CPMD 10-K & 10-Q changes, risk factors and insider trading

An investment in our common stockshares is highly speculative, involves a high degree of risk and should be made only by investors who can afford a complete loss. You should carefully consider the following risk factors, together with the other information in this report, including our financial statements and the related notes, before you decide to buy our common stock.shares. If any of the following risks actually occurs, then our business, financial condition or results of operations could be materially adversely affected, the trading volume and value of our common stockshares could decline, and you may lose all or part of your investment therein.

AsWe of December 31, 2024, wehave had an accumulated deficit of $101.2 million and incurred a netlimited lossoperating of approximately $9.9 million on revenues of $820,137history in the yearcannabis endedindustry Decemberand 31, 2024. Ourour ability to increase our revenues and achieve our plans for growth and profitability depends on many factors, which include:

Until we are able to generate sufficient cash flow from our existing operations, we will need to issue additional debt or equity securities to fund our business and business plan. If we issue equity or convertible debt securities to raise additional funds, our existing stockholdersshareholders will likely experience dilution, and the new equity or debt securities may have rights, preferences, and privileges senior to those of our existing stockholders.shareholders. If we incur additional debt, it may increase our leverage, requiring us to pay additional interest expenses. We may not be able to obtain financing on favorable terms, or at all, in which case, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive pressures.

We expect to incur significant ongoing costs and obligations related to its investment in infrastructure and growth and for regulatory compliance, which could have a material adverse impact on the Company’s results of operations, financial condition and cash flows. In addition, future changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on the business, results of operations and our financial condition..condition. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in this report, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to achieve and sustain profitability, the market price of our common stockshares may decrease.

To date, fresh cannabis, dried cannabis, cannabis oil products, primarily edibles and beverages infused with cannabis are permitted under the Cannabis Act. However, there is uncertainty regarding how and when certain regulatory changes will be implemented. Further, the general legislation framework pertaining to the Canadian recreational cannabis market is subject to significant provincial and territorial regulation, which varies across provinces and territories. Unfavorable regulatory changes, delays or both may therefore materially and adversely affect the future business, financial condition and results of operations of the Company.

The Company’sOur future success will depend upon itsour ability to attract and retain key management, including our President/Chief Executive Officer, technical experts and sales personnel. We intend to enhance our management and technical expertise by recruiting qualified individuals who possess desired skills and experience in certain targeted areas. Our inability to retain employees and attract and retain sufficient additional employees or engineering and technical support resources could have a material adverse effect on our business, results of operations and financial condition. Shortages in qualified personnel or the loss of key personnel limit our ability to develop and market our cannabis-related products. The loss of any of our senior management or key employees could materially adversely affect our ability to execute our business plan and strategy, and we may not be able to find adequate replacements on a timely basis, or at all.

Our revenues and expenses are expected to be primarily denominated in Canadian dollars (“CAD”) and Euros (“EUR”) and therefore may be exposed to significant currency exchange fluctuations due to translation to the Company’s reporting currency in United States dollars (“USD”). Recent events in the global financial markets have been coupled with increased volatility in the currency markets. Fluctuations in the exchange rate between the USD and the CAD may have a material adverse effect on the Company’s business, financial condition and operating results. The Company may, in the future, establish a program to hedge a portion of its foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. However, even if the Company develops a hedging program, there can be no assurance that it will effectively mitigate currency risks.

At the date of this report, we have secured insurance coverage with respect to builder’s risk, general liability and property. We have not yet secured insurance coverage with respect to workers’ compensation, directors’ and officers’ insurance, fire and other similar policies customarily obtained for businesses to the extent commercially appropriate; and, because we are engaged in and operate within the cannabis industry, there might be exclusions and additional difficulties and complexities associated with obtaining such insurance coverage that could cause us to suffer uninsured losses, which could adversely affect our business, results of operations, and profitability. There is no assurance that we will be able to obtain and utilize such insurance coverage, if necessary.

The cultivation of cannabis involves a reliance on third party transportationdistribution services which could result in supply delays, reliability of delivery and other related risks.

