UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-56155

CRYOMASS TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Nevada		82-5051728
(State of incorporation)		(IRS Employer Identification No.)

1001 Bannock Street, Suite 612, Denver, CO		80204
(Address of principal executive offices)		(Zip Code)

303-416-7208

(Registrant’s telephone number, including area code)

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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. ☐

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

As of May 11, 2023, the registrant had 205,329,137 shares of its common stock, par value $0.001 per share, outstanding.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology.

The identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:

●

Trends affecting our financial condition, results of operations or future prospects, including the impact of COVID-19;

●

Our business and growth strategies;

●

Our financing plans and forecasts;

●

The factors that we expect to contribute to our success and our ability to be successful in the future;

●

Our business model and strategy for realizing positive results as sales increase;

●

Competition, including our ability to respond to such competition and its expectations regarding continued competition in the market in which we compete;

●

Our ability to meet our projected operating expenditures and the costs associated with development of new projects;

●

The impact of new accounting pronouncements on our financial statements;

●

Whether our cash flows from operating activities will be sufficient to meet our operating expenditures;

●

Our market risk exposure and efforts to minimize risk;

●

Regulations, including tax law and practice, federal and state laws governing the cannabis and cannabinoid industries, and tariff legislation;

●

Our overall outlook including all statements under Management’s Discussion and Analysis of Financial Condition and Results of Operations;

●

That estimates and assumptions made in the preparation of financial statements in conformity with accounting principles generally accepted in the United states (“GAAP”) may differ from actual results; and

●

Our expectations as to future financial performance, cash and expense levels and liquidity sources.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance. A more detailed description of risk factors that may affect our operating results can be found in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 24, 2023, and our other filings with the SEC. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

TABLE OF CONTENTS

		PAGE

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	1
	Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2023 and 2022	2
	Consolidated Statements of Shareholders’ Equity (Unaudited) for the Three Months Ended March 31, 2023 and 2022	3
	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2023 and 2022	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
Signatures		28

CRYOMASS TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS

	March 31, 2023 (unaudited)			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	663,978		$	2,016,057
Deferred Tax asset		21,788			21,788
Prepaid expenses		92,774			128,651
Total current assets		778,540			2,166,496

Property and equipment, net		737,302			525,855
Goodwill		1,190,000			1,190,000
Intangible assets, net		3,879,919			3,980,582
Total assets	$	6,585,761		$	7,862,933

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	1,431,221		$	1,288,465
Total current liabilities		1,431,221			1,288,465
Notes payable, related party		2,000,000			2,000,000
Total liabilities		3,431,221			3,288,465

Commitments and contingencies (Note 10)

Shareholders’ equity:
Preferred stock, $0.001 par value, 100,000 shares authorized, no shares issued and outstanding respectively		-			-
Common stock, $0.001 par value, 500,000,000 shares authorized, 204,779,137 and 202,651,205 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		204,780			202,652
Additional paid-in capital		43,559,814			43,163,579
Common stock to be issued		-			219,765
Accumulated deficit		(40,610,054	)		(39,011,528	)
Total shareholders’ equity		3,154,540			4,574,468
Total liabilities and shareholders’ equity	$	6,585,761		$	7,862,933

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

CRYOMASS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended March 31,
	2023			2022

Net sales	$	-		$	-
Cost of goods sold		-			-
Gross profit		-			-

Operating expenses:
Personnel costs		768,266			335,230
General and administrative		339,895			295,349
Legal and professional fees		298,742			1,458,257
Depreciation and amortization expense		124,529			21,832
Research and development		123			17,122
Total operating expenses		1,531,555			2,127,790
Loss from operations		(1,531,555	)		(2,127,790	)

Other income (expenses):
Interest expense - net		(53,661	)		(36,023	)
Gain / (loss) on foreign exchange		(13,310	)		11,508
Total other expenses		(66,971	)		(24,515	)
Net loss before taxes		(1,598,526	)		(2,152,305	)
Income taxes		-			-
Net loss	$	(1,598,526	)	$	(2,152,305	)

Net loss per common share:
Loss per common share - basic and diluted	$	(0.01	)	$	(0.01	)

Weighted average common shares outstanding—basic and diluted		204,021,504			198,268,853

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

CRYOMASS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock				Additional Paid-In		Common Stock to			Accumulated			Total Shareholders’
	Shares		Amount		Capital		Be Issued			Deficit			Equity
Balance at December 31, 2021		196,949,801	$	196,950	$	41,916,207	$	-		$	(28,588,837	)	$	13,524,320
Share issuance in exchange for services		458,334		458		159,959		80,208			-			240,625
Stock-based compensation		1,735,529		1,736		139,079		-			-			140,815
Net loss		-		-		-		-			(2,152,305	)		(2,152,305	)
Balance at March 31, 2022		199,143,664	$	199,144	$	42,215,245	$	80,208		$	(30,741,142	)	$	11,753,455
Balance at December 31, 2022		202,651,205	$	202,652	$	43,163,579	$	219,765		$	(39,011,528	)	$	4,574,468
Common stock issued for prior period services		62,500		62		21,813		(21,875	)		-			-
Common stock issued for current period services		187,500		188		65,438		-			-			65,626
Common stock issued for vested RSUs for prior period services		1,100,000		1,100		196,790		(197,890	)		-			-
Common stock issued for vested RSUs for current period services		777,932		778		49,222		-			-			50,000
Stock-based compensation for vested RSUs for current period services		-		-		62,972		-			-			62,972
Net loss		-		-		-		-			(1,598,526	)		(1,598,526	)
Balance at March 31, 2023		204,779,137	$	204,780	$	43,559,814	$	-		$	(40,610,054	)	$	3,154,540

