# EDGAR Filing Document

**Accession Number:** 0001081938
**File Stem:** 0001654954-26-005180
**Filing Date:** 2026-5
**Character Count:** 127291
**Document Hash:** 0f308afcc8624ca53432f043ffad0fa4
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001654954-26-005180.hdr.sgml**: 20260520

**ACCESSION NUMBER**: 0001654954-26-005180

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 47

**CONFORMED PERIOD OF REPORT**: 20260331

**FILED AS OF DATE**: 20260520

**DATE AS OF CHANGE**: 20260520

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** CANNAPHARMARX, INC.
- **CENTRAL INDEX KEY:** 0001081938
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 274635140
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-27055
- **FILM NUMBER:** 261003763

**BUSINESS ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** 4439 TOWNSHIP RD 304
- **CITY:** MOUNTAIN VIEW COUNTY
- **NON US STATE TERRITORY:** ALBERTA
- **PROVINCE COUNTRY:** A0
- **ZIP:** T0M 0R0
- **BUSINESS PHONE:** 949-652-6838

**MAIL ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** 4439 TOWNSHIP RD 304
- **CITY:** MOUNTAIN VIEW COUNTY
- **NON US STATE TERRITORY:** ALBERTA
- **PROVINCE COUNTRY:** A0
- **ZIP:** T0M 0R0

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** GOLDEN DRAGON HOLDING CO.
- **DATE OF NAME CHANGE:** 20110125

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** CCVG, INC.
- **DATE OF NAME CHANGE:** 20101117

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** CONCORD VENTURES, INC.
- **DATE OF NAME CHANGE:** 20071003

?xml version='1.0' encoding='ASCII'? canna_10q.htm

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

☒&nbsp;&nbsp;&nbsp;&nbsp; QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended **<u>March 31, 2026</u>**

**or**

☐&nbsp;&nbsp;&nbsp;&nbsp; TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________to ___________

Commission File Number: **<u>000-27055</u>**

---

| |
|:---|
| **CANNAPHARMARX, INC.** |
| (Exact name of small business issuer as specified in its charter) |

---

---

| | |
|:---|:---|
| **Delaware** | **27-4635140** |
| (State of other jurisdiction of incorporation) | (IRS Employer ID No.) |

---

**4439 Township Rd 304, <u>Mountain View County, Alberta, Canada T0M 0R0</u>**

(Address of principal executive offices)

**<u>403-637-0420</u>**

(Issuer'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** |
| N/A | N/A | N/A |

---

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

Indicate by check mark whether the registrant has submitted electronically 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). Yes ☒&nbsp;&nbsp;&nbsp;&nbsp; No ☐

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

---

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

---

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

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

The number of shares of the registrant's common shares issued and outstanding as of May 20, 2026, was 678,501,405 shares.

**CANNAPHARMARX, INC.**

**March 31, 2026**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | **Page** |
|  | **PART I. FINANCIAL INFORMATION** |  |
| [Item 1](#FS) | [Condensed Interim Consolidated Financial Statements (unaudited)](#FS) | 3 |
| [Item 2](#P1I2) | [Management's Discussion and Analysis of Financial Condition and Results of Operations/Plan of Operation](#P1I2) | 18 |
| [Item 3](#P1I3) | [Quantitative and Qualitative Disclosures About Market Risk](#P1I3) | 28 |
| [Item 4](#P1I4) | [Controls and Procedures](#P1I4) | 28 |
|  | **[PART II. OTHER INFORMATION](#P2)** |  |
| [Item 1](#P2I1) | [Legal Proceedings](#P2I1) | 30 |
| [Item 1A](#P2I1A) | [Risk Factors](#P2I1A) | 30 |
| [Item 2](#P2I2) | [Unregistered Sales of Equity Securities and Use of Proceeds](#P2I2) | 30 |
| [Item 3](#P2I3) | [Defaults Upon Senior Securities](#P2I3) | 30 |
| [Item 4](#P2I4) | [Mine Safety Disclosures](#P2I4) | 30 |
| [Item 5](#P2I5) | [Other Information](#P2I5) | 30 |
| [Item 6](#P2I6) | [Exhibits](#P2I6) | 31 |
|  | [Signatures](#SIGN) | 32 |

---

---

| |
|:---|
| 2 |
| *[**Table of Contents**](#TOC)* |

---

**CANNAPHARMARX, INC.**<br>**CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS**<br>**(in United States dollars)**<br>

---

| | | |
|:---|:---|:---|
|  | **March 31,** <br>**2026** <br>(Unaudited) | **December 31,**<br>**2025** |
| **ASSETS** |  |  |
| **Current assets** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash | $**633** | $1804 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goods and services tax receivable | **19064** | 29832 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | **6944** | 164430 |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | **902913** | 1115322 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current assets | **929554** | 1311388 |
| **Non-current assets** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Equipment, net | **176101** | 127029 |
| &nbsp;&nbsp;&nbsp;&nbsp;Right-of-use building, net | **5475079** | 5579987 |
| **Total assets** | $**6580734** | $7018404 |
| **LIABILITIES AND SHAREHOLDERS' DEFICIT** |  |  |
| **Current liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities | $**10232578** | $10059415 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued interest | **2157329** | 1720278 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | **-** | 260561 |
| &nbsp;&nbsp;&nbsp;&nbsp;Notes payable | **478270** | 482661 |
| &nbsp;&nbsp;&nbsp;&nbsp;Convertible notes | **1017004** | 1017004 |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative conversion feature | **1208438** | 2009476 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans payable to related parties, current portion | **13130027** | 12567911 |
| &nbsp;&nbsp;&nbsp;&nbsp;Royalty payable | **429520** | 305492 |
| &nbsp;&nbsp;&nbsp;&nbsp;Liability for right-of-use building, current portion | **983755** | 1000479 |
| &nbsp;&nbsp;&nbsp;&nbsp;Obligation to issue shares | **1849155** | 2166681 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | **31486076** | 31589958 |
| **Non-current liability** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans payable to related parties | **433696** | 548574 |
| &nbsp;&nbsp;&nbsp;&nbsp;Liability for right-of-use building  | **4930850** | 5033601 |
| **Total liabilities** | $**36850622** | $37172133 |
| &nbsp;&nbsp;&nbsp;&nbsp;**SHAREHOLDERS' DEFICIT** |  |  |
| Preferred shares series A, $1.00 par value, 100,000 shares authorized, 74,416 issued and outstanding as at March 31, 2026 and December 31, 2025 | $**74416** | $74416 |
| Preferred shares series B, $1.00 par value, 3,000,000 shares authorized, 455,000 shares issued and outstanding as at March 31, 2026 and December 31, 2025 | **455000** | 455000 |
| Preferred shares series C, $1.00 par value, 100,000 shares authorized, 100,000 shares issued and outstanding as at March 31, 2026 and December 31, 2025 | **100000** | 100000 |
| Common shares, $0.0001 par value; 5,000,000,000 and 5,000,000,000 shares authorized, 678,501,405 and 662,501,405 issued and outstanding as at March 31, 2026 and December 31, 2025, respectively | **67850** | 66250 |
| Shares to be issued | **-** | 1600 |
| Treasury shares, $0.0001 par value 6,230,761 shares as at March 31, 2026 and December 31, 2025 | **623** | 623 |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | **81520643** | 81520643 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | **(112697611)** | (112315590) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income | **209191** | (56671) |
| Total shareholders' deficit | **(30269888)** | (30153729) |
| **Total liabilities and shareholders' deficit** | $**6580734** | $7018404 |

---

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

---

| |
|:---|
| 3 |
| *[**Table of Contents**](#TOC)* |

---

**CANNAPHARMARX, INC.**<br>**CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**<br>**For the three months ended March 31, 2026 and 2025**<br>**(in United States dollars)**<br>**(Unaudited)**<br>

---

| | | |
|:---|:---|:---|
|  | Three months ended<br>March 31, | Three months ended<br>March 31, |
|  | **2026** | 2025 |
| **Revenue** | $**627462** | $335319 |
| **Cost of goods sold** | **1036915** | 837926 |
| **Gross loss** | **(409453)** | (502607) |
| **Operating expenses** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | **35814** | 38641 |
| &nbsp;&nbsp;&nbsp;&nbsp;Professional fees | **105856** | 136337 |
| &nbsp;&nbsp;&nbsp;&nbsp;Royalty expense | **131220** | - |
| Total operating expenses | **272890** | 174978 |
| Loss from operations | **(682343)** | (677585) |
| **Other income (expenses)** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in the fair value of derivative conversion feature | **801038** | 641711 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in the fair value of obligation to issue shares | **317527** | 1880911 |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange gain (loss) | **(31084)** | 9885 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | **(475617)** | (615516) |
| &nbsp;&nbsp;&nbsp;&nbsp;Imputed interest expense | **(311542)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other expense | **-** | (1930000) |
| Total other income (expenses) | **300322** | (13009) |
| **Net loss** | **(382021)** | (690594) |
| Foreign currency translation adjustment | **265862** | (6891) |
| **Net comprehensive loss** | $**(116159)** | $(697485) |
| Basic and diluted income (loss) per share of common shares | $**(0.00)** | $(0.00) |
| **Weighted average number of shares outstanding** | **669790294** | 662501405 |

---

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

---

| |
|:---|
| 4 |
| *[**Table of Contents**](#TOC)* |

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**CANNAPHARMARX, INC.**<br>**CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS**<br>**For the three months ended March 31, 2026 and 2025**<br>**(in United States dollars)**<br>**(Unaudited)**<br>

