UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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| [X] |
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the quarterly period ended March 31, 2015 |
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| [ ] |
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the transition period from __________ to__________ |
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Commission File Number: 333-178482 |
Cannabis-Rx, Inc.
(Exact name of registrant as specified
in its charter)
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| Nevada |
30-0693512 |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
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7702 E Doubletree Ranch Rd. Ste 300
Scottsdale AZ 88258 |
| (Address of principal executive offices) |
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| 480.902.3399 |
| (Registrant’s telephone number) |
|
_______________________________________________________ |
| (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 smaller reporting company.
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| [ ] Large accelerated filer |
[ ] Accelerated filer |
| [ ] Non-accelerated filer |
[X] Smaller reporting company |
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
State the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date: 156,000,000 as of September 11, 2015
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our consolidated financial statements
included in this Form 10-Q are as follows:
These consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America for interim financial information and
the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the interim period ended March 31, 2015 are not necessarily indicative of the results that
can be expected for the full year.
CANNABIS-RX
INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| |
March
31, | |
December
31, |
| |
2015 | |
2014 |
| ASSETS |
| |
|
| Real Estate
Inventory |
| |
|
| Properties
held for sale |
$ | 3,791,265 | | |
$ | 7,335,148 | |
| Properties
under development |
| 8,269,221 | | |
| 6,741,130 | |
| Real Estate
Inventory |
| 12,060,486 | | |
| 14,076,278 | |
| |
| | | |
| | |
| Properties
held for investment |
| | | |
| | |
| Buildings,
net |
| 664,297 | | |
| 672,465 | |
| Land |
| 593,285 | | |
| 593,285 | |
| Properties
held for investment, net |
| 1,257,582 | | |
| 1,265,750 | |
| |
| | | |
| | |
| Cash |
| 3,242,391 | | |
| 1,098,530 | |
| Receivable |
| 55,250 | | |
| — | |
| Prepaid
income tax |
| 25,000 | | |
| — | |
| Due
from Berkshire Homes, Inc. – related party |
| 151,968 | | |
| 156,968 | |
| Prepaid
Expense |
| 25,000 | | |
| 25,000 | |
| TOTAL
ASSETS |
$ | 16,817,677 | | |
$ | 16,622,526 | |
| |
| | | |
| | |
| LIABILITIES
AND STOCKHOLDERS' DEFICIT |
| | | |
| | |
| Accounts
payable to related parties |
$ | 15,412 | | |
| 10,420 | |
| Accounts
payable and accrued expenses |
| 76,319 | | |
| 72,991 | |
| Accrued
interest |
| 1,092,704 | | |
| 884,705 | |
| Security
deposit |
| 39,000 | | |
| 39,000 | |
| Option
to purchase deposit |
| 100,000 | | |
| 100,000 | |
| Promissory
notes |
| 16,250,000 | | |
| 16,250,000 | |
| Total
Liabilities |
| 17,573,435 | | |
| 17,357,116 | |
| |
| | | |
| | |
| Stockholders’
Deficit |
| | | |
| | |
| Preferred
stock, par value $0.0001, 50,000,000 authorized and 2,000,000 shares issued and outstanding on March 31, 2015 and December 31, 2014. |
| 200 | | |
| 200 | |
| Common
stock, par value $0.0001, 1,500,000,000 shares authorized 156,000,000
and 156,000,000 shares issued and outstanding on March 31, 2015 and December 31, 2014, respectively |
| 15,600 | | |
| 15,600 | |
| Additional
paid-in capital |
| 65,000 | | |
| 65,000 | |
| Share subscriptions
receivable |
| (20,000 | ) | |
| (20,000 | ) |
| Accumulated
deficit |
| (816,558 | ) | |
| (795,390 | ) |
| Total
Stockholders' Deficit |
| (755,758 | ) | |
| (734,590 | ) |
| TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT |
| 16,817,677 | | |
| 16,622,526 | |
The accompanying notes are an integral
part of these unaudited financial statements.
