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Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law
including the securities laws of
any of the forward-looking statements to conform these statements to actual
results.
In this quarterly report, unless otherwise specified, our financial statements are expressed inUnited States Dollars (US$) and are prepared in accordance withUnited States generally accepted accounting principles. All references to "common shares" refer to the common shares in our capital stock.
Unless expressly indicated or the context requires otherwise, the terms
“
Technologies Inc.
owned subsidiaries.
General Overview
Cryomass Technologies Inc ("Cryomass Technologies" or the "Company") began asAuto Tool Technologies Inc. , which was incorporated under the laws of theState of Nevada onMay 10, 2011 . The Company's name was changed toAFC Building Technologies Inc. effectiveJanuary 10, 2014 . EffectiveApril 26, 2018 , the Company changed its name toFirst Colombia Development Corp. EffectiveOctober 14, 2019 , the Company changed its name toRedwood Green Corp. EffectiveSeptember 1, 2020 , the Company changed its name toAndina Gold Corp. OnJuly 15, 2021 , the Company entered into a plan of merger with its wholly-owned subsidiary,Cryomass Technologies Inc aNevada corporation, for the purpose of changing the name of the Company toCryomass Technologies Inc. effectiveAugust 27, 2021 . Our stock trading symbol is CRYM.
The Company’s principal office is located at
website is www.cryomass.com.
OnMay 10, 2018 , the Company acquired all the issued and outstanding share capital of First Colombia Devco S.A.S. ("Devco") a Colombian company, and began to establish various business ventures inColombia in the agriculture and real estate development, tourism, and infrastructure sectors before commencing to phase them out inApril 2019 . OnJuly 1, 2019 , the Company acquired 100% of the membership interests inGeneral Extract, LLC ("General Extract"), aColorado limited liability company. General Extract was founded in 2015 as an importer, distributor, broker and postprocessor of hemp and hemp derivatives. The Company acquired all of the issued and outstanding membership interests, including business plans and access to contacts. OnJuly 15, 2019 , the Company, through its wholly owned subsidiaryGood Acquisition Co. , entered into a Membership Interest Purchase Agreement to acquire intellectual property and other assets ofCritical Mass Industries LLC DBA Good Meds ("CMI" and/or "Good Meds"), aColorado limited liability company ("CMI Transaction"). CMI is licensed by theMarijuana Enforcement Division of Colorado Department of Revenue . Under the terms of the Membership Interest Purchase Agreement, CMI retained the cannabis license, inventory and accounts receivable (the "Cannabis License Assets") and continued to operate the cannabis business related to those assets. In consideration for the transfer of the acquired assets, the Company delivered 13,553,233 shares of the Company common stock, in addition to$1,999,770 in cash to CMI. 21 EffectiveDecember 31, 2021 , we entered into a restated and amended administrative services agreement, terminated our license and marketing agreements, and restated the asset purchase agreement with CMI and affiliates. As a result of these agreements, we disposed of all CMI-related assets and extinguished any and all related obligations. For clarity, we have no management or operations decision-making right or responsibility, nor any access to future economic benefits from operation of the assets. Therefore, upon commencing these agreements, we determined that CMI no longer qualifies as a variable interest entity ("VIE") as ofDecember 31, 2021 . InAugust 2020 , the Company established a wholly owned Colombian subsidiary, Andina Gold Colombia SAS for the purpose of exploring unique opportunities for gold exploration inColumbia . InDecember 2020 , due to the death of the top geologist exploring opportunities on behalf of the Company, and the effects of the ongoing Coronavirus pandemic, the Company determined that pursuit of gold exploration inColombia was no longer a practical alternative. OnJune 22, 2021 , the Company entered into an Asset Purchase Agreement withCryocann USA Corp , aCalifornia corporation ("Cryocann"), pursuant to which Company acquired substantially all the assets of Cryocann. The aggregate purchase price was$3,500,000 million in cash and 10,000,000 shares of Company common stock As part of the Cryocann Acquisition, we retained both Cryocann employees,who have expert knowledge of the industry, related participants, customers and the acquired patented technology. Under their employment agreements, each employee may receive compensation if specific performance targets are met in association with our future operating performance when the Cryocann technology enters the market. The technology and assets acquired from Cryocann are operated from the Company's subsidiary,Cryomass LLC . The patented cryo-mechanical technology is for the separation of plant materials in the harvesting of hemp and cannabis, and potentially other high value crops such as hops. We believe this technology will reduce