UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly period ended September 30, 2017or

or

For the transition period from __________________ to __________________CQENS Technologies Inc.

Commission file number: 000-55470

VapAria Corporation

(Exact name of registrant as specified in its charter)

(612) (612) 812-2037

(Registrant’s telephone number, including area code)

not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ No ☐

[X] Yes [  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.4.05 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes ☒ No ☐

[X] Yes [  ] 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:company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by checkmarkcheck mark if the registrant has elected not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B)13(a) of the Securities Act: [  ]Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the registrant’sissuer’s classes of common stock, as of the latest practicable date. 75,260,00026,060,595 shares of common stock are issued and outstanding as of November 8, 2017.August 15, 2022.

TABLE OF CONTENTS

CAUTIONARY STATEMENTSTATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about:

You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements, Part 1. Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended December 31, 20162021 as filed on April 14, 2022 (the “2021 10-K”) and our other filings with the Securities and Exchange Commission. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, when used in this report the terms “VapAria,“CQENS,” “we,” “our,” “us,” and similar terms refersrefer to VapAria Corporation,CQENS Technologies Inc., a Delaware corporation, and our wholly-owned subsidiary VapAria Solutions Inc., a Minnesota corporation (“VapAria Solutions”).corporation. In addition, “third“second quarter 2017”of 2022” refers to the three months ended SeptemberJune 30, 2017, “third2022, “second quarter 2016”of 2021” refers to the three months ended SeptemberJune 30, 2016, “2017”2021, “2021” refers to the year ended December 31, 2021, and “2022” refers to the year ending December 31, 2017 and “2016” refers to the year ended December 31, 2016.

Unless specifically set forth to the contrary, the2022. The information which appears on our web site atwww.vaparia.comwww.cqens.com is not part of this report.

PART 1 – FINANCIAL INFORMATION

Item 1. Financial StatementsStatements.

VapAria CorporationCQENS Technologies Inc.

Consolidated Balance Sheets

See accompanying notes to unaudited consolidated financial statements

VapAria Corporation

CQENS Technologies Inc.

Consolidated Statements of Operations

(Unaudited)

(Unaudited)

See accompanying notes to unaudited consolidated financial statements

VapAria Corporation

Consolidated StatementCQENS Technologies Inc.

Statements of Changes in Stockholders’ DeficitEquity

For the ninethree and six months ended SeptemberJune 30, 20172022 and 2021

(Unaudited)

See accompanying notes to unaudited consolidated financial statements

VapAria Corporation

Consolidated CQENS Technologies Inc.

Statements of Cash Flows

(Unaudited)

See accompanying notes to unaudited consolidated financial statements

VapAria Corporation

CQENS Technologies Inc.

Notes to Unaudited Consolidated Financial Statements

SeptemberJune 30, 20172022

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF BASIS OF PRESENTATION

Nature of Business

VapAria CorporationCQENS Technologies, Inc. (“we”, “our”, the “Company”, “CQENS”) was incorporated underis a technology company with a proprietary method of heating plant-based consumable formulations that produce an aerosol that lead to the lawseffective and efficient inhalation of the Stateplant’s constituents. This is accomplished at a high temperature but without the accompanying constituents of Delaware on December 21, 2009 under the name OICco Acquisition IV, Inc.

The Companycombustion. Our system of heating is a specialty pharmaceutical company engagedhigh temperature, non-combustion system. Our Heat-not-Burn Tobacco Product (HTP) system is a patent-pending method of heating plant-based consumables for inhalation that is superior to other methods of ingestion, smoking, vaping, swallowing or via topical application.

In the six months ended June 30, 2022 the effects of the COVID-19 pandemic were felt by the Company. While the duration and full impact of the pandemic is unknown at this time, we expect that the pandemic will continue to adversely impact CQENS in several ways. Our business model is dependent upon our ability to enter into strategic partnerships in the research, designfuture, including alliances with consumer product companies, to enhance and accelerate the development and commercialization of methodsour proposed products. We will also be dependent upon third party manufacturers to produce our proposed products, as well as third party marketing and medicantsdistribution companies. We believe that our business opportunities are international in nature and include potential partnerships in the UK, the EU and Asia, including the People’s Republic of China. The worldwide pandemic caused by COVID-19 have caused certain of these opportunities to address chronic conditions with novel, vapor-centric approachesbe delayed. Although the pandemic continues in 2022 and while certain of these opportunities might be limited or lost, we are optimistic that in the second half of this year we can raise a limited amount of working capital. We will need to pain management, appetite suppression, smoking cessation and various sleep disorders.

raise additional working capital to provide sufficient funding to bring our proposed products to market. The impact of COVID-19 on the capital markets will make it more difficult for small, pre-revenue companies such as ours to access capital. We will continue to assess the impact of the COVID-19 pandemic on our Company, has limitedhowever, at this time we are unable to predict all possible impacts on our company, our operations and while our executive officers devote a substantial amount of their time to the Company without cash compensation, as of September 30, 2017, we had no employees.prospects.