For our customers to receive their product, we rely on third party transportationdistribution services. This can cause logistical problems with and delays in patients obtaining their orders and cannot be directly controlled by the Company. Any delay by third party transportationdistribution services may adversely affect the Company’s financial performance. Moreover, security of the product during transportation to and from the Company’s facilities is critical due to the nature of the product. A breach of security during transport could have material adverse effects on the Company’s business, financials and prospects. Any such breach could impact the Company’s future ability to continue operating under its licenses or the prospect of renewing its licenses.

We are reliant on information technology systems and may be damaged by cyber-attacks.cyber attacks.

We have entered into agreements with third parties for hardware, software, telecommunications and other information technology (“IT”) services in connection with our operations. Our operations depend, in part, on how our suppliers protect networks, equipment, IT systems and software against damage from a number of threats, including, but not limited to, cyber-attacks, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as preemptivepre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenditures. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact our reputation and results of operations.

Given the nature of the Company’s product and its lack of legal availability outside of channels approved by the Government of Canada, as well as the concentration of inventory in our facilities, despite meeting or exceeding Health Canada’s security requirements, there remains a risk of shrinkage as well as theft. A security breach at our facilities could expose us to additional liability and to potentially costly litigation, increaseincreased expenses relating to the resolution and future prevention of these breaches and may deter potential customers from choosing the Company’s products.

Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Additionally, our litigation costs could be significant, even if we achieve favorable outcomes. As of the date of this report, we have outstanding lawsuits against us. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify, make temporarily unavailable, or stop manufacturing or selling our vehicles in some or all markets, all of which could negatively affect our sales and revenue growth and adversely affect our business, prospects, results of operations, cash flows, and financial condition.

Under Canadian regulations, a licensed producer of cannabis may haveRegulatory restrictions on the typemarketing and formsale of marketingcannabis itproducts canin undertakeour whichtarget markets could materially impact salesour performanceoperating results.

The development of our business and operating results may be hinderedadversely affected by applicable restrictions on salessales, marketing, product specifications, and marketing activitiesdistribution imposed by Health Canada or U.S. regulatory authorities. The regulatory environmentauthorities in Canadathe limitsjurisdictions ourin which we seek to operate, including in the European Union and Asia. Cannabis-related regulations in these markets impose limitations on advertising, labeling, product form, THC content, and distribution channels, which may restrict the Company’s ability to effectively market its products and compete for market share in a manner similar to other industries.share. If we are unable to effectivelycomply marketwith ourevolving productsregulatory and compete for market share,requirements or if the costs of complianceassociated with government legislation and regulationcompliance cannot be absorbedoffset through increasedpricing sellingor pricesoperational for its products,efficiencies, our salesfinancial condition and operating results wouldcould be materially adversely affected.

We believe the recreational and medical and recreational cannabis industries are highly dependent upon consumer perception regarding the safety, efficacy and quality of the cannabis produced. Consumer perception of our products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis products.

There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the cannabis market generally, any particular product or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for our products and our business, results of operations and financial condition. Our dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on our company, the demand for our products, and our results of operations, and financial condition. Adverse publicity reports or other media attention regarding the safety, efficacy and quality of medical and recreational cannabis in general, or the Company’s products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately or as directed.

Regulatory scrutiny of our industry may negatively impact our ability to raise additional capitalcapital.

Risks related to our common stockshares and itstheir market value:

A limited public trading market exists for our common stock,shares, which makes it difficult for our stockholdersshareholders to sell their common stock on the public markets.shares. Any trading in our shares may have a significant effect on our stockshare prices.price.

Historically our common stockshares hashave traded on the OTC Markets under the symbol “CPMD.” However, as of the filing of this Report,report, our common stockshares hashave been relegated to being only traded on the “expert market”. We expect with our filing of this Report,annual report, our common stockshares will resume trading on the OTC Markets. Until that timetime, however, our shareholders will experience difficulty trading our common stock.shares. Even when we were current in our reports, the trading activity of our common stockshares iswas volatile and a market may not develop or be sustained. As a result, any trading price of our common stockshares may not be an accurate indicator of the valuation of our common stock. Any trading in our shares could have a significant effect on our stock price.shares. If a more liquid public market for our common stockshares does not develop, then investors may not be able to resell the shares of our common stockshares that they have purchased and may lose all of their investment. No assurance can be given that an active market will develop or that a stockholdershareholder will ever be able to liquidate itstheir shares of common stock without considerable delay, if at all. Many brokerage firms may not be willing to affect transactions in theour securities.common shares. Even if an investor finds a broker willing to affect a transaction in our securities,common shares, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Furthermore, our stockshare price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political, and market conditions, such as recessions, interest rates, and international currency fluctuations, may adversely affect the market price and liquidity of our common stock.shares.