processing costs and increases the quality of extracted compounds. We are exploring the application of the underlying technology to a broad range of industries that handle high-value materials and that could benefit from our precision capture methods. We anticipate that cannabis and hemp will be the first in a series of such industries. To develop and commercialize the technology, we contracted with an independent engineering and manufacturing firm to refine the design of our cryo-mechanical system for the handling of harvested hemp, cannabis and other high-value plants. The system exploitsCryoMass's U.S. -patented process for the controlled application of liquid nitrogen to stabilize and separate the structural elements of gross plant material. The system, which we now call the CryoMass Trichome Separation System is fully developed and optimized for the low-cost collection of fully intact hemp and cannabis trichomes. It can be used within minutes after plants have been cut and can also efficiently capture trichomes from fresh frozen or even dried plant parts, including trim. The device's through-put capacity is to be approximately 600 kilograms of gross plant material per hour. The advanced design for the equipment has been completed, and testing of a prototype machine is currently un The engineering and manufacturing firm has indicated that it has the capacity to build 10 to 15 such devices per month. The first functional "beta" machine has completed field testing. The Company is currently negotiating a license arrangement with a third party to deploy twelve trichome separation units at the prospective partner's facility inCalifornia and other locations, with the intention of starting commercial operations shortly thereafter. Management believes theCryoMass system will deliver a compelling combination of cost and time savings while enhancing product quality and quantity for largescale cultivators and processors of hemp and cannabis. The use of aCryoMass system - which can be trucked to and operated on the fields of most large hemp and cannabis growers or be permanently installed at a user's processing facility - should eliminate many of the costs that come with traditional practices, especially the labor, fuel and capital costs of drying and curing hemp or cannabis that is grown for the extraction of end products. With traditional practices, harvested plants are transported to a specially constructed drying house and then treated for a week or longer under controlled conditions of temperature and humidity. It's a costly method. With our system, harvested plants are simply fed into the front end of aCryoMass trichome separation system, and minutes later fully intact trichomes are collected at the back end of the unit. With traditional practices and their seven-to-ten days of handling and drying, a large share of a plant's valuable trichomes break off and are lost. Then the remaining trichomes are damaged by long exposure to oxygen and by the evaporation of their volatile terpenes. TheCryoMass system, on the other hand, stabilizes and collects fully intact trichomes at harvest, leaving no opportunity for such wasteful loss. Field-captured trichomes are the cleanest element of a hemp or cannabis plant because, unlike the rest of the plant, trichomes do not readily take up heavy metals, pesticides or other common soil contaminants. As a product for end-users, field-captured trichomes are closest to being contaminant free. As feedstock for manufacturers of extracts and oils, they are the key to the purest products possible. 22
Because the trichomes collected withCryoMass technology represent only 10% or so of a plant's weight and volume, they are cheaper to ship and store than gross plant material. For the same reason and because trichomes are free of the waxes and other unwanted materials found in the rest of the plant, processing trichomes into oils and extracts can be far quicker, cheaper and easier than processing gross plant material. Even trichomes captured from dried or frozen plant parts deliver this cost-saving advantage to processors of oils and extracts. The three-dimensional advantage achievable with theCryoMass system - first-stage cost savings, product enhancement and downstream cost savings - can as much as double a crop's wholesale value. And in some jurisdictions, users may enjoy a reduction in excise taxes levied on cannabis and hemp harvests, which typically are tied to the gross weight of hemp or cannabis that is removed
from the field. Production and processing of hemp and cannabis is a huge, worldwide industry. In theU.S. , for example, the wholesale value of the cannabis crop from just the 11 states permitting adult-use and medical cannabis exceeds$6 billion annually. Growth in theU.S. and in the worldwide market is likely fed in part by the growing acceptance of medicinal cannabis products and anticipated legislative changes in various jurisdictions worldwide. Several other high-value plants, including species that are important for health and wellness products, wrap their valuable elements in trichomes. The technology we are developing for hemp and cannabis may have profitable application to
those other species as well.
