannaPharmaRx, Inc. (the "Company") as of December 31, 2016 and 2015, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ BF Borgers CPA PC            

BF Borgers CPA PC

 

We have served as the Company's auditor since 2018.

Lakewood, CO

September 14, 2018

 

 

 

 F-2 

 

 

CANNAPHARMARX, INC.

BALANCE SHEETS

 

   December 31,   December 31, 
   2016   2015 
         
ASSETS    
         
Current assets          
Cash and cash equivalents  $   $2,621 
Prepaid expenses   1,667    9,438 
Total current assets   1,667    12,059 
Total Assets  $1,667   $12,059 
           
           
LIABILITIES & STOCKHOLDERS' DEFICIT          
           
Current liabilities          
Accounts payable and accrued expenses  $599,575   $456,601 
Accrued legal settlement payable in cash   190,000    190,000 
Accrued expense - related party   150,000    50,000 
Loan payable - related party   19,758     
Total current liabilities   959,333    696,601 
Total Liabilities   959,333    696,601 
           
Stockholders' Equity          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding        
Common stock, $0.0001 par value; 100,000,000 shares authorized, 17,960,741 and 17,960,741 issued and outstanding as of December 31, 2016 and December 31, 2015, respectively   1,796    1,796 
Additional paid in capital   32,930,067    32,201,942 
Retained earnings (deficit)   (33,889,530)   (32,888,280)
Total Stockholders' Deficit   (957,667)   (684,542)
Total Liabilities and Stockholders' Deficit  $1,667   $12,059 

 

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

 

 

 

 F-3 

 

 

CANNAPHARMARX, INC.

STATEMENTS OF OPERATIONS

 

   For the Year 
   Ended December 31, 
   2016   2015 
         
Revenue  $   $ 
           
Operating Expenses:          
General & administrative   276,766    4,217,456 
Stock-based compensation   728,125    7,435,004 
Total operating expenses   1,004,891    11,652,460 
Income (loss) from operations   (1,004,891)   (11,652,460)
           
Other income (expense)          
Interest (expense)   (423)   (2,724)
Loss on disposal of assets       (87,748)
Other income (expense)   4,064     
Other income (expense) net   3,641    (90,472)
Income (loss) before provision for income taxes   (1,001,250)   (11,742,932)
Provision (credit) for income tax        
Net income (loss)  $(1,001,250)  $(11,742,932)
           
Net income (loss) per share (Basic and fully diluted)  $(0.06)  $(0.77)
           
Weighted average number of shares outstanding   17,960,741    15,338,352 

 

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

 

 

 

 F-4 

 

 

CANNAPHARMARX, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

 

   Common Stock   Paid in   Retained Earnings/  

Stockholders'

Equity/

 
   Shares   Value   Capital   (Deficit)   (Deficit) 
Balances at December 31, 2014   17,374,407   $1,737   $20,855,381   $(21,145,348)  $(288,230)
                          
Common stock sold   556,334    56    804,496         804,552 
Shares issued in acquisition of Canna Colorado   9,750,000    975    (975)         
Shares issued to vendor in prior year, paid par this period           120         120 
Cancellation of shares owned by Canna Colorado   (10,420,000)   (1,042)   1,042          
Debt settled in merger/acquisition           1,245         1,245 
Bank refund of overdraft balance to close account           4,556         4,556 
Shares issued in litigation settlement   600,000    60    1,597,440         1,597,500 
Warrants issued for IR services           1,153,643         1,153,643 
Shares issued for brokerage services   100,000    10    349,990         350,000 
Stock based compensation           7,435,004         7,435,004 
Net loss               (11,742,932)   (11,742,932)
Balances at December 31, 2015   17,960,741   $1,796   $32,201,942   $(32,888,280)  $(684,542)
                          
Stock based compensation           728,125        728,125 
Net loss                  (1,001,250)   (1,001,250)
Balances at December 31, 2016   17,960,741   $1,796   $32,930,067   $(33,889,530)  $(957,667)

 

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

 

 F-5 

 

 

CANNAPHARMARX, INC.