We may be subject to heightened scrutiny by United States and Canadian authorities, which could ultimately lead to the market for our Commoncommon Stockshares becoming highly illiquid and our shareholders having no ability to effect trades

Currently, our common stockshares isare listedtraded on the OTC MarketsPink Sheets in the United States. Our business, operations, and investments in the United States, and any such future business, operations, or investments, may become the subject of heightened scrutiny by regulators, stockshares exchanges and other authorities in Canada and the United States. As a result, we may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on our ability to operate or invest in the United States or any other jurisdiction, in addition to those described herein.

Existing shareholders may be diluted to the extent we raise additional funds through additionalfuture equity financings

We continue to sell shares and issue notes convertible into shares for cash to fund operations,our capital expansion, mergers and acquisitionsoperations that will dilute the current shareholders. There is no guarantee that the Company will be able to achieve its business objectives. The continued development of our company will require additional financing. The failure to raise such capital could result in the delay or indefinite postponement of current business objectives or our going out of business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable to us.

If additional funds are raised through issuances of equity or convertible debt securities, existing shareholders will suffer dilution, which in some cases may be significant, and any new equity securities issued could have rights, preferences and privileges superior to those of holders of our common stock.shares. Our articles of incorporation permit the issuance of 300,000,000 shares of5,000,000,000 common stock,shares, and shareholders have no preemptivepre-emptive rights in connection with further issuances. The directors of the Company have discretion to determine the price and the terms of further issuances. In addition, from time to time, we may enter into transactions to acquire assets or the shares of other companies. These transactions may be financed wholly or partially with debt, which may temporarily increase our debt levels. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We will require additional financing to fund our operations to the point where we generate positive cash flow. Negative cash flow may restrict our ability to pursue our business objectives.

Our stockshare price has undergone a great deal of volatility, including a significant decrease over the past few years. The volatility may mean that, at times, our stockholders may be unable to resell their shares at or above the price at which they acquired them

From January 1, 20242025 through the date of this Report,annual report, the price per share of our common stockshares has ranged from a high of $0.020$0.008 to a low of $0.001.$0.002. The price of our common stockshares has been, and may continue to be, highly volatile and subject to wide fluctuations. The market value of our common stockshares has declined in the past, due in part to our operating performance and to conversions of dilutive debt instruments that we have issued to fund operations. In the future, broad market and industry factors may decrease the market price of our common stock,shares, regardless of our actual operating performance. Recent declines in the market price of our common stockshares have and could continue to affect our access to capital, and may, if they continue, impact our ability to continue operations at the current level. In addition, any continuation of the recent declines in the price of our common stockshares may curtail investment opportunities presented to us and negatively impact other aspects of our business, including our ability to fund our operations. As a result of any such declines, many stockholdersshareholders have been or may become unable to resell their shares at or above the price at which they acquired them.shares.

The volatility of the market price of our common stockshares could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

These market fluctuations may also materially and adversely affect the market price of our common stock.shares.

Our stockcommon isshares are categorized as a penny stock.shares. Trading of our stockshares may beare restricted by the sec’sSEC’s penny stockshares regulations which may limit a stockholder’sshareholder’s ability to buy and sell our stockshares

Our stockcommon isshares are categorized as a “penny stockshares”, as that term is defined in SEC Rule 3a51-1, which generally provides that a “penny stockshare”, is any equity security that has a market price (as defined) less than U.S. $5.00 per share, subject to certain exceptions. Our securities are coveredsubject byto the penny stockshares rules, including Rule 15g-9, which imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stockshares rules require a broker-dealer, prior to a transaction in a penny stockshares not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocksshares and the nature and level of risks in the penny stockshares market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock,shares, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stockshares held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stockshares rules require that prior to a transaction in a penny stockshares not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stockshares isare a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stockshares that isare subject to these penny stockshares rules. Consequently, these penny stockshares rules may affect the ability of broker-dealers to trade our securities and reduce the number of potential investors. We believe that the penny stockshares rules discourage investor interest in and limit the marketability of our common stock.shares.

Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’sshareholder’s ability to buy and sell our stockshares

In addition to the “penny stockshares” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their noninstitutionalnon-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculativespeculatively low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock,shares, which may limit your ability to buy and sell our stockshares and have an adverse effect on the market for our shares.

We have not voluntarily implemented various corporate governance measures, in the absence of which, stockholdersshareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters

Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and National Association of Securities Dealers Automated Quotations (“NASDAQ”) are those that address board of directors’ independence, audit committee oversight and the adoption of a code of ethics. While our board of directors has adopted a Code of Ethics and an Audit Committee Charter, we have not yet adopted any of the other corporate governance measures, and, since our securities are not currently listed on a national securities exchange or NASDAQ, we are not currently required to do so. If our common stockshares becomesbecome listed, we will be required to adopt these other corporate governance measures, and we intend to do so. It is possible that if we were to adopt some or all of these corporate governance measures, stockholdersshareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

We were originally incorporated in the state of Colorado in August 1998 as Network Acquisitions, Inc. Since then, we haveunderwent focusedseveral name changes over the years and, in October 2014, changed our legal name to CannaPharmaRx, Inc.We focus our business efforts on evaluation,the negotiation, acquisition, and developmentoperation of cannabis cultivation projectsfacilities in Canada.

On January 6, 2022, we entered into a 20-year operating lease with Formosa Mountain Ltd. for the use of a leased facility located in Cremona, Alberta, Canada. We recommissioned the 55,000 square foot facility (the “Facility”) into a newan indoor cannabis farm with 1110 growing rooms and 1one drying and packing room during 2022. During 2025, we added one additional growing room to our operations. The Facility currentlynow operateshas 5 of thesesix growing rooms and theone 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 the 1110 growing rooms.

We received an operating license from Health Canada on December 9, 2022, and a cannabis license from the CRA on December 22, 2022.2022 Under the new license, weand commenced cannabis production during the year ended December 31, 2023 and began to make sales in 2024.

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 year ended December 31, 2024,2025, the Companywe reported $820,137$1,362,163 (20232024 - $nil$820,137) in revenuerevenue. andAs at December 31, 2025, we had cash of $1,804, a working capital deficiency of $24,733,636$30,278,570 (2023and -an $17,532,490).accumulated deficit of $112,315,590. Additionally, for the year ended December 31, 2025, we used $789,102 of cash in our operating activities.

TheThese financial metrics and the Company’s accumulated deficit of $101,184,142$112,315,590 as of December 31, 20242025 indicatesindicate substantialmaterial uncertainty aboutover the Company’s ability to continue as a going concern. Management’s plans includeto engagingmitigate inthis furtheruncertainty researchinvolve and development and raisingsecuring additional capital in the short term to fund such activitiesprimarily through sales of its common stock.shares Management’sor abilityother toinstruments. implementGiven itsthe plansCompany's and continueclassification as a goingpenny concernstock may be dependent upon raising additional capital. Our continued existence dependstraded on the successOTC Markets, its constrained liquidity and solvency position, and the limited availability of ourthird-party effortsfinancing, management expects that any significant additional funding will most likely need to raisebe additionalsourced capitalfrom necessaryrelated to meet our obligations as they come due and to obtain sufficient capital to execute our business plan. We may obtain capital primarily through issuances of debt or equity or entering into collaborative arrangements with corporate partners.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.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 further scale down or perhaps even cease the operationoperations of our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders.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 doinclude notcertain includeaccruals and adjustments thatbased mighton management’s best estimates regarding this uncertainty; however, the ultimate resolution of these matters could differ materially from these estimates and result fromin theadditional outcome of this uncertainty.adjustments.