The Company has a fiscal year end of December 31.

Basis of presentationPresentation

Basis of Presentation - The accompanying financial statements have been prepared by the Company without audit. In the opinion of the management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of SeptemberJune 30, 20172022 have been made.

Certain information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and footnotes thereto in the Company’s December 31, 20162021 audited financial statements contained in its Annual Report on Form 10K as filed with the Securities and Exchange Commission on April 17, 2017.statements. The results of operations for the period ended SeptemberJune 30, 20172022 are not necessarily indicative of the operating results for the full year.

ReclassificationsRecent Accounting Pronouncements– Certain reclassifications may have been made to our prior year’s consolidated financial statements to conform to current year presentation. These reclassifications had no effect on our previously reported results of operations

The Company does not believe that any recently issued effective pronouncements, or accumulated deficit.

Recent accounting pronouncements – No recent accounting standards issued orbut not yet effective, has had, or are expected toif adopted, would have a material impacteffect on the Company’s consolidatedaccompanying financial statements.

NOTE 2 – GOING CONCERN

The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has limitedrecurring losses, and although has cash and cash equivalents in excess of five hundred thousand dollars, with renewed research and development efforts and with no source of revenue sufficient to cover its operations costs andover the next 12 months these may not allow it to continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company will be dependent upon the raising of additional capital. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

NOTE 3 – STOCKHOLDER’SSTOCKHOLDERS’ EQUITY

There was 0 sale of our common stock during the six months ended June 30, 2022.

On April 21, 2022, we granted 60,000 options under the Company’s 2014 Equity Compensation Plan to two consultants. Each of the consultants was granted options, fully vested upon grant, to purchase 30,000 shares at an exercise price of $10.00 per share. The fair market value of the options at the grant date using the Black Sholes option pricing model was determined to be $599,293.

On June 30, 2017,24, 2022 we granted 20,000 options under the Company paidCompany’s 2014 Equity Compensation Plan to a consultant. The options granted are fully vested upon grant and allow consultant to purchase 20,000 shares of the Company’s stock at an annual dividendexercise price of 50,000$10.00 per share. The fair market value of the options at the grant date using the Black Sholes option pricing model was determined to be $199,749.

On February 15, 2021, we granted 400,000 options under the Company’s 2019 Equity Compensation Plan to two consulting engineers involved in our research and development. Each of the consultants was granted options to purchase 200,000 shares at $7.00 per share. 100,000of the grants are exercisable immediately, with the balance vesting over the next four years in equal installments and subject to certain terms and conditions, including continuing in their consulting roles through the vesting periods. The fair market value of the options at the grant date was determined to be $2,798,086 of which $2,036,625 was expensed in 2021. The options were valued using the Black Scholes option pricing model with the following assumptions: 1) a current stock price per share of $7.00, based on the price of recent offerings; 2) expected term of 5 years; 3) computed volatility of 303.59%; and 4) the risk-free rate of return of 0.27%. The exercise period of the immediately exercisable options terminates on February 15, 2026.

On March 15, 2021, we sold a total of 71,429 shares of our common stock for $500,000 to a non-U.S. Person in a private transaction. We did not pay a commission or finder’s fee and are using proceeds for working capital.

On April 21, 2021, we sold a total of 71,430 shares of our common stock to two non-U.S. Persons each paying $250,000 for a total of $500,000 in private transactions. We did not pay a commissions or finder’s fees and are using proceeds for working capital.

On May 1, 2021, we entered into a consulting engagement memorandum with an unrelated third party for the sole shareholderconsultant’s guidance and expertise in identifying business opportunities, partners and other skilled consultants in the People’s Republic of China and/or other territories of Asia. As compensation for the services, we issued this individual 20,000 shares of our Series A Preferred Stock, Chong Corporation,common stock valued at $140,000. The recipient was a related entity.non-U.S. person and the issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Regulation S promulgated thereunder.

