UNITED STATESU.S. SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
================================================================================__________________
FORM 10-K
(Mark__________________
(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, 2013 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO.
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDEDDECEMBER 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
GOLDEN DRAGON HOLDING CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 27-4635140
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2460 WEST 26th AVENUE, SUITE 380-C, DENVER, COLORADO 80211
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(303) 704-4623
(TELEPHONE NUMBER, INCLUDING AREA CODE)
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
None.
Securities to be registered pursuant to Section 12(g) of the Act: COMMON STOCK,
$0.0001 PAR VALUE
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 |X|
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 |X|
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|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 Yesx 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 registrant'sthe 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 Yesx No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitionthe definitions of "accelerated“large accelerated filer,” “accelerated filer”, “smaller reporting company”, and large accelerated filer"“emerging growth company” in Rule 12b-2 of the Exchange Act. (check(Check one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting
| Large accelerated filero | Accelerated filero |
| Non-accelerated filero | Smaller Reporting Companyx |
| Emerging growth companyx |
If an emerging growth company, |X|
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).x Yes |X|o No |_|
The
State the aggregate market value of the of the outstanding shares ofvoting and non-voting common stockequity 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 the Registrant (898,594)such common equity, as of the last business day of the Registrant'sregistrant’s most recently completed second fiscal quarter on June 30, 2016 was approximately
$89,859 based upon$8,397,371.
As of September 14, 2018, the last reported sales price on the OTCBB for such date
($0.10).
The number ofRegistrant had 17,960,741 shares of the Registrant's common stockCommon Stock issued and outstanding, as
of January 29, 2014 was 2,384,407.
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DOCUMENTS INCORPORATED BY REFERENCE
None
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FORWARD LOOKING STATEMENTS
In addition to historical information, some of the information presented in this
This Annual Report on Form 10-K contains "forward-looking statements"forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Although Golden Dragon Holding Co. ("Golden Dragon"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 the "Company,"
which may also be referred to as "we," "us"“plans,” or "our") believes that its
expectationscomparable terminology, are forward-looking statements based on reasonablecurrent expectations and assumptions, within the bounds of its
knowledge of its business and operations: there can be no assurance that actual
results will not differ materially from our expectations. Such forward-looking
statements are subject toentail various risks and uncertainties that could cause actual results to differ materially from those anticipated, including but not limitedexpressed in such forward-looking statements.
Important factors known to our abilityus that could cause such material differences are identified in this Report. We undertake no obligation to raise debt an,correct or equity to meet our ongoing operating
expenses and merge with another entity with experienced management and
opportunities for growth in return for shares of our common stock to create
value for our shareholders. Cautionary statements regarding the risks,
uncertainties and other factors associated with theseupdate any forward-looking statements, are discussed on page 7 below.whether as a result of new information, future events or otherwise. You are urgedadvised, however, to carefully consider these
factors, as well as other information containedconsult any future disclosures we make on related subjects in this Annual Report on Form
10-K and in our other periodicfuture reports and documents filed withto the SEC.
Item 1. BUSINESS
Summary
Golden Dragon Holding Co. ("the Company," "we" or "us") is a publicly quoted
shell company seeking to obtain debt and, or, equity finance to meet our ongoing
operating expenses and attempt to merge with another entity with experienced
management and opportunities for growth in return for shares of our common stock
to create value for our shareholders.
Business.
History
We are a development stage enterprise in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises" now referred to as ACS 915 "Development Stage Entities." We
have been in the development stage since Inception (January 1, 2011).
Historical Operations
Concord Ventures, Inc. ("Concord") waswere originally incorporated in August 1998 in the State of Colorado. 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 under a Chapter 11 reorganization. Wecreditors. 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 and so are now
listed on both the OTC Market's OTCQB and the OTC Bulletin Board and continue
trade under the symbol "GDHC"
Background
Board.
In April 2010, Concord incorporated three new subsidiary companies,we re-domiciled in Delaware under the name CCVG, Inc. ("CCVG"), CCAPS Co. ("CCAPS") and Golden Dragon Holding Co. ("Golden Dragon"(“CCVG”).
All three of the new subsidiary companies were domiciled in Delaware.
Re-domicile in Delaware
In order for Concord to re-domicile in Delaware from Colorado, on September 29,
2010, Concord entered into an Agreement and Plan of Merger ("the Merger
Agreement") with its wholly owned subsidiary, CCVG. Under the terms of the
Merger Agreement, Concord shares of common stock converted automatically to CCVG
shares, without change or necessity to reissue. Also under the Merger Agreement,
CCVG became the surviving company domiciled in Delaware.
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Reorganization into a Holding Company Structure Effective December 31, 2010, pursuant to the Delaware Holding Company formation
statute, under Delaware General Corporate Law (DGCL) Section 251(g), CCVG completed an Agreement and Plan of Merger and Reorganization into a Holding
Company ("the Reorganization"y (the “Reorganization") with CCAPS and Golden Dragon, both wholly-owned
subsidiaries of CCVG. The Reorganizationwhich provided for the merger of CCVG with
and into CCAPS, with CCAPS being the surviving corporation in that merger.
Contemporaneously with CCVG's merger with and into CCAPS, the shareholderstwo of CCVG were converted into shareholders of Golden Dragon on a one share for one
share basis.our wholly owned subsidiaries. As a result of this reorganization into a Holding Company structure, Goldenour name was changes to “Golden Dragon Inc.”, which became the surviving publicly quoted parent holding company with CCAPS,
the surviving corporation of the merger between CCVG and CCAPS, becoming the
sole remaining wholly-owned subsidiary of Golden Dragon.
The Reorganization has been accounted for so as to reflect the fact that both
CCVG and Golden Dragon were under common control at the date of the
Reorganization, similar to a reverse acquisition of CCVG and its subsidiary
company, CCAPS, by Golden Dragon.
Sale of CCAPS
company.
On December 31, 2010, Golden DragonMay 9, 2014, we entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with an unrelated third party.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 terms of the Share Purchase Agreement, Golden Dragon sold 100%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 issued and outstanding shares of its sole
remaining wholly owned subsidiary, CCAPS for $100 cash consideration, subject to
its debts, and issued 25,000 restricted shares of Golden Dragonour common stock valued at $1,000, to CCAPS pursuant to the terms of the Share Purchase
Agreement. At the time of the sale, CCAPS had no ongoing operations or assets
and outstanding liabilities of approximately $678,000.
Following the merger of CCVG with and into CCAPS, CCAPS, as the surviving
corporation in that merger, retained all outstanding liabilities of CCVG in the
divestiture.
previously owned by Canna Colorado were cancelled.As a result of the saleaforesaid 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 100%Mr. Gary Herick, who remains as one of our officers and directors.
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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.
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.
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.
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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 and outstandingMr. Cohen 600,000 restricted shares of CCAPS,
Golden Dragon,our common stock.
FINRA Action
On January 29, 2015, we received a deficiency notice from the surviving publiclyFinancial 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.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is quoted holding company,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 no longer
consolidatedevelop in the liabilitiesforeseeable future.
Transfer of CCAPSour common stock may also be restricted under the securities or CCVG.
PLAN OF OPERATIONS
Our planblue sky laws of operationcertain 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 obtain debtsell 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 or, equity financeExchange Act. Rather than creating a need to meet our
ongoing operating expenses andcomply with those rules, some broker-dealers will refuse to attempt to merge with another entity with
experienced managementsell penny stock.
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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 opportunitiesreceive 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 growth in return forour 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 to create valueissued 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.”
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Stock Transfer Agent
Our stock transfer agent for our shareholders. Theresecurities is can be no assurance
that these events can be successfully completed. In particular thereMountain Share Transfer, Inc., 2030 Powers Ferry Road SE, Suite 212, Atlanta, GA 30339. Their telephone number is no
assurance that(303) 460-1149.
Dividends
We have never declared or paid any such business will be located or thatcash dividends on our common stock. We currently intend to retain future earnings, if any, stockholder will
realizeto finance the expansion of our business. As a result, we do not anticipate paying any return on their shares after such a transaction. Any merger or
acquisition completedcash 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 expectedfound at the SEC website, www.sec.gov. As of the date of this report we need to havefile 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 dilutive
effectbusiness, 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 percentageOTC 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.
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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 heldof 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 current stockholders. We believeCompany, with the exception of Mr. Gary Herick, who remains as one of our officers and directors.
As a result, we are an insignificant participant amongnow considered a “shell” company as defined under the firms whichSecurities 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 acquisitioncannabis industry. However, if an opportunity in another industry arises we will review that opportunity as well. One of business opportunities.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 many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we have. In view of our limited
financial resources and limited management availability, we will continue to be
at a significant competitive disadvantage compared to our competitors.
General Business Plan
We intend to seek, investigate and, if such investigation warrants, acquire an
interest in business opportunities presented to us by persons or firms which
desire to seek the advantages of an issuer who has complied with the Securities
Act of 1934 (the "1934 Act"). We will not restrict our search to any specific
business, industry or geographical location, and we may participate in business
ventures of virtually any nature. This discussion of our proposed business is
purposefully general and is not meant to be restrictive of our unlimited
discretion to search for and enter into potential business opportunities. We
anticipate that we may be able to participate in only one potential business
venture because of our lack of financial resources.
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We may seek a business opportunity with entities which have recently commenced
operations, or that desire to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service, or for other corporate purposes. We may acquire assets
and establish wholly owned subsidiaries in various businesses or acquire
existing businesses as subsidiaries.
