Cryomass Technologies, Inc. - Quarter Report: 2019 March (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 March 31, 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

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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.

77,100,016 common shares issued and outstanding as of June 17, 2019.

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TABLE OF CONTENTS

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PART I – FINANCIAL INFORMATION

Item1.             Financial Statements Consolidated Financial Statements

Our unaudited condensed consolidated financial statements for the three-month periods ended March 31, 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-month period ended March 31, 2019 are not necessarily indicative of the results that can be expected for the year ending December 31, 2019.

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First Colombia Development Corp.
Condensed Consolidated Balance Sheets
(Unaudited)

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

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First Colombia Development Corp.
Condensed Consolidated Statements of Operations
(Unaudited)

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

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First Colombia Development Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

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

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First Colombia Development Corp.
Condensed Statements of Stockholders’ (Deficit) Equity
(Unaudited)

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

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First Colombia Development Corp.
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Unaudited)

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First Colombia Development Corp.
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Unaudited)

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First Colombia Development Corp.
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Unaudited)

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Item 2.             Management’s Discussion and Analysis of Financial Condition and Results of 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. Working in value-added areas of the supply chain, General Extract operates a hemp-derivative refinement and distribution center in Denver, Colorado. As an intermediary in the global supply of cannabis products, General Extract is closely aligned with both the upstream and downstream cannabis leaders.

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In addition to the above acquisitions, we announced a proposed private placement of the Company’s common stock in a non-brokered transaction. Under the terms of the private placement, the Company has offered up to $8,000,000 in shares (an increase from the previously announced offering of up to $7,000,000 in shares) of common stock at a price of $0.50 per share. As of this date, we have closed on sales of $350,000 of common stock through the issuance of 700,000 shares. The offering is being made exclusively to accredited investors pursuant to exemptions from registration under the Securities Act of 1933.

We expect the acquisitions and the remainder of the financing will close by the end of the third quarter of 2019.

Cash Requirements

Based on our current planned expenditures, we will require approximately $3,000,000 over the next 12 months. In order to provide funds, we plan to complete the non-brokered private placement we have already announced and have held an initial closing as discussed above. While there is no assurance that we will be successful in completing the private placement financings, we have received numerous expressions of interest in addition to the funds already received. If we 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 quarter ended March 31, 2019, which are included herein.

Three Months Ended March 31, 2019 and March 31, 2018

Our operating results for the three months ended March 31, 2019 and March 31, 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 March 31, 2019 and March 31, 2018.

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Operating Expenses

We incurred a net loss of $71,338 for the three months ended March 31, 2019, compared to $50,047 during the three months ended March 31, 2018. This increase was due mainly to an increase in selling, marketing and administrative expense driven by the ramp-up in operations in Colombia and increased management oversight at the parent company level, partially offset by a decrease in interest expense.

Liquidity and Financial Condition

Working Capital

As at March 31, 2019, we had current assets of $176,539 (consisting of cash, inventory, and prepaid expenses and advances), current liabilities of $58,033 and working capital of $118,506. This compares to our total current assets of $246,200, current liabilities of $57,029 and working capital of $189,171 as at December 31, 2018.

Cash Flows

Operating Activities

Net cash used in operating activities was $74,635 during the three months ended March 31, 2019 compared with net cash used in operating activities of $162,232 during the three months ended March 31, 2018. The decrease in cash used in operating activities related mainly to a reduction in accounts payable and accrued liabilities that occurred in the three months ended March 31, 2018 that was not repeated in the three months ended March 31, 2019.

Investing Activities

There were no investing activities in the three months ended March 31, 2019 or March 31, 2018.

Financing Activities

Net cash provided by financing activities was $178 during the three months ended March 31, 2019 compared with $509,942 in the three months ended March 31, 2018. This decrease is attributable to private placement activity in the 2018 period that was not repeated in the 2019 period.

Going Concern

Our consolidated financial statements for the three-month period ended March 31, 2019 have been prepared on a going concern basis and contain an additional explanatory paragraph which identifies issues that raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations. As at March 31, 2019, our company has not generated any revenues and has an accumulated deficit of $911,994. These factors raise substantial doubt regarding our company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should our company be unable to continue as a going concern.

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 formerly 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 March 31, 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 March 31, 2019 due to our Company’s limited internal resources and lack of ability to have 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.

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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

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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.

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