UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

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

Commission file number: 000-56155

(Exact name of registrant as specified in its charter)

Nevada		82-5051728
(State of incorporation)		(IRS Employer Identification No.)

1001 Bannock Street, Suite 612, Denver, CO		80204
(Address of principal executive offices)		(Zip Code)

303-416-7208

(Registrant’s telephone number, including area code)

CRYOMASS TECHNOLOGIES INC.

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

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 ☒ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No

As of June 30, 2023, the last business day of the registrant’s last completed second quarter, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $23,733,696, based on the June 30, 2023 closing price of the registrant’s common stock, as reported by OTC Markets, Inc. For the purposes of this disclosure, shares of common stock held by each executive officer, director and stockholder known by the registrant to be affiliated with such individuals based on public filings and other information known to the registrant have been excluded since such persons may be deemed affiliates. This determination of affiliate status for the purpose is not necessarily a conclusive determination for other purposes.

As of June 7, 2024, the registrant had 218,684,877 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

		PAGE

PART I
Item 1	Business	1
Item 1A	Risk Factors	2
Item 1B	Unresolved Staff Comments	13
Item 1C	Cybersecurity	13
Item 2	Properties	13
Item 3	Legal Proceedings	13
Item 4	Mine Safety Disclosures	13

PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6	[Reserved]	15
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	19
Item 8	Financial Statements and Supplementary Data	19
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	19
Item 9A	Controls and Procedures	20
Item 9B	Other Information	21
Item 9C	Disclosure Regarding Foreign Jurisdictions That Prevents Inspections	21

PART III
Item 10	Directors, Executive Officers and Corporate Governance	22
Item 11	Executive Compensation	28
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	39
Item 13	Certain Relationships and Related Transactions, and Director Independence	40
Item 14	Principal Accountant Fees and Services	40

PART IV
Item 15	Exhibit and Financial Statement Schedules	41
	Signatures	43

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue”, and negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

Forward-looking statements include, among others, risks relating to U.S. federal regulation, the variation in state regulation, risks relating to U.S. regulatory landscape and enforcement related to cannabis, including political risks; risks relating to anti-money laundering laws and regulation; risks relating to changes in cannabis laws and regulatory uncertainty; risks relating to legal, regulatory or political change; risks relating to the market price and volatility of the cannabis sector; risks relating to the internal controls of the Company and dilution; risks relating to the global economic condition; risks relating to the value of the common stock; tax and insurance related risks; risks relating to the limited operating history of the Company and the reliance on the expertise and judgment of senior management of the Company; risks relating to competition; risks relating to the difficulty in recruiting and retaining management and key personnel and managing growth; risks relating to the unreliability of forecasts; risks relating to the inability to innovate and find efficiencies; website and operational risks; risks relating to the reliance on third-party suppliers, manufacturers and contractors; risks relating to revenue shortfalls; risks relating to the ability to obtain the necessary permits and authorizations; risks relating to potential conflicts of interest; risks related to proprietary intellectual property and potential infringement by third parties; risks relating to the lack of U.S. bankruptcy protection, currency fluctuations and lack of earnings and dividend record; risks relating to anti-money laundering laws and regulation; risks relating to civil asset forfeiture; risks relating to the heightened scrutiny of investments in the U.S.; risks relating to the ability and constraints on marketing products; risks relating to the settlements of trades, access to banks and legality of contracts; risks relating to the unfavorable tax treatment of cannabis businesses in the U.S. and the classification of the Company for U.S. tax purposes; risks relating to the public opinion, consumer acceptance and perception of the cannabis industry; security risks; risks relating to litigation; risks inherent in an agricultural business; risks relating to the Company’s reliance on licenses; risks relating to product liability and product recall; risks relating to regulatory or agency proceedings, investigations and audits; risks relating to the newly established legal regimes; and general economic risks as well as those risk factors discussed under “Risk Factors” below.

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this Annual Report on Form 10-K are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.

From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

We assume no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms “Cryomass Technologies,” the “Company,” “we,” “us,” and “our” refer to Cryomass Technologies Inc., a Nevada corporation, and, where appropriate, its wholly owned subsidiaries.

PART I

ITEM 1 BUSINESS

Company History

The Company’s principal office is located at 1001 Bannock St., Suite 612, Denver, CO 80204, and its telephone number is 303-416-7208. The Company’s website is www.cryomass.com. Information appearing on the website is not incorporated by reference into this report.

Cryomass Technologies Inc is the parent company to wholly-owned subsidiaries Cryomass LLC, Cryomass California LLC, and 1304740 B.C. Unlimited Liability Company dba Cryomass Canada.

On June 22, 2021, the Company entered into an Asset Purchase Agreement with Cryocann USA Corp, a California corporation (“Cryocann”), pursuant to which Company acquired substantially all the assets of Cryocann. The acquired assets included the patented cryogenic process titled “System and method for cryogenic separation of plant material” (US patent #10,864,525) for the reduction of biomass and efficient isolation, collection and preservation of delicate resin glands (trichomes) of harvested of hemp and cannabis, and potentially other high value trichome-rich plants.

In September 2021, we were granted an additional patent for our process from the Chinese Intellectual Property Office. In April 2022, we were granted another patent # 3,064,896 from the Canadian Intellectual Property Office. We currently are taking steps to gain further protection for our intellectual property through the European Union Intellectual Property Office and other international jurisdictions. On January 31, 2023 and January 30, 2024 we were granted two additional related patents, US patent #11,565,270 and US Patent #11,883,829 respectively.

The first functional commercial unit, known as a CryoSift Separator™, has been installed at the premises of an operating partner, pursuant to a license and lease arrangement, in California, at the facilities of Rubberrock, Inc. See below.

Market Size

Production and processing of hemp and cannabis is a huge, worldwide industry. In the U.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 the U.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.

Recent Developments

In January 2023, we signed a license and lease arrangement with RedTape Core Partners LLC (“RedTape”) to deploy multiple CryoMass trichome separation units at the prospective partner’s facility in California and other locations, which was subsequently amended on August 16, 2023. No funds were ever paid by RedTape to CryoMass pursuant to the lease and license agreement. On December 20, 2023, notice of termination was sent to RedTape.

On August 18, 2023, the Company entered into a Patent License and Equipment Rental Agreement with Rubberrock, Inc. (“Rubberrock”) for a term of five years, in which the Company licenses its proprietary CryoSift Separator™ process and technology and leases one CryoSift Separator™ Unit for use in the state of California. The agreement was amended on January 9, 2024 and again on February 28, 2024. Under the terms of the transaction, as amended, Rubberrock agreed to pay license fees of $100,000, which was paid on September 23, 2023, and a monthly royalty based on 10% of revenues. Subsequent to the commencement of the RubberRock agreement, our Chief Executive Officer, Christian Noel, joined the board of directors of RubberRock at the end of September 2023, which created a related party disclosure requirement. In January 2024, Christian Noel left the board of directors of RubberRock.

We believe that our technologies 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. To that end, Cryomass is working with an extensive pipeline of cultivators and processors in various markets, including several states in the USA, as well as Canada.

On September 15, 2022, the Company entered into a $2,000,000 Loan Agreement and Unsecured Promissory Note with CRYM Co-Invest, which accrued interest at 12% per annum, payable quarterly. On December 31, 2023, the parties amended and restated the agreement includes an additional loan amount of $135,000, disbursed on December 22, 2023. The total principal is $2,289,590, which includes principal and in-kind interest and accrues regular interest at an amended rate of 15% annually. The Company is obligated to repay the principal and all remaining accrued interest in full by April 1, 2025. The Company also issued four tranches of common stock purchase warrants to CRYM Co-Invest that are exercisable up until February 8, 2029 and include a cashless exercise option. The total number of warrant shares issued was 20,000,000 (each tranche for 5,000,000 shares, exercisable at $0.25, $0.50, $0.75 and $1.00, per share, respectively). The Company also included a sale and purchase commitment option feature where CRYM Co-Invest has agreed to direct its affiliates to purchase up to five (5) units of the Company’s equipment for $1,200,000 each. Along with the sale and purchase commitment option, if the Company identifies a suitable lessee to rent the equipment from the affiliate and enter into an equipment rental agreement, then CRYM Co-Invest and the Company will each receive 50% of a monthly processing fee for the term of the equipment rental. Lastly, the amended agreement also includes a net revenue sharing commitment feature that begins after the first equipment purchase by the lender’s affiliate, whereby the Company will remit 10% of the Company’s quarterly net revenue that is generated through non-affiliated rental and non-affiliated sales income.

Available Information

Our website address is https://cryomass.com. We do not intend our website address to be an active link or to otherwise incorporate by reference the contents of the website into this report. The U.S. Securities and Exchange Commission (the “SEC”) maintains an internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

ITEM 1A RISK FACTORS

You should carefully consider the risks described below together with all other information included in our public filings before making an investment decision with regard to our securities. The statements contained in or incorporated into this Prospectus that are not historic facts are forward- looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward- looking statements. While the risks described below are the ones we believe are most important for you to consider, these risks are not the only ones that we face. If any of the following events described in these risk factors actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our Common Shares could decline, and you may lose all or part of your investment.

General Risk Factors

We have a limited operating history in an evolving industry, which makes it difficult to accurately assess our future growth prospects.

Although we believe our management team has extensive knowledge of the cannabis and other relevant industries and closely monitors changes in legislation, we also intend to provide equipment and services in an evolving environment that may not develop as expected. Furthermore, our operations continue to evolve under our business plan as we continually assess new strategic opportunities for our business within various areas. Assessing the future prospects of our business is challenging in light of both known and unknown risks and difficulties we may encounter. Growth prospects in the industry can be affected by a wide variety of factors including:

●

Competition from other similar companies;

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Regulatory limitations on the industry we primarily supply to (cannabis agriculture) we can offer and markets we can serve;

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Other changes in the regulation of cannabis and hemp grow, harvesting and processing;

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Changes in cannabis industry demand and consumer behavior, which may affect the size of the agricultural businesses we intend to serve;

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Our ability to access adequate financing on reasonable terms and our ability to raise additional capital in order to fund our operations;

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Our ability to retain and recruit personnel with relevant industry experience;

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Challenges with new machinery, services and markets; and

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Fluctuations in the commodities markets.

We may not be able to successfully address these factors, which could negatively impact our growth, harm our business and cause our operating results to be worse than expected.

Our success depends on the introduction of new products, which requires substantial expenditures.

Our long-term results depend upon our ability to introduce and market new products successfully. The success of our new products will depend on a number of factors, including:

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innovation;

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customer acceptance;

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the efficiency of our suppliers in providing component parts and of our contract manufacturing facilities in producing final products; and

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the performance and quality of our products relative to those of our competitors.

We cannot predict the level of market acceptance, or the amount of market share our new products will achieve. We may experience delays in the introduction of new products. Any delays or other problems with our new product launches will adversely affect our performance. In addition, introducing new products can result in decreases in revenues from our existing products. We expect to make substantial investments in product development and refinement. We may need more funding for product development and refinement than is readily available, which could adversely affect our business.

We face significant competition, and, if we are unable to compete successfully against other agricultural equipment manufacturers, we will lose customers and our net sales and profitability will decline.

The agricultural equipment business is highly competitive, particularly in the United States. Established and substantially larger agricultural equipment manufacturers, with substantially greater financial and other resources, have the capability to compete with us successfully. Our competitors may substantially increase the resources devoted to the development and marketing of products that compete with our products. In addition, competitive pressures in the agricultural equipment business may affect the market prices of new and used equipment, which, in turn, may adversely affect our performance.

We will require significant additional capital to fund our business plan.

The Company will be required to expend significant funds to implement its business plan. The Company anticipates that it will be required to make substantial capital expenditures for the manufacture of its equipment.

The Company’s ability to obtain necessary funding for these purposes, in turn, depends upon a number of factors, including the status of the national and worldwide economy and the financial markets and the availability of capital. Capital markets worldwide were adversely affected by substantial losses by financial institutions, caused by investments in asset-backed securities and remnants from those losses continue to impact the ability for the Company to raise capital. The Company may not be successful in obtaining the required financing or, if it can obtain such financing, such financing may not be on terms that are favorable to us.

The Company’s inability to access sufficient capital for its operations could have a material adverse effect on its financial condition, results of operations, or prospects. Sales of substantial amounts of securities may have a highly dilutive effect on the Company’s ownership or share structure. Sales of a large number of shares of the Company’s Common Shares in the public markets, or the potential for such sales, could decrease the trading price of the Common Shares and could impair the Company’s ability to raise capital through future sales of Common Shares.

International, national and regional trade laws, regulations and policies and government farm programs and policies could significantly impair our profitability and growth prospects.

International, national and regional laws, regulations and policies directly or indirectly related to or restricting the import and export of the Company’s products, services and technology, including protectionist policies in particular jurisdictions or for the benefit of favored industries or sectors, could harm the Company’s ability to grow in international markets and subject the Company to civil and criminal sanctions. Restricted access to global markets impairs the Company’s ability to export goods and services from its various manufacturing locations around the world, and limits the ability to access raw materials and high-quality parts and components at competitive prices on a timely basis. Trade restrictions could limit the Company’s ability to capitalize on future growth opportunities in international markets and impair the Company’s ability to expand the business by offering new technologies, products and services. These restrictions may affect the Company’s competitive position. Additionally, changes in government farm programs and policies, including restrictions on cannabis and hemp cultivation and processing, can significantly influence demand for agricultural equipment.

Changing demand for certain agricultural products could have an effect on the price of farming output and consequently the demand for certain of our equipment and could also result in higher research and development costs related to changing machine requirements.

Negative economic conditions and outlook can materially weaken demand for our equipment and services, limit access to funding and result in higher funding costs.

The demand for the Company’s products and services can be significantly reduced in an economic environment characterized by high unemployment, cautious consumer spending, lower corporate earnings, U.S. budget issues and lower business investment. Negative or uncertain economic conditions causing the Company’s customers to lack confidence in the general economic outlook can significantly reduce their likelihood of purchasing the Company’s equipment. If negative economic conditions affect the overall farm economy, there could be a similar effect on the Company’s agricultural equipment sales. In addition, uncertain or negative outlook with respect to ongoing U.S. budget issues as well as general economic conditions and outlook can cause significant changes in market liquidity conditions. Such changes could impact access to funding and associated funding costs, which could reduce the Company’s earnings and cash flows. Such changes could affect the ability of the Company’s customers, contract manufacturers, suppliers and lenders to finance their respective businesses, to access liquidity at acceptable financing costs, if at all, the availability of supplies, materials and manufacturing facilities and on the demand for the Company’s products.

We may encounter difficulties in fully exploiting the assets we acquired from Cryocann USA Corp and may not fully achieve, or achieve within a reasonable time frame, expected strategic objectives and other expected benefits of the acquisitions.

Our acquisition of Cryocann USA Corp assets is expected to realize strategic and other benefits, including, among other things, the opportunity to enter the agricultural equipment industry, identify customers and provide our customers with an appealing range of products and services. However, it is impossible to predict with certainty whether, or to what extent, these benefits will be realized or whether we will be able to exploit the acquired assets in a timely and effective manner. For example:

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the costs of using the assets in developing and manufacturing agricultural equipment may be higher than we expect and may require significant attention from our management;

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the asset acquisition and subsequent exploitation of the assets may result in as of yet unidentified liabilities, such as infringement of third parties’ intellectual property, environmental liabilities or liabilities for violations of laws, such as the FCPA, that we did not expect;

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our ability to successfully carry out our growth strategies with the help of the acquired assets will be affected by, among other things, our ability to maintain and enhance our relationships with potential customers, our ability to manufacture and distribution products, changes in the spending patterns and preferences of customers and potential customers, fluctuating economic and competitive conditions and our ability to retain their key personnel;

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litigation or other claims in connection with the acquired assets, including claims from Cryocann USA Corp customers, current or former shareholders or other third parties; and

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our due diligence of Cryocann USA Corp may have failed to identify all liabilities associated with the acquisition. Further, the acquired assets consisted primarily of intellectual property, which does not have a market value, and we may not have correctly assessed the relative benefits and detriments of making the acquisition and may have pay acquisition consideration exceeding the value of the acquired assets.

Further acquisitions may be necessary to realize our overall corporate strategy. There can be no assurance that we will be able to identify appropriate acquisition targets, successfully acquire identified targets or successfully integrate the business of acquired companies or the assets acquired to realize the full, anticipated benefits of such acquisitions. Our ability to address these issues will determine the extent to which we are able to successfully integrate, exploit and develop the acquired assets and to realize the expected benefits of the Cryocann USA Corp. transactions. Our failure to do so could have a material adverse effect on our performance following the transaction.

Our business results depend largely on its ability to understand its customers’ specific preferences and requirements, and to develop, manufacture and market products that meet customer demand.

The Company’s ability to match new product offerings to customers’ anticipated preferences for different types and sizes of equipment and various equipment features and functionality, at affordable prices, is critical to its success. This requires a thorough understanding of the Company’s potential customers and their needs, as well as an understanding of the cannabis and hemp cultivation dynamics and of other agricultural commodities cultivation dynamics. Failure to deliver quality products that meet customer needs at competitive prices ahead of competitors could have a significant adverse effect on the Company’s business.

Our business may be directly and indirectly affected by unfavorable weather conditions or natural disasters that reduce agricultural production and demand for agriculture equipment.

Poor or unusual weather conditions can significantly affect the purchasing decisions of the Company’s potential customers. Natural calamities such as regional floods, hurricanes or other storms, and droughts can have significant negative effects on agricultural production. The resulting negative impact on farm income can strongly affect demand for agricultural equipment.

Changes in the availability and price of certain raw materials, components and whole goods could result in production disruptions or increased costs and lower profits on sales of our products.

The Company requires access to various materials and components at competitive prices to manufacture and distribute its products. Changes in the availability and price of these materials and components, which have fluctuated in the past and are more likely to fluctuate during times of economic volatility, can significantly increase the costs of production which could have a material negative effect on the profitability of the business, particularly if the Company, due to pricing considerations or other factors, is unable to recover the increased costs from its customers. The Company relies on suppliers and contract manufacturers to acquire materials and components to manufacture its products. Supply chain and contract manufacturing disruptions due to supplier or contract manufacturer financial distress, capacity constraints, business continuity, quality, delivery or disruptions due to weather-related or natural disaster events could affect the Company’s operations and profitability.

In determining the required quantities of our products and the manufacturing schedule, we must make significant judgments and estimates that are not based on any historical data. Because of the inherent nature of estimates, there could be significant differences between our estimates and the actual amounts of products we require, which could harm our business and results of operations.

The agricultural equipment industry is highly seasonal, and seasonal fluctuations may significantly impact our performance.

The agricultural equipment business is highly seasonal, which may cause our quarterly results and our cash flow to fluctuate during the year. Farmers generally purchase agricultural equipment seasonally in conjunction with the harvesting seasons. Seasonal fluctuations can significantly impact our performance in a specific quarter, or overall.

If we are unable to hire and retain key personnel, we may not be able to implement our business plan and our business may fail.

Our future success depends to a large extent on our ability to attract, hire, train and retain qualified managerial, operational and other personnel. We have limited funds for this purpose and we face significant competition for qualified and experienced employees in our industry and from other industries and, as a result, we may be unable to attract and retain the personnel needed to successfully conduct and grow our operations. Additionally, key personnel, including members of management, may leave and compete against us. At present, we do not have all the necessary personnel to carry out our business plans. If we are unable to hire and retain key personnel, our business will be materially adversely affected.