On May 16, 2021, we entered into a consulting engagement memorandum with an unrelated third party pursuant to which we engaged this party to identify key Asian resources for our company. As of September 30, 2017,compensation for the Company had 75,260,000services, we issued this individual 16,072 shares of our common stock issuedvalued at $112,504. The recipient was a non-U.S. person and outstanding.the issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Regulation S promulgated thereunder.

On May 17, 2021, we sold a total of 71,429 shares of our common stock for $500,000 to a non-U.S. Person in a private transaction. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

NOTE 4 – RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2017 the Company borrowed an aggregate of $131,000 from Chong Corporation, a related entity. The balance outstanding at September 30, 2017 is $518,544. The loan is unsecured, noninterest bearing and due on demand.

We maintain our corporate offices at 5550 Nicollet Avenue, Minneapolis, MN 55419. We lease the premises on a month-to-month basis from 5550 Nicollet, LLC, an affiliatea company owned by Mr. Chong. Rent for each of Mr. Chong, having renewed the lease for an additional 12-month term at an annual rentalsecond quarters of $9,180 with expiration on December 31, 2017. Rent2022 and 2021 was $6,885 for the nine-month period in 2017 compared to $6,750 in 2016.$2,325. As of SeptemberJune 30, 2017, $6,8852022, there is no outstanding balance for rent due to 5550 Nicollet LLC.

Note 5 – LEASES

We account for our leases under ASC 842, Leases, which requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the expedients permitted under the transition guidance that retained lease classification and initial direct costs for any leases that existed prior to adoption of the standard.

NOTE 5 – NOTE PAYABLEWe categorized leases with terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset of its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of June 30, 2022. Our lease for property is for three years. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

AsLease liabilities are recognized at the present value of September 30, 2017, the Company hasfixed lease payments using a note payablediscount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the lease. Lease assets are tested for impairment in the amountsame manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost over the lesser of $50,000 due to an individual. The note was issued on May 30, 2013 and bears eight per cent (8%) annual interest. It was extended to July 1, 2014, then to December 31, 2014, then to June 30, 2015, then to December 31, 2015, then June 30, 2016, to December 31, 2016 and then to August 31, 2017. The note was again amended in August 2017their expected useful life or the lease term.

When we have options to extend the maturitylease term, terminate the lease before the contractual expiration date, for bothor purchase the principalleased asset, and interest to December 31, 2017.

The Company analyzedit is reasonably certain that we will exercise the modification option, we consider these options in determining the classification and measurement of the lease. Costs associated with the operating lease are recognized on a straight-line basis within operating expenses over the term under ASC 470-60 “Trouble Debt Restructurings”of the lease.

The following table presents the lease-related asset and ASC 470-50 “Extinguishmentliability recorded on the balance sheets:

SCHEDULE OF LEASE RELATED ASSET AND LIABILITY

Supplemental cash flow information related to leases were as follows:

SCHEDULE OF CASH FLOW INFORMATION RELATED LEASES

The table below present the remaining lease terms and discount rates for operating lease.

SCHEDULE OF REMAINING LEASE TERMS AND DISCOUNT RATES

Maturities of Debt”. The Company determined the modification is not substantial and the transaction should not be accounted forlease liabilities as an extinguishment of debt.June 30, 2022, were as follows:

SCHEDULE OF MATURITIES OF LEASE LIABILITIES

NOTE

Note 6 – CONVERTIBLE NOTESUBSEQUENT EVENTS

The Company assumed an unsecured convertible note for $40,000 that was issued onOn July 14, 2014 as part of the acquisition of VapAria Solutions. The note matures on December 31, 2017 and bears interest at 10% per annum. The note is convertible into11, 2022 we sold 35,000 shares of our common stock at $0.08 per share. The Company analyzed the conversion optionfor $350,000 to an investor in the notes for derivative accounting treatment under ASC Topic 815, “Derivatives and Hedging,” and determined that the instrument doesa private transaction. We did not qualify for derivative accounting. The Company therefore performed an analysis to determine if the conversion option was subjectpay a commission or finder’s fee.

On July 11, 2022 we issued 10,000 shares of our common stock to a beneficial conversion feature and determined that the instrument does not have a beneficial conversion feature.