STATEMENTS OF CASH FLOWS

 

   For the Year 
   Ended December 31, 
   2016   2015 
Cash Flows From Operating Activities:          
Net income (loss)  $(1,001,250)  $(11,742,932)
           
Adjustments to reconcile net income to net cash provided by (used for) operating activities          
Depreciation       12,031 
Stock-based compensation expense   728,125    7,435,004 
Warrants issued for services   –     1,153,643 
Settlement payment non-current portion   –     (135,000)
Stock issued for services   –     350,000 
Legal settlement payable in stock   –     (1,597,500)
Legal settlement by stock issuance   –     1,597,500 
Changes in operating assets and liabilities          
Decrease in other receivables   –     531 
(Increase)/decrease in prepaid expenses   –     34,133 
Increase/(Decrease) in accounts payable and accrued expenses   7,771    319,735 
Decrease in current legal settlement payment   142,974    (25,000)
Increase/(Decrease) in accrued payable - related party   100,000    49,096 
Net cash provided by (used for) operating activities   (22,380)   (2,548,759)
           
Cash Flows From Investing Activities:          
Purchase of fixed assets       (2,078)
Deposit paid toward specialty Pharma acquisition -recovery       50,000 
Disposal of assets net of depreciation       87,748 
Net cash provided by (used for) investing activities       135,670 
           
Cash Flows From Financing Activities:          
Proceeds from (paydown of) related party loans   19,758     
Cash forgiveness from bank to close overdrawn account       4,556 
Cash acquired in acquisition of Canna Colorado       1,245 
Shares issued to vendor in prior year, paid par this period       120 
Proceeds from sales of common stock       804,550 
Net cash provided by (used for) financing activities   19,758    810,471 
           
Net Increase (Decrease) In Cash   (2,621)   (1,602,618)
Cash At The Beginning Of The Period   2,621    1,605,239 
Cash At The End Of The Period  $   $2,621 
           
Schedule of Non-Cash Investing and Financing Activities          
Value of stock issued in litigation settlement  $   $1,597,500 
           
Supplemental Disclosure          
Cash paid for interest  $423   $2,071 
Cash paid for income taxes  $   $500 

 

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

 

 

 F-6 

 

 

CANNAPHARMARX, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

 

NATURE OF OPERATIONS

 

CannaPharmaRx, Inc. (the “Company”) is a Delaware corporation. As of the date of this Report the Company intends to engage in acquisitions or joint ventures with a company or companies that will allow to become a national or internationally branded cannabis cultivation company, or otherwise engage in the cannabis industry. Management is engaged in seeking out and evaluating businesses for acquisition. However, if an opportunity in another industry arises the Company will review that opportunity as well. The proposed business activities described herein classify us as a “shell company. Rule 12b-2 of the 34 Act defines a shell company as a company that has:

 

(1) No or nominal operations; and

(2) Either:

(i) No or nominal assets;

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

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

 

HISTORY

 

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

 

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

 

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

 

In October 2014, the Company changed its legal name to “CannaPharmaRx, Inc.”

 

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

 

In April 2016, the Company ceased operations. Its then management resigned their respective positions with the Company, with the exception of Mr. Gary Herick, who remains as an officer and director.

 

 

 

 F-7 

 

 

As a result, the Company is now considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended.

 

BASIS OF PRESENTATION

 

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

 

The Company has been inactive since April 2016.

 

USE OF ESTIMATES

 

The preparation of our financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Due to uncertainties inherent in the estimation process, it is possible that these estimates could be materially revised within the next year.

 

CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents consist of cash and highly liquid debt instruments with original maturities of less than three months.

 

PROPERTY AND EQUIPMENT

 

Historically when the company acquired fixed assets, depreciation expenses have been calculated using the straight-line method over the estimated useful lives of the respective assets, ranging from three to seven years.

 

Depreciation expenses total $-0- and $12,031 for the years ended December 31, 2016 and December 31, 2015, respectively.

 

DEFERRED COSTS AND OTHER OFFERING COSTS

 

All costs with respect to raising capital in the two private placements of the Company’s common stock were expensed by the Company both in 2014 and 2015. These costs were applied as internal operational expenses. The Company had no deferred costs or other stock offering costs as of either December 31, 2016 or December 31, 2015.

 

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

 

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS

 

In the event that facts and circumstances indicated that the cost of long-lived and intangible assets may be impaired, an evaluation of recoverability will be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset will be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value will be required. The Company had no intangible assets at December 31, 2016, or December 31, 2015.

 

 

 

 F-8 

 

 

FAIR VALUES OF ASSETS AND LIABILITIES

 

The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

    Level 1:   Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
     
    Level 2:   Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments.
     