Our growth is highly dependent on the U.S. cannabis and hemp markets. New regulations causing licensing shortages and future regulations may create other limitations that decrease the demand for our products. General regulations at state and federal in the future may adversely impact our business.

The base of cannabis growers in the U.S. has grown over the past 20 years since the legalization of cannabis for medical uses in states such as California, Colorado and Washington. The U.S. cannabis market is still in its infancy and early adopter states such as California, Colorado and Washington represent a large portion of historical industry revenues. The U.S. cannabis cultivation market is expected to be one of the fastest growing industries in the U.S. over the next five years. If the U.S. cannabis cultivation market does not grow as expected, our business, financial condition and results of operations could be adversely impacted. The California cannabis cultivation market is expected to be one of the fastest growing industries in California over the next five years. If the California cannabis cultivation market does not grow as expected, our business, financial condition and results of operations could be adversely impacted.

Cannabis remains illegal under U.S. federal law, with cannabis listed as a Schedule I substance under the United States Controlled Substances Act of 1970 (the “CSA”). Notwithstanding laws in various states permitting certain cannabis activities, all cannabis activities, including possession, distribution, processing and manufacturing of cannabis and investment in, and financial services or transactions involving proceeds of, or promoting such activities remain illegal under various U.S. federal criminal and civil laws and regulations, including the CSA, as well as laws and regulations of several states that have not legalized some or any cannabis activities to date. Compliance with applicable state laws regarding cannabis activities does not protect us from federal prosecution or other enforcement action, such as seizure or forfeiture remedies, nor does it provide any defense to such prosecution or action. Cannabis activities conducted in or related to conduct in multiple states may potentially face a higher level of scrutiny from federal authorities. Penalties for violating federal drug, conspiracy, aiding, abetting, bank fraud and/or money laundering laws may include prison, fines, and seizure/forfeiture of property used in connection with cannabis activities, including proceeds derived from such activities.

We are not currently subject directly to any state laws or regulations controlling participants in the legal cannabis industry. However, regulation of the cannabis industry does impact our potential customers in the cultivation industry and, accordingly, there can be no assurance that changes in regulation of the industry and more rigorous enforcement by federal authorities will not have a material adverse effect on us.

Legislation and regulations pertaining to the use and cultivation of cannabis are enacted on both the state and federal government level within the United States. As a result, the laws governing the cultivation and use of cannabis may be subject to change. Any new laws and regulations limiting the use or cultivation of cannabis and any enforcement actions by state and federal governments could indirectly reduce demand for our products and may impact our current and planned future operations.

Evolving federal and state laws and regulations pertaining to the use or cultivation of cannabis, as well active enforcement by federal or state authorities of the laws and regulations governing the use and cultivation of cannabis may indirectly and adversely affect our business, our revenues and our profits. Local, state and federal cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could require the end users of certain of our products or us to incur substantial costs associated with compliance or to alter our respective business plans. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operation and financial condition.

Certain of our products may be purchased for use for agricultural products other than cannabis and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, future scientific research and public perception.

The public’s perception of cannabis may significantly impact the cannabis industry’s success. Both the medical and adult-use of cannabis are controversial topics, and there is no guarantee that future scientific research, publicity, regulations, medical opinion, and public opinion relating to cannabis will be favorable. The cannabis industry is an early-stage business that is constantly evolving with no guarantee of viability. Among other things, such a shift in public opinion could cause state jurisdictions to abandon initiatives or proposals to legalize cultivation and sale of cannabis or adopt new laws or regulations restricting or prohibiting the cultivation of cannabis where it is now legal, thereby limiting the potential customers who are engaged in the cannabis industry.

Demand for our products may be negatively impacted depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions develop. We cannot predict the nature of such developments or the effect, if any, that such developments could have on our business.

Our indirect involvement in the cannabis industry could affect the public’s perception of us and be detrimental to our reputation.

Damage to our reputation can be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether true or not. Cannabis has often been associated with various other narcotics, violence and criminal activities, the risk of which is that our retailers and resellers that transact with cannabis businesses might attract negative publicity. There is also risk that the action(s) of other participants, companies and service providers in the cannabis industry may negatively affect the reputation of the industry as a whole and thereby negatively impact our reputation. The increased use of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views with regard to cannabis companies and their activities, whether true or not and the cannabis industry in general, whether true or not. We do not ultimately have direct control over how the cannabis industry and its suppliers is perceived by others. Reputation loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance its business strategy and realize on its growth prospects, thereby having a material adverse impact on our business.

Businesses involved in the cannabis industry, and investments in such businesses, are subject to a variety of laws and regulations related to money laundering, financial recordkeeping and proceeds of crimes.

We sell our products through third party retailers and resellers. Investments in the U.S. cannabis industry are subject to a variety of laws and regulations that involve money laundering, financial recordkeeping and proceeds of crime, including the BSA, as amended by the Patriot Act, other anti-money laundering laws, and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States. In February 2014, the Financial Crimes Enforcement Network of the Treasury Department issued a memorandum (the “FinCEN Memo”) providing guidance to banks seeking to provide services to cannabis businesses. The FinCEN Memo outlines circumstances under which banks may provide services to cannabis businesses without risking prosecution for violation of U.S. federal money laundering laws. It refers to supplementary guidance that Deputy Attorney General Cole issued to U.S. federal prosecutors relating to the prosecution of U.S. money laundering offenses predicated on cannabis violations of the CSA and outlines extensive due diligence and reporting requirements, which most banks have viewed as onerous. The FinCEN Memo currently remains in place, but it is unclear at this time whether the current administration will continue to follow the guidelines of the FinCEN Memo. Such requirements could negatively affect the ability of certain of the end users of our products to establish and maintain banking connections.

We are subject to extensive anti-corruption laws and regulations.

The Company’s foreign operations, if and when established, must comply with all applicable laws, which may include the U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act or other anti-corruption laws. These anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence government officials or private individuals for the purpose of obtaining or retaining a business advantage regardless of whether those practices are legal or culturally expected in a particular jurisdiction. Recently, there has been a substantial increase in the global enforcement of anti-corruption laws. Although the Company has a compliance program in place designed to reduce the likelihood of potential violations of such laws, violations of these laws could result in criminal or civil sanctions and have an adverse effect on the Company’s reputation, business and results of operations and financial condition.

Our business, results of operations and financial condition may be adversely affected by pandemic infectious diseases,.

Pandemic infectious diseases, such as the COVID-19 pandemic, may adversely impact our business, consolidated results of operations and financial condition. The global spread of COVID-19 has created significant volatility and uncertainty and economic disruption. The extent to which COVID-19 will continue to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; the effect on our customers and customer demand our services, products and solutions; our ability to sell and provide its services and solutions, including as a result of travel restrictions and people working from home; the ability of our customers to pay for our services and solutions; and any closures of our offices and the offices and facilities of our customers. COVID-19, as well as measures taken by governmental authorities to limit the spread of this or similar viruses, may interfere with the ability of our employees, suppliers, and other business providers to carry out their assigned tasks or supply materials or services at ordinary levels of performance relative to the requirements of our business, which may cause us to materially curtail certain of our business operations. We require additional funding and such funding may not be available to us as a result of contracting capital markets resulting from the COVID-19 or similar pandemics. Any of these events could materially adversely affect our business, financial condition, results of operations and/or stock price.

Natural disasters, pandemic outbreaks or other health crises could disrupt business and result in lower sales and otherwise adversely affect our financial performance.

The occurrence of one or more natural disasters, climate change, pandemic outbreaks or other health crises (including but not limited to the COVID-19 outbreak), could adversely affect our business and financial performance. If any of these events result in the closure of one or more of our dispensaries, extended sick leave involving our personnel, or impact key suppliers, our operations and financial performance could be materially adversely affected through an inability to provide other support functions to our stores and through lost sales. These events also could affect consumer shopping patterns or prevent customers from reaching our dispensaries, which could lead to lost sales and higher markdowns, the temporary lack of an adequate work force in a market, the temporary or long-term disruption of product availability in our dispensaries and the temporary or long-term inability to obtain technology needed to effectively run our business.

Our business may be impacted by geopolitical events, war, terrorism, and other related business interruptions.

War, terrorism, geopolitical uncertainties, and other related business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a material adverse effect on the Company, its suppliers, logistics providers, manufacturing vendors and customers. The Company’s business operations are subject to interruption by, among others, disasters, whether as a result of war, refugee crises, fire, power shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, labor disputes, and other events beyond its control. Such events could decrease demand for the Company’s products, make it difficult or impossible for the Company to develop, prototype, make and deliver products to its customers or to receive components from its suppliers, and create delays and inefficiencies in the Company’s supply chain. While the Company’s suppliers are expected to maintain safe working environments and operations, an industrial accident could occur and could result in disruption to the Company’s business and harm to the Company’s reputation. In any event of business interruption, the Company could incur significant losses, require substantial recovery time and experience significant expenditures in order to resume operations.

Security breaches and other disruptions to our information technology infrastructure could interfere with our operations and could compromise the Company’s and its customers’ and suppliers’ information, exposing us to liability that would cause the Company’s business and reputation to suffer.

In the ordinary course of business, the Company relies upon information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities, including supply chain, manufacturing, distribution, invoicing and collection of payments from intermediaries or other purchasers or lessees of our equipment. We use information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. Additionally, we collect and store sensitive data, including intellectual property, proprietary business information and the proprietary business information of the Company’s customers and suppliers, as well as personally identifiable information of our customers and employees, in third party data centers, “cloud” providers and on information technology networks. The secure operation of these information technology networks, and the processing and maintenance of this information is critical to the Company’s business operations and strategy. Such third parties, as well as the Company’s information technology networks, cloud and infrastructure may be vulnerable to damage, disruptions or shutdowns due to attacks by hackers or breaches due to employee error or malfeasance or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures or natural disasters or other catastrophic events. The occurrence of any of these events could compromise the respective storage networks, data centers or cloud, and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations, and damage our reputation, which could adversely affect the Company’s business.

Our suppliers, contract manufacturers and customers are subject to and affected by increasingly rigorous environmental, health and safety laws and regulations of federal, state and local authorities in the U.S. and various regulatory authorities with jurisdiction over the Company’s operations. In addition, private civil litigation on these subjects has increased, primarily in the U.S.

Enforcement actions arising from violations of environmental, health and safety laws or regulations can lead to investigation and defense costs, and result in significant fines or penalties. In addition, new or more stringent requirements of governmental authorities could prevent or restrict the Company’s operations, or those of our suppliers and customers, require significant expenditures to achieve compliance and/or give rise to civil or criminal liability. There can be no assurance that violations of such legislation and/or regulations, or private civil claims for damages to property or personal injury arising from the environmental, health or safety impacts of our operations, or those of our suppliers and customers, would not have consequences that result in a material adverse effect on our business, financial condition or results of operations.

Increasingly stringent engine emission standards could impact our ability to manufacture and distribute certain equipment, which could negatively affect business results.

The Company’s equipment operations must meet increasingly stringent engine emission reduction standards, including USEPA, Interim Tier 4/Stage IIIb and Final Tier 4/Stage IV non-road diesel emission requirements in the U.S. and European Union.

We may incur increased costs due to new or more stringent greenhouse gas emission standards designed to address climate change and could be further impacted by physical effects attributed to climate change on its facilities, suppliers and customers.

There is a growing political and scientific consensus that emissions of greenhouse gases (GHG) continue to alter the composition of Earth’s atmosphere in ways that are affecting and are expected to continue to affect the global climate. These considerations may lead to international, national, regional or local legislative or regulatory responses in the future. Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, as well as companies in many business sectors, including the Company, are considering ways to reduce GHG emissions. The regulation of GHG emissions from certain stationary or mobile sources could result in additional costs to the Company or its suppliers in the form of taxes or emission allowances, facilities improvements and energy costs, which would increase our operating costs through higher contract manufacturing, utility, transportation and materials costs. Increased input costs and compliance-related costs could also impact customer operations and demand for our equipment. Because the impact of any future GHG legislative, regulatory or product standard requirements on our businesses and products is dependent on the timing and design of mandates or standards, the Company is unable to predict its potential impact at this time.

Furthermore, the potential physical impacts of climate change on our suppliers and customers and therefore on our operations are highly uncertain and will be particular to the circumstances developing in various geographical regions. These may include long-term changes in temperature levels and water availability. These potential physical effects may adversely impact the demand for the Company’s products and the cost, production, sales and financial performance of the Company’s operations.

Our business increasingly is subject to regulations relating to privacy and data protection, and if we violate any of those regulations, we could be subject to significant claims, penalties and damages.

Increasingly, the United States, the European Union and other governmental entities are imposing regulations designed to protect the collection, maintenance and transfer of personal information. For example, the European Union adopted the General Data Protection Regulation (the “GDPR”) that imposes stringent data protection requirements and greater penalties for non-compliance beginning in May 2018. The GDPR also protects a broader set of personal information than traditionally has been protected in the United States and provides for a right of “erasure.” Other regulations govern the collection and transfer of financial data and data security generally. These regulations generally impose penalties in the event of violations. While we attempt to comply with all applicable cybersecurity regulations, their implementation is complex, and, if we are not successful, we may be subject to penalties and claims for damages from regulators and the impacted individuals.

Risks Relating to Our Intellectual Property

Recent laws make it difficult to predict how patents will be issued or enforced in our industry.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. There have been numerous recent changes to the patent laws and to the rules of the United States Patent and Trademark Office (the “USPTO”), which may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, the Leahy-Smith America Invents Act, which was signed into law in 2011, includes a transition from a “first-to-invent” system to a “first-to-file” system, and changes the way issued patents can be challenged. Certain changes, such as the institution of inter partes review and post-grant and derivation proceedings, came into effect in 2012. Substantive changes to patent law associated with the Leahy-Smith America Invents Act may affect our ability to obtain patents, and, if obtained, to enforce or defend them in litigation or inter partes review, or post-grant or derivation proceedings, all of which could harm our business.

We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.

Our ability to compete effectively depends in part on our rights to trademarks, patents and other intellectual property rights we own. We have not sought to register every one of our intellectual properties either in the United States or in every country in which such intellectual property may be used. Furthermore, because of the differences in foreign trademark, patent and other intellectual property or proprietary rights laws, we may not receive the same protection in other countries as we would in the United States with respect to the registered brand names and issued patents we hold. If we are unable to protect our intellectual property, proprietary information and/or brand names, we could suffer a material adverse effect on our business, financial condition and results of operations.

Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products or services infringe their intellectual property rights. Any litigation or claims brought by or against us could result in substantial costs and diversion of our resources. A successful claim of trademark, patent or other intellectual property infringement against us, or any other successful challenge to the use of our intellectual property, could subject us to damages or prevent us from providing certain products or services, or using certain of our recognized brand names, which could have a material adverse effect on our business, financial condition and results of operations.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance or annuity fees on any issued patents are due to be paid to the USPTO, and/or foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payments and other similar provisions during the patent application process. While an inadvertent or unintentional lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, nonpayment of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our products, our competitors might be able to enter the market, which would have a material adverse effect on our business.

From time to time, we may need to rely on licenses to proprietary technologies, which may be difficult or expensive to obtain or we may lose certain licenses which may be difficult to replace, harming our competitive position.

We may need to obtain licenses to patents and other proprietary rights held by third parties to develop, manufacture and market our products, if, for example, we sought to develop our products, in conjunction with any patented technology. If we are unable to timely obtain these licenses on commercially reasonable terms and maintain these licenses, our ability to commercially market our products, may be inhibited or prevented, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In spite of our best efforts, our licensors might conclude that we have materially breached our license agreements and might therefore terminate the license agreements, thereby removing our ability to develop and commercialize products and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors may have the freedom to market products identical to ours.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our success depends upon our ability to develop, manufacture, market and sell our products, and to use our proprietary technologies without infringing the proprietary rights of third parties. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference or derivation proceedings and various other post-grant proceedings before the USPTO and/or non-United States opposition proceedings. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. As a result of any such infringement claims, or to avoid potential claims, we may choose or be compelled to seek intellectual property licenses from third parties. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees, royalties, minimum royalties and/or milestone payments and the rights granted to us could be nonexclusive, which would mean that our competitors may be able to obtain licenses to the same intellectual property. Ultimately, we could be prevented from commercializing a product and/or technology or be forced to cease some aspect of our business operations if, as a result of actual or threatened infringement claims, we are unable to enter into licenses of the relevant intellectual property on acceptable terms. Further, if we attempt to modify a product and/or technology or to develop alternative methods or products in response to infringement claims or to avoid potential claims, we could incur substantial costs, encounter delays in product introductions or interruptions in sales.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

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Others may be able to construct products that are similar to our products but that are not covered by the claims of the patents that we own or have exclusively licensed;

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We or our licensors or strategic collaborators, if any, might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;

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We or our licensors or strategic collaborators, if any, might not have been the first to file patent applications covering certain of our inventions;

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Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

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It is possible that our pending patent applications will not lead to issued patents;

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Issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;

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Our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

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We may not develop additional proprietary technologies that are patentable; and

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The patents of others may have an adverse effect on our business.

Should any of these events occur, they could significantly harm our business, results of operations and prospects.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. We are not aware of any threatened or pending claims related to these matters or concerning agreements with our employees, but in the future litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Intellectual property disputes could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the value of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Risks Related to the Common Shares

The Company’s Common Share price may be volatile and as a result investor could lose all or part of their investment.

In addition to volatility associated with equity securities in general, the value of an investor’s investment could decline due to the impact of any of the following factors upon the market price of the Common Shares:

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disappointing results from the Company’s operations or financing activities;

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decline in demand for its Common Shares;

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downward revisions in securities analysts’ estimates or changes in general market conditions;

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technological innovations by competitors or in competing technologies;

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investor perception of the Company’s industry or its prospects; and

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general economic trends.

Our Common Share price on the OTCQX has experienced significant price and volume fluctuations. Stock markets in general have experienced extreme price and volume fluctuations, and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of the Common Shares. As a result, an investor may be unable to sell any Common Shares such investor acquires at a desired price.

Potential future sales under Rule 144 may depress the market price for our Common Shares.

In general, under Rule 144, a person who has satisfied a minimum holding period of between 6 months and one-year and any other applicable requirements of Rule 144, may thereafter sell such shares publicly. A significant number of the Company’s currently issued and outstanding Common Shares held by existing shareholders, including officers and directors and other principal shareholders, are currently eligible for resale pursuant to and in accordance with the provisions of Rule 144. The possible future sale of the Company’s Common Shares by its existing shareholders, pursuant to and in accordance with the provisions of Rule 144, may have a depressive effect on the price of its Common Shares in the over-the-counter market.

The Company’s Common Shares currently deemed a “penny stock”, which may make it more difficult for investors to sell their Common Shares.

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price less than $5.00 per Common Share or an exercise price of less than $5.00 per Common Share, subject to certain exceptions. The Company’s s securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000, exclusive of their principal residence, or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock 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 stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock 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 stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is 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 stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade its securities. The Company believes that the penny stock rules may discourage investor interest in and limit the marketability of its Common Shares.

The Company has never paid dividends on its Common Shares.

The Company has not paid dividends on its Common Shares to date, and it does not expect to pay dividends for the foreseeable future. The Company intends to retain its initial earnings, if any, to finance its operations. Any future dividends on Common Shares will depend upon the Company’s earnings, its then-existing financial requirements, and other factors, and will be at the discretion of the Board.