---

| | | |
|:---|:---|:---|
|  | Three months ended<br>March 31,  | Three months ended<br>March 31,  |
|  | **2026** | 2025 |
| **Operating activities** |  |  |
| Net loss | $**(382021)** | $(690594) |
| Adjustments for non-cash items: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization and depreciation included in cost of goods sold | &nbsp;&nbsp;&nbsp;&nbsp;(15808) | (18509) |
| Amortization and depreciation | 15808 | 18509 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in the fair value of derivative conversion feature | **(801038)** | (641711) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in the fair value of obligation to issue shares | **(317527)** | (1880911) |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange loss | **31084** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other expense | **-** | 1930000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | **475617** | 615516 |
| &nbsp;&nbsp;&nbsp;&nbsp;Imputed interest expense | **311542** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on impairment of inventory included in cost of goods sold | **493722** | 479933 |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Goods and services tax receivable | **10435** | (2786) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | **(358784)** | (261129) |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | **(281019)** | (416310) |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | **(260343)** | 66148 |
| &nbsp;&nbsp;&nbsp;&nbsp;Royalty payable | **131220** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities | **703456** | 200463 |
| **Cash used in operating activities** | **(243656)** | (601381) |
| **Financing activities** |  |  |
| Proceeds from related party loans | **242485** | 600433 |
| **Cash provided by financing activities** | **242485** | 600433 |
| Net change in cash | **(1171)** | (948) |
| Cash, beginning of period | **1804** | 2156 |
| **Cash, end of period** | $**633** | $1208 |
| **Supplemental disclosure of cash flow information:** |  |  |
| Cash paid for income taxes | $**-** | $- |
| Cash paid for interest expense | $**-** | $- |
| **Supplemental disclosure of non-cash financing and investing activities:** |  |  |
| Cash received by related parties directly from customers | $**516021** | $- |
| Cash paid by related parties directly to suppliers | $**519531** | $- |
| Equipment in accounts payable and accrued liabilities | $**55118** | $- |
| Reclassification of notes payable to loans payable to related parties | $**-** | $6809386 |

---

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

---

| |
|:---|
| 5 |
| *[**Table of Contents**](#TOC)* |

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**CANNAPHARMARX, INC.**<br>**CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT**<br>**(in United States dollars)**<br>**(Unaudited)**<br>

---

| | | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred Shares** | **Preferred Shares** | **Preferred Shares** | **Preferred Shares** | **Preferred Shares** | **Preferred Shares** |  |  |  |  |  |  | | | | |
|  | **Series A** | **Series A** | **Series B** | **Series B** | **Series C** | **Series C** | **Common Shares** | **Common Shares** | **Shares to be issued** | **Shares to be issued** | **Treasury Shares** | **Treasury Shares** | | | | |
|  | **Number**<br>**of shares** |<br>**Value** | **Number**<br>**of shares** |<br>**Value** | **Number**<br>**of shares** |<br>**Value** | **Number**<br>**of shares** |<br>**Value** | **Number**<br>**of shares** |<br>**Value** | **Number**<br>**of shares** |<br>**Value** | <br>**Additional**<br>**Paid-in**<br>**Capital** | <br><br>**Accumulated**<br>**Deficit** | **Accumulated** <br>**Other**<br>**Comprehensive**<br>**(Loss) Income** | <br>**Total**<br>**Shareholders'**<br> **Deficit** |
| Balance, December 31, 2024 | 74416 | $74416 | 455000 | $455000 | 100000 | $100000 | 662501405 | $66250 |  |  | 6230761 | $623 | $80122590 | $(101184142) | $555626 | $(19809637) |
| Change in foreign currency translation |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (6891) | (6891) |
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (690594) | - | (690594) |
| Balance, March 31, 2025 | 74416 | $74416 | 455000 | $455000 | 100000 | $100000 | 662501405 | $66250 |  |  | 6230761 | $623 | $80122590 | $(101874736) | $548735 | $(20507122) |
| Related party loan modification, adjustment |  |  |  |  |  |  |  |  |  |  |  |  | 1256853 |  |  | 1256853 |
| Shares to be issued |  |  |  |  |  |  |  |  | 16000000 | 1600 |  |  | 141200 |  |  | 142800 |
| Change in foreign currency translation |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (605406) | (605406) |
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (10440854) | - | (10440854) |
| Balance, December 31, 2025 | 74416 | $74416 | 455000 | $455000 | 100000 | $100000 | 662501405 | $66250 | 16000000 | 1600 | 6230761 | $623 | $81520643 | $(112315590) | $(56671) | $(30153729) |
| Issuance of common shares |  |  |  |  |  |  | 16000000 | 1600 | (16000000) | (1600) |  |  |  |  |  |  |
| Change in foreign currency translation |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 265862 | 265862 |
| Net loss | **-** | **-** | **-** | **-** | **-** | **-** | **-** | **-** | - | - | **-** | **-** | **-** | (382021) | **-** | (382021) |
| **Balance, March 31, 2026**  | **74416** | $**74416** | **455000** | $**455000** | **100000** | $**100000** | **678501405** | $**67850** | **-** | **-** | **6230761** | $**623** | $**81520643** | $**(112697611)** | $**209191** | $**(30269888)** |

---

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

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|:---|
| 6 |
| *[**Table of Contents**](#TOC)* |

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)** <br>

**NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES**

CannaPharmaRx, Inc. was originally incorporated in the state of Colorado in August 1998 as Network Acquisitions, Inc. The Company underwent several name changes over the years and, in October 2014, changed its legal name to CannaPharmaRx, Inc. (hereinafter the "Company"). The Company focuses its business efforts on the acquisition, development and operation of cannabis cultivation facilities in Canada.

On January 6, 2022, the Company entered into a 20-year operating lease with Formosa Mountain Ltd. ("Formosa") for the use of a facility located in Cremona, Alberta, Canada. During 2022, the Company recommissioned the 55,000 square foot facility (the "Facility") into an indoor cannabis farm with 10 growing rooms and one drying and packing room. During 2025, the Company added one additional growing room to its operations. The Facility now has six growing rooms and one drying and packing room in operation and plans to increase capacity over the next one to two years to open a second drying and packing room and to operate all 10 growing rooms.

The Company received an operating license from Health Canada on December 9, 2022, and a cannabis license from the Canada Revenue Agency on December 22, 2022, and commenced cannabis production during the year ended December 31, 2023. Our common shares are traded on the OTC Pink Sheets under the trading symbol "CPMD."

**Potential liability exposure and insurance coverage**

The Company has not paid any insurance premiums since early 2024. As a result, its current insurance coverage has lapsed. The Company may be subject to claims for damages and other expenses that are not covered by insurance. The Company's business, profitability, and growth prospects could be adversely affected in the event it is required to pay damages and incur defense costs in connection with a liability claim. There can be no assurance that the Company will be able to reinstate or obtain insurance coverage in the future in amounts, or at a cost, that would provide adequate protection.

***<u>Basis of presentation</u>***

The accompanying unaudited condensed interim consolidated financial statements (the "financial statements") have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP") and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2025.

All figures are in United States ("US") dollars ("USD") unless indicated otherwise. All references to "CAD" are to Canadian dollars.

***<u>Foreign currency translation</u>***

As at March 31, 2026, the official exchange rate for the translation of CAD to USD was 0.7174 (December 31, 2025 - 0.7296). During the three months ended March 31, 2026, the official average exchange rate for translation of CAD to USD was 0.7290 (2025 - 0.6968).

***<u>Loss per share</u>***

Loss per share is presented in accordance with Accounting Standards Update, Earnings per Share (Topic 260), which requires the presentation of both basic and diluted earnings per share ("EPS") on the income statements.

Basic EPS excludes any dilutive effects of share options, share purchase warrants, and convertible securities but does include the restricted shares of common shares issued. Basic EPS calculations are determined by dividing net income by the weighted average number of shares of common shares outstanding during the year.

Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common shares were exercised using the treasury stock method or converted to common shares using the if-converted method. Diluted EPS calculations are determined by dividing net income by the weighted average number of shares of common shares and dilutive common shares equivalents outstanding. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. As of March 31, 2026, convertible preferred shares outstanding totaled 629,416 shares (December 31, 2025 - 629,416 shares) and share purchase warrants outstanding totaled 39,924,940 (December 31, 2025 - 39,924,940). The Company's convertible notes were all excluded from the calculation of diluted EPS on the basis that they were anti-dilutive.

*<u>**Fair values of assets and liabilities**</u>*

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.

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

---

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company's financial assets and liabilities comprise of cash, accounts receivable, accounts payable and accrued liabilities, accrued interest, notes payable, convertible notes, derivative conversion feature, loans payable to related parties, royalty payable and obligation to issue shares.

The Company measures the fair value of its convertible notes, derivative conversion feature and obligation to issue shares based on Level 3 hierarchy.

There are no other financial assets or liabilities measured at fair value on a recurring basis presented on the Company's balance sheet. As at March 31, 2026, the carrying values of the Company's financial instruments approximate their fair values.

***<u>Use of estimates</u>***

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates relate to the impairment of long-lived assets, the valuation of financial instruments, the valuation of inventory, the provision of 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 at 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.

In preparing these financial statements, the Company is exposed to the same sources of estimation uncertainty as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025

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| 7 |
| *[**Table of Contents**](#TOC)* |

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (continued)**

***<u>Reclassification of prior period amounts</u>***

Rent expense for the three months ended March 31, 2025 of $1,045 has been reclassified to general and administrative expenses, and foreign exchange gain for the three months ended March 31, 2025 of $9,885 has been reclassified from general and administrative expenses and presented within other income. These reclassifications had no impact on the Company's loss from operations or net comprehensive loss for any period presented.

***<u>Significant Accounting Policies</u>***

There have been no material changes to our significant accounting policies from our Annual Report on Form 10-K for the year ended December 31, 2025.

**NOTE 2 - GOING CONCERN AND LIQUIDITY**

As at March 31, 2026, the Company had cash of $633 (December 31, 2025 - $1,804), a working capital deficiency of $30,556,522 (December 31, 2025 - $30,278,570) and an accumulated deficit of $112,697,611 (December 31, 2025 - $112,315,590). Additionally, during the three months ended March 31, 2026, the cash used in operating activities was $243,656 (2025 - $601,381).

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 current financial projections, the Company does not have sufficient existing cash resources to fund its current operations. Accordingly, there is substantial doubt about the Company's ability to continue as a going concern. Management intends to address these liquidity challenges through debt financings and/or raise additional funding through equity financing to support ongoing operating expenses and working capital needs. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company and therefore, the Company is heavily reliant on funding from related parties. If the Company is unable to secure adequate financing or otherwise successfully implement its plans, it may be required to significantly reduce or curtail its operations, or cease operations entirely. Any issuance of equity securities to raise capital could result in substantial dilution to existing shareholders. Certain borrowings are secured by the Company's assets, including equipment, investments and receivables. In the event of default, lenders may have the right to seize collateralized assets. These consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

On March 17, 2025, the Company and its subsidiary, 2323414 Alberta Ltd. ("Alberta Ltd."), which operates the Company's principal business activities, including the cultivation, processing, and distribution of cannabis, entered into a security and royalty agreement with Koze Investments LLC ("Koze"), a California-based limited liability company engaged in providing financing and investment services. Alberta Ltd. is a subsidiary of the Company in which Koze has been considered a related party since March 11, 2025, the date on which its manager, Elliot Zemel, was appointed as a director of the Company. Pursuant to the agreement, the Company is required to pay a royalty on cannabis product sales from the prior month. If royalty payments are not made on time, the applicable rate increases. The agreement stipulates that a default occurs if Alberta Ltd. fails to make royalty or lease payments for three consecutive months, or for any four months within a rolling six-month period. As collateral, the Company granted Koze a security interest in its entire ownership interest in Alberta Ltd., which will remain in place until all obligations are fully satisfied. As of March 31, 2026, Alberta Ltd. was in default of its payment obligations, and Koze agreed to forbear from exercising his rights over the ownership interest until May 31, 2026. The Company also incurred royalty expenses under the agreement and recorded a related liability in accounts payable and accrued liabilities as of March 31, 2026.