CANNABIS-RX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| |
Three months ended March
31, 2015 | |
Three months ended March
31, 2014 |
| REVENUES |
$ | 6,221,735 | | |
$ | 853,500 | |
| |
| | | |
| | |
| RENTAL
INCOME |
| 55,250 | | |
| — | |
| TOTAL
REVENUES |
| 6,276,985 | | |
| 853,500 | |
| |
| | | |
| | |
| COST OF SALES |
| 5,911,745 | | |
| 762,333 | |
| |
| | | |
| | |
| GROSS
PROFIT |
| 365,240 | | |
| 91,167 | |
| |
| | | |
| | |
| EXPENSES |
| | | |
| | |
| Depreciation |
| 8,168 | | |
| — | |
| Consulting fees |
| 30,000 | | |
| 11,500 | |
| General and administrative |
| 73,913 | | |
| 9,860 | |
| Marketing and
public relations |
| 829 | | |
| — | |
| Professional fees |
| 22,853 | | |
| 8,294 | |
| Management fees and
expenses |
| 42,645 | | |
| 18,750 | |
| TOTAL EXPENSES |
| 178,408 | | |
| 48,404 | |
| |
| | | |
| | |
| INCOME FROM OPERATIONS |
| 186,832 | | |
| 42,763 | |
| |
| | | |
| | |
| OTHER INCOME (EXPENSE) |
| | | |
| | |
| Interest expense |
| (208,000 | ) | |
| (158,959 | ) |
TOTAL
OTHER INCOME (EXPENSE) |
| (208,000 | ) | |
| (158,959 | ) |
| |
| | | |
| | |
| NET
LOSS |
$ | (21,168 | ) | |
$ | (116,196 | ) |
| |
| | | |
| | |
| NET LOSS PER SHARE:
BASIC AND DILUTED |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | |
| WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED |
| 156,000,000 | | |
| 155,644,444 | |
Accompanying notes
are an integral part of these unaudited financial statements.
CANNABIS-RX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| |
Three
months ended March 31, 2015 | |
Three
months ended March 31, 2014 |
| |
| |
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
| | | |
| | |
| Net
income (loss) |
$ | (21,168 | ) | |
$ | (116,196 | ) |
| Adjustments
to reconcile net loss to net cash |
| | | |
| | |
| used
in operating activities |
| | | |
| | |
| Depreciation |
| 8,168 | | |
| — | |
| Changes
in assets and liabilities |
| | | |
| | |
| Properties |
| 2,015,792 | | |
| (6,652,691 | ) |
| Accounts
payable - related party |
| 4,992 | | |
| — | |
| Accounts
payable and accrued expenses |
| 211,327 | | |
| 283,050 | |
| Receivable |
| (55,250 | ) | |
| — | |
| Prepaid
income tax |
| (25,000 | ) | |
| — | |
| Net
cash provided by (used in) operating activities |
| 2,138,861 | | |
| (6,485,837 | ) |
| |
| | | |
| | |
| CASH
FLOWS FROM INVESTING ACTIVITIES |
| | | |
| | |
| Advances
repaid by Berkshire Homes, Inc. |
| 5,000 | | |
| — | |
| Purchase
of property held for investment |
| — | | |
| (183,443 | ) |
| Net
cash provided by (used in) investing activities |
| 5,000 | | |
| (183,443 | ) |
| |
| | | |
| | |
| CASH
FLOWS FROM FINANCING ACTIVITIES |
| | | |
| | |
| Proceeds
from sale of stock |
| — | | |
| 2,000 | |
| Proceeds
from promissory notes |
| — | | |
| 8,000,000 | |
| Net
cash provided by financing activities |
| — | | |
| 8,002,000 | |
| |
| | | |
| | |
| NET
CHANGE IN CASH |
| 2,143,861 | | |
| 1,332,720 | |
| CASH - BEGINNING
OF PERIOD |
| 1,098,530 | | |
| 2,186,879 | |
| CASH - END
OF PERIOD |
$ | 3,242,391 | | |
$ | 3,519,599 | |
| |
| | | |
| | |
| SUPPLEMENTAL
CASH FLOW INFORMATION: |
| | | |
| | |
| Cash
paid for interest |
$ | — | | |
$ | — | |
| Cash
paid for taxes |
$ | — | | |
$ | — | |
| NON-CASH
TRANSACTIONS: |
| | | |
| | |
| Subscription
receivable |
$ | — | | |
$ | 20,000 | |
The accompanying notes are an integral
part of these unaudited financial statements.