FINRA has adopted sales practice requirements, which may also limit an investor’s ability to buy and sell the Company’s Common Shares.

In addition to the “penny stock” 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 non-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 speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy the Company’s Common Shares, which may limit an investor’s ability to buy and sell its stock and have an adverse effect on the market for the Common Shares.

Investors’ interests in the Company will be diluted and investors may suffer dilution in their net book value per share of Common Shares if we issue additional employee/director/consultant options or if we sell additional Common Shares and/or warrants to finance its operations.

In order to further expand the Company’s operations and meet its objectives, any additional growth and/or expanded business activity will likely need to be financed through sale of and issuance of additional Common Shares. The Company will also in the future grant to some or all of its directors, officers, and key employees and/or consultants options to purchase Common Shares as non-cash incentives. The issuance of any equity securities could, and the issuance of any additional Common Shares will, cause the Company’s existing shareholders to experience dilution of their ownership interests.

If the Company issues additional Common Shares or decides to enter into joint ventures with other parties in order to raise financing through the sale of equity securities, investors’ interests in the Company will be diluted and investors may suffer dilution in their net book value per share of Common Shares depending on the price at which such securities are sold.

The issuance of additional shares of Common Shares may negatively impact the trading price of the Company’s securities.

We have issued Common Shares in the past and will continue to issue Common Shares to finance our activities in the future. In addition, newly issued or outstanding options and warrants to purchase Common Shares may be exercised, resulting in the issuance of additional Common Shares. Any such issuance of additional Common Shares would result in dilution to the Company’s shareholders, and even the perception that such an issuance may occur could have a negative impact on the trading price of the Common Shares.

The issuance of a large number of shares of our Common Stock could significantly dilute existing stockholders and negatively impact the market price of our Common Stock.

On January 6, 2021, the Company entered into an Equity Purchase Agreement, with Peak One providing that, upon the terms and subject to the conditions thereof, Peak One is committed to purchase, on an unconditional basis, shares of Common Stock (“Put Shares”) at an aggregate price of up to $10 million over the course of the commitment period. Pursuant to the terms of the equity purchase agreement, the purchase price for each of the Put Shares equals 89% of the Market Price on such date on which the Purchase Price is calculated. The Market Price is defined in the EPA as the lesser of the (i) closing bid price of the Common Stock on the Principal Market on the Trading Day immediately preceding the respective Put Date, or (ii) the lowest closing bid price of the Common Shares on the Principal Market for any Trading Day during the Valuation Period. The Valuation Period is defined as the period of seven (7) Trading Days immediately following the Clearing Date associated with the applicable Put Notice. The Valuation Period begins on the first Trading Day following the Clearing Date. As a result, if we sell shares of Common Stock under the equity purchase agreement, we will be issuing Common Stock at below market prices, which could cause the market price of our Common Stock to decline, and if such issuances are significant in number, the amount of the decline in our market price could also be significant. In general, we are unlikely to sell shares of Common Stock under the equity purchase agreement at a time when the additional dilution to stockholders would be substantial unless we are unable to obtain capital to meet our financial obligations from other sources on better terms at such time. However, if we do, the dilution that could result from such issuances could have a material adverse impact on existing stockholders and could cause the price of our common stock to fall rapidly based on the amount of such dilution.

The Selling Securityholders may sell a large number of shares, resulting in substantial diminution to the value of shares held by existing stockholders.

Pursuant to the Equity Purchase Agreement, we are prohibited from delivering a Put Notice to Peak One to the extent that the issuance of shares would cause the Selling Securityholders to beneficially own more than 4.99% of our then-outstanding shares of common stock; provided, however, the Selling Securityholders in their sole discretion can waive this ownership limitation up to 9.99% of our then-outstanding shares of Common Stock. These restrictions however, do not prevent the Selling Stockholder from selling shares of Common Stock received in connection with the Equity Line and then receiving additional shares of Common Stock in connection with a subsequent issuance. In this way, the Selling Securityholders could sell more than 4.99% (or 9.99% if 4.99% ownership limitation is waived) of the outstanding shares of Common Stock in a relatively short time frame while never holding more than 4.99% (or 9.99% if 4.99% ownership limitation is waived) at any one time. As a result, existing stockholders and new investors could experience substantial diminution in the value of their shares of Common Stock. Additionally, we do not have the right to control the timing and amount of any sales by the Selling Securityholders of the shares issued under the Equity Line.

The Company faces risks related to compliance with corporate governance laws and financial reporting standards.

The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the SEC and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, referred to as Section 404, materially increase the Company’s legal and financial compliance costs and make certain activities more time-consuming and burdensome.

Cautionary Note

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

ITEM 1B UNRESOLVED STAFF COMMENTS

None.

ITEM 1C CYBERSECURITY

Risk management and strategy

The Company recognizes the critical importance of maintaining the trust and confidence of business partners and employees toward our business and are committed to protecting the confidentiality, integrity and availability of our business operations and systems. The Company uses third-party vendors to manage its information technology systems, including but not limited to services in cloud security, email filtering, endpoint security, darkweb reporting, antivirus/antimalware, employee security awareness training, and asset management and support. Cybersecurity considerations affect the selection and oversight of our third-party service providers. We perform diligence on third parties that have access to our systems, data or facilities that house such systems or data, and continually monitor cybersecurity threat risks identified through such diligence. Management reviews the security policies, procedures, and certifications of all third-party service providers prior to engagement.

As of the time of filing, there are no known cybersecurity threats that have materially affected, or are reasonable likely to materially affect the Company, including its business strategy, result of operations, or financial conditions. The Company pro-actively monitors for cybersecurity threats and responds accordingly to minimize its exposure to such threats.

Governance

Cybersecurity is an important part of our risk management processes and an area of focus for our board of directors and management. Our board of directors will discuss with management our cybersecurity threat risk management and processes surrounding material cybersecurity threat risks or incidents and developments, as well as the steps management has taken to respond to such risks. Management has engaged a reputable third-party to assist in monitoring the Company’s cybersecurity risks which will be communicated to the Chief Financial Officer. The board will receive prompt and timely information from the Chief Financial Officer regarding any cybersecurity incident, as well as ongoing updates regarding any such incident until it has been addressed. Members of the board of directors are also encouraged to regularly engage in conversations with management on cybersecurity-related news events.

ITEM 2 PROPERTIES

Executive Offices

Our executive office address is 1001 Bannock Street, Denver, CO 80204. This space is currently sufficient for our purposes, and we expect it to be sufficient for the foreseeable future. The address of agent for service in Nevada and registered corporate office is InCorp Services, Inc., 36 South 18th Avenue, Suite D, Brighton, CO 80601.

ITEM 3 LEGAL PROCEEDINGS

None applicable.

None.

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is quoted on the OTC Markets OTCQB Trading Tier under the ticker symbol “CRYM”. The following table sets forth, for the periods indicated, the high and low sales prices of our common stock:

Three Months Ended	2023				2022
	High		Low		High		Low
March 31	$	0.25	$	0.08	$	0.33	$	0.20
June 30		0.15		0.08		0.54		0.20
September 30		0.18		0.07		0.38		0.22
December 31		0.09		0.02		0.28		0.17

Holders

As of April 12, 2024, there were 326 registered holders of record of our common stock, plus approximately 4,000 additional shareholders owning shares held for them beneficially in brokerage accounts, and we had 218,684,877 common shares issued and outstanding.

Dividend Policy

We have not paid any dividends since our incorporation and do not anticipate the payment of dividends in the foreseeable future. At present, our policy is to retain any earnings to develop and market our services. The payment of dividends in the future will depend upon, among other factors, our earnings, capital requirements and operating financial conditions.

Equity Compensation Plan Information

The Company adopted its 2019 Omnibus Stock Incentive Plan (the “2019 Plan”), and on January 10, 2022, the shareholders approved the 2022 Stock Incentive Plan which then replaced the 2019 Plan (collectively the “Stock Incentive Plans”). The Stock Incentive Plans provide for the issuance of stock options, stock grants and RSUs to employees, directors and consultants. The primary purpose of the Stock Incentive Plans is to enhance the ability to attract, motivate, and retain the services of qualified employees, officers and directors. Any stock incentives granted under the Stock Incentive Plans will be at the discretion of the Compensation Committee of the Board of Directors.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

We did not sell any equity securities which were not registered under the Securities Act during the year ended December 31, 2023 that were not otherwise disclosed in this annual report on Form 10-K, in our quarterly reports on Form 10-Q, or in our current reports on Form 8-K filed during the year ended December 31, 2023.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during our fourth quarter of our fiscal year ended December 31, 2023.

ITEM 6 [RESERVED]

Not applicable.

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2023 and 2022 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements” at the beginning of this report.

General Overview

Cryomass Technologies Inc (“Cryomass Technologies” or the “Company”) began as Auto Tool Technologies Inc., which was incorporated under the laws of the State of Nevada on May 10, 2011. The Company’s name was changed to AFC Building Technologies Inc. effective January 10, 2014. Effective April 26, 2018, the Company changed its name to First Colombia Development Corp. On May 10, 2018, the Company began to establish various business ventures in Colombia through its Colombian subsidiary, First Colombia Devco S.A.S (“Devco”). On July 1, 2019, the Company acquired 100% of the membership interests in General Extract, LLC, a Colorado limited liability company, in exchange for the shares of Devco. The name of this subsidiary was subsequently changed to Cryomass LLC. On July 15, 2019, the Company entered into a Membership Interest Purchase Agreement to acquire cannabis-related intellectual property and certain other assets, but not cannabis licenses, of Critical Mass Industries LLC (“CMI”), a Colorado limited liability company. Effective October 14, 2019, the Company changed its name to Redwood Green Corp. In August 2020, the Company established a wholly owned Colombian subsidiary, Andina Gold Colombia SAS for this purpose acquiring gold properties in Colombia. Effective September 1, 2020, the Company changed its name to Andina Gold Corp. In Q1 2022 the respective subsidiary was closed.

On July 15, 2021, the Company changed its name to Cryomass Technologies Inc and subsequently changed its trading symbol to CRYM. Effective December 31, 2021, the Company disposed of all CMI-related assets and extinguished any and all related obligations.

The patented technology acquired from CryoCann (including US patent #10,864,525) harnesses liquid nitrogen to reduce biomass and then efficiently isolate, collect and preserve delicate resin glands (trichomes) containing prized compounds like cannabinoids and terpenes. Building on this technology, CryoMass has engineered its premier Trichome Separation unit (CryoSift Separator™), optimized via patented cryogenic processes to rapidly capture intact, high-value cannabis and hemp trichomes (CryoSift™). Much like sugar and flour refinements, the resulting CryoSift™ concentrate is a superior product compared to unprocessed biomass. For cultivators, reducing biomass into CryoSift™ slashes volume up to 80%, dramatically lowering storage, handling, and transportation costs. Properly stored, CryoSift™ prevents potency and terpene degradation, preserving value. For processors, the minimized input volume also enables considerable cost savings and logistics advantages. Extracting from CryoSift™ using solvents and manufacturing solventless products unlocks industrial scale yields unattainable otherwise. CryoMass anticipates its efficiencies will catalyze industry-wide shifts in cannabis and hemp post-harvest methods. Additionally, the technology shows promise for diverse trichome-rich plants. On January 31, 2023 and January 30, 2024 we were granted two additional related patents, US patent #11,565,270 and US Patent #11,883,829 respectively.

Through an independent engineering and manufacturing firm we refined the design of the CryoSift Separator™ for the handling of harvested hemp, cannabis and other premium crops. Our first CryoSift Separator™ unit has been fully developed and delivered to a licensee in California as described in the following section of this report. The engineering and manufacturing firm has indicated that it has the capacity to manufacture sufficient units to meet our needs for the foreseeable future.

Canadian Patent no. 3 064 896 “Cryogenic Separation of Plant Material” was filed on May 25, 2018 by two assignors, who assigned it, among other, various other intellectual property rights, to a wholly owned subsidiary of the Company as part of the Cryocann June 22, 2021 transaction. The respective Canadian patent was granted on April 19, 2022. Provided that all patent maintenance fees are paid, the Canadian patent no. 3 064 896 will expire on May 25, 2038.

In September 2021, we were granted an additional patent for our process from the Chinese Intellectual Property Office. On February 8, 2024, we were notified by the European Patent Office of the intention to grant a European patent based on our application no. 18 730 941.4-1101. We currently are taking steps to gain further protection for our intellectual property through the European Union Intellectual Property Office, European Patent Office and in several other non-US jurisdictions.

Our Current Business

Our business portfolio includes the accounts of Cryomass LLC, Cryomass California LLC and 1304740 BC ULC dba Cryomass Canada, which are 100% owned by Cryomass Technologies Inc.

CryoMass Technologies Inc. develops and licenses cutting-edge equipment and processes to refine harvested cannabis, hemp, and other premium crops. The company’s patented technology harnesses liquid nitrogen to reduce biomass and then efficiently isolate, collect and preserve delicate resin glands (trichomes) containing prized compounds like cannabinoids and terpenes. Building on this technology, CryoMass has engineered its premier Trichome Separation unit (CryoSift Separator™), optimized via patented cryogenic processes to rapidly capture intact, high-value cannabis and hemp trichomes (CryoSift™). Much like sugar and flour refinements, the resulting CryoSift™ concentrate is a superior product compared to unprocessed biomass. For cultivators, reducing biomass into CryoSift™ slashes volume up to 80%, dramatically lowering storage, handling, and transportation costs. Properly stored, CryoSift™ prevents potency and terpene degradation, preserving value. For processors, the minimized input volume also enables considerable cost savings and logistics advantages. Extracting from CryoSift™ using solvents and manufacturing solventless products unlocks industrial scale yields unattainable otherwise. CryoMass anticipates its efficiencies will catalyze industry-wide shifts in cannabis and hemp post-harvest methods. Additionally, the technology shows promise for diverse trichome-rich plants.

Because the trichomes collected with CryoMass technology represent only 10% to 20% of a plant’s 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 CryoSift Separator™ – first-stage cost savings, product enhancement and downstream cost savings – can significantly increase a crop’s wholesale value.

In January 2023, we signed a license and lease arrangement with RedTape Core Partners LLC (“RedTape”) to deploy multiple CryoMass trichome separation units at the prospective partner’s facility in California and other locations, which was amended August 16, 2023. No funds were ever paid by RedTape to CryoMass pursuant to the lease and license agreement, and the agreement was terminated on December 20, 2023.

On August 18, 2023, the Company entered into a Patent License and Equipment Rental Agreement with Rubberrock, Inc. (“Rubberrock”) for a term of five years, in which the Company licenses its proprietary CryoSift Separator™ process and technology and leases one CryoSift Separator™ Unit for use in the state of California. The agreement was subsequently amended on January 9, 2024 and again on February 28, 2024. Under the terms of the transaction, Rubberrock paid license fees of $100,000 payable and a monthly royalty based on 10% of revenues. Subsequent to the commencement of the RubberRock agreement, our Chief Executive Officer, Christian Noel, joined the board of directors of RubberRock at the end of September 2023, which created a related party disclosure requirement. In January 2024, Christian Noel ceased to be on the board of directors of RubberRock.

Results of Operations for the Years Ended December 31, 2023 and 2022

The following table shows our results of operations for the years ended December 31, 2023 and 2022. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

	For the Years Ended December 31,						Change
	2023			2022			Dollars			Percentage
Revenues	$	13,552		$	-		$	13,552			100	%
Cost of goods sold, inclusive of depreciation		-			-			-			0	%
Gross profit		13,552			-			13,552			100	%
Total operating expenses		10,795,649			10,311,810			483,839			5	%
Loss from operations		(10,782,097	)		(10,311,810	)		(470,287	)		5	%
Total other expenses		(2,151,843	)		(132,669	)		(2,019,174	)		1,522	%
Net loss before taxes		(12,933,940	)		(10,444,479	)		(2,489,461	)		24	%
Income taxes		21,788			(21,788	)		43,576			-200	%
Net loss	$	(12,955,728	)	$	(10,422,691	)	$	(2,533,037	)		24	%

Revenues

Revenues for the year ended December 31, 2023 consisted of $5,000 of territory license fees, and $8,552 of royalties generated from our licensee’s gross sales. There were no revenues for the year ended December 31, 2022.

Operating Expenses

Operating expenses encompass personnel costs, research and development, depreciation and amortization expenses, loss on impairment of intangibles, general and administrative expenses, and legal and professional fees. Total operating expenses were $10,795,649 for the year ended December 31, 2023 as compared to $10,311,810 for the year ended December 31, 2022. The net increase of $483,839, or 5%, was primarily attributable to the following changes in operating expenses of:

●

Loss on impairment of goodwill - $1,190,000 increase

●

Loss on impairment of intangible assets - $3,653,043 increase

●

Personnel costs - $1,076,789 increase

●

General and administrative - $3,885,126 decrease

●

Legal and professional fees - $1,710,532 decrease

The increase of $1,190,000, or 100%, and $3,653,043, or 100%, in loss on impairment of goodwill and intangible assets, respectively, stems from delays in implementing the Company’s business model of its cryogenic process, resulting in impairment as of June 30, 2023. The increase of $1,076,789 or 54% in personnel costs is primarily due to the Company hiring a consultant to assist with development of internal controls for the nine months ended September 30, 2023, as well as hiring an additional employee in the first half of 2023. The decrease of $3,885,126, or 69% in general and administrative expenses primarily relates to the write off in 2022 of two large loans with its prior business partner, CMI, that the Company deemed uncollectible. The decrease of $1,710,532 or 68% in legal and professional fees relates to large invoices in the first half of 2022 for investor relations services.

Other Expense

Other expense for the year ended December 31, 2023 consisted of $388,909 interest expense, $47,441 loss on foreign exchange, and $1,715,493 loss on extinguishment of debt. Other expense for the year ended December 31, 2022 consisted of $147,014 interest expense and $14,345 gain on foreign exchange. The increase in interest expense was primarily attributable to interest owed on debt The Company obtained during the year ending 2023. The loss on foreign exchange predominantly relates to a payable agreement with Cryomass LLC’s supplier.

Net Loss

For the foregoing reasons, we had a net loss of $12,955,728 for the year ended December 31, 2023, or $0.06 net loss per common share – basic and diluted, compared to a net loss of $10,422,691 for the year ended December 31, 2022, or $0.05 net loss per common share – basic and diluted.

Liquidity, Capital Resources and Cash Flows

The Company believes that its available cash balance as of the date of this filing will not be sufficient to fund its anticipated level of operations for at least the next twelve months. The Company believes that, at the present time, its ability to continue operations depends on cash expected to be available from planned equipment sales and royalty payments in connection with future revenue generation, as well as possible debt and equity investment sources, to fund its anticipated level of operations for at least the next twelve months. As of December 31, 2023, the Company had a working deficit of $2,341,440 and cash balance of $49,224. The Company estimates that it needs approximately $3,200,000 to cover overhead costs and capital expenditure requirements ranging up to $3,125,000 based on the current pipeline of customer activity. The Company believes that the Company will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results of operations and additional financing until the Company can achieve profitability and positive cash flows from operating activities. However, there can be no assurance that the Company will receive sufficient cash flow from operations or otherwise that we will be able to attract the necessary financing.