We expect that the selection of a business opportunity will be complex. Due to
general economic conditions, rapid technological advances being made in some
industries and shortages of available capital, we believe that there are
numerous firms seeking the benefits of an issuer who has complied with the 1934
Act. Such benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all stockholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We have, and will continue to have, essentially
no assets to provide the owners of business opportunities. However,assurances we will be able to offer ownersconsummate 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 candidatescandidate 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 opportunitypotential 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 controlling ownership interest in an issuer who has complied with the 1934 Act
without incurring the cost and time required to conduct an initial public
offering.
The analysis of new business opportunities will be undertaken by,company or under the
supervision of,companies utilizing our Board of Directors. We intend to concentrate on identifying
preliminary prospective business opportunities which may be brought to our
attention through present associations of our director, professional advisorssecurities as part or by our stockholders. In analyzing prospective business opportunities, we will
consider such matters as (i) available technical, financial and managerial
resources; (ii) working capital and other financial requirements; (iii) history
of operations, if any, and prospects for the future; (iv) nature of present and
expected competition; (v) quality, experience and depth of management services;
(vi) potential for further research, development or exploration; (vii) specific
risk factors not now foreseeable but that may be anticipated to impact the
proposed activitiesall of the company; (viii) potential for growth or expansion;
(ix) potential for profit; (x) public recognition and acceptance of products,
services or trades; (xi) name identification; and (xii) other factors that we
consider relevant. As part ofconsideration to be paid, our investigation of the business opportunity, we
expect to meet personally with management and key personnel. To the extent
possible, we intend to utilize written reports and personal investigation to
evaluate the above factors.
Wecurrent shareholders will not acquire or merge with any company for which audited financial
statements cannot be obtained within a reasonable period of time after closing
of the proposed transaction.
Acquisition Opportunities
incur dilution.
In implementing a structure for a particular business acquisition, we may become a party to a merger, consolidation, reorganization, joint venture, asset purchase, or licensing agreement with another companycorporation or entity. We may also acquire stock or assets of an existing business. Upon the consummation of a transaction, it is probablelikely that our present management and stockholdersshareholders will no longer be in control of us. In
addition, our current directors may, as part of the terms of the acquisition
transaction, resign and be replaced by new directors without a vote of our
stockholders, or our controlling shareholder may sell his stock in us. Any such
sale will only be made in compliance with the securities laws of the United
States and any applicable state.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance upon exemption from registration under application federal
and state securities laws. In some circumstances, as a negotiated element of the
transaction, we may agree to register all or a part of such securities
immediately after the transaction is consummated or at specified times
thereafter. If such registration occurs, it will be undertaken by the surviving
entity after it has successfully consummated a merger or acquisition and is no
longer considered a shell company. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
our securities may have a depressive effect on the value of our securities in
the future. There is no assurance that such a trading market will develop.
While the actual terms of a transaction cannot be predicted, it is expected that
the parties to any business transaction will find it desirable to avoid the
creation of a taxable event and thereby structure the business transaction in a
so-called "tax-free" reorganization under Sections 368(a)(1) or 351 of the
Internal Revenue Code (the "Code"). In order to obtain tax-free treatment under
the Code, it may be necessary for the owner of the acquired business to own 80%
or more of the voting stock of the surviving entity. In such event, our
5
stockholders would retain less than 20% of the issued and outstanding shares of
the surviving entity. This would result in significant dilution in the equity of
our stockholders.
Company.
As part of our investigation, we expect toour 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 opportunityacquisition will depend on the nature of the opportunity, the respective needs and desires of bothus and other parties, and the management of the opportunity.
With respect to any merger or acquisition candidate and depending upon, among other
things, the target company's assets and liabilities, our stockholders will in
all likelihood hold a substantially lesser percentage ownership interest in us
following any merger or acquisition. The percentage ownership may be subject to
significant reduction in the event we acquire a target company with assets and
expectations of growth. Any merger or acquisition can be expected to have a
significant dilutive effect on the percentage of shares held by our
stockholders.
relative negotiation strength.
| 9 |
We will participate in a business opportunityan acquisition only after the negotiation and execution of appropriate written business agreements. Although the terms of such agreements cannot be predicted, generally we anticipate that such agreements will (i) require some specific representations and warranties by all of the parties;
(ii)parties thereto, will specify certain events of default; (iii)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; (iv)closing, will outline the manner of bearing costs, including costs associated with the Company'sour attorneys and accountants; (v)accountants, will set forth remedies on defaults;default and (vi)will include miscellaneous other terms.
As stated above, we
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 or merge with 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 withinwith the requirements of the 193434 Act, or if the audited financial statements provided do not conform to the representations made by that
businessthe candidate to be acquired in the definitiveclosing 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 definitive closing documentsagreement will also contain a provision providing for reimbursementthe acquisition entity to reimburse us for ourall costs associated with the proposed transaction.
Competition
We believe
As of the date of this Report we are an insignificant participant among the firms which engage in
the acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we have. In view of our limited
financial resources and limited management availability, we will continue to be
at a significant competitive disadvantage compared to our competitors.
Investment Company Act 1940
Although we will be subject to regulation under the Securities Act of 1933, as
amended, and the 1934 Act, we believe we will not be subject to regulation under
the Investment Company Act of 1940 (the "1940 Act") insofar as we will not be
engaged in the business of investing or trading in securities. In the event we
engage in business combinationsdiscussions with various companies but there are no assurances that these discussions will result in us holding passive investment
interests in a number of entities, we could be subject to regulation under the
1940 Act. In such event, we would be required to register as an investment
company and incur significant registration and compliance costs. We have
obtained no formal determination from the SEC as to our status under the 1940
Act and, consequently, any violation of the 1940 Act would subject us to
material adverse consequences. We believe that, currently, we are exempt under
Regulation 3a-2 of the 1940 Act.
INTELLECTUAL PROPERTY
We do not hold any patents or patent applications.
EMPLOYEES
As of December 31, 2013, Mr. Cutler serves as our Chief Executive Officer and
Chief Financial Officer. We do not have an employment agreement with Mr. Cutler.
We have no other employees.
6
ITEM 1A. RISK FACTORS
WE HAD APPROXIMATELY $8.4 MILLION OF LIABILITIES OUTSTANDING
The legal advice we have received is that these liabilities have been
extinguished through the passage of time under the statute of limitations or
ceased to be our liabilities following the Reorganization and the sale of CCAPS.
It is possible that creditors may dispute this and could seek to take legal
action against us to collect their alleged debts. The costs of defending such
legal action could be significant and would hinder our ability to complete a
reverse merger.
WE HAVE INCURRED SIGNIFICANT LOSSES AND ANTICIPATE FUTURE LOSSES.
As of December 31, 2013, we had an accumulated deficit of $17,166,915 and a
stockholders' deficit of $292,034.
Future losses are likely to occur as and until we are able to merge with another
entity with experienced management and opportunities for growth in return for
shares of our common stock to create value for our shareholders as we have no
sources of income to meet our operating expenses. As a result of these, among
other factors, we received from our registered independent public accountants in
their report for the financial statements for the years ended December 31, 2013
and 2012, an explanatory paragraph stating that there is substantial doubt about
our ability to continue as a going concern.
OUR EXISTING FINANCIAL RESOURCES ARE INSUFFICIENT TO MEET OUR ONGOING OPERATING
EXPENSES.
We have no sources of income at this time and insufficient assets to meet our
ongoing operating expenses. In the short term, unless we are able to raise
additional debt and, or, equity we shall be unable to meet our ongoing operating
expenses. On a longer term basis, we intend to merge with another entity with
experienced management and opportunities for growth in return for shares of our
common stock to create value for our shareholders. There can be no assurance
that these events will be successfully completed.
WE INTEND TO PURSUE THE ACQUISITION OF AN OPERATING BUSINESS
Our sole strategy is to acquire an operating business. Successful implementation
of this strategy depends on our ability to identify a suitable acquisition
candidate, acquire such company on acceptable terms and integrate its
operations. In pursuing acquisition opportunities, we compete with other
companies with similar strategies. Competition for acquisition targets may
result in increased prices of acquisition targets and a diminished pool of
companies available for acquisition. Acquisitions involve a number of other
risks, including risks of acquiring undisclosed or undesired liabilities,
acquired in-process technology, stock compensation expense, diversion of
management attention, potential disputes with the seller of one or more acquired
entities and possible failure to retain key acquired personnel. Any acquired
entity or assets may not perform relative to our expectations. Our ability to
meet these challenges has not been established.
At the time of this filing, we have not executed any formal arrangement,
agreement or understanding with respect to engaging in a merger with, joint
venture with or acquisition of a private or public entity. There can be no
assurance that we will be successful in identifying and evaluating suitable
business opportunities or in concluding a business combination. We have not
identified any particular industry or specific business within an industry for
evaluation.definitive agreement. There is no assurance wesignificant 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 able to negotiateinterested in a business
combination on terms favorable, if at all.
We have not established a specific length of operating history or specified
level of earnings, assets, net worth or other criteria which we will require a
target business opportunity to have achieved, and without which we would not
consider a business combination. Accordingly, wewith us may enter into 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 business opportunity having no significant operating history,
losses, limited or no potential for earnings, limited assets, negative net worth
or other negative characteristics.
7
SCARCITY OF, AND COMPETITION FOR, BUSINESS OPPORTUNITIES AND COMBINATIONS
We believe we are an insignificant participant amongprivate company will normally involve the firms which engage intransfer to the acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we have. Nearly all such
entities have significantly greater financial resources, technical expertise and
managerial capabilities than us and, consequently, we will be at a competitive
disadvantage in identifying possible business opportunities and successfully
completing a business combination. Moreover, we will also compete in seeking
merger or acquisition candidates with numerous other small public companies. In
view of our limited financial resources and limited management availability, we
will continue to be at a significant competitive disadvantage compared to our
competitors.