CANNABIS-RX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS
Organization and Description of Business
Cannabis-RX Inc. (the “Company”) was incorporated
in Delaware on July 5, 2011. The business plan of the Company was to create a marketing and promotion platform for a stretch and
fitness apparatus. On July 3, 2013, the Company changed its business to acquiring, improving and selling real property, and changed
its name from L3 Corp. to Longview Real Estate, Inc. On January 30, 2014, the Company changed its name to Cannabis-Rx Inc. with
the Company’s real estate business expanding to include the regulated cannabis industry by purchasing and selling real estate
assets and leasing space and related facilities to licensed marijuana growers and dispensary owners for their operations. In addition,
the Company plans to expand its business to provide financing and consulting services to the cannabis industry in addition to commercial
real estate solutions.
The accompanying unaudited interim financial statements
of Cannabis-RX, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted
in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with
the Company’s audited 2014 annual financial statements and notes thereto filed on Form 10-K with the SEC. In the opinion
of management, all adjustments, consisting of normal reoccurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods present have been reflected herein. The results of operation for interim
periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which
would substantially duplicate the disclosure required in the Company’s fiscal 2014 financial statements have been omitted.
NOTE 2 – GOING CONCERN
These consolidated financial statements
have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities
in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated
deficit of $816,558 as of March 31, 2015. Further losses are anticipated in the development of its business raising substantial
doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent
upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations
and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs
over the next twelve months with loans and/or private placement of common stock. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities
that might result from this uncertainty.
NOTE 3 - REAL ESTATE INVENTORY
Inventories
are stated at the lower of cost or market. During the current interim
period, the Company received net proceeds of $2,015,792 from real estate properties purchased for resale.
| Inventory balance: 12/31/2014 | |
| 14,076,278 | |
| Properties Sold: | |
| (5,911,585 | ) |
| Properties Acquired: | |
| 3,895,793 | |
| Ending Balance: (3/31/15) | |
| 12,060,486 | |
NOTE 4 - PROMISSORY NOTES
During 2013, the
Company borrowed $150,000 under 2 notes at 18% interest per annum. The notes have matured but have not been declared in default.
We continue to accrue interest at the face amount.
During 2013, the
Company borrowed $8,100,000 under 3 notes at 5% interest per annum. The promissory notes are unsecured and mature twenty-four months
from their issuances.
On January 27, 2014 the Company issued
a promissory note in the principal amount of $4,000,000 at the interest rate of 5% per annum and due and payable twenty four months
from the date of issuance, subject to acceleration in the event of default and may be prepaid in whole or in part without penalty
or premium.
On February 19, 2014 the Company
issued a promissory note in the principal amount of $4,000,000 at the interest rate of 5% per annum and due and payable twenty
four months from the date of issuance, subject to acceleration in the event of default and may be prepaid in whole or in part
without penalty or premium.
On March 27, 2014 the Company entered into a secured lending agreement in the principal amount
of $14,000,000 at the interest rate of 5% per annum and due and payable twenty four months from the date of issuance, subject
to acceleration in the event of default and may be prepaid in whole or in part without penalty or premium. No funds have
been received from this agreement as of March 31, 2014.
Total
interest expense recorded on the notes for the periods ended March 31, 2015 and 2014 was $208,000 and $158,959.
NOTE 5 - RELATED PARTY TRANSACTIONS
As of March 31, 2015, the Company had a balance of $15,412
owed to a director and officer for management fees and expenses paid on behalf of the Company.
