Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



__________________



FORM 10-K/A

Amendment No. 1

__________________



(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, 2019                              
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                               
|o | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ________________ to________________________.



Commission File Number: 000-27055



CANNAPHARMARX, INC.

(Exact name of registrant as specified in
its charter)



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





|Suite 3600
                                               888 3rd Street SW |            |                                
|--------------------------------------------------------------------------- | ---------- | -------------------------------
|Calgary, Alberta, Canada                                                    | T2P 5C5    | 949-652-6838                   
|(Address of principal executive office)                                     | (Zip Code) | (Registrant’s telephone number)



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



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



|Title of each class | Trading Symbol(s) | Name of each exchange on which registered
|------------------- | ----------------- | -----------------------------------------
|Common Stock        | CPMD              | 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.oYesxNo



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.oYesxNo



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.xYesoNo



Indicate
by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files).xYesoNo



Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.oYesxNo



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”,
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)



|Large accelerated filero | Accelerated filero        
|------------------------ | --------------------------
|Non-accelerated filero   | Smaller Reporting Companyx
|                         | Emerging growth companyx  



If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).oYesxNo



State the aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last
sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently
completed second fiscal quarter on June 30, 2019 was $27,271,721.



As of May 26, 2020, the Registrant had 36,640,939 shares of Common Stock
issued and outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of the Company’s Proxy Statement
for the Annual Meeting of Shareholders to be held on or about August 21, 2020, or such other date as may be selected in the future,
are incorporated by reference in certain sections of PART III.













TABLE OF CONTENTS



|         |                                                                                                                     | Page No.
|-------- | ------------------------------------------------------------------------------------------------------------------- | --------
|PART I   |                                                                                                                     |         
|Item 1.  | Business                                                                                                            | 1       
|Item 1A. | Risk Factors                                                                                                        | 13      
|Item 1B. | Unresolved Staff Comments                                                                                           | 13      
|Item 2   | Properties                                                                                                          | 13      
|Item 3.  | Legal Proceedings                                                                                                   | 13      
|Item 4.  | Mine Safety Disclosures                                                                                             | 14      
|         |                                                                                                                     |         
|PART II  |                                                                                                                     |         
|Item 5.  | Market for the Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities | 15      
|Item 6.  | Selected Financial Data                                                                                             | 17      
|Item 7.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                               | 17      
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                                                          | 22      
|Item 8.  | Financial Statements and Supplementary Data                                                                         | 22      
|Item 9.  | Changes in and Disagreements on Accounting and Financial Disclosure                                                 | 22      
|Item 9A. | Controls and Procedures                                                                                             | 23      
|Item 9B. | Other Information                                                                                                   | 24      
|         |                                                                                                                     |         
|PART III |                                                                                                                     |         
|Item 10. | Directors, Executive Officers and Corporate Governance                                                              | 25      
|Item 11. | Executive Compensation                                                                                              | 25      
|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                      | 25      
|Item 13. | Certain Relationships and Related Transactions, and Director Independence                                           | 25      
|Item 14. | Principal Accounting Fees and Services                                                                              | 25      
|         |                                                                                                                     |         
|PART IV  |                                                                                                                     |         
|Item 15. | Exhibits, Financial Statement Schedules                                                                             | 26      
|         |                                                                                                                     |         
|         | Signatures                                                                                                          | 27      

















i









FORWARD-LOOKING STATEMENTS



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



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









EXPLANATORY NOTE



This Amendment No. 1 to our Annual
Report on Form 10-K filed May 27, 2020 (the “Original Report”) is being filed to include the information below
regarding our reliance on the SEC’s conditional exemptive orders issued in response to the Covid-19 pandemic. With the
exception of the additional disclosure set forth below, as well as the updated disclosure relating to the termination of the
Sunniva Purchase Agreement, all disclosures contained in the Original Report are unchanged.



On March 27, 2020, CannapharmaRx,
Inc. (the “Company”) filed a Current Report on Form 8-K, and is filing this Annual Report on Form 10-K, in reliance
on the Order of the Securities and Exchange Commission dated March 4, 2020, as modified March 25, 2020, pursuant to Section 36
of the Securities Exchange Act of 1934 modifying exemptions from the reporting and proxy delivery requirements for public companies
(Release No. 34-22465).



The preparation of the Company’s
Annual Report, including financial statements and completion of the auditing process, was delayed by government-imposed quarantines,
office closures and travel restrictions, which affected both the Company’s and its service provider’s personnel. Specifically,
the Company’s officers reside in Canada, which also was locked down during all applicable periods of time. Its professionals,
including its independent accountants, its legal counsel and its internal accounting consultant, all reside in the US. Both the
US and Canada have been locked down by the government since early March 2020, due to concerns related to the spread of COVID-19.
As a result of these government-imposed quarantines, office closings and travel restrictions, the Company’s accounting personnel
and service providers have been delayed in processing certain of its accounting records and receipts required to complete the
audit of the Company’s financial statements.































ii







PART I



|ITEM 1. | BUSINESS.
|------- | ---------





Impact of Current Coronavirus (COVID-19)
Pandemic on our Company



On March 11, 2020,
the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating
effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility
in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further
spread of the disease.



COVID-19 and the
Canadian and U.S.’s response to the pandemic are significantly affecting the economy. There are no comparable events that
provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly
uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business
or our operations.



While the COVID-19 pandemic had an effect
on our ability to complete this Report and our financial statements included herein in a timely manner, the impact on our business
is indeterminable. Nonetheless a material portion of our future business is dependent on successfully consummating acquisitions
discussed below. In the event that quarantine and social distancing rules are put in place and continue through such time then
we may be materially adversely affected, as our ability to meet with the sellers and arrange for relevant financing may cause
delays or otherwise negatively affect our efforts.



History



We were originally incorporated in the
State of Colorado in August 1998 under the name “Network Acquisitions, Inc.” We changed our name to Cavion Technologies,
Inc. in February 1999 and subsequently to Concord Ventures, Inc. in October 2006.



On December 21, 2000, we filed for protection
under Chapter 11 of the United States Bankruptcy Code. In connection with the filing, on February 16, 2001, we sold our entire
business, and all of our assets, for the benefit of our creditors. After the sale, we still had liabilities of $8.4 million and
were subsequently dismissed by the Court from the Chapter 11 reorganization, effective March 13, 2001, at which time the last of
our remaining directors resigned. On March 13, 2001, we had no business or other source of income, no assets, no employees or directors,
outstanding liabilities of approximately $8.4 million and had terminated our duty to file reports under securities law. In February
2008, we were re-listed on the OTC Bulletin Board.



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



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



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.”









1







Pursuant to the Merger all of the shares
of our common stock previously owned by Canna Colorado were canceled. As a result of the
aforesaid transactions, we became an early-stage pharmaceutical company whose purpose was to advance cannabinoid research and discovery
using proprietary formulation and drug delivery technology then under development.



In
April 2016, we ceased operations. Our then management resigned their respective positions with our Company with the exception of
Mr. Gary Herick, who remained one of our officers and directors until April 23, 2019.



Description of Current Business



We are involved in the cannabis industry
in Canada. Our principal business activities to date have been to negotiate, acquire and develop various cannabis cultivation projects
throughout Canada. We are also looking at possible opportunities in the US but as of the date of this Report we do not own or operate
any businesses in the US.





Our activities to date have centered around
three projects, including (i) the Hanover Project; (ii) the Great Northern Project; and (iii) the acquisition of Sunniva Medical,
Inc. On June 8, 2020, we received a notice of termination of the relevant Purchase Agreement with Sunniva. As of the date of
this amended Report, we are engaged in discussions with Sunniva about acquiring a portion of the land to be used as a cannabis
cultivation facility, but no definitive agreement has been reached.



Hanover Project





Effective November 19, 2018, we entered
into a Securities Purchase Agreement with Alternative Medical Solutions, Inc., an Ontario, Canada corporation (“AMS”),
its shareholders and Hanover CPMD Acquisition Corp., wherein we acquired all of the issued and outstanding securities of AMS.
As part of the material terms of this transaction, we also agreed to acquire all of the outstanding shareholder loans held by
the principal shareholder of AMS. The purchase price was CAD$12,700,000, of which CAD$1,012,982 was paid at closing and we assumed
debt of approximately CAD$650,000. The principal shareholders of AMS elected to receive 971,765 shares of our Common Stock in
lieu of CAD$985,000 in additional cash. We granted the holders of these shares “piggyback” registration rights but
we have not yet filed a registration statement to cause us to register these shares with the SEC. The balance of approximately
CAD$10,000,000 is to be paid pursuant to the terms of a relevant subordinated non-interest bearing promissory note, secured only
by the shares acquired in AMS Principal payments under the Promissory Note are due quarterly and are computed based upon 50% of
AMS' cash flow, defined as EBITDA less all capital expenditures, taxes incurred, non-recurring items and other non-cash items
for the relevant fiscal quarter, including the servicing of all senior debt payment obligations of the company. The Promissory
Note matures the earlier of two years from the date AMS receives a license to cultivate or December 31, 2021. As of the date of
this report, we are not producing any cannabis on this property. We are currently reviewing our proposed activities on this project.
Much of how we elect to proceed will depend upon our success in closing and funding the Sunniva project discussed below. If
we are successful in closing and constructing the Sunniva cannabis cultivation facility, we may elect to develop a cannabis extraction
facility on this property or sell it.





Relevant thereto, in January 2019 we also
entered into a two year Consulting Agreement with Stephen Barber, a founder and principal shareholder of AMS, to assist us in our
ongoing discussions and negotiations with various governmental agencies, including the City of Hanover and Province of Ontario,
whereby we agreed to pay (i) a consulting fee of US$225,000, payable on or before April 30, 2019, along with a monthly fee of CAD$1,500
and (ii) an option to purchase up to 500,000 shares of our common stock at an exercise price of USD$1.00 per share, which option
shall expire November 19, 2020. Further, we agreed to repurchase 45,000 shares of the stock issued to him as part of the AMS acquisition
for CAD$33,750 (USD$0.75 per share) on or before April 30, 2019. As of December 31, 2019, per the terms of these agreements we
owed the balance of $237,409 to Mr. Barber., which is past due as of the date of this Report. However, we are currently reviewing
whether Mr. Barber has performed pursuant to the terms of the Consulting Agreement. See “Part I, Item 3, Legal Proceedings”
below.



The AMS cultivation facility is a 48,750
square foot cannabis grow facility built on a 6.7-acre parcel of land located in Hanover, Ontario Canada. To date, exterior construction
of the building has been completed, however, no interior construction has begun. Upon full completion, the facility will contain
up to 20 separate growing rooms which we believe will provide annual production capacity of 9,500 kilos of cannabis (20,900
lbs.). Together with the remaining equipment needed to complete the grow we estimate that we will require approximately CAD$20
million in additional financing which we will seek to raise via equity and debt. However, if we successfully close the Sunniva
acquisition discussed below, we will probably elect not to complete this grow facility. While no definitive decision has been made,
as of the date of this Report we are considering converting the building to a cannabis extraction facility or sell the property.



Sunniva Acquisition



On or about June 11, 2019, we, along with
a wholly owned subsidiary of our Company, entered into a Securities Purchase Agreement with Sunniva, Inc, a British Columbia, Canada
corporation (“Sunniva”) wherein we have agreed to acquire all of the issued and outstanding securities of Sunniva’s
wholly-owned subsidiaries Sunniva Medical Inc. and 1167025 B.C. LTD. These companies are the current owners of the Sunniva Canada
Campus, which includes construction assets for a planned 759,000 square-foot greenhouse located on an approximately 114-acre property
in Okanagan Falls, British Columbia. Thereafter, we also reported that the terms of the relevant agreement, specifically, the purchase
price to be paid, had been amended.









2







On March 16, 2020, we entered into
a third amendment to the agreement with Sunniva, again amending the terms of the purchase price and resetting the proposed closing
date of this transaction to be on or before March 31, 2020. The purchase price was again amended to CAD $12.9 million in cash
and CAD $7.1 million through the issuance of 3,566,687 of our newly created Series C Convertible, Redeemable Preferred Shares
(the “Consideration Shares”) from the previous purchase price of CAD $16.0 million in cash and a note in the principal
amount of CAD $4.0 million. The extension agreements lapsed.



Subsequent Event



On June 8, 2020, we received a notice
of termination of this Purchase Agreement, as amended, from Sunniva. We are in discussions with Sunniva about recovering our deposit,
as well as acquiring a smaller piece of the property. A reduced piece of the property would still accommodate the original footprint
of the facility as designed.



The SMI project is a 759,000 square foot
cannabis grow facility to be built on an approximately 116-acre parcel of land located in Okanagan Falls, British Columbia, Canada. The
full facility is designed with two phases. Phase One is comprised of development of 458,000 square feet and Phase Two is the development
of the remaining 301,000 square feet. To date, all design, engineering and site improvements required for both Phases have been
completed. However, except for the concrete footings for Phase One, no physical construction of the grow facility has begun.



Each Phase is designed to have 8 separate
growing rooms of approximately 22,000 square feet which we believe will provide annual production capacity of 60,000 kg of cannabis
flower (120,000 lbs.). Upon full completion of both Phases, the facility will contain 16 separate growing rooms which we estimate
will provide annual production capacity of 120,000 kilograms of cannabis flower (264,000 lbs.).



Completion of the build-out of Phase One
of the facility is expected to take an estimated 12 months and require additional capital of approximately CAD$135,000,000. Phase
Two, which can be completed in the future requires additional financing of approximately CAD$95,000,000. We had previously reported
on May 7, 2019, that we had executed an agreement with KannaREIT, Inc., wherein KannaREIT had agreed to enter into a relationship
with us to arrange a construction financing facility for the continued development of the Sunniva property. However, that agreement
was terminated in November 2019 as the substantive terms of the agreement changed materially and financing conditions in the cannabis
industry became challenging.





Great Northern Acquisition







In early 2019 we retained new members
of management who are actively engaged in the Canadian cannabis industry, including former management of GN Ventures, Ltd, Alberta,
Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”). Not coincidentally, effective February 25, 2019, we acquired 3,712,500
shares and 2,500,000 Warrants to purchase 2,500,000 shares of Common Stock of GN in exchange for an aggregate of 7,988,963 shares
of our Common Stock, from our current CEO, who is a former shareholder of GN. We believe this is the initial step in our efforts
to acquire all of the issued and outstanding stock of GN. In April 2020 we submitted an offer to GN shareholders holding 3,671,597
shares of GN, offering 1.5 shares of our Common Stock for every one share of GN that is assigned to us. While no assurances
can be provided, we anticipate acquiring additional GN interests during the second calendar quarter of 2020, but as of the date
of this Report we have no agreement to acquire any additional GN interests.