During the years ended December 31, 20242025 and 2023,2024, the Company reported revenue of $820,137$1,362,163 and $nil,$820,137, respectively. ProductThe salesincrease in 2025 was primarily driven by the continued expansion of the Company’s medical cannabis commencedproduct duringline, 2024improved distribution capabilities, increased market penetration, and therefore the Companyonboarding reportedof nonew revenueretail inpartners thesince priorlate year.2024.

During the years ended December 31, 20242025 and 2023,2024, the Company reported a gross loss of $2,934,927$2,084,908 and $nil,$2,934,927, respectively. The decrease in gross loss in 20242025 iswas primarily due to higher sales volumes, which drove stronger revenue growth that outpaced the Company’srise ongoingin optimizationcost of productiongoods processes, which led to higher production costs that were not recovered through sales. Furthermore, product pricing was set below market levels due to suboptimal THC levels, further impacting profitability.sold.

During the years ended December 31, 20242025 and 2023,2024, the Company’s operating expenses consisted primarily of amortization and depreciation, general and administrative expenses, payroll landand consulting fees, and legal and professional fees associated with the costs for services or employees in finance, accounting, sales,sales and administrative activitiesactivities, and theroyalty compliance of a public company.expense. Overall operating expenses for the year ended December 31, 20242025 werewas $671,330$1,262,856 compared to operating$696,022 expensesin 2024, an increase of $1,581,104 in the comparable period, a decrease of $909,774.$566,834. The decreaseincrease is primarily attributable to the following:

The summary of the Company’s other income (expenseexpenses) for the years ended December 31, 20242025 and 20232024 is as follows:

OtherTotal expenseother wasexpenses $6,299,532were $7,783,684 for the year ended December 31, 20242025 compared to other income of $5,269,560$6,274,840 in the prior year, resulting in an increase in total expense of $11,569,092.$1,508,844. The changeincrease is primarily attributable to the following:

As a result of the foregoing, during the year ended December 31, 2024,2025, we incurred a net loss of $11,131,448 or $0.02 per share compared to a loss of $9,905,789 or $0.02 per share compared to net income of $3,688,456 or $0.01 in the prior year.

Cash used in operating activities for the year ended December 31, 20242025 decreased by $577,220$908,130 compared to the prior year, primarily due to management’smore effortsefficient toworking increasecapital management, including better inventory turnover and improvestronger workingmanagement capitalof management.accounts payable and accrued liabilities.

Cash used in investing activities was $5,519 for the year ended December 31, 2024 decreased by $80,6342025 compared to the$nil priorin year2024, due to nothe purchase of property, plant andnew equipment in the current year.2025.

Effective February 1, 2023, the Company entered into a leaserental agreement granting it the right to lease anuse office space located at Suite 3600, 888 5th Avenue SW, Calgary, Alberta, Canada, T2P 3R7.3R7 Thefor a monthly rent isof CAD $500 CAD per month. This space was provided by a company toaffiliated whichwith Richard Orman (“Mr. Orman, theOrman”), chairman of the Company’s board of directors,directors. isThe related.Company ceased using the office space and accordingly stopped accruing rent expense after June 30, 2025. During the year ended December 31, 2024,2025, the Company incurred rent expense of $4,381$2,124 (20232024 - $2,599$4,381). for this space which is recorded as a general and administrative expense.

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 and six months ended MarchJune 31,30, 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 onin our Annual Report on Form 10-K for the year ended December 31, 2025.

As used in this Quarterly Report on Form 10-Q and10-Q, unless otherwise indicated, the terms “CannaPharmaRXCannaPharmaRX,”, the “CompanyCompany,”, “wewe,”, “usus,”, 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 tocurrently focus on producing high-quality medical cannabis and craft cannabis products. Our principal executive office is located at 302,4439 3204-RideauTownship PlaceRd SW.,304, Calgary,Mountain View County, Alberta, Canada T2ST0M 1Z2.0R0.