    Level 3:   Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As of December 31, 2016 and December 31, 2015, the Company does not have any assets or liabilities which are considered Level 2 or 3 in the hierarchy.

 

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the periods ended December 31, 2016, or December 31, 2015.

 

FINANCIAL INSTRUMENTS

 

The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with exact precision. The fair value of the Company’s financial instruments, which include cash, prepaid expenses, accounts payable and the related party loan, each approximate their carrying value due either to their short length to maturity or interest rates that approximate prevailing market rates.

 

INCOME TAXES

 

The Company accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

COMPREHENSIVE INCOME (LOSS)

 

Comprehensive income is defined as all changes in stockholders’ equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our inception, there have been no differences between our comprehensive loss and net loss.

 

 

 

 F-9 

 

 

INCOME (LOSS) PER SHARE

 

Income (loss) per share is presented in accordance with Accounting Standards Update (“ASU”), Earning per Share (Topic 260) which requires the presentation of both basic and diluted earnings per share (“EPS”) on the income statements. Basic EPS would exclude any dilutive effects of options, warrants and convertible securities but does include the restricted shares of common stock issued. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock. Basic EPS calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted EPS calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.

 

Stock options outstanding at December 31, 2016 to purchase 750,000 shares of common stock are excluded from the calculations of diluted net loss per share since their effect is antidilutive.

 

STOCK-BASED COMPENSATION

 

The Company has adopted ASC Topic 718, (Compensation—Stock Compensation), which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The fair value of stock warrants was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate and dividend yield.

 

BUSINESS SEGMENTS

 

Our activities during the year ended December 31, 2016 comprised a single segment.

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

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

 

Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

 

NOTE 2. GOING CONCERN AND LIQUIDITY

 

The Company had $-0- cash on hand as of December 31, 2016, and no revenue-producing business or other sources of income. Additionally, as of December 31, 2016, the Company had outstanding liabilities totaling $959,333 and stockholders’ deficit of $957,667. The Company had a working capital deficit of $957,667 at December 31, 2016.

 

 

 

 F-10 

 

 

In the Company’s financial statements for the fiscal years ended December 31, 2016 and 2015, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on our current financial projections, we believe we do not have sufficient existing cash resources to fund our current limited operations.

 

It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations.

 

NOTE 3. ASSETS

 

As of December 31, 2016, the Company had $1,667 in total assets comprised of prepaid expenses.

 

NOTE 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

As of December 31, 2016, the balance of accounts payable and accrued expenses was $769,333, which is primarily comprised of trade payables and accrued salaries and wages and legal fees.

 

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

 

NOTE 5. COMMITMENTS

 

OPERATING LEASE

 

The Company had a non-cancellable operating lease for its headquarters located in Carneys Point, New Jersey. The term of this lease ended April 30, 2016. As of December 31, 2016 the Company owed $18,540 on this lease and had not made any new commitments for office space.

 

NOTE 6. LITIGATION AND ACCRUED SETTLEMENT LIABILITIES

 

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

 

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

 

 

 

 F-11 

 

 

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

 

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

 

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

 

NOTE 7. STOCKHOLDERS’ EQUITY

 

PREFERRED STOCK

 

The Company is authorized to issue up to 10,000,000 shares of one or more series of preferred stock, at a par value of $0.0001, all of which is nonvoting. The Board of Directors may, without stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights, voting rights and any other preferences. No shares of preferred stock were issued or outstanding as of December 31, 2016.

 

COMMON STOCK

 

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

 

RECENT ISSUANCES OF COMMON STOCK

 

In March 2015, the Company began offering in a private placement of shares of its restricted common stock to accredited investors at $1.50 per share (the “Private Placement”). Through December 31, 2015 the Company issued a total of 556,334 shares in exchange for $804,550 of gross proceeds.

 

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

 

WARRANTS

 

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

 

 

 

 F-12 

 

 

On February 23, 2015, the Company issued another 3-year warrant (the “Second Warrant,” and together with the First Warrant, the “VCR Warrants”) to VCR as compensation for VCR’s services in managing and implementing investor relations strategies with the U.S. investment community and industry. The Second Warrant is exercisable for 244,283 of the Company’s fully-diluted common shares at an exercise price equal to the price per share of the Company’s common stock on the 10 days preceding February 23, 2015 or $2.50. The Second Warrant has a 3-year life, a cashless exercise provision and is fully transferable with the Company’s approval, which may not be unreasonably withheld. The Second Warrant is callable on 60 days’ notice if (i) the Company’s common stock trades on the NASDAQ and (ii) the Company’s common stock trades at three times the exercise price of the Second Warrant for 20 consecutive trading days. These warrants were valued at $523,576 using the Black-Scholes method of valuation. The Company has not issued any warrants since February 23rd, 2015.