3







GN owns a 60,000 square foot cannabis
cultivation and grow facility located on 38 acres in Stevensville, Ontario, Canada. Because we are minority shareholders of GN
and GN is a privately held company, we cannot confirm that the information we currently have on their operations is complete or
fully reliable. We have been verbally advised that, once completed, GN estimates annual total production capacity from the Stevensville
facility of up to 12,500 kilograms of cannabis. GN believes the Stevensville facility to be complete, and GN’s subsidiary,
9869247 Canada Limited, received a license to cultivate from the Canadian Ministry of Health on July 5, 2019. As a result, in
October 2019 we believe that GN has commenced cultivation activities and began generating revenues during the first calendar quarter
of 2020. Additionally, it is our current understanding that GN intends to increase cannabis production by building additional
cannabis cultivation facilities on the excess land presently owned adjacent to the existing Stevensville facility, provided that
additional funding can be obtained on commercially reasonable terms. GN does not have any firm commitment to provide any of the
funds necessary for expansion as of the date of this Report. We cannot state any definitive information concerning Great Northern
because it is a privately held Canadian company who is keeping their business activities confidential. We expect that we will
obtain additional information on the business activities of GN once we renew discussions to acquire additional interests and can
perform our due diligence.



Growth by Acquisition



We also plan to grow through the acquisition
of related, complementary businesses. In doing so we expect to increase revenues and profits by providing a broader range of services
in vertical markets which are consolidated under one parent, thus realizing synergies between the brands to increase sales on multiple
fronts; reducing overhead costs by streamlining operations; and eliminating duplicitous efforts and costs. There are no assurances
that we will increase profitability if we are successful in acquiring other synergistic companies.



If we are successful, the acquisition of
related, complementary businesses is expected to increase revenues and profits by providing a broader range of services in vertical
markets which are consolidated under one parent, thus reducing overhead costs by streamlining operations and eliminating duplicitous
efforts and costs. There are no assurances that we will increase profitability if we are successful in acquiring other synergistic
companies.



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











4







In implementing a structure for a particular
acquisition, we may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another
corporation or entity. We may also acquire stock or assets of an existing business.



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



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





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



We are presently in discussion with other
companies operating in the cannabis industry regarding a potential acquisition. However, there can be no assurance we will be
successful consummating any additional acquisitions in the future, nor can there be any assurance we will have access available
to equity and debt financing required to consummate any transaction in the future.



Employees



We currently employ 4 employees, including
our current officers and a Director of Finance.











5







We anticipate that we will retain additional
employees as we develop our existing projects and close additional acquisitions in the future, of which there is no assurance.
We believe that there are a sufficient number of potential qualified employees available. No employee is a member of any union.
We believe our relationship with our employees is satisfactory.



Competition



We are competing
with other companies, both publicly held and private, who are also seeking to acquire or otherwise consolidate with an existing
Canadian cannabis business. Many 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.



Government
Regulation



It is our intention to continue to emphasize
the cannabis industry in our search for business opportunities, specifically in Canada but are also currently considering opportunities
in the United States in states that have approved cannabis legalization. However, as of the date of this Report cannabis is still
considered a Schedule 1 controlled substance under US federal law. A Schedule I controlled substance is defined as a substance
that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high
potential for abuse. The Department of Justice defines Schedule 1 controlled substances as “the most dangerous drugs of all
the drug schedules with potentially severe psychological or physical dependence.”



If the Federal Government decides to enforce
the Controlled Substances Act in any state in which we own an interest in a cannabis operation, persons that are charged with distributing,
possessing with intent to distribute, or growing marijuana could be subject to fines and terms of imprisonment, the maximum being
life imprisonment and a $50 million fine. Any such change in the Federal Government’s enforcement of current federal laws
could cause significant financial damage to us if we are able to acquire or develop a cannabis related operation in the US. If
so, we may be irreparably harmed by a change in enforcement by the federal or state governments.



As of the date of this Report, 11 states
and the District of Columbia have legalized adult use cannabis. There are 23 other states where medical marijuana has been legalized.
The state laws are in conflict with the Federal Controlled Substances Act, which makes marijuana use and possession illegal on
a national level.









6







Previously, the Obama administration took
the position that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully
abiding by state-designated laws allowing the use and distribution of medical marijuana. The Trump administration has revised
this policy. Specifically, the Department of Justice (“DOJ”) vacated the Cole Memorandum in favor of deferral of
any enforcement of federal regulation to the individual states. However, certain other protections remain in place via budgetary
element embedment (Rohrabacher-Farr amendment now referred to as the Rohrabacher-Blumenauer Amendment), which limits funding of
any enforcement of anti-cannabis legislation. The Department of Justice has stated that it will continue to enforce the Controlled
Substance Act with respect to marijuana to prevent:



| | · | the distribution of marijuana to minors;
| | - | ----------------------------------------



| | · | criminal enterprises, gangs and cartels receiving revenue from the sale of marijuana;
| | - | -------------------------------------------------------------------------------------



| | · | the diversion of marijuana from states where it is legal under state law to other states;
| | - | -----------------------------------------------------------------------------------------



| | · | state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | · | violence and the use of firearms in the cultivation and distribution of marijuana;
| | - | ----------------------------------------------------------------------------------



| | · | driving while impaired and the exacerbation of other adverse public health consequences associated with marijuana use;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | the growing of marijuana on public lands; and
| | - | ---------------------------------------------



| | · | marijuana possession or use on federal property.
| | - | ------------------------------------------------



Since the use of marijuana is illegal under
federal law, federally chartered banks will not accept for deposit funds from businesses involved with marijuana. Consequently,
businesses involved in the marijuana industry often have trouble finding a bank willing to accept their business. The inability
to open bank accounts may make it difficult for us to operate. There does appears to be recent movement to allow state-chartered
banks and credit unions to provide banking to the industry, but as of the date of this Report there are only nominal entities that
have been formed that offer these services.



Although cultivation and distribution
of marijuana for medical use is permitted in many states, provided compliance with applicable state and local laws, rules, and
regulations, marijuana is illegal under federal law. Strict enforcement of federal law regarding marijuana would likely result
in the inability to implement our business plan in the US and could expose us and our management to potential criminal liability
and subject our properties to civil forfeiture. Though the cultivation and distribution of marijuana remains illegal under federal
law, H.R. 83, enacted by Congress on December 16, 2014, provides that none of the funds made available to the DOJ pursuant to
the 2015 Consolidated and Further Continuing Appropriations Act may be used to prevent states from implementing their own laws
that authorize the use, distribution, possession, or cultivation of medical marijuana. However, state laws do not supersede the
prohibitions set forth in the federal drug laws.



For a comprehensive and up to date perspective
on this process and current states and territories cannabis laws please refer to the following link: http://www.mpp.org/states/key-marijuana-policy-reform.html.



Canadian Regulations



Summary of the Cannabis Act



On October 17, 2018, the Cannabis Act
(Canada) (the “Cannabis Act”) and the Cannabis Regulations(Canada) (the “Cannabis Regulations”)
came into force as law with the effect of legalizing adult recreational use of cannabis across Canada. The Cannabis Act and the
Cannabis Regulations incorporate the Access to Cannabis for Medical for Medical Purposes Regulations(the “ACMPR”),
which came into force in Canada on August 24, 2016 and were previously made under the CDSA (as defined herein). New Industrial
Hemp Regulations, SOR 2018-145 were also made under the Cannabis Act, which replaced the Industrial Hemp Regulations that were
previously made under the CDSA.









7







When the Cannabis Act came into force,
cannabis was removed from Schedule II to the Controlled Drugs and Substances Act (Canada) (the “CDSA”).
Prior to the Cannabis Act coming into force, the ACMPR permitted access to cannabis for medical purposes for Canadians who had
been authorized to use cannabis by their health care practitioner. The ACMPR replaced the Marihuana for Medical Purposes Regulations
(Canada)(the “MMPR”), which was implemented in June 2013. The MMPR replaced the Marihuana Medical Access
Regulations (Canada) (the “MMAR”), which was implemented in 2001. Like the ACMPR, the MMPR and MMAR were
both promulgated under the CDSA and represent initial steps in the Government of Canada’s regulation of medical cannabis
and eventual legalization and regulation of adult-use recreational cannabis.



The Cannabis Act and the Cannabis Regulations
permit the recreational use of cannabis by adults and regulate the production, distribution, promotion and sale of cannabis products
(as defined therein) in Canada, for both recreational and medical purposes. Under the Cannabis Regulations, Canadians who are authorized
by their health care practitioner to use medical cannabis have the option of purchasing cannabis from one of the producers licensed
by Health Canada and are also able to register with Health Canada to produce a limited amount of cannabis for their own medical
purposes or to designate an individual who is registered with Health Canada to produce cannabis on their behalf for personal medical
purposes.



Pursuant to the Cannabis Act, and subject
to provincial regulations, individuals over the age of 18 are able to purchase cannabis products from authorized retailers and
are able to legally possess up to 30 grams of dried cannabis, or the equivalent amount. As of the date of this Prospectus, the
permitted classes of cannabis that an authorized person may sell include: dried cannabis, cannabis oil, fresh cannabis, cannabis
plants, cannabis plant seeds, edible cannabis, cannabis extracts and cannabis topicals. The Cannabis Act also permits households
to grow a maximum of four cannabis plants. This limit applies regardless of the number of adults that reside in the household.
In addition, the Cannabis Act provides provincial and territorial governments the authority to prescribe regulations regarding
use, retail and distribution, as well as the ability to alter some of the existing baseline requirements of the Cannabis Act, such
as increasing the minimum age for purchase and consumption and setting rules around promotion of cannabis products within the province
or territory.



The Cannabis Regulations, among other things,
set out requirements relating to licensing, including key personnel and security requirements; good production practices; cannabis
products; packaging and labelling; and access to cannabis for medical purposes. They are summarized below.



Licenses



The Cannabis Regulations establish six
classes of licenses under the Cannabis Act: cultivation; processing; analytical testing; sale to individual clients for medical
purposes; research; and cannabis drug production. It also provides for subclasses of cultivation (standard cultivation, micro-cultivation
and nursery) and processing (standard processing and micro-processing).



Key Personnel and Security Clearances



The Cannabis Regulations require that license
holders retain certain key personnel, depending on the class of license. Holders of a license for cultivation, processing and sale
must retain a responsible person (who serves as the main point of contact with Health Canada) and head of security. Holders of
a license for cultivation must also retain a master grower, and holders of a license for processing must retain a quality assurance
person.











8







The Cannabis Regulations require a valid
security clearance issued by the Minister (as defined in the Cannabis Act) for certain people associated with cannabis licensees.
Security clearances must be held by directors, officers, individuals who exercise, or are in a position to exercise, direct control
over a corporate licensee, directors and officers of any corporation that exercises, or is in a position to exercise, direct control
over a corporate licensee and the key personnel noted above (responsible person, head of security, master grower and quality assurance
person) and any other individuals identified by the Minister. The Minister may refuse to grant security clearances at its discretion
to individuals or associations, such as those involved in organized crime or individuals with prior convictions for, or an association
with, drug trafficking, corruption or violent offences (individuals with histories of non-violent, lower-risk criminal activity,
for example, simple possession of cannabis, or small-scale cultivation of cannabis plants are not precluded from participating
in the legal cannabis industry).



Good Production Practices and Cannabis
Products



Part 5 of the Cannabis Regulations establishes
the good production practices which must be met prior to the sale, distribution or export of cannabis, and Part 6 of the Cannabis
Regulations establishes rules for cannabis products, including permitted/prohibited ingredients and amounts of THC (Tetrahydrocannabinol).
These require that cannabis and anything that will be used as an ingredient must be produced, packaged, labelled, distributed,
stored, sampled and tested in accordance with standard operating procedures that are designed to ensure that those activities are
conducted in accordance with the applicable requirements of Parts 5 (Good Production Practices) and Part 6 (Cannabis Products).



The good production practices requirements
relate to storage, distribution, the design and construction of buildings, filtration and ventilation systems, water supply, lighting,
equipment, sanitation programs and testing.



Part 6 of the Cannabis Regulations sets
standards for the safe consumption of cannabis products, in respect of being free from biological and chemical contaminants and
also limits the amounts of THC in cannabis products.



Cannabis Tracking System



Under the Cannabis Act, the Minister established
and maintains a national cannabis tacking system, which is called The Cannabis Tracking and Licensing System (the “CTLS”).
The CTLS provides an online secure platform for filing applications for licenses and security clearances under the Cannabis Regulations.
Through the cannabis supply chain, the CTLS also tracks cannabis from federal cannabis license holders to individual medical clients,
or from federal cannabis license holders to recreational market channels. The tracking function of the CTLS serves to limit the
diversion of cannabis into, and out of, the regulated medical and recreational markets.



Promotion, Packaging and Labelling



The Cannabis Act establishes strict prohibitions
on the promotion of cannabis, and the Cannabis Regulations establish rules around plain packaging and labelling. Among other things,
it is prohibited to promote cannabis in a way that could be appealing to young people, by way of a testimonial or endorsement or
through depiction of a person, character or animal, whether real or fictional; or in a manner associated with a “lifestyle”.
The Cannabis Regulations establish rules around packaging and labelling to promote informed consumer choice, allow for the safe
handling and transportation of cannabis products, ensure child-proofing on containers and reducing the appeal of cannabis to youth.
The size and color of packaging, logos, names and other brand elements is restricted. Cannabis package labels must include specific
information, such as: (i) product source information, including the class of cannabis and the name, phone number and email of the
processor; (ii) a mandatory health warning, rotating between Heath Canada’s list of standard health warnings; (iii) the Health
Canada standardized cannabis symbol; and (iv) information specifying THC and Cannabidiol content.











9







Cannabis for Medical Purposes



The medical cannabis regulatory framework
shifted from the ACMPR made under the CDSA to the Cannabis Act and the Cannabis Regulations. Under Part 14 of the Cannabis Regulations,
there are three options available to an individual who has received authorization from his/her healthcare practitioner to use cannabis
for medical purposes: (i) by registering with a holder of a license to sell for medical purposes; (ii) by registering with Health
Canada for the production of a limited amount of cannabis for their own medical purposes; or (iii) by designating a third party
to produce cannabis for them. With respect to (ii) and (iii), the starting materials for the production of cannabis, such as cannabis
plants or seeds, must be obtained from medical sales license holders.



Provincial and Territorial Regulatory
Framework



The governments of every Canadian province
and territory have implemented regulatory regimes for the use, distribution and sale of cannabis products for recreational purposes
within their jurisdiction. The only provinces with restrictions on classes of cannabis that may be sold in the recreational markets
are Québec and Manitoba, where plants and seeds are not sold because personal cultivation for recreational purposes is prohibited
in those two provinces. In addition, as of the date of this Prospectus, some provinces are considering whether or not to allow
cannabis vape products to be sold, including Newfoundland and Labrador.



Regardless of the specific provincial retail
framework, all cannabis products for the recreational cannabis market must be supplied by federally licensed cultivators (plants
and seeds only) and processors (all other allowable classes of cannabis – currently dried cannabis, cannabis oil, cannabis
edibles, cannabis extracts and cannabis topicals). In most provinces and territories, a liquor or cannabis authority operated by
the province serves as a wholesaler, with retailers purchasing cannabis products from the liquor or cannabis authority or from
provincially licensed distributors. The wholesalers, in turn, acquire the cannabis products from federally licensed cultivators
and processors.