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 3 - INVENTORY**

A summary of the Company's inventory as at March 31, 2026 and December 31, 2025 is as follows:

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| | | |
|:---|:---|:---|
|  | **2026** | 2025 |
| Finished goods, net of impairment provision from prior periods | $**741495** | $827537 |
| Work in process, net of impairment provision from prior periods | **647292** | 774265 |
| Less: impairment of work in process inventory included in cost of goods sold | **(485874)** | (486480) |
|  | $**902913** | $1115322 |

---

The Company evaluates its inventory, including work in progress, at each reporting period to ensure it is stated at the lower of cost or net realizable value ("NRV"). NRV is defined as the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.

If the estimated NRV of inventory is less than its recorded cost, the Company records a write-down to reflect the inventory at NRV. Such write-downs are recognized in cost of goods sold in the period identified.

**NOTE 4 - DERIVATIVE CONVERSION FEATURE**

A summary of Company's derivative conversion feature which arises from convertible notes as at March 31, 2026 is as follows:

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| | |
|:---|:---|
| Balance, December 31, 2024 | $1159324 |
| Changes in fair value of derivative conversion feature | 850152 |
| Balance, December 31, 2025 | 2009476 |
| Changes in fair value of derivative conversion feature | (801038) |
| **Balance, March 31, 2026** | $**1208438** |

---

The Company used an option pricing model to calculate the derivative conversion feature. A summary of the Company's weighted average inputs used in the model for the three months ended March 31, 2026 and the year ended December 31, 2025 is as follows:

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| | | |
|:---|:---|:---|
|  | **Period ended March 31, 2026** | Year ended December 31, 2025 |
| Share price | $**0.004** | $0.005 |
| Exercise price | $**0.003** | $0.002 |
| Risk-free interest rate | **3.00%** | 2.90% |
| Expected volatility | **352.40%** | 348.80% |
| Expected life | **1.00 year** | 1.00 year |
| Expected dividend yield | **0.00%** | 0.00% |

---

The risk-free interest rate was based on rates established by the Federal Reserve Bank. Beginning with the year ended December 31, 2025, the Company estimated expected volatility using a peer-based approach rather than the historical volatility of its own common shares. The Company's common shares trade infrequently on the OTC Markets, and management determined that historical volatility derived solely from Company-specific trading data was not reflective of market-participant assumptions. As at the date of these financial statements, all convertible notes were past their maturity date and accordingly, the expected term of the conversion feature of the notes was assumed to be 1 year from the date of these financial statements. The expected annual dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 5 - RELATED PARTY TRANSACTIONS**

A related party is any individual or entity that can exercise significant influence over the Company, or over which the Company can exercise significant influence. Related parties include affiliates, principal owners, directors, executive management, their immediate family members, and entities under common control. The Company has a significant amount of related party balances and transactions.

a) Key related party transactions

A summary of the Company's related party transactions is as follows:

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| | | |
|:---|:---|:---|
|  | Three months ended<br>March 31, | Three months ended<br>March 31, |
|  | **2026** | 2025 |
|  | **$**  | $ |
| Revenue | **627462** |  |
| Lease expense due to Formosa included in cost of goods sold | **273374** | 261285 |
| Professional fees | **53758** | 112363 |
| Royalty expense | **131220** |  |
| Interest expense | **360188** | 585063 |
| Imputed interest expense | **311542** |  |
| Other expense | **-** | 1930000 |

---

*<u>Revenue</u>*

During the three months ended March 31, 2026, the Company recognized all of its revenue of $627,462 (2025 - $nil) from related parties being D.N.S. CANTEK 2019 LTD ("Cantek"), an Israeli limited corporation owned 100% by Koze, and for which Mr. Tal serves as a financial advisor.

*<u>Lease expense</u>*

The Company has a lease with Formosa, which became a related party upon the appointment of its manager, Elliot Zemel, as a director of the Company on March 11, 2025. During the three months ended March 31, 2026, the Company recognized interest expense related to rent in default of $161,323 (2025 - $154,702), associated with unpaid lease payments.

During the three months ended March 31, 2026, the Company incurred lease expense of $273,374 (2025 - $261,285) associated with the Formosa lease, which is included in cost of goods sold.

*<u>Professional fees</u>*

· During the three months ended March 31, 2026, the Company incurred professional expenses of $42,733 (2025 - $78,363) related to accounting fees payable to Invictus Accounting Group LLP ("Invictus"), a company which provides part-time CFO, financial reporting, and bookkeeping services to the Company. Mr. Oliver Foeste is the Managing Partner of Invictus.

· During the three months ended March 31, 2026, the Company incurred professional expenses of $11,025 payable to Fabian Vancott (2025 - $34,000) related to legal fees. Anthony Panek who is a partner in Fabian Vancott, is also a director of the Company.

*<u>Royalty expense</u>*

On March 17, 2025, the Company and Alberta Ltd., entered into a security and royalty agreement with Koze (the "Royalty Agreement") (Note 2), pursuant to which the Company is required to pay a royalty of CAD $0.20 per gram on cannabis product sales, payable at the beginning of the month for the previous month, as additional consideration related to the lease with Formosa. Immediately upon failure to pay the royalty when due, the royalty rate increases to CAD $0.40 per gram sold for the applicable month. As of March 31, 2026, Alberta Ltd. was in default of its payment obligations, and Koze agreed to forbear from exercising its rights over the ownership interest until May 31, 2026.

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 5 - RELATED PARTY TRANSACTIONS (continued)**

During the three months ended March 31, 2026, the Company sold 450,000 grams of cannabis products, and for the three months ended March 31, 2026, the Company incurred a royalty expense of $131,220 (2025 - $nil).

*<u>Interest expense</u>*

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| |
|:---|
| During the three months ended March 31, 2026, the Company incurred interest expense on promissory and convertible notes with Mr. Tal of $11,153 (2025 - $14,425). |
| During the three months ended March 31, 2026, the Company incurred interest expense on promissory and convertible notes with Koze of $160,108 (2025 - $415,936). |
| During the three months ended March 31, 2026, the Company incurred interest expense on promissory note with Formosa of $27,604 (2025 - $nil). |
| During the three months ended March 31, 2026, the Company incurred interest expense on rent in default with Formosa of $161,323 (2025 - $154,702). |

---

*<u>Imputed interest expense</u>*

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| |
|:---|
| During the three months ended March 31, 2026, the Company incurred imputed interest expense on promissory and convertible notes with Mr. Tal of $17,099 (2025 - $nil). |
| During the three months ended March 31, 2026, the Company incurred imputed interest expense on promissory and convertible notes with Koze of $248,108 (2025 - $nil) |
| During the three months ended March 31, 2026, the Company incurred imputed interest expense on promissory and convertible notes with Formosa of $46,335 (2025- $nil). |

---

*<u>Other expense</u>* 

During the three months ended March 31, 2025, the Company made a non-cash one-time adjustment of $1,930,000 to lease-related rent expense due to a clarification in the interpretation of the lease terms for the Facility, which is recorded as other expense.

b) Amounts due to related parties

A summary of the Company's related party liabilities as at March 31, 2026 and December 31, 2025, is as follows:

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| | | |
|:---|:---|:---|
|  | **2026** | 2025 |
| Accounts payable and accrued liabilities | $**5609993** | $5416889 |
| Accrued interest | **1675619** | 1352899 |
| Loans payable to related parties | **13563723** | 13116485 |
| Royalty payable | **429520** | 305492 |
| Liability for right-of-use building | **5914605** | 6034080 |
| Obligation to issue shares | **1849155** | 2166681 |
| **Total related party liabilities** | $**29042615** | $28392526 |

---

*<u>Accounts payable and accrued liabilities</u>*

As at March 31, 2026, accounts payable and accrued liabilities include balances owing to related parties as follows:

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| |
|:---|
| As at March 31, 2026, $4,481,131 (December 31, 2025 - $4,283,706) was payable to Formosa for outstanding lease payments. As at March 31, 2026, accrued interest on unpaid lease payments on the Formosa lease was $1,178,602 (December 31, 2025 - $1,037,180). |
| As at March 31, 2026, $141,896 (December 31, 2025 - $146,306) was payable to Invictus for part-time CFO, financial reporting, and bookkeeping services provided to the Company. |
| As at March 31, 2026, $319,279 (December 31, 2025 - $319,279) was payable to Mr. Orman for unpaid directors' fees for 2021 through 2023. |

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 5 - RELATED PARTY TRANSACTIONS (continued)**

· As at March 31, 2026, $542,727 (December 31, 2025 - $551,953) was payable to Dominic Colvin, a director of the Company, for unpaid salary and expense reimbursement amounts during Mr. Colvin's employment with the Company as its CEO during the years 2019 through 2022. Mr. Colvin has disputed this amount and is asserting a claim for $1,679,060. As of March 31, 2026, the Company is in the process of reviewing the claim and remains in ongoing discussions with Mr. Colvin. No resolution has been reached with respect to this matter.

· As at March 31, 2026, $124,960 (December 31, 2025 - $115,645) was payable to Fabian Vancott in respect of unpaid legal fees.

*<u>Loans payable to related parties</u>*

On August 7, 2025, the Company entered into an agreement (the "Debt Modification") with Mr. Tal, Koze and Formosa to amend the annual interest rates on all outstanding promissory and convertible notes held by them to 6%, compounding annually. This was deemed to be a substantial modification of the terms of the agreements and was accounted for as an extinguishment of the promissory and convertible notes and recognition of new notes at the new 6% rate. The term to maturity was unchanged. In connection with the issuance of the new notes resulting from the Debt Modification, the Company determined that the market interest rate for similar instruments was 15%. Accordingly, the debt was recorded at a discount to reflect this effective interest rate, with the discount amortized to imputed interest expense over the term of the debt using the effective interest method.