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

CRYOMASS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,598,526	)	$	(2,152,305	)
Adjustments to reconcile net loss to net cash used in operating activities from continuing operations:
Amortization of debt discount		-			31,250
Depreciation and amortization expense		124,529			21,832
Fair value of common stock issued pursuant to service and advisory agreements		-			160,417
Stock-based compensation expense		-			140,815
Common stock issued for vested RSUs for current period services		50,000			-
Stock-based compensation for vested RSUs for current period services		62,972			-
Common stock issued for the current period services		65,626			-
Change in operating assets and liabilities:
Prepaid expenses		35,877			684,205
Accounts payable and accrued expenses		(78,821	)		(517,514	)
Net cash used in operating activities		(1,338,343	)		(1,631,300	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of loans receivable		-			(618,831	)
Purchase of property and equipment		-			(8,641	)
Purchase of intangible assets		(13,736	)		-
Net cash used in investing activities		(13,736	)		(627,472	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock subscribed and to be issued		-			80,208
Net cash provided by financing activities		-			80,208
Net (decrease) in cash		(1,352,079	)		(2,178,564	)
Cash at beginning of period		2,016,057			5,772,839
Cash at end of period	$	663,978		$	3,594,275
Supplemental disclosure of non-cash investing activities:
Purchase of property and equipment on credit	$	(221,577	)		-

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of the Business

Cryomass Technologies Inc (“Cryomass Technologies” or the “Company”) designs, manufactures and is developing the strategy to commercialize patented cryo-mechanical systems for the harvesting and refinement of hemp, cannabis, and potentially other high value crops such as hops. The system exploits CryoMass’s U.S.-patented process for the controlled application of liquid nitrogen to stabilize and separate the structural elements of gross plant material. The device currently under development can be operated at a cultivation site or be installed at a processing facility and is being optimized for the collection of fully intact hemp and cannabis trichomes. The first functional “beta” machine has completed field testing. The Company recently signed a license and lease arrangement with a third party to deploy multiple CryoMass trichome separation units at the prospective partner’s facility in California and other locations, with the intention of starting commercial operations shortly.

The Company’s principal office is located at 1001 Bannock St., Suite 612, Denver, CO 80204, and its telephone number is 303-416-7208. The Company’s website is www.cryomass.com. Information appearing on the website is not incorporated by reference into this prospectus.

Cryomass Technologies Inc serves as the parent company to its wholly-owned subsidiaries which include Cryomass LLC, Cryomass California LLC, and 1304740 B.C. Unlimited Liability Company.

On June 22, 2021, the Company entered into an Asset Purchase Agreement with Cryocann USA Corp, a California corporation (“Cryocann”), pursuant to which Company acquired substantially all the assets of Cryocann. The aggregate purchase price was $3,500,000 million in cash and 10,000,000 shares of Company common stock As part of the Cryocann Acquisition, we retained both Cryocann employees, who have expert knowledge of the industry, related participants, customers and the acquired patented technology. Under their employment agreements, each employee may receive compensation if specific performance targets are met in association with our future operating performance when the Cryocann technology enters the market. The technology and assets acquired from Cryocann are operated from the Company’s subsidiary, Cryomass LLC. The patented cryo-mechanical technology is for the separation of plant materials in the harvesting of hemp and cannabis, and potentially other high value crops such as hops.

In September 2021, we were granted an additional patent for our process from the Chinese Intellectual Property Office. We currently are taking steps to gain further protection for our intellectual property through the European Union Intellectual Property Office and several other international jurisdictions.

2. Going Concern Uncertainty, Financial Conditions and Management’s Plans

The Company believes that there is substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its available cash balance as of the date of this filing will not be sufficient to fund its anticipated level of operations for at least the next twelve months. The Company believes that, at the present time, its ability to continue operations depends on cash expected to be available from lease payments and royalty payments in connection with future revenue generation, or possibly from debt or equity investments, to fund its anticipated level of operations for at least the next twelve months. As of March 31, 2023, the Company had a working deficit of $652,681 and cash balance of $663,978. The Company estimates that it needs approximately $4,000,000 to cover overhead costs and has capital expenditure requirements ranging from zero to $6,600,000 depending on how many trichome separation units are ordered over the next twelve months. The Company believes that the Company will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results of operations and, depending on the results of operations, the Company may need additional equity or debt financing until the Company can achieve profitability and positive cash flows from operating activities from, for example, our recently signed lease and license agreement. As of March 31, 2023, one trichome separation unit has been delivered and is expected to begin producing revenue in the second quarter of 2023. Since the operating expenses of the unit are required to be covered by the licensee and not the Company, the royalty payment would be free cash flow which could be used to cover operating expenses. However, there can be no assurance that the Company will receive sufficient operating cash flow from our licensing agreement or that we will be able to attract the necessary financing.

The continuation of our Company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our Company to obtain necessary equity or debt financing to continue operations, and ultimately the attainment of profitable operations. For the three months ended March 31, 2023, our Company used $1,338,343 of cash for operating activities, incurred a net loss of $1,598,526 and has an accumulated deficit of $40,610,054 since inception.

Our financial statements for the three months ended March 31, 2023 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

3. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles. The consolidated financial statements include the accounts of the Cryomass Technologies Inc, Cryomass LLC, Cryomass California LLC, and 1304740 B.C. Unlimited Liability Company. All significant intercompany balances and transactions have been eliminated in consolidation. The Company operates as one segment from its corporate headquarters in Colorado.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to determining the fair value of the assets acquired and liabilities assumed in acquisition, determining the useful lives and potential impairment of long-lived assets and potential impairment of goodwill. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts. Aside from this, the Company does not believe it is exposed to any unusual credit risk.

Purchase Accounting for Acquisitions

We apply the acquisition method of accounting for a business combination. In general, this methodology requires us to record assets acquired and liabilities assumed at their respective fair values at the date of acquisition. Any amount of the purchase price paid that is in excess of the estimated fair value of the net assets acquired is recorded as goodwill. For certain acquisitions, we also record a liability for contingent consideration based on estimated future business performance. We monitor our assumptions surrounding these estimated future cash flows and, if there is a significant change, would record an adjustment to the contingent consideration liability and a corresponding adjustment to either income or expense. We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses. These types of analyses require us to make assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flow.

If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.

Expenses

Operating Expenses

Operating expenses encompass personnel costs, research and development expenses, general and administrative expenses, professional and legal fees and depreciation and amortization related to the property and equipment and intangibles acquired through the acquisition of Cryocann. Personnel costs consist primarily of consulting expense and administrative salaries and wages. General and administrative expenses are comprised of travel expenses, accounting expenses, stock-based compensation, and board fees. Professional services are principally comprised of outside legal and professional fees.