Summary of the Cannabis Act



On October 17, 2019, the Cannabis Act came
into force as law with the effect of legalizing adult recreational use of cannabis across Canada. The Cannabis Act replaced the
ACMPR and the IHR, both of which came into force under the Controlled Drugs and Substances Act (Canada) (the “CDSA”),
which previously permitted access to cannabis for medical purposes for only those Canadians who had been authorized to use cannabis
by their health care practitioner. The ACMPR replaced the Marihuana for Medical Purposes Regulations (Canada) (the “MMPR”),
which was implemented in June 2013. The MMPR replaced the Marihuana Medical Access Regulations (Canada) (the “MMAR”)
which was implemented in 2001. The MMPR and MMAR were initial steps in the Government of Canada’s legislative path towards
the eventual legalization and regulating recreational and medical cannabis.



The Cannabis Act permits the recreational
adult use of cannabis and regulates the production, distribution and sale of cannabis and related oil extracts in Canada, for both
recreational and medical purposes. Under the Cannabis Act, Canadians who are authorized by their health care practitioner to use
medical cannabis have the option of purchasing cannabis from one of the producers licensed by Health Canada and are also able to
register with Health Canada to produce a limited amount of cannabis for their own medical purposes or to designate an individual
who is registered with Health Canada to produce cannabis on their behalf for personal medical purposes.











10







Pursuant to the Cannabis Act, subject to
provincial regulations, individuals over the age of 18 are be able to purchase fresh cannabis, dried cannabis, cannabis oil, and
cannabis plants or seeds and are able to legally possess up to 30 grams of dried cannabis, or the equivalent amount in fresh cannabis
or cannabis oil. The Cannabis Act also permits households to grow a maximum of four cannabis plants. This limit applies regardless
of the number of adults that reside in the household. In addition, the Cannabis Act provides provincial and municipal governments
the authority to prescribe regulations regarding retail and distribution, as well as the ability to alter some of the existing
baseline requirements of the Cannabis Act, such as increasing the minimum age for purchase and consumption.



Provincial and territorial governments
in Canada have made varying announcements on the proposed regulatory regimes for the distribution and sale of cannabis for adult-use
purposes. For example, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Yukon and the Northwest Territories have
chosen the government-regulated model for distribution, whereas Saskatchewan and Newfoundland & Labrador have opted for a private
sector approach. Alberta, Ontario, Manitoba, Nunavut and British Columbia have announced plans to pursue a hybrid approach of public
and private sale and distribution.



In connection with the new framework for
regulating cannabis in Canada, the Federal Government has introduced new penalties under the Criminal Code (Canada), including
penalties for the illegal sale of cannabis, possession of cannabis over the prescribed limit, production of cannabis beyond personal
cultivation limits, taking cannabis across the Canadian border, giving or selling cannabis to a youth and involving a youth to
commit a cannabis-related offence.



On July 11, 2019, the Federal Government
published regulations in the Canada Gazette to support the Cannabis Act, including the Cannabis Regulations, the new Industrial
Hemp Regulations, along with proposed amendments to the Narcotic Control Regulations and certain regulations under the Food and
Drugs Act (Canada). The Industrial Hemp Regulations and the Cannabis Regulations, among other things, outline the rules for the
legal cultivation, processing, research, analytical testing, distribution, sale, importation and exportation of cannabis and hemp
in Canada, including the various classes of licenses that can be granted, and set standards for cannabis and hemp products. The
Industrial Hemp Regulations and the Cannabis Regulations include strict specifications for the plain packaging and labeling and
analytical testing of all cannabis products as well as stringent physical and personnel security requirements for all federally
licensed production sites. The Industrial Hemp Regulations and the Cannabis Regulations also maintain a distinct system for access
to cannabis. With the Cannabis Act now in force, cannabis has ceased to be regulated under the CDSA and is instead regulated under
the Cannabis Act, and both the ACMPR and the IHR have been repealed effective October 17, 2019.



On June 7, 2019, Bill-C45 passed the third
reading in the Senate with a number of amendments to the language of the Cannabis Act. More specifically, the Senate proposed:



| | · | establishing a committee of the Senate and a committee of the House of Commons to undertake a comprehensive review of the administration and operation of the Cannabis Act;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | assisting provinces and territories to facilitate the development of workplace impairment policies;
| | - | ---------------------------------------------------------------------------------------------------



| | · | allowing provinces to place restrictions on the ability of individuals to engage in home cultivation;
| | - | -----------------------------------------------------------------------------------------------------



| | · | that law enforcement be provided with the appropriate tools and resources to address concerns about continued illicit production, diversion, and sale of cannabis to youth, including preventing the sharing of marihuana among young adults by rendering it a ticketable offense;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | that the prices set for cannabis products and the applicable taxes reflect the dual objective of minimizing the health dangers of cannabis consumption and undercutting the illicit market of cannabis;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------











11







| | · | mandatory health warnings for cannabis products, including warnings about the danger of smoking cannabis, the danger of exposure to second-hand cannabis smoke, and the risks of combining cannabis and tobacco;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | testing procedures for THC content be standardized to ensure accurate measurement to better protect consumer health and safety;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | that forthcoming regulations for edible products and other forms of cannabis ensure that product packaging is child-resistant and does not appeal to young people and that the type of available products should be strictly limited;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | adequate and ongoing funding for sustained, evidence-based cannabis education and prevention programs to provide Canadians, especially young Canadians, with knowledge about the health risks of cannabis use, including on-going research initiatives on the impact of cannabis use on the developing brain; and that the federal government commit to on-going educational initiatives to ensure youth are informed on the effects of cannabis use;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | to prohibit licensees under the Cannabis Act to distribute branded merchandise, such as T-shirts and baseball caps and imposing a moratorium on loosening the regulations on the branding, marketing, and promotion of cannabis for 10 years;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | to set aggressive targets, comparable to the successful Federal Tobacco Control Strategy, to reduce the number of youth and adult cannabis users; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | · | to ensure that the Cannabis Tracking System be operational upon the coming-into-force of the Cannabis Act.
| | - | ----------------------------------------------------------------------------------------------------------



Security Clearances



The Cannabis Regulations require that certain
people associated with cannabis licensees, including individuals occupying a “key position” directors, officers, large
shareholders and individuals identified by the Minister of Health, must hold a valid security clearance issued by the Minister
of Health. Officers and directors of a parent corporation must be security cleared.



Under the Cannabis Regulations, the Minister
of Health may refuse to grant security clearances to individuals with associations to organized crime or with past convictions
for, or an association with, drug trafficking, corruption or violent offenses. Individuals who have histories of nonviolent, lower-risk
criminal activity (for example, simple possession of cannabis, or small-scale cultivation of cannabis plants) are not precluded
from participating in the legal cannabis industry, and the grant of security clearance to such individuals is at the discretion
of the Minister of Health and such applications will be reviewed on a case-by-case basis.



Cannabis Tracking System



Under the Cannabis Act, the Minister
of Health is authorized to establish and maintain a national cannabis tracking system. The Cannabis Regulations set out a national
cannabis tracking system to track cannabis throughout the supply chain to help prevent diversion of cannabis into, and out of,
the illicit market. The Cannabis Regulations also provides the Minister of Health with the authority to make a ministerial order
that would require certain persons named in such order to report specific information about their authorized activities with cannabis,
in the form and manner specified by the Minister of Health.



Cannabis Products



The Cannabis Regulations set out the requirements
for the sale of cannabis products at the retail level permit the sale of dried cannabis, cannabis oil, fresh cannabis, cannabis
plants, and cannabis seeds, including in such forms as “pre-rolled” and in capsules. The THC content and serving size
of cannabis products is limited by the Cannabis Regulations. The sale of edibles containing cannabis and cannabis concentrates
was not initially permitted, however, such products are expected to be legalized by the fall of 2019.











12







Description of Canadian Licenses and Licensing Requirements



Laws and regulations affecting the medical
marijuana industry are constantly changing, which could detrimentally affect our proposed operations. Local, state and federal
medical marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur
substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations
of such violations, could disrupt our business and result in a material adverse effect on our operations. It is also possible that
regulations may be enacted in the future that will be directly applicable to our business. These ever-changing regulations could
even affect federal tax policies that may make it difficult to claim tax deductions on our returns. We cannot predict the nature
of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations
or administrative policies and procedures, when and if promulgated, could have on our business.



|Item 1A. | Risk Factors.
|-------- | -------------



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



|ITEM 1B. | UNRESOLVED STAFF COMMENTS.
|-------- | --------------------------



None.



|ITEM 2. | PROPERTIES
|------- | ----------



Our principal place of business is located
at 3600, 888 3RD Street SW, Calgary, Canada T2P 5C5. This sublease may be terminated by either party on 30 days’
notice. Rent is $4,000 CAD per month. This space was provided by a company to which, Mr. Orman, one of our directors, serves as
a Director. We believe this location is sufficient for our current business purposes.



We have another office located at Suite
206 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which we have rented pursuant to an oral sublease from PLC International Investments
Inc, a company owned and controlled by Dominic Colvin, our current CEO, President and a director. This location consists of approximately
500 sq. feet. We pay a monthly rent of CAD $1,500.



Previously, from April 1, 2018 until April
1, 2019, our principal place of business was located at 2 Park Plaza, Suite 1200 – B. Irvine, CA. 92614. This space was 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 was $1,000, which was accrued during the term of this lease and remains due and owing as of the date of this report.



|ITEM 3. | LEGAL PROCEEDINGS.
|------- | ------------------



As part of our acquisition of AMS we assumed
an action filed against AMS by Ataraxia Canada, Inc., alleging breach of contract, specifically, breach of a nonbinding term sheet
providing for Ataraxia to acquire controlling interest in AMS and they are seeking $15 million in damages. A Statement of Claim
was prepared by Ataraxia Canada, Inc., as plaintiff, and circulated to Alternative Medical Solutions Inc., as defendant, on August
2, 2018 under the Ontario Superior Court of Justice (Court file no. CV-17-580157). The parties have engaged in discussions with
respect to a potential settlement of this matter. Counsel has advised that it believes it is premature to speculate on any outcome
of this litigation, including the likelihood of a settlement or any potential liability at this time.











13







Our agreement to acquire AMS contained
a provision requiring us to diligently defend against the claims brought forth in, and assume full and complete control of, the
Ataraxia litigation, provided that we shall not enter into any compromise or settlement in respect of the Ataraxia litigation without
the prior written consent of the sellers, which consent is not to be unreasonably withheld, conditioned or delayed. The sellers
are obligated to cooperate fully and make available to us all pertinent information and witnesses under their control, make such
assignments and take such other steps as in the opinion of our counsel are reasonably necessary to enable us to defend against
the claims brought forth in the Ataraxia litigation.



We are currently reviewing two separate
situations with our legal counsel in order to ascertain whether we have claims against Steven Barber arising out of his default
of the Consulting Agreement we entered into as part of the AMS acquisition more fully described in” Part I, Item 1,”
Business, above and various claims against Gary Herick, a former officer and director. In January 2020 we received correspondence
from counsel for Mr. Barber demanding payment on amounts purported to be due pursuant to his Consulting Agreement with us. we are
currently reviewing whether Mr. Barber has performed pursuant to the terms of the Consulting Agreement we are currently reviewing
whether Mr. Barber has performed pursuant to the terms of the Consulting Agreement



No decision on whether to proceed on either
of these situations has been reached as of the date of this Report.



We are not a party to any other legal
proceeding or aware of any other threatened action as of the date of this Report.



|ITEM 4. | MINE SAFETY DISCLOSURES.
|------- | ------------------------



Not Applicable.

























14







PART II



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



Market
Information



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



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



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



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



|               |  | High |      |  | Low |  
|-------------- |  | ---- | ---- |  | --- | -
|Fiscal 2018    |  | $    |      |  | $   |  
|               |  |      |      |  |     |  
|First Quarter  |  | $    | 2.01 |  |     | $
|Second Quarter |  |      | 1.65 |  |     |  
|Third Quarter  |  |      | 2.55 |  |     |  
|Fourth Quarter |  |      | 4.00 |  |     |  
|               |  |      |      |  |     |  
|Fiscal 2019    |  |      |      |  |     |  
|               |  |      |      |  |     |  
|First Quarter  |  | $    | 2.69 |  |     | $
|Second Quarter |  |      | 2.05 |  |     |  
|Third Quarter  |  |      | 2.99 |  |     |  
|Fourth Quarter |  |      | 2.19 |  |     |  



As of
May 26, 2020, the closing price of our Common Stock was $1.40 per share.



The Securities Enforcement
and Penny Stock Reform Act of 1990



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



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











15







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



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



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



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



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



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



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



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



| | · | the bid and offer quotations for the penny stock;
| | - | -------------------------------------------------



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



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



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



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



Holders



As of the date of this Report there were
36,640,939 shares of our Common Stock issued and outstanding, which were held by 293 stockholders of record, not including those
persons holding shares in “street name.”











16







In April 2018 we issued 60,000 shares
of our Series A Convertible Preferred Stock at a price of $1.00 per share. Each share of Series A Convertible Preferred Stock
is convertible into 1,250 shares of our Common Stock and vote on an as-converted basis. There are currently five holders of these
Series A shares, plus one holder that we are disputing. See “Legal Proceedings.” The rights and designations of these
Preferred Shares include the following:



| | · | entitles the holder thereof to 1,250 votes per share of Series A Convertible Preferred Stock owned 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                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | · | is not redeemable.                                                                                                                                                                                                                                                                                                                                                                                                



In August 2019, we closed a private offering
and issued 475,000 shares of Series B Convertible Preferred Stock as part of such offering. Each share of Series B Convertible
Preferred Stock is convertible into one share of our Common Stock. There are currently 26 holders of our Series B Convertible Preferred
Stock.



Stock Transfer Agent



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



Dividends



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



Reports



We are subject to certain reporting requirements
and furnish annual financial reports to our stockholders, certified by our independent accountants, and furnish unaudited quarterly
financial reports in our quarterly reports filed electronically with the SEC. All reports and information filed by us can be found
at the SEC website, www.sec.govm as well as on our website, www.cannapharmarx.com.



|Item 6. | Selected Financial Data.
|------- | ------------------------



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



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



The following discussion should be read
in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire
to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution
readers regarding certain forward-looking statements in the following discussion and elsewhere in this Report and in any other
statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate to future operations, strategies, financial results
or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or
on our behalf. We disclaim any obligation to update forward-looking statements.











17







Overview and History



We were originally incorporated in the
State of Colorado in August 1998 under the name “Network Acquisitions, Inc.” We changed our name to Cavion Technologies,
Inc. in February 1999 and subsequently to Concord Ventures, Inc. in October 2006.



On December 21, 2000, we filed for protection
under Chapter 11 of the United States Bankruptcy Code. In connection with the filing, on February 16, 2001, we sold our entire
business, and all of our assets, for the benefit of our creditors. After the sale, we still had liabilities of $8.4 million and
were subsequently dismissed by the Court from the Chapter 11 reorganization, effective March 13, 2001, at which time the last of
our remaining directors resigned. On March 13, 2001, we had no business or other source of income, no assets, no employees or directors,
outstanding liabilities of approximately $8.4 million and had terminated our duty to file reports under securities law. In February
2008, we were re-listed on the OTC Bulletin Board.