As at March 31, 2026, the loans payable to related parties consists of the following:

<u>PLC International Investments Inc. ("PLC")</u>

· A $13,223 interest-free loan from PLC, a company owned by Dominic Colvin, a director of the Company;

<u>Loans payable to Koze</u>

On March 11, 2025, Koze became a related party upon the appointment of its manager as a director of the Company. As a result, the balance owing on promissory notes was reclassified from notes payable to loans payable to related parties during the year ended December 31, 2025.

On August 7, 2025, the Company entered into the Debt Modification agreement with Koze to amend the annual interest rates on all outstanding promissory and convertible notes held by Koze to 6%, compounding annually.

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| | |
|:---|:---|
| ·  | *<u>Koze Lucky Tackle Box Management, LLC ("LTB"):</u>* |
|  | On November 22, 2023, the Company entered into promissory notes of $2,550,000 with Koze, as part of the LTB transaction, bearing interest at 13% per annum. Originally due on November 22, 2024, the maturity date for this note was extended to December 31, 2025, by agreement with Koze. On March 18, 2026, Mr. Tal and Koze agreed to extend the maturity date of the promissory notes to December 31, 2026. |

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| |
|:---|
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $2,550,000 and $555,406, respectively, were extinguished. A new note ("Koze LTB") of $2,978,661 bearing 6% interest, compounding annually, was recognized resulting in a gain of $126,745 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $46,107 and imputed interest expense of $69,601 related to the note. As at March 31, 2026, the outstanding principal balance on the note was $3,163,079 (December 31, 2025 - $3,093,478) and accrued interest payable on the note was $122,169 (December 31, 2025 - $76,062). |
| *Koze A:* |
| On May 25, 2023, the Company entered into a promissory note with Koze, bearing annual interest at 24% compounded monthly, to fund for certain documented expenses. |

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 5 - RELATED PARTY TRANSACTIONS (continued)**

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| |
|:---|
| <br>As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $849,278 and $443,339, respectively, were extinguished. A new note ("Koze A") of $1,134,669 bearing 6% interest, compounding annually, was recognized resulting in a gain of $157,949 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $22,026 and imputed interest expense of $34,489 related to the note. During the three months ended March 31, 2026, the Company had $161,813 in net additions to the promissory note. As at March 31, 2026, the outstanding principal balance on the note was $1,596,545 (December 31, 2025 - $1,400,243) and accrued interest payable on the note was $53,096 (December 31, 2025 - $31,070). |
| *Koze B:* |
| On May 25, 2023, the Company entered into another promissory note with Koze, bearing annual interest at 24% compounded monthly, to fund the Company for certain documented expenses. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $4,040,474 and $1,366,780, respectively, were extinguished. A new note ("Koze B") of $4,767,106 bearing 6% interest, compounding annually, was recognized resulting in a gain of $640,148 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $84,794 and imputed interest expense of $132,769 related to the note. During the three months ended March 31, 2026, the Company made $84,182 in net repayments on the promissory note. As at March 31, 2026, the outstanding principal balance on the note was $5,652,377 (December 31, 2025 - $5,529,686) and accrued interest payable on the note was $213,594 (December 31, 2025 - $132,215). |
| *Koze C:* |
| On February 8, 2024, the Company entered into another promissory note with Koze, bearing annual interest at 24% compounded monthly. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $275,000 and $97,403, respectively, were extinguished. A new note ("Koze C") of $330,551 bearing 6% interest, compounding annually, was recognized resulting in a gain of $41,852 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $5,196 and imputed interest expense of $8,140 related to the note. As at March 31, 2026, the outstanding principal balance on the note was $351,841 (December 31, 2025 - $343,701) and accrued interest payable on the note was $13,590 (December 31, 2025 - $8,394). |

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|:---|
| *<u>Koze convertible note ("Koze CN"):</u>* |
| The Company has a convertible note with Koze, bearing annual interest at 24%. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $68,555 and $75,714, respectively, were extinguished. A new note, Koze CN, of $126,275 bearing 6% interest, compounding annually, was recognized resulting in a gain of $17,995 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $1,985 and imputed interest expense of $3,109 related to the note. As at March 31, 2026, the outstanding principal balance on the note was $134,407 (December 31, 2025 - $131,298) and accrued interest payable on the note was $5,192 (December 31, 2025 - $3,207). |

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 5 - RELATED PARTY TRANSACTIONS (continued)**

During the three months ended March 31, 2026, Koze made payments of $519,531 directly to the Company's suppliers. In addition, $516,021 was received directly by Koze, as collections from customers.

<u>Loans payable to Mr. Tal</u>

On August 7, 2025, the Company entered into the Debt Modification agreement with Mr. Tal to amend the annual interest rates on all outstanding promissory and convertible notes held by him to 6%, compounding annually.

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|:---|
| *<u>Mr. Tal LTB:</u>* |
| On November 22, 2023, the Company entered into a promissory note of $450,000 with Mr. Tal as part of the LTB transaction, bearing interest at 13% per annum. Originally due on November 22, 2024, the maturity date for this note was extended to December 31, 2025, by agreement with Mr. Tal. On March 18, 2026, Mr. Tal and Koze agreed to extend the maturity date of the promissory notes to December 31, 2026. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $438,296 and $89,768, respectively, were extinguished. A new note ("Mr. Tal LTB") of $507,422 bearing 6% interest, compounding annually, was recognized resulting in a gain of $20,641 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $6,518 and imputed interest expense of $9,844 related to the note. During the three months ended March 31, 2026, the Company made net repayments of $30,000 on the promissory note and accrued interest. As at March 31, 2026, the outstanding principal balance on the note was $441,659 (December 31, 2025 - $447,647) and accrued interest payable on the note was $4,237 (December 31, 2025 - $11,887). |
| *<u>Mr. Tal convertible note ("Mr. Tal CN"):</u>* |
| The Company had a convertible note with Mr. Tal, bearing interest at 24%. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $212,555 and $121,427, respectively, were extinguished. A new note, Mr. Tal CN, of $294,850 bearing 6% interest, compounding annually, was recognized resulting in a gain of $39,132 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $4,635 and imputed interest expense of $7,255 related to the note. As at March 31, 2026, the outstanding principal balance on the note was $313,826 (December 31, 2025 - $306,571) and accrued interest payable on the note was $12,128 (December 31, 2025 - $7,488). |

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<u>Promissory note with Formosa</u>

On January 1, 2025, the Company entered into a promissory note with Formosa in the amount of $1,930,000, bearing interest at 5% per annum, with respect to a one-time adjustment made to lease-related rent expense due to a clarification in the interpretation of the lease terms for the Facility.

As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $1,930,000 and $58,098, respectively, were extinguished. A new note of $1,775,707 bearing 6% interest, compounding annually, was recognized resulting in a gain of $212,391 from extinguishment, recorded directly to additional paid-in capital.

During the three months ended March 31, 2026, the Company recognized interest expense of $27,604 and imputed interest expense of $46,335 related to the note. As at March 31, 2026, the outstanding balance on the note was $1,896,766 (December 31, 2025 - $1,850,431) and accrued interest payable on the note was $73,012 (December 31, 2025 - $45,396).

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 5 - RELATED PARTY TRANSACTIONS (continued)**

A summary of the accrued interest of the Company's loans payable to related parties as at March 31, 2026 and December 31, 2025 is as follows:

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| | | |
|:---|:---|:---|
|  | **2026** | 2025 |
| Koze LTB | $**122169** | $76062 |
| Koze A | **53096** | 31070 |
| Koze B | **213594** | 132215 |
| Koze C | **13590** | 8394 |
| Koze CN | **5192** | 3207 |
| Mr. Tal LTB | **4237** | 11887 |
| Mr. Tal CN | **12128** | 7488 |
| Promissory note with Formosa | **73012** | 45396 |
|  | $**497018** | $315719 |

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*<u>Royalty payable</u>*

Pursuant to the Royalty Agreement, as of March 31, 2026, the royalty amount payable to Koze was $429,520 (CAD $598,708) (2025 - $nil).

*<u>Obligation to issue shares</u>*

As at March 31, 2026, the Company has an obligation to issue an additional 172,015 Class C preferred shares to each of Mr. Tal and Koze (December 31, 2025 - 166,668 each) as part of the LTB transaction, valued at $924,578 for each party (December 31, 2025 - $1,083,341 each).

*<u>Liability for right-of-use building</u>*

On March 11, 2025, Formosa became a related party upon the appointment of its manager as a director of the Company.

As at March 31, 2026, the liability for right-of-use building was $5,914,605 (December 31, 2025 - $6,034,080).

Under the terms of the agreement, a default occurs if Alberta Ltd. fails to make such payments or lease payments for three consecutive months or for any four months within any rolling six-month period. As collateral for the obligations under the agreement, the Company granted Koze a security interest in all of its ownership interest in Alberta Ltd. the security interest will remain in place until all obligations are fully satisfied. As of March 31, 2026, Alberta Ltd. has failed to make the payments under the agreement and Koze agreed to forbear from exercising his right of ownership interest in Alberta Ltd. until May 31, 2026 (Note 2).

**NOTE 6 - COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS**

As at March 31, 2026, the Company has outstanding borrowings under various loan agreements with multiple lenders, most of which are in default. Certain borrowings are secured by the Company's assets, including equipment, investments and receivables. In the event of default, lenders may have the right to seize collateralized assets.

**Steven Barber**

As part of the Company's acquisition of Alternative Medical Solutions Inc. ("AMS") in 2018, the Company is currently reviewing with legal counsel to ascertain whether it has claims against Steven Barber arising out of his default of the consulting agreement the Company entered into as part of the AMS acquisition (the "Consulting Agreement"). In January 2020, the Company received correspondence from counsel for Mr. Barber demanding payment on amounts purported to be due pursuant to his Consulting Agreement with the Company. The Company has reviewed whether Mr. Barber has performed pursuant to the terms of the Consulting Agreement and noticed concerns.

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 6 - COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS (continued)**

No decision on whether to proceed on either of these situations has been reached as at the date of this Report, but the Company does not believe that these situations present a probability of material risk. As of March 31, 2026, the Company has an outstanding payable of $549,780 included in accounts payable and accrued liabilities (December 31, 2025 - $549,780).

