Cryomass Technologies, Inc. - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

or

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

For the transition period from              to                  

Commission File Number 333-181259

FIRST COLOMBIA DEVELOPMENT CORP.
(Exact name of registrant as specified in its charter)

415-729-1747
(Registrant's telephone number, including area code)

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

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 [X] NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] YES [   ] NO

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

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 [X] NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
[  ] YES [   ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

105,426,708 common shares issued and outstanding as of August 12, 2019.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item1. Financial Statements Consolidated Financial Statements

Our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2019 and 2018 form part of this quarterly report. Unless otherwise specified our consolidated financial statements are expressed in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles with the instructions to Form 10-Q and Article 8 of Regulation S-X.

Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that can be expected for the year ending December 31, 2019.

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

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

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

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

First Colombia Development Inc. (the "Company") was incorporated under the laws of the State of Nevada on May 10, 2011. Effective April 26, 2018, the Company changed its name from AFC Building Technologies Inc. to First Colombia Development Inc. On May 10, 2018, the Company acquired all the issued and outstanding share capital of a Colombian company, First Colombia Devco SAS. ("Devco"), and began to establish various business ventures in Colombia in the agriculture and real estate development, tourism, and infrastructure sectors before commencing to phase them out in April 2019. On April 26, 2019, the Company began to reposition itself into the cannabis industry in the United States, and on May 14, 2019, announced two non-binding letters of intent to acquire assets in the cannabis space, including medical marijuana dispensaries and cannabis oil extraction assets.

In April 2019, the Company began to reposition itself into the cannabis industry. As a result, the Company intends to sell its Colombian subsidiary, Devco, as well as its principal remaining asset, approximately 13 hectares of undeveloped land. The operations of the Colombian business and land will be accounted for as discontinued operations through the expected divestiture (see Note 7).

The accompanying condensed consolidated balance sheets include the following carrying amounts of assets and liabilities related to these discontinued operations:

     The condensed consolidated statements of operations include the following operating results related to these discontinued operations:

Forward-Looking Statements

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

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

Unless otherwise specified our financial statements are expressed in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our" and "our company" mean First Colombia Development Corp., a company incorporated under the laws of the state of Nevada, and our current wholly-owned subsidiary, First Colombia Devco SAS, a Colombian company, unless otherwise indicated.

General Overview

We were incorporated under the laws of the state of Nevada on May 10, 2011. Our fiscal year end is December 31. Our business offices are currently located at 3020 Bridgway, Ste 505, Sausalito, CA 94965. The address of agent for service in Nevada and registered corporate office is c/o National Registered Agents, Inc. of Nevada, 100 East William Street, Suite 204, Carson City, NV, 89701. Our telephone number is (415) 729-1747.

In April 2018 we effected a forward stock split of our authorized and issued and outstanding shares of common stock on a one (1) old for two (2) new basis. Upon effect of the forward split, our authorized capital increased from 250,000,000 shares of common stock to 500,000,000 shares of common stock and correspondingly, our issued and outstanding shares of common stock increased from 34,760,008 to 73,520,016 shares of common stock, all with a par value of $0.001. Certificate of Change and Articles of Merger to effect the forward split and the merger and change of name to First Colombia Development Corp. were filed with the Nevada Secretary of State on April 12, 2018, with an effective date of April 26, 2018. The name change and reverse stock split were subsequently reviewed and approved by the Financial Industry Regulatory Authority (FINRA) with an effective date of April 26, 2018.

Our Current Business

Effective May 10, 2018, we executed and closed a purchase agreement with Grupo Jaque Ltd. and First Colombia Devco SAS whereby we acquired the issued and outstanding share capital of First Colombia Devco SAS, a Colombian company, from its sole shareholder, Grupo Jaque Ltd. The consideration for the purchase was $100,000, which represented a reimbursement of the vendor’s costs to capitalize and establish the Colombian company, and the costs of establishing the company’s Colombian head offices.

On April 26, 2019, the Company began repositioning itself through the disposal of the Colombian assets and to develop a nationwide network of medical marijuana dispensaries and related businesses in the United States, where legally permitted, with a focus on both THC-dominant and CBD-dominant cannabis manufacturing, distribution and sales. On May 14, 2019, we announced a non-binding letter of intent with Critical Mass Industries LLC dba GoodMeds ("GoodMeds") pursuant to which the Company will acquire the management assets related to dispensing, cultivation, and extraction, as well as the brand assets of GoodMeds, which includes BOSM Labs, in exchange for US$1,999,770 and 15,053,233 shares of common stock. GoodMeds was founded in Denver in 2009 by John Knapp. As a pioneering company in a fully-regulated cannabis marketplace, GoodMeds operates two storefronts and a 90,000 square foot cultivation and extraction facility, producing world-class Medical and Adult Use products. On May 14, 2019, the Company also entered into a non-binding letter of intent to acquire General Extract LLC dba General Extract ("General Extract"). General Extract was founded in 2015 as an importer, distributor, broker and postprocessor of hemp and hemp derivatives. As an intermediary in the global supply of cannabis products, General Extract is closely aligned with both the upstream and downstream cannabis leaders.

The GoodMeds transaction closed on August 7, 2019 on substantially the same terms as indicated in the Letter of Intent dated May 14, 2019. The General Extract transaction  is expected to close in the third quarter..