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



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



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



In
April 2016, we ceased operations. Our then management resigned their respective positions with our Company, with the exception
of Mr. Gary Herick, who remained as one of our officers and directors until March 2019.



As
a result, until February 2019 we were classified as a “shell” company as defined byRule 12b-2 under
the Securities Exchange Act of 1934, as amended. In February 2019 we filed a report on Form 8-K/A advising that we had taken all
steps necessary and disclosed all required information with the SEC so as to allow us to no longer be considered a “shell”
company. Pursuant to SEC rules, our Common Stock is now eligible for the exemption from registration provided by Rule 144, effective
February 13, 2020.



Our
principal place of business is located at3600 888-3rd Street SW, Calgary, Alberta, Canada,
phone949-652-6838. Our website address is www.cannapharmarx.com.



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











18







PLAN OF OPERATION



See “Part 1, Item 1, Business,”
above for a detailed discussion of our current business activities and plan of operation, the contents of which are incorporated
herein as if set forth.



LIQUIDITY AND CAPITAL RESOURCES



As of December 31, 2019, we had $1,547
in cash.



In April 2018, we issued 60,000 shares
of our Series A Convertible Preferred Stock at a price of $1.00 per share. Each share of Series A Convertible Preferred Stock is
convertible into 1,250 shares of common stock and vote on an as-converted basis. The rights and designations of these Preferred
Shares include the following:



| | · | entitles the holder thereof to 1,250 votes on all matters submitted to a vote of the shareholders;
| | - | --------------------------------------------------------------------------------------------------



| | · | The holders of outstanding Series A Convertible Preferred Stock shall only be entitled to receive dividends upon declaration by the Board of Directors of a dividend payable on our Common Stock whereupon the holders of the Series A Convertible Preferred Stock shall receive a dividend on the number of shares of Common Stock in to which each share of Series A Convertible Preferred Stock is convertible;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Each Series A Preferred Share is convertible into 1,250 shares of Common Stock; and
| | - | -----------------------------------------------------------------------------------



| | · | not redeemable.
| | - | ---------------





During 2018 we conducted a private offering
of 12% Convertible Debentures where we accepted subscriptions in the aggregate amount of $2,072,000 from 35 accredited investors,
as that term is defined in Rule 501 of Regulation D. Each Convertible Debenture is convertible into shares of our Common Stock
at the lesser of $0.40 or a 50% of the closing market price on the date a business combination valued at greater than $5,000,000
is completed. We relied upon the exemption from registration provided by Rule 506 of Regulation D to issue the Convertible Debentures.
We used the proceeds from this offering for the purchase of AMS, as well as working capital, including costs associated with the
preparation of over three years of reports that had not been filed with the SEC. During the initial calendar quarter of 2019 we
entered into a Qualified Financing with our minority purchase of GN stock and warrants described in “Part I, Item 1, Business”,
above and Note 4 “Investment”. On March 31, 2019, the convertible notes amounting to $2,072,000 along
with $130,212 of accrued interest were converted, pursuant to the automatic conversion terms included in the Convertible Debentures,
to shares of our Common Stock at a price of $0.40 per share, or a total of 5,505,530 shares. This offering closed in January 2019.









19







In the first quarter of 2019 we commenced
a private offering of Units to accredited investors only at a price of $1.00 per Unit, each Unit consisting of one share of Series
B Convertible Preferred Stock convertible into one share of our Common Stock and one Common Stock Purchase Warrant exercisable
to purchase one share of our Common Stock at an exercise price of $2.00. In August 2019 we closed this offering after accepting
aggregate subscriptions totaling $475,000. The Units were offered in reliance upon the exemption from registration provided by
Rule 506 of Regulation D. We use these funds for working capital purposes.



On July 8, 2019, we commenced a private
offering of Units at a price of $50,000 per Unit, each Unit consisting of 50,000 shares of our Common Stock and one $50,000 unsecured
Convertible Note (a “Convertible Note”), which mature one year from the date of issuance and accrue interest at 5%
per annum. These Convertible Notes are convertible into shares of our Common Stock at a conversion price of $1.00 per share. During
the year ended December 31, 2019, we issued 31 Units in this Offering for net proceeds of $1,550,000 to six accredited investors.
Since our stock price exceeded the conversion feature of the Convertible Notes and was immediately exercisable, we recorded a beneficial
conversion feature (“BCF”) and expense of $1,550,000 which was charged to interest expense with an offset to paid-in
capital.





The 1,550,000 million shares of Common
Stock included in the Units were valued at $5,075,000. The excess above the $1,550,000 face value of the Convertible Notes or,
$3,525,000, was charged to interest expense with an offset to paid-in capital. The remaining $1,550,000 was recorded as a Note
discount of $1,550,000 to be amortized over the three year period from the date of the Note to the maturity date. We recorded $552,602
in interest expense related to the amortization of note discount during the year ended December 31, 2019.





We estimate that in order to complete
development of the cultivation facilities we presently own located in Hanover, Ontario, we would require approximately CAD $20
million However, our ability to arrange such financing has been significantly impaired by the collapse of the cannabis sector
in late 2019 in addition to the arrival of the COVD19 Pandemic in 2020. If we are successful in closing the Sunniva acquisitions
discussed herein we may elect to complete the development of this project. While no decision whether to proceed or not has
been made, if we close Sunniva we will either elect to sell this property, or if it makes economic sense, develop an extraction
facility.



In addition, as disclosed above, in June
we executed an SPA with Sunniva in consideration for the payment of CAD $20 million. In order to fully develop this property we
would need to raise both the purchase price, plus approximately CAD $225 million to complete the development of this property.



We had previously reported that we had
received a commitment from HB Partners 48, Inc., Toronto, Canada for this financing. However, as a result of several factors unrelated
to our business, including the Coronavirus pandemic, they elected not to proceed.



We are also working to arrange other
construction financing facilities for the continued development of the properties we intend to acquire from Sunniva, which
facility will be converted to a permanent financing facility upon the completion of the Sunniva site improvements. However, while
we believe we will be able to obtain such financing, as of the date of this Report we do not have any agreement to provide this
construction financing and there are no assurances that we will obtain this financing on reasonable terms, or at all. Failure
to obtain this financing will have a negative impact on our ability to implement our business plan described herein.







20









On July 3, 2019, we entered into a 12%
$1,000,000 Loan Agreement with Koze Investments LLC (“Koze”), payable in full on June 27, 2020. Under the terms of
the 12% Note, Koze took a first security interest against our Hanover, Ontario cannabis facility in progress and required the us
to pay off the existing mortgage of approximately CAD $650,000. Additionally, we agreed to pay a 3% origination fee, prepay six
months of interest ($60,000) and to issue to Koze five-year warrants to purchase 1,001,000 shares of our Common Stock at an exercise
price $1.00 per share. After paying the origination fees, the prepayment and paying off the original mortgage, we used a portion
of the remaining proceeds as payment against the SMI purchase price of CAD $1,000,000.



In May 2019, a director loaned us the principal
amount of $75,000. In October 2019, our Chief Executive Officer extended a loan to us in the principal amount of $250,000. Both
of these loans are non-interest bearing and are due upon demand.



Currently, we have no committed source
for any funds to allow us to complete any of our proposed acquisitions or projects. No representation is made that any funds will
be available when needed. In the event funds cannot be raised if and when needed, we may not be able to carry out our business
plan. Our inability to obtain funding for our projects will have a negative impact on our anticipated results of operations.



Subsequent Events



On January 8, 2020, we issued two $100,000
Senior OID Convertible Promissory Notes (“OID Notes) to two accredited investors (“Holders”) and received $190,000
in proceeds. Under the provisions of the OID Notes, each Holder was granted the right are their sole discretion to fund up to another
$150,000 each under the same terms. The maturity date for each additional tranche of this OID Note funded shall be twelve (12)
months from the date of funding.



These Notes were issued with a one-year
maturity date, an 8% interest rate. The OID Notes are convertible into our Common Stock at a price equivalent to; the lower of
$1.25/share at any time after 180 days, or 75% times the lowest closing price of Common Stock for 20 consecutive trading days prior
to conversion. In the event of a change of control, the conversion price is 75% of the closing price. We have the right to redeem
these Notes at any time prior to maturity at 110% multiplied by the principal plus accrued interest plus outstanding accrued interest
plus default interest if any. These OID Notes which also include anti-dilution features are senior obligations with priority over
future debt, excluding mortgage debt.



On February 27, 2020, we issued another
OID Note for $160,000 to a third accredited investor under comparable terms and received proceeds of $152,000. This Note is convertible
into shares of our Common Stock at a price equivalent to; the lower of $1.25/share for the first 180 days from issuance, seventy-five
percent (75%) of the lowest closing price of our Common Stock during the twenty (20) trading days immediately preceding Conversion
Date. At issuance, we delivered a stock certificate representing half the purchase price in a restricted form (the “Returnable
Shares”) in the name of the investor (153,940 shares based on the low closing price of $0.812). The Returnable Shares will
only be returned to our treasury if the Note is prepaid in full within the initial 180 days after issuance.



On March 31, 2020, we issued an additional
OID Note for $78,000 to an accredited investor under comparable terms stated above and received proceeds of $75,000.





On May 22, 2020, we received a Letter
of Interest from InSpire Capital and its assigns wherein they have agreed to loan us the principal sum of CAD $6.5 million to
purchase the Sunniva property. The loan will be for a term of one year and accrues interest at the rate of 12% per annum, with
a requirement that we make monthly interest payments of CAD $64,000. We are also obligated to pay a Lender Fee and Brokerage Fee
of CAD $455,000 each at closing, along with a co-broker fee of CAD $260,000 and legal fees. We paid a fee of CAD $30,000 upon
execution. We borrowed CAD $20,000 of this fee from two of our officers on an interest free basis.









21







Inflation



Although our operations are influenced
by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the
year ended December 31, 2019.



Critical Accounting Policies
and Estimates



Critical Accounting Estimates



Our financial statements and accompanying
notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make
estimates, judgments, and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually
evaluate the accounting policies and estimates used to prepare the financial statements. The estimates are based on historical
experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ
from these estimates made by management.



RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS



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.



Off-Balance Sheet Arrangements



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



|Item 7a. | Quantitative And Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------



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



|Item 8. | Financial Statements And Supplementary Data
|------- | -------------------------------------------



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



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



None











22







|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, 2019, 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, 2019, 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.











23







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, 2019. 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 2013).



Based on its assessment, management has
concluded that as of December 31, 2019, our disclosure controls and procedures and internal control over financial reporting were
effective.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------



None.























24







PART
III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------



Information concerning our directors and
officers is incorporated by reference to our Definitive Proxy Statement on Schedule 14A to be filed with the Securities and Exchange
Commission within 150 days after the end of our fiscal year.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



Information concerning our directors and
officers is incorporated by reference to our Definitive Proxy Statement on Schedule 14A to be filed with the Securities and Exchange
Commission within 150 days after the end of our fiscal year.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



Information concerning our directors and
officers is incorporated by reference to our Definitive Proxy Statement on Schedule 14A to be filed with the Securities and Exchange
Commission within 150 days after the end of our fiscal year.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|-------- | ------------------------------------------------------------------------



Information concerning our directors and
officers is incorporated by reference to our Definitive Proxy Statement on Schedule 14A to be filed with the Securities and Exchange
Commission within 150 days after the end of our fiscal year.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES.
|-------- | ---------------------------------------



Information concerning our directors and
officers is incorporated by reference to our Definitive Proxy Statement on Schedule 14A to be filed with the Securities and Exchange
Commission within 150 days after the end of our fiscal year.

































25







PART
IV



|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.
|-------- | -----------------------------------------



The following exhibits are included with this Report:

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



The following exhibits have previously
been filed with the Securities and Exchange Commission on the date indicated.



|Exhibit No.                                                                                    |  | Description                                                                                                                                                                                            |  | Filed With                     |  | Date Filed
|---------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------ |  | ----------
|EX-2 Exhibits: Plans of Acquisition, Reorganization, Arrangements Liquidations and Successions |  |                                                                                                                                                                                                        |  |                               
|2.1                                                                                            |  | Amended and Restated Agreement and Plan of Merger between CannaPharmaRx, Inc. (DE), CannaPharmaRX, Inc. (CO) and CPHR Acquisition Corp. (subsidiary of Canna DE) dated 4/21/15                         |  | 8-K Dated 4/21/15              |  | 04/24/15  
|                                                                                               |  |                                                                                                                                                                                                        |  |                                |  |           
|EX-3 Exhibits: Articles of Incorporation/Organization and Bylaws                               |  |                                                                                                                                                                                                        |  |                               
|3-1b                                                                                           |  | Bylaws of Golden Dragon Holding Co. Adopted 12/31/10                                                                                                                                                   |  | 10-K for YE 12/31/13           |  | 02/06/14  
|3.1                                                                                            |  | Certificate of Amendment of Certificate of Incorporation of Dragon Holding Co. dated 10/22/14 (changing name to CannaPharmaRx, Inc.) dated 10/22/14 filed with Delaware Secretary of State             |  | 8-K Dated 10/23/14             |  | 10/24/14  
|                                                                                               |  |                                                                                                                                                                                                        |  |                                |  |           
|EX-10 Exhibits:  Material Contracts                                                            |  |                                                                                                                                                                                                        |  |                               
|10.1                                                                                           |  | Agreement and Plan of Merger between Golden Dragon Holding Co., CannaPharmaRX, and CPHR Acquisition Corp. (subsidiary of Golden Dragon) dated 5/15/14                                                  |  | 8-K Dated 5/15/14              |  | 06/04/14  
|10.2                                                                                           |  | Form of Exchange Agreement and Representations-exchange shares of CannaPharmaRX, Inc. (DE) to shareholders of CannaPharmaRX, Inc. (CO) (undated)                                                       |  | 10-K for FYE 12/31/14          |  | 03/31/15  
|10.1                                                                                           |  | Confidential Settlement and Release of Claims Agreement between CannaPharmaRX, Inc. and Gary Herick, Gerald Crocker, James Smeeding, Matthew Sherwood and Robert Liess and Gary M. Cohen dated 3/30/15 |  | 8-K Dated 3/30/15              |  | 04/03/15  
|10.2                                                                                           |  | Form of Exchange Agreement, Consent and Representations between-exchange shares of CannaPharmaRX, Inc. (DE) to shareholders of CannaPharmaRX, Inc. (CO) (undated)                                      |  | 10-Q for Quarter Ended 3/31/15 |  | 05/14/15  
|10.3                                                                                           |  | Securities Purchase Agreement between Alternative Medical Solutions Inc. and Shareholders thereof and CannaPharmaRX, Inc. and Hanover CPMD Acquisition Corp. dated 11/19/18                            |  | 8-K Dated 11/19/18             |  | 11/21/18  
|10.4                                                                                           |  | Form of Registration Rights Agreement                                                                                                                                                                  |  | 10-K for FYE 12/31/18          |  | 04/03/2019
|10.5                                                                                           |  | Form of Convertible Debenture                                                                                                                                                                          |  | 10-K for FYE 12/31/18          |  | 04/03/2019