**Deloitte LLP**

On July 18, 2024, Deloitte LLP ("Deloitte") filed a civil claim in the Alberta Court of Justice, alleging a breach of contract. Deloitte was engaged by the Company to assist with fiscal year 2022 finance backfill and diagnostic services and in accordance with a signed engagement letter dated August 29, 2022, proceeded to perform the professional services. Deloitte pleads that it has discharged its responsibilities and delivered its accounts to the Company. The Company acknowledged the satisfactory completion of services and the debts rendered but made no further payment as agreed other than an instalment payment on April 18, 2024. Deloitte is seeking recovery of the amount owed. As of March 31, 2026, the amount payable for services from Deloitte included in accounts payable and accrued liabilities was $33,953 (December 31, 2025 - $34,530).

**Former Executives**

Former executives John Cassels and Andrew Steedman (collectively the "plaintiffs") have filed a lawsuit against the Company alleging wrongful termination, related misconduct, and unpaid compensation. The plaintiffs seek $3 million in compensatory damages and an additional $3 million in punitive damages. During the three months ended March 31, 2026, the Company had a deposition related to the lawsuit which did not result in any material change to the status of the lawsuit. As of March 31, 2026, the Company maintains an accrual of approximately $916,000 for unpaid salaries owed to the plaintiffs for services rendered from April 2019 through June 2023. No additional loss contingency has been recorded, as the lawsuit remains in its early stages and the ultimate outcome is uncertain. The Company actively monitors this matter and will update its assessment as additional information becomes available.

**Astor Street LLC**

Astor Street LLC was issued two promissory notes by the Company in January 2021 and granted a security interest in all present and after acquired assets of the Company. Astor Street LLC commenced a claim to recover the amounts owing for CAD $312,303 in April 2022, obtained default judgment in the amount of CAD $314,273 in March 2023. On September 30, 2025, Astor Street LLC took steps to seize assets belonging to the Company. The Company is currently assessing the validity of the claim and default judgment, and whether it is necessary to come to a negotiated resolution. As of March 31, 2026, the amounts payable for promissory notes to Astor Street LLC included in notes payable was $215,223 (CAD $300,000) (December 31, 2025 - $218,882 (CAD $300,000)).

**NOTE 7 - SEGMENT NOTE**

The Company operates as a single operating segment. The Company's CODM is its CEO, who reviews financial information presented on a consolidated basis. The CODM uses revenue, cost of goods sold, consolidated operating margin and net income to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the determination of the rate at which the Company seeks to grow its operating profit margin and the allocation of budget between cost of goods sold, professional fees, and general and administrative expenses.

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**CANNAPHARMARX, INC.**<br>**NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**<br>**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**<br>**(in United States dollars)**<br>

**NOTE 7 - SEGMENT NOTE (continued)**

The following table presents selected financial information with respect to the Company's single operating segment for the three months ended March 31, 2026 and 2025:

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| | | |
|:---|:---|:---|
|  | **2026** | 2025 |
| **Revenue** | $**627462** | $335319 |
| **Cost of goods sold** | **1036915** | 837926 |
| **Gross loss** | **(409453)** | (502607) |
| **Operating expenses** |  |  |
| General and administrative | **35814** | 38641 |
| Professional fees | **105856** | 136337 |
| Royalty expense | **131220** | - |
| Total operating expenses | **272890** | 174978 |
| **Loss from operations** | **(682343)** | (677585) |
| Other segment items | **364112** | (13009) |
| Net loss | $**(318231)** | $(690594) |

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**NOTE 8 - SIGNIFICANT EVENTS DURING THE PERIOD**

On February 3, 2026, the Company entered into an agreement to settle $50,000 and $10,377 in outstanding note payable principal and accrued interest, respectively, through the issuance of 30,188,500 common shares. As at March 31, 2026, the shares have not been issued.

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**ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

*The following discussion and analysis of the Company's financial condition and results of operations for the interim period as at and for the three months ended March 31, 2026 and 2025 should be read together with the Company's financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related footnotes included on our Form 10-K for the year ended December 31, 2025.*

*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.*

***Forward-Looking Statements***

This Quarterly Report on Form 10-Q includes a number of "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including statements concerning anticipated financial results and developments of our operations in future periods that reflect management's current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the U.S. Securities and Exchange Commission (the "SEC") on March 31, 2026 any of which may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:

· risks associated with the Company's history of losses and need for additional financing,

· risks associated with increased costs affecting its financial condition,

· risks associated with uninsured risks,

· risks associated with governmental and environmental regulations,

· risks associated with future legislation regarding the cannabis industry and climate change,

· risks associated with cybersecurity and cyber-attacks,

· risks associated with legal matters and claims against the Company,

· risks related to economic conditions,

· risks related to our ability to manage growth,

· risks related to our dependence on key personnel,

· risks related to our SEC filing history, and

· risks related to our securities.

This list is not exhaustive of the factors that may affect the Company's forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by law, the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company qualifies all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.

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Readers are urged to carefully review and consider the various disclosures made by us in this Report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

**OVERVIEW AND HISTORY**

As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms "CannaPharmaRX", the "Company", "we", "us", and "our" refer to CannaPharmaRX, Inc. and our wholly owned subsidiaries. Unless otherwise specified, all dollar amounts are expressed in United States dollars ("USD"). We specialize in the acquisition, development, and operation of cannabis cultivation facilities in Canada. We were originally incorporated in the state of Colorado in August 1998 as Network Acquisitions, Inc. In October 2014, we changed our legal name to CannaPharmaRx, Inc. We evolved to focus on producing high-quality medical cannabis and craft products. Our principal executive office is located at 302, 3204-Rideau Place SW., Calgary, Alberta, Canada T2S 1Z2.

On January 6, 2022, we entered into a 20-year operating lease for the use of a 55,000 square foot facility located in Cremona, Alberta, Canada (the "Facility"). During 2022, we recommissioned the Facility into an indoor cannabis farm with 10 growing rooms and one drying and packing room. The Facility currently operates six of these growing rooms and the drying and packing room and plans to increase capacity over the next one to two years to open a second drying and packing room and to operate all 10 growing rooms.

We received an operating license from Health Canada on December 9, 2022, and a cannabis license from the Canada Revenue Agency on December 22, 2022 and commenced cannabis production during the year ended December 31, 2023. Our common shares are traded on the OTC Pink Sheets under the trading symbol "CPMD."

**Growth strategy**

We plan to grow by increasing our growth capacity at the Facility to support sales of cannabis to the European markets, with a focus on Germany and Israel. To support this initiative, we intend to increase the operations in the Facility from six growing rooms to 10 growing rooms over the next one to two years and to open a second drying and packing room; building and developing a sales network in Germany and Israel; and applying for European Union Good Manufacturing Practices ("EU-GMP") certification. Currently, we are required to send our cannabis to a third-party European intermediary for packaging in compliance with EU-GMP standards. Once certified, we will be able to remove this step from our delivery process and ship directly to countries within the European Union ("EU"), reducing overall costs and shipping timelines.

To facilitate our growth strategy, on November 22, 2023, we entered into an agreement with LTB Management, LLC ("LTB") in support of building and developing a sales network in the EU and obtaining access to LTB's e-commerce technology related to online sales of cannabis in the EU. Under this agreement, we obtained 100 Class B units of LTB in exchange for 27,224,962 share purchase warrants, each entitling the holders to purchase one share of our common shares at $0.02 per share until November 22, 2028; $3,000,000 in promissory notes payable to the LTB; and 100,000 Class C preferred shares of our company. Contingent consideration included a quarterly true up of LTB's preferred share proportional ownership to 33% of the outstanding shares of our common shares, and an earn out whereby LTB can earn up to an additional 12% pro-rata preferred share proportional ownership (which, if earned, will result in the true up increasing by the pro-rata preferred share proportional ownership earned) based on our reaching a threshold of $2,500,000 in annual revenue at any time within 24 months of the agreement date. As at March 31, 2026, we have an obligation to issue an additional 344,029 Class C preferred shares to LTB under the true up, valued at $1,849,155.

**OUR PRODUCTS**

*<u>Cannabis Products</u>*

We produce and sell dried cannabis flower, which is packaged for sale as dried flower, trim and shake. We sell dried flower for medicinal purposes. Dried flower continues to be the core of all cannabis markets globally and accordingly our focus on consistent high-quality cultivation is relentless.

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**Going Concern**

Substantial doubt exists as to our ability to continue as a going concern based on the fact that we do not have adequate working capital to finance our day-to-day operations. For the three months ended March 31, 2026, we reported $627,462 (2025 - $335,319) in revenue. As at March 31, 2026, we had cash of $633, a working capital deficiency of $30,556,522 and an accumulated deficit of $112,697,611. Additionally, for the three months ended March 31, 2026, we used $243,656 (2025 - $601,381) of cash in operating activities.

These financial metrics and the Company's accumulated deficit of $112,697,611 as of March 31, 2026 indicate material uncertainty over the Company's ability to continue as a going concern. Management's plans to mitigate this uncertainty involve securing additional capital in the short term primarily through sales of common shares or other instruments. Given the Company's classification as a penny stock traded on the OTC Markets, its constrained liquidity and solvency position, and the limited availability of third-party financing, management expects that any significant additional funding will most likely need to be sourced from related parties. There can be no assurance that we will be successful in completing additional financing or collaboration transactions or, if financing is available, that it can be obtained on commercially reasonable terms or in amounts sufficient to meet its obligations as they become due and support execution of its business plan. If we are not able to obtain the additional financing on a timely basis, we may be required to scale down or perhaps even cease the operations of our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current shareholders. Obtaining commercial or related party loans, assuming those loans would be available, will increase our liabilities and future cash commitments. We are subject to pending litigation and legal proceedings, the outcomes of which are uncertain and could result in significant costs, settlements, or judgments. While management does not currently believe these matters will have a material adverse effect, unfavorable outcomes could adversely impact the Company's liquidity, results of operations, and ability to continue as a going concern. Our financial statements include certain accruals and adjustments based on management's best estimates regarding this uncertainty; however, the ultimate resolution of these matters could differ materially from these estimates and result in additional adjustments.