In
Chinese Intellectual Property Office. We currently are taking steps to gain
further protection for our intellectual property through the European Union
Intellectual Property Office and several other international jurisdictions.
OnNovember 17, 2021 , we announced the completion of a$10.3 million equity financing. The financing and the earlier conversion of substantially all the company's debt into common stock left the Company with adequate resources for our planned business development. In connection with the financing, 1,010,000 shares and 760,000 shares ofCryoMass Technologies common stock were purchased by CEOChristian Noël and Chairman of the BoardDelon Human , respectively, either individually or through entities controlled by them. Update on COVID-19 InDecember 2019 , a novel strain of coronavirus was reported to have surfaced inWuhan, China , which has spread throughout the world, includingthe United States . OnJanuary 30, 2020 , theWorld Health Organization declared the outbreak of COVID-19 a "Public Health Emergency of International Concern," and onMarch 11, 2020 , it characterized the outbreak as a "pandemic". The impact of COVID-19 developments and uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions, both domestic and international, closing of borders and business slowdowns or shutdowns in affected areas. As a result, COVID-19 has impacted the Company's business. Although deemed an essential business during the pandemic, many dispensaries and cannabis manufacturers have suspended or reduced operations on a temporary basis due to matters associated with COVID-19. While activities resumed in full in 2022, there are continued threats of short-notice, temporary restrictions that may impact our business.
The COVID-19 pandemic and responses to this crisis, including actions taken by
federal, state and local governments, have had an impact on the operations of
the Company, including, without limitation, the following: reduced staffing due
to employee suspected conditions and social distancing measures; constraints on
productivity; management and staff non-essential business-related travel was
constrained due to stay-at-home orders; some employees have shifted to remote
work resulting in loss of productivity; consumers visiting dispensaries operated
under license impacted by stay-at-home orders. Management continues to monitor
the COVID-19 pandemic situation and federal, state and local recommendations and
will provide updates as appropriate.
23
Our Current Business
Our business portfolio includes the accounts of Cryomass LLC (formerly known as
General Extract), which is controlled by the Company through its 100% ownership
interest. The Company dissolved its previously reported VIE relationship with
Critical Mass Industries Inc. , such that we no longer report the VIE as
discontinued operations held for sale.
On June 23, 2021 , the Company consummated purchase of assets of Cryocann USA
Corp through its wholly-owned subsidiary Cryomass LLC . We have finalized
research and development work of our patented technology. We have completed
commercial-scale testing of the system and have been targeting specific markets
and industries to employ this ground-breaking technology.
Management believes the CryoMass system will deliver a compelling combination of
cost and time savings while enhancing product quality and quantity for
largescale cultivators and processors of hemp and cannabis. The use of
a CryoMass system should eliminate many of the costs that come with traditional
practices, especially the labor, fuel and capital costs of drying and curing
hemp or cannabis that is grown for the extraction of end products. With
traditional practices, harvested plants are transported to a specially
constructed drying house and then treated for a week or longer under controlled
conditions of temperature and humidity. It's a costly method. With our system,
harvested plants are simply fed into the front end of a CryoMass trichome
separation system, and minutes later fully intact trichomes are collected at the
back end of the unit. With traditional practices and their seven-to-ten days of
handling and drying, a large share of a plant's valuable trichomes break off and
are lost. Then the remaining trichomes are damaged by long exposure to oxygen
and by the evaporation of their volatile terpenes. The CryoMass system, on the
other hand, stabilizes and collects fully intact trichomes at harvest, leaving
no opportunity for such wasteful loss. Field-captured trichomes are the cleanest
element of a hemp or cannabis plant because, unlike the rest of the plant,
trichomes do not readily take up heavy metals, pesticides or other common soil
contaminants. As a product for end-users, field-captured trichomes are closest
to being contaminant free. As feedstock for manufacturers of extracts and oils,
they are the key to the purest products possible.