BECAUSE INSIDERS CONTROL OUR ACTIVITIES, THAT MAY CAUSE US TO ACT IN A MANNER
THAT IS MOST BENEFICIAL TO THEM AND NOT TO OUTSIDE SHAREHOLDERS WHICH COULD
CAUSE US NOT TO TAKE ACTIONS THAT OUTSIDE INVESTORS MIGHT VIEW FAVORABLY
Our sole executive officer, directors, and holders of 5% or more of our issued
and outstanding common stock beneficially own approximately 65% of our issued
and outstanding common stock. As a result, they effectively control all matters
requiring director and stockholder approval, including the election of
directors, the approval of significant corporate transactions, such as mergers
and related party transaction. These insiders also have the ability to delay or
perhaps even block, by their ownership of our stock, an unsolicited tender
offer. This concentration of ownership could have the effect of delaying,
deterring or preventing a change in control of ourprivate company that you might view
favorably.
OUR CHIEF EXECUTIVE OFFICER HAS THE ABILITY TO EFFECTIVELY CONTROL SUBSTANTIALLY
ALL ACTIONS TAKEN BY STOCKHOLDERS.
Mr. Cutler, the sole officer and a director of the Company owns in excess of our
50%majority of our issued and outstanding common stock and is able to effectively
control substantially all actions takenthe substitution by our stockholders, including the electionprivate company of its own management and board of directors. Such concentration
| 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 ownership could also havesecurities 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 effectCompany files a registration statement with the SEC that includes certain specific information about existing business operations of delaying, deterringa 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 preventingnominal 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 that might
otherwise be beneficial to stockholders and may also discourage acquisition bids
for us and limit the amount certain investors may be willing to pay for shares
of common stock.
OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST WHICH MAY NOT BE RESOLVED FAVORABLY
TO US.
Certain conflicts of interest may exist between our directors and us. Our
Directors have other business interests to which they devote their attention,
and may be expected to continue to do so although management time should be
devoted to our business. As a result, conflicts of interest may arise that can
be resolved only through exercise of such judgment as is consistent with
fiduciary duties to us. See "Directors, Executive Officers, Promoters and
Corporate Governance" (page 19), and "Conflicts of Interest." (page 20).
WE MAY DEPEND UPON OUTSIDE ADVISORS, WHO MAY NOT BE AVAILABLE ON REASONABLE
TERMS AND AS NEEDED.
To supplement the business experience of our officers and directors, we mayCompany. Since a principal benefit of a business combination with us would normally be required to employ accountants, technical experts, appraisers, attorneys, or
other consultants or advisors. Our Board without any input from stockholders
will make the selection of any such advisors. Furthermore,considered our status as a reporting company, it is anticipated that such persons may be engaged on an "as needed" basis without a continuing
fiduciary or other obligationwe will continue to us. In the event we consider it necessary to
hire outside advisors, we may elect to hire persons who are affiliates, if they
are able to provide the required services.
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA MAY HAVE AN EFFECT ON THE
TRADABILITY OF OUR SECURITIES.
Our securities are currently listed on the Over the Counter Bulletin Board and
the OTC Market's OTCQB. Our shares are subject to a Securities and Exchange
Commission rule that imposes special sales practice requirements upon
broker-dealers who sell such securities to persons other than established
customers or accredited investors. For purposes of the rule, the phrase
"accredited investors" means, in general terms, institutions with assets in
8
excess of $5,000,000, or individuals having a net worth in excess of $1,000,000
or having an annual income that exceeds $200,000 (or that, when combined with a
spouse's income, exceeds $300,000). For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Consequently, the rule may affect the ability of broker-dealers to sell
our securities and also may affect the ability of purchasers in this offering to
sell their securities in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9file reports under the Securities and Exchange Act of 1934, as amended. Because our securities constitute "penny stocks" within
the meaning of the rules, the rules would apply to us and to our securities. The
rules may further affect the ability of owners of Shares to sell our securities
in any market that might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one orfollowing a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent investor losses. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
OUR STOCK IS THINLY TRADED AND AS A RESULT YOU MAY BE UNABLE TO SELL AT OR NEAR
ASK PRICES OR AT ALL IF YOU NEED TO LIQUIDATE YOUR SHARES.
The shares of our common stock are thinly-traded on the OTC Bulletin Board and
the OTC Markets" OTCQB, meaning that the number of persons interested in
purchasing our shares of common stock at or near ask prices at any given time
may be relatively small or non-existent. This situation is attributable to a
number of factors, including the fact that we are a small company which is
relatively unknown to stock analysts, stock brokers, institutional investors and
others in the investment community that generate or influence sales volume, and
that even if we came to the attention of such persons, they tend to be
risk-averse and would be reluctant to follow an unproven, early stage company
such as ours or purchase or recommend the purchase of our shares of common stock
until such time as we became more seasoned and viable. As a consequence, there
may be periods of several days or more when trading activity in our shares of
common stock is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on Securities price. We cannot give
you any assurance that a broader or more active public trading market for our
shares of Common Stock will develop or be sustained, or that any trading levels
will be sustained. Due to these conditions, we can give investors no assurance
that they will be able to sell their shares of common stock at or near ask
prices or at all if you need money or otherwise desire to liquidate your shares
of common stock of our Company.
THE PRICE OF OUR COMMON STOCK COULD BE HIGHLY VOLATILE
It is likely that our common stock will be subject to price volatility, low
volumes of trades and large spreads in bid and ask prices quoted by market
makers. Due to the low volume of shares traded on any trading day, persons
buying or selling in relatively small quantities may easily influence prices of
our common stock. This low volume of trades could also cause the price of our
stock to fluctuate greatly, with large percentage changes in price occurring in
any trading day session. Holders of our common stock may also not be able to
readily liquidate their investment or may be forced to sell at depressed prices
due to low volume trading. If high spreads between the bid and ask prices of our
common stock exist at the time of a purchase, the stock would have to appreciate
substantially on a relative percentage basis for an investor to recoup their
investment. Broad market fluctuations and general economic and political
conditions may also adversely affect the market price of our common stock.business combination. No assurance can be given that an active market in our common stockthis will developoccur or, be sustained. If an active marketif it does, not develop, holdersfor how long.
LIQUIDITY AND CAPITAL RESOURCES
As of our common stock
may be unable to readily sell the shares they holdDecember 31, 2016, we had no cash or may not be able to sell
their shares at all.
9
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION AND
DILUTION TO STOCKHOLDERS
Our primary plan of operation is based upon a business combination withcash equivalents.
In March 2015, we commenced a private concern which, in all likelihood, would result in us issuing securities
to stockholders of such private company. The issuance of previously authorized
and unissued shares of our common stock would result in reduction in percentage
of shares owned by present and prospective stockholders and may result in a
change in control or management. In addition, any merger or acquisition can be
expected to have a significant dilutive effect on the percentage of the shares
held our stockholders.
LOSS OF CONTROL BY OUR PRESENT MANAGEMENT AND STOCKHOLDERS MAY OCCUR UPON
ISSUANCE OF ADDITIONAL SHARES.
We may issue further Shares as consideration for the cash or assets or services
out of our authorized but unissued Common Stock that would, upon issuance,
represent a majority of our voting power and equity. The result of such an
issuance would be those new stockholders and management would control us, and
persons unknown could replace our management at this time. Such an occurrence
would result in a greatly reduced percentage of ownership of us by our current
Shareholders.
OUR SECURITIES ARE NOT CURRENTLY ELIGIBLE FOR SALE UNDER RULE 144 AND ANY FUTURE
SALES OF OUR SECURITIES MAY BE ADVERSELY AFFECTED BY OUR FAILURE TO FILE ALL
REPORTS REQUIRED BY THE EXCHANGE ACT.
All of the outstanding shares of common stock held by the Company's present
officers, directors, and affiliate stockholders are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted Shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws.
Rule 144, as promulgated under the Securities Act is not available for the
resale of securities, initially issued by a shell company (reporting or
non-reporting) or a former shell company, unless certain conditions are
satisfied. We are a shell company. As a result, our securities cannot be resold
under Rule 144 unless certain conditions are met. These conditions are:
o the issuer of the securities has ceased to be a shell company;
o the issuer is subject to the reporting requirements of section 13 or
15(d) of the Exchange Act;
o the issuer has filed all reports and other materials required to be
filed by Section 13 or 15(d) of the Exchange Act, as applicable,
during the preceding 12 months, other than Form 8-K reports; and
o one year has elapsed since the issuer has filed current "Form 10
information" with the Commission reflecting its status as an entity
that is no longer a shell company.
The only way for our securities to be eligible for resale prior to the
conditions of Rule 144 being met, is for us to have registered them with the SEC
on a Registration Statement on Form S-1 and such registration being declared
effective by the SEC. At the time of this filing, management has no plans to
file a registration statement with the SEC.
A sale under Rule 144 or under any other exemption from the Act, if available,
or pursuant to subsequent registration of shares of common stock of present
stockholders, may have a depressive effect upon the price of the common stock in
any market that may develop.
WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS ON OUR COMMON STOCK
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
10
ITEM 2. DESCRIPTION OF PROPERTIES
Our mailing address is 2460 West 26th Avenue, Suite 380-C, Denver, Colorado,
80211. We do not pay rent for the use of this mailing address. We do not believe
it will be necessary to maintain an office at any time in the foreseeable future
in order to carry out our plan of operations described herein.
ITEM 3.LEGAL PROCEEDINGS
No legal proceedings are currently pending or threatened to the best of our
knowledge.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information.
Shares of our Common Stock are presently traded on the over-the-counter market
on the OTC Bulletin Board maintained by the Financial Industry Regulatory
Authority ("FINRA") and are listed on the OTC Markets' OTCQB under the trading
symbol "GDHC."