 

STOCK OPTIONS

 

As a result of all stock option activity to date, the Company has recorded aggregate stock-based compensation charges of $728,125 for the year ended December 31, 2016 and $7,435,004 during the year ended December 31, 2015. As of December 31, 2016, 750,000 vested options were outstanding, all of which belonged to Mr. Herick and all had been fully expensed.

 

NOTE 8. INCOME TAXES

 

As of December 31, 2016, the Company has approximately $6,322,000 of federal net operating loss carryforwards, respectively. The federal net operating loss carryforwards begin to expire in 2030. State net operating loss carryforwards begin to expire in 2034. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carry forwards could be subject to annual limitations against taxable income in future periods, which could substantially limit the eventual utilization of such carry forwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carry forward is subject to any Internal Revenue Code Section 382 limitation. To the extent there is a limitation, there could be a substantial reduction in the deferred tax asset with an offsetting reduction in the valuation allowance. As of September 30, 2016, the Company has no unrecognized income tax benefits.

 

The tax years from 2014 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.

 

NOTE 9. SUBSEQUENT EVENTS

 

In April 2018, the Company issued 60,000 shares of its Series A Convertible Preferred Stock at $1.00 per share to its current management, all of whom are accredited investors. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of common stock and vote on an as converted basis. The rights and designations of these Preferred Shares include the following:

 

  · 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;

 

  · not redeemable.

 

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

 

On April 1, 2018, the Company changed its principal place of business to 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space is provided on a twelve month term by a company to which Mr. Nicosia, one of the Company’s directors, serves as Chief Executive Officer. Monthly rent is $1,000, however, as of the date of this filing the Company has not made any rent payments and continue to accrue those amounts as accounts payable.

 

 

 

 F-13 

 

EX-31.1 2 cannapharmarx_10k-ex3101.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

 

I, Nick Colvin, certify that:

 

  1. I have reviewed this annual report on Form 10-K of Cannapharmarx, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

 

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: September 14, 2018 /s/ Dominic Colvin
  Dominic Colvin , Chief Executive Officer
EX-31.2 3 cannapharmarx_10k-ex3102.htm CERTIFICATION

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

 

I, Gary Herick, certify that:

 

  1. I have reviewed this annual report on Form 10-K of Cannapharmarx, Inc..;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

 

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: September 14, 2018 /s/ Gary Herick
  Gary Herick, Chief Financial Officer
EX-32 4 cannapharmarx_10k-ex3200.htm CERTIFICATION

Exhibit 32

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with this annual report of Cannapharmarx Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission on September 14, 2018 (the “Report”), we, the undersigned, in the capacities and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

 

  1. The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: September 14, 2018 /s/ Dominick Colvin
  Dominick Colvin, Chief Executive Officer
   