The note was originally due on September 1, 2014. The Company entered into a note amendment on September 1, 2014 and the due date was extended to December 1, 2014. On December 1, 2014, the Company extended the note again to December 31, 2015. On December 31, 2015, the note was extended to July 31, 2016. On December 31, 2016, it was extended to August 31, 2017. On August 16, 2017 the note was extended to December 31, 2017. The Company analyzed the modification of the term under ASC 470-60 “Trouble Debt Restructurings” and ASC 470-50 “Extinguishment of Debt”. The Company determined the modification is not substantial and the transaction should not be accounted for as an extinguishment of debt.

NOTE 7 – COMMITMENT AND CONTINGENCIES

Relating to the December 2013 License Agreement with Chong Corporation, a related party, beginning in the calendar year in which the first licensed products or licensed services takes place, but not prior to January 1, 2015, the Company is required to pay to Chong Corporation, a related entity, a 3% royalty for revenues with a $50,000 annual minimum royalty commitment.

The December 31, 2013 agreement with Chong Corporation also requires us to payconsultant for the costs associated with maintaining the patent applicationsconsultant’s guidance in identifying business opportunities, partners and patents licensed to us. For the nine months ended September 30, 2017, there were no reimbursable costs.other skilled consultants in both Asia and North America.

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

The following discussion of our financial condition and results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 should be read in conjunction with the unaudited consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under “Cautionary Statements Regarding Forward-Looking Information” appearing earlier in this report, Part I. Item 1A. Risk Factors appearing in our Annual Report on Form2021 10-K, for the year ended December 31, 2016, and our other filings with the Securities and Exchange Commission. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report.

Overview and plan of operations

We are a pre-clinical specialty pharmaceutical company. Priortechnology company; we design and develop innovative methods to forming VapAria Solutions in 2010,heat plant-based and/or medicant-infused formulations to produce aerosols for the efficient and efficacious inhalation of the plant and medicant constituents contained therein. We have two ways of accomplishing this: 1) at high temperatures via induction without combustion or the constituents of combustion; and 2) at low temperatures, where we heat an inert carrier, producing an inhalable, medicant-infused aerosol while maintaining the integrity of the active ingredient(s).

Our high-temperature non-combusting technology is supported by 22 U.S. and international patents and pending patents. Among the applications of our management had more than 25 years’ collective experience in vaporization and vapor delivery of medicants, having been partners in a joint venture with pioneers in the industry and having had undertaken significant work internationally researching and developing products, shepherding them through the patent process and introducing them into the U.S. wholesale and retail supply chain.

Our initial goal was to leverage rights we acquired in December 2013 from an affiliate to develop and successfully launch a product in partnership with well-capitalized and experienced industry participants based on our exclusive license and exclusive options to license patented and patent-pending technology are those for Heat-not-Burn (“HnB”) devices. In one instance for example, our method of heating a tobacco formulation for inhalation is superior, less toxic and far more convenient than other methods of tobacco consumption, especially when compared to the inhalation of the smoke produced by combustible products, i.e., cigarettes, cigars and pipes. Independent tests of our system’s prototypes supported the benefits of rapid heating, confirmed non-combustion, even at high temperatures and produced better toxicology results, 98% better, when compared to products requiring combustion and compared to other non-combusting technologies undercurrently on the December 2013 Agreementmarket.

Our low-temperature, aerosolizing technology is supported by 30 U.S. and international patents and pending patents. This portfolio includes intellectual property (“IP”) around device designs and around formulations designedcontaining a wide variety of herbal and pharmaceutical preparations. This system features the ability to significantly improveverify the user, validate the medicant or pharmaceutical preparation and measure, meter and monitor the proper, prescribed dosage.

We define our target market as the “international inhalation market,” a market that includes herbal, pharmaceutical, medical, recreational and lifestyle products and ingredients. Industry experts, like Nielsen, Grand View Research, Fior Markets, have published reports in the last half of 2021 that we have consolidated; these consolidated estimates support that this as a $950 billion USD annual market currently and it’s expected to grow to $1.1 trillion USD by 2025. The largest category within this market is the combustible tobacco market, comprising 92% of the total. Our near-term focus is on currentthis segment, which represents the greatest opportunity for growth and the greatest opportunity to positively impact public health and wellness.