Because the trichomes collected from CryoMass system represent only 10% or so of
a plant's weight and volume, they are cheaper to ship and store than gross plant
material. For the same reason and because trichomes are free of the waxes and
other unwanted materials found in the rest of the plant, processing trichomes
into oils and extracts can be far quicker, cheaper and easier than processing
gross plant material. Even trichomes captured from dried or frozen plant parts
deliver this cost-saving advantage to processors of oils and extracts. The
three-dimensional advantage achievable with the CryoMass system - first-stage
cost savings, product enhancement and downstream cost savings - can as much as
double a crop's wholesale value. And in some jurisdictions, users may enjoy a
reduction in excise taxes levied on cannabis and hemp harvests, which typically
are tied to the gross weight of hemp or cannabis that is removed from the field.
Results of Operations for the Three Months Ended
Our operating results for the three months endedSeptember 30, 2022 and 2021 are summarized as follows: For the Three Months Ended September 30, Change 2022 2021 Dollars Percentage Net sales $ - $ - $ - 0 % Cost of goods sold, inclusive of depreciation - - - 0 % Gross profit - - - 0 % Total operating expenses 1,253,826 2,056,476 (802,650 ) -39 % Loss from operations (1,253,826 ) (2,056,476 ) 802,650 -39 % Total other expenses 25,413 (567,431 ) 592,844 -104 % Net loss from continuing operations, before taxes (1,228,413 ) (2,623,907 ) 1,395,494 -53 % Income taxes - - - 0 %
Net loss from continuing operations
-53 % Net income / (loss) from disc. operations, net of tax $ -$ 250,092 $ (250,092 ) -100 % Net loss$ (1,228,413 ) $ (2,373,815 ) $ 1,145,402 -48 % 24
Our operating results for the three months ended
relating to our former variable interest entity, CMI, are classified as
discontinued operations above and summarized as follows:
For the Three Months Ended
September 30, Change
2022 2021 Dollars Percentage
Net sales $ - $ 1,399,505 $ (1,399,505 ) -100 %
Cost of goods sold, inclusive of depreciation - 857,281 (857,281 ) -100 %
Gross profit - 542,224 (542,224 ) -100 %
Total operating expenses - 292,132 (292,132 ) -100 %
Gain / (loss) from operations - 250,092 (250,092 ) -100 %
Total other expenses - - - 0 %
Net income / (loss), before taxes - 250,092 (250,092 ) -100 %
Income taxes - - - 0 %
Net income / (loss) $ - $ 250,092 $ (250,092 ) -100 %
There were no net sales related to continuing operations for the three months endedSeptember 30, 2022 and 2021. CMI had no net sales for the three months endedSeptember 30, 2022 . CMI net sales were$1,399,505 for the three months endedSeptember 30, 2021 , of which$943,012 was related to medical retail,$456,540 was related to medical wholesale,$(47) was related to recreational wholesale and$0 was related to other revenues. The overall decrease in CMI net sales for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 was$1,399,505 , or 100%, which is which is attributable to the Company's disposal of its discontinued operations as ofDecember 31, 2021 . There were no cost of goods sold related to continuing operations for the three months endedSeptember 30, 2022 and 2021, respectively. CMI had no cost of goods sold for the three months endedSeptember 30, 2022 . CMI's cost of goods sold were$857,281 for the three months endedSeptember 30, 2021 , representing a decrease of$857,281 or 100%. This decrease is attributable to the Company's disposal of its discontinued operations as ofDecember 31, 2021 . Operating Expenses
Operating expenses encompass personnel costs, general and administrative
expenses, and legal and professional fees. Total operating expenses were
operating expenses of:
? Personnel costs -$471,388 decrease ? General and administrative expenses -$183,760 decrease
The decrease of$471,388 , or 39%, in personnel costs is primarily due to a large employee signing bonus and consulting contracts for investor relations and equipment testing in 2021. The decrease of$183,760 , or 38%, in general and administrative expenses is primarily due to the fact that the Company incurred significant stock options costs during the three months endingSeptember 30, 2021 . CMI operating expenses encompass personnel costs, general and administrative, legal and professional fees, and amortization expense. Total operating expenses for CMI were$0 and$292,132 for the three months endingSeptember 30, 2022 and 2021, respectively, representing a decrease of$292,132 , or 100%. This decrease was attributable to the Company's disposal of its discontinued operations as ofDecember 31, 2021 . Other Expense Other expense for the three months endingSeptember 30, 2022 consisted of$19,636 interest expense and$45,049 gain on foreign exchange. Other expense for the three months endingSeptember 30, 2021 consisted of$590,601 interest expense and$23,170 gain on foreign exchange. The decrease in interest expense was a result of fully converting$4,900,000 of notes payable into common shares during Q4 2021. The loss on foreign exchange relates to a payable agreement
withCryomass LLC's supplier.