Cash Requirements

Based on our current planned expenditures, we will require approximately $5,000,000 over the next 12 months. In order to provide funds, on August 5, 2019, we completed the non-brokered private placement we previously announced in which we received gross proceeds of $7,736,730. Should we require more funds and are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

We have not investigated the availability of commercial loans or other debt financing to supplement or meet our cash requirements. In the uncertain event that any such debt financing alternatives were available to us on acceptable terms, they would increase our liabilities and future cash commitments.

Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Results of Operations

The following summary of our results of operations should be read in conjunction with our financial statements for the three and six months ended June 30, 2019, which are included herein.

Three Months Ended June 30, 2019 and June 30, 2018

Our operating results for the three months ended June 30, 2019 and June 30, 2018 are summarized as follows:

Revenue and Cost of Sales

We had no revenues and did not engage in any sales activities during the three-month periods ended June 30, 2019 and June 30, 2018.

Operating Expenses and Net Loss

We incurred a net loss of $221,231 for the three months ended June 30, 2019 compared to $85,634 during the three months ended June 30, 2018. The increase was primarily due to an increase in consulting fees, legal costs, travel and other selling, marketing and administrative expenses driven by increased management oversight at the parent company level due to the planned shift in operations. This increase was partially offset by lower operations and net loss from our discontinued operations.

Six Months Ended June 30, 2019 and June 30, 2018

Our operating results for the six months ended June 30, 2019 and June 30, 2018 are summarized as follows:

Revenue and Cost of Sales

We had no revenues and did not engage in any sales activities during the six-month periods ended June 30, 2019 and June 30, 2018.

Operating Expenses and Net Loss

We incurred a net loss of $292,569 for the six months ended June 30, 2019 compared to $135,681 during the six months ended June 30, 2018. The increase was primarily due to an increase in consulting fees, legal costs, travel and other selling, marketing and administrative expenses driven by increased management oversight at the parent company level due to the planned shift in operations.

Liquidity and Financial Condition

Working Capital

As of June 30, 2019, we had current assets of $3,174,160 (consisting of cash, prepaid expenses and advances and current assets held for sale of $48,452), current liabilities of $172,678 (including accounts payable and accrued liabilities, due to related party and current liabilities held for sale of $23,123), and working capital of $3,001,482.

As of December 31, 2018, we had current assets of $246,200 (including reclassified current assets held for sale of $48,238), current liabilities of $57,029 (including reclassified current liabilities held for sale of $25,860), and working capital of $189,171.

The increase in working capital is primarily due to proceeds from our sale of common stock, and common stock subscribed, in June 2019.

Cash Flows

Operating Activities

Net cash used in operating activities was $192,330 during the six months ended June 30, 2019, primarily due to our net loss of $292,569, partially offset by an increase in accounts payable and accrued liabilities of $118,261.

Net cash used in operating activities was $213,772 during the six months ended June 30, 2018, primarily due to our net loss of $135,681 and in increase in accounts payable and accrued liabilities of $89,931.

Investing Activities

There were no investing activities for the six months ended June 30, 2019. Net cash used in investing activities was $152,287 during the six months ended June 30, 2018, due to cash paid for our subsidiary of $54,793 and purchase of property and equipment by Devco of $94,494.

Financing Activities

Net cash provided by financing activities was $3,109,776 during the six months ended June 30, 2019, primarily due to $3,156,900 in proceeds received from the sale of our common stock and common stock subscribed in June 2019, minus equity issuance costs of $47,250.

Net cash provided by financing activities was $964,787 during the six months ended June 30, 2018, primarily due to $965,000 in proceeds received from the sale of our common stock and common stock subscribed in February 2018.

Going Concern

As of June 30, 2019, we had an accumulated deficit of $1,133,225. During the six months ended June 30, 2019, we incurred a net loss of $292,569 and used $192,330 of net cash in operating activities. We expect to continue to generate operating losses for the foreseeable future. As of June 30, 2019, we had cash of $3,120,845.

Based on our current operating plan, we expect that our cash will be sufficient to fund its operating expenses and debt service requirements for at least 12 months from the issuance date of these interim condensed consolidated financial statements. Based on this, we have determined there is not substantial doubt about our ability to continue as a going concern. The future viability of the Company beyond that point is dependent on our ability to raise additional capital to finance its operations. Although we has been successful in raising capital in the past, there is no assurance that we will be successful in obtaining such additional financing on terms acceptable to the Company, if at all.

Critical Accounting Policies

These financial statements and related notes are expressed in US dollars. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, First Colombia Devco SAS. All inter-company accounts and transactions have been eliminated. The Company’s fiscal year-end is December 31.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a "smaller reporting company", we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by our Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, our Company carried out an evaluation with the participation of our Company's management, including our Company's Chief Executive Officer ("CEO") and our Company's Chief Financial Officer ("CFO"), of the effectiveness of our Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of June 30, 2019. Based upon that evaluation, our Company's CEO and CFO concluded that our Company's disclosure controls and procedures were not effective as of June 30, 2019 due to lack of documented controls and procedures and lack of multiple levels of transaction review.

Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop procedures to address the current deficiencies to the extent possible given limitations in financial and personnel resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

Item 1A.  Risk Factors

As a "smaller reporting company", we are not required to provide the information required by this Item.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

SIGNATURES

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

FIRST COLOMBIA DEVELOPMENT CORP.
(Registrant)

Dated: August 12, 2019

/s/Christopher Hansen                   
Christopher A Hansen                           
President, Chief Executive Officer, and Director
(Principal Executive Officer)

Dated: August 12, 2019

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