We plan to grow by increasing our growth capacity at the Facility to support cannabis sales of cannabis to thein European markets, with a focus on Germany and Israel. To support this initiative, we intend to increase theexpand operations in at the Facility from six active growing rooms to all 10 growing rooms over the next one to two years and toyears, open a second drying and packing room, room; buildingbuild and developingdevelop a sales network in Germany and Israel;Israel, and applyingapply 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 ableexpect to removeeliminate this step from our delivery process and ship directly to countries within the European Union (“EU”), reducing overall costs and shipping timelines.times.

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,June 30, 2026, we have an obligation to issue an additional 344,029363,385 Class C preferred shares to LTB under the true up, valued at $1,849,155.$1,090,155.

We produce and sell dried cannabis flower, which is packagedwe package for sale as dried flower, trimtrim, and shake. We sellmarket dried flower primarily for medicinal purposes.use. Dried flower continuesremains to be thea core ofproduct category allacross global cannabis markets globallymarkets, and accordinglywe ourtherefore maintain a strong focus on consistentconsistent, high-quality cultivation is relentless.cultivation.

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 and six months ended MarchJune 31,30, 2026, we reported $627,462$276,218 and $903,680, respectively (2025 - $335,319$231,608 and $566,927, respectively) in revenue. As at MarchJune 31,30, 2026, we had cash of $633,$555, a working capital deficiency of $30,556,522$31,236,572 and an accumulated deficit of $112,697,611.$114,606,653. Additionally, for the threesix months ended MarchJune 31,30, 2026, we used $243,656$371,025 (2025 - $601,381-$1,047,844) of cash in operating activities.

These financialconditions metricsraise andsubstantial doubt about 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’sManagement plans to mitigateaddress this uncertainty involveby securingseeking additional capital in the shortnear termterm, primarily through salesequity of common sharesissuances or other financing instruments. Given the Company's classificationstatus as a penny stock tradedissuer on the OTC Markets, its constrained liquidity and solvency position, and the limited availability of third-party financing, management expects that anya significant portion of any additional funding will most likely need to be sourcedcome from related parties. There can be no assurance that wethe Company will complete additional financings or collaboration transactions, or that any financing will be successful in completing additional financing or collaboration transactions or, if financing is available, that it can be obtainedavailable on commercially reasonable terms or in amounts sufficient to meet its obligations as they become due and support execution of its business plan. If wethe areCompany does not able to obtain the additional financing on a timely basis, weit may be required to scale downback or perhaps even cease theoperations. operations of our business. TheAny issuance of additional equity securities by us could resultmaterially dilute in a significant dilution in the equity interests of our currentexisting shareholders. ObtainingIn commercial or related party loans, assuming those loans would be available, will increase our liabilities and future cash commitments. We are subject toaddition, pending litigation and other 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 outcomesproceedings could adversely impactaffect the Company’s liquidity, results of operations, and ability to continue as a going concern.concern Ourif financialresolved 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.unfavorably.

On March 17, 2025, the Company and its subsidiary, 2323414 Alberta Ltd. (“Alberta Ltd.”), which operatesconducts 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-basedCalifornia limited liability company engaged in providing financing and investment services. Alberta Ltd. is a subsidiary of the Company in whichactivities. 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 toUnder the agreement, the Company is required to pay a royalty on cannabis product sales from the prior month.month, If royalty payments are not made on time,with the applicable rate increases.increasing if royalty payments are not made on time. The agreement stipulatesprovides that a default occurs if Alberta Ltd. fails to make royalty or lease payments for three consecutive months, 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 ofat MarchJune 31,30, 2026, Alberta Ltd. was in default of its payment obligations, and Koze agreed to forbear from exercising hisits rights over thethat ownership interest until May August 31, 2026. The Company also incurred royalty expensesexpense under the agreement and recorded a related liability in accountsroyalty payable andas at accruedJune liabilities as of March 31,30, 2026.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE MARCH 31,30, 2026 AND 2025

During the three months ended MarchJune 31,30, 2026 and 2025, the Company reported revenue of $627,462$276,218 and $335,319,$231,608, respectively. The increase was primarily drivenreflects byhigher sales to Cantek in the continuedcurrent period, expansionas ofdiscussed theunder Company’s“Related medicalparty cannabis product line, improved distribution capabilities, increased market penetration, and the onboarding of new retail partners since late 2024.transactions.”