We believe our HnB technologies are of great interest to the international tobacco industry and the growing hemp/CBD and cannabis industries. HnBs represent the latest in tobacco and inhalable technologies, and likely to supplant the electronic vapor system (EVS) technologies including e-cigarettes and electronic nicotine delivery systemssystems. We believe HnBs, if properly designed, will avoid many of the issues that have proved troublesome for EVS’ including thermal decomposition, heating irregularities and the formation and presence of high levels of acrolein and formaldehyde. In late 2019 Philip Morris International introduced its HnB product to U.S. markets. This product, which was sold in more than 40 countries before entering U.S. markets, like other consumerHnB technologies, is a device that heats a tobacco stick, rather than burning it, and testing supports claims that the product can potentially reduce the number of noxious chemicals found in cigarette smoke by 95%.

Since late 2019 we have focused our efforts on commercializing our HnB technology. This entry began with the December 31, 2019 transaction pursuant to which we acquired the following assets from Xten Capital Group, Inc., formerly known as Chong Corporation (“Xten”), a related party:

Through to the date of this report we have continued our efforts begun in 2019, including:

Additionally, the MOU provides for CQENS to license its technology to The Barker Group under certain terms and conditions yet to be finalized and for The Barker Group to invest in CQENS with terms and conditions yet to be finalized. The foregoing initiatives, as well as other items contained in the marketplace. Throughout 2016non-binding MOU, are subject to the completion and intoexecution of definitive agreements, all of which will be subject to customary closing conditions.

Since signing the third quarter of 2017,MOU, we have been engaged in substantive discussions and negotiations designed to identify an initial target market in the U.S. and the EU, to develop a product for that market and agree to a definitive agreement to launch the product.

On August 17, 2021, we entered into a Joint Venture Agreement (the “Joint Venture Agreement”) with several international companies whichFirebird Manufacturing, LLC (“Firebird”). Under the terms of the Joint Venture Agreement the parties have expressed interestagreed to organize, negotiate and establish a limited liability company joint venture entity (the “Joint Venture Entity”) for the purposes of developing, manufacturing and distributing Heat- not-Burn (“HnB”) hemp/CBD products in our licensed technologythe United States for an initial term of four years, subject to an automatic renewal for successive one-year terms provided certain conditions are met.. The Joint Venture Entity will be owned equally by the Company and Firebird. The Company will license its intellectual property to the Joint Venture Entity, receiving a 10% royalty on direct consumable sales and will be responsible for designing and coordinating the manufacture of an HnB device exclusively conformed to heat but not combust hemp/CBD. Firebird will be responsible for manufacturing the hemp/CBD consumable and distributing both the device and consumables to the retail locations where the product can be lawfully sold. Pursuant to the Joint Venture Agreement, the Company and Firebird will each receive on a monthly basis a distribution out of the Joint Venture profits, if any, equal to 30% after payment of expenses. The remaining profits, if any, will be distributed annually. The JV Agreement also provides that the parties will be prohibited from marketing a competing product for two years following the termination of the Joint Venture Entity, subject to penalty in pursuitthe amount of this strategy. During$5 million. The Joint Venture Agreement also sets forth in general terms the secondrespective contributions of the parties, including equipment, manufacturing facilities, intellectual property and third quartersexpertise. Under the terms of 2017, these discussionsthe Joint Venture Agreement, there will be five managers of the Joint Venture Entity, three of whom will be designated by the Company and two of whom will be designated by Firebird. In the event the parties formalize and enter into a Joint Venture Entity Operating Agreement, Jay Barker, an affiliate of Firebird, may be appointed to the Company’s board of directors. The Joint Venture Agreement contains customary representations and warranties. The parties have involved demonstrationsalso agreed to indemnify each other and the JV against any losses arising from a breach by the other of our fully functional, programmable prototypescertain representations and discussionswarranties. The execution of terms relatedthe Joint Venture Entity Operating Agreement is subject to licensingformalizing the definitive Joint Venture Operating Agreement and the execution of additional agreements, including a license agreement for the use of intellectual property, certain product development agreements, supply agreements and such other agreements as may be necessary to further the purpose of the Joint Venture Agreement. There are no assurances that would provide a combinationthe parties will complete and formalize such agreements.