During 2014, the Company advanced $156,968 to Berkshire Homes,
Inc., a public company with a common director and management. During the period, the Company was repaid $5,000 of the outstanding
advances. As of March 31, 2015, the outstanding balance was $ 151,968.
The balances owed to or by related parties are unsecured,
non-interest bearing and repayable on demand.
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information,
including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the
assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements
generally are identified by the words “believes,” “project,” “expects,” “anticipates,”
“estimates,” “intends,” “strategy,” “plan,” “may,” “will,”
“would,” “will be,” “will continue,” “will likely result,” and similar expressions.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which
may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations
and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory
changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties
should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Company Overview
We were incorporated on July 5, 2011 in the State of Delaware.
We are engaged in the business of acquiring a portfolio of distressed properties in certain strategic areas at deep discounts,
rehabilitating these properties and selling or leasing them for the quickest and highest return possible. In conjunction with these
real estate operations, in January 2014, we began catering to the real estate needs of the regulated cannabis industry, in states
and other locations where such business is licensed and permitted. In this niche market, we plan to purchase real estate assets
and lease growing space and related facilities to licensed marijuana growers and dispensary owners for their operations.
To date, we have raised $16,250,000 through the sale of unsecured
promissory notes. We continue to seek out the best financing opportunities in order to deploy funds into our business operations
that we believe best suited to the real estate industry, as well as pursue real estate opportunities in the cannabis industry.
Commercial Real Estate Solutions
We have been searching in Colorado, Washington, Florida and
California or properties to acquire suited to the cannabis industry. We will continue to evaluate and consider the purchase of
industrial commercial buildings that are in the designated zoned areas of municipalities. To date, after extensive due diligence,
we have acquired only two properties suited for cannabis use. Furthermore, the final use of these properties is not limited to
the cannabis industry.
In order to attract cannabis-related tenants to lease our
properties, we are willing to renovate these spaces based on the requirements of the business, and incorporate these additional
costs into their lease. For example, if it is a grow facility we will provide significant electrical, HVAC, and security upgrades.
Often these tenant improvements are the responsibility of the leasee. Additionally, we are willing to facilitate these improvements
by offering to consult on the build-out of their facility and/or capital based on the needs of the tenant, the term of the lease,
and their business model. However, after our due diligence certain projects were not pursed inasmuch as they failed to meet our
underwriting standards.
In the marijuana space, tenants typically pay a 30 –
40 percent premium to lease space to operate in, simply due to the nature of the business. We plan to offer our space at a lesser
premium to the usual 30 - 40 percent. Our targets are 20 - 30 percent.
In Florida, we purchased and rehabilitated a 9.23 acre property
totaling 209,000 square feet in a trio of industrial buildings to house cannabis operations. However, because the ballot measure
did not receive 60% voter approval the measure failed. Regardless, we are confident in our ability to maximize the value of the
asset and will market the property for sale.
Financing and Consulting Services
While we continue to be willing to consider and provide financing
and consulting services to the cannabis industry, in addition to our commercial real estate solutions, we have not undertaken such
proposals based on our due diligence. We will continue to entertain financing options with licensed or existing operators within
the marijuana industry that require start-up, operating or expansion capital. As previously indicated, we have invested in two
building designated to be used in the cannabis industry. We will also consider providing capital to current and potential tenants
of our buildings that require funding to refinance current debt, as long as they meet our underwriting criteria. Additionally,
we offer sale-and-leaseback financing arrangements with tenant purchase options. These types of financing solutions provide flexibility
for our tenants long-term, while capitalizing their operations.
Through our network of real estate experts - legal, licensing,
construction and growing - we plan to provide consulting services to our tenants in the marijuana industry trying to navigate the
real estate/zoning process and/or regulatory environment. We provide counsel to help businesses set up their grow operations. Specifically,
we can provide guidance/counsel regarding construction management and grow design (electrical, HVAC, lighting, etc.). We are also
looking into providing regulatory compliance consulting.