Other Expense, net

Other expense, net consisted of interest expense, other income and (loss) gain on foreign exchange.

Stock-Based Compensation

The fair value of restricted stock units (“RSUs”) granted are measured on the grant date using the closing price of the Company’s common shares on the grant date. For stock options, the Company engages a valuation firm to calculate the grant date fair value of the options issued. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures over the course of a vesting period. All stock-based compensation costs are recorded in general and administrative expenses in the consolidated statements of operations.

Property and Equipment, net

Purchase of property and equipment are recorded at cost. Improvements and replacements of property and equipment are capitalized. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the consolidated statements of operations. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset, as follows:

		Estimated Useful Life
Computer equipment		3 – 5 years
Furniture and fixtures		5 – 7 years
Machinery and equipment		15 years
Leasehold improvements		Shorter of lease term or useful life

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of an acquired entity over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.

Indefinite-lived intangible assets established in connection with business combinations consist of in process research and development and internal-use software. Intangible assets with indefinite lives are recorded at their estimated fair value at the date of acquisition. Once in process research and development is placed in service, it will be amortized over the estimated useful life. Internal-use software costs recognized as an intangible asset relates to capitalizable costs of computer software obtained for internal-use as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40-30-1. All other internal-use software costs are expensed as incurred by the Company. Amortization will be recorded straight-line over the estimated useful life of the software once the software is ready for its intended use. As of March 31, 2023, our internal-use software was not ready for its intended use. The estimated useful life for internal-use software will be determined and periodically reassessed based on considerations for obsolescence, technology, competition, and other economic factors.

Intangible assets with finite lives are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. Amortization of assets ceases upon designation as held for sale. The estimated useful lives of intangible assets are detailed in the table below:

		Estimated Useful Life
Patent		120 Months
In process research and development		104 Months
Internal use software		Pending

Impairment of Goodwill and Intangible Assets

Goodwill

Goodwill is not amortized, but instead is tested annually at December 31 for impairment and upon the occurrence of certain events or substantive changes in circumstances.

We account for the impairment of goodwill under the provisions of Financial Accounting Standards Board (FASB) Accounting Standard Update 2017-04 (“ASU 2017-04”), “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” and FASB Accounting Standards Codification (ASC) 350-20-35, Intangibles – Goodwill and Other – Goodwill.

The Company performs impairment testing for goodwill by performing the following steps: 1) evaluate the relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, 2) if yes to step 1, calculate the fair value of the reporting unit and compare it with its carrying amount, including goodwill, 3) recognize impairment, limited to the total amount of goodwill allocated to that reporting unit, equal to the excess of the carrying value of a reporting unit over its fair value.

Management concluded that there were no events indicative of goodwill impairment during the three months ended March 31, 2023.

Indefinite-Lived Intangible Assets and Intangible Assets Subject to Amortization

Indefinite-lived intangible assets are not amortized, but instead are tested annually at December 31 for impairment and upon the occurrence of certain events or substantive changes in circumstances.

We account for the impairment of indefinite-lived intangible assets under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-30-35, Intangibles – Goodwill and Other – General Intangibles Other Than Goodwill. Following this guidance, the Company compares the estimated fair value of the indefinite-lived intangible assets to its carrying value. If the carrying value exceeds the fair value, the Company recognizes impairment equal to that excess.

We account for the impairment of intangible assets subject to amortization under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360-10-35, Property, Plant, and Equipment. Following this guidance, the Company compares the estimated fair value of the intangible assets subject to amortization to its carrying value. If the carrying value exceeds the fair value, the Company recognizes impairment equal to that excess.

Management concluded that there were no events indicative of identifiable intangible asset impairment during the three months ended March 31, 2023.

Leases

We account for our leases under ASC 842. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or our incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the right of use and lease liability, we have elected to combine lease and non-lease components. We exclude short-term leases having an initial term of 12 months or less from the new guidance as an accounting policy election, and recognize rent expense on a straight-line basis over the lease term.

Income Taxes

The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is likely that the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the consolidated financial statements.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

	●	Level 1 — Quoted prices in active markets for identical assets or liabilities.

	●	Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

	●	Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying values reported in the consolidated balance sheets for cash, prepaid expenses, accounts payable, and notes payable approximate fair values because of the immediate or short-term maturities of these financial instruments. There were no other assets or liabilities that require fair value to be recalculated on a recurring basis.

Net Loss per Share

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures. Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. There were 2,336,588 unvested RSU’s considered potentially dilutive securities outstanding as of March 31, 2023 and 1,933,985 unvested RSU’s considered potentially dilutive securities outstanding as of March 31, 2022. Diluted net loss per share is the same as basic net loss per share for each period.

4. Property and Equipment, Net

Property and equipment, net, of $737,302 and $525,855 as of March 31, 2023 and December 31, 2022, respectively, consisted entirely of machinery and equipment.

	March 31, 2023			December 31, 2022
Machinery and equipment		752,833			531,255
Less: Accumulated depreciation		(15,531	)		(5,400	)
	$	737,302		$	525,855

Depreciation expense for the three months ended March 31, 2023 and 2022 was $10,130 and $0, respectively.

5. Goodwill and Intangible Assets

The carrying value of goodwill was $1,190,000 as of March 31, 2023 and December 31, 2022.

The following tables summarize information relating to the Company’s identifiable intangible assets as of March 31, 2023 and December 31, 2022:

	March 31, 2023
	Estimated Useful Life	Gross Amount		Accumulated Amortization			Carrying Value
Amortized
Patent	120 months	$	873,263	$	(152,821	)	$	720,442
Indefinite-lived
In-process research and development	104 months		3,209,000		(162,242	)		3,046,758
Internal use software	Pending		112,719		-			112,719
Total identifiable intangible assets		$	4,194,982	$	(315,063	)	$	3,879,919

	December 31, 2022
	Estimated Useful Life	Gross Amount		Accumulated Amortization			Carrying Value
Amortized
Patent	120 months	$	873,263	$	(130,989	)	$	742,274
Indefinite-lived
In-process research and development	104 months		3,209,000		(69,675	)		3,139,325
Internal use software	Pending		98,983		-			98,983
Total identifiable intangible assets		$	4,181,246	$	(200,664	)	$	3,980,582

Amortization expense was $114,399 and $21,832 for the three months ended March 31, 2023 and 2022, respectively.