26







SIGNATURES



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



|                         | CANNAPHARMARX, INC. |                                                                 
|------------------------ | ------------------- | ----------------------------------------------------------------
|                         |                     |                                                                 
|Dated:
    June 22, 2020 | By:                 | /s/ Dominic Colvin                                              
|                         |                     | Dominic Colvin,
        Principal Executive Officer             
|                         |                     |                                                                 
|                         |                     |                                                                 
|                         | By:                 | /s/ John Cassels                                                
|                         |                     | John Cassels,
        Principal Financial and Accounting Officer





In accordance with the Exchange Act,
this amended Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities
indicated on June 22, 2020.



s/ Dominic Colvin

Dominic Colvin, Director



s/ Matt Nicosia

Matt Nicosia, Director



s/ James Samuelson

James Samuelson, Director



s/ Marc R. Branson

Marc R. Branson, Director



s/ Richard D. Orman

Richard D. Orman, Director





























27







INDEX TO FINANCIAL STATEMENTS



|                                                                                                                    |  | Page
|------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                    |  |     
|Report of
    Independent Registered Accounting Firm                                                                |  | F-2 
|                                                                                                                    |  |     
|Audited Financial Statements:                                                                                       |  |     
|                                                                                                                    |  |     
|Consolidated Balance Sheets as of December 31, 2019 and 2018                                                        |  | F-3 
|                                                                                                                    |  |     
|Consolidated Statements of Operations for the Years ended December 31, 2019, and 2018                               |  | F-4 
|                                                                                                                    |  |     
|Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Years ended December 31, 2019, and 2018 |  | F-5 
|                                                                                                                    |  |     
|Consolidated Statements of Cash Flows for the Years ended December 31, 2019, and 2018                               |  | F-6 
|                                                                                                                    |  |     
|Notes to the Consolidated Financial Statements                                                                      |  | F-7 



















F-1







Report of Independent Registered Public Accounting Firm



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



Opinion on the Financial Statements



We have audited the accompanying consolidated
balance sheets of CannaPharmaRx, Inc. as of December 31, 2019 and 2018, the related statements of operations, stockholders' equity
(deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States.



Basis for Opinion



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



We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting 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.



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



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



The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues
to experience negative cash flows from operations. These factors raise substantial doubt about the Company's 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.



/S/ BF Borgers CPA PC

We have served as the Company's auditor
since 2018

Lakewood, CO

May 26, 2020















F-2







CANNAPHARMARX, INC.

CONSOLIDATED BALANCE SHEETS





|                                                                                                                                                                                   |  | December 31, |             | December 31,
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | ------------
|                                                                                                                                                                                   |  | 2019         |             | 2018        
|ASSETS                                                                                                                                                                             |  |              |             |             
|                                                                                                                                                                                   |  |              |             |             
|Current assets                                                                                                                                                                     |  |              |             |             
|Cash                                                                                                                                                                               |  | $            | 1,547       |             
|Deposit                                                                                                                                                                            |  |              | 1,308,830   |             
|HST Receivable                                                                                                                                                                     |  |              | 28,361      |             
|Prepaid expenses                                                                                                                                                                   |  |              | 592,473     |             
|Total current assets                                                                                                                                                               |  |              | 1,931,211   |             
|                                                                                                                                                                                   |  |              |             |             
|Construction in progress                                                                                                                                                           |  |              | 1,540,918   |             
|Land                                                                                                                                                                               |  |              | 143,201     |             
|Office equipment                                                                                                                                                                   |  |              | 3,978       |             
|Investments                                                                                                                                                                        |  |              | 4,193,597   |             
|Intangible assets                                                                                                                                                                  |  |              | 1,834,176   |             
|Goodwill                                                                                                                                                                           |  |              | 6,370,333   |             
|Total Assets                                                                                                                                                                       |  | $            | 16,017,414  |             
|                                                                                                                                                                                   |  |              |             |             
|LIABILITIES & STOCKHOLDERS' DEFICIT                                                                                                                                                |  |              |             |             
|                                                                                                                                                                                   |  |              |             |             
|Current liabilities                                                                                                                                                                |  |              |             |             
|Accounts payable and accrued expenses                                                                                                                                              |  | $            | 902,854     |             
|Accounts payable related party                                                                                                                                                     |  |              | 154,291     |             
|Accrued interest                                                                                                                                                                   |  |              | 27,630      |             
|Mortgages payable                                                                                                                                                                  |  |              | –           |             
|Accrued legal settlement                                                                                                                                                           |  |              | 190,000     |             
|Accrued expense - related party                                                                                                                                                    |  |              | 606,356     |             
|Notes payable current                                                                                                                                                              |  |              | 1,090,794   |             
|Convertible Notes -net of discount                                                                                                                                                 |  |              | 552,603     |             
|Loan payable - related party                                                                                                                                                       |  |              | 427,805     |             
|Total current liabilities                                                                                                                                                          |  |              | 3,952,333   |             
|Notes payable long-term                                                                                                                                                            |  |              | 7,210,883   |             
|Total Liabilities                                                                                                                                                                  |  |              | 11,163,216  |             
|                                                                                                                                                                                   |  |              |             |             
|Commitments and contingencies                                                                                                                                                      |  |              | –           |             
|                                                                                                                                                                                   |  |              |             |             
|Stockholders' Equity                                                                                                                                                               |  |              |             |             
|Preferred stock, Series A, $0.0001 par value, 60,000 shares authorized, 60,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively           |  |              | 60,000      |             
|Preferred Stock Series B, $0.0001 par value, 3,000,000 shares authorized 475,000 and -0- shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively |  |              | 475,000     |             
|Common stock, $0.0001 par value; 300,000,000 shares authorized, 36,486,999 and 18,942,506 issued and outstanding as of December 31, 2019 and December 31, 2018, respectively       |  |              | 3,649       |             
|Treasury stock, 133,200 and -0- shares as of December 31, 2019 and
    December 31, 2018, respectively                                                                             |  |              | (13         | )           
|Additional paid in capital                                                                                                                                                         |  |              | 61,619,415  |             
|Retained earnings (deficit)                                                                                                                                                        |  |              | (57,441,549 | )           
|Accumulated other comprehensive income (loss)                                                                                                                                      |  |              | 137,696     |             
|Total Stockholders' Equity (Deficit)                                                                                                                                               |  |              | 4,854,198   |             
|Total Liabilities and Stockholders' (Equity)                                                                                                                                       |  | $            | 16,017,414  |             



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











F-3









CANNAPHARMARX,
INC.

CONSOLIDATED STATEMENTS
OF OPERATIONS





|                                                  |  | 2019 |             | 2018
|------------------------------------------------- |  | ---- | ----------- | ----
|Revenue                                           |  | $    | –           |     
|                                                  |  |      |             |     
|Operating Expenses:                               |  |      |             |     
|General & administrative                          |  |      | 477,887     |     
|Acquisition expenses                              |  |      | 5,926,727   |     
|Acquisition expenses -related party               |  |      | –           |     
|Amortization and depreciation                     |  |      | 129,035     |     
|Stock based compensation                          |  |      | 736,186     |     
|Travel and entertainment                          |  |      | 109,174     |     
|Rent                                              |  |      | 30,148      |     
|Rent- related parties                             |  |      | 24,299      |     
|Professional fees                                 |  |      | 518,970     |     
|Consulting fees                                   |  |      | 261,352     |     
|Investment write-down                             |  |      | 7,070,841   |     
|Consulting fees-related parties                   |  |      | 693,324     |     
|Total operating expenses                          |  |      | 15,977,943  |     
|Income (loss) from operations                     |  |      | (15,977,943 | )   
|                                                  |  |      |             |     
|Other income (expense)                            |  |      |             |     
|Interest (expense)                                |  |      | (4,473,137  | )   
|Other income                                      |  |      | –           |     
|Other income (expense) net                        |  |      | (4,473,137  | )   
|Income (loss) before provision for income taxes   |  |      | (20,451,080 | )   
|Provision (credit) for income tax                 |  |      | –           |     
|Net income (loss)                                 |  | $    | (20,451,080 | )   
|                                                  |  |      |             |     
|Basic and diluted earnings(loss) per common share |  | $    | (0.66       | )   
|                                                  |  |      |             |     
|Weighted average number of shares outstanding     |  |      | 31,174,936  |     
|                                                  |  |      |             |     
|Comprehensive loss:                               |  |      |             |     
|Net income (loss)                                 |  | $    | (20,451,080 | )   
|Foreign currency translation adjustment           |  |      | 137,696     |     
|Comprehensive income (loss)                       |  | $    | (20,313,386 | )   



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











F-4









CANNAPHARMARX, INC.

CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY







|                                                                                        |  | Preferred Stock Series
    A |        | Preferred Stock Series
    B |  | Common Stock |        | Treasury Stock |  | Paid in |         | Retained earnings |  | Accumulated other
    comprehensive income |         | Equity/
|--------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---------------------------- |  | ------------ | ------ | -------------- |  | ------- | ------- | ----------------- |  | ------------------------------------------ | ------- | -------
|                                                                                        |  | Shares                       |        | Value                        |  | Shares       |        | Value          |  | Shares  |         | Value             |  | Shares                                     |         | Value  
|Balances
    at January 1, 2018                                                         |  |                              | –      |                              |  | $            | –      |                |  |         | –       |                   |  | $                                          | –       |        
|                                                                                        |  |                              |        |                              |  |              |        |                |  |         |         |                   |  |                                            |         |        
|Net loss                                                                                |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Issuance of Series A Preferred
    Stock                                                |  |                              | 60,000 |                              |  |              | 60,000 |                |  |         | –       |                   |  |                                            | –       |        
|Recognition of beneficial
    conversion feature on convertible debentures              |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Stock-based compensation related
    to warrant issuances                               |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Shares issued in connection
    with the acquisition of AMS                             |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Balances
    at December 31, 2018                                                       |  |                              | 60,000 |                              |  | $            | 60,000 |                |  |         | –       |                   |  | $                                          | –       |        
|                                                                                        |  |                              |        |                              |  |              |        |                |  |         |         |                   |  |                                            |         |        
|Net loss                                                                                |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Change in foreign currency
    translation                                              |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Issuance of Series B Preferred
    Stock                                                |  |                              | –      |                              |  |              | –      |                |  |         | 475,000 |                   |  |                                            | 475,000 |        
|Conversion of convertible
    notes and accrued interest into common shares             |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Issuance of common stock to
    purchase non-controlling interest in GNS                |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Stock based compensation related
    to warrant issuances                               |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Issuance of common shares
    in connection with the issuance of convertible debentures |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Repurchase of shares from
    investor                                                  |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Issuance
    of common shares for acquisition fees                                      |  |                              | –      |                              |  |              | –      |                |  |         | –       |                   |  |                                            | –       |        
|Balances
    at December 31, 2019                                                       |  |                              | 60,000 |                              |  | $            | 60,000 |                |  |         | 475,000 |                   |  | $                                          | 475,000 |        





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











F-5









CANNAPHARMARX,
INC.

STATEMENTS OF
CONSOLIDATED CASH FLOWS





|                                                                                            |  | 2019 |             | 2018
|------------------------------------------------------------------------------------------- |  | ---- | ----------- | ----
|Cash Flows From Operating Activities:                                                       |  |      |             |     
|Net income (loss)                                                                           |  | $    | (20,451,080 | )   
|Adjustments to reconcile net income to net cash provided by (used for) operating activities |  |      |             |     
|Stock-based compensation expense                                                            |  |      | 736,186     |     
|Amortization of intangible assets                                                           |  |      | 128,256     |     
|Loss on investments                                                                         |  |      | 7,070,841   |     
|Depreciation                                                                                |  |      | 779         |     
|Amortization of debt discount                                                               |  |      | 4,434,751   |     
|Acquisition consideration paid in common stock                                              |  |      | 5,800,000   |     
|Changes in operating assets and liabilities                                                 |  |      |             |     
|(Increase)/decrease in prepaid expenses                                                     |  |      | (1,869,283  | )   
|Accrued interest                                                                            |  |      | 27,630      |     
|Mortgages payable                                                                           |  |      | (500,435    | )   
|Accounts payable related party                                                              |  |      | 145,291     |     
|Accrued expense related party                                                               |  |      | 456,356     |     
|Accounts payable and accrued expense                                                        |  |      | 225,937     |     
|Net cash provided by (used for) operating activities                                        |  |      | (3,794,771  | )   
|                                                                                            |  |      |             |     
|Cash Flows From Investing Activities:                                                       |  |      |             |     
|Purchase of fixed assets                                                                    |  |      | (4,774      | )   
|Cash paid for the acquisition of AMS                                                        |  |      | –           |     
|Capitalized mortgage interest and changes in construction in progress                       |  |      | (42,163     | )   
|Net cash provided by (used for) investing activities                                        |  |      | (46,937     | )   
|                                                                                            |  |      |             |     
|Cash Flows From Financing Activities:                                                       |  |      | –           |     
|Proceeds from the sale of convertible notes                                                 |  |      | 1,550,000   |     
|Proceeds from the sale of notes payable                                                     |  |      | 1,050,000   |     
|Purchase of treasury shares                                                                 |  |      | (98,955     | )   
|Proceeds from related party loans                                                           |  |      | 290,400     |     
|Proceeds from the sale of preferred stock                                                   |  |      | 475,000     |     
|Net cash provided by (used for) financing activities                                        |  |      | 3,266,445   |     
|                                                                                            |  |      |             |     
|Effect of exchange rates on cash and cash equivalents                                       |  |      | 112,692     |     
|Net Increase (Decrease) In Cash                                                             |  |      | (575,263    | )   
|Cash At The Beginning Of The Period                                                         |  |      | 464,118     |     
|Cash At The End Of The Period                                                               |  | $    | 1,547       |     
|                                                                                            |  |      |             |     
|Supplemental disclosure of cash flow information:                                           |  |      |             |     
|Cash paid for interest                                                                      |  | $    | 66,016      |     
|Cash paid for income taxes                                                                  |  | $    | –           |     
|                                                                                            |  |      |             |     
|Supplemental disclosure of non-cash investing and financing activities:                     |  |      |             |     
|Common stock issued related to the acquisition of AMS                                       |  | $    | –           |     
|Debt issued related to the acquisition of AMS                                               |  | $    | –           |     
|Other accrued consideration related to the acquisition of AMS                               |  | $    | –           |     
|Common stock issued related to investment in Great Northern Cannabis                        |  | $    | 11,264,438  |     
|Common stock issued to convert convertible notes and accrued interest into equity           |  | $    | 2,202,213   |     



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











F-6







CANNAPHARMARX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018





|NOTE 1. | NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
|------- | --------------------------------------------------------



Nature of Operations



CannaPharmaRx, Inc. (the “Company”)
is a Delaware corporation. In November 2018 it formed an Ontario corporation, Hanover CPMD Acquisition Corporation, to facilitate
the acquisition described below. 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.