Going Concern

The Company believes that there is substantial doubt about the Company’s ability to continue as a going concern. Our financial statements for the year ended December 31, 2023 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

Capital Resources

The following table summarizes total current assets, liabilities and working capital for the periods indicated:

	December 31,
	2023			2022
Current assets	$	152,522		$	2,166,496
Current liabilities		2,493,962			1,288,465
Working capital/(deficit)	$	(2,341,440	)	$	878,031

As of December 31, 2023 and 2022, we had a cash balance of $49,224 and $2,016,057, respectively.

Summary of Cash Flows

	For the Years Ended December 31,
	2023			2022
Net cash used in operating activities	$	(3,804,980	)	$	(4,766,864	)
Net cash used in investing activities	$	(74,236	)	$	(1,018,669	)
Net cash provided by financing activities	$	1,912,383		$	2,028,751

Net cash used in operating activities

Net cash used in operating activities was $3,804,980 during the year ended December 31, 2023. This included a net loss of $12,955,728, a non-cash charge related to the amortization of debt discount of $67,421, a non- cash charge related to depreciation and amortization of $329,223, a non-cash charge related to loss on foreign exchange related to notes payable of $10,164, non-cash charges related to the loss on impairment of goodwill and intangible assets of $1,190,000 and $3,653,043, respectively, a non-cash charge related to loss on extinguishment of debt of $1,715,493, a non-cash charge related to deferred income tax expense of $21,788, a non-cash charge related to common stock issued for vested RSUs for current period services of $131,304, a non-cash charge related to stock-based compensation for vested RSUs for current period services of $249,855, a non-cash charge related to stock options issued for current period services of $849,946, a non-cash charge related to common stock issued for current period services of $85,738. This was partially offset by net changes in accounts receivable, prepaid expenses, accounts payable and accrued expenses, and deferred revenue of $846,773.

Net cash used in operating activities was $4,766,864 during the year ended December 31, 2022. This included a net loss of $10,422,691, a non-cash charge related to the amortization of debt discount of $72,917, a non- cash charge related to depreciation and amortization of $157,001, a non-cash charge related to bad debt expense of $4,218,831, a non-cash charge related to the fair value of common stock issued of $590,625, a non-cash charge related to stock-based compensation of $603,463, and a non-cash charge related to deferred income tax of $21,788. This was partially offset by net changes in accounts receivable, prepaid expenses, inventories, accounts payable and accrued expenses, and taxes payable of $34,778.

Net cash used in investing activities

Net cash used in investing activities was $74,236 during the year ended December 31, 2023, due to the purchase of property and equipment and intangible assets.

Net cash used in investing activities was $1,018,669 during the year ended December 31, 2022, due to the purchase of property and equipment, purchase of intangible assets, and issuance of loan receivable.

Net cash provided by financing activities

Net cash provided by financing activities for the year ended December 31, 2023 was $1,912,383, which consisted of $387,642 proceeds from the issuance of common stock, $16,000 proceeds from exercise of stock options, and $1,375,755 proceeds from notes payable, and principal-in-kind interest accrued of $132,986.

Net cash provided by financing activities for the year ended December 31, 2022 was $2,028,751, which consisted of $256,876 proceeds from the issuance of common stock, $21,875 proceeds from common stock to be issued, and $1,750,000 proceeds from notes payable.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to intangibles, accounting for acquisitions, warrants, income taxes, useful life and recoverability of long-lived assets and deferred income tax asset valuations. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for a smaller reporting company.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations, and shareholders’ equity (deficit) and cash flows for each of the two years in the years ended December 31, 2023 and 2022, together with the related notes and the report of our independent registered public accounting firm, are set forth on pages F-1 to F-22 of this report.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On May 3, 2024, the Securities and Exchange Commission (“SEC”) issued a press release charging BF Borgers CPA PC (“Borgers”) with fraud due to deliberate and systemic failures to comply with Public Company Accounting Oversight Board (PCAOB) standards in its audits and reviews. Borgers served as the company’s auditor from fiscal year 2019 through the end of 2022. In compliance with the SECS’s order, the Company engaged its current auditor, Haynie & Company, to re-audit the financial statements for the year ended December 31, 2022. No material changes resulted from the re-audit.

ITEM 9A CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosures. Based upon that evaluation, our Company’s CEO and CFO concluded that our Company’s disclosure controls and procedures were not effective as of December 31, 2023.

Management has not formally documented its procedures and controls and as such does not have a sufficient basis to assess its internal controls over financial reporting. Management identified that it did not maintain adequately designed internal control over the preparation and oversight of:

●

month-end and period-end financial close processes.

●

non-routine or complex transactions.

●

the adoption of new accounting standards.

Management’s Report on Internal Control Over Financial Reporting

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023, the end of the annual period covered by this report and according to the criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based on that evaluation, management has concluded that the Company did not maintain effective internal control over financial reporting as of the fiscal year ended December 31, 2023 due to the existence of significant deficiency in the internal control over financial reporting described below.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal controls 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. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified the following material weakness during the year ended December 31, 2023:

●

Management did not timely detect impairment of goodwill and intangible assets as of June 30, 2023 in accordance with GAAP.

Management remediated the above material weakness through designing processes to timely detect impairment and operating those processes as designed in an effective manner. Further, there is no longer a material risk of detecting goodwill impairment, as the total balance was written off as of December 31, 2023.

Management has determined that we did not maintain effective internal controls over financial reporting as of the fiscal year ended December 31, 2023 due to the existence of the following significant deficiencies identified by management:

●

Due to the Company’s size, there is insufficient segregation of duties to prevent or detect on a timely basis a misstatement of our annual or interim financial statements.

●

Information technology controls are ineffective or lacking, An IT strategic plan and general controls related to access, change management, segregation of duties, contingency planning, information security, business applications, and interfaces are not yet adequately implemented, updated and monitored.

●

A top-down risk assessment has not yet been performed and documented by management to identify, analyze, and assess risks related to operations, external financial and non-financial reporting, internal reporting, compliance, fraud or other changes that could significantly impact the internal control environment.

●

Internal controls and related activities that could mitigate financial statement risks within key business processes have either not been established or are not fully adequate, documented, and/or maintained. Also, various regulatory compliance issues currently exist at an entity-level related to the control environment component specific to non-performance and/or insufficient/incomplete performance, document maintenance, review and approval, and the enforcement of individual accountability.

●

Documented accounting and other standard rules, guidelines, policies and procedures for key functions within the organization (HR, Payroll, Finance, Sales, IT, etc) have either not been established, are not complete, and/or are not consistently being utilized and monitored against control activities for compliance and ICFR effectiveness.

●

A whistle-blower program has not yet been established for the anonymous reporting, appropriate tracking, investigating, monitoring, and resolving of alleged wrongdoing, personnel complaints and grievances, without retribution.

●

Recurring, formalized employee communication and training on internal controls and the company’s commitment to ICFR has not yet been established. Additionally, a permanent, independent internal audit solution has not yet been established to perform an ongoing evaluation of the company’s key controls and ICFR, continuous monitoring of corrective actions, and regular reporting of internal control deficiencies and overall effectiveness of the company’s internal control environment.

We intend to continue to evaluate and strengthen our internal control over financial reporting. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our SEC reporting obligations.

Management engaged the services of an experienced expert in internal controls until September 30, 2023 who evaluated our current system and began implementation of a more effective system to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop or improve procedures to address the current significant deficiencies to the extent possible during the next twelve months.

Management utilizes external experts to assist the Company with technical accounting expertise needs as deemed necessary and has engaged a consultant to perform a formal assessment and remediation of its internal control’s framework. However, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.

Attestation report of Registered Public Accounting Firm

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting because we are not an “accelerated filer” or a “large accelerated filer”. Our management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Management’s Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (who is also the Company’s principal executive officer), and our chief financial officer (who is also the Company’s principal financial and accounting officer) to allow for timely decisions regarding required disclosure. Thus, in accordance with Rules 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2023, which is the end of the period covered by this Form 10-K. Based on the evaluation of these disclosure controls and procedures, and in light of the significant deficiencies found in our internal controls over financial reporting, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to significant deficiencies identified in our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

We have not been able to remediate the significant deficiencies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and 2022. Our remediation efforts will continue to be implemented throughout our 2023 and 2024 fiscal years. We believe that the controls that we will be implementing will improve the effectiveness of our internal control over financial reporting. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address the significant deficiencies or determine to supplement or modify certain of the remediation measures described above.

ITEM 9B OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

None.

PART III

For Part III, the information set forth in our definitive Proxy Statement for our Annual Meeting of Shareholders to be filed within 120 days after December 31, 2023, hereby is incorporated by reference into this Report.

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

Our directors and executive officers and their respective ages, positions, and biographical information are set forth below.

Name	Position	Age
Christian Noël	Chief Executive Officer & Director		47
Philip Mullin	Chief Financial Officer		70
Patricia Kovacevic	General Counsel, Corporate Secretary		53
Dr. Delon Human	Chairman of the Board		61
Mario Gobbo	Director		70
Mark Radke	Director		69
Simon Langelier	Director		66

Christian Noël, Chief Executive Officer & Director

Christian Noel is a trusted investor and business strategist, who has held senior positions in financial and investment organizations in Montreal, Canada, for the last 21 years. During his career, he has acquired extensive experience in risk management, tax planning, wealth management, and financial strategy design and execution.

In 2005 he joined Richardson GMP as Vice-President and Partner. Richardson GMP is a non-bank organization that specializes in portfolio management for high-net-worth individuals and families.

In 2014 Christian was admitted as a portfolio manager of GVC Ltd, a boutique wealth management firm based in Montreal, and was subsequently named Partner. At GVC, he developed a deep understanding of the nascent cannabis industry, building a team to analyze investment opportunities in all facets of the cannabis value chain, thereby providing clients with a superior range of services.

Christian expertise spans many different industries and has performed numerous due diligence activities over the last 20 years. He specializes in small and mid-cap companies as well as sophisticated alternative investment strategies. Christian is fluent in English and French and possesses a vast network of relationships in North American, European, and other regional capital markets.

Philip Mullin, Chief Financial Officer

Philip Mullin has 30 years’ experience as CFO, COO, and in consulting and turnarounds for businesses with revenues of less than $100 million and has served as Chief Financial Officer of the Company since June, 2019. Mr. Mullin was previously managing director of Somerset Associates LLC, a CFO, accounting, tax and financial consulting company. Between 2009 and 2019, he operated primarily in consulting and interim CFO roles in multiple sectors including fintech, blockchain, drones, recycling, medical marijuana, and electrical power generation. From 2003-09, Mr. Mullin was a partner of Tatum Partners, a human capital firm engaged in providing CFO services. Within Tatum, Mr. Mullin served in numerous leadership roles: from 2006-09, as CFO of Zi Corporation, a leading software development company specializing in mobile phones, which was sold in April 2009 to Nuance Communications; from 2003-06, as interim CFO of Homax Products, Vice President Finance of Yakima Products, and as a consultant in several engagements in industrial construction, manufacturing and air transportation. From 2001-03, he served as turnaround consultant to companies in the telecom sector; from 1995-2001, he was engaged in various C-level capacities in a public entity that was restructured and eventually became International DisplayWorks, a manufacturer of LCD displays based in Rocklin, California with operations in Shenzhen, China, which was later sold to Flextronics.

Mr. Mullin began his career in banking in 1982 after completing his MBA from University of Western Ontario Richard Ivey School of Business in London, Ontario, Canada and BA in Economics from Wilfrid Laurier University, in Waterloo, Ontario, Canada.

Patricia Kovacevic, General Counsel & Head of External Affairs

An experienced legal and compliance department leader, Patricia I. Kovacevic’s career comprises leading senior legal and regulatory positions with FDA-regulated multinationals, including Philip Morris International and Lorillard, as well as partner roles with large law firms.

Her expertise includes corporate law, compliance, M&A, US and global food, drug, nicotine and consumer goods regulation, cannabis/CBD regulation, external affairs and the legal framework applicable to marketing, media communications, investigations, FCPA, trade sanctions, privacy, intellectual property, product development and launch. She also led cross-disciplinary teams engaged in scientific research efforts. She has served on various trade association bodies and conference advisory boards. Ms. Kovacevic authored several articles on nicotine regulation, co-authored an academic treatise, “The Regulation of E-Cigarettes” and is often invited as a keynote speaker or panelist before global conferences and government agencies public hearings.

Patricia Kovacevic is an attorney admitted to practice in New York, before the U.S. Tax Court, before the U.S. Court of International Trade and before the Supreme Court of the United States. She holds a Juris Doctor (Doctor of Law) degree from Columbia Law School in New York and completed the Harvard Business School “Corporate Leader” executive education program. Ms. Kovacevic speaks several languages, including French, Italian, Spanish, Romanian and Croatian.

Dr. Delon Human, Chairman of the Board

Dr. Delon Human, M.B.Ch.B., M.Prax.Med, MFGP, DCH, MBA serves as President of the Board of Directors of Cryomass Technologies Inc

He is an experienced global business leader, published author and health & technology consultant. He serves as President of Health Diplomats, a specialized health, technology and nutrition consulting group, operating worldwide. Health Diplomats clients include Fortune 500 companies such as Johnson & Johnson, Pfizer, Nestlé, McDonald’s, Nicoventures, BAT, ABInBev, foundations such as the IKEA Foundation, Rockefeller Foundation, PepsiCo Foundation; governments such as Ireland, South Africa, Kuwait and Taiwan and NGOs such as the International Food and Beverage Alliance (IFBA).

From 2016 to 2020, he served as Director (Vice-Chairman) of the Board of Pharmacielo, a biopharmaceutical health & wellness company, from its early phase, to its listing on the Toronto Stock Exchange. Since August 2019, he has also served on the board of Redwood Green Corporation (now called Cryomass Technologies Inc), from December 2019 as Chairman of the Board. This company is listed on the USA OTCQX stock exchange. In addition, he serves on the board of the Fio Corporation, a big data and medical diagnostics company.

He has acted as adviser to three WHO Directors-General and to UN Secretary-General Ban Ki Moon. Up to 2014 he served as Secretary-General and Special Envoy to WHO / UN of the International Food and Beverage Alliance, a group of leading food and non-alcoholic beverage companies with a global presence (including Unilever, Nestlé, McDonald’s, Coca-Cola, PepsiCo, Ferrero, Mars, General Mills, Mondeléz and the Bel Group). He serves on the Board of Directors / Advisory Boards of selected health, wellness and medical diagnostics companies.

Up to 2005, Dr. Human served as secretary general of the World Medical Association (WMA), the global representative body for physicians. He was instrumental in the establishment of the World Health Professions Alliance, an alliance of the global representative bodies of physicians, nurses, pharmacists, dentists and physical therapists. During 2006 he was elected to serve as the secretary-general of the Africa Medical Association (AfMA). He is a fellow of the Russian and Romanian Academies of Medical Sciences. He is a published author, international lecturer and health care consultant specializing in global health strategy, corporate and product transformation, harm reduction, access to healthcare and health communication. He authored the book “Wise Nicotine” in 2009, in which the preferred future for tobacco harm reduction and the emergence of next generation nicotine products was described. Editor of the book “Caring Physicians of the World”, a project in collaboration with Pfizer Inc.

He was a clinician for two decades, part of the pediatric endocrinology research and diabetes unit at the John Radcliffe Hospital and was involved in the establishment of several medical centers, a hospital and emergency clinic in South Africa.

Dr. Human qualified as a physician in South Africa and completed his postgraduate studies in family medicine and child health in South Africa and Oxford, England. His business studies (MBA) were completed at the Edinburgh Business School.

Mario Gobbo, Director

Mario Gobbo has 35 years of banking and corporate finance experience in healthcare and energy. His expertise encompasses venture capital and private equity as well as investment banking and strategic advisory services. Mr. Gobbo was acting CFO of Xcovery, a cancer-based biotech company and currently serves on the Supervisory Board and is Chair of Cinkarna Celje, a fine chemicals for paints (titanium dioxide) company in Celje, Slovenia. Until recently, he was on the board of Zavarovalnica Triglav, the largest Slovene insurance company spearheading healthcare insurance in Central Europe and was Chairman of the Board and is Chair of the Audit Committee of Helix BioPharma, a Toronto-listed biotech company developing interesting novel complex biomolecules to combat various cancers. As an executive director, he was also on the board of Lazard Brothers, London.

While Managing Director for Health Care Capital Markets and Advisory with Natixis Bleichroeder in New York, from 2006 to 2009, he secured transactions for the bank’s M&A and equity capital markets pharmaceuticals and life sciences group. He obtained mandates for several IPOs and follow-on transactions on NASDAQ, as well as advisory assignments for health care and medical devices companies. When with the International Finance Corporation, a World Bank Group institution dealing with private sector investments, the team he led completed several highly successful equity and loan investments in biotech and generic pharmaceutical companies and funds in India, Latin America, China and Central Europe. From 1993 to 2001, he was with Lazard in London, where he created and managed their Central and Eastern European operations, including Turkey. Mr. Gobbo advised on M&A, fundraising and privatization efforts for several key firms in the region.

Mario Gobbo holds a Bachelor of Arts in Organic Chemistry from Harvard College, a Master of Science in Biochemistry from the University of Colorado and an MBA, a Master of Business Economics and a PhD (Management) from the Wharton School of the University of Pennsylvania.

Mark Radke, Director

Mark Radke is a lawyer with a distinguished career in the area of financial services, specializing in federal securities regulation. As the Chief of Staff of the Securities and Exchange Commission under Chairman Harvey Pitt, he was responsible for that agency’s rulemaking in response to the Sarbanes Oxley Act. In private practice, as partner at several multinational law firms, he has represented corporations, brokerage and accounting firms, hedge funds and individuals on corporate governance, compliance, and regulatory issues involving not only the SEC but other federal and state regulators.

He was active in advising clients on legislative initiatives that lead to the Dodd-Frank Act of 2010, and in subsequent efforts to extend, implement or amend various components of that and other federal securities legislation.

As an adjunct professor at the Georgetown University Law Center, he has taught classes in aspects of securities regulation since 1999. He holds a B.A., University of Washington, J.D., University of Baltimore, LI.M., Securities Regulation, Georgetown University Law Center.

Simon Langelier, Director

Simon Langelier had a 30-year career with industry leader Philip Morris International, serving in several senior positions, including President Eastern Europe, Middle East & Africa, President Eastern Asia and President of Next Generation Products & Adjacent Businesses. He was also Managing Director in numerous countries in Europe as well as Colombia.

Between June 2017 and February 2023 Mr. Langelier was a non-executive director at Imperial Brands PLC, a British multinational company with a comprehensive portfolio of traditional and non-combustible tobacco and nicotine products. He also served as Chairman of the Board of PharmaCielo Ltd from August 2015 through June 2021.

Mr. Langelier is currently an Honorary Professorial Fellow at Lancaster University in the U.K, a member of the Dean’s Council of that university’s Management School and a BSc Management Sciences graduate from the same institution.

Information Concerning the Board of Directors and Certain Committees

The Board of Directors currently consists of five directors, four of whom the Board of Directors has determined are independent within the meaning of the rules of the OTCQX, which the Company has adopted as its definition of independence in the Audit Committee Charter. The Board of Directors held four regularly scheduled meetings during the 2023 fiscal year. Each of the directors attended all meetings of the Board of Directors and committees on which they served during the 2023 fiscal year. The Board of Directors does not have a formal policy governing director attendance at its annual meeting of stockholders.

The standing committees of the Board of Directors are the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, each of which was formed in 2019.