On March 17, 2025, the Company and its subsidiary, 2323414 Alberta Ltd. ("Alberta Ltd."), which operates the Company's principal business activities, including the cultivation, processing, and distribution of cannabis, entered into a security and royalty agreement with Koze Investments LLC ("Koze"), a California-based limited liability company engaged in providing financing and investment services. Alberta Ltd. is a subsidiary of the Company in which Koze has been considered a related party since March 11, 2025, the date on which its manager, Elliot Zemel, was appointed as a director of the Company. Pursuant to the agreement, the Company is required to pay a royalty on cannabis product sales from the prior month. If royalty payments are not made on time, the applicable rate increases. The agreement stipulates that a default occurs if Alberta Ltd. fails to make royalty or lease payments for three consecutive months, or for any four months within a rolling six-month period. As collateral, the Company granted Koze a security interest in its entire ownership interest in Alberta Ltd., which will remain in place until all obligations are fully satisfied. As of March 31, 2026, Alberta Ltd. was in default of its payment obligations, and Koze agreed to forbear from exercising his rights over the ownership interest until May 31, 2026. The Company also incurred royalty expenses under the agreement and recorded a related liability in accounts payable and accrued liabilities as of March 31, 2026.

**RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025**

**Revenue**

During the three months ended March 31, 2026 and 2025, the Company reported revenue of $627,462 and $335,319, respectively. The increase was primarily driven by the continued expansion of the Company's medical cannabis product line, improved distribution capabilities, increased market penetration, and the onboarding of new retail partners since late 2024.

**Cost of Goods Sold**

During the three months ended March 31, 2026 and 2025, the Company reported cost of goods sold of $1,036,915 and $837,926, respectively. The increase was primarily driven by higher sales volumes in 2026, which necessitated increased production activity and resulted in elevated costs related to direct materials, labor, and manufacturing overhead. Included in cost of goods sold for the three months ended March 31, 2026 and 2025 are losses on the impairment of inventory of $493,721 and $479,933, respectively, primarily based on factors including expected yield of work-in-progress inventory and corresponding market prices.

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**Gross Loss**

During the three months ended March 31, 2026 and 2025, the Company reported a gross loss of $409,453 and $502,607, respectively. The decrease in gross loss was primarily due to higher sales volumes, which drove stronger revenue growth that outpaced the rise in cost of goods sold.

**Operating Expenses**

A summary of the Company's operating expenses for the three months ended March 31, 2026 and 2025 is as follows:

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| | | |
|:---|:---|:---|
|  | **2026** | 2025 |
| General and administrative | $**35814** | $38641 |
| Professional fees | **105856** | 136337 |
| Royalty expense | **131220** | - |
|  | $**272890** | $174978 |

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During the three months ended March 31, 2026 and 2025, the Company's operating expenses consisted primarily of general and administrative expenses, professional fees associated with the costs for services or employees in finance, accounting, sales, administrative activities and the compliance of a public company, and royalty expense. Overall operating expenses for the three months ended March 31, 2026 were $272,890 compared to operating expenses of $174,978 in the prior year comparable period, an increase of $97,912. The increase is primarily attributable to the following:

· A $131,220 increase in royalty expense due to an agreement entered into by the Company with Koze on March 17, 2025, which did not incur royalty expenses during the prior year comparable period.

The increase was partially offset by the following decrease in operating expenses:

· A $30,481 decrease in professional fees primarily due to lower accounting fees in the current period related to enhanced processes and cost efficiencies.

**Other income (expenses)**

A summary of the Company's other income and expenses for the three months ended March 31, 2026 and 2025 is as follows:

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| | | |
|:---|:---|:---|
|  | **2026** | 2025 |
| Change in the fair value of derivative conversion feature | $**801038** | $641711 |
| Change in the fair value of obligation to issue shares | **317527** | 1880911 |
| Foreign exchange gain (loss) | **(31084)** | 9885 |
| Interest expense | **(475617)** | (615516) |
| Imputed interest expense | **(311542)** |  |
| Other expense | **-** | (1930000) |
|  | $**300322** | $(13009) |

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Other income totaled $300,322 for the three months ended March 31, 2026 compared to other expenses of $13,009 in the 2025 period, primarily due to the following:

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| Change in the fair value of derivative conversion feature arising from variably priced convertible notes was a gain of $801,038 compared to $641,711 in the prior year comparable period. The primary drivers of these fair value changes were fluctuations in the common shares of the Company's peers as the Company's common shares trade infrequently on the OTC Markets, the remaining term to expiration of the convertible notes and the conversion feature's exercise price. |
| A $139,899 decrease in interest expense is primarily attributable to a reduction in the interest rate for certain loans to related parties, pursuant to a debt modification agreement entered into by the Company with those related parties.  |
| A non-cash one-time adjustment of $1,930,000 in the prior year comparable period was made to lease-related rent expense due to a clarification in the interpretation of the lease terms between management and Formosa. |

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The increase in other income was partially offset by the following decreases:

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| Change in the fair value of obligation to issue shares was a gain of $317,527 compared to a gain of $1,880,911 in the 2025 comparable period resulting from remeasurement of the obligation to issue shares. Key factors influencing the measurement of the obligation to issue shares include fluctuations in the Company's common shares price and the number of common shares outstanding. |
| A $40,969 increase in the foreign exchange loss primarily due to currency fluctuations between the USD and CAD. |
| A $311,542 increase in imputed interest expense due to debt modification of certain loans to related parties, which resulted in a remeasurement of the liabilities and recognition of additional imputed interest expense. |

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**Net Loss**

As a result of the foregoing, during the three months ended March 31, 2026, the Company recorded a net loss of $382,021 or $0.00 per share compared to a net loss of $690,594 or $0.00 per share in the 2025 comparable quarter.

**LIQUIDITY AND CAPITAL RESOURCES**

As of March 31, 2026, the Company had $633 in cash as compared to $1,804, and working capital deficiency of $30,556,522 compared to $30,278,570 as of December 31, 2025. During the three months ended March 31, 2026, the Company's funding was primarily attributable to advances from Koze, a related party, directly to the suppliers of the Company. During the three months ended March 31, 2026, Koze made payments of $519,531 directly to the Company's suppliers. In addition, $516,021 was received directly by Koze, as collections from customers. This promissory note represents an ongoing funding arrangement under which additional amounts are funded by Koze based on the Company's operational needs from time to time.

Based on current financial projections, the Company does not have sufficient existing cash resources to fund its current operations. Accordingly, there is substantial doubt about the Company's ability to continue as a going concern. Management intends to address these liquidity challenges through debt financings and/or raise additional funding through equity financing to support ongoing operating expenses and working capital needs. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company and therefore, the Company is heavily reliant on funding from related parties. If the Company is unable to secure adequate financing or otherwise successfully implement its plans, it may be required to significantly reduce or curtail its operations, or cease operations entirely. Any issuance of equity securities to raise capital could result in substantial dilution to existing shareholders. Certain borrowings are secured by the Company's assets, including equipment, investments and receivables. In the event of default, lenders may have the right to seize collateralized assets.

The summary of the Company's cash flows for the three months ended March 31, 2026 and 2025 is as follows:

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|:---|:---|:---|
|  | **2026** | 2025 |
| Cash used in operating activities | $**(243656)** | $(601381) |
| Cash provided by financing activities | **242485** | 600433 |
|  | $**(1171)** | $(948) |

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*Cash flows from operating activities*

Cash used in operating activities for the three months ended March 31, 2026 decreased by $357,725 compared to the prior year comparable period, primarily due to higher sales during the current period, more efficient working capital management and stronger management of accounts payable and accrued liabilities.

*Cash flows from investing activities*

For the three months ended March 31, 2026 and 2025, there were no cash flows related to investing activities.

*Cash flows from financing activities*

Cash provided by financing activities for the three months ended March 31, 2026 was $242,485 compared to $600,433 in the prior year comparable period, due to proceeds from related party loans.

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**Related party transactions**

*<u>Revenue</u>*

During the three months ended March 31, 2026, the Company recognized all of its revenue of $627,462 (2025 - $nil) from related parties being D.N.S. CANTEK 2019 LTD ("Cantek"), an Israeli limited corporation owned 100% by Koze, and for which Mr. Tal serves as a financial advisor.

These related party relationships did not influence our business decisions or pricing, as sales are determined primarily based on market demand and the ability to achieve the highest possible selling price.

A summary of the Company's average selling prices by market is as follows:

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|:---|:---|:---|
|  | **Average Price per Gram (CAD)<sup>\*</sup>** | **Average Price per Gram (CAD)<sup>\*</sup>** |
| **Market** | **Premium Batches**  | **Medium Batches**  |
| Germany | **2.05** | **1.6** |
| Israel | **2.0** | **1.6-1.8** |
| Canada | **2.0** | **1.1-1.5** |
| Portugal | **1.8-2.0** | **0.8-1.5** |

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<sup>\*</sup> Batches with THC concentrations below 20% are generally sold at lower average prices compared to higher-THC batches.

*<u>Lease expense</u>*

The Company has a lease with Formosa, which became a related party upon the appointment of its manager, Elliot Zemel, as a director of the Company on March 11, 2025. During the three months ended March 31, 2026, the Company recognized interest expense related to rent in default of $161,323 (2025 - $154,702), associated with unpaid lease payments.

During the three months ended March 31, 2026, the Company incurred lease expense of $273,374 (2025 - $261,285) associated with the Formosa lease, which is included in cost of goods sold.

*<u>Professional fees</u>*

· During the three months ended March 31, 2026, the Company incurred professional expenses of $42,733 (2025 - $78,363) related to accounting fees payable to Invictus Accounting Group LLP ("Invictus"), a company which provides part-time CFO, financial reporting, and bookkeeping services to the Company. Mr. Oliver Foeste is the Managing Partner of Invictus.

· During the three months ended March 31, 2026, the Company incurred professional expenses of $11,025 payable to Fabian Vancott (2025 - $34,000) related to legal fees. Anthony Panek who is a partner in Fabian Vancott, is also a director of the Company.

*<u>Royalty expense</u>*

On March 17, 2025, the Company and Alberta Ltd., entered into the Royalty Agreement, pursuant to which the Company is required to pay a royalty of CAD $0.20 per gram on cannabis product sales, payable at the beginning of the month for the previous month, as additional consideration related to the lease with Formosa. Immediately upon failure to pay the royalty when due, the royalty rate increases to CAD $0.40 per gram sold for the applicable month. As of March 31, 2026, Alberta Ltd. was in default of its payment obligations, and Koze agreed to forbear from exercising its rights over the ownership interest until May 31, 2026.

During the three months ended March 31, 2026, the Company sold 450,000 grams of cannabis products, and for the three months ended March 31, 2026, the Company incurred a royalty expense of $131,220 (2025 - $nil).