On July 13, 2022, we announced that we completed R&D stages for the module for the automated manufacture of upfront paymentsconsumables for its proprietary, patented and ongoing royalties. Whilepatent pending Heat-not-Burn system. The system heats plant-based and/or medicant-infused formulations to produce aerosols for the inhalation of the plant and medicant constituents without combustion or the constituents of combustion, although there are no definitive agreements have been reached, our discussions continueassurances its products can be commercialized. Contemporaneous with certainthe completion of these parties under standard non-disclosure agreements.R&D stages, effective July 13, 2022 the Company entered into a manufacturing contract with Montrade S.p.A., (“Montrade”) a company based in Bologna, Italy, for Montrade to manufacture and install the module. The Company made an initial payment of $589,265 USD and is required to make additional payments of up to $1,086,465 USD for the module as certain stages are completed. Montrade is an industry leading designer and manufacturer of machines for a wide range of products, including heated tobacco products.

On August 1, 2022 the Company was informed that the Patent Office of Singapore issued the Company Singapore Patent No. 11202006324T for our innovative Heat-not-Burn (“HnB”) system on January 21, 2022. We were further informed that the US Patent and Trademark Office issued the Company US Patent No. 11,272,741 also for our HnB system on March 15.2022.

In mid-2015On August 2, 2022 we adjustedwere informed that the patent office of Japan issued the Company a Patent, registration number 7093919, for our business focus owing to continuing research, developmentHnB system on June 23, 2022. As of the date of this filing, we now have a total of four HnB related Patents and design throughoutanother 21 pending US and thus, we completed a full design of a product embodiment based on our proprietary technology, authorized the production of fully functional prototypes and are scheduling pre-clinical assessmentsinternational  patents for the prototypes. In the first nine months of 2017 and 2016 we spent $51,261 and $95,172, respectively, in research and development costs related to these efforts. In addition to taking delivery of our prototypes, in the third quarter of 2016, we engaged an industry expert with 28 years of relevant experience to design IND-enabling studies that should take us from pre-clinical stage to clinical stage and make the FDA 505(b)(2) pathway to regulatory approval and commercialization available to us. Certain of the costs associated with these studies are included in our funding needs for the next 12 months described below. If we are unable to raise sufficient capital to fund these costs or we are unable to secure licensing and product development agreements that would provide for upfront payments, our ability to continue our commercialization efforts will be adversely impacted.system.

Our management, through the Chong Corporation, an affiliated entity that is the licensor of the intellectual property rights we acquired in December 2013 and January 2016, has built an extensive and robust portfolio of intellectual property that includes patented and patent-pending methods of vaporization and patented and patent-pending medicants and herbal remedies identified for their effectiveness and suitability to address the markets identified above. Historically we have relied upon related party loans that, as of September 30, 2017, totaled $518,544. Our management has worked without cash compensation. In the first nine months of 2017, the loan increased by $131,000, and these proceeds were used to pay expenses associated with research, development and design, patent protection prosecution activities and ordinary business expenses associated with identifying, meeting with and negotiating with potential business partners and our general operating expenses, including the payment of our obligations. If we are unable to secure licensing and product development agreements that would provide for upfront payments, we estimate that we will need to raise between $1 million and $2 million over the next 12 months to continue to implement our business plan.

In addition, if we are successful in securing licensing and product development agreements we expect that the structure of the possible future agreements would provide upfront payments. We may also seek to raise the necessary capital through future public or private debt or equity offerings of our securities, although we do not have any commitments from any third parties to provide any capital to us. While we believe that the exclusive rights to the proprietary technology on which our business is predicated could provide us with a significant competitive advantage if we can bring one or more products to market, our ability to accomplish that in the near term is dependent on a successful prototype and positive pre-clinical assessments of the prototype. Given the current lack of a public market for our common stock, our status as a pre-clinical stage company and the difficulties small companies experience in accessing the capital markets, we expect to encounter difficulties in pursuing public or private capital raises. Until such time as we are able to raise all or a portion of the necessary capital, our ability to continue to implement our business plan will be in jeopardy.

Going concern

For the first ninesix months of 2017ended June 30, 2022, we reported a net loss of $126,730$2,377,237 and net cash used in operations of $132,342$1,589,948 compared to a net loss of $183,268$2,601,485 and net cash used in operations of $167,456$652,174 for the first ninesix months of 2016.ended June 30, 2021. At SeptemberJune 30, 2017,2022, we had cash on hand of $3,142$1,840,776 and an accumulated deficit of $1,539,279.$15,686,731. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 20162021 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our minimallimited cash and no source of revenues which aremay not be sufficient to cover our operating costs. These factors, among others, despite the cash and cash equivalent amount on hand at the end of this quarter, raise substantial doubt about our ability to continue as a going concern.concern and pay our obligations as they become due over the next year. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to raise additional capital, develop a source of revenues, report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