The following table sets forth the range of high and low sales prices for the
Company's common stock for each of the fiscal quarters for the past two years as
reported on the OTC Markets' OTCQB and the OTC Bulletin Board. These prices
represent inter-dealer prices without adjustments for mark-up, mark-down, or
commission and do not necessarily reflect actual transactions.
High Low
Year Ended December 31, 2013:
First quarter $0.15 $0.12
Second quarter 0.23 0.10
Third quarter 0.14 0.10
Fourth quarter 0.12 0.10
High Low
Year Ended December 31, 2012:
First quarter $0.265 $0.15
Second quarter 0.30 0.265
Third quarter 0.30 0.12
Fourth quarter 0.145 0.10
Record Holders.
There were 104 holders of record as of January 13, 2014. However, we believe the
number of beneficial holders of our shares of common stock to be approximately
430. In many instances, a registered stockholder is a broker or other entity
holding shares in street name for one or more customers who beneficially own the
shares.
Our transfer agent is Mountain Share Transfer, Inc., PO Box 191767 Atlanta,
Georgia 31119. The telephone number is 303-460-1149.
11
Dividends.
We have not paid or declared cash distributions or dividends on our shares of
common stock and do not intend to pay cash dividends in the foreseeable future.
Future cash dividends will be determined by our board of directors based upon
our earnings, financial condition, capital requirements and other relevant
factors.
Penny Stock.
Penny Stock Regulation Broker-dealer practices in connection with transactions
in "penny stocks" are regulated by certain penny stock rules adopted by the
Securities and Exchange Commission. Penny stocks generally are equity securities
with a price of less than $5.00. Excluded from the penny stock designation are
securities registered on certain national securities exchanges or quoted on
NASDAQ, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange/system or sold to
established customers or accredited investors.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in connection with the transaction, and the
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, 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 agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. As our securities have become subject to the penny stock
rules, investors may find it more difficult to sell their securities.
Recent Sales of Unregistered Securities
We sold no shares of common stock during the years ended December 31, 2013 and
2012.
Stock Incentive Plans -- details concerning the activities and status of our
stock incentive plans during the period are set out in Note 9. Stockholders'
(Deficit) / Equity of our Financial Statements on page 34 below.
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are
not required to provide information required by this Item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto and the other financial information
included elsewhere in this report. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward looking statements as a
result of any number of factors, including those set forth under "Risk Factors"
on page 7 and elsewhere in this report.
12
OVERVIEW
Summary
Golden Dragon Holding Co. ("the Company," "we" or "us") is a publicly quoted
shell company seeking to obtain debt and, or, equity finance to meet our ongoing
operating expenses and attempt to merge with another entity with experienced
management and opportunities for growth in return for sharesplacement of our common stock to create value for our shareholders.
We are a development stage enterpriseaccredited investors at $1.50 per share. Through September 30, 2015, we issued an aggregate of 536,334 shares and received $804,500 in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises" now referred to as ACS 915 "Development Stage Entities." gross proceeds.
We have been in the development stage since Inception (January 1, 2011).
Reorganization into a Holding Company Structure
Effective December 31, 2010, pursuant to the Delaware Holding Company formation
statute, DGCL Section 251(g), CCVG completed an Agreement and Plan of Merger and
Reorganization into a Holding Company ("the Reorganization") with CCAPS and
Golden Dragon, both wholly-owned subsidiaries of CCVG. The Reorganization
provided for the merger of CCVG with and into CCAPS, with CCAPS being the
surviving corporation in that merger. Contemporaneously with CCVG's merger with
and into CCAPS, the shareholders of CCVG were converted into shareholders of
Golden Dragon on a one share for one share basis.
As a result of this reorganization into a Holding Company structure, Golden
Dragon became the surviving publicly quoted parent holding company with CCAPS,
the surviving corporation of the merger between CCVG and CCAPS, becoming the
sole remaining wholly-owned subsidiary of Golden Dragon.
The Reorganization has been accounted for so as to reflect the fact that both
CCVG and Golden Dragon were under common control at the date of the
Reorganization, similar to a reverse acquisition of CCVG and its subsidiary
company, CCAPS, by Golden Dragon.
Sale of CCAPS
On December 31, 2010, Golden Dragon entered into a Share Purchase Agreement with
James Clark. Under the terms of the Share Purchase Agreement, Golden Dragon sold
100% of the issued and outstanding shares of its sole remaining wholly owned
subsidiary, CCAPS, to James Clark for $100 cash consideration, subject to its
debts, and issued 25,000 shares of Golden Dragon common stock, valued at $1,000,
to CCAPS pursuant to the terms of the Share Purchase Agreement. At the time of
the sale, CCAPS had no ongoingrevenue-producing operations or assets and outstanding liabilities
of approximately $678,000.
Following the merger of CCVG with and into CCAPS, CCAPS, as the surviving
corporation in that merger, retained all outstanding liabilities of CCVG in the
divestiture.
As a result of the sale of 100% of the issued and outstanding shares of CCAPS,
Golden Dragon, the surviving publicly quoted holding company will no longer
consolidate the liabilities of CCAPS or CCVG.
PLAN OF OPERATIONS
Our plan of operations is to raise debt and, or, equity to meet our ongoing
operating expenses and attempt to merge with another entity with experienced
management and opportunities for growth in return for shares of our common stock
to create value for our shareholders. There can be no assurance that we will
successfully complete these transactions. In particular there is no assurance
that any such business will be located or that any stockholder will realize any
return on their shares after such a transaction. Any merger or acquisition
completed by us can be expected to have a significant dilutive effect on the
percentage of shares held by our current stockholders. We believe we are an
insignificant participant among the firms which engage in the acquisition of
business opportunities. There are many established venture capital and financial
concerns that have significantly greater financial and personnel resources and
technical expertise than we have. In view of our limited financial resources and
limited management availability, we will continue to be at a significant
competitive disadvantage compared to our competitors.
13
We intend to seek, investigate and, if such investigation warrants, acquire an
interest in business opportunities presented to us by persons or firms which
desire to seek the advantages of an issuer who has complied with the Securities
Act of 1934 (the "1934 Act"). We will not restrict our search to any specific
business, industry or geographical location, and we may participate in business
ventures of virtually any nature. This discussion of our proposed business is
purposefully general and is not meant to be restrictive of our virtually
unlimited discretion to search for and enter into potential business
opportunities. We anticipate that we may be able to participate in only one
potential business venture because of our lack of financial resources.
We may seek a business opportunity with entities which have recently commenced
operations, or that desire to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service, or for other corporate purposes. We may acquire assets
and establish wholly owned subsidiaries in various businesses or acquire
existing businesses as subsidiaries. Though no such opportunities have been
identified at the time of this filing.
We expect that the selection of a business opportunity will be complex and
risky. Due to general economic conditions, rapid technological advances being
made in some industries and shortages of available capital, we believe that
there are numerous firms seeking the benefits of an issuer who has complied with
the 1934 Act. Such benefits may include facilitating or improving the terms on
which additional equity financing may be sought, providing liquidity for
incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes) for all stockholders
and other factors. Potentially, available business opportunities may occur in
many different industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex. We have, and will continue to
have, essentially no assets to provide the owners of business opportunities.
However, we will be able to offer owners of acquisition candidates the
opportunity to acquire a controlling ownership interest in an issuer who has
complied with the 1934 Act without incurring the cost and time required to
conduct an initial public offering.
The analysis of new business opportunities will be undertaken by, or under the
supervision of, our Board of Directors. We intend to concentrate on identifying
preliminary prospective business opportunities which may be brought to our
attention through present associations of our director, professional advisors or
by our stockholders. In analyzing prospective business opportunities, we will
consider such matters as (i) available technical, financial and managerial
resources; (ii) working capital and other financial requirements; (iii) history
of operations, if any, and prospects for the future; (iv) nature of present and
expected competition; (v) quality, experience and depth of management services;
(vi) potential for further research, development or exploration; (vii) specific
risk factors not now foreseeable but that may be anticipated to impact the
proposed activities of the company; (viii) potential for growth or expansion;
(ix) potential for profit; (x) public recognition and acceptance of products,
services or trades; (xi) name identification; and (xii) other factors that we
consider relevant. As part of our investigation of the business opportunity, we
expect to meet personally with management and key personnel. To the extent
possible, we intend to utilize written reports and personal investigation to
evaluate the above factors.
We will not acquire or merge with any company for which audited financial
statements cannot be obtained within a reasonable period of time after closing
of the proposed transaction.
Liquidity and Capital Resources
As at December 31, 2013, we had no assets, no operating business or other source of income outstanding liabilities of $292,034 and a stockholders' deficit of
$292,034.
In our financial statements for the fiscal years ended December 31, 2013 and
2012, the Reportas of the Independent Registered Public Accounting Firm includesdate of this Report, nor have we had any revenue during the past 3 years. See “Plan of Operation” above herein for an explanatory paragraph that describes substantial doubt aboutexplanation of our ability to
continue as a going concern. Our financial statements for the fiscal years ended
December 31, 2013 and 2012 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. We had a working capital deficit
of $292,034 and reported an accumulated deficit of $17,166,915 as at December
31, 2013.
current business activities.
It is our current intention to seek raise debt and, and/or equity financing to fund ongoing operating expenses and attempt to merge with another entity with
experienced management and opportunities for growth in return for shares of our
common stock to create value for our shareholders.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. 14
RESULTS OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 2013 COMPARED TO THE FISCAL YEAR ENDED DECEMBER
31, 2012
Revenue
DuringSee “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 years ended December 31, 2013proceeds from this offering on working capital.
We must raise additional funds to support our expected operating plan and 2012,our continued operations. We cannot provide any assurances that we didwill 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 recognize any
revenues from its activities. Webe 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 anticipate recognizing revenues in the
near future, givenbelieve that inflation had a material effect on our operational activities are purely administrative in
nature.