*<u>Interest expense</u>*

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| During the three months ended March 31, 2026, the Company incurred interest expense on promissory and convertible notes with Mr. Tal of $11,153 (2025 - $14,425). |
| During the three months ended March 31, 2026, the Company incurred interest expense on promissory and convertible notes with Koze of $160,108 (2025 - $415,936). |
| During the three months ended March 31, 2026, the Company incurred interest expense on promissory note with Formosa of $27,604 (2025 - $nil). |
| During the three months ended 31, 2026, the Company incurred interest expense on rent in default with Formosa of $161,323 (2025 - $154,702). |

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*<u>Imputed interest expense</u>*

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| During the three months ended March 31, 2026, the Company incurred imputed interest expense on promissory and convertible notes with Mr. Tal of $17,099 (2025 - $nil). |
| During the three months ended March 31, 2026, the Company incurred imputed interest expense on promissory and convertible notes with Koze of $248,108 (2025 - $nil) |
| During the three months ended March 31, 2026, the Company incurred imputed interest expense on promissory and convertible notes with Formosa of $46,335 (2025- $nil). |

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*<u>Other expense</u>* 

During the three months ended March 31, 2025, the Company made a non-cash one-time adjustment of $1,930,000 to lease-related rent expense due to a clarification in the interpretation of the lease terms for the Facility, which is recorded as other expense.

*<u>Accounts payable and accrued liabilities</u>*

As at March 31, 2026, accounts payable and accrued liabilities include balances owing to related parties as follows:

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| As at March 31, 2026, $4,481,131 (December 31, 2025 - $4,283,706) was payable to Formosa for outstanding lease payments. As at March 31, 2026, accrued interest on unpaid lease payments on the Formosa lease was $1,178,602 (December 31, 2025 - $1,037,180). |
| As at March 31, 2026, $141,896 (December 31, 2025 - $146,306) was payable to Invictus for part-time CFO, financial reporting, and bookkeeping services provided to the Company. |
| As at March 31, 2026, $319,279 (December 31, 2025 - $319,279) was payable to Mr. Orman for unpaid directors' fees for 2021 through 2023. |
| As at March 31, 2026, $542,727 (December 31, 2025 - $551,953) was payable to Dominic Colvin, a director of the Company, for unpaid salary and expense reimbursement amounts during Mr. Colvin's employment with the Company as its CEO during the years 2019 through 2022. Mr. Colvin has disputed this amount and is asserting a claim for $1,679,060. As of March 31, 2026, the Company is in the process of reviewing the claim and remains in ongoing discussions with Mr. Colvin. No resolution has been reached with respect to this matter. |
| As at March 31, 2026, $124,960 (December 31, 2025 - $115,645) was payable to Fabian Vancott in respect of unpaid legal fees. |

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*<u>Loans payable to related parties</u>*

On August 7, 2025, the Company entered into an agreement (the "Debt Modification") with Mr. Tal and Koze to amend the annual interest rates on all outstanding promissory and convertible notes held by them to 6%, compounding annually. This was deemed to be a substantial modification of the terms of the agreements and was accounted for as an extinguishment of the promissory and convertible notes and recognition of new notes at the new 6% rate. The term to maturity was unchanged. In connection with the issuance of the new notes resulting from the Debt Modification, the Company determined that the market interest rate for similar instruments was 15%. Accordingly, the debt was recorded at a discount to reflect this effective interest rate, with the discount amortized to imputed interest expense over the term of the debt using the effective interest method.

As at March 31, 2026, the loans payable to related parties consists of the following:

<u>PLC International Investments Inc. ("PLC")</u>

· A $13,223 interest-free loan from PLC, a company owned by Dominic Colvin, a director of the Company.

<u>Loans payable to Koze</u>

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| | |
|:---|:---|
| ·  | *<u>Koze LTB:</u>* |
|  | On November 22, 2023, the Company entered into promissory notes of $2,550,000 with Koze, as part of the LTB transaction, bearing interest at 13% per annum. Originally due on November 22, 2024, the maturity date for this note was extended to December 31, 2025, by agreement with Koze. On March 18, 2026, Mr. Tal and Koze agreed to extend the maturity date of the promissory notes to December 31, 2026. |

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|:---|
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $2,550,000 and $555,406, respectively, were extinguished. A new note ("Koze LTB") of $2,978,661 bearing 6% interest, compounding annually, was recognized resulting in a gain of $126,745 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $46,107 and imputed interest expense of $69,601 related to the note. As at March 31, 2026, the outstanding principal balance on the note was $3,163,079 (December 31, 2025 - $3,093,478) and accrued interest payable on the note was $122,169 (December 31, 2025 - $76,062). |
| *<u>Koze A:</u>* |
| On May 25, 2023, the Company entered into a promissory note with Koze, bearing interest at 24% compounded monthly, to fund for certain documented expenses. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $849,278 and $443,339, respectively, were extinguished. A new note ("Koze A") of $1,134,669 bearing 6% interest, compounding annually, was recognized resulting in a gain of $157,949 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $22,026 and imputed interest expense of $34,489 related to the note. During the three months ended March 31, 2026, the Company had $161,813 in net additions to the promissory note. As at March 31, 2026, the outstanding principal balance on the note was $1,596,545 (December 31, 2025 - $1,400,243) and accrued interest payable on the note was $53,096 (December 31, 2025 - $31,070). |
| *<u>Koze B:</u>* |
| On May 25, 2023, the Company entered into another promissory note with Koze, bearing interest at 24% compounded monthly, to fund the Company for certain documented expenses. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $4,040,474 and $1,366,780, respectively, were extinguished. A new note ("Koze B") of $4,767,106 bearing 6% interest, compounding annually, was recognized resulting in a gain of $640,148 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $84,794 and imputed interest expense of $132,769 related to the note. During the three months ended March 31, 2026, the Company had $84,182 in net additions on the promissory note. As at March 31, 2026, the outstanding principal balance on the note was $5,652,377 (December 31, 2025 - $5,529,686) and accrued interest payable on the note was $213,594 (December 31, 2025 - $132,215). |
| *<u>Koze C:</u>* |
| On February 8, 2024, the Company entered into another promissory note with Koze, bearing interest at 24% compounded monthly. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $275,000 and $97,403, respectively, were extinguished. A new note ("Koze C") of $330,551 bearing 6% interest, compounding annually, was recognized resulting in a gain of $41,852 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $5,196 and imputed interest expense of $8,140 related to the note. As at March 31, 2026, the outstanding principal balance on the note was $351,841 (December 31, 2025 - $343,701) and accrued interest payable on the note was $13,590 (December 31, 2025 - $8,394). |
| *<u>Koze convertible note ("Koze CN"):</u>* |
| The Company has a convertible note with Koze, bearing annual interest at 24%. |

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|:---|
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $68,555 and $75,714, respectively, were extinguished. A new note, Koze CN, of $126,275 bearing 6% interest, compounding annually, was recognized resulting in a gain of $17,995 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $1,985 and imputed interest expense of $3,109 related to the note. As at March 31, 2026, the outstanding principal balance on the note was $134,407 (December 31, 2025 - $131,298) and accrued interest payable on the note was $5,192 (December 31, 2025 - $3,207). |

---

<u>Loans payable to Mr. Tal</u>

---

| |
|:---|
| *<u>Mr. Tal LTB:</u>* |
| On November 22, 2023, the Company entered into a promissory note of $450,000 with Mr. Tal as part of the LTB transaction, bearing interest at 13% per annum. Originally due on November 22, 2024, the maturity date for this note was extended to December 31, 2025, by agreement with Mr. Tal. On March 18, 2026, Mr. Tal and Koze agreed to extend the maturity date of the promissory notes to December 31, 2026. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $438,296 and $89,768, respectively, were extinguished. A new note ("Mr. Tal LTB") of $507,422 bearing 6% interest, compounding annually, was recognized resulting in a gain of $20,641 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $6,518 and imputed interest expense of $9,844 related to the note. During the three months ended March 31, 2026, the Company made net repayments of $30,000 on the promissory note and accrued interest. As at March 31, 2026, the outstanding principal balance on the note was $441,659 (December 31, 2025 - $447,647) and accrued interest payable on the note was $4,237 (December 31, 2025 - $11,887). |
| *<u>Mr. Tal convertible note ("Mr. Tal CN"):</u>* |
| The Company had a convertible note with Mr. Tal, bearing interest at 24%. |
| As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $212,555 and $121,427, respectively, were extinguished. A new note, Mr. Tal CN, of $294,850 bearing 6% interest, compounding annually, was recognized resulting in a gain of $39,132 from extinguishment, recorded directly to additional paid-in capital. |
| During the three months ended March 31, 2026, the Company recognized interest expense of $4,635 and imputed interest expense of $7,255 related to the note. As at March 31, 2026, the outstanding principal balance on the note was $313,826 (December 31, 2025 - $306,571) and accrued interest payable on the note was $12,128 (December 31, 2025 - $7,488). |

---

<u>Promissory note with Formosa</u>

On January 1, 2025, the Company entered into a promissory note with Formosa in the amount of $1,930,000, bearing interest at 5% per annum, with respect to a one-time adjustment made to lease-related rent expense due to a clarification in the interpretation of the lease terms for the Facility.

As a result of the Debt Modification, principal and accrued interest outstanding related to the note as of August 7, 2025 of $1,930,000 and $58,098, respectively, were extinguished. A new note of $1,775,707 bearing 6% interest, compounding annually, was recognized resulting in a gain of $212,391 from extinguishment, recorded directly to additional paid-in capital.

During the three months ended March 31, 2026, the Company recognized interest expense of $27,604 and imputed interest expense of $46,335 related to the note. As at March 31, 2026, the outstanding balance on the note was $1,896,766 (December 31, 2025 - $1,850,431) and accrued interest payable on the note was $73,012 (December 31, 2025 - $45,396).

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A summary of the accrued interest of the Company's loans payable to related parties as at March 31, 2026 and December 31, 2025 is as follows:

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| | | |
|:---|:---|:---|
|  | **2026** | 2025 |
| Koze LTB | $**122169** | $76062 |
| Koze A | **53096** | 31070 |
| Koze B | **213594** | 132215 |
| Koze C | **13590** | 8394 |
| Koze CN | **5192** | 3207 |
| Mr. Tal LTB | **4237** | 11887 |
| Mr. Tal CN | **12128** | 7488 |
| Promissory note with Formosa | **73012** | 45396 |
|  | $**497018** | $315719 |

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*<u>Royalty payable</u>*

Pursuant to the Royalty Agreement, as of March 31, 2026, the royalty amount payable to Koze was $429,520 (CAD $598,708) (2025 - $nil).