Results of operations

We did not generate any revenues from our operations in the 2017first six months of 2022 or 2016 periods.2021. Our total operating expenses for the thirdsecond quarter of 2017 and the nine months then ended decreased 25.5% and 32.0%, respectively,2022 increased 99.1% over those reported in the comparable 2016 periods.second quarter of 2021 while the first half of 2022 decreased 8.6% over those reported in the first half of 2021. General and administrative expenses which include amortization, rent, and website hosting expenses, decreased 8.9%14.1% in the third quarter of 2017 from the comparable period in 2016, and were essentially flat for the first ninesix months of 2017 as2022 compared to the first nine monthssame period in 2021 due mainly to the non-cash stock option expense of 2016.$1,672,293 relating to the options granted to two consulting engineers involved in research and development activities during 2021.

Research and development expenses decreased 33.9% and 46.1% in the thirdsecond quarter 2017of 2022 increased 20.8% over this same period in 2021 while the first six months show an increase of 11.0% over the first half of 2021 which reflects the cost of building and testing product prototypes. Professional fees decreased 45.1% in the nine months then endedsecond quarter of 2022 compared to the second quarter of 2021 with an overall increase of 2.9% in the first half of 2022 when compared to this same period in 2021 which is attributable primarily to an increase in consulting services and their associated fees. Professional fees in 2022 includes an agreement entered into in January 2022 with an unrelated third party whereby the same periodsconsultant will provide introductions to manufacturers and advice and counsel regarding potential manufacturers for the products of the Company in the prior year which is directly attributable to higher costsPeoples Republic of China and/or other territories of Asia and general business plan and strategy in the earlier periods related to prototype development. Professional fees declinedregion as required by 15.0% in the third quarter of 2017 comparedCompany. Further the consultant will identify and introduce high net worth capital sources (qualified non-U.S. investors) to the third quarterCompany. In exchange the Company paid a consulting fee of 2016, and declined 19.8% for the nine months ended September 30, 2017 from the comparable period in 2016, both of which are directly attributable to higher legal fees in the earlier periods.$333,000.

We do expect that our operating expenses will increase as we continue to develop our business and we devote additional resources towards promoting that growth, most notably reflected in anticipated increases in research and development, general overhead, salaries for personnel and technical resources, as well as increased costs associated with our SEC reporting obligations. However, as set forth elsewhere in this report, our ability to continue to develop our business and achieve our operational goals is dependent upon our ability to raise significant additional working capital. As the availability of this capital is unknown, we are unable to quantify at this time the expected increases in operating expenses in future periods.

Liquidity and capital resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of SeptemberJune 30, 2017,2022, we had $3,142$1,840,776 in cash and cash equivalents and a working capital deficitsurplus of $644,237,$2,049,138 as compared to $4,484$3,588,377 in cash and cash equivalents and a working capital deficitsurplus of $530,620$3,532,821 at December 31, 2016.2021. Our current liabilities increased $110,928decreased $57,441 from December 31, 2016,2021, reflecting increases in interest payable and in the loan amount from a related party while partially offset by our$26,385 decrease in accounts payable.payable and a $56,157 decrease in accrued expenses offset by $25,101 in current portion of our lease liability. Our sole source of operating capital duringin the first ninesix months ended June 30, 2022 came solely from the cash on hand at the end of 2017 came from additional borrowing from2021 compared to the six months ended June 30, 2021 where we sold 214,288 shares of our common stock that raised $1,500,000.

The ability of the Company to continue as a related party which lent us an additional $131,000.

We do not have any commitments forgoing concern is dependent upon the Company obtaining adequate capital expenditures. Our working capitalto fund operating losses until it becomes profitable. As the company is not sufficientgenerating revenues, continued activities and expenditures to fund ourbring product(s) to market as soon as we are able is important. Management believes the currently available funding will be insufficient to finance the Company’s operations for at leasta year from the next 12 monthsdate of these financial statements and to satisfy our obligations as they become due. On August 31, 2017, the holder

As of a $50,000 principal amount note agreed to the extension of the due date of the note from August 31, 2017 to December 31, 2017. The remaining note in the principal amount of $40,000 is convertible into 500,000 shares of our common stock at the option of the holder and has now been extended to December 31, 2017. While there areJune 30, 2022 we have no assurances the holder will elect to convert the note, in that event we granted the holder demand and piggyback registration rights for those shares. If we are unable to repay the notes at year end 2017, we anticipate that the holders will extend under the terms and conditions of earlier extensions, but there are no agreements to do so at the time of this filing. We also oweoutstanding debt with a related party $518,544and at June 30, 2021 the outstanding amount we owed a related party was $255,544 which is due on demand.