Audit Committee. The purpose of the Audit Committee is to oversee (i) the integrity of our financial statements and disclosures, (ii) our compliance with legal and regulatory requirements, (iii) the qualifications, independence and performance of our independent auditing firm (the “External Auditor”), (iv) the performance of our External Auditors, (v) our internal control systems, and (vi) our procedures for monitoring compliance with our Code of Business Conduct and Ethics.

The Audit Committee held four formal meetings during fiscal year 2023. The current members of the Audit Committee are Messrs. Gobbo (Chair) and Radke.

The Board of Directors has determined that each member of the Audit Committee meets the independence standards set forth in Rule 10A-3 promulgated under the Exchange Act and the independence standards set forth in the rules of the OTCQX. The Board of Directors has determined that Mr. Gobbo qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K, promulgated under the Exchange Act.

The Audit Committee operates under a written charter that is reviewed annually. Under the charter, the Audit Committee is required to pre-approve the audit and non-audit services to be performed by our independent registered public accounting firm.

Our Audit Committee meets on a regular basis, at least quarterly and more frequently as necessary. Our Audit Committee’s primary function is to assist our Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information to be provided to stockholders and others, reviewing our system of internal controls, which management has established, overseeing the audit and financial reporting process, including the preapproval of services performed by our independent registered public accounting firm, and overseeing certain areas of risk management.

Compensation Committee. The Compensation Committee reviews the compensation strategy of the Company and consults with the Chief Executive Officer, as needed, regarding the role of our compensation strategy in achieving our objectives and performance goals and the long-term interests of our stockholders. The Compensation Committee has direct responsibility for approving the compensation of our Chief Executive Officer and makes recommendations to the Board with respect to our other executive officers. The term “executive officer” has the same meaning specified for the term “officer” in Rule 16a-1(f) under the Exchange Act.

Our Chief Executive Officer sets the compensation of anyone whose compensation is not set by the Board and reports to the Board regarding the basis for any such compensation if requested by it.

The Compensation Committee may retain compensation consultants, outside counsel and other advisors as the Board deems appropriate to assist it in discharging its duties.

The Compensation Committee held one formal meeting during fiscal year 2023. The members of the Compensation Committee are Dr. Human (Chair), and Mr. Langelier.

The Compensation Committee operates under a written charter that is reviewed annually.

Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee identifies and recommends to the Board individuals qualified to be nominated for election to the Board and recommends to the Board the members and Chairperson for each Board committee.

In addition to stockholders’ general nominating rights provided in our Bylaws, stockholders may recommend director candidates for consideration by the Board. The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders if the recommendations are sent to the Board in accordance with the procedures in the bylaws. All director nominations submitted by stockholders to the Board for its consideration must include all of the required information set forth in our Bylaws.

Director Qualifications. In selecting nominees for director, without regard to the source of the recommendation, the Nominating and Corporate Governance Committee believes that each director nominee should be evaluated based on his or her individual merits, taking into account the needs of the Company and the composition of the Board. Members of the Board should have the highest professional and personal ethics, consistent with our values and standards and Code of Ethics. At a minimum, a nominee must possess integrity, skill, leadership ability, financial sophistication, and capacity to help guide us. Nominees should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on their experiences. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to responsibly perform all director duties. In addition, the Nominating and Corporate Governance Committee considers all applicable statutory and regulatory requirements and the requirements of any exchange upon which our common stock is listed or to which it may apply in the foreseeable future.

Evaluation of Director Nominees. The Nominating and Corporate Governance Committee will typically employ a variety of methods for identifying and evaluating nominees for director. The Nominating and Corporate Governance Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee will consider various potential candidates for director. Candidates may come to the attention of the Nominating and Corporate Governance Committee through current directors, stockholders, or other companies or persons. The Nominating and Corporate Governance Committee does not evaluate director candidates recommended by stockholders differently than director candidates recommended by other sources. Director candidates may be evaluated at regular or special meetings of the Nominating and Corporate Governance Committee and may be considered at any point during the year.

We do not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the Nominating and Corporate Governance Committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills, and expertise to oversee our businesses. In evaluating director nominations, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience, and capability on the Board. In connection with this evaluation, the Audit and Executive Oversight Committee will make a determination of whether to interview a prospective nominee based upon the Board’s level of interest. If warranted, one or more members of the Nominating and Corporate Governance Committee, and others as appropriate, will interview prospective nominees in person or by telephone. After completing this evaluation and any appropriate interviews, the Nominating and Corporate Governance Committee will recommend the director nominees after consideration of all its directors’ input. The director nominees are then selected by a majority of the independent directors on the Board, meeting in executive session and considering the Nominating and Corporate Governance Committee’s recommendations.

The Nominating and Corporate Governance Committee did not hold any meetings during the fiscal year 2023. The members of the Nominating and Corporate Governance Committee are Messrs. Radke (Chair) and Mr. Langelier.

The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee meets the independence standards set forth in Rule 10A-3 promulgated under the Exchange Act and the independence standards set forth in the New York Stock Exchange.

The Nominating and Corporate Governance Committee operates under a written charter that is reviewed annually.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).

During the fiscal year ended December 31, 2019, the Company and its officers, directors and 10% shareholders (“Reporting Persons”) were not subject to the insider trading reports under Section 16 of the Securities Exchange Act of 1934. On March 23, 2020 the Company became a reporting company under the Exchange Act and from that date Reporting Persons will be responsible for such filings. At time of filing, all such reports that should have been filed have been filed.

Code of Ethics and Business Conduct

We have adopted a Code of Ethics that applies to all employees including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Ethics is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and (v) accountability for adherence to the code. Our Code of Ethics is available on our website at cryomass.com.

Legal Proceedings

None applicable.

None.

Family Relationships

There are no family relationships among our directors or executive officers.

Involvement in Certain Legal Proceedings

None of our directors, executive officers, promoters or control persons has been involved in any events requiring disclosure under Item 401(f) of Regulation S-K, except as follows:

ITEM 11 EXECUTIVE COMPENSATION

The following table sets forth, for the years indicated, all compensation paid, distributed or earned for services, including salary and bonus amounts, rendered in all capacities by the Company’s named executive officers during the years ended December 31, 2023 and December 31, 2022. The information contained below represents compensation earned by the Company’s officers for their work related to the Company:

Name and Position	Year		Salary ($)		Share-based awards ($)		Option-based awards ($)		Total compensation ($)
Christian Noel, Chief Executive Officer		2023		425,700		-		174,240		599,940
		2022		387,000		148,945		-		535,945

Philip Mullin, Chief Financial Officer		2023		300,000		-		120,000		432,180
		2022		290,400		182,500		-		472,900

Patricia Kovacevic, General Counsel & Head of External Affairs		2023		266,200		-		53,240		319,440
		2022		266,200		76,445		-		342,645

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table provides information regarding the incentive plan awards for each named executive officer outstanding as of December 31, 2023:

Outstanding Share Awards and Option Awards as of December 31, 2023

	Option-based Awards						Share-based Awards
Name and Position	Number of securities underlying unexercised options (#)		Option exercise price ($)		Value of unexercised in-the-money options as at December 31, 2023		Number of shares or units of shares that have not vested		Market or payout value of share awards that have not vested
Christian Noel, Chief Executive Officer		-		-		-		-		-
Philip Mullin, Chief Financial Officer		1,900,000		0.16		-		-		-
Patricia Kovacevic, General Counsel & Head of External Affairs		1,000,000		0.29		-		-		-

The following table provides information regarding the value vested or earned on incentive plan awards during the year ended December 31, 2023

Incentive Plan Awards – Value Vested or Earned During the Year

Name and Position	Option-based awards-Value vested during the year($)	Share-based awards-Value vested during the year ($)
Christian Noel, Chief Executive Officer	N/A		148,945
Philip Mullin, Chief Financial Officer	N/A		72,500
Patricia Kovacevic, General Counsel & Head of External Affairs	N/A		26,445

Re-pricing of Options

We did not re-price any options previously granted to our executive officers during the fiscal years ended December 31, 2023 and 2022.

Director Compensation

The general policy of the Board is that compensation for independent directors should be a fair mix between cash and equity-based compensation. Additionally, the Company reimburses directors for reasonable expenses incurred during the course of their performance. There are no long-term incentive or medical reimbursement plans. the Company does not pay directors, who are part of management, for Board service in addition to their regular employee compensation. The Board determines the amount of director compensation. The board may appoint a compensation committee to take on this role.

Director Compensation Table

The following table provides information regarding compensation paid to the Company’s directors (other than a director who was a named executive officer) during the year ended December 31, 2023:

Name	Fees earned ($)		Share-based awards ($)		Option-based awards ($)		Total ($)
Dr. Delon Human	$	32,000	$	55,530	$	-	$	87,530
Mario Gobbo		32,000		18,510		-		50,510
Mark Radke		32,000		18,510		-		50,510
Simon Langelier		32,000		-		-		32,000
Christian Noel		32,000		50,000		-		82,000

2019 Omnibus Stock Incentive Plan

The Company adopted its 2019 Omnibus Stock Incentive Plan (the “2019 Plan”), which was then replaced by the 2022 Stock Incentive plan, provided for the issuance of stock options, stock grants and RSUs to employees, directors and consultants. The primary purpose of the 2019 Plan was to enhance the ability to attract, motivate, and retain the services of qualified employees, officers and directors. Any RSUs granted under the Stock Incentive Plans were at the discretion of the Compensation Committee of the Board of Directors.

2022 Stock Incentive plan

General

The board of directors of the Company have adopted the 2022 Stock Incentive Plan (Incentive Plan), ratified by the Company’s stockholders at the January 10, 2022 Annual Meeting of Stockholders. The purpose of the Incentive Plan is to advance the interests of the Company and its stockholders by enabling the Company and its subsidiaries to attract and retain qualified individuals to perform services, to provide incentive compensation for such individuals in a form that is linked to the growth and profitability of the Company and increases in stockholder value, and to provide opportunities for equity participation that align the interests of recipients with those of its stockholders.

The Incentive Plan permits the board of directors of the Company, or a committee or subcommittee thereof, to grant to eligible employees, non-employee directors and consultants of the Company and its subsidiaries non-statutory and incentive stock options, stock appreciation rights (SARs), restricted stock awards, restricted stock units (RSUs), deferred stock units, performance awards, non-employee director awards, and other stock-based awards. Subject to adjustment, the maximum number of shares of Common Stock to be authorized for issuance under the Incentive Plan is 30,000,000 shares of Common Stock.

Summary of the Incentive Plan

The following is a summary of the principal features of the Incentive Plan.

Purpose

The purpose of the Incentive Plan is to advance the interests of the Company and its stockholders by enabling the Company and its subsidiaries to attract and retain qualified individuals to perform services, to provide incentive compensation for such individuals in a form that is linked to the growth and profitability of the Company and increases in stockholder value, and to provide opportunities for equity participation that align the interests of recipients with those of its stockholders.

Administration

The board of directors of the Company will administer the Incentive Plan. The board has the authority under the Incentive Plan to delegate plan administration to a committee of the board or a subcommittee thereof. The board of directors of the Company or the committee of the board to which administration of the Incentive Plan has been delegated is referred to as the Committee. Subject to certain limitations, the Committee will have broad authority under the terms of the Incentive Plan to take certain actions under the plan.

To the extent permitted by applicable law, the Committee may delegate to one or more of its members or to one or more officers of the Company such administrative duties or powers, as it may deem advisable. The Committee may authorize one or more directors or officers of the Company to designate employees, other than officers, non-employee directors, or 10% stockholders of the Company, to receive awards under the Incentive Plan and determine the size of any such awards, subject to certain limitations.

No Re-pricing

The Committee may not, without prior approval of the Company stockholders, effect any re-pricing of any previously granted “underwater” option or SAR by: (i) amending or modifying the terms of the option or SAR to lower the exercise price or grant price; (ii) canceling the underwater option or SAR in exchange for (A) cash; (B) replacement options or SARs having a lower exercise price or grant price; or (C) other awards; or (iii) repurchasing the underwater options or SARs and granting new awards under the Incentive Plan. An option or SAR will be deemed to be “underwater” at any time when the fair market value of Common Stock is less than the exercise price of the option or the grant price of the SAR.

Stock Subject to the Incentive Plan

Subject to adjustment (as described below), the maximum number of shares of Common Stock authorized for issuance under the Incentive Plan is 30,000,000 shares.

Shares that are issued under the Incentive Plan or that are subject to outstanding awards will be applied to reduce the maximum number of shares remaining available for issuance under the Incentive Plan only to the extent they are used; provided, however, that the full number of shares subject to a stock-settled SAR or other stock-based award will be counted against the shares authorized for issuance under the Incentive Plan, regardless of the number of shares actually issued upon settlement of such SAR or other stock-based award. Any shares withheld to satisfy tax withholding obligations on awards issued under the Incentive Plan, any shares withheld to pay the exercise price or grant price of awards under the Incentive Plan and any shares not issued or delivered as a result of the “net exercise” of an outstanding option or settlement of a SAR in shares will not be counted against the shares authorized for issuance under the Incentive Plan and will be available again for grant under the Incentive Plan. Shares subject to awards settled in cash will again be available for issuance pursuant to awards granted under the Incentive Plan. Any shares related to awards granted under the Incentive Plan that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of the shares will be available again for grant under the Incentive Plan. Any shares repurchased by the Company on the open market using the proceeds from the exercise of an award will not increase the number of shares available for future grant of awards. To the extent permitted by applicable law, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or a subsidiary or otherwise will not be counted against shares available for issuance pursuant to the Incentive Plan. The shares available for issuance under the Incentive Plan may be authorized and unissued shares or treasury shares.

Adjustments

In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin off) or other similar change in the corporate structure or shares of Common Stock, the Committee will make the appropriate adjustment or substitution. These adjustments or substitutions may be to the number and kind of securities and property that may be available for issuance under the Incentive Plan. In order to prevent dilution or enlargement of the rights of participants, the Committee may also adjust the number, kind, and exercise price or grant price of securities or other property subject to outstanding awards.

Eligible Participants

Awards may be granted to employees, non-employee directors and consultants of the Company or any of its subsidiaries. A “consultant” for purposes of the Incentive Plan is one who renders services to the Company or its subsidiaries that are not in connection with the offer and sale of its securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for its securities.

Types of Awards

The Incentive Plan will permit the Company to grant non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards and other stock-based awards. Awards may be granted either alone or in addition to or in tandem with any other type of award.

Stock Options. Stock options entitle the holder to purchase a specified number of shares of Common Stock at a specified price, which is called the exercise price, subject to the terms and conditions of the stock option grant. The Incentive Plan permits the grant of both non-statutory and incentive stock options. Incentive stock options may be granted solely to eligible employees of the Company or its subsidiary. Each stock option granted under the Incentive Plan must be evidenced by an award agreement that specifies the exercise price, the term, the number of shares underlying the stock option, the vesting and any other conditions. The exercise price of each stock option granted under the Incentive Plan must be at least 100% of the fair market value of a share of Common Stock as of the date the award is granted to a participant. Fair market value under the plan means, unless otherwise determined by the Committee, the closing sale price of Common Stock, as reported on the Nasdaq Stock Market, on the grant date. The Committee will fix the terms and conditions of each stock option, subject to certain restrictions, such as a ten-year maximum term.

Stock Appreciation Rights. A stock appreciation right, or SAR, is a right granted to receive payment of cash, stock or a combination of both, equal to the excess of the fair market value of shares of Common Stock on the exercise date over the grant price of such shares. Each SAR granted must be evidenced by an award agreement that specifies the grant price, the term, and such other provisions as the Committee may determine. The grant price of a SAR must be at least 100% of the fair market value of Common Stock on the date of grant. The Committee will fix the term of each SAR, but SARs granted under the Incentive Plan will not be exercisable more than 10 years after the date the SAR is granted.

Restricted Stock Awards, Restricted Stock Units and Deferred Stock Units. Restricted stock awards, restricted stock units, or RSUs, and/or deferred stock units may be granted under the Incentive Plan. A restricted stock award is an award of Common Stock that is subject to restrictions on transfer and risk of forfeiture upon certain events, typically including termination of service. RSUs or deferred stock units are similar to restricted stock awards except that no shares are actually awarded to the participant on the grant date. Deferred stock units permit the holder to receive shares of Common Stock or the equivalent value in cash or other property at a future time as determined by the Committee. The Committee will determine, and set forth in an award agreement, the period of restriction, the number of shares of restricted stock awards or the number of RSUs or deferred stock units granted, the time of payment for deferred stock units and other such conditions or restrictions.

Performance Awards. Performance awards, in the form of cash, shares of Common Stock, other awards or a combination of both, may be granted under the Incentive Plan in such amounts and upon such terms as the Committee may determine. The Committee shall determine, and set forth in an award agreement, the amount of cash and/or number of shares or other awards, the performance goals, the performance periods and other terms and conditions. The extent to which the participant achieves his or her performance goals during the applicable performance period will determine the amount of cash and/or number of shares or other awards earned by the participant.

Non-Employee Director Awards. The Committee at any time and from time to time may approve resolutions providing for the automatic grant to non-employee directors of non-statutory stock options or SARs. The Committee may also at any time and from time-to-time grant on a discretionary basis to non-employee directors non-statutory stock options or SARs. In either case, any such awards may be granted singly, in combination, or in tandem, and may be granted pursuant to such terms, conditions and limitations as the Committee may establish in its sole discretion consistent with the provisions of the Incentive Plan. The Committee may permit non-employee directors to elect to receive all or any portion of their annual retainers, meeting fees or other fees in restricted stock, RSUs, deferred stock units or other stock-based awards in lieu of cash. Under the Incentive Plan the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of awards granted to a non-employee director as compensation for services as a non-employee director during any fiscal year of the Company may not exceed $250,000 (increased to $350,000 with respect to any director serving as Chairman of the Board or Lead Independent Director or in the fiscal year of a director’s initial service as a director).

Other Stock-Based Awards. Consistent with the terms of the plan, other stock-based awards may be granted to participants in such amounts and upon such terms as the Committee may determine.

Dividend Equivalents. With the exception of stock options, SARs and unvested performance awards, awards under the Incentive Plan may, in the Committee’s discretion, earn dividend equivalents with respect to the cash or stock dividends or other distributions that would have been paid on the shares of Common Stock covered by such award had such shares been issued and outstanding on the dividend payment date. However, no dividends or dividend equivalents may be paid on unvested awards. Such dividend equivalents will be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as determined by the Committee.

Termination of Employment or Other Service

The Incentive Plan provides for certain default rules in the event of a termination of a participant’s employment or other service. These default rules may be modified in an award agreement or an individual agreement between the Company and a participant. If a participant’s employment or other service with the Company is terminated for cause, then all outstanding awards held by such participant will be terminated and forfeited. In the event a participant’s employment or other service with the Company is terminated by reason of death, disability or retirement, then:

●

All outstanding stock options (excluding non-employee director options in the case of retirement) and SARs held by the participant will, to the extent exercisable, remain exercisable for a period of one year after such termination, but not later than the date the stock options or SARs expire;

●

All outstanding stock options and SARs that are not exercisable and all outstanding restricted stock will be terminated and forfeited; and

●

All outstanding unvested RSUs, performance awards and other stock-based awards held by the participant will terminate and be forfeited. However, with respect to any awards that vest based on the achievement of performance goals, if a participant’s employment or other service with the Company or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in no event less than one year), the Committee may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance period.