General and Administrative Expenses
Duringresults of operations during the year ended December 31, 2013, we incurred $80,3112016.
Critical Accounting Policies and Estimates
Critical Accounting Estimates
Our financial statements and accompanying notes have been prepared in generalaccordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and administrative expenses, comparedassumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to $89,568 we incurredprepare 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 general and
administrative expenses inour Annual Report on Form 10-K for the year ended December 31, 2012, a decrease of
$9,257. General and administrative expenses consist mainly of legal and
accounting expenses incurred2014 in maintaining our public reporting status and the
decrease from 2012 to 2013 related primarily to a decrease in legal fees
incurred between the two periods.
Operating Income (Loss)
In the year ended December 31, 2013, we recognized operating loss of $80,311
compared to an operating expense of $89,568 in the year ended December 31, 2012,
a variance of $9,257 due to the factors as discussed above.
Interest and Other Income / (Expenses) Net
In the year ended December 31, 2013, we incurred net interest expense of $14,095
in interest and other income / (expenses) net compared to $8,499 in the year
ended December 31, 2012, a increase of $5,596. The interest expense represented
accrued interest at 8% on the loan made to us by Mr. Cutler, an officer and
director, in respect of expenses incurred settling certain of our outstanding
liabilities and bringing our books and records up to date which he paid directly
on our behalf. The increase in interest expense in the year ended December 31,
2013 as compared to the year ended December 31, 2012 reflected the increase in
the principal balance of the loan provided to us by Mr. Cutler between the two
periods.
(Loss) Profit before Income Tax
In the year ended December 31, 2013, we recognized a loss before income taxes of
$94,406 compared to loss before taxes of $98,067 in the year ended December 31,
2012, a decrease of $3,661, due to the factors discussed above.
Provision for Income Taxes
No provision for income taxes was recorded in either the year ended December 31,
2013 or 2012 as we incurred taxable losses in both periods.
Net (Loss) Income
In the year ended December 31, 2013, we realized a net loss of $94,406 compared
to a net loss of $98,067 in the year ended December 31, 2012, a decrease of
$3,661, due to the factors set out above.
CASH FLOW INFORMATION FOR THE FISCAL YEARS ENDED DECEMBER 31, 2013 AND 2012
As at December 31, 2013, we had no assets, no operating business or other source
of income, outstanding liabilities of $292,034 and a stockholders' deficit of
$292,034.
15
In our financial statements for the fiscal years ended December 31, 2013 and
2012, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern. Our financial statements for the fiscal years ended
December 31, 2013 and 2012 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. We had a working capital deficit
of $292,034 and reported an accumulated deficit of $17,166,915 as at December
31, 2013.
It is our current intention to seek raise debt and, or, equity financing to fund
ongoing operating expenses and attempt to merge with another entity with
experienced management and opportunities for growth in return for shares of our
common stock to create value for our shareholders. There is no assurance that
these events will be satisfactorily completed.
During the fiscal year ended December 31, 2013, we used cash of $11,017 in our
operating activities compared to $10,913 cash we used in operating activities
during the fiscal year ended December 31, 2012, a decrease of $104. During the
twelve months ended December 31, 2013 we incurred net losses of $94,406 which,
after adjustment for $60,000 in non cash compensatory loan increases, were
partially offset by a positive movement in operating liabilities of $23,389.
During the twelve months ended December 31, 2012 we incurred net losses of
$98,067 which, after adjustment for $60,000 in non cash compensatory loan
increases, were partially offset by a positive movement in operating liabilities
of $27,154
No cash was provided by, or used in, investing activities during the fiscal
years ended December 31, 2013 or 2012
During the fiscal year ended December 31, 2013, we received $10,992 from
financing activities, compared to $10,913 in the year ended December 31, 2012,
an increase of $79. This increase represented the increased level of funding
required to be provided to us by Mr. Cutler, our sole officer and a director. Critical Accounting Policies All companies are requiredsection 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 include a discussion(1) present inception-to-date information on the statements of critical accounting
policiesincome, cash flows and estimates used in the preparation of their financial statements. On
an on-going basis, we evaluate our critical accounting policies and estimates.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form our 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.
Our significant accounting policies are described in Note 1 tostockholders’ equity, (2) label the financial statements on page 31 below. These policies were selected because they representas those of a development stage entity; (3) disclose a description of the more significant accounting policiesdevelopment stage activities in which the entity is engaged and methods that are broadly applied(4) disclose in the preparation of our financial statements.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, it should be noted that we
intendentities are permitted to acquire a new operating business. The critical accounting policies and
estimatesearly adopt for such new operations will, in all likelihood, be significantly
different from our current policies and estimates.
Off Balance Sheet Arrangements, Contractual Obligations and Commercial
Commitments
All companies are required to include a discussion to address, among other
things, liquidity, off-balance sheet arrangements, contractual obligations and
commercial commitments. Details of the arrangements, contractual obligations and
commercial commitments are described in Note. 7 toany 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 page 33 below.
ACCOUNTING PRONOUNCEMENTS
We havethe 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.
EFFECTS OF INFLATION
Although we cannot accurately anticipate the effect of inflation on our
operations, we do
| 12 |
Off-Balance Sheet Arrangements
We have not believeentered into any off-balance sheet arrangements that inflation has had,have or isare reasonably likely in the future to have a materialcurrent or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or financial condition.
16
ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
capital resources and would be considered material to investors.
Item 7a. Quantitative And Qualitative Disclosures About Market Risk
As a "smallersmaller reporting company" as defined by Item 10 of Regulation S-K,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.
ITEM 8. FINANCIAL STATEMENTS
Our financial statementsItem are includedset forth immediately following the signature page and are incorporated herein commencingby reference.
Item 9. Changes in and Disagreements with Accountants on page 24.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Accounting and Financial Disclosure.
On November 30, 2013,June 11, 2018, we informed by Ronald Chadwick, P.C. ("Ronald Chadwick"engaged BF Borgers CPA PC as our independent registered public accounting firm, and effective June 11, 2018, we dismissed KLJ & Associates, LLP (“KLJ”)
that it was terminating its services, as our independent registered public accounting firm. Ronald ChadwickThe decision to dismiss KLJ and to appoint BF Borgers CPA PC was the independent registered public accounting firm for the
Registrant from January 1, 2011 until November 30, 2013. Ronald Chadwick's
reportsapproved 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 the Registrant'sour financial statements for either of the twelve month periodstwo fiscal years ended December 31, 20122014 and 2011 and the period from Inception (January 1, 2011)
to December 31, 2012did2013 did not (a) contain an adverse opinion or disclaimer of opinion, or (b)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, or (c) contained any disagreements on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements, if not resolvedexcept relevant to the satisfaction of Ronald
Chadwick, would have caused it to make reference to the subject matter of the
disagreements in connection with its reports for the twelve month periods ended
December 31, 2012 and 2011, the period from Inception (January 1, 2011) to
December 31, 2012 and the subsequent interim periods preceding November 30,
2013. None of the reportable events set forth in Item 304(a)(1)(iv) of
Regulation S-K occurred during the twelve month periods ended December 31, 2012
and 2011, the period from Inception (January 1, 2011) to December 31, 2012 and
the subsequent interim periods preceding November 30, 2013 in which Ronald
Chadwick served as the Registrant's principal independent accountants.
However, the report of Ronald Chadwick dated March 19, 2013 on our financial
statements for the twelve month periods ended December 31, 2012 and 2011, and
for the period from Inception (January 1, 2011) to December 31, 2012 contained
an explanatory paragraph which noted that there was substantial doubt as to our
ability to continue as a going concern.
On January 20, 2014, we retained KLJ & Associates, LLP ("KLJ") as our
independent registered public accounting firm.
We have had no disagreements with either Chadwick or KLJ with respect to any
accounting or financial disclosure issues.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain a system of disclosure controls and procedures (as defined in
Securities Exchange Act Rule 15d-15(e)) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer and Chief
Financial Officer, Mr. Cutler, carried out an evaluation under the supervision
and with the participation of our management, of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 15d-14 as of the end of the period covered by this report. Based on the
foregoing evaluation, Mr. Cutler has concluded that our disclosure controls and
procedures are effective in timely alerting management to material information
17
required to be included in our periodic SEC filings and to ensure that
information required to be disclosed in our periodic SEC filings is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, to allow timely decisions regarding required
disclosure.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management, consisting of Mr. Cutler, our Chief Executive Officer and Chief
Financial Officer, is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f), is a process
designed by, or under the supervision of, our principal executive and principal
financial officers and effected by our Board of Directors, management and other
personnel, 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, based on
criteria established in Internal Control--Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission 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 our
assets;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of our financial statements in
accordance with generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use of disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control 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. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2013. Based on this assessment, management believes
that as of December 31, 2013, our internal control over financial reporting is
effective based on those criteria.
This annual report does not include an attestation report of the company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the SEC to
provide only management's report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes during our last fiscal quarter that materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. OTHER INFORMATION
None.
18
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Effective December 31, 2013, our directors and officers were:
NAME AGE POSITION
------------------------ ------- ---------------------------------------
David J. Cutler 58 President, Chief Executive Officer,
Chief Financial Officer and Director
Redgie Green 59 Director
David J. Cutler - President, Chief Executive Officer, Chief Financial Officer
and Director. Mr. Cutler became our director and officer in March 2006. Mr.