History



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



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



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



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











F-7







In
April 2016, the Company ceased operations. As a result, the Company was then considered a “shell” company as
defined under the Securities Exchange Act of 1934, as amended, as defined in Rule 405 of the Securities Act and Rule
12b-2 of the Exchange Act.



Effective December 31, 2018, the
Company and Hanover CPMD Acquisition Corp. (“CPMD Hanover”) a newly formed, wholly-owned subsidiary, entered into
a Securities Purchase Agreement with Alternative Medical Solutions, Inc., an Ontario, Canada corporation (“AMS”),
its shareholders, wherein the Company acquired all of the issued and outstanding securities of AMS. AMS is a corporation
organized under the laws of the Province of Ontario, Canada. It is a late-stage marijuana licensed producer applicant in
Canada. It is currently in the Pre-License Inspection and Licensing phase, which is Stage 5 of 6, with a fully approved
license. Upon completion of the final construction of the facility, Health Canada will inspect the facility and relevant
operating procedures to ensure it meets the standards that have been approved in the application. At the completion of the
licensing stage. AMS will receive a license to begin the cultivation of marijuana. There can be no assurances that the
Company will receive this license.



The facility is a 48,750 square foot marijuana
grow facility built on a 6.7-acre parcel of land located in Hanover, Ontario Canada.  To date, the exterior construction of
the building has been completed, however, no interior construction has begun. Upon full completion, the facility will contain up
to 20 separate growing rooms which we believe will provide an annual production capacity of 9,500 kilos of marijuana (20,900 lbs.).
Completion of the build-out of the facility is expected to take an estimated 20 weeks. Together with the remaining equipment needed
to complete the grow the Company estimates that it will require approximately CAD$20.0 million in additional financing which it
may seek to raise via equity and debt. There can be no assurances that the Company will successfully raise the financing required
to complete the construction of the facility and begin cultivation.



As a result of the completion of the acquisition
of AMS, on December 31, 2018, the Company no longer fit the definition of a “shell company,” as defined in Rule 405
of the Securities Act and Rule 12b-2 of the Exchange Act. It filed the required disclosure on Form 8-K/A with the SEC on February
14, 2019 advising that it was no longer a shell company pursuant to the aforesaid Rule.





Effective February 25, 2019, the Company
acquired 3,712,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of Common Stock of GN Ventures, Ltd, Alberta, Canada,
f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of its Common Stock, from
a former shareholder of GN who is now the Company’s President and CEO. These shares and warrants, when exercised, will represent
5% and 3%, respectively, of the issued and outstanding stock of GN. While no assurances can be provided, the Company believes this
is the initial step in its efforts to acquire all of the issued and outstanding stock of GN. The Company anticipates making additional
purchases of stock from other shareholders of GN.



GN owns a 60,000 square foot cannabis cultivation
and grow facility located on 38 acres in Stevensville, Ontario, Canada. Because the Company is a minority shareholder of GN and
GN is a privately held company, the Company cannot confirm that the information it currently has on GN’s operations is complete
or fully reliable. The Company has been verbally advised that, once completed, GN estimates annual total production capacity from
the Stevensville facility of up to 12,500 kilograms of cannabis. GN believes the Stevensville facility to be complete, and GN’s
subsidiary, 9869247 Canada Limited, received a license to cultivate from the Canadian Ministry of Health on July 5, 2019. As a
result, in October 2019 GN commenced cultivation activities and began generating revenues during the first calendar quarter of
2020. Additionally, it is the Company’s current understanding that GN intends to increase cannabis production by building
additional cannabis cultivation facilities on the excess land presently owned adjacent to the existing Stevensville facility, provided
that additional funding can be obtained on commercially reasonable terms. Neither the Company nor GN have any firm commitment to
provide any of the funds necessary for expansion as of the date of this Report. The Company expect that it will obtain additional
information on the business activities of GN once it renews discussions to acquire additional interests and can perform its due
diligence.



Effective June 11, 2019, the Company entered
into a Securities Purchase Agreement with Sunniva, Inc, a British Columbia, Canada corporation (“Sunniva”) wherein
the Company agreed to acquire all of the issued and outstanding securities of Sunniva’s wholly-owned subsidiaries Sunniva
Medical Inc. (“SMI”) and 1167025 B.C. LTD (“1167025”). These companies are the current owners of the Sunniva
Canada Campus, which includes construction assets for a planned 759,000 square-foot greenhouse located on an approximately 114-acre
property in Okanagan Falls, British Columbia.











F-8









On March 16, 2020, the Company and Sunniva
entered into a third amendment to the agreement, again amending the terms of the purchase price and resetting the proposed closing
date of this transaction to be on or before March 31, 2020. The purchase price was amended to CAD $12.9 million in cash and CAD
$7.1 million through the issuance of 3,566,687 of the Company’s newly created Series C Convertible, Redeemable Preferred
Shares (the “Consideration Shares”). The Consideration Shares will pay an 8% cumulative dividend, are convertible
into shares of the Company’s Common Stock and will give certain retraction rights based on the Company’s future capital
raises. On June 8, 2020, the Company received a notice of termination of this Purchase Agreement, as amended, from Sunniva.
The Company is in discussions with Sunniva about recovering its deposit, as well as acquiring a smaller segment of the facility.
See Note 16, Subsequent Events, below.



Basis of Presentation



The accompanying financial statements have
been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard
CodificationTM” (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 the current presentation.



All figures are in U.S. dollars unless indicated otherwise.



Use of Estimates



The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable
and inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial
instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends,
and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these
financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets
and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.



Cash and Cash Equivalents



The Company considers all highly liquid
temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2019 and December
31, 2018, the Company cash and cash equivalents totaled $1,547 and $464,118, respectively.



Comprehensive Gain or Loss



ASC 220 “Comprehensive Income,”
establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As
of December 31, 2019, and December 31, 2018, the Company determined that it had no items that represented components of comprehensive
income and, therefore, has included a statement of comprehensive income in the financial statements.











F-9









Reclassifications



Certain prior
year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net
earnings and financial position.



Derivative Financial Instruments



The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risk. Terms of convertible and other promissory notes are reviewed
to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host
contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at
each reporting date, with corresponding changes in fair value recorded in current period operating results. For the periods ended December 31, 2019 and 2018, the Company had no derivative instruments.



Beneficial Conversion Features



In accordance with FASB ASC 470-20, “Debt
with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the
issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money
when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to
the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment
date as the difference between the conversion price and the fair value of the common stock or other securities into which the security
is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued
with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated
to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion
price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the
BCF is limited to the basis that is initially allocated to the convertible security.



Foreign Currency Translation



The functional currency and the reporting
currency of CannapharmaRx’s US operations is United States dollars, (“USD”). The functional currency of the Company’s
Canadian operations is Canadian dollars (“CAD”), Management has adopted ASC 830 “Foreign Currency Matters”
for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange
rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses.



Transactions denominated in currencies
other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of
the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income
for the respective periods.



Assets and liabilities of the Company’s
operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet
dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded
at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive
income, a separate component of stockholders' equity in the statement of stockholders' equity. These translation adjustments are
reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity.



Harmonized Sales Tax



The Harmonized Sales Tax (“HST”)
is a combination of the Canadian Goods and Services Tax (“GST”) and Provincial Sales Tax (“PST”) that is
applied to taxable goods and services. By fusing sales tax at the federal level with sales tax at the provincial level, the participating
provinces harmonized both taxes into a single federal-provincial sales tax. HST is a consumption tax paid by the consumer at the
point of sale (POS). The vendor or seller collects the tax proceeds from consumers by adding the HST rate to the cost of goods
and services. They then remit the total collected tax to the government periodically.











F-10







The HST is in effect in five of the ten
Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. The HST is collected
by the Canada Revenue Agency (CRA), which remits the appropriate amounts to the participating provinces. The HST may differ across
these five provinces, as each province will set its own PST rates within the HST. In provinces and territories which have not enacted
the HST, the CRA collects only the 5% goods and services tax. The current rate in Ontario is 13%.



Capital Assets- Construction In Progress



As of December 31, 2019, and 2018, the
Company had $1,540,918 and 1,426,922 in construction in progress (“CIP”), respectively, comprised entirely of the building
acquired relating to the acquisition of AMS. The Company did not record any depreciation expense on CIP for the years ended December
31, 2019, and December 31, 2018.



Stock-Based Compensation



The Company has adopted ASC Topic 718, (Compensation—Stock
Compensation), which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance
now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on
the grant date based on the fair value. The fair value is determined using the Black-Scholes option-pricing model. The resulting
amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which
is generally the vesting period. The fair value of stock warrants was determined at the date of grant using the Black-Scholes option-pricing
model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected
volatility, risk-free rate, and dividend yield. Stock options outstanding at December 31, 2019, to purchase 750,000 shares of common
stock are excluded from the calculations of diluted net loss per share since their effect is anti-dilutive.



Goodwill and Intangible Assets



Goodwill represents the future economic
benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising
from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers.
Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized
on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets
consist of customer relationships and non-compete agreements. Their useful lives range from 10 to 15 years. The Company’s
indefinite-lived intangible assets consist of trade names.



Goodwill and indefinite-lived assets are
not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company
performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events
or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment
testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to
its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches.
The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the
reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting
unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the
discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest
rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s
size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal
value, growth rates, future capital expenditures, and changes in future working capital requirements. The market approaches use
key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting
unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair
value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair
value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value
of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the
reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired
on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in
an amount equal to the excess.











F-11







Determining the fair value of a reporting
unit is judgmental and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans,
and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for
purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates
could cause the Company to perform an impairment test prior to scheduled annual impairment tests.



The Company performed its annual fair
value assessment on December 31, 2019, on its subsidiaries with material goodwill and intangible asset amounts on
their respective balance sheets and determined that no impairment exists.



Long-Lived Assets



The Company evaluates the recoverability
of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived
asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows
of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value
of the assets, the assets are written down to the estimated fair value.



The Company evaluated the recoverability
of its long-lived assets on December 31, 2019, and on December 31, 2018, respectively on its subsidiaries with material amounts
on their respective balance sheets and determined that no impairment exists.



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.











F-12







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.



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 the 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, 2019, or December 31, 2018.



Financial Instruments



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



Income Taxes



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



Income (Loss) Per Share



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



Business Segments



The Company’s activities during the year ended December
31, 2019, comprised a single segment.



Recently Issued Accounting Pronouncements



The Company has implemented all new accounting
pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
The Company adopted ASC 842 on January 1, 2019. However, the adoption of the standard had no impact on the Company’s financial
statements since all Company leases are month to month, or short-term rental.













F-13







|NOTE 2. | GOING CONCERN AND LIQUIDITY
|------- | ---------------------------



As of December 31, 2019, and 2018, the
Company had $1,547 and $464,118 cash on hand, respectively, and no revenue-producing business or other sources of income. Additionally,
as of December 31, 2019, the Company had outstanding liabilities totaling $11,163,216 and a retained earnings deficit of $57,441,549.
The Company had a working capital deficit of $2,021,122 on December 31, 2019.



In the Company’s financial statements
for the fiscal years ended December 31, 2019, and 2018, the Reports of the Independent Registered Public Accounting Firm include
an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. These
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. Based on its current financial projections, the Company believes
it does not have sufficient existing cash resources to fund its current limited operations.



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



|NOTE 3. | DEPOSITS
|------- | --------



As of December 31, 2019, and December 31,
2018, the Company had deposits of $1,308,830 and $-0-, respectively. The $1,308,830 deposit is non-refundable and will be credited
against the purchase price of the Sunniva acquisition (referenced throughout this Report) if it is successfully consummated.



|NOTE 4. | PREPAID EXPENSES
|------- | ----------------



The following table sets forth the components
of the Company’s prepaid expenses at December 31, 2019, and December 31, 2018:



|                                     |  | December 31, 2019 |         | December 31, 2018
|------------------------------------ |  | ----------------- | ------- | -----------------
|                                     |  |                   |         |                  
|Prepaid stock purchase (a)           |  | $                 | –       |                  
|Prepaid expenses                     |  |                   | 236,742 |                  
|Prepaid acquisition expenses-Sunniva |  |                   | 355,731 |                  
|Prepaid interest (b)                 |  |                   | –       |                  
|Total                                |  | $                 | 592,473 |                  



| | (a) | Represented money held in escrow to purchase Company stock held by the Sellers of AMS under the terms of the Securities Purchase Agreement for the acquisition of AMS
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | For 2018, $35,734 represented six months of prepaid interest on
a mortgage assumed by the Company under the terms of the acquisition of AMS. In June 2019 the Company received a $1,000,000 in
proceeds from Note Payable to Koze Investments, LLC (“Koze”). Under the terms of this agreement the Company prepaid
$59,220 which represented six months of prepaid interest on a mortgage assumed by the Company under the terms of the acquisition
of AMS. This amount has been capitalized in full as an addition to construction in progress for the year ended December 31, 2019.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 5. | INVESTMENT
|------- | ----------





On February 25, 2019, the Company acquired
3,712,500 shares and 2,500,000 Warrants to purchase 2,500,000 shares of common stock at a price of CAD$1.00 of GN Ventures, Ltd.,
Alberta, Canada, f/k/a Great Northern Cannabis, Ltd. (“GN”), in exchange for an aggregate of 7,988,963 shares of the
Company’s Common Stock from a former officer and shareholder of GN. On the date of purchase, the Company’s Common Stock
was trading at $1.41 which values the purchase at $11,264,438. For balance sheet purposes the Company has treated this purchase
using the cost method because the purchase consists of an investment in a private company in which the Company does not have the
ability to exercise significant influence over GN’s operating and financial activities.



The Company conducted an impairment
test on December 31, 2019, and determined that an impairment existed resulting in a write-down of the investment by
$7,070,841 to a current value of $4,193,597.









F-14







|NOTE 6. | PROPERTY, PLANT, AND EQUIPMENT
|------- | ------------------------------



The following table sets forth the components of the Company’s
property and equipment at December 31, 2019, and December 31, 2018:



|                                          |  | December 31, 2019     |           | December 31, 2018       
|----------------------------------------- |  | --------------------- | --------- | ------------------------
|                                          |  | Gross Carrying Amount |           | Accumulated Depreciation
|                                          |  |                       |           |                         
|Computers, software, and office equipment |  | $                     | 4,757     |                         
|Land                                      |  |                       | 143,201   |                         
|Construction in progress                  |  |                       | 1,540,918 |                         
|Total fixed assets                        |  | $                     | 1,688,876 |                         



For the years ended December 31, 2019,
and 2018, the Company recorded depreciation expense of $779 and $-0- respectively.



As of December 31, 2019 and December 31,
2018, the Company had $1,540,918 and $1,426,922, respectively, in construction in progress. Land was valued at $143,201 for both
periods. The facility acquired as part of the AMS acquisition is a 48,750 square foot marijuana grow facility built on a 6.7-acre
parcel of land located in Hanover, Ontario Canada. To date, the exterior construction of the building has been completed, however,
no interior construction has begun.