In the event a participant’s employment or other service with the Company is terminated by reason other than for cause, death, disability or retirement, then:

●

All outstanding stock options (including non-employee director options) and SARs held by the participant that then are exercisable will remain exercisable for three months after the date of such termination, but will not be exercisable later than the date the stock options or SARs expire;

●

All outstanding restricted stock will be terminated and forfeited; and

●

All outstanding unvested RSUs, performance awards and other stock-based awards will be terminated and forfeited. However, with respect to any awards that vest based on the achievement of performance goals, if a participant’s employment or other service with the Company or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in no event less than one year), the Committee may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance period.

Modification of Rights upon Termination

Upon a participant’s termination of employment or other service with the Company or any subsidiary, the Committee may, in its sole discretion (which may be exercised at any time on or after the grant date, including following such termination) cause stock options or SARs (or any part thereof) held by such participant as of the effective date of such termination to terminate, become or continue to become exercisable or remain exercisable following such termination of employment or service, and restricted stock, RSUs, deferred stock units, performance awards, non-employee director awards and other stock-based awards held by such participant as of the effective date of such termination to terminate, vest or become free of restrictions and conditions to payment, as the case may be, following such termination of employment or service, in each case in the manner determined by the Committee; provided, however, that no stock option or SAR may remain exercisable beyond its expiration date any such action by the Committee adversely affecting any outstanding award will not be effective without the consent of the affected participant, except to the extent the Committee is authorized by the Incentive Plan to take such action.

Forfeiture and Recoupment

If a participant is determined by the Committee to have taken any action while providing services to the Company or within one year after termination of such services, that would constitute “cause” or an “adverse action,” as such terms are defined in the Incentive Plan, all rights of the participant under the Incentive Plan and any agreements evidencing an award then held by the participant will terminate and be forfeited. The Committee has the authority to rescind the exercise, vesting, issuance or payment in respect of any awards of the participant that were exercised, vested, issued or paid, and require the participant to pay to the Company, within 10 days of receipt of notice, any amount received or the amount gained as a result of any such rescinded exercise, vesting, issuance or payment. the Company may defer the exercise of any stock option or SAR for up to six months after receipt of notice of exercise in order for the Board to determine whether “cause” or “adverse action” exists. The Company is entitled to withhold and deduct future wages or make other arrangements to collect any amount due.

In addition, if the Company is required to prepare an accounting restatement due to material noncompliance, as a result of misconduct, with any financial reporting requirement under the securities laws, then any participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 will reimburse the Company for the amount of any award received by such individual under the Incentive Plan during the 12 month period following the first public issuance or filing with the SEC, as the case may be, of the financial document embodying such financial reporting requirement. The Company also may seek to recover any award made as required by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other clawback, forfeiture or recoupment provision required by applicable law or under the requirements of any stock exchange or market upon which Common Stock is then listed or traded or any policy adopted by the Company.

Effect of Change in Control

Generally, a change in control will mean:

●

The acquisition, other than from the Company, by any individual, entity or group of beneficial ownership of 50% or more of the then outstanding shares of Common Stock;

●

The consummation of a reorganization, merger or consolidation of the Company with respect to which all or substantially all of the individuals or entities who were the beneficial owners of Common Stock immediately prior to the transaction do not, following the transaction, beneficially own more than 50% of the outstanding shares of common stock and voting securities of the corporation resulting from the transaction; or

●

A complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company.

Subject to the terms of the applicable award agreement or an individual agreement between the Company and a participant, upon a change in control, the Committee may, in its discretion, determine whether some or all outstanding options and SARs shall become exercisable in full or in part, whether the restriction period and performance period applicable to some or all outstanding restricted stock awards and RSUs shall lapse in full or in part and whether the performance measures applicable to some or all outstanding awards shall be deemed to be satisfied. The Committee may further require that shares of stock of the corporation resulting from such a change in control, or a parent corporation thereof, be substituted for some or all of the shares of Common Stock subject to an outstanding award and that any outstanding awards, in whole or in part, be surrendered to the Company by the holder, to be immediately cancelled by the Company, in exchange for a cash payment, shares of capital stock of the corporation resulting from or succeeding the Company or a combination of both cash and such shares of stock.

Term, Termination and Amendment

Unless sooner terminated by the Board, the Incentive Plan will terminate at midnight on the day before the ten year anniversary of its effective date. No award will be granted after termination of the Incentive Plan, but awards outstanding upon termination of the Incentive Plan will remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the Incentive Plan.

Subject to certain exceptions, the Board has the authority to suspend or terminate the Incentive Plan or terminate any outstanding award agreement and the Board has the authority to amend the Incentive Plan or amend or modify the terms of any outstanding award at any time and from time to time. No amendments to the Incentive Plan will be effective without approval of the Company’ stockholders if: (a) stockholder approval of the amendment is then required pursuant to Section 422 of the Code, the rules of the primary stock exchange on which Common Stock is then traded, applicable U.S. state and federal laws or regulations and the applicable laws of any foreign country or jurisdiction where awards are, or will be, granted under the Incentive Plan; or (b) such amendment would: (i) materially increase benefits accruing to participants; (ii) modify the re-pricing provisions of the Incentive Plan; (iii) increase the aggregate number of shares of Common Stock issued or issuable under the Incentive Plan; (iv) increase any limitation set forth in the Incentive Plan on the number of shares of Common Stock which may be issued or the aggregate value of awards which may be made, in respect of any type of award to any single participant during any specified period; (v) modify the eligibility requirements for participants in the Incentive Plan; or (vi) reduce the minimum exercise price or grant price as set forth in the Incentive Plan. No termination, suspension or amendment of the Incentive Plan or an award agreement shall adversely affect any award previously granted under the Incentive Plan without the written consent of the participant holding such award.

Federal Income Tax Information

The following is a general summary, as of the date of this prospectus/proxy statement, of the federal income tax consequences to participants and the Company of transactions under the Incentive Plan. This summary is intended for the information of stockholders considering how to vote at the Annual Meeting and not as tax guidance to participants in the Incentive Plan, as the consequences may vary with the types of grants made, the identity of the participant and the method of payment or settlement. The summary does not address the effects of other federal taxes or taxes imposed under state, local or foreign tax laws. Participants are encouraged to seek the advice of a qualified tax advisor regarding the tax consequences of participation in the Incentive Plan.

Tax Consequences of Awards

Incentive Stock Options. With respect to incentive stock options, generally, the participant is not taxed, and the Company is not entitled to a deduction, on either the grant or the exercise of an incentive stock option so long as the requirements of Section 422 of the Code continue to be met. If the participant meets the employment requirements and does not dispose of the shares of Common Stock acquired upon exercise of an incentive stock option until at least one year after date of the exercise of the stock option and at least two years after the date the stock option was granted, gain or loss realized on sale of the shares will be treated as long-term capital gain or loss. If the shares of Common Stock are disposed of before those periods expire, which is called a disqualifying disposition, the participant will be required to recognize ordinary income in an amount equal to the lesser of (i) the excess, if any, of the fair market value of Common Stock on the date of exercise over the exercise price, or (ii) if the disposition is a taxable sale or exchange, the amount of gain realized. Upon a disqualifying disposition, the Company will generally be entitled, in the same tax year, to a deduction equal to the amount of ordinary income recognized by the participant, assuming that a deduction is allowed under Section 162(m) of the Code.

Non-Statutory Stock Options. The grant of a stock option that does not qualify for treatment as an incentive stock option, which is generally referred to as a non-statutory stock option, is generally not a taxable event for the participant. Upon exercise of the stock option, the participant will generally be required to recognize ordinary income in an amount equal to the excess of the fair market value of Common Stock acquired upon exercise (determined as of the date of exercise) over the exercise price of the stock option, and the Company will be entitled to a deduction in an equal amount in the same tax year, assuming that a deduction is allowed under Section 162(m) of the Code. At the time of a subsequent sale or disposition of shares obtained upon exercise of a non-statutory stock option, any gain or loss will be a capital gain or loss, which will be either a long-term or short-term capital gain or loss, depending on how long the shares have been held.

SARs. The grant of an SAR will not cause the participant to recognize ordinary income or entitle the Company to a deduction for federal income tax purposes. Upon the exercise of an SAR, the participant will recognize ordinary income in the amount of the cash or the value of shares payable to the participant (before reduction for any withholding taxes), and the Company will receive a corresponding deduction in an amount equal to the ordinary income recognized by the participant, assuming that a deduction is allowed under Section 162(m) of the Code.

Restricted Stock, RSUs, Deferred Stock Units and Other Stock-Based Awards. The federal income tax consequences with respect to restricted stock, RSUs, deferred stock units, performance shares and performance stock units, and other stock unit and stock-based awards depend on the facts and circumstances of each award, including, in particular, the nature of any restrictions imposed with respect to the awards. In general, if an award of stock granted to the participant is subject to a “substantial risk of forfeiture” (e.g., the award is conditioned upon the future performance of substantial services by the participant) and is nontransferable, a taxable event occurs when the risk of forfeiture ceases or the awards become transferable, whichever first occurs. At such time, the participant will recognize ordinary income to the extent of the excess of the fair market value of the stock on such date over the participant’s cost for such stock (if any), and the same amount is deductible by the Company, assuming that a deduction is allowed under Section 162(m) of the Code. Under certain circumstances, the participant, by making an election under Section 83(b) of the Code, can accelerate federal income tax recognition with respect to an award of stock that is subject to a substantial risk of forfeiture and transferability restrictions, in which event the ordinary income amount and the Company’ deduction, assuming that a deduction is allowed under Section 162(m) of the Code, will be measured and timed as of the grant date of the award. If the stock award granted to the participant is not subject to a substantial risk of forfeiture or transferability restrictions, the participant will recognize ordinary income with respect to the award to the extent of the excess of the fair market value of the stock at the time of grant over the participant’s cost, if any, and the same amount is deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code. If a stock unit award or other stock-based award is granted but no stock is actually issued to the participant at the time the award is granted, the participant will recognize ordinary income at the time the participant receives the stock free of any substantial risk of forfeiture (or receives cash in lieu of such stock) and the amount of such income will be equal to the fair market value of the stock at such time over the participant’s cost, if any, and the same amount is then deductible by the Company, assuming that a deduction is allowed under Section 162(m) of the Code.

Withholding Obligations

The Company is entitled to withhold and deduct from future wages of the participant, to make other arrangements for the collection of, or to require the participant to pay to the Company, an amount necessary for it to satisfy the participant’s federal, state or local tax withholding obligations with respect to awards granted under the Incentive Plan. Withholding for taxes may be calculated based on the maximum applicable tax rate for the participant’s jurisdiction or such other rate that will not trigger a negative accounting impact on the Company. The Committee may permit a participant to satisfy a tax withholding obligation by withholding shares of Common Stock underlying an award, tendering previously acquired shares, delivery of a broker exercise notice or a combination of these methods.

Code Section 409A

A participant may be subject to a 20% penalty tax, in addition to ordinary income tax, at the time a grant becomes vested, plus an interest penalty tax, if the grant constitutes deferred compensation under Section 409A of the Code and the requirements of Section 409A of the Code are not satisfied.

Code Section 162(m)

Pursuant to Section 162(m) of the Code, the annual compensation paid to an individual who is a “covered employee” is not deductible by the Company to the extent it exceeds $1 million. The Tax Cut and Jobs Act, signed into law on December 22, 2017, amended Section 162(m), effective for tax years beginning after December 31, 2017, (i) to expand the definition of a “covered employee” to include any person who was the Chief Executive Officer or the Chief Financial Officer at any time during the year and the three most highly compensated officers (other than the Chief Executive Officer or the Chief Financial Officer) who were employed at any time during the year whether or not the compensation is reported in the Summary Compensation Table included in the proxy statement for the Company’ Annual Meeting; (ii) to treat any individual who is considered a covered employee at any time during a tax year beginning after December 31, 2106 as remaining a covered employee permanently; and (iii) to eliminate the performance-based compensation exception to the $1 million deduction limit.

Excise Tax on Parachute Payments

Unless otherwise provided in a separate agreement between a participant and the Company, if, with respect to a participant, the acceleration of the vesting of an award or the payment of cash in exchange for all or part of an award, together with any other payments that such participant has the right to receive from the Company, would constitute a “parachute payment” then the payments to such participant will be reduced to the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999 of the Code. Such reduction, however, will only be made if the aggregate amount of the payments after such reduction exceeds the difference between the amount of such payments absent such reduction minus the aggregate amount of the excise tax imposed under Section 4999 of the Code attributable to any such excess parachute payments. If such provisions are applicable and if an employee will be subject to a 20% excise tax on any “excess parachute payment” pursuant to Section 4999 of the Code, the Company will be denied a deduction with respect to such excess parachute payment pursuant to Section 280G of the Code.

New Plan Benefits

It is not presently possible to determine the benefits or amounts that will be received by or allocated to participants under the Incentive Plan or would have been received by or allocated to participants for the last completed fiscal year if the Incentive Plan had then been in effect because awards under the Incentive Plan will be made at the discretion of the Committee.

Vote Required for Approval

The approval of the Incentive Plan Proposal received the affirmative vote of the holders of a majority of the shares of Common Stock cast by the stockholders represented in person or by proxy and entitled to vote thereon at the Annual Meeting of Stockholders held on January 10, 2022. Abstentions and broker non-votes will not be counted for purposes of determining whether this proposal has been approved.

Incentive Plan Awards

The following table provides information regarding the incentive plan awards for each director (other than a director who was a named executive officer) outstanding as of December 31, 2023:

Outstanding Share Awards and Options Awards

Option-based Awards

Share-based Awards

Name

Number of
securities
underlying
unexercised
options (#)

Option
exercise price
($)

Value of
unexercised
in-the-money
options as of
December 31,
2023

Number of
shares or
units of
shares that
have not
vested

Market or
payout value
of share
awards that
have not
vested

Dr. Delon Human

1,500,000

0.16

463,461

19,767

Mario Gobbo

N/A

463,461

19,767

Mark Radke

N/A

463,461

19,767

Simon Langelier

N/A

455,327

19,420

Directors and Officers Liability Insurance

As of December 31, 2023, the Corporation maintained $5,000,000 of group liability insurance for the protection of the directors and officers of the Corporation. In the fiscal year ended December 31, 2023, the Corporation paid an annual premium of $395,665 for such policy.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options, restricted share units and deferred share units may be granted at the discretion of the Board or a committee thereof.

Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

None of our directors or executive officers or any associate or affiliate of our Company during the last two fiscal years, is or has been indebted to our Company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

Termination Benefits

We do not have agreements with any named executives that would result in payments to them solely upon a change in control of Cryomass Technologies Inc. However, under the employment and severance agreements with named executives, three named executives would be entitled to severance benefits upon termination of employment under certain circumstances. Further, our Compensation Committee retains discretion to provide additional benefits to senior executives upon termination or resignation if it determines the circumstances so warrant.

As of the date hereof, Ms. Patricia Kovacevic’s employment agreement provides that Ms. Kovacevic shall receive continued payments from the Company in the event of disability, death, termination for any reason or no reason except for cause (including resignation) of the named executive officer with the Company, for the duration of the term of the respective employment agreement, and shall be given credit under any RSU agreement as if she remained employed with the Company for the term of the employment agreement for the purposes of vesting thereunder.

As of the date hereof, Mr. Philip Blair Mullin’s employment agreement provides that Mr. Mullin shall receive certain payments from the Company in the event of disability, death, termination for other than for cause of the named executive officer with the Company, for the duration of the term of the respective employment agreement, and shall be given credit under any RSU agreement as if he remained employed with the Company for the term of the employment agreement for the purposes of vesting thereunder.

As of the date hereof, Mr. Christian Noel’s employment agreements provides that Mr. Noel shall receive certain payments from the Company in the event of disability, death, termination for other than for cause of the named executive officer with the Company, for the duration of the term of the respective employment agreement, and shall be given credit under any RSU agreement as if he remained employed with the Company for the term of the employment agreement for the purposes of vesting thereunder.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of June 7, 2024 by (a) each shareholder who is known to us to own beneficially 5% or more of our outstanding Common Stock, (b) all directors, (c) our executive officers and (d) all executive officers and directors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their shares of Common Stock, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their shares of Common Stock.

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock that such person has the right to acquire within 60 days of June 7, 2024. For purposes of computing the percentage of outstanding shares of our Common Stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of June 7, 2024 are deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise identified, the address of our directors and officers is c/o Cryomass Technologies Inc., 1001 Bannock St, Suite 612, Denver, CO 80204.

Name and Address of Beneficial Owner (1)	Amount and Nature of Beneficial Ownership			Percentage of Class (2)
Alexander Massa		66,205,000	(3)		25.3
Christian Noël		10,280,532	(4)		4.6
Philip Mullin		4,152,400	(5)		1.9
Delon Human		3,372,779	(6)		1.5
Patricia Kovacevic		1,929,400	(7)		0.9
Mario Gobbo		685,529			0.3
Mark Radke		685,529			0.3
Simon Langelier		577,395			0.3
All directors and officers as a group (7 persons)		21,683,564			9.5

(1)	Unless otherwise indicated, the address of the beneficial owner is c/o the Company, 1001 Bannock Street, Suite 612, Denver, CO 80204.

(2)	Based on 218,684,877 shares outstanding

(3)

Alexander Massa has voting and investment control over 22,500,000 shares and warrants to purchase 42,500,000 shares held by CRYM Co-Invest, LP, 602,500 shares held by Ham Senior Inc., and 602,500 shares held by Hungry Asset Monster Inc. The address for CRYM Co-Invest, LP is One World Trade Center, Suite 83G, New York, NY 10007 and the address for Ham Senior Inc. and Hungry Asset Monster Inc. is 50 North Laura Street, Jacksonville, FL 32202.

(4)	Mr. Noël is the beneficial holder of stock options to purchase 1,742,400 shares, exercisable at $0.05 per share, expiring in 2029 and beneficial owner of 974,671 shares held by Trichome Capital Inc.

(5)	Mr. Mullin is the beneficial holder of stock options to purchase 1,900,000 shares, exercisable at $0.16 per share expiring in 2030, and stock options to purchase 1,200,000 shares, exercisable at $0.05 per share, expiring in 2029.

(6)	Dr. Human is the beneficial holder of fully-vested stock options to purchase 1,500,000 shares, exercisable at $0.16 per share, expiring in 2030, and is the beneficial owner of 760,000 shares and exercisable warrants to purchase 227,250 shares held by Health Diplomats Pte Ltd.

(7)	Ms. Kovacevic is the beneficial holder of stock options to purchase 1,000,000 shares, exercisable at $0.29 per share, expiring in 2031, and stock options to purchase 532,400 shares, exercisable at $0.05 per share, expiring in 2029.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Review, Approval or other transactions, transactions with family members – loans, debt conversion, private placement, ratification of transactions with related persons

We have adopted a code of ethics and we rely on our board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our Board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to our Board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our Board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our Board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company. On December 31, 2023, we entered into an amended loan agreement with CRYM Co-Invest, a related party which was approved by the Board. There were no other such transactions or requests for review during the fiscal years ended December 31, 2023 and December 31, 2022.

Director Independence

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table shows the fees paid or accrued by us for the audit and other services provided for the fiscal periods shown.