Cutler is the Principal of Cutler & Co., LLC, a PCAOB registered US auditing
company. Mr. Cutler has been the Chief Financial Officer of US Precious Metals,
Inc., a publicly quoted mineral exploration company with interests in Mexico,
since December 2011 and a director and Chief Financial Officer of Discovery Gold
Corporation, a publicly quoted mineral exploration company with interests in
Ghana, since August 2012. Mr. Cutler is the sole officer and a director of the
following publicly quoted shell companies: Southwestern Water Exploration Co.,
since March 2011, Torrent Energy Corporation, since October 2011, Quantech
Electronics Corp since May 2012 and Capital Resource Alliance, Inc., since
September 2012. Mr. Cutler was the sole officer and a director of Aspeon, Inc.
(nka Aspi, Inc.), a publicly listed shell company, from April 2005 until October
2009, US Holdings, Inc. (formerly USN Corporation), from July 2011 to July 2013
and a director and officer of Atomic Paintball, Inc., a development stage owner
and operator of paintball parks, from August 2006 until December 2009. Atomic
Paintball, Inc. filed for Chapter 7 in 2009. Mr. Cutler has a Masters degree
from St. Catherine College in Cambridge, United Kingdom and qualified as a
British Chartered Accountant and Chartered Tax Advisor with Arthur Andersen &
Co. in London. He was subsequently admitted as a Fellow of the UK Institute of
Chartered Accountants. Since arriving in the United States, Mr. Cutler has
qualified as a Certified Public Accountant, a Certified Valuation Analyst of the
National Association of Certified Valuation Analysts and obtained an executive
MBA from Colorado State University.
Redgie Green - Director. Mr. Green became a director in March 2006. Mr. Green
has served as the Chief Executive Officer and a Director of Legacy Technology
Holdings, Inc. since October 2010 and as a Director of Momentum BioFuels, Inc.
since May 2012. Mr. Green served as the Chief Executive Officer of Sun River
Energy, Inc. from January 2009 through August 3, 2010. From January 2009 through
October 2009, he served as the President of Sun River Energy, Inc. He has served
as a director of Sun River Energy, Inc. from 1998 through October 2010. He
served as a director of ASPI, Inc. from 2006 through the fall of 2009 and was
appointed as an officer and director of Captech Financial, Inc. in May 2006. He
served as a director of Baymark Technologies, Inc. 2005-2006. Mr. Green was
co-owner and operator of Green's B&R Enterprises, a wholesale donut baker since
1983. He has been an active investor in small capital and high-tech adventures
since 1987.
CONFLICTS OF INTEREST - GENERAL
Our directors and officers are, or may become, in their individual capacities,
officers, directors, controlling shareholder and/or partners of other entities
engaged in a variety of businesses. Thus, there exist potential conflicts of
interest including, among other things, time, efforts and corporation
opportunity, involved in participation with such other business entities. While
each officer and director of our business is engaged in business activities
outside of our business, they devote to our business such time as they believe
to be necessary.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently no requirement contained in our Articles of Incorporation, Bylaws, or
minutes which requires officers and directors of our business to disclose to us
business opportunities which come to their attention. Our officers and directors
do, however, have a fiduciary duty of loyalty to us to disclose to us any
business opportunities which come to their attention, in their capacity as an
officer and/or director or otherwise. Excluded from this duty would be
opportunities which the person learns about through his involvement as an
officer and director of another company. We have no intention of merging with or
acquiring an affiliate, associate person or business opportunity from any
affiliate or any client of any such person.
COMMITTEES OF THE BOARD OF DIRECTORS
In the ordinary course of business, the board of directors maintains a
compensation committee and an audit committee. We do not have a compensation
committee or audit committee.
The primary function of the compensation committee is to review and make
recommendations to the board of directors with respect to the compensation,
including bonuses, of our officers and to administer the grants under our stock
option plan.
19
The functions of the audit committee are to review the scope of the audit
procedures employed by our independent auditors, to review with the independent
auditors our accounting practices and policies and recommend to whom reports
should be submitted, to review with the independent auditors their final audit reports to review with our internal and independent auditors our overall
accounting and financial controls, to be available to the independent auditors
during the year for consultation, to approve the audit fee charged by the
independent auditors, to report to the board of directors with respect to such
matters and to recommend the selection of the independent auditors.
In the absence of a separate audit committee our board of directors functions as
audit committee and performs some of the same functions of an audit committee,
such as recommending a firm of independent certified public accountants to audit
the annual financial statements; reviewing the independent auditors
independence, the financial statements and their audit report; and reviewing
management's administration of the system of internal accounting controls.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our Officers and
Directors, and persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership and changes in ownership with the SEC.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish us with copies of all Section 16(a) forms they file. Based
solely on our review of copies of such reports received, and representations
from certain reporting persons, we believe that, during the fiscal year ended
December 31, 2012, all Section 16(a) filing requirements applicable to our
officers, directors and greater than 10% beneficial owners were filed in
compliance with all applicable requirements.
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.
Due to the limited scope of our current operations, we have not adopted a
corporate code of ethics that applies to our principal executive officer,
principal accounting officer, or persons performing similar functions.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation paid
by the Company to the President and the Company's most highly compensated
executive officers for the fiscal year ended December 31, 2013, 2012 and 2011
(the "Named Executive Officers"):
SUMMARY EXECUTIVE COMPENSATION TABLE
Non-equity Non-qualified
incentive deferred
Stock Option plan compensation All other
Salary Bonus awards awards compensation earnings compensation Total
Name & Position Year ($) ($) ($) ($) ($) ($) ($) ($)
-------------------- -------- -------- ------- -------- -------- ------------ -------------- ------------- --------
David J. Cutler, 2013 60,000 0 0 0 0 0 0 60,000
President, CEO, 2012 60,000 0 0 0 0 0 0 60,000
CFO and Director 2011 60,000 0 0 0 0 0 0 60,000
DIRECTOR COMPENSATION
The following table sets forth certain information concerning compensation paid
to our directors for services as directors during the year ended December 31,
2013:
Fees
Earned Non-Equity Nonqualified
Or Stock Options Incentive Plan Deferred All Other
Paid-in Awards Awards Compensation Compensation Compensation Total
Cash ($) ($) ($) ($) ($) ($)
Name ($)
-------------------------------- ----------- ---------- ---------- ----------------- ---------------- ----------------- -----------
David J. Cutler, director 0 0 0 0 0 60,000(1) 60,000
Redgie Green, director 0 0 0 0 0 0 0
(1) Mr. Cutler receives a cash compensation for his services as the Chief
Executive Officer and Chief Financial Officer of the Company.
The Company does not pay any Directors fees for meeting attendance.
All of the Company's officers and/or directors will continue to be active in
other companies. All officers and directors have retained the right to conduct
their own independent business interests.
EQUITY COMPENSATION PLAN INFORMATION
The Company has not established an equity compensation plan or Incentive Stock
Option Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of our common stock, as of December 31, 2013 by:
o each person who is known by us to own beneficially more than 5% of our
outstanding common stock,
o each of our named executive officers and directors, and
o all executive officers and directors as a group.
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OUTSTANDING (2)
----------------------------------------------------- ------------- ------------
David J. Cutler, CEO, CFO and Director (1) 1,521,120 63.8%
Redgie Green, Director(1) 25,000 1.0%
------------ ------------
All executive officers and directors as a group (2 1,546,120 64.8$
individuals) ============ =============
(1) c/o 12191 West 64th Avenue, Suite 205B, Arvada, Colorado 80004.
(2) Based upon 2,384,407 shares of the Company's common stock issued and
outstanding on December 31, 2012.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As at December 31, 2013, we had an outstanding loan with Mr. Cutler of $213,934
(2012- $142,943) and accrued interest outstanding of $25,294 (2012 - $11,199).
20
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
We incurred $3,250 in audit fees with our auditor, Ronald Chadwick, PC, in the
year ended December 31, 2013 (2012 - $3,250).
Tax Fees
We did not incur any tax fees with our auditor, Ronald Chadwick, PC, in the
years ended December 31, 2013 or 2012.
All Other Fees
During the twelve months ended December 31, 2013, we incurred $4,500 (2012 -
$4,500) with our auditor, Ronald Chadwick, PC, in other fees in respect the
review of our quarterly financial statements.
It is the role of the Audit Committee, or in the absence of an audit committee,
the Board of Directors, to consider whether, and determine that, the auditor's
provision of non-audit services would be compatible with maintaining the
auditor's independence.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this Annual Report on Form 10-K in
accordance with Item 601 of Regulation S-K:
EXHIBIT DESCRIPTION AND METHOD OF FILING
NUMBER
--------------- ----------------------------------------------------------------
2.1 Agreement and Plan of Merger (1)
2.2 Agreement and Plan of Merger and Reorganization Into Holding
Company (2)
3(i).1 Articles of Incorporation of Golden Dragon Holding Co.(*)
3(ii).1 Bylaws of Golden Dragon Holding Co.(*)
31.1 Certification of Chief Executive & Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act*
32.1 Certification of Principal Executive & Accounting Officer
pursuant to Section 906 of the Sarbanes-Oxley Act*
101.INS XBRL Instance Document (3)
101.SCH XBRL Taxonomy Extension Schema Document (3)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (3)
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (3)
101.LAB XBRL Taxonomy Extension Label Linkbase Document (3)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (3)
---------------
* Filed herewith.
21
(1) Filed as an exhibit to the Company' Current Report on Form 8-K, filed with
the SEC on October 14, 2010.
(2) Filed as an exhibit to the Company's Current Report on Form 8-K, filed with
the SEC on January 28, 2011.
(3) Pursuant to Rule 406T of Regulation S-T, this interactive data file is
deemed not filed or part of a registration statement or prospectus for purposes
of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for
purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is
not subject to liability under these sections.