Dated: September 14, 2018 /s/ Gary Herick
  Gary Herick, Chief Financial Officer
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12 Months Ended
Dec. 31, 2016
Sep. 13, 2018
Jun. 30, 2016
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Entity Registrant Name CannaPharmaRX, Inc.    
Entity Central Index Key 0001081938    
Document Type 10-K    
Document Period End Date Dec. 31, 2016    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Is Entity a Well-known Seasoned Issuer? No    
Is Entity a Voluntary Filer? No    
Is Entity's Reporting Status Current? No    
Entity Filer Category Smaller Reporting Company    
Entity Public Float     $ 8,397,371
Entity Common Stock, Shares Outstanding   17,960,741  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2016    
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Dec. 31, 2016
Dec. 31, 2015
Current assets    
Cash and cash equivalents $ 0 $ 2,621
Prepaid expenses 1,667 9,438
Total current assets 1,667 12,059
Total Assets 1,667 12,059
Current liabilities    
Accounts payable and accrued expenses 599,575 456,601
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Retained deficit (33,889,530) (32,888,280)
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Dec. 31, 2015
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Stock issued for acquisition, value $ 975 (975)    
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Common stock sold, value $ 56 804,496   804,552
Stock based compensation   7,435,004   7,435,004
Net loss     (11,742,932) (11,742,932)
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Stock issued for acquisition, value $ 975 (975)    
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Cancellation of shares owned by Canna Colorado, shares (10,420,000)      
Cancellation of shares owned by Canna Colorado, value $ (1,042) 1,042    
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Shares issued in litigation settlement, value $ 60 1,597,440   1,597,500
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Shares issued for brokerage services, shares 100,000      
Shares issued for brokerage services, value $ 10 349,990   350,000
Stock based compensation   728,125   728,125
Net loss     (1,001,250) (1,001,250)
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Cash Flows From Operating Activities:    
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Stock issued for services 0 350,000
Noncash write-off of related party loan   0
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Changes in operating Assets & Liabilities    
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Increase/(Decrease) in accounts payable and accrued expenses 7,771 319,735
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Increase/(Decrease) in current legal settlement payable 142,974 (25,000)
Net cash provided by (used for) operating activities (22,380) (2,548,759)
Cash Flows From Investing Activities:    
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Disposal of assets net of depreciation 0 87,748
Deposit paid toward Specialty Pharmacy acquisition 0 50,000
Net cash provided by (used for) investing activities 0 135,670
Cash Flows From Financing Activities:    
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Net Increase (Decrease) In Cash and Cash Equivalents (2,621) (1,602,618)
Cash and Cash Equivalents At The Beginning Of The Period 2,621 1,605,239
Cash and Cash Equivalents At The End Of The Period 0 2,621
Schedule of Non-Cash Investing and Financing Activities    
Value of stock issued in litigation settlement 0 1,597,500
Supplemental Disclosure    
Cash paid for interest 423 2,071
Cash paid for income taxes $ 0 $ 500
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. Nature of Operations and Significant Accounting Policies
12 Months Ended
Dec. 31, 2016
Accounting Policies [Abstract]  
Nature of Operations and Significant Accounting Policies

NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

 

NATURE OF OPERATIONS

 

CannaPharmaRx, Inc. (the “Company”) is a Delaware corporation. As of the date of this Report the Company intends to engage in acquisitions or joint ventures with a company or companies that will allow to become a national or internationally branded cannabis cultivation company, or otherwise engage in the cannabis industry. Management is engaged in seeking out and evaluating businesses for acquisition. However, if an opportunity in another industry arises the Company will review that opportunity as well. The proposed business activities described herein classify us as a “shell company. Rule 12b-2 of the 34 Act defines a shell company as a company that has:

 

(1) No or nominal operations; and

(2) Either:

(i) No or nominal assets;

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

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

 

HISTORY 

 

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

 

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

 

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

 

In October 2014, the Company changed its legal name to “CannaPharmaRx, Inc.”

 

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

 

In April 2016, the Company ceased operations. Its then management resigned their respective positions with the Company, with the exception of Mr. Gary Herick, who remains as an officer and director.

 

As a result, the Company is now considered a “shell” company as defined under the Securities Exchange Act of 1934, as amended.

 

BASIS OF PRESENTATION

 

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

 

The Company has been inactive since April 2016.

 

USE OF ESTIMATES

 

The preparation of our financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Due to uncertainties inherent in the estimation process, it is possible that these estimates could be materially revised within the next year.

 

CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents consist of cash and highly liquid debt instruments with original maturities of less than three months.

 

PROPERTY AND EQUIPMENT

 

Historically when the company acquired fixed assets, depreciation expenses have been calculated using the straight-line method over the estimated useful lives of the respective assets, ranging from three to seven years.

 

Depreciation expenses total $-0- and $12,031 for the years ended December 31, 2016 and December 31, 2015, respectively.

 

DEFERRED COSTS AND OTHER OFFERING COSTS

 

All costs with respect to raising capital in the two private placements of the Company’s common stock were expensed by the Company both in 2014 and 2015. These costs were applied as internal operational expenses. The Company had no deferred costs or other stock offering costs as of either December 31, 2016 or December 31, 2015.

 

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

 

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS

 

In the event that facts and circumstances indicated that the cost of long-lived and intangible assets may be impaired, an evaluation of recoverability will be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset will be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value will be required. The Company had no intangible assets at December 31, 2016, or December 31, 2015.

 

FAIR VALUES OF ASSETS AND LIABILITIES

 

The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

    Level 1:   Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
     
    Level 2:   Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments.
     