	2023		2022
Borgers:
Audit and Non-Audit Fees
Audit fees	$	165,000	$	375,860
Audit-related fees		15,000		54,000
Total	$	180,000	$	429,860

	2023		2022
Macias Gini & O’Connell:
Audit and Non-Audit Fees
Audit fees	$	115,878	$	-
Audit-related fees		-		-
Total	$	115,878	$	-

The Audit Committee pre-approves all audit and non-audit services to be performed by the independent registered public accounting firm in accordance with the rules and regulations promulgated under the Exchange Act. The Board pre-approved 100% of the audit and audit-related services performed by the independent registered public accounting firm for the fiscal years ended December 31, 2023 and 2022. The percentage of hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employee was 0%.

PART IV

ITEM 15 EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

Our consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations and shareholders’ equity (deficit) and cash flows for each of the two years in the years ended December 31, 2023 and 2022, together with the related notes and the report of our independent registered public accounting firm, are set forth on pages F-1 to F-22 of this report.

(b) Exhibits

Exhibit Number		Description
(3)		Articles of Incorporation and Bylaws
3.1		Articles of Incorporation (incorporated by reference to our Registration Statement on Form S- 1 filed on May 9, 2012).
3.2		Bylaws (incorporated by reference to our Registration Statement on Form S-1 filed on May 9, 2012).
3.3		Certificate of Amendment (incorporated by reference to our Current Report on Form 8-K filed on January 13, 2014).
3.4		Certificate of Change filed with the Nevada Secretary of State on April 12, 2018 with an effective date of April 26, 2018. (incorporated by reference to our Current Report on Form 8-K filed on May 2, 2018)
3.5		Articles of Merger filed with the Nevada Secretary of State on April 12, 2018 with an effective date of April 26, 2018. (incorporated by reference to our Current Report on Form 8-K filed on May 2, 2018)
3.6		Articles of Merger filed with the Nevada Secretary of State on October 14, 2019 (incorporated by reference to our Current Report on Form 8-K filed on October 18, 2019)
3.7		Articles of Merger filed with the Nevada Secretary of State on September 1, 2020 (incorporated by reference to our Current Report on Form 8-K filed on September 3, 2020)
3.8		Articles of Merger filed with the Nevada Secretary of State on July 23, 2021 (incorporated by reference to our Current Report on Form 8-K filed on July 27, 2021)
(10)		Material Contracts
10.1		Asset Purchase Agreement between Andina Gold Corp, General Extract LLC, Cryocann USA Corporation, Steve Cimini and Matt Armstrong dated June 22, 2021 (incorporated by reference to our Current Report on Form 8-K filed on June 28, 2021)
10.2		Asset Purchase Agreement Among Critical Mass Industries LLC, Critical Mass Industries, Inc., John Knapp, Good Meds, Inc. and Cryomass Technologies Inc dated December 31, 2021 (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.3		Mutual Termination Agreement by and among Critical Mass Industries LLC, Critical Mass Industries, Inc., John Knapp, and Good Meds, Inc dated December 31, 2021 (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.4		Restated and Amended Administrative Services Agreement by and among Critical Mass Industries LLC, Critical Mass Industries, Inc., John Knapp, and Good Meds, Inc dated December 31, 2021 (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.5		2019 Omnibus Equity Incentive Plan (incorporated by reference to our Annual Report on Form 10-K for December 31, 2020)
10.6		2022 Stock Incentive Plan (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.7		Christian Noel Employment Agreement (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)

10.8		Amendment to Christian Noel Employment Agreement dated December 13, 2021 (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.9		Philip Mullin Revised Employment Agreement (incorporated by reference to our Annual Report on Form 10-K for December 31, 2020)
10.10		Amendment to Philip Mullin Revised Employment Agreement (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.11		Patricia Kovacevic Third Amended Employment Agreement (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.12		Amendment to Patricia Kovacevic Third Employment Agreement (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.13		Form of Convertible Note (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.14		Form of Warrant- August 1, 2020 (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.15		Form of Warrant- April 2021 (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.16		Form of Warrant-October 2021 (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.17		Form of Warrant-November 2021 (incorporated by reference to our Registration Statement on Form S- 1 filed on February 14, 2022)
10.18		Equity Purchase Agreement with Peak One Opportunity Fund, L.P. (incorporated by reference to our Registration Statement on Form S-1 filed on April 27, 2022)
10.19		Amendment No. 1 to Equity Purchase Agreement with Peak One Opportunity Fund, L.P. (incorporated by reference to our Registration Statement on Form S-1 filed on April 27, 2022)
10.20		Patent License and Equipment Rental Agreement by and between Cryomass Technologies Inc and RedTape Core Partners LLC and Affiliates dated January 16, 2023 (incorporated by reference to our Annual Report on Form 10-K for December 31, 2022)
10.21		Restated and Amended Patent License and Equipment Rental Agreement by and between RedTape Core Partners LLC and Cryomass Technologies Inc., dated August 15, 2023 (incorporated by reference to our Quarterly Report on Form 10-Q for June 30, 2023)
10.22		Patent License and Equipment Rental Agreement Rubberrock Inc., dated August 18, 2023 (incorporated by reference to our Quarterly Report on Form 10-Q for June 30, 2023)
10.23*		Patricia Kovacevic Fifth Amended and Restated Employment Agreement
10.24*		Third Amendment to the Employment Agreement Dated June 24, 2020, By and Between Cryomass Technologies Inc and Philip Blair Mullin
10.25*		Second Amendment to the Employment Agreement Dated April 1, 2021, By and Between Cryomass Technologies Inc and Christian Noel
10.26*		Amended and Restated Loan Agreement and Secured Promissory Note Dated December 31, 2023 By and Between Cryomass Technologies Inc and CRYM Co-Invest
10.27*		Patent and Trademark Security Agreement Dated December 31, 2023 By and Between Cryomass Technologies Inc and CRYM Co-Invest
10.28*		Equipment Purchase and Sale Agreement Dated February 29, 2024 By and Between Cryomass LLC and CRYM Co-Invest Unit #1 LLP
10.29*		Equipment Lease and Non-Exclusive Patent License Agreement Dated February 29, 2024 By and Between Cryomass LLC and CRYM Co-Invest Unit #1 LLP
10.30*		Equipment Purchase and Sale Agreement Dated May 9, 2024 By and Between Cryomass LLC and CRYM Co-Invest Unit #2 LLP
10.31*		Equipment Lease and Non-Exclusive Patent License Agreement Dated May 10, 2024 By and Between Cryomass LLC and CRYM Co-Invest Unit #2 LLP
21		Subsidiaries of the Registrant (incorporated by reference to our Registration Statement on Form S-1 filed on June 17, 2022)
(31)		Rule 13a-14(a)/15d-14(a) Certifications
31.1*		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.
31.2*		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
(32)		Section 1350 Certifications
32.1*		Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.
32.2*		Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
(101)*		Interactive Data Files
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith.

SIGNATURES

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

CRYOMASS TECHNOLOGIES INC.
(Registrant)

Dated: June 13, 2024

/s/ Christian Noël
Christian Noël
Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Christian Noël	Chief Executive Officer & Director	June 13, 2024
Christian Noël	(Principal Executive Officer)

/s/ Philip Mullin	Chief Financial Officer	June 13, 2024
Philip Mullin	(Principal Accounting Officer)

/s/ Dr. Delon Human	President of the Board of Directors	June 13, 2024
Dr. Delon Human

/s/ Mario Gobbo	Director	June 13, 2024
Mario Gobbo

/s/ Mark Radke	Director	June 13, 2024
Mark Radke

/s/ Simon Langelier	Director	June 13, 2024
Simon Langelier

CRYOMASS TECHNOLOGIES INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	PAGE
Report of Independent Registered Public Accounting Firm (PCAOB ID # 457)	F-2

Consolidated Balance Sheets as of December 31, 2023 and 2022	F-3

Consolidated Statements of Operations for the years ended December 31, 2023 and 2022	F-4

Consolidated Statements of Shareholders’ equity (deficit) for the years ended December 31, 2023 and 2022	F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022	F-6

Notes to the Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Cryomass Technologies Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cryomass Technologies Inc. (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Consideration of the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a working capital deficit, recurring losses from operations, and limited cash resources to meet future operating requirements. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation and Analysis of Complex Debt and Equity Transaction Associated with a Debt Modification

As discussed in Note 9 to the financial statements, the Company modified one of its outstanding notes which included the issuance of new warrants. This required the Company to perform an analysis as to whether this modification should be recorded as an extinguishment of debt. To help with this analysis, the Company utilized a third-party valuation specialist to fair value the instruments to ensure the allocation between the instruments was appropriately recorded. This valuation and allocation involves challenging, subjective, and complex judgment.

How the Critical Audit Matter was Addressed in the Audit

To address the matter, we performed the following procedures:

●

We obtained an understanding of management’s process for developing their debt modification analysis and fair value estimate.

●

We followed professional standards relating to the use of specialists employed by management which includes:

Evaluating the expertise and independence of third-party specialists.

Gaining an understanding of management’s process for developing the fair value estimate.

Assessing the inputs and key assumptions used to develop the model

●

We utilized professionals within our firm with specialized skills and knowledge to assess the methodology.

●

We verified the appropriate recording of the transaction.

Haynie & Company

Salt Lake City, Utah

June 13, 2024

We have served as the Company’s auditor since 2024.

F-2

CRYOMASS TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS

	As of December 31,
	2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	49,224		$	2,016,057
Accounts receivable, net		8,552			-
Deferred tax asset		-			21,788
Prepaid expenses		94,746			128,651
Total current assets		152,522			2,166,496

Property and equipment, net		723,072			525,855
Goodwill		-			1,190,000
Intangible assets, net		96,912			3,980,582
Total assets	$	972,506		$	7,862,933

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses	$	2,236,462		$	1,288,465
Deferred revenue, current – related party		20,000			-
Notes payable, current, net of discount		237,500			-
Total current liabilities		2,493,962			1,288,465
Deferred revenue, long term – related party		75,000			-
Notes payable, net of discount		597,381			-
Notes payable, related party, net of discount and premium		2,470,405			2,000,000
Contingent royalty liability		1,185,000			-
Total liabilities		6,821,748			3,288,465

Commitments and contingencies (Note 12)

Shareholders’ equity (deficit):
Common stock, $0.001 par value, 500,000,000 shares authorized, 210,032,401 and 202,651,205 shares issued and outstanding at December 31, 2023 and 2022, respectively		210,033			202,652
Additional paid-in capital		45,907,981			43,163,579
Common stock to be issued		-			219,765
Accumulated deficit		(51,967,256	)		(39,011,528	)
Total shareholders’ equity (deficit)		(5,849,242	)		4,574,468
Total liabilities and shareholders’ equity (deficit)	$	972,506		$	7,862,933

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

F-3

CRYOMASS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Years Ended December 31,
	2023			2022
Revenues	$	13,552		$	-
Cost of goods sold		-			-
Gross profit		13,552			-

Operating expenses:
Personnel costs		3,080,295			2,003,506
General and administrative		1,714,912			5,600,038
Legal and professional fees		814,815			2,525,347
Depreciation and amortization		329,223			162,401
Research and development		13,361			20,518
Loss on impairment of goodwill		1,190,000			-
Loss on impairment of intangible assets		3,653,043			-
Total operating expenses		10,795,649			10,311,810
Loss from operations		(10,782,097	)		(10,311,810	)

Other income (expenses):
Interest expense – net		(388,909	)		(147,014	)
Gain (loss) on foreign exchange		(47,441	)		14,345
Loss on extinguishment of debt		(1,715,493	)		-
Total other expenses		(2,151,843	)		(132,669	)
Net loss before taxes		(12,933,940	)		(10,444,479	)
Income tax expense (benefit)		21,788			(21,788	)
Net loss	$	(12,955,728	)	$	(10,422,691	)

Net loss per common share:
Loss per common share – basic and diluted	$	(0.06	)	$	(0.05	)

Weighted average common shares outstanding—basic and diluted		206,812,616			200,884,333

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

F-4

CRYOMASS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

	Common Stock						Additional Paid-In			Common Stock to be			Accumulated			Total Shareholders’
	Shares			Amount			Capital			Issued			Deficit			Equity
Balance at December 31, 2021		196,949,801		$	196,950		$	41,916,207		$	-		$	(28,588,837	)	$	13,524,320

Share issuance in exchange for services		1,687,502			1,687			588,938			21,875			-			612,500

Stock-based compensation		2,885,529			2,886			402,687			197,890			-			603,463

Shares issued from warrants exercised		220,500			221			65,930			-			-			66,151

Share issuance from sale of common stock		1,000,000			1,000			213,134			-			-			214,134

Share cancellation related to interest on note payable		(92,127	)		(92	)		(23,317	)		-			-			(23,409	)
Net loss		-			-			-			-			(10,422,691	)		(10,422,691	)

Balance at December 31, 2022		202,651,205		$	202,652		$	43,163,579		$	219,765		$	(39,011,528	)	$	4,574,468
Common stock issued for prior period services		62,500			62			21,813			(21,875	)		-			-

Common stock issued for current period services		375,000			375			85,363			-			-			85,738

Common stock issued for vested RSUs for prior period services		1,100,000			1,100			196,790			(197,890	)		-			-

Common stock issued for vested RSUs for current period services		1,594,807			1,595			129,709			-			-			131,304

Stock-based compensation for vested RSUs for current period services		-			-			249,855			-			-			249,855

Share issuance from sale of common stock and warrants		4,148,889			4,149			383,493			-			-			387,642

Share issuance from exercise of stock options		100,000			100			15,900			-			-			16,000

Stock options issued for current period services		-			-			849,946			-			-			849,946

Warrants issued in conjunction with notes payable		-			-			811,533			-			-			811,533
Net loss		-			-			-			-			(12,955,728	)		(12,955,728	)

Balance at December 31, 2023		210,032,401			210,033			45,907,981			-			(51,967,256	)		(5,849,242	)

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

F-5

CRYOMASS TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(12,955,728	)	$	(10,422,691	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		67,421			72,917
Depreciation and amortization expense		329,223			157,001
Bad debt expense		-			4,218,831
Loss on foreign exchange related to notes payable		10,164			-
Loss on impairment of goodwill		1,190,000			-
Loss on impairment of intangible assets		3,653,043			-
Loss on extinguishment of debt		1,715,493			-
Stock-based compensation expense		-			603,463
Share issuances in exchange for services		-			590,625
Deferred income tax expense (benefit)		21,788			(21,788	)
Common stock issued for vested RSUs for current period services		131,304			-
Stock-based compensation for vested RSUs for current period services		249,855			-
Stock options issued for current period services		849,946			-
Common stock issued for current period services		85,738			-
Change in operating assets and liabilities:
Accounts receivable, net		(8,552	)		-
Prepaid expenses		33,905			628,732
Accounts payable and accrued expenses		726,420			(593,954	)
Deferred revenue		95,000			-
Net cash used in operating activities		(3,804,980	)		(4,766,864	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of loans receivable		-			(618,831	)
Purchase of property and equipment		(25,000	)		(300,855	)
Purchase of intangible assets		(49,236	)		(98,983	)
Net cash used in investing activities		(74,236	)		(1,018,669	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		387,642			256,876
Proceeds from common stock subscribed and to be issued		-			21,875
Proceeds from exercise of stock options		16,000			-
Proceeds from notes payable		1,375,755			1,750,000
Principal-in-kind interest accrued		132,986			-
Net cash provided by financing activities		1,912,383			2,028,751
Net increase (decrease) in cash		(1,966,833	)		(3,756,782	)
Cash and cash equivalents at beginning of period		2,016,057			5,772,839
Cash and cash equivalents at end of period	$	49,224		$	2,016,057
Supplemental disclosure of non-cash investing activities:
Purchase of property and equipment on credit	$	221,577		$	-
Supplemental disclosure of non-cash financing activities:
Net debt discount (premium) recognized from notes payable	$	302,644		$	-

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

F-6

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF THE BUSINESS

Cryomass Technologies Inc. (the “Company”) develops and licenses cutting-edge equipment and processes to refine harvested cannabis, hemp, and other premium crops. The Company’s patented technology harnesses liquid nitrogen to reduce biomass and then efficiently isolate, collect and preserve delicate resin glands (trichomes) containing prized compounds like cannabinoids and terpenes. Building on this technology, the Company has engineered its premier Trichome Separation unit (CryoSift Separator™), optimized via patented cryogenic processes to rapidly capture intact, high-value cannabis and hemp trichomes (CryoSift™).

Cryomass Technologies Inc. is the parent company to wholly-owned subsidiaries Cryomass LLC, Cryomass California LLC, and 1304740 B.C. Unlimited Liability Company dba Cryomass Canada.

On June 22, 2021, the Company entered into an Asset Purchase Agreement with Cryocann USA Corp, (“Cryocann”) a California corporation (“Cryocann”), pursuant to which Company acquired substantially all the assets of Cryocann. The acquired assets included the patented cryogenic process titled “System and method for cryogenic separation of plant material” (US patent #10,864,525) for the reduction of biomass and efficient isolation, collection and preservation of delicate resin glands (trichomes) of harvested hemp and cannabis, and potentially other high value trichome-rich plants.

In September 2021, we were granted an additional patent for our process from the Chinese Intellectual Property Office. In April 2022, we were granted another patent #3,064,896 from the Canadian Intellectual Property Office. We currently are taking steps to gain further protection for our intellectual property through the European Union Intellectual Property Office and other international jurisdictions.

The first functional commercial unit, known as a CryoSift Separator™, has been installed at the premises of an operating partner, pursuant to a license and lease arrangement, in California.

2. GOING CONCERN UNCERTAINTY, FINANCIAL CONDITIONS AND MANAGEMENT’S PLANS

The Company believes that there is substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its available cash balance as of the date of this filing will not be sufficient to fund its anticipated level of operations for at least the next twelve months. The Company believes that, at the present time, its ability to continue operations depends on cash expected to be available from planned equipment sales and royalty payments in connection with future revenue generation, or possibly from debt or equity investments, to fund its anticipated level of operations for at least the next twelve months. As of December 31, 2023, the Company had a working deficit of $2,341,440 and cash balance of $49,224. The Company estimates that it needs approximately $3,200,000 to cover overhead costs and has capital expenditure requirements of up to $3,125,000, based on the current pipeline of customer activity. The Company believes that the Company will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results of operations and additional financing until the Company can achieve profitability and positive cash flows from operating activities from, for example, our recently signed equipment purchase and revenue sharing agreement. Since the operating expenses of the unit are required to be covered by licensee and not the Company, the royalty payment would be free cash flow which could be used to cover operating expenses. However, there can be no assurance that the Company will receive sufficient operating cash flow from this agreement or that we will be able to attract the necessary financing.

The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity or debt financing to continue operations, and ultimately the attainment of profitable operations. For the twelve months ended December 31, 2023, our company used $3,804,980 of cash for operating activities, incurred a net loss of $12,955,728 and has an accumulated deficit of $51,967,256 since inception.

Our financial statements for the year ended December 31, 2023 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

F-7

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). The condensed consolidated financial statements include the accounts of the Cryomass Technologies Inc., Cryomass LLC, Cryomass California LLC, and 1304740 B.C. Unlimited Liability Company dba Cryomass Canada. All significant intercompany balances and transactions have been eliminated in consolidation. The Company operates as one segment from its corporate headquarters in Colorado.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, determining the fair value of the assets acquired and liabilities assumed in acquisition, determining the useful lives and potential impairment of long-lived assets and potential impairment of goodwill. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts. Aside from this, the Company does not believe it is exposed to any unusual credit risk.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. Subsequently, the FASB issued several other updates related to revenue recognition (collectively with ASU 2014-09, the “new revenue standards” or “ASC 606”). In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, further delaying the effective date for Topic 606 to fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020.