22
INDEX TO FINANCIAL STATEMENTS
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............... 25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............... 26
BALANCE SHEETS
As of December 31, 2013 and 2012..................................... 26
STATEMENTS OF OPERATIONS
For the Years Ended December 313, 2013 and 2012 and the Period from
Inception (January 1, 2011) Through Deceber 31, 2013................. 27
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Period from Inception (January 1, 2011) Through December 31, 2013 28
STATEMENTS OF CASH FLOWS
For the Years Ended December 313, 2013 and 2012 and the Period from
Inception (January 1, 2011) Through Deceber 31, 2013................. 29
NOTES TO FINANCIAL STATEMENTS.............................................. 30
23
KLJ & Associates, LLP
Certified Public Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders Golden Dragon Holding Co.
We have audited the accompanying balance sheets of Golden Dragon Holding Co. (a
development stage company) (the "Company") as of December 31, 2013 and the
related statements of operations, stockholders' equity, and cash flows for the
year then ended. Golden Dragon Holding Co.'s management is responsible for these
financial statements. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of Golden
Dragon Holding Co. for the cumulative period from January 1, 2011 through
December 31, 2012 were audited by other auditors whose report dated March 19,
2013, expressed an unqualified opinion on those statements. Our opinion, in so
far as it relates to the period from January 1, 2011 through December 31, 2012,
is based solely on the report of other auditors.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based upon our audit and the report of the other independent
auditors, the financial statements referred to above present fairly, in all
material respects, the financial position of Golden Dragon Holding Co. as of
December 31, 2013 and 2012, and the results of its operations and its cash flows for the years ended December 31, 2014 and 2013, and 2012 and for the cumulative period
January 1, 2011(Inception) to December 31, 2013 in conformity with accounting
principles generally accepted in the United States of America.
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, Thethe Company, is in the development stage, has not earned
significant revenue, has suffered net losses and has had negative cash flows from operating activities during the years ended December 31, 20132014 and for the
cumulative period January 1, 2011 through December 31, 2013. These matters raise substantial doubt about the Company'sCompany’s ability to continue as a going concern. Management'sManagement’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.
/s/ KLJ & Associates, LLP
KLJ & Associates, LLP
St. Louis Park, MN”
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.
None.
| 15 |
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 29, 2014
24
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM2011 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. Denver, Colorado
IDuring 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 |
Item 15. Exhibits, Financial Statements Schedules.
The following exhibits are included with this report:
| 22 |
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
| 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 sheetsheets of Golden Dragon Holding Co. (a
development stage company)CannaPharmaRx, Inc. (the "Company") as of December 31, 2012,2016 and 2015, the related statements of operations, stockholders' equity (deficit), and cash flows for the yearyears 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 period from January 1, 2011 (inception ofyears then ended, in conformity with accounting principles generally accepted in the development
stage) through December 31, 2012. United States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. MyOur responsibility is to express an opinion on thesethe Company's financial statements based on myour audit. IWe 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 myour audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).PCAOB. Those standards require that Iwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anmisstatement, whether due to error or fraud.
Our audit includesincluded 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 supportingregarding the amounts and disclosures in the financial statements. AnOur audit also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation. Istatements. We believe that myour audit provides a reasonable basis for myour opinion.
In my opinion,
Substantial Doubt about the financial statements referredCompany’s Ability to above present fairly, in all
material respects, the financial position of Golden Dragon Holding Co.Continue as of
December 31, 2012, and the results of its operations and its cash flows for the
year then ended, and for the period from January 1, 2011 (inception of the
development stage) through December 31, 2012 in conformity with accounting
principles generally accepted in the United States of America.
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 has suffered a loss from operations and has a
working capital deficit and stockholders' deficit. These conditionsCompany’s significant operating losses raise substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Aurora, Colorado /s/ Ronald R. Chadwick, P.C.
March 19, 2013 RONALD R. CHADWICK, P.C.
25
/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.
| 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.
| 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.
| 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.
FOR THE YEARS ENDED DECEMBER 31, 2013
1. 2016 AND 2015
| NOTE 1. | NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES |
NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - Golden Dragon Holding Co. ("the Company," "we" or "us"
CannaPharmaRx, Inc. (the “Company”) is a publicly quotedDelaware 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 seekingas 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 obtain debtCavion 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 equity
financeother source of income, no assets, no employees or directors, outstanding liabilities of approximately $8.4 million and had terminated its duty to meet our ongoing operating expenses and attemptfile reports under securities law. In February 2008, after filing of a Form 10 registration statement pursuant to merge with another
entity with experienced management and opportunities for growth in return for
sharesthe Securities Exchange Act of our common stock to create value for our shareholders.
1934, as amended, we were re-listed on the OTC Bulletin Board.
In April 2010, Concord Ventures, Inc. ("Concord"), a Colorado corporation,
incorporated three new subsidiary companies,the Company re-domiciled in Delaware under the name CCVG, Inc. ("CCVG"(“CCVG”), CCAPS Co.
("CCAPS") and Golden Dragon Holding Co. ("Golden Dragon"). All three of the new
subsidiary companies were domiciled in Delaware.
Development Stage Company - We are a development stage enterprise in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises" now referred to as ACS 915
"Development Stage Entities." We have been in the development stage since
Inception (January 1, 2011). Among the disclosures required as a development
stage company are that our financial statements are identified as those of a
development stage company, and that the statements of operations, stockholders'
deficit and cash flows disclose activity since the date of our Inception
(January 1, 2011) as a development stage company.
Re-domicile in Delaware
In order for Concord to re-domicile in Delaware from Colorado, on September 29,
2010, Concord entered into an Agreement and Plan of Merger ("the Merger
Agreement") with its wholly owned subsidiary, CCVG. Under the terms of the
Merger Agreement, Concord shares of common stock converted automatically to CCVG
shares, without change or necessity to reissue. Also under the Merger Agreement,
CCVG became the surviving company domiciled in Delaware
Reorganization into a Holding Company Structure
Effective.Effective December 31, 2010, underthe Company completed an Agreement and Plan of Merger and Reorganization into a Holding Company ("(the “Reorganization") which provided for the Reorganization") filed with the
Secretarymerger of State of Delaware:
- Golden Dragon acquired 100%two of the issued share capital of CCVG in a
share for share exchange of Golden Dragon shares for CCVG shares with
CCVG's existing shareholders, and
- CCVG merged with CCAPS, one of CCVG's former subsidiary companies.Company’s wholly owned subsidiaries. As a result of this reorganization into a Holding Company structure, Goldenthe Company’s name became “Golden Dragon Inc.,” which became the surviving publicly quoted parent holding company with CCAPS,company.
On May 9, 2014, the surviving corporation of the merger between CCVG and CCAPS, becoming the
sole remaining wholly-owned subsidiary of Golden Dragon.
The Reorganization has been accounted for so as to reflect the fact that both
CCVG and Golden Dragon were under common control at the date of the
Reorganization, similar to a reverse acquisition of CCVG and its subsidiary
company, CCAPS, by Golden Dragon.
Sale of CCAPS
On December 31, 2010, Golden DragonCompany entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with James Clark.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 terms of the Share Purchase Agreement, Golden Dragon sold
100%Canna Colorado purchased 1,421,120 restricted shares of the issuedCompany’s common stock from Mr. Cutler and outstandingan additional 9,000,000 common shares ofdirectly from the Company.
In October 2014, the Company changed its sole remaining wholly owned
subsidiary, CCAPS,legal name to James Clark for $100 cash consideration, subject to its
debts, and issued 25,000 shares of Golden Dragon Common Stock, valued at $1,000,
to CCAPS pursuant to the terms of the Share Purchase Agreement. At the time of
the sale, CCAPS had no ongoing operations or assets and outstanding liabilities
of approximately $678,000.
30
Following the merger of CCVG with and into CCAPS, CCAPS, as the surviving
corporation in that merger, retained all outstanding liabilities of CCVG in the
divestiture.
“CannaPharmaRx, Inc.”
As a result of the saleaforesaid 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 100%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 issuedFinancial 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 outstanding shares of CCAPS,
Golden Dragon,assumptions that affect the surviving publicly quoted holding company will no longer
consolidateamounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Due to uncertainties inherent in the liabilities of CCAPS or CCVG.
Cash and Cash Equivalents -- 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- We sold all of our
PROPERTY AND EQUIPMENT
Historically when the company acquired fixed assets, effective February 16,
2001depreciation 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 benefit of our creditors as part of our Chapter 11 reorganization.
Accordingly, we had no property and equipment as of December 31, 2013 and 2012
and we recorded no depreciation expense in the years ended December 31, 20132016 and 2012.
Deferred Costs and Other -- OfferingDecember 31, 2015, respectively.
DEFERRED COSTS AND OTHER OFFERING COSTS
All costs with respect to issueraising capital in the two private placements of the Company’s common stock warrantswere expensed by the Company both in 2014 and 2015. These costs were applied as internal operational expenses. The Company had no deferred costs or options by us wereother 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 deferreddefer these costs and ultimately offset them against the proceeds from these equitycapital or financial transactions if successful, or expensed if the proposed equityfinancial transaction isproves unsuccessful. We had no deferred costs and
other as at December 31, 2013 and 2012.
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 waswill be performed. If an evaluation wasis required, the estimated future undiscounted cash flows associated with the asset werewill be compared to the asset'sasset’s carrying amount to determine if a write-down to market value or discounted cash flow value waswill be required. Financial Instruments -- 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 valuesvalue 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 carrying amounts of notes receivable, accounts receivable,
accounts payable and accrued liabilities approximated fair value because of the
short-term maturities of these instruments. The fair value of notesthe Company’s financial instruments, which include cash, prepaid expenses, accounts payable approximated toand the related party loan, each approximate their carrying value as generallydue either to their short length to maturity or interest rates reflected
our effective annual borrowing rate.
Income Taxes -- We accountthat 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.
Advertising cost -- Advertising costs were expensed as incurred. No advertising
costs were incurred in the years ended December 31, 2013 and 2012.