CMI had no other expense for the three months ending
2021.
Net Loss
For the foregoing reasons, we had a net loss of
ending
diluted, compared to a net loss of
25
Results of Operations for the Nine Months EndedSeptember 30, 2022 and 2021 Our operating results for the nine months endedSeptember 30, 2022 and 2021 are summarized as follows: For the Nine Months Ended September 30, Change 2022 2021 Dollars Percentage
Net sales $ - $ - $ - 0 % Cost of goods sold, inclusive of depreciation - - - 0 % Gross profit - - 0 % Total operating expenses 4,797,859 5,689,625
(891,766 ) -16 % Loss from operations (4,797,859 ) (5,689,625 ) 891,766 -16 % Total other expenses (13,276 ) (1,106,150 ) 1,092,874 -99 % Net loss from continuing operations, before taxes (4,811,135 ) (6,795,775 ) 1,984,640 -29 % Income taxes - - - 0 % Net loss from continuing operations$ (4,811,135 ) $ (6,795,775 ) $ 1,984,640 -29 % Net income from discontinued operations, net of tax $ -$ 605,394 $ (605,394 ) -100 % Net loss$ (4,811,135 ) $ (6,190,381 ) $ 1,379,246 -22 % Our operating results for the nine months endedSeptember 30, 2022 and 2021, relating to our former variable interest entity, CMI, are included above and summarized as follows: For the Nine Months Ended September 30, Change 2022 2021 Dollars Percentage Net sales $ -$ 4,713,077 $ (4,713,077 ) -100 % Cost of goods sold, inclusive of depreciation - 2,982,974 (2,982,974 ) -100 % Gross profit - 1,730,103 (1,730,103 ) -100 % Total operating expenses - 1,074,906 (1,074,906 ) -100 % Gain / (loss) from operations - 655,197 (655,197 ) -100 % Total other expenses - (49,803 ) (49,803 ) -100 % Net income, before taxes -
605,394 (605,394 ) -100 % Income taxes - - - 0 % Net income $ - $ 605,394$ (605,394 ) -100 %
There were no net sales related to continuing operations for the nine months endedSeptember 30, 2022 and 2021. CMI contributed no net sales for the nine months endedSeptember 30, 2022 . CMI net sales were$4,713,077 for the nine months endedSeptember 30, 2021 , of which$3,196,912 was related to medical retail,$1,525,132 was related to medical wholesale,$8,963 was related to recreational wholesale, and$(17,930) was related to other revenues. The overall decrease in CMI net sales for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 was$4,713,077 , or 100%. There were no cost of goods sold related to continuing operations for the nine months endedSeptember 30, 2022 and 2021. CMI contributed no cost of goods sold for the nine months endedSeptember 30, 2022 . CMI's cost of goods sold were$2,982,974 for the nine months endedSeptember 30, 2021 , representing a decrease of$2,982,974 or 100%. This decrease is attributable to the Company's disposal of its discontinued operations as ofDecember 31, 2021 . Operating Expenses
Operating expenses encompass personnel costs, general and administrative
expenses, and legal and professional fees. Total operating expenses were
? General and administrative expenses -$2,025,786 decrease ? Legal and professional fees -$1,539,371 increase
The$2,025,786 , or 71%, decrease in general and administrative expenses is primarily due to the fact that the Company incurred additional stock-based compensation expense during the nine months endingSeptember 30, 2021 related to new CEOChristian Noel's employment agreement and stock options granted for the Cryocann Acquisition. The 1,539,371, or 193%, increase in legal and professional fees primarily resulted from the fact that the Company incurred a number of large expenses for its primary investor relations consultant. 