*<u>Obligation to issue shares</u>*

As at March 31, 2026, the Company has an obligation to issue an additional 172,015 Class C preferred shares to each of Mr. Tal and Koze (December 31, 2025 - 166,668 each) as part of the LTB transaction, valued at $924,578 for each party (December 31, 2025 - $1,083,341 each).

*<u>Liability for right-of-use building</u>*

On March 11, 2025, Formosa became a related party upon the appointment of its manager as a director of the Company.

As at March 31, 2026, the liability for right-of-use building was $5,914,605 (December 31, 2025 - $6,034,080)

Under the terms of the agreement, a default occurs if Alberta Ltd. fails to make such payments or lease payments for three consecutive months or for any four months within any rolling six-month period. As collateral for the obligations under the agreement, the Company granted Koze a security interest in all of its ownership interest in Alberta Ltd. the security interest will remain in place until all obligations are fully satisfied. As of March 31, 2026, Alberta Ltd. has failed to make the payments under the agreement and Koze agreed to forbear from exercising his right of ownership interest in Alberta Ltd. until May 31, 2026.

**Critical accounting estimates**

The Company's financial statements and accompanying notes have been prepared in accordance with US 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.

In preparing these financial statements, the Company is exposed to the same sources of estimation uncertainty as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

**Recently issued accounting pronouncements**

<u>New accounting standards not yet adopted</u>

In November 2024, the FASB issued ASU No. 2024-03, Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires an entity to disclose the amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption. It also requires an entity to include certain amounts that are already required to be disclosed under current GAAP in the same disclosure. Additionally, it requires an entity to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and to disclose the total amount of selling expenses and, in annual reporting periods, an entity's definition of selling expenses. The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. Management is currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

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**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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

The Company is classified as a smaller reporting company and is not required to provide the information under this item pursuant to Regulation S-K.

**ITEM 4. CONTROLS AND PROCEDURES**

**Disclosure controls and procedures**

*<u>Controls and procedures</u>*

Our management, with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), 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 SEC, 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 March 31, 2026, at reasonable assurance levels.

*<u>Inherent limitations</u>*

Our management, including our CEO and CFO, 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.

*<u>Changes in internal control over financial reporting</u>*

There were no changes in our internal control over financial reporting during the three months ended March 31, 2026, 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.

**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 15d15(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.

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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 March 31, 2026. 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 March 31, 2026, our disclosure controls and procedures and internal control over financial reporting were not effective and that a material weakness existed in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a Company's annual or interim financial statements will not be prevented or detected on a timely basis.

Management has identified deficiencies in operating effectiveness that, in combination, represent a material weakness in internal control over financial reporting as follows:

· Due to management and staff turnover in the prior years, accurate information and records were not consistently maintained within our records and there were instances where documentation to support certain transactions was difficult to obtain or unobtainable. These deficiencies represent a material weakness in our internal control over financial reporting.

Because of the material weakness identified, management has concluded that its internal control over financial reporting was not effective as of March 31, 2026. We are in the process of developing and implementing remediation plans to address the material weakness described above.

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**PART II. OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS**

**Steven Barber**

As part of the Company's acquisition of AMS in 2018, the Company is currently reviewing with legal counsel to ascertain whether it has claims against Steven Barber arising out of his default of the consulting agreement the Company entered into as part of the Consulting Agreement. In January 2020, the Company received correspondence from counsel for Mr. Barber demanding payment on amounts purported to be due pursuant to his Consulting Agreement with the Company. The Company has reviewed whether Mr. Barber has performed pursuant to the terms of the Consulting Agreement and noticed concerns.

No decision on whether to proceed on either of these situations has been reached as at the date of this Report, but the Company does not believe that these situations present a probability of material risk. As of March 31, 2026, the Company has an outstanding payable of $549,780 included in accounts payable and accrued liabilities (December 31, 2025 - $549,780).

**Deloitte LLP**

On July 18, 2024, Deloitte filed a civil claim in the Alberta Court of Justice, alleging a breach of contract. Deloitte was engaged by the Company to assist with fiscal year 2022 finance backfill and diagnostic services and in accordance with a signed engagement letter dated August 29, 2022, proceeded to perform the professional services. Deloitte pleads that it has discharged its responsibilities and delivered its accounts to the Company. The Company acknowledged the satisfactory completion of services and the debts rendered but made no further payment as agreed other than an instalment payment on April 18, 2024. Deloitte is seeking recovery of the amount owed. As of March 31, 2026, the amount payable for services from Deloitte included in accounts payable and accrued liabilities was $33,953 (December 31, 2025 - $34,530).

**Former Executives**

The plaintiffs have filed a lawsuit against the Company alleging wrongful termination, related misconduct, and unpaid compensation. The plaintiffs seek $3 million in compensatory damages and an additional $3 million in punitive damages. During the three months ended March 31, 2026, the Company had a deposition related to the lawsuit which did not result in any material change to the status of the lawsuit. As of March 31, 2026, the Company maintains an accrual of approximately $916,000 for unpaid salaries owed to the plaintiffs for services rendered from April 2019 through June 2023. No additional loss contingency has been recorded, as the lawsuit remains in its early stages and the ultimate outcome is uncertain. The Company actively monitors this matter and will update its assessment as additional information becomes available.

**Astor Street LLC**

Astor Street LLC was issued two promissory notes by the Company in January 2021 and granted a security interest in all present and after acquired assets of the Company. Astor Street LLC commenced a claim to recover the amounts owing for CAD $312,303 in April 2022, obtained default judgment in the amount of CAD $314,273 in March 2023. On September 30, 2025, Astor Street LLC took steps to seize assets belonging to the Company. The Company is currently assessing the validity of the claim and default judgment, and whether it is necessary to come to a negotiated resolution. As of March 31, 2026, the amounts payable for promissory notes to Astor Street LLC included in notes payable was $215,223 (CAD $300,000) (December 31, 2025 - $218,882 (CAD $300,000)).

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 1A. RISK FACTORS**

There have been no material changes to the Company's "Risk Factors" set forth in its Annual Report on Form 10-K for the year ended December 31, 2025.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

No equity transactions occurred during the three months ended March 31, 2026.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

None.

**ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable

**ITEM 5. OTHER INFORMATION**

During the three months ended March 31, 2026, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

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**ITEM 6. EXHIBITS**

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| | |
|:---|:---|
| 2.1 | Amended and Restated Membership Interest Purchase Agreement, dated November 22, 2023 |
| 3.1 | Bylaws adopted 12/31/10 |
| 3.2 | Certificate of Amendment of Certificate of Incorporation dated 10/22/14  |
| 3.3 | Certificate of Designation of Preferences, Rights and Limitation of Series C Convertible Preferred Stock |
| 4.1 | Letter Agreement between the Company and Koze Investments, LLC and Amir Tal regarding Allocation of Revenue from IMC Cannabis Transaction dated March 17, 2025 |
| 4.2 | Security And Royalty Agreement between the Company and Koze Investments, LLC dated March 17, 2025 |
| 4.3 | Amended and Restated Lease dated January 1, 2025 |
| 4.4 | Amendment No. 1 to Amended and Restated Secured Promissory Note; entered into with Koze Investments LLC and Amir Tal |
| 4.5 | Amendment No. 1 to Amended and Restated Senior Secured Promissory Note; entered into with Koze Investments |
| 4.6 | Secured Promissory Note dated February 26, 2025 |
| 4.7 | Transfer of 2323414 Alberta Ltd. to Elliot Zemel dated March 17, 2025 |
| 4.8 | Forbearance Agreement 2323414 Alberta (CPMD) - Formosa (June 2025) |
| 4.9 | Letter Agreement (Payment Schedule) - A. Tal |
| 4.10 | Payment Schedule (Payment Schedule) - Koze Investments |
| [31.1](canna_ex311.htm) | [Certification of Chief Executive Officer required by Rule 13a-14(a) under the Exchange Act (filed herewith).](canna_ex311.htm) |
| [31.2](canna_ex312.htm) | [Certification of Chief Financial Officer required by Rule 13a-14(a) under the Exchange Act (filed herewith).](canna_ex312.htm) |
| [32](canna_ex32.htm) | [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).](canna_ex32.htm) |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are <br>embedded within the Inline XBRL document) |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101) |

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**SIGNATURES**

Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on May 20, 2026.

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| | |
|:---|:---|
| **CannaPharmaRx, Inc.** | **CannaPharmaRx, Inc.** |
| By: | /s/ Constantine Nkafu |
|  | Constantine Nkafu, |
|  | Chief Executive Officer |
| By: | /s/ Oliver Foeste |
|  | Oliver Foeste, |
|  | Chief Financial Officer |

---

## Exhibit 31.1

**EXHIBIT 31.1**

**CERTIFICATION PURSUANT TO**

**RULE 13a-14(a) UNDER THE**

**SECURITIES EXCHANGE ACT OF 1934, AS AMENDED**

I, Constantine Nkafu, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CannaPharmaRx, Inc.;

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

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

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

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

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

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

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

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

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

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

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| | |
|:---|:---|
| Dated: May 20, 2026 | /s/ Constantine Nkafu |
|  | Constantine Nkafu, Chief Executive Officer |

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## Exhibit 31.2

**EXHIBIT 31.2**

**CERTIFICATION PURSUANT TO**

**RULE 13a-14(a) UNDER THE**

**SECURITIES EXCHANGE ACT OF 1934, AS AMENDED**

I, Oliver Foeste, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CannaPharmaRx, Inc.;

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

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

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

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

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

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

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

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

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

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

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| | |
|:---|:---|
| Dated: May 20, 2026 | /s/ Oliver Foeste |
|  | Oliver Foeste, Chief Financial Officer (Principal Financial Officer) |

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## Exhibit 32.1

**EXHIBIT 32**

**CERTIFICATION PURSUANT TO**

**18 USC, SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with this quarterly report of CannaPharmaRx, Inc. (the "Company") on Form 10-Q for the three-month period ended March 31, 2026, as filed with the Securities and Exchange Commission on May 20, 2026 (the "Report"), we, the undersigned, in the capacities and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

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

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

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| | |
|:---|:---|
| Dated: May 20, 2026 | /s/ Constantine Nkafu |
|  | Constantine Nkafu, Chief Executive Officer |
| Dated: May 20, 2026 | /s/ Oliver Foeste |
|  | Oliver Foeste, Chief Financial Officer (Principal Financial Officer) |

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