For construction in-progress assets, no
depreciation is recorded until the asset is placed in service. When construction is completed, the asset should be reclassified
as building, building improvements, or land improvement and should be capitalized and depreciated. Construction in progress includes
all costs related to the construction of a medical cannabis facility. Cost also includes soft costs such as loan fees and interest
and consulting fees and related expenses. The facility is not available for use and therefore not being amortized.



|NOTE 7. | BUSINESS COMBINATION
|------- | --------------------



Description of acquisition



On November 19, 2018, the Company entered
into a Securities Purchase Agreement with AMS, wherein effective December 31, 2018, the Company acquired all of the issued and
outstanding securities of AMS.











F-15







Fair Value of Consideration Transferred and Recording
of Assets Acquired



The following table summarizes the acquisition date fair value
of the consideration paid, identifiable assets acquired, and liabilities assumed including an amount for goodwill:



|Consideration Paid:                                                         |  |   |           |  
|--------------------------------------------------------------------------- |  | - | --------- | -
|Cash and cash equivalents                                                   |  | $ | 726,747   |  
|Common stock, 981,765 shares of CannapharmaRx common stock                  |  |   | 1,612,600 |  
|Promissory note net of $697,083 discount                                    |  |   | 6,632,917 |  
|Fair value of total consideration                                           |  | $ | 8,972,264 |  
|                                                                            |  |   |           |  
|Recognized amount of identifiable assets acquired, and liabilities assumed: |  |   |           |  
|Construction in progress                                                    |  | $ | 1,563,260 |  
|Accrued liabilities                                                         |  |   | (50,560   | )
|Mortgage payable                                                            |  |   | (476,450  | )
|Intangible assets                                                           |  |   | 1,871,000 |  
|Goodwill                                                                    |  |   | 6,065,014 |  
|                                                                            |  | $ | 8,972,264 |  



|NOTE
8. | GOODWILL AND INTANGIBLE ASSETS
|------- | ------------------------------



As of December 31, 2019, and December 31,
2018, the Company had $6,370,333 and $6,065,014 in goodwill, respectively. Additionally, the Company had $1,834,176 and $1,871,000
in intangible assets, respectively, for the same periods ended December 31, 2019, and 2018, respectively. The goodwill and intangible
assets arose as a result of the acquisition of AMS. Based on a valuation study performed on the acquisition, the Company determined
that the marijuana license in process at AMS had a value of $1,871,000 which is being amortized over a fifteen-year period or $124,733
per year.



The Company did not record any amortization
expense for the year ended December 31, 2018, because the acquisition of AMS was consummated on the last day of the Company’s
year ended December 31, 2018. The Company began recording amortization expense on January 1, 2019. Amortization expense for the
years ended December 31, 2019, and 2018 were $128,256 and $-0- respectively.



|NOTE 9. | ACCOUNT PAYABLE AND ACCRUED LIABILITIES
|------- | ---------------------------------------



Accounts payables are recognized initially
at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid.
Accrued expenses are recognized based on the expected amount required to settle the obligation or liability.



The following table sets forth the components
of the Company’s accrued liabilities on December 31, 2019, and December 31, 2018.



|                                               |  | December 31, 2019 |           | December 31, 2018
|---------------------------------------------- |  | ----------------- | --------- | -----------------
|                                               |  |                   |           |                  
|Accounts payable and accrued expenses          |  | $                 | 902,854   |                  
|Accrued interest (a)                           |  |                   | 27,630    |                  
|Mortgages payable (b)                          |  |                   | –         |                  
|Accrued legal settlement (c)                   |  |                   | 190,000   |                  
|Total accounts payable and accrued liabilities |  | $                 | 1,120,484 |                  



| | (a) | Represents interest accrued on the outstanding convertible notes -see Note 12, Notes Payable
| | --- | --------------------------------------------------------------------------------------------



| | (b) | Pursuant to the
    acquisition of AMS, the Company assumed the mortgage on the construction in progress. The mortgage was an interest-only
    instrument at an interest rate of 15% due and payable on December 31, 2019. In July 2019, the Company paid off the mortgage
    from the proceeds of a USD$1.0 million one year 12% Note with Koze Investments. See Note 12, Notes Payable. As a condition
    for entering into the Note, Koze required the Company to prepay approximately $60,000, or six months' worth of interest.
    There was no prepaid interest on the Note as of December 31, 2019.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------











F-16







| | (c) | The Company had previously been a party to an action filed by Gary M. Cohen, a former officer and director of the Company in 2014. In March 2015, the Company entered into a Settlement Agreement with Mr. Cohen wherein the Company agreed to repurchase 2,250,000 shares of its Common Stock from Mr. Cohen in consideration for $350,000. Mr. Cohen passed away while there was a remaining balance of $190,000 remaining to be paid in accordance with the Settlement Agreement. The Company has taken the position that his death has discharged any obligation the Company might have to make the balance of the payments. The Company has not received any demand for payment or otherwise been involved in any attempt to collect this balance for a period of greater than two years prior to the date of this Report.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NOTE 10. | RELATED PARTY TRANSACTIONS
|-------- | --------------------------



The following table sets forth the components
of the Company’s related party liabilities on December 31, 2019, and December 31, 2018.



|                                                       |  | December 31, 2019 |           | December 31, 2018
|------------------------------------------------------ |  | ----------------- | --------- | -----------------
|                                                       |  |                   |           |                  
|Accounts payable and accrued payroll, related party(a) |  | $                 | 582,096   |                  
|Accrued expense - related party(b)                     |  |                   | 606,356   |                  
|Total accounts payable and accrued liabilities         |  | $                 | 1,188,452 |                  



| | (a) | Accounts payable and accrued payroll-related parties as of December 31, 2019, is comprised of the
following:
| | --- | ------------------------------------------------------------------------------------------------------------



Interest-free loans of $75,000 and $250,000
from James Samuelson, a director and the Company’s CEO and a director, respectively, amounting to a total of $325,000, accrued
salaries for officers and employees of $154,291, and $102,805 of accounts payable due to officers and employees.



(b) Accrued expense
related parties of $606,356 is comprised of bonuses and fees due to current and former directors and officers of the Company. As
of December 30, 2019, and December 31, 2018, there was $150,000 due to claims received from two former directors, which was purported
to be accrued salaries arising out of services provided in 2015 and 2016. Management is in the process of reviewing these claims.



From April 1, 2018 through March 2019,
the Company’s principal place of business was located at 2 Park Plaza, Suite 1200 – B. Irvine, CA 92614. This space
was provided to the Company on a twelve-month term by a company of which Mr. Nicosia, one of the Company’s directors, serves
of the President and CEO. The monthly rent at that location was $1,000, however, as of the date of this report, the Company has
not made any rent payments and continues to accrue those amounts as accounts payable.



Effective on March 2019, the Company changed
its principal place of business to Suite 206 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which the Company has rented pursuant
to an oral sublease from PLC International Investments Inc, a company owned and controlled by Dominic Colvin, the Company’s
current CEO, President and a director. This location consists of approximately 500 sq. feet. The Company paid a monthly rent of
$1,500 (CAD).



Effective March 22, 2019, the Company changed
its principal place of business and leases three offices at 3600 888 3 St SW, Calgary, Alberta, Canada, T2P 5C5. The lease may
be terminated by either party on 30 days’ notice. Rent is $4,000 CAD per month. This space was provided by a company to which,
Mr. Orman, one of the Company’s directors, serves as a Director.



See Note 16, Subsequent Events, below,
for additional related party transactions.





F-17







|NOTE 11. | CONVERTIBLE NOTES
|-------- | -----------------



The following tables set forth the components
of the Company’s, convertible debentures as of December 31, 2019, and December 31, 2018:



|                                     |  | December 31, 2019 |           | December 31,  2018
|------------------------------------ |  | ----------------- | --------- | ------------------
|                                     |  |                   |           |                   
|Principal value of convertible notes |  | $                 | 1,550,000 |                   
|Note discount                        |  |                   | (997,397  | )                 
|Total convertible notes, net current |  | $                 | 552,603   |                   



In July 2018, the Company commenced an
offering of up to $2 million of one-year maturity convertible notes (“Notes”). The maximum amount under the Offering
was subsequently increased to $2,500,000 These Notes carried both a voluntary conversion feature and an automatic conversion feature.
The Notes carried an interest rate of 12% and are convertible into shares of the Company’s Common Stock.





Through the period ended December 31, 2018,
the Company had received $2,072,000 in proceeds from the sale of convertible notes to 35 accredited investors. No proceeds were
received from convertible notes during the year ended December 31, 2019.



Automatic conversion feature



If the Company issues equity
securities (“Equity Securities”) in a transaction or series of related transactions resulting in aggregate gross proceeds
to the Company of at least $5,000,000, including conversion of the Notes and any other indebtedness, or issuance of Equity Securities
in connection with any business combination, including a merger or acquisition (a “Qualified Financing”), then the
Notes, and any accrued but unpaid interest thereon, will automatically convert into the equity securities issued pursuant to the
Qualified Financing at a conversion price equal to the lesser of (i) 50% of the per-share price paid by the purchasers of such
equity securities in the Qualified Financing or (ii) $0.40 per share.



Voluntary conversion feature



If these Notes have not been previously
converted pursuant to a Qualified Financing, then, upon Holders election prior to the Maturity Date or effective upon the Maturity
Date, the Holder may elect to convert their Notes into shares of the Company’s Common Stock at a conversion price equal to
the lesser of (i) 50% of the market price for the Company’s Common Stock as of the Maturity Date or (ii) $0.40 per share.



During the three month period ended March
31, 2019, the Company entered into a Qualified Financing with its minority purchase of GN stock and warrants described in Note
4 “Investment”. As a result on March 31, 2019, the convertible notes amounting to $2,072,000 along with $130,212 of
accrued interest were converted, pursuant to the automatic conversion terms described above, to equity at a price of $0.40 per
share, or a total of 5,505,530 shares.



No further convertible notes were offered
under these terms and Offering was closed.



On July 8, 2019, the Company commenced
a private offering of Units at a price of $50,000 per Unit, each Unit consisting of 50,000 shares of the Company’s Common
Stock and one $50,000 unsecured Convertible Note (“a Convertible Note”), which mature one year from the date of issuance
and accrue interest at 5% per annum. These Convertible Notes are convertible into shares of the Company’s Common Stock at
a conversion price of $1.00 per share. During the year ended December 31, 2019, the Company issued 31 Units in this offering for
get proceeds of $1,550,000 to six accredited investors. Since the Company’s stock price exceeded the conversion feature of
the Convertible Notes and was immediately exercisable, the Company recorded a beneficial conversion feature (“BCF”)
and expense of $1,550,000 which was charged to interest expense with an offset to paid-in capital.











F-18







In addition, the 1,550,000 shares of
Common Stock included in the Unites were valued at $5,075,000. The excess above the $1,550,000 face value of the Convertible
Notes or, $3,525,000, was charged to interest expense with an offset to paid-in capital. The remaining $1,550,000 was
recorded as a Note discount of $1,550,000 to be amortized over the three year period from the date of the Note to the
maturity date. The Company recorded $552,602 in interest expense related to the amortization of note discount during the
year ended December 31, 2019.



|NOTE 12. | NOTES PAYABLE
|-------- | -------------



The following tables set forth the components
of the Company’s, convertible debentures as of December 31, 2019, and December 31, 2018:



|                                           |  | December 31, 2019 |            |   | December 31,  2018 |  
|------------------------------------------ |  | ----------------- | ---------- | - | ------------------ | -
|Principal value of Promissory Note         |  | $                 | 8,789,794  |   |                    | $
|Loan discounts                             |  |                   | (488,117   | ) |                    |  
|Less: Current portion, net of discount     |  |                   | (1,090,794 | ) |                    |  
|Promissory Note, long term net of discount |  | $                 | 7,210,883  |   |                    | $



Pursuant to the terms of the Securities
Purchase Agreement with AMS the Company issued a non-interest bearing CAD $10,000,000 ($7,330,000 USD) promissory note secured
only by the shares acquired in AMS. Principal payments under the Promissory Note are due quarterly commencing upon AMS receiving
a license to cultivate and are computed based upon 50% of AMS' cash flow, defined as EBITDA less all capital expenditures, taxes
incurred, non-recurring items and other non-cash items for the relevant fiscal quarter, including the servicing of all senior debt
payment obligations of the Company. The Promissory Note matures the earlier of two years from the date AMS receives a license to
cultivate, or December 31, 2021.



The Company performed a valuation study
as part of the AMS acquisition. The valuation study determined that the Promissory Note should be valued at $6,632,917 since it
was non-interest bearing. As a result, the Company recorded a note discount of $697,083. The note discount will be amortized to
interest expense over the three-year term of the Promissory Note. During the year ended December 31, 2019, the Company recorded
$317,000 in interest expense related to the amortization of the note discount. No interest expense was recorded in 2018 since the
acquisition occurred on December 31, 2018.



On July 3, 2019, the Company entered into
a 12% $1,000,000 Loan Agreement with Koze payable in full on June 27, 2020. Under the terms of the 12% Note, Koze took a first
security interest against the Company’s Hanover, Ontario cannabis facility in progress and required the Company to pay off
its existing mortgage of approximately $650,000 CAD. Additionally, the Company agreed to pay a 3% origination fee, prepay six months
of interest ($60,000) and to issue to Koze five-year warrants to purchase 1,001,000 shares of the Company’s Common Stock
at an exercise price $1.00 per share. After paying the origination fees, the prepayment and paying off the original mortgage, the
Company used a portion of the remaining proceeds as payment against the SMI purchase price of CAD $1,000,000.



|NOTE 13. | INCOME TAXES
|-------- | ------------



As of December 31, 2019, the Company has
approximately $57,000,000 of federal net operating loss carryforwards. The federal net operating loss carryforwards begin to expire
in 2030. State net operating loss carryforwards begin to expire in 2034. Due to the change in ownership provisions of the Internal
Revenue Code, the availability of the Company’s net operating loss carryforwards could be subject to annual limitations against
taxable income in future periods which could substantially limit the eventual utilization of such carryforwards. The Company has
not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination
has been made whether the net operating loss carryforward is subject to any Internal Revenue Code Section 382 limitation.
To the extent there is a limitation there could be a substantial reduction in the deferred tax asset with an offsetting reduction
in the valuation allowance. As of December 31, 2019, the Company has no unrecognized income tax benefits.











F-19







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 14. | COMMITMENTS AND CONTINGENCIES
|-------- | -----------------------------



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



In March 2019, the Company temporarily
moved its principal place of business to Suite 206 1180 Sunset Drive, Kelowna, BC, Canada Z1Y 9W6, which the Company rented under
an oral sublease from PLC International Investments Inc, a company owned and controlled by Dominic Colvin, the Company’s
current CEO, President, and a director. This location consists of approximately 500 sq. feet. The Company continues to occupy this
location as of the date of this Report and pays a monthly rent of $1,500 (CAD).