    Level 3:   Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As of December 31, 2016 and December 31, 2015, the Company does not have any assets or liabilities which are considered Level 2 or 3 in the hierarchy.

 

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the periods ended December 31, 2016, or December 31, 2015.

 

FINANCIAL INSTRUMENTS

 

The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with exact precision. The fair value of the Company’s financial instruments, which include cash, prepaid expenses, accounts payable and the related party loan, each approximate their carrying value due either to their short length to maturity or interest rates that approximate prevailing market rates.

 

INCOME TAXES

 

The Company accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

COMPREHENSIVE INCOME (LOSS)

 

Comprehensive income is defined as all changes in stockholders’ equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our inception, there have been no differences between our comprehensive loss and net loss.

 

INCOME (LOSS) PER SHARE

 

Income (loss) per share is presented in accordance with Accounting Standards Update (“ASU”), Earning per Share (Topic 260) which requires the presentation of both basic and diluted earnings per share (“EPS”) on the income statements. Basic EPS would exclude any dilutive effects of options, warrants and convertible securities but does include the restricted shares of common stock issued. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock. Basic EPS calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted EPS calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.

 

Stock options outstanding at December 31, 2016 to purchase 750,000 shares of common stock are excluded from the calculations of diluted net loss per share since their effect is antidilutive.

 

STOCK-BASED COMPENSATION

 

The Company has adopted ASC Topic 718, (Compensation—Stock Compensation), which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The fair value of stock warrants was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate and dividend yield.

 

BUSINESS SEGMENTS

 

Our activities during the year ended December 31, 2016 comprised a single segment.

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

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

 

Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
2. Going Concern and Liquidity
12 Months Ended
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern and Liquidity

NOTE 2. GOING CONCERN AND LIQUIDITY

 

The Company had $-0- cash on hand as of December 31, 2016, and no revenue-producing business or other sources of income. Additionally, as of December 31, 2016, the Company had outstanding liabilities totaling $959,333 and stockholders’ deficit of $957,667. The Company had a working capital deficit of $957,667 at December 31, 2016.

 

In the Company’s financial statements for the fiscal years ended December 31, 2016 and 2015, the Reports of the Independent Registered Public Accounting Firm include an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on our current financial projections, we believe we do not have sufficient existing cash resources to fund our current limited operations.

 

It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
3. Assets
12 Months Ended
Dec. 31, 2016
Assets  
Assets

NOTE 3. ASSETS

 

As of December 31, 2016, the Company had $1,667 in total assets comprised of prepaid expenses.

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
4. Accounts Payable and Accrued Expenses
12 Months Ended
Dec. 31, 2016
Payables and Accruals [Abstract]  
Accounts Payable and Accrued Expenses

NOTE 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

As of December 31, 2016, the balance of accounts payable and accrued expenses was $769,333, which is primarily comprised of trade payables and accrued salaries and wages and legal fees.

 

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

XML 21 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
5. Commitments
12 Months Ended
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments

NOTE 5. COMMITMENTS

 

OPERATING LEASE

 

The Company had a non-cancellable operating lease for its headquarters located in Carneys Point, New Jersey. The term of this lease ended April 30, 2016. As of December 31, 2016 the Company owed $18,540 on this lease and had not made any new commitments for office space.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
6. Litigation and Accrued Settlement Liabilities
12 Months Ended
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Litigation and Accrued Settlement Liabilities

NOTE 6. LITIGATION AND ACCRUED SETTLEMENT LIABILITIES

 

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

 

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

 

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

 

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

 

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

XML 23 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
7. Stockholders' Equity
12 Months Ended
Dec. 31, 2016
Equity [Abstract]  
Stockholders' Equity

NOTE 7. STOCKHOLDERS’ EQUITY

 

PREFERRED STOCK

 

The Company is authorized to issue up to 10,000,000 shares of one or more series of preferred stock, at a par value of $0.0001, all of which is nonvoting. The Board of Directors may, without stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights, voting rights and any other preferences. No shares of preferred stock were issued or outstanding as of December 31, 2016.

 

COMMON STOCK

 

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

 

RECENT ISSUANCES OF COMMON STOCK

 

In March 2015, the Company began offering in a private placement of shares of its restricted common stock to accredited investors at $1.50 per share (the “Private Placement”). Through December 31, 2015 the Company issued a total of 556,334 shares in exchange for $804,550 of gross proceeds.