Years ending December 31,	Amount
2023 (remainder of year)		343,197
2024		457,596
2025		457,596
2026		457,596
2027		457,596
Thereafter		1,706,338
		3,879,919

6. Loans Receivable

On July 15, 2019, the Company entered into a Membership Interest Purchase Agreement to acquire cannabis-related intellectual property and certain other assets, but not cannabis licenses, of Critical Mass Industries LLC (“CMI”), a Colorado limited liability company. Effective December 31, 2021, the Company disposed of all CMI-related assets and extinguished any and all related obligations. In conjunction with the disposal, we received a $6,600,000 promissory note due to us no later than December 31, 2023, of which we determined the net realizable value of the gross amount of the note was 3,600,000 as of December 31, 2021. In consideration of the loan receivable, we conveyed to CMI, any and all manufacturing, grow equipment, and retail-related assets and other assets Seller owned in the state of Colorado and were used by CMI subsidiaries in the course of business, including client lists and appertaining intellectual property, as well as all liabilities related to these assets. During the first quarter of 2022, the Company issued an additional $618,831 in loans to CMI. During the fourth quarter of 2022, the Company deemed the full loan receivable balance to be uncollectible and therefore it is no longer included on the consolidated balance sheets as of March 31, 2023.

7. Notes Payable, Related Party

On September 15, 2022, the Company entered into a loan agreement of $2,000,000 with CRYM Co-Invest, for which Alexander Massa, a 23.1% beneficial owner of the Company, has investment control. The note accrues interest at 12% per annum and matures on October 1, 2024. As of March 31, 2023, we have accrued $130,000 in interest expense on the loan.

8. Shareholders’ Equity

From January to March 2022, the Company issued 458,334 shares of common stock at $0.35 per share for a total dollar value of $160,417 in exchange for services, 550,000 shares of common stock at $0.2695 per share for a total dollar value of $148,225 for 2021 management performance bonuses, 185,529 shares of common stock at $0.2695 per share for a total dollar value of $50,000 for director compensation, and 1,000,000 shares of common stock at $0.65 for a total dollar value of $130,000 for 2020 RSU grants vesting in January 2022.

From January to March 2023, the Company issued 62,500 shares of common stock at $0.35 per share for a total dollar value of $21,875 for prior period services, 187,500 shares of common stock at $0.35 per share for a total dollar value of $65,625 for current period services, 1,100,000 shares of common stock at $0.1799 per share for a total dollar value of $197,890 for vested RSUs for prior period services, and 777,932 shares of common stock at $0.1799 per share for a total dollar value of $139,950 for vested RSUs for current period services.

Restricted Stock Unit Awards

The Company adopted its 2019 Omnibus Stock Incentive Plan (the “2019 Plan”), which provides for the issuance of stock options, stock grants and RSUs to employees, directors and consultants. The primary purpose of the 2019 Plan is to enhance the ability to attract, motivate, and retain the services of qualified employees, officers and directors. Any RSUs granted under the 2019 Plan will be at the discretion of the Compensation Committee of the Board of Directors. On January 10, 2022, the shareholders approved the 2022 Stock Incentive Plan which then replaced the 2019 Plan.

A summary of the Company’s RSU award activity for the three months ended March 31, 2023 and 2022, respectively, is as follows:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		1,453,857		$	0.30
Granted		2,760,660			0.17
Vested		(1,877,932	)		0.23
Forfeited		-			-
Outstanding at March 31, 2023		2,336,585		$	0.21

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021		2,200,003		$	0.45
Granted		1,469,511			0.27
Vested		(1,735,529	)		0.49
Forfeited		-			-
Outstanding at March 31, 2022		1,933,985		$	0.27

The total fair value of RSUs vested during the three months ending March 31, 2023 and 2022 was $424,640 and $848,600, respectively. As of March 31, 2023 and 2022, there was $303,663 and $187,761, respectively, of unrecognized stock-based compensation cost related to non-vested RSU’s, which is expected to be recognized over the remaining vesting period.

Stock-based compensation expense relating to RSU’s was $112,972 and $140,815 for the three months ending March 31, 2023 and 2022, respectively. Stock-based compensation for the three months ending March 31, 2023 consisted of equity awards forfeited, granted and vested to employees, directors and consultants of the Company in the amount of $15,929, $97,043, and $0, respectively. Expenses for stock-based compensation are included on the accompanying consolidated statements of operations in general and administrative expense.

Stock Option Awards

A summary of the Company’s stock option activity for the three months ended March 31, 2023 and 2022, respectively, is as follows:

	Stock Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2022		8,500,000	$	0.18		8.5	$	1,579,108
Granted and vested		-		-		-		-
Forfeited		-		-		-		-
Outstanding at March 31, 2023		8,500,000	$	0.18		8.0	$	1,579,108

	Stock Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2021		8,500,000	$	0.18		9.2	$	1,579,108
Granted and vested		-		-		-		-
Forfeited		-		-		-		-
Outstanding at March 31, 2022		8,500,000	$	0.18		9.0	$	1,579,108

During the three months ended March 31, 2023 and 2022, the Company did not issue any stock options.

Warrants

During the year ended December 31, 2021, the Company issued warrants with the option to purchase 73,950,000 common shares at an exercise price of $0.40 per share through a series of convertible note offerings and equity subscription agreements. All of the convertible notes were converted in 2021. Of these warrants, 15,000,000 shares expired on March 31, 2023, 9,500,000 expired on April 30, 2023, 1,000,000 expire on September 17, 2023, 9,000,000 expire on October 15, 2023, 9,510,000 expire on October 26, 2023, 190,000 expire on November 2, 2023, 4,560,000 expire on November 10, 2023, 1,940,000 expire on November 15, 2023, and 750,000 expire on November 17, 2023, and 22,500,000 expire on November 10, 2024. During the three months ended March 31, 2023, no warrants were exercised.

The fair value of these warrants was $1,867,960, which was recorded to additional paid in capital in the year ended December 31, 2021.