Results of Operations for the three months ended March 31, 2015 and 2014
Revenues
We
generated sales of $6,221,735 and rental income of $55,250 for the three months ended March 31, 2015, as compared with
sales of $853,500 and $0 rental income for the same period ended 2014. Our cost of sales totaled $5,991,745 for the three
months ended March 31, 2015, as compared with $762,333 for the same period ended 2014. Our costs of sales includes: purchase
price, rental expenses, rehabilitation, escrow, closing costs, and commissions.
We achieved a gross profit of $365,240 for the three months
ended March 31, 2015, as compared with $91,167 for the same period ended 2014. We expect our revenues to climb in 2015 as we dispose
of the properties that we have previously acquired.
Operating Expenses
Operating expenses increased to $178,408 for the three months
ended March 31, 2015 from $48,404 for the three months ended March 31, 2014. Our operating expenses for the three months ended
March 31, 2015 consisted of general and administrative expenses of $73,913, management fees and expenses of $42,645, professional
fees of $22,853, deprecation of $8,168, consulting fees of $30,000 and marketing and public relations fees of $829. In comparison,
our operating expenses for the three months ended March 31, 2014 consisted of management fees of $18,750, consulting fees of $11,500,
professional fees of $8,294 and general and administrative expenses of $9,860.
We anticipate our operating expenses will increase as we
continue our business operations. The increase will be attributable to administrative and operating costs associated with our new
cannabis real estate related activities, the acquisition, renovation and sale of residential properties and the professional fees
associated with our reporting obligations under the Securities Exchange Act of 1934.
Other Expenses
Interest expenses increased to $208,000 for the three months
ended March 31, 2015, from $158,959 for the three months ended March 31, 2014. We expect that interest expenses will increase as
we plan to take on more debt to finance our property acquisitions resulting in higher interest expenses.
Net Income/Loss
We recognized net loss of $21,168
for the three months ended March 31, 2015, compared to a net loss of $116,196 for the three months ended March 31, 2014.
Liquidity and Capital Resources
As of March 31, 2015, we had total assets of $16,817,677
consisting mostly of cash and our real property inventory. We had total liabilities of $17,573,435
as of March 31, 2015.
Operating activities provided $2,138,861 in cash for the
three months ended March 31, 2015, as compared with $6,485,837 used for the three months ended March 31, 2014. Our positive operating
cash flow for 2015 was mainly a result of our real property inventory.
Investing activities provided $5,000 in cash for the three
months ended March 31, 2015, as compared with $183,443 used for the three months ended March 31, 2014. Our positive investing cash
flow for the three months ended March 31, 2015 was mainly a result of advances that we repaid to Berkshire Homes, Inc.
Financing activities for the three months ended March 31,
2015 generated $0 in cash, as compared with cash flows provided by financing activities of $8,002,000 for the three months ended
March 31, 2014.
To date, we have raised $16, 250,000 through the sale of
unsecured promissory notes. We continue to seek out the best financing opportunities in order to deploy funds into business operations
that we believe best suited in the cannabis industry, as well as continue to pursue our real estate activities.
As of March 31, 2015, we had $3,242,391 in cash. With the
cash on hand, we have sufficient cash to operate our business at the current level for the next twelve months. Our plan, however,
is to acquire more properties, and to do this, we intend to fund our expansion through debt and/or equity financing arrangements.
We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time.
There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.
Going Concern
The accompanying financial statements have been prepared
on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course
of business for the foreseeable future. We have incurred losses since inception resulting in an accumulated deficit of $816,558
as of March 31, 2015 and further losses are anticipated in the development of our business raising substantial doubt about our
ability to continue as a going concern. The ability to continue as a going concern is dependent upon generating profitable operations
in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business
operations when they come due. Management anticipates financing operating costs over the next twelve months with loans and/or private
placement of common stock. These financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants
list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical
accounting policy” is one which is both important to the portrayal of a company’s financial condition and results,
and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain.