 

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

 

WARRANTS

 

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

 

On February 23, 2015, the Company issued another 3-year warrant (the “Second Warrant,” and together with the First Warrant, the “VCR Warrants”) to VCR as compensation for VCR’s services in managing and implementing investor relations strategies with the U.S. investment community and industry. The Second Warrant is exercisable for 244,283 of the Company’s fully-diluted common shares at an exercise price equal to the price per share of the Company’s common stock on the 10 days preceding February 23, 2015 or $2.50. The Second Warrant has a 3-year life, a cashless exercise provision and is fully transferable with the Company’s approval, which may not be unreasonably withheld. The Second Warrant is callable on 60 days’ notice if (i) the Company’s common stock trades on the NASDAQ and (ii) the Company’s common stock trades at three times the exercise price of the Second Warrant for 20 consecutive trading days. These warrants were valued at $523,576 using the Black-Scholes method of valuation. The Company has not issued any warrants since February 23rd, 2015.

 

STOCK OPTIONS

 

As a result of all stock option activity to date, the Company has recorded aggregate stock-based compensation charges of $728,125 for the year ended December 31, 2016 and $7,435,004 during the year ended December 31, 2015. As of December 31, 2016, 750,000 vested options were outstanding, all of which belonged to Mr. Herick and all had been fully expensed.

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
8. Income Taxes
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 8. INCOME TAXES

 

As of December 31, 2016, the Company has approximately $6,322,000 of federal net operating loss carryforwards, respectively. The federal net operating loss carryforwards begin to expire in 2030. State net operating loss carryforwards begin to expire in 2034. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carry forwards could be subject to annual limitations against taxable income in future periods, which could substantially limit the eventual utilization of such carry forwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carry forward is subject to any Internal Revenue Code Section 382 limitation. To the extent there is a limitation, there could be a substantial reduction in the deferred tax asset with an offsetting reduction in the valuation allowance. As of September 30, 2016, the Company has no unrecognized income tax benefits.

 

The tax years from 2014 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
9. Subsequent Events
12 Months Ended
Dec. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events

NOTE 9. SUBSEQUENT EVENTS

 

In April 2018, the Company issued 60,000 shares of its Series A Convertible Preferred Stock at $1.00 per share to its current management, all of whom are accredited investors. Each share of Series A Convertible Preferred Stock is convertible into 1,250 shares of common stock and vote on an as converted basis. The rights and designations of these Preferred Shares include the following:

 

  · 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;

 

  · not redeemable.

 

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

 

On April 1, 2018, the Company changed its principal place of business to 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space is provided on a twelve month term by a company to which Mr. Nicosia, one of the Company’s directors, serves as Chief Executive Officer. Monthly rent is $1,000, however, as of the date of this filing the Company has not made any rent payments and continue to accrue those amounts as accounts payable.

 

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. Nature of Operations and Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2016
Accounting Policies [Abstract]  
BASIS OF PRESENTATION

BASIS OF PRESENTATION

 

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

 

The Company has been inactive since April 2016.

USE OF ESTIMATES

USE OF ESTIMATES

 

The preparation of our financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Due to uncertainties inherent in the estimation process, it is possible that these estimates could be materially revised within the next year.

CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents consist of cash and highly liquid debt instruments with original maturities of less than three months.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

 

Historically when the company acquired fixed assets, depreciation expenses have been calculated using the straight-line method over the estimated useful lives of the respective assets, ranging from three to seven years.

 

Depreciation expenses total $-0- and $12,031 for the years ended December 31, 2016 and December 31, 2015, respectively.

DEFERRED COSTS AND OTHER OFFERING COSTS

DEFERRED COSTS AND OTHER OFFERING COSTS

 

All costs with respect to raising capital in the two private placements of the Company’s common stock were expensed by the Company both in 2014 and 2015. These costs were applied as internal operational expenses. The Company had no deferred costs or other stock offering costs as of either December 31, 2016 or December 31, 2015.

 

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

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS

 

In the event that facts and circumstances indicated that the cost of long-lived and intangible assets may be impaired, an evaluation of recoverability will be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset will be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value will be required. The Company had no intangible assets at December 31, 2016, or December 31, 2015.

FAIR VALUES OF ASSETS AND LIABILITIES

FAIR VALUES OF ASSETS AND LIABILITIES

 

The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

    Level 1:   Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
     
    Level 2:   Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments.
     