9. Income Taxes

In accordance with ASC 740-270, the Company calculates the interim tax expense based on an annual effective tax rate (“AETR”). The AETR represents the Company’s estimated effective tax rate for the year based on full year projection of tax expense, divided by the projection of full year pretax book loss, adjusted for discrete transactions occurring during the period. The annual effective tax rate for the three months ended March 31, 2023 was 0.0%,

The Company currently carries a deferred tax asset on its balance sheet.

10. Commitments & Contingencies

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

Legal Proceedings

None.

11. Subsequent Events

On April 17, 2023, the Company received $100,000, $50,000, $25,000, and CAD $250,000 loans from Simon Langelier, Health Diplomats Pte Ltd, Mario Gobbo, and 9083-0043 Quebec Inc, respectively. Mr. Langelier and Mr. Gobbo are directors of the Company. Dr. Delon Human is also a director of the Company who is the President of Health Diplomats Pte Ltd. 9083-0043 Quebec Inc is not a related party. The loans from the directors mature on April 17, 2025 and accrue interest at 12% per annum. The loan from 9083-0043 Quebec Inc matures on December 15, 2025 and also accrues interest at 12% per annum. In conjunction with the loans, the respective parties were issued warrants to purchase 454,500, 227,250, 113,625, and 840,750 shares of common stock with an exercise price of $0.25 per share. The warrants expire on April 17, 2027.

On April 18, 2023, the Company received a CAD $100,000 loan from Investissement S Losier Inc. The loan matures on December 15, 2025 and accrues interest at 12% per annum. In conjunction with the loan, the counterparty was issued warrants to purchase 336,300 shares of common stock with an exercise price of $0.25 per share. The warrants expire on April 17, 2027.

On April 28, 2023, the Company issued 550,000 shares of common stock as part of an employment agreement for a new employee.

On April 30, 2023, 9,500,000 outstanding warrants with an exercise price of $0.40 expired.

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

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

In this quarterly report, unless otherwise specified, our financial statements are expressed in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles. All references to “common shares” refer to the common shares in our capital stock.

Unless expressly indicated or the context requires otherwise, the terms “Cryomass Technologies,” the “Company,” “we,” “us,” and “our” refer to Cryomass Technologies Inc., a Nevada corporation, and, where appropriate, its wholly owned subsidiaries.

General Overview

Cryomass Technologies Inc (“Cryomass Technologies” or the “Company”) began as Auto Tool Technologies Inc., which was incorporated under the laws of the State of Nevada on May 10, 2011. The Company’s name was changed to AFC Building Technologies Inc. effective January 10, 2014. Effective April 26, 2018, the Company changed its name to First Colombia Development Corp. Effective October 14, 2019, the Company changed its name to Redwood Green Corp. Effective September 1, 2020, the Company changed its name to Andina Gold Corp. On July 15, 2021, the Company changed its name to Cryomass Technologies Inc and subsequently changed its trading symbol changed to CRYM.

On May 10, 2018, the Company began to establish various business ventures in Colombia through its Colombian subsidiary, First Colombia Devco S.A.S (“Devco”). On July 1, 2019, the Company acquired 100% of the membership interests in General Extract, LLC, a Colorado limited liability company, in exchange for the shares of Devco. The name of this subsidiary was subsequently changed to Cryomass LLC. On July 15, 2019, the Company entered into a Membership Interest Purchase Agreement to acquire cannabis-related intellectual property and certain other assets, but not cannabis licenses, of Critical Mass Industries LLC (“CMI”), a Colorado limited liability company.

Effective December 31, 2021, the Company disposed of all CMI-related assets and extinguished any and all related obligations.

In August 2020, the Company established a wholly owned Colombian subsidiary, Andina Gold Colombia SAS for this purpose acquiring gold properties in Colombia. However, due to the untimely death of our top geologist, the Company determined that pursuit of gold exploration in Colombia was no longer a practical alternative. In Q1 2022 the respective subsidiary was closed.

On June 22, 2021, the Company entered into an Asset Purchase Agreement with Cryocann USA Corp, a California corporation (“Cryocann”), pursuant to which Company acquired substantially all the assets of Cryocann. The aggregate purchase price was $3,500,000 million in cash and 10,000,000 shares of Company common stock. As part of the Cryocann Acquisition, we retained both Cryocann employees, who have expert knowledge of the industry, related participants, customers and the acquired patented technology. Under their employment agreements, each employee may receive compensation if specific performance targets are met in association with our future operating performance when the Cryocann technology enters the market. The technology and assets acquired from Cryocann are operated from the Company’s subsidiary, Cryomass LLC. The patented cryo-mechanical technology is for the separation of plant materials in the harvesting of hemp and cannabis, and potentially other high value crops such as hops. We believe this technology will reduce processing costs and increases the quality of extracted compounds. We are exploring the application of the underlying technology to a broad range of industries that handle high-value materials and that could benefit from our precision capture methods. We anticipate that cannabis and hemp will be the first in a series of such industries.

To develop and commercialize the technology, we contracted with an independent engineering and manufacturing firm to refine the design of our cryo-mechanical system for the handling of harvested hemp, cannabis and other high-value plants. The system exploits CryoMass’s U.S.-patented process for the controlled application of liquid nitrogen to stabilize and separate the structural elements of gross plant material. The device currently under development is scaled for highway transportability and is being optimized for the low-cost collection of fully intact hemp and cannabis trichomes. It can be used within minutes after plants have been cut and can also efficiently capture trichomes from fresh frozen or even dried plant parts, including trim. The device’s through-put capacity is expected to be approximately 600 kilograms of gross plant material per hour. The advanced design for the equipment has been completed, and testing of a prototype machine is currently underway. The engineering and manufacturing firm has indicated that it has the capacity to build 10 to 15 such devices per month.

Canadian Patent no. 3 064 896 “Cryogenic Separation of Plant Material” was filed on May 25, 2018 by two assignors, who assigned it, among other, various other intellectual property rights, to a wholly owned subsidiary of the Company as part of the Cryocann June 22, 2021 transaction. The respective Canadian patent was granted on April 19, 2022. Provided that all patent maintenance fees are paid, the Canadian patent no. 2 064 896 will expire on May 25, 2038.