We do not have the funds necessary to repay these obligations or to fund the costs associated with filing a registration statement if the noteholder converts the note and exercises its registration rights. As described earlier in this report, we will need to raise between $1,000,000 and $2,000,000$3,000,000 to $5,000,000 in additional capital during the next 12 months if we are unable to secure licensing and product development agreements.months. As we do not have any firm commitments for all or any portion of this necessary capital, there are no assurances we will have sufficient funds to fund our operating expenses and continued development of our products and to satisfy our obligations as they become due.due over the next 12 months. In that event, our ability to continue as a going concern is in jeopardy.

Net Cash Used in Operating Activities

We used $132,342Summary of cash flows

Our cash used in our operating activities duringincreased 143.8% in the six months ended June 30, 2022 when compared to the six months ended June 30, 2021. During these time periods we primarily used the cash to fund our net losses.

In the first nine monthshalf of 2017 as2022 there was $157,653 net cash used in investing activities from capitalization of IP related legal fees, for additions to furniture and equipment, and leasehold improvements compared to $167,456net cash used by our operatingin investing activities of $79,065 for the capitalization of IP related legal fees in the first nine monthshalf of 2016. The higher levels reported in 2016 were due to costs associated with2021.

In the initial developmentfirst half of our prototypes.

Net Cash Provided by (Used in) Investing Activities

There was no2022 we did not have any net cash provided by (used in) investing activities in eitherfinancing activities. In the first nine monthshalf of 2017 or 2016.

Net Cash Provided by Financing Activities

Net2021 our net cash provided by financing activities consisted of $131,000 in proceeds$1,500,000 raised from borrowings from Chong Corporation, a related entity, during the first nine monthssale of 2017 as compared to $166,000 in borrowings from Chong Corporation in the comparable period214,288 shares of 2016.our common stock.

Critical accounting policies

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, accounts receivable allowances and impairment of long-lived assets. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our audited consolidatedunaudited financial statements for 20162021 appearing in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 17, 2017.14, 2022.

Recent accounting pronouncements

The Company has implemented all new relevant accounting pronouncements that are in effect through the date of these financial statements. The pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations.

Off balance sheet arrangements

As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable for a smaller reporting company.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

We maintain “disclosure controls and procedures” as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also 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.

Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information relating to our company required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure due to the presence of continuing material weakness in our internal control over financial reporting as reported in our Annual Report on Form 10-K for the year ended December 31, 2016.2021. These material weaknesses in our internal control over financial reporting result from limited segregation of duties and limited multiple level of review in the financial close process.

The existence of the continuing material weaknesses in our internal control over financial reporting increases the risk that a future restatement of our financials is possible. In order to remediate these material weaknesses, we will need to expand our accounting resources. We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal control over financial reporting on an ongoing basis, however, we do not expect that the deficiencies in our disclosure controls will be remediated until such time as we have remediated the material weaknesses in our internal control over financial reporting. Subject to the availability of sufficient capital, we expect to expand our accounting resources during the next 12 to 18 months2022, in an effort to remediate the material weaknesses in our internal control over financial reporting.

Changes in Internal Control over Financial Reporting.

There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.

PART II- – OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

In addition to the other information set forth in this report you should carefully consider the risk factors discussed in Part I, Item 1A in our Annual Report on Form2021 10-K for the year ended December 31, 2016 and our subsequent filings with the Securities and Exchange Commission, which could materially affect our business, financial condition or future results. These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable to our company’s operations.

Item 5. Other Information.

On August 16, 2017, the holder of a $40,000 principal amount convertible note agreed to the extension of the due date of the note from August 31, 2017 to December 31, 2017; and on August 31, 2017, the holder of a $50,000 principal amount note agreed to the extension of the due date of the note from August 31, 2017 to December 31, 2017.None.

Item 6. Exhibits.

+ Exhibits and/or Schedules have been omitted. The Company hereby agrees to furnish to the Staff of the Securities and Exchange Commission upon request any omitted information.

* filed herewithSIGNATURES

SIGNATURES

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