    Level 3:   Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. As of December 31, 2016 and December 31, 2015, the Company does not have any assets or liabilities which are considered Level 2 or 3 in the hierarchy.

 

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the periods ended December 31, 2016, or December 31, 2015.

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS

 

The estimated fair value for financial instruments was determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with exact precision. The fair value of the Company’s financial instruments, which include cash, prepaid expenses, accounts payable and the related party loan, each approximate their carrying value due either to their short length to maturity or interest rates that approximate prevailing market rates.

INCOME TAXES

INCOME TAXES

 

The Company accounts for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

COMPREHENSIVE INCOME (LOSS)

COMPREHENSIVE INCOME (LOSS)

 

Comprehensive income is defined as all changes in stockholders’ equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our inception, there have been no differences between our comprehensive loss and net loss.

INCOME (LOSS) PER SHARE

INCOME (LOSS) PER SHARE

 

Income (loss) per share is presented in accordance with Accounting Standards Update (“ASU”), Earning per Share (Topic 260) which requires the presentation of both basic and diluted earnings per share (“EPS”) on the income statements. Basic EPS would exclude any dilutive effects of options, warrants and convertible securities but does include the restricted shares of common stock issued. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock. Basic EPS calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted EPS calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.

 

Stock options outstanding at December 31, 2016 to purchase 750,000 shares of common stock are excluded from the calculations of diluted net loss per share since their effect is antidilutive.

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

 

The Company has adopted ASC Topic 718, (Compensation—Stock Compensation), which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The fair value of stock warrants was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate and dividend yield.

BUSINESS SEGMENTS

BUSINESS SEGMENTS

 

Our activities during the year ended December 31, 2016 comprised a single segment.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

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

 

Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
1. Nature of Operations and Significant Accounting Policies (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Depreciation expense $ 0 $ 12,031
Intangible assets 0 0
Asset impairment charges $ 0 $ 0
Options [Member]    
Antidilutive shares 750,000  
XML 28 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
2. Going Concern and Liquidity (Details Narrative) - USD ($)
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]      
Cash $ 0 $ 2,621 $ 1,605,239
Liabilities 959,333 696,601  
Stockholders' Deficit (957,667) $ (684,542) $ (288,230)
Working Capital $ (957,667)    
XML 29 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
3. Assets (Details Narrative) - USD ($)
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Assets      
Cash and cash equivalents $ 0 $ 2,621 $ 1,605,239
Prepaid expenses 1,667 9,438  
Total current assets $ 1,667 $ 12,059  
XML 30 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
4. Accounts Payable and Accrued Expenses (Details Narrative) - USD ($)
Dec. 31, 2016
Dec. 31, 2015
Payables and Accruals [Abstract]    
Total accounts payable and accrued expenses $ 769,333  
Accrued legal settlements $ 190,000 $ 190,000
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
5. Commitments (Details Narrative)
12 Months Ended
Dec. 31, 2016
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Lease commitment $ 18,540
Lease expiration date Apr. 30, 2016
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
7. Stockholders' Equity (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Proceeds from sale of stock $ 0 $ 804,550
Shares issued for brokerage services, value 350,000 350,000
Stock based compensation $ 728,125 $ 7,435,004
Warrants [Member] | First Warrant [Member]    
Warrants issued   244,283
Warrant exercise price   $ 2.90
Warrant weighted average life   3 years
Warrant fair value   $ 630,067
Warrants [Member] | Second Warrant [Member]    
Warrants issued   244,283
Warrant exercise price   $ 2.50
Warrant weighted average life   3 years
Warrant fair value   $ 523,576
Options [Member]    
Options outstanding 750,000 0
Stock based compensation not yet recognized $ 728,125 $ 7,435,004
Financial Services Firm [Member]    
Shares issued for brokerage services, shares   100,000
Shares issued for brokerage services, value   $ 350,000
Private Placement [Member]    
Stock issued new, shares   556,334
Proceeds from sale of stock   $ 804,550
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
8. Income Taxes (Details Narrative)
12 Months Ended
Dec. 31, 2016
USD ($)
Net operating loss carryforwards $ 6,322,000
Operating loss carryforward begining expiration date Dec. 31, 2030
New Jersey [Member]  
Operating loss carryforward begining expiration date Dec. 31, 2034
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