Management believes the CryoMass system will deliver a compelling combination of cost and time savings while enhancing product quality and quantity for largescale cultivators and processors of hemp and cannabis. The use of a CryoMass system – which can be trucked to and operated on the fields of most large hemp and cannabis growers or be permanently installed at a user’s processing facility – should eliminate many of the costs that come with traditional practices, especially the labor, fuel and capital costs of drying and curing hemp or cannabis that is grown for the extraction of end products. With traditional practices, harvested plants are transported to a specially constructed drying house and then treated for a week or longer under controlled conditions of temperature and humidity. It’s a costly method. With our system, harvested plants are simply fed into the front end of a CryoMass machine, and minutes later fully intact trichomes are collected at the back end of the machine. With traditional practices and their seven-to-ten days of handling and drying, a large share of a plant’s valuable trichomes break off and are lost. Then the remaining trichomes are damaged by long exposure to oxygen and by the evaporation of their volatile terpenes. The CryoMass system, on the other hand, stabilizes and collects fully intact trichomes at harvest, leaving no opportunity for such wasteful loss. Field-captured trichomes are the cleanest element of a hemp or cannabis plant because, unlike the rest of the plant, trichomes do not readily take up heavy metals, pesticides or other common soil contaminants. As a product for end-users, field-captured trichomes are closest to being contaminant free. As feedstock for manufacturers of extracts and oils, they are the key to the purest products possible.

Because the trichomes collected with CryoMass technology represent only 10% or so of a plant’s weight and volume, they are cheaper to ship and store than gross plant material. For the same reason and because trichomes are free of the waxes and other unwanted materials found in the rest of the plant, processing trichomes into oils and extracts can be far quicker, cheaper and easier than processing gross plant material. Even trichomes captured from dried or frozen plant parts deliver this cost-saving advantage to processors of oils and extracts. The three-dimensional advantage achievable with the CryoMass system – first-stage cost savings, product enhancement and downstream cost savings – can as much as double a crop’s wholesale value. And in some jurisdictions, users may enjoy a reduction in excise taxes levied on cannabis and hemp harvests, which typically are tied to the gross weight of hemp or cannabis that is removed from the field.

Production and processing of hemp and cannabis is a huge, worldwide industry. In the U.S., for example, the wholesale value of the cannabis crop from just the 11 states permitting adult-use and medical cannabis exceeds $6 billion annually. Growth in the U.S. and in the worldwide market is likely fed in part by the growing acceptance of medicinal cannabis products and anticipated legislative changes in various jurisdictions worldwide.

Several other high-value plants, including species that are important for health and wellness products, wrap their valuable elements in trichomes. The technology we are developing for hemp and cannabis may have profitable application to those other species as well.

Update on COVID-19

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has spread throughout the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of COVID-19 a “Public Health Emergency of International Concern,” and on March 11, 2020, it characterized the outbreak as a “pandemic”. The impact of COVID-19 developments and uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets.

To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions, both domestic and international, closing of borders and business slowdowns or shutdowns in affected areas. As a result, COVID-19 has impacted the Company’s business. Although deemed an essential business during the pandemic, many dispensaries and cannabis manufacturers have suspended or reduced operations on a temporary basis due to matters associated with COVID-19.

The COVID-19 pandemic and responses to this crisis, including actions taken by federal, state and local governments, have had an impact on the operations of the Company, including, without limitation, the following: reduced staffing due to employee suspected conditions and social distancing measures; constraints on productivity; management and staff non-essential business-related travel was constrained due to stay-at-home orders; some employees have shifted to remote work resulting in loss of productivity; consumers visiting dispensaries operated under license impacted by stay-at-home orders. Management continues to monitor the COVID-19 pandemic situation and federal, state and local recommendations and will provide updates as appropriate.

Our Current Business

Our business portfolio includes the accounts of Cryomass LLC (formerly known as General Extract), which is controlled by the Company through its 100% ownership interest. The Company dissolved its previously reported VIE relationship with Critical Mass Industries Inc., as of December 31, 2021.

On June 23, 2021, the Company consummated purchase of assets of Cryocann USA Corp through its wholly-owned subsidiary Cryomass LLC. We have finalized research and development work of our patented technology. We have completed commercial-scale testing of the system and have been targeting specific markets and industries to employ this ground-breaking technology.

The Company recently signed a license and lease arrangement with RedTape Core Partners LLC (“RedTape”) to deploy multiple CryoMass trichome separation units at the prospective partner’s facility in California and other locations, with the intention of starting commercial operations shortly. Under the terms of a multi-state license agreement, RedTape has licensed the patented process and will deploy 12 Trichome Separation systems for a total upfront investment of US$10.2 million payable in installments to CryoMass throughout 2023. CryoMass has agreed to deliver the units to RedTape according to a schedule that extends over 24 months. In addition to the installments, RedTape will pay CryoMass 50% of all net revenue generated by the units over the life of the agreement. The license agreement grants RedTape the exclusive right, subject to agreed-upon distribution and licensing milestones, to distribute the Trichome Separation units and develop the hemp and cannabis processing and extraction markets with CryoMass in states where RedTape has extensive affiliate business operations and alliances. The five states covered by the agreement are California, New York, New Jersey, Florida and Pennsylvania.

Management believes the CryoMass system will deliver a compelling combination of cost and time savings while enhancing product quality and quantity for largescale cultivators and processors of hemp and cannabis. The use of a CryoMass system should eliminate many of the costs that come with traditional practices, especially the labor, fuel and capital costs of drying and curing hemp or cannabis that is grown for the extraction of end products. With traditional practices, harvested plants are transported to a specially constructed drying house and then treated for a week or longer under controlled conditions of temperature and humidity. It’s a costly method. With our system, harvested plants are simply fed into the front end of a CryoMass trichome separation system, and minutes later fully intact trichomes are collected at the back end of the unit. With traditional practices and their seven-to-ten days of handling and drying, a large share of a plant’s valuable trichomes break off and are lost. Then the remaining trichomes are damaged by long exposure to oxygen and by the evaporation of their volatile terpenes. The CryoMass system, on the other hand, stabilizes and collects fully intact trichomes at harvest, leaving no opportunity for such wasteful loss. Field-captured trichomes are the cleanest element of a hemp or cannabis plant because, unlike the rest of the plant, trichomes do not readily take up heavy metals, pesticides or other common soil contaminants. As a product for end-users, field-captured trichomes are closest to being contaminant free. As feedstock for manufacturers of extracts and oils, they are the key to the purest products possible.