26 CMI operating expenses encompass personnel costs, general and administrative, legal and professional fees, and amortization expense. Total operating expenses for CMI were$0 and$782,774 , respectively, for the nine months endedSeptember 30, 2022 and 2021, which represents a decrease of$782,774 or 100%. Other Expense Other expense for the nine months endingSeptember 30, 2022 consisted of$90,894 interest expense and$77,618 gain on foreign exchange. Other expense for the nine months endingSeptember 30, 2021 consisted of$1,152,858 interest expense and$46,708 gain on foreign exchange. The decrease in interest expense was a result of fully converting$4,900,000 of notes payable into common shares during Q4 2021. The loss on foreign exchange relates to a payable agreement withCryomass LLC's supplier. CMI contributed no other expense for the nine months endingSeptember 30, 2022 . CMI's other expense during the three months endingSeptember 30, 2021 consisted of$49,803 interest expense, which primarily relates to the related party note. Net Loss
For the foregoing reasons, we had a net loss of
ending
diluted, compared to a net loss of
Liquidity, Capital Resources and Cash Flows
The Company believes it has sufficient cash available, in addition to cash expected to be available from lease payments and royalty payments in connection with future revenue generation, to fund its anticipated level of operations for at least the next twelve months. As ofSeptember 30, 2022 , the Company had working capital of$2,031,369 and cash balance of$3,129,736 . The Company estimates that it needs approximately$4,000,000 to cover overhead costs over the next twelve months. The Company has capital expenditure requirements ranging from zero to$6,600,000 depending on how many trichome separation units are ordered over the next twelve months, but upfront lease payments are expected to offset each unit ordered. However, if needed, the Company also has available to it a facility that can be used to put shares to an investment fund in return for cash. The dollar amount of each put is determined by a formula which is based on trading volumes and prices of our shares. Based on current trading volumes and prices, we estimate that approximately$100,000 could be available every two weeks until we reach the facility limit of$10,000,000 or the end of 2023, whichever comes first. We believe that the combination of available cash, lease payments and royalty payments from revenue generation and the facility described above will be sufficient to meet our anticipated costs going forward. COVID-19 has resulted in, and may continue to result in, significant disruption of financial markets, which may reduce the Company's ability to access capital or its customers' ability to pay the Company for past or future purchases, which could negatively affect the Company's liquidity. The Company believes that the cash balances and cash from operations will be sufficient to satisfy its cash needs for the next few months until it can obtain new long-term financing or other sources of capital. If we are unable to attain additional financing, we will have to seek additional strategic alternatives and relief from our additional liabilities accumulated during COVID-19. The impact of COVID-19 developments and uncertainty with respect to the economic effects of the pandemic have introduced significant volatility in the financial markets. The uncertainties associated with COVID-19 related to our industry present risk and doubt about the Company's ability to continue as a going concern. Going Concern
Management believes it has sufficient cash available to support an anticipated
level of operations for at least 12 months following the date of this report.
Capital Resources
The following table summarizes total current assets, liabilities and working
capital for the periods indicated:
September 30, December 31,
2022 2021
Current assets $ 3,266,373 $ 6,530,222
Current liabilities 1,235,004 1,882,419
Working capital $ 2,031,369 $ 4,647,803
As of
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