Effective March 22, 2019, the Company entered
into a lease agreement to lease three offices at 3600 888 3 St SW, Calgary, Alberta, Canada, T2P 5C5. The lease may be terminated
by either party on 30 days’ notice. Rent is $4,000 CAD per month. This space was provided by a company to which, Mr. Orman,
one of the Company’s directors, serves as a Director.



Effective June 11, 2019, the Company entered
into a Securities Purchase Agreement with Sunniva, Inc., a British Columbia, Canada corporation (“Sunniva”) wherein
the Company agreed to acquire all of the issued and outstanding securities of Sunniva’s wholly-owned subsidiaries Sunniva
Medical Inc. (“SMI”) and 1167025 B.C. LTD (“1167025”). The purchase price is CAD$20,000,000 of which CAD$1,000,000
was payable on or before June 21, 2019, and CAD$19,000,000 payable at closing.



On October 2, 2019, the Company entered
into an Extension Agreement with Sunniva wherein Sunniva has agreed to amend the settlement of the purchase price to CAD $16.0
million in cash and CAD $4.0 million by way of the Company’s issuance of a promissory note from the previous all-cash settlement
of CAD $20.0 million. Sunniva received an incremental non-refundable deposit of CAD $700,000 as part of the amended terms, which
will be applied to the purchase price at closing and the closing date was amended to October 31, 2019. As of the date of this Report,
the Company is engaged in discussions with Sunniva to extend the closing date to November 30, 2019.











F-20







On March 16, 2020, the Company and Sunniva
entered into a third amendment to the agreement, again amending the terms of the purchase price and resetting the proposed closing
date of this transaction to be on or before March 31, 2020. The purchase price was amended to CAD $12.9 million in cash and CAD
$7.1 million through the issuance of 3,566,687 of the Company’s newly created Series C Convertible, Redeemable Preferred
Shares (the “Consideration Shares”). The Consideration Shares will pay an 8% cumulative dividend, are convertible into
shares of the Company’s Common Stock and will give certain retraction rights based on the Company’s future capital
raises.



Although the transaction had not closed
as of the date of this Report, both parties remain committed to closing the transaction.



|NOTE 15. | STOCKHOLDERS’ EQUITY
|-------- | --------------------



Preferred Stock



The Company is authorized to issue up to
10,000,000 shares of one or more series of Preferred Stock, par value of $0.0001 per share. The Board of Directors may, without
stockholder approval, determine the dividend rates, redemption prices, preferences on liquidation or dissolution, conversion rights,
voting rights, and any other preferences.



Series A Preferred Stock



In April 2018, the Company issued 60,000
shares of its Series A Convertible Preferred Stock at a price of $1.00 per share to certain investors who then became members of
the board of directors. 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 the Company’s Common Stock, whereupon the holders of the Series A Convertible Preferred Stock shall receive a dividend on the number of shares of Common Stock into 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.
| | - | ---------------



The beneficial conversion (“BCF”)
feature attributed to the purchase of Preferred Stock was deemed to have no value on the date of purchase for the following reasons:



| | Ø | There was no public trading market for the Convertible Preferred Stock, and none is expected to develop in the future.
| | - | ----------------------------------------------------------------------------------------------------------------------



| | Ø | Any shares of Common Stock underlying the Preferred Stock to be issued upon conversion would not be eligible for any exemption from registration pursuant to Rule 144 for a period of one (1) year from the date which the Company ceases being deemed a shell company.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Ø | Currently, there is a very limited trading market for the Company's Common Stock.
| | - | ---------------------------------------------------------------------------------



| | Ø | The Company had no business activity for the prior twenty-four (24) month period;
| | - | ---------------------------------------------------------------------------------



| | Ø | The Company has limited assets and substantial liabilities.
| | - | -----------------------------------------------------------











F-21







Therefore, the BCF related to the Preferred
Shares was considered to have no value on the date of issuance.



There were 60,000 shares of Series A Preferred
Stock issued and outstanding as of December 31, 2019, and December 31, 2018, respectively.



Series B Preferred Stock / Common
Stock



In February 2019, the Company commenced
an offering of up to $3 million in principal amount of Units at $1.00 per Unit, each Unit consisting of one share of Series “B”
Convertible Preferred Stock, each Convertible Preferred Share convertible into one share of the Company’s Common Stock at
the election of the holder and one Common Stock Purchase Warrant exercisable to purchase one share of Common Stock at an exercise
price of $2.00 per share, which offering was offered only to “accredited investors,” as that term is defined in Rule
501 of Regulation D. This Offering was closed at the end of August 2019. As of December 31, 2019, the Company had accepted $475,000
in subscriptions in this Offering.



There were 475,000 and -0- shares of Series
B Convertible Preferred Stock issued and outstanding as of December 31, 2019, and December 31, 2018, respectively.



The Company is authorized to issue 300,000,000
shares of Common Stock, par value $0.0001 per share. As of December 31, 2019, and December 31, 2018, 36,486,999 and 18,942,506
shares of Common Stock were issued and outstanding, respectively.



In January 2019, the Company closed a private
offering of 12% Convertible Debentures where it accepted subscriptions in the aggregate amount of $2,072,000 from 35 accredited
investors, as that term is defined in Rule 501 of Regulation D. Each Convertible Debenture is convertible into shares of Common
Stock at the lesser of $0.40 or 50% of the closing market price on the date a business combination valued at greater than $5,000,000
is completed., The Company used the proceeds from this Offering for the purchase of AMS, as well as working capital, including
costs associated with the preparation of over three years of reports that had not been filed with the SEC. During the three month
period ended March 31, 2019, the Company entered into a Qualified Financing with its minority purchase of GN stock and warrants
described in Note 4 “Investment”. As a result on March 31, 2019, the convertible notes amounting to $2,072,000 along
with $130,212 of accrued interest were converted, pursuant to the automatic conversion terms described above, to equity at a price
of $0.40 per share, or a total of 5,505,530 shares.



Unit Offering



On July 8, 2019, the Company commenced
a private offering of Units at a price of $50,000 per Unit, each Unit consisting of 50,000 shares of the Company’s Common
Stock and one $50,000 unsecured Convertible Note (“a Convertible Note”), which mature in one year from the date of
issuance and accrue interest at 5% per annum. These Convertible Notes are convertible into one share of the Company’s Common
Stock at a conversion price of $1.00 per share. During the year ended December 31, 2019, the Company issued 31 Units, including
$1,550,000 in Convertible Notes to six accredited investors. Since the Company’s stock price exceeded the conversion feature
of the Unit convertible Notes and was immediately exercisable, the Company recorded a beneficial conversion feature (“BCF”)
and expense of $1,550,000 which was charged to interest expense with an offset to paid-in capital.



Additionally, 1.55 million shares of Common
Stock were issued in connection with the sale of the Units which were valued at $5,075,000. The excess above the $1,550,000 face
value of the Convertible Notes or, $3,525,000 was charged to interest expense with an offset to paid-in capital. The remaining
$1,550,000 was recorded as a Note discount of $1,550,000 to be amortized over a one year period. $552,602 in interest expense related
to this discount was recorded during the year ended December 31, 2019.











F-22







Shares Issued in Connection with the Assignment Agreement
with Great Northern Ltd



On September 28, 2018, Great Northern Cannabis,
Ltd (“GN”), entered a Letter of Intent with P2P Green Power Energy Solutions and certain individuals to acquire all
of the issued and outstanding shares of AMS. On October 10, 2018, the Company entered into an Assignment and Assumption Agreement
(“the AA Agreement”) with GN. Under the terms of the AA Agreement, the Company essentially purchased the right to acquire
AMS from GN for the following consideration:



| | · | A refundable payment of CAD $200,000
| | - | ------------------------------------



| | · | An accountable reimbursement of GN expenses and fees related to the AMS acquisition not to exceed CAD $300,000
| | - | --------------------------------------------------------------------------------------------------------------



| | · | In the event that we didn’t enter into a management agreement with GN post-closing, we agreed to issue GN, 2,500,000 shares of our Common Stock trading under symbol CPMD
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All of the above consideration was expressly
contingent upon the closing of the AMS acquisition which was in fact consummated by the Company on December 31, 2018. The payments
of $200,000 and $300,000 were made to GN. On August 30, 2019, the parties determined that no management agreement had been entered
into so the Company issued 2,500,000 shares to GN valued at $5,800,000 as required pursuant to the Agreement. Under the guidelines
of ASC 805, Business Combinations, since we disclosed that the AMS transaction was complete, the goodwill re-measurement period
ended and therefore we could not adjust goodwill for this transaction. As a result, we recorded an acquisition expense on the Company’s
income statement for $5,800,000.



Shares Reserved for Issuance



As of December 31, 2019, the Company had
80,124,750 Common Shares reserved for issuance. These shares are comprised of 75,000,000 Common Shares issuable upon the conversion
of the Series A Preferred Stock; 475,000 Common Shares issuable upon the conversion of Series B Preferred Stock; 750,000 Common
Shares upon the exercise of stock options, 1,550,000 shares issuable upon a conversion of the Convertible Notes and 2,344,750 Common
Shares issuable upon the exercise of warrants. None of these shares were used in the calculation of earnings per share because
their inclusion would be anti-dilutive since the Company is operating at a loss. There are no assurances that the conversion rights
will be utilized or that the options or the warrants will be exercised.



Stock Options



During the year ended December 31, 2019,
and December 31, 2018, the Company did not record any stock-based compensation expense related to stock options. As of December
31, 2019 the only option outstanding was held by a former officer who had 750,000 vested options to purchase 750,000 shares of
the Company’s Common Stock at an exercise price of $1.00 per share. This stock option expires on November 1, 2024.



Stock Purchase Warrants



The following table reflects all outstanding and exercisable
warrants on December 31, 2019, and December 31, 2018:



|                                        |  | Number of  Warrants  Outstanding (a) |           | Weighted Average  Exercise Price |  | Average Remaining  Contractual  Life (Years)
|--------------------------------------- |  | ------------------------------------ | --------- | -------------------------------- |  | --------------------------------------------
|                                        |  |                                      |           |                                  |  |                                             
|Warrants outstanding, January 1, 2018   |  |                                      | –         |                                  |  |                                             
|Warrants issued                         |  |                                      | 350,000   |                                  |  | $                                           
|Warrants outstanding, December 31, 2018 |  |                                      | 350,000   |                                  |  | $                                           
|Warrants issued (a)                     |  |                                      | 1,519,750 |                                  |  | $                                           
|Warrants outstanding December 31, 2019  |  |                                      | 1,869,750 |                                  |  | $                                           











F-23







Stock purchase warrants are exercisable
for a period of two-five years from the date of issuance.



| | (a) | The number of warrants reflected in this table does not include 475,000 warrants that were issued at various times during 2019 in connection with the issuance of the Company’s Series B Preferred stock. These warrants are exercisable for a period of three years at a strike price of $2.00 per share. The Company accounts for warrants issued to purchase shares of its common stock or preferred stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. Therefore, no stock-based compensation expense was recorded for the issuance of these 475,000 warrants.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The value of the stock purchase warrants
for the periods ended December 31, 2019, and December 31, 2018, was determined using the following Black-Scholes methodology:



|Expected dividend yield (1)       |  |  | 0.00%           | 
|--------------------------------- |  |  | --------------- | 
|Risk-free interest rate range (2) |  |  | 1.75 - 2.91%    | 
|Volatility range (3)              |  |  | 1.23% - 442.92% | 
|Expected life (in years)          |  |  | 2.00 - 5.00     | 

______________

|(1) | The Company has no history or expectation of paying cash dividends on its Common Stock.                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant.      
|(3) | The volatility of the Company’s Common Stock is based on trading activity for the previous three year period ended at each stock purchase warrant contract date.



|NOTE 16. | SUBSEQUENT EVENTS
|-------- | -----------------



On January 8, 2020, the Company issued
two $100,000 Senior OID Convertible Promissory Notes (“OID Notes) to two accredited investors (“Holders”) and
received $190,000 in proceeds. Under the provisions of the OID Notes, each Holder was granted the right are their sole discretion
to fund up to another $150,000 each under the same terms. The maturity date for each additional tranche of this OID Note funded
shall be twelve (12) months from the date of funding.



These Notes were issued with a one-year
maturity date, an 8% interest rate. The OID Notes are convertible into the Company’s Common Stock at a price equivalent to;
the lower of $1.25/share at any time after 180 days, or 75% times the lowest closing price of Common Stock for 20 consecutive trading
days prior to conversion. In the event of a change of control, the conversion price is 75% of the closing price. The Company has
the right to Redeem these Notes at any time prior to maturity at 110% multiplied by the principal plus accrued interest plus outstanding
accrued interest plus default interest if any. These OID Notes which also include anti-dilution features are senior obligations
with priority over future debt, excluding mortgage debt.



On February 27, 2020, the Company issued
another OID Note for $160,000 to a third accredited investor under comparable terms and received proceeds of $152,000. This Note
is convertible into common stock at a price equivalent to; the lower of $1.25/share for the first 180 days from issuance, seventy-five
percent (75%) of the lowest closing price of the Company’s Common Stock during the twenty (20) trading days immediately preceding
Conversion Date. At issuance, the Company delivered a stock certificate representing half the Purchase Price in a restricted form
(the “Returnable Shares”) in the name of the investor (153,940 shares based on the low closing price of $0.812). The
Returnable Shares will only be returned to the Company’s treasury if the Note is prepaid in full within the initial 180 days
after issuance.





These OID notes are considered to be derivative
financial instruments and will create a derivative liability in its financial statements for the period ended March 31, 2020.



On March 16, 2020, the Company and Sunniva
entered into a third amendment to the agreement, again amending the terms of the purchase price and resetting the proposed closing
date of this transaction to be on or before March 31, 2020. The purchase price was amended to CAD $12.9 million in cash and CAD
$7.1 million through the issuance of 3,566,687 of the Company’s newly created Series C Convertible, Redeemable Preferred
Shares (the “Consideration Shares”). The Consideration Shares will pay an 8% cumulative dividend, are convertible into
shares of the Company’s Common Stock and will give certain retraction rights based on the Company’s future capital
raises.



On June 8, 2020, the Company received
a notice of termination of this Purchase Agreement, as amended, from Sunniva. The Company is in discussions with Sunniva about
recovering itsdeposit, as well as acquiring a smaller segment of the facility.



On March 31, 2020, the Company issued an
OID Note for $78,000 to an accredited investor under comparable terms and received proceeds of $75,000.





On May 22, 2020, the Company received
a Letter of Interest from InSpire Capital and its assigns wherein they have agreed to loan the Company the principal sum of CAD
$6.5 million to purchase the Sunniva property. The loan will be for a term of one year and accrue interest at the rate of 12%
per annum, with a requirement that the Company make monthly interest payments of CAD $64,000. The Company is also obligated to
pay a Lender Fee and Brokerage Fee of CAD $455,000 each at closing, along with a co-broker fee of CAD $260,000 and legal fees.
The Company paid a fee of CAD $30,000 upon execution. The Company borrowed CAD $20,000 of this fee from two of its officers
on an interest free basis, which loans are due on demand.









F-24