Because the trichomes collected from CryoMass system represent only 10% or so of a plant’s weight and volume, they are cheaper to ship and store than gross plant material. For the same reason and because trichomes are free of the waxes and other unwanted materials found in the rest of the plant, processing trichomes into oils and extracts can be far quicker, cheaper and easier than processing gross plant material. Even trichomes captured from dried or frozen plant parts deliver this cost-saving advantage to processors of oils and extracts. The three-dimensional advantage achievable with the CryoMass system – first-stage cost savings, product enhancement and downstream cost savings – can as much as double a crop’s wholesale value. And in some jurisdictions, users may enjoy a reduction in excise taxes levied on cannabis and hemp harvests, which typically are tied to the gross weight of hemp or cannabis that is removed from the field.

Results of Operations for the Three Months Ended March 31, 2023 and 2022

Our operating results for the three months ended March 31, 2023 and 2022 are summarized as follows:

	For the Three Months Ended March 31,						Change
	2023			2022			Dollars			Percentage
Net sales	$	-		$	-		$	-			0	%
Cost of goods sold, inclusive of depreciation		-			-			-			0	%
Gross profit		-			-			-			0	%
Total operating expenses		1,531,555			2,127,790			(596,235	)		-28	%
Loss from operations		(1,531,555	)		(2,127,790	)		596,235			28	%
Total other expenses		(66,971	)		(24,515	)		(42,456	)		173	%
Net loss from continuing operations, before taxes		(1,598,526	)		(2,152,305	)		553,779			-26	%
Income taxes		-			-			-			0	%
Net loss	$	(1,598,526	)	$	(2,152,305	)	$	553,779			26	%

Net Sales and Cost of Goods Sold

There were no net sales or cost of goods sold for the three months ended March 31, 2023 and 2022.

Operating Expenses

Operating expenses encompass personnel costs, research and development, general and administrative expenses, and legal and professional fees. Total operating expenses were $1,531,555 for the three months ended March 31, 2023 as compared to $2,127,790 for the three months ended March 31, 2022. The net decrease of $596,235 or 28%, was primarily attributable to the following changes in operating expenses of:

●

Legal and professional fees - $1,159,515 decrease

●

Personnel costs - $433,036 increase

The decrease of $1,159,515, or 80%, in legal and professional fees is primarily due to the fact that the Company incurred significant costs related to investor relations market awareness activities during the three months ending March 31, 2022. The increase of $433,036, or 129%, in personnel costs is primarily due to the fact that the Company hired several new employees subsequent to the first quarter of 2022 and therefore has occurred additional salary expense.

Other Expense

Other expense for the three months ending March 31, 2023 consisted of $53,661 interest expense – net and $13,310 loss on foreign exchange. Other expense for the three months ending March 31, 2022 consisted of $36,023 interest expense and $11,508 gain on foreign exchange. The increase in interest expense was a result of the Company entering into a new loan agreement in Q3 2022. The loss on foreign exchange predominantly relates to a payable agreement with Cryomass LLC’s supplier.

Net Loss

For the foregoing reasons, we had a net loss of $1,598,526 for the three months ending March 31, 2023, or $0.01 net loss per common share – basic and diluted, compared to a net loss of $2,152,305 for the three months ending March 31, 2022, or $0.01 net loss per common share – basic and diluted.

Liquidity, Capital Resources and Cash Flows

The Company believes that its available cash balance as of the date of this filing will not be sufficient to fund its anticipated level of operations for at least the next twelve months. The Company believes that, at the present time, its ability to continue operations depends on cash expected to be available from lease payments and royalty payments in connection with future revenue generation, as well as possible debt and equity investment sources, to fund its anticipated level of operations for at least the next twelve months. As of March 31, 2023, the Company had a working deficit of $652,681 and cash balance of $663,978 The Company estimates that it needs approximately $4,200,000 to cover overhead costs and capital expenditure requirements ranging from zero to $6,600,000 depending on how many trichome separation units are ordered over the next twelve months. The Company believes that the Company will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results of operations and, depending on the results of operations, the Company will need additional equity or debt financing until the Company can achieve profitability and positive cash flows from operating activities from, for example, our recently signed lease and license agreement. As of March 31, 2023, one trichome separation unit has been delivered and is expected to begin producing revenue in the second quarter of 2023. Since the operating expenses of the unit are required to be covered by the licensee and not the Company, the royalty payment would be free cash flow which could be used to cover operating expenses. However, there can be no assurance that the Company will receive sufficient operating cash flow from our licensing agreement or otherwise that we will be able to attract the necessary financing.

COVID-19 has resulted in, and may continue to result in, significant disruption of financial markets, which may reduce the Company’s ability to access capital or its customers’ ability to pay the Company for past or future purchases, which could negatively affect the Company’s liquidity. The Company believes that the cash balances and cash from operations will be sufficient to satisfy its cash needs for the next few months until it can obtain new long-term financing or other sources of capital. If we are unable to attain additional financing, we will have to seek additional strategic alternatives and relief from our additional liabilities accumulated during COVID-19.

The impact of COVID-19 developments and uncertainty with respect to the economic effects of the pandemic have introduced significant volatility in the financial markets. The uncertainties associated with COVID-19 related to our industry present risk and doubt about the Company’s ability to continue as a going concern.

Going Concern

The Company believes that there is substantial doubt about the Company’s ability to continue as a going concern. Our financial statements for the three months ended March 31, 2023 have been prepared on a going concern basis do not include any adjustments that might result from the outcome of this uncertainty.

Capital Resources

The following table summarizes total current assets, liabilities and working (deficit) capital for the periods indicated:

	March 31, 2023			December 31, 2022
Current assets	$	778,540		$	2,166,496
Current liabilities		1,431,221			1,288,465
Working (deficit) capital	$	(652,681	)	$	878,031

As of March 31, 2023 and December 31, 2022, we had a cash balance of $663,978 and $2,016,057, respectively.