Comprehensive Income (Loss) --
COMPREHENSIVE INCOME (LOSS)
Comprehensive income is defined as all changes in stockholders'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 werehave been no differences between our comprehensive loss and net loss.
Our comprehensive income / (loss) for the years ended December 31, 2013 and 2012
was identical to our net income / (loss) for the years ended December 31, 2013
and 2012.
Income (Loss) Per Share --.
| F-9 |
INCOME (LOSS) PER SHARE
Income (loss) per share is presented in accordance with Accounting Standards Update ("ASU"(“ASU”),Earning Perper Share (Topic(Topic 260) which requires the presentation of both basic and diluted earnings per share ("EPS"(“EPS”) on the consolidated 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 would reflectreflects the potential dilution that would occur if securities ofor 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. Basic and diluted EPS
were identical for the years ended
Stock options outstanding at December 31, 2013 and 2012 as we had no
warrants or2016 to purchase 750,000 shares of common stock options outstanding during these years.
31
Stock-Based Compensation - We haveare 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, (formerly SFAS 123R)(Compensation—Stock Compensation),
"Accounting for Stock-Based 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 we expectthe 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.
Use
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 Estimates -- The preparationdevelopment 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 our consolidatedincome, 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 conformity with generally accepted accounting principles requires managementwhich 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 make estimates and assumptions that affectearly adopt for any annual or interim reporting period for which the amounts reported in these financial statements have yet to be issued. The Company has elected to early adopt these amendments, and accompanying notes. Actual results could differ fromaccordingly, has not labeled the financial statements as those estimates. Due to uncertainties inherent inof a development stage entity and has not presented inception-to-date information on the estimation process, it is
possible that these estimates could be materially revised within the next year.
Business Segments -- We consider our ongoing activities to constitute a single
segment.
Recently Issued Accounting Pronouncements-- We haverespective 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.
2. GOING CONCERN AND LIQUIDITY
As
| 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, 2013, we had no assets, no operating business or other source
of income, outstanding liabilities of $292,034 and a stockholders' deficit of
$292,034.
2016.
| F-10 |
In ourthe Company’s financial statements for the fiscal years ended December 31, 20132016 and 2012,2015, the ReportReports of the Independent Registered Public Accounting Firm includesinclude an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. OurThese financial statements for the fiscal years ended
December 31, 2013 and 2012 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. We had a working capital deficit
of $292,034 and reported an accumulated deficit of $17,166,915 as at December
31, 2013.
Based on our current financial projections, we believe we do not have sufficient existing cash resources to fund our current limited operations.
It is ourthe Company’s current intention to seek raise debt and, and/or equity financing to fund ongoing operating expenses and attempt to merge with another entity with
experienced management and opportunities for growth in return for shares of our
common stock to create value for our shareholders.expenses. There is no assurance that these events will be satisfactorily completed.
3. ASSETS
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 atof December 31, 2013, we2016, the Company had no$1,667 in total assets (2012- $25).
4. ACCOUNTS PAYABLE
Effectivecomprised of prepaid expenses.
| NOTE 4. | ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
As of December 31, 2013,2016, the outstanding balance of accounts payable represents our balances dueand 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 respectcash over the next 12 months total $190,000 as of professional fees to our attorney and
auditors.
5. ACCRUED EXPENSES - RELATED PARTY
As at December 31, 2013, we2016, as discussed in Note 6 (Litigation and Accrued Settlement Liabilities).
| NOTE 5. | COMMITMENTS |
OPERATING LEASE
The Company had accrued interesta non-cancellable operating lease for its headquarters located in Carneys Point, New Jersey. The term of $25,294 (2012 - $11,199)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.
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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. Cutler,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 officer, director and shareholder of ours.
32
6. RELATED PARTY LOANS
As atexpense in such amount during the period ended December 31, 2013, we had an outstanding loan2014. Pursuant to the Settlement Agreement, $160,000 has been paid to Mr. Cohen in cash through September 30, 2015 in accordance with Mr. Cutler, an officer,
director and shareholderthe settlement payment terms, leaving a remaining liability of ours,$190,000 as of $213,934 (2011- $142,943).
The loan is repayable on demand and carries interest at 8%.
7. COMMITMENTS AND CONTINGENCIES
We were not subject to any contractual obligations and commercial commitments as
at December 31, 2013 (2012 - $0).
No legal proceedings are currently pending or threatened2015 to be paid in cash in the bestfuture, 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 our
knowledge.
8. RELATED PARTY TRANSACTIONS
As at December 31, 2013, we had an outstanding loan with Mr. Cutler, our
principal shareholder, directorlibel and sole officer, of $213,934 (2012- $142,943)
and accrued interest outstanding of $25,294 (2012 - $11,199).
9. STOCKHOLDERS' (DEFICIT)
Preferred Stock
We weretortious interference.
| NOTE 7. | STOCKHOLDERS’ EQUITY |
PREFERRED STOCK
The Company is authorized without further action by the shareholders, 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 shareholderstockholder 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 during the financial
years endedas of December 31, 2013 and 2012.
Common Stock
We were2016.
COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share. NoAs 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 twelve months ending December
31, 2013 or 2012.
Warrants
No warrantsperiod and were issued or outstanding duringvalued at $350,000 based on the years ended December 31, 2013
and 2012.
Stock Options
Effective March 19, 1999, we adopted atrading average of the Company’s stock option plan (the "Plan"). The Plan
provides for grants of incentive stock options, nonqualified stock options and
restricted stock to designated employees, officers, directors, advisors and
independent contractors. The Plan authorizedover the ten days preceding issuance of upthose shares.
WARRANTS
On January 20, 2015, the Company issued a 3-year warrant (the “First Warrant”) to 75,000Viridian 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 of Common Stock. Underat an exercise price equal to the Plan, the exercise 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 non-qualified3-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 option must betrades 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.
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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 at least 50% of the fair market value of the
common stock at the grant date, and the exercise price per share of an incentivethe 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 must equalactivity to date, the fair market valueCompany has recorded aggregate stock-based compensation charges of $728,125 for the common stock at the grant
date.
No stock options were issued or outstanding during the yearsyear ended December 31, 20132016 and 2012.
10. INCOME TAXES
We did not provide any current or deferred US$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 income tax provision or
benefit for anynet 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 periods presented in these financial statements because
we have experienced losses since Inception (January 1, 2011). When it is more
likely than not, that a tax asset cannot be realized through future income,Internal Revenue Code, the Company must record an allowance against any future potential future tax
33
benefit. We provided a full valuation allowance againstavailability of the net deferred tax
asset, consisting ofCompany’s net operating loss carry forwards because management has
determined that it is more likely than not that we will not earncould be subject to annual limitations against taxable income sufficient to realizein future periods, which could substantially limit the deferred tax assets during theeventual utilization of such carry forward periods.forwards. The Company has not taken a tax position that, if challenged, would have a
material effectanalyzed the historical or potential impact of its equity financings on the financial statements for the years ended December 31,
2013 and 2012 as defined under ASC 740, "Accounting for Income Taxes." We did
not recognize any adjustment to the liability for uncertain ta positionbeneficial ownership and therefore did not record any adjustment tono determination has been made whether the beginning balance of the
accumulated deficit on the balance sheet.
The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The sources and tax effects of the differences for the periods presented are as
follows:
2013 2012
Income tax provision at the federal statutory rate 39% 39%
Effect of operating losses (39%) (39%)
- % -%
======== =========
Changes in the net deferred tax assets consist of the following:
2013 2012
Net operating loss carry forward $ 94,406 $ 98,067
Valuation allowance (94,406) (98,067)
Netis 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 reconciliationConvertible Preferred Stock at $1.00 per share to its current management, all of income taxes computedwhom 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 statutory ratelesser of $0.40 or 50% discount to the market price on the date of conversion. The term of the notes is as follows:
2013 2012
Tax at statutory rate (39%) $ 38,246 $ 36,818
Increase in valuation allowance (38,246) (36,818)
Net deferred tax asset $ - $ -
=============== =============
The net federal operating loss carryforward will expire between 2031for one year and 2033.
This carry forward maythey must be limitedconverted upon the consummationclosing a financing, acquisition or other form of a business combination under IRC Section 381.
11. SEGMENT INFORMATION
We consider our ongoing business activities to constitute a single segment.
12. SUBSEQUENT EVENTS
On January 20, 2014, we retained KLJ & Associates, LLP as our independent
registered public accounting firm.
We have evaluated subsequent events through January 29, 2014. There have been no
subsequent events after December 31, 2013, otherin an amount greater than as disclosed above, for
which disclosure is required.
34
SIGNATURES
In accordance with the requirements of Section 12$5 million. As of the Securities Exchange Actdate of 1934,this report the RegistrantCompany has duly causedaccepted aggregate subscriptions of $640,000 in this Registration StatementOffering, 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 be signed2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space is provided on its behalfa twelve month term by a company to which Mr. Nicosia, one of the undersigned, thereunto duly authorized.
GOLDEN DRAGON HOLDING CO.
Date: February 5, 2014 By: /s/ David J. Cutler
------------------------------
David J. CutlerCompany’s directors, serves as Chief Executive Officer, &
Chief Financial Officer
In accordance with the Securities Exchange Act of 1924, this report has been
signed by the following persons on behalfOfficer. Monthly rent is $1,000, however, as of the Registrantdate of this filing the Company has not made any rent payments and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------------------------- ---------------------------- -----------------------
/s/ David J. Cutler Chief Financial Officer February 5, 2014
-------------------------- & Chief Financial Officer
David J. Cutler (Principal Financial and
Accounting Officer)
/s/ Redgie Green Director February 5, 2014
--------------------------
Redgie Green
35continue to accrue those amounts as accounts payable.
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