Our critical accounting policies are set forth in Note 2
to the financial statements.
Recently Issued Accounting Pronouncements
We do not expect the adoption of recently issued accounting
pronouncements to have a significant impact on our results of operations, financial position or cash flow.
Off Balance Sheet Arrangements
As of March 31, 2015, there were no off balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
A smaller reporting company is not required to provide the
information required by this Item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange
Act, as of March 31, 2015, to ensure that information required to be disclosed by us in the reports filed or submitted by us under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange
Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or
submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and
principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31,
2015, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses
identified and described below.
Our principal executive officers do not expect that our disclosure
controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed
to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure
controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only
reasonable, not absolute assurance that the objectives of the system are met. 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 the Company have been detected. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can
be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.
Remediation Plan to Address the Material Weaknesses in
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 our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following
three material weaknesses that have caused management to conclude that, as of March 31, 2015, our disclosure controls and procedures,
and our internal control over financial reporting, were not effective at the reasonable assurance level:
| • | We do not have written documentation of our internal control policies and procedures. Written
documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of
the period ending March 31, 2015. Management evaluated the impact of our failure to have written documentation of our internal
controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency
that resulted represented a material weakness. |
| • | We do not have sufficient segregation of duties within accounting functions, which is a basic
internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically
feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions
should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our
assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a
material weakness. |
| • | Effective controls over the control environment were not maintained. Specifically, a formally
adopted written code of business conduct and ethics that governs our employees, officers, and directors was not in place. Additionally,
management has not developed and effectively communicated to employees its accounting policies and procedures. This has resulted
in inconsistent practices. Further, our Board of Directors does not currently have any independent members and no director qualifies
as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have
a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. |
To address these material weaknesses, management performed
additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material
respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that
the financial statements included in this report fairly present, in all material respects, our financial condition, results of
operations and cash flows for the periods presented.
To remediate the material weakness in our documentation,
evaluation and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness
once resources become available.
We intend to remedy our material weakness with regard to
insufficient segregation of duties by hiring additional employees in order to segregate duties in a manner that establishes effective
internal controls once resources become available.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial
reporting occurred during the period covered by this report, the period ended March 31, 2015, that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceeding. We are
not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our
voting securities are adverse to us or have a material interest adverse to us.
Item 1A:Risk Factors
A smaller reporting company is 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
N/A
Item 5. Other Information
None
Item 6. Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
Cannabis-Rx, Inc.
|
| Date: |
September __, 2015
|
| By: |
/s/ Llorn Kylo |
|
Llorn Kylo |
| Title: |
President, Chief Executive Officer, and Director |
CERTIFICATIONS
I, Llorn Kylo, certify that;
| 1. |
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2015 of Cannabis-RX Inc. (the “registrant”); |
| 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 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 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 control 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 on 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 fiscal 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 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. |
Date: September 25, 2015
/s/ Llorn Kylo
By: Llorn Kylo
Title: Chief Executive Officer
CERTIFICATIONS
I, Munjit Johal, certify that;
| 1. |
|
I
have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2015 of Cannabis-RX Inc. (the
“registrant”); |
| 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 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 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 control 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 on 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 fiscal 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 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. |
Date: September 25, 2015
/s/ Munjit Johal
By: Munjit Johal
Title: Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the quarterly
Report of Cannabis-RX Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015 filed with
the Securities and Exchange Commission (the “Report”), I, Llorn Kylo, Chief Executive Officer of the Company, adn
I, Munjit Johal, Cheif Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a)
of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material
respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations
of the Company for the periods presented. |
| By: |
/s/ Llorn Kylo |
| Name: |
Llorn Kylo |
| Title: |
Principal Executive Officer and Director |
| Date: |
September 25, 2015 |
| By: |
/s/ Munjit Johal |
| Name: |
Munjit Johal |
| Title: |
Principal Financial Officer |
| Date: |
September 25, 2015 |
This certification has been furnished solely pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
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