Summary of Cash Flows

	For the Three Months Ended March 31,
	2023			2022
Net cash used in operating activities	$	(1,338,343	)	$	(1,631,300	)
Net cash used in investing activities	$	(13,736	)	$	(627,472	)
Net cash provided by financing activities	$	-		$	80,208

Net cash used in operating activities

Net cash used in operating activities was $1,338,343 during the three months ended March 31, 2023. This included a net loss of $1,598,526, a non-cash charge related to depreciation and amortization of $124,529, a non-cash charge related to stock-based compensation of $112,972, and a non-cash charge related to fair value of common stock issued pursuant to service and advisory agreements of $65,626. This was in addition to net changes in prepaid expenses and accounts payable and accrued expenses of $(42,944).

Net cash used in operating activities was $1,631,300 during the three months ended March 31, 2022. This included a net loss of $2,152,305, a non-cash charge related to amortization of debt discount of $31,250, a non-cash charge related to depreciation and amortization expense of $21,832, a non-cash charge related to fair value of common stock issued pursuant to service and advisory agreements of $160,417, and a non-cash charge related to stock-based compensation of $140,815. This was partially offset by net changes in prepaid expenses and accounts payable and accrued expenses of $166,691.

Net cash used in investing activities

Net cash used in investing activities was $13,736 during the three months ended March 31, 2023, due to the purchase of intangible assets.

Net cash used in investing activities was $627,472 during the three months ended March 31, 2022, due to the issuance of loans receivable and purchase of property and equipment.

Net cash used/provided by financing activities

There was no cash activity related to financing activities for the three months ended March 31, 2023.

Net cash provided by financing activities for the three months ended March 31, 2022 was $80,208, due to common stock subscribed and to be issued.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to intangibles, accounting for acquisitions, income taxes, useful life and recoverability of long-lived assets and deferred income tax asset valuations. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for a smaller reporting company.

Item 4. Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosures. Based upon that evaluation, our Company’s CEO and CFO concluded that our Company’s disclosure controls and procedures were not effective as of March 31, 2023.

Management has not formally documented its procedures and controls and as such does not have a sufficient basis to assess its internal controls over financial reporting. Management identified that it did not maintain adequately designed internal control over the preparation and oversight of:

●

month-end and period-end financial close processes.

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non-routine or complex transactions.

●

the adoption of new accounting standards.

Management’s Report on Internal Control Over Financial Reporting

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023, the end of the annual period covered by this report and according to the criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based on that evaluation, management has concluded that the Company did not maintain effective internal control over financial reporting as of the quarter ended March 31, 2023 due to the existence of significant deficiency in the internal control over financial reporting described below.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management has determined that we did not maintain effective internal controls over financial reporting as of the quarter ended March 31, 2023 due to the existence of the following significant deficiencies identified by management:

●

Due to the Company’s size, there is insufficient segregation of duties to prevent or detect on a timely basis a misstatement of our annual or interim financial statements.

●

Information technology controls are ineffective or lacking, An IT strategic plan and general controls related to access, change management, segregation of duties, contingency planning, information security, business applications, and interfaces are not yet adequately implemented, updated and monitored.

●

A top-down risk assessment has not yet been performed and documented by management to identify, analyze, and assess risks related to operations, external financial and non-financial reporting, internal reporting, compliance, fraud or other changes that could significantly impact the internal control environment.

●

Internal controls and related activities that could mitigate financial statement risks within key business processes have either not been established or are not fully adequate, documented, and/or maintained. Also, various regulatory compliance issues currently exist at an entity-level related to the control environment component specific to non-performance and/or insufficient/incomplete performance, document maintenance, review and approval, and the enforcement of individual accountability.

●

Documented accounting and other standard rules, guidelines, policies and procedures for key functions within the organization (HR, Payroll, Finance, Sales, IT, etc) have either not been established, are not complete, and/or are not consistently being utilized and monitored against control activities for compliance and ICFR effectiveness.

●

A whistle-blower program has not yet been established for the anonymous reporting, appropriate tracking, investigating, monitoring, and resolving of alleged wrongdoing, personnel complaints and grievances, without retribution.

●

Recurring, formalized employee communication and training on internal controls and the company’s commitment to ICFR has not yet been established. Additionally, a permanent, independent internal audit solution has not yet been established to perform an ongoing evaluation of the company’s key controls and ICFR, continuous monitoring of corrective actions, and regular reporting of internal control deficiencies and overall effectiveness of the company’s internal control environment.

We intend to continue to evaluate and strengthen our internal control over financial reporting. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our SEC reporting obligations.

Management has engaged the services of an experienced expert in internal controls who has been evaluating our current system and implement a more effective system to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop or improve procedures to address the current deficiencies to the extent possible by the end of fiscal 2023.

Management utilizes external experts to assist the Company with technical accounting expertise needs as deemed necessary and has engaged a consultant to perform a formal assessment and remediation of its internal control’s framework. However, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.

Attestation report of Registered Public Accounting Firm

This Quarterly Report on Form 10-Q does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting because we are not an “accelerated filer” or a “large accelerated filer”. Our management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Quarterly Report on Form 10-Q.

Management’s Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (who is also the Company’s principal executive officer), and our chief financial officer (who is also the Company’s principal financial and accounting officer) to allow for timely decisions regarding required disclosure. Thus, in accordance with Rules 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2023, which is the end of the period covered by this Form 10-Q. Based on the evaluation of these disclosure controls and procedures, and in light of the significant deficiency found in our internal controls over financial reporting, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to a significant deficiency identified in our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2023. We have not been able to remediate the significant deficiency described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and 2021. Our remediation efforts will continue to be implemented throughout our 2023 fiscal year. We believe that the controls that we will be implementing will improve the effectiveness of our internal control over financial reporting. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address the significant deficiency or determine to supplement or modify certain of the remediation measures described above.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent quarterly reports on Form 10-Q, which could materially affect our business, financial condition or future results.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number		Description
31.1*		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.
31.2*		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
32.1*		Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.
32.2*		Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith.

SIGNATURES

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

CRYOMASS TECHNOLOGIES INC.
(Registrant)

Dated: May 15, 2023

/s/ Christian Noel
Christian Noel
Chief Executive Officer and Director
(Principal Executive Officer)

Dated: May 15, 2023

/s/ Philip Mullin
Philip Mullin
Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)