During the three months ended MarchJune 31,30, 2026 and 2025, the Company reported cost of goods sold of $1,036,915$414,664 and $837,926,$852,818, respectively. The increasedecrease was primarily drivendue byto lower inventory impairment charges in the current period, which more than offset the effect of higher sales volumes in 2026, which necessitated increased production activity and resulted in elevated costs related to direct materials, labor, and manufacturing overhead.volumes. Included in cost of goods sold for the three months ended MarchJune 31,30, 2026 and 2025 are losses on the impairment of inventory of $493,721$218,752 and $479,933,$566,270, respectively, primarily based on factors including expected yield of work-in-progress inventory and corresponding market prices.

During the three months ended MarchJune 31,30, 2026 and 2025, the Company reported a gross loss of $409,453$138,446 and $502,607,$621,210, respectively. The decrease in gross loss was primarily due to higher sales volumes, which drove stronger revenue growth that outpacedreflects the riseincrease in revenue and the decrease in cost of goods sold.sold, including lower inventory impairment charges, in the current period.

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

During the three months ended MarchJune 31,30, 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 MarchJune 31,30, 2026 were $272,890$240,385 compared to operating expenses of $174,978 $219,770 in the prior year comparable period, an increase of $97,912.$20,615. The increase is primarily attributable to the following:

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

Other incomeexpenses totaled $300,322$1,229,889 for the threesix months ended MarchJune 31,30, 2026 compared towith other expenses of $13,009$585,487 in the comparable 2025 period, primarily due to the following:

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

As a result of the foregoing, during the threesix months ended MarchJune 31,30, 2026, the Company recorded a net loss of $382,021$2,291,063 or $0.00 per share compared to a net loss of $690,594$2,104,052 or $0.00 per share in the 2025 comparable quarter.period.

As ofat MarchJune 31,30, 2026, the Company had $633$555 in cashcash, compared with $1,804 as comparedat toDecember $1,804,31, 2025, and a working capital deficiency of $30,556,522$31,236,572 compared towith $30,278,570 as ofat December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, the Company’s funding was primarily attributable to advances frommade by Koze, a related party, directly to the suppliersCompany’s of the Company.suppliers. During the three and six months ended MarchJune 31,30, 2026, Koze made payments of $438,906 $519,531and $958,437, respectively, directly to the Company’s suppliers. In addition, $516,021 wasKoze received $269,084 and $785,105 respectively directly by Koze, as collections from customers. ThisThese promissoryadvances noteand representscustomer collections relate to an ongoing funding arrangement under which Koze funds additional amounts arefrom fundedtime byto Kozetime based on the Company’s operational needs from time to time.needs.

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, investmentsequipment 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:

Cash used in operating activities for the three six months ended MarchJune 31,30, 2026 decreased by $357,725$676,819 compared to the prior year comparable period, primarily due to higher salescash duringpaid by related parties directly to suppliers in the current period, more efficient working capital management and stronger management of accounts payable and accrued liabilities.period.

Cash provided by financing activities for the three six months ended MarchJune 31,30, 2026 was $242,485$424,894 compared to $600,433$1,062,663 in the prior year comparable period, due to proceeds from related party loans.

During the three and six months ended MarchJune 31,30, 2026, the Company recognized all of its revenue of $627,462$276,218 and $903,680, respectively (2025 - $nil$231,608 and $231,608, respectively) 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.

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.

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 ofat MarchJune 31, 30, 2026, Alberta Ltd. was in default of its payment obligations, and Koze agreed to forbear from exercising its rights over the ownership interest until MayAugust 31, 2026.

During the three and six months ended MarchJune 31,30, 2026, the Company sold 450,000221,055 and 671,055 grams of cannabis products, respectively, (2025 - 192,384 and 192,384 grams respectively) and for the three and six months ended MarchJune 31,30, 2026, the Company incurred a royalty expense of $131,220$63,875 and $195,095, respectively (2025 - $nil$55,599 and $55,599, respectively). which is calculated using royalty rate of CAD $0.40 per gram sold since no royalty payments have been made by the Company

During the three and six months ended MarchJune 31,30, 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.

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