Pursuant to ASC 606, entities recognize revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. The model provides that entities follow five steps: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to each performance obligation, and (v) recognize revenue when or as each performance obligation is satisfied (i.e., either point in time or over time).

F-8

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The promised goods or services in the Company’s arrangements typically consist of (1) a license, including rights to the Company’s intellectual property; or / and (2) an obligation to make available for use equipment uniquely suited to apply the intellectual property to customers.

Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on its own or whether the required expertise is readily available, and whether the goods or services are integral or dependent to other goods or services in the contract. For performance obligations which consist of products, shipping and distribution activities occur prior to the transfer of control of the Company’s products and are considered activities to fulfill the Company’s promise to deliver goods to the customers.

The Company estimates the transaction price based on the amount expected to be entitled to for transferring the promised goods or services in the contract. The consideration may include fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential payment and the likelihood that the underlying constraint will be released. The Company utilizes either the most likely amount method or expected value method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. Variable consideration may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Customer prepayments are recorded as contract liabilities (deferred revenue), which shall be subsequently recognized as revenue upon satisfaction of the underlying performance obligations over the life of the contract. The portion of the liabilities that is expected to be recognized as revenue during the succeeding twelve-month period are recorded in Deferred Revenue and the remaining portion is recorded in Deferred Revenue, long term on the accompanying balance sheets at the end of each reporting period.

Expenses

Operating Expenses

Operating expenses encompass personnel costs, research and development expenses, general and administrative expenses, professional and legal fees and depreciation and amortization related to the property and equipment and intangibles acquired through the implementation of internal use software. Personnel costs consist primarily of consulting expense and administrative salaries and wages. General and administrative expenses are comprised of travel expenses, accounting expenses, stock-based compensation, and board fees. Professional services are principally comprised of outside legal and professional fees.

F-9

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other Income (Expenses)

Other income (Expenses) consisted of interest expense, net gain (loss) on foreign exchange and loss on extinguishment of debt.

Stock-Based Compensation

The fair value of restricted stock units (“RSUs”) granted are measured on the grant date using the closing price of the Company’s common shares on the grant date. For stock options, the Company engages a valuation firm to calculate the grant date fair value of the options issued. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures over the course of a vesting period. All stock-based compensation costs are recorded in general and administrative expenses in the consolidated statements of operations.

Property and Equipment, net

Purchase of property and equipment are recorded at cost. Improvements and replacements of property and equipment are capitalized. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the consolidated statements of operations. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset, as follows:

		Estimated Useful Life
Machinery and equipment		15 years

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of an acquired entity over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.

Indefinite-lived intangible assets established in connection with business combinations consist of in-process research and development and internal-use software. Intangible assets with indefinite lives are recorded at their estimated fair value at the date of acquisition. Once in-process research and development is placed in service, it will be amortized over the estimated useful life. Internal-use software costs recognized as an intangible asset relates to capitalizable costs of computer software obtained for internal-use as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40-30-1. All other internal-use software costs are expensed as incurred by the Company. Amortization is recorded straight-line over the estimated useful life of the software. The software has a useful life of 26 months with amortization beginning on April 1, 2023.

Intangible assets with finite lives are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. Amortization of assets ceases upon designation as held for sale. The estimated useful lives of intangible assets are detailed in the table below:

		Estimated Useful Life
Patent		120 Months
In-process research and development		104 Months
Internal-use software		26 Months

F-10

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Goodwill and Intangible Assets

Goodwill

Goodwill is not amortized, but instead is tested annually at December 31 for impairment and upon the occurrence of certain events or substantive changes in circumstances.

We account for the impairment of goodwill under the provisions of Financial Accounting Standards Board (FASB) Accounting Standard Update 2017-04 (“ASU 2017-04”), “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” and FASB Accounting Standards Codification (ASC) 350-20-35, Intangibles – Goodwill and Other – Goodwill.

The Company performs impairment testing for goodwill by performing the following steps: 1) evaluate the relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, 2) if yes to step 1, calculate the fair value of the reporting unit and compare it with its carrying amount, including goodwill, 3) recognize impairment, limited to the total amount of goodwill allocated to that reporting unit, equal to the excess of the carrying value of a reporting unit over its fair value.

Due to delays in implementing the Company’s business model of its cryogenic process, management fully impaired goodwill during the year ended December 31, 2023.

Indefinite-Lived Intangible Assets and Intangible Assets Subject to Amortization

Indefinite-lived intangible assets are not amortized, but instead are tested annually at December 31 for impairment and upon the occurrence of certain events or substantive changes in circumstances.

We account for the impairment of indefinite-lived intangible assets under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-30-35, Intangibles – Goodwill and Other – General Intangibles Other Than Goodwill. Following this guidance, the Company compares the estimated fair value of the indefinite-lived intangible assets to its carrying value. If the carrying value exceeds the fair value, the Company recognizes impairment equal to that excess.

We account for the impairment of intangible assets subject to amortization under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360-10-35, Property, Plant, and Equipment. Following this guidance, the Company compares the estimated fair value of the intangible assets subject to amortization to its carrying value. If the carrying value exceeds the fair value, the Company recognizes impairment equal to that excess.

Due to delays in implementing the Company’s business model of its cryogenic process, management fully impaired all related identifiable intangible assets including patents and in-process research and development during the year ended December 31, 2023. Internal-use software was not impaired as of December 31, 2023.

Leases

We account for our leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or our incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the right of use and lease liability, we have elected to combine lease and non-lease components. We exclude short-term leases having an initial term of 12 months or less from the new guidance as an accounting policy election, and recognize rent expense on a straight-line basis over the lease term.

F-11

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Income Taxes

The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is likely that the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the consolidated financial statements.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

	●	Level 1 — Quoted prices in active markets for identical assets or liabilities.

	●	Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

	●	Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying values reported in the consolidated balance sheets for cash, accounts receivable, prepaid expenses, accounts payable, and notes payable approximate fair values because of the immediate or short-term maturities of these financial instruments.

Between April and November 2023, the Company issued warrants in conjunction with promissory notes (the “Promissory Notes”) and common stock subscription agreements (the “Common Stock Subscription Agreements”) to investors as part of a capital raising effort The Company has determined that the Warrants are classified as equity and are initially measured at fair value. The fair value of the Warrants was determined utilizing a Binomial model considering all relevant assumptions at the dates of issuance. As the fair value of the Promissory Notes at the issuance date is less than the cash proceeds received, a debt discount on the Promissory Notes was also recorded. The debt discount will be amortized over the lives of the Promissory Notes using the effective interest method.

On September 15, 2022, the Company entered into a $2,000,000 Loan Agreement and Unsecured Promissory Note with CRYM Co-Invest (“CRYM Co-Invest”), which accrued interest at 12% per annum, payable quarterly. On December 31, 2023, the parties amended and restated the agreement includes an additional loan amount of $135,000, disbursed on December 22, 2023. The total principal is $2,289,590, which includes principal in-kind interest and accrues regular interest at an amended rate of 15% annually. The Company is obligated to repay the principal and all remaining accrued interest in full by April 1, 2025. A discounted cash flow analysis was used to determine the fair value of the debt. The Company also issued four tranches of common stock purchase warrants to CRYM Co-Invest that are exercisable up until February 8, 2029 and include a cashless exercise option. The total number of warrant shares issued was 20,000,000 (each tranche for 5,000,000 shares, exercisable at $0.25, $0.50, $0.75 and $1.00, per share, respectively). The fair value of the Warrants was determined utilizing a Binomial model considering all relevant assumptions at the dates of issuance. The Company also included a sale and purchase commitment option feature where CRYM Co-Invest has agreed to direct its affiliates to purchase up to five (5) units of the Company’s equipment for $1,200,000 each. Along with the sale and purchase commitment option, if the Company identifies a suitable lessee to rent the equipment from the affiliate and enter into an equipment rental agreement, then CRYM Co-Invest and the Company will each receive 50% of a monthly processing fee for the term of the equipment rental. Lastly, the amended agreement also includes a net revenue sharing commitment feature that begins after the first equipment purchase by the lender’s affiliate, whereby the Company will remit 10% of the Company’s quarterly net revenue that is generated through non-affiliated rental and non-affiliated sales income. With respect to the measurement of the contingent liability for future net revenue royalty payments, management has measured this based on the best estimate of the expected future liability, present valued to the date of initial recognition of this liability, being December 31, 2023.

F-12

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Net Loss per Share

The Company follows ASC 260, Earnings Per Share, which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement for all entities with complex capital structures. Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. Diluted net loss per share is the same as basic net loss per share for each period.

Recent Accounting Pronouncements

None.

4. REVENUE

During the twelve months ended December 31, 2023, the Company recognized a deferred revenue balance of $100,000 on receipt of the upfront fee, on September 25, 2023, associated with the delivery of one complete unit of processing equipment and patent license to RubberRock Inc, as defined in the territory license fee section of our licensing agreement. This amount will be amortized straight-line over the 5-year contract term. As such, the Company recognized $5,000 of revenue in Q4 2023. As of December 31, 2023, $100,000 of the territory license fee was paid and $95,000 remained in deferred revenue.

The Company additionally recognized $8,552 of royalty revenue from its contract with RubberRock Inc.

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, of $723,072 and $525,855 as of December 31, 2023 and 2022, respectively, consisted entirely of machinery and equipment.

	December 31, 2023			December 31, 2022
Machinery and equipment	$	777,833		$	531,255
Less: Accumulated depreciation		(54,761	)		(5,400	)
	$	723,072		$	525,855

Depreciation expense for the years ended December 31, 2023 and 2022 was $49,360 and $5,400, respectively.

6. GOODWILL AND INTANGIBLE ASSETS

The carrying value of goodwill was $0 and $1,190,000, as of December 31, 2023 and December 31, 2022, respectively. We fully impaired goodwill due to delays in implementing our business model, resulting in a $1,190,000 impairment charge for the year ended December 31, 2023. No additional goodwill has been recognized.

The following tables summarize information relating to the Company’s identifiable intangible assets as of December 31, 2023 and December 31, 2022, respectively.

	December 31, 2023
	Estimated	Gross		Accumulated						Carrying
	Useful Life	Amount		Amortization			Impairment			Value
Amortized
Patent	120 months	$	873,263	$	(174,653	)	$	(698,610	)	$	-
Internal-use software	26 months		148,219		(51,307	)		-			96,912
In-process research and development	104 months		3,209,000		(254,567	)		(2,954,433	)		-
Total identifiable intangible assets		$	4,230,482	$	(480,527	)	$	(3,653,043	)	$	96,912

F-13

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

	December 31, 2022
	Estimated Useful Life	Gross Amount		Accumulated Amortization			Carrying Value
Amortized
Patent	120 months		873,263		(130,989	)		742,274
Indefinite-lived
In-process research and development	104 months		3,209,000		(69,675	)		3,139,325
Internal-use software			98,983		-			98,983
Total identifiable intangible assets		$	4,181,246	$	(200,664	)	$	3,980,582

Amortization expense was $279,863 and $157,001 for the years ended December 31, 2023 and 2022, respectively.

The remaining estimated amortization expense by year is as follows:

Years ending December 31,	Amount
2024	$	68,412
2025		28,500
	$	96,912

7. DEFERRED REVENUE – RELATED PARTY

On August 18, 2023, we signed a license agreement with California-based RubberRock Inc and its affiliates (“RubberRock” or the “Licensee”). Under the agreement, RubberRock obtained from us a license to use and rent one unit of our equipment under certain rights for the use of the licensed patent solely in connection with the equipment and solely in California. We retain title to and have access to the equipment at all times. The duration of the agreement is five years from August 18, 2023. We subsequently amended the agreement on January 9, 2024 and on February 28, 2024.

Under the terms of the amended agreement, which are further detailed below, RubberRock agreed to license the patented process and deploy a Unit in exchange for a territory license fee (the “Territory License Fee”) of $100,000 payable in one or more payments as determined by the Company. The Equipment was delivered to the agreed upon RubberRock location on September 13, 2023 and RubberRock paid $100,000 of the total Territory License Fee on September 25, 2023.

In addition to the Territory License Fee, RubberRock will pay the Company monthly royalties.

Subsequent to the commencement of the RubberRock agreement, our Chief Executive Officer, Christian Noel, joined the board of directors of RubberRock at the end of September 2023, which created a related party disclosure requirement. In January 2024, Christian Noel left the board of directors of RubberRock.

During the twelve months ended December 31, 2023, we determined that the $100,000 of territory license fees we received did not meet the criteria for revenue recognition and therefore was recorded as deferred revenue as of September 30, 2023. As this amount is recognized as revenue over the five-year life of the contract, we recognized $5,000 of revenue in the fourth quarter of 2023.

F-14

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8. NOTES PAYABLE

Between April and November 2023, the Company issued Promissory Notes to investors as part of a capital raising effort. The Promissory Notes issued have a total principal amount of $1,240,755, or $1,255,206 net of foreign currency adjustments, and bear interest of 12%. Of the $1,240,755 received in Promissory Notes with warrants, $175,000 of the proceeds are from related parties (net of initial debt discount of $54,128), which is further detailed in Note 9. The Promissory Notes have maturities between 24 and 32 months after issuance, at which point repayment is due in full. In conjunction with the Promissory Notes, the Company also issued Warrants to purchase common shares of the Company (the “Common Shares”) to the same investors. The Company issued 3,381,300 warrants with an exercise price of $0.25 and 2,032,500 with an exercise price of $0.09. The Warrants are exercisable for four years from the issuance date. The Company has determined that the Warrants are classified as equity and are initially measured at fair value. The fair value of the Warrants was determined utilizing a Binomial model considering all relevant assumptions at the dates of issuance, including the Company stock price ($0.13 for April subscription agreements, one of which is for Simon Langelier, $0.09 for May subscription agreements, $0.12 for June subscription agreement, $0.14 for July subscription agreement, $0.09 for October subscription agreement, $0.08 for November subscription agreement), term (4 years), historical volatility (152-154%), and risk-free rate (3.8% for April subscription agreements, 3.6% and 3.7% for May subscription agreements for Mario Gobbo and a private investor, respectively, 4.0% for June subscription agreement for Health Diplomats Pte Ltd, 4.2% for July subscription agreement, 5.0% for October subscription agreement, 4.6% for November subscription agreement). The grant date fair value of the Warrants was $351,054. The fair value of the Promissory Notes was $889,701. As the fair value of the Promissory Notes at the issuance date is less than the cash proceeds received, a debt discount on the Promissory Notes of $351,054 was also recorded. As of December 31, 2023, the carrying value of the Promissory Notes was $967,286, net of discount, of which $834,881 relates to non-related parties, and the interest accrued was $67,566.

The table below discloses the aggregate amount of long-term borrowings not from related parties maturing in each of the following years:

Years ending December 31,	Amount
2024	$	250,000
2025		830,205
2026		-
2027		-
2028		-
Total gross principal		1,080,205
(Less: debt discount, net of amortization)		(245,324	)
Carrying value as of December 31, 2023	$	834,881

F-15

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9. RELATED PARTY TRANSACTIONS

On September 15, 2022, the Company entered into a loan agreement of $2,000,000 with CRYM Co-Invest LP, of which Alexander Massa, a 23.1% beneficial owner of the Company, has investment control. On December 31, 2023, the parties amended and restated the agreement includes an additional loan amount of $135,000, disbursed on December 22, 2023. The total principal is $2,289,590, which includes principal in-kind interest and accrues regular interest at an amended rate of 15% annually. The Company is obligated to repay the principal and all remaining accrued interest in full by April 1, 2025. A discounted cash flow analysis was used to determine the fair value of the debt. The Company also issued four tranches of common stock purchase warrants to CRYM Co-Invest that are exercisable up until February 8, 2029 and include a cashless exercise option. The total number of warrant shares issued was 20,000,000 (each tranche for 5,000,000 shares, exercisable at $0.25, $0.50, $0.75 and $1.00, per share, respectively). The fair value of the Warrants was determined utilizing a Binomial model considering all relevant assumptions at the dates of issuance, including the Company stock price ($0.04), term (5 years), rounded annual volatility (150%), and risk-free rate (3.84%). The Company also included a sale and purchase commitment option feature where CRYM Co-Invest has agreed to direct its affiliates to purchase up to five (5) units of the Company’s equipment for $1,200,000 each. Along with the sale and purchase commitment option, if the Company identifies a suitable lessee to rent the equipment from the affiliate and enter into an equipment rental agreement, then CRYM Co-Invest and the Company will each receive 50% of a monthly processing fee for the term of the equipment rental. Lastly, the amended agreement also includes a net revenue sharing commitment feature that begins after the first equipment purchase by the lender’s affiliate, whereby the Company will remit 10% of the Company’s quarterly net revenue that is generated through non-affiliated rental and non-affiliated sales income. With respect to the measurement of the contingent liability for future net revenue royalty payments, management has measured this based on the best estimate of the expected future liability, present valued to the date of initial recognition of this liability, being December 31, 2023.

The Company received $100,000, $50,000, and $25,000 from Simon Langelier, Health Diplomats Pte Ltd, and Mario Gobbo, respectively. Mr. Langelier and Mr. Gobbo are directors of the Company. Dr. Delon Human is also a director of the Company and is the President of Health Diplomats Pte Ltd. The notes mature on April 17, 2025, June 5, 2025 and May 2, 2025, respectively, and accrue interest at 12% per annum. In conjunction with the loans, the respective parties were issued warrants to purchase 454,500, 227,250, and 113,625 shares of common stock with an exercise price of $0.25 per share. The warrants expire on April 17, 2027, June 5, 2027 and May 2, 2027, respectively.

The table below discloses the aggregate amount of long-term borrowings from related parties maturing in each of the following years:

Years ending December 31,	Amount
2024	$	-
2025		2,464,590
2026		-
2027		-
2028		-
Total gross principal		2,464,590
Debt premium		48,410
(Less: debt discount, net of amortization)		(42,595	)
Carrying value as of December 31, 2023	$	2,470,405

F-16

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10. SHAREHOLDERS’ EQUITY (DEFICIT)

From January to March 2022, the Company issued 458,334 shares of common stock for a total dollar value of $160,417 and accrued an additional $80,208 in common stock to be issued at a later date for a total dollar value of $240,625 in exchange for services. The Company also issued 550,000 shares of common stock for 2021 management performance bonuses, 185,529 shares of common stock for director compensation, and 1,000,000 shares of common stock for 2020 RSU grants vesting in January 2022, all of which were expensed over the RSU grant vesting period, incurring $140,815 of expense during the first quarter of 2022.

From April to June 2022, the Company issued 220,500 shares of common stock for exercise of warrants for a total dollar value of $66,151 and 687,501 shares of common stock for a total dollar value of $240,626 in exchange for services. The Company also issued 1,000,000 shares of common stock related to director and management compensation which were expensed over the RSU grant vesting period, incurring $69,095 of expense during the second quarter of 2022.

From July to September 2022, the Company issued 416,667 shares of common stock in exchange for services, of which 229,167 related to prior period services, for a total net dollar value of $80,208, 1,000,000 shares from the sale of common stock for a total dollar value of $214,134, and 150,000 shares related to vesting of employee RSU grants for a total dollar value of $31,500. Additionally, 92,127 shares with a total dollar value of $23,409 were cancelled. These shares were initially issued for interest consideration on a note payable, but were subsequently cancelled when the Company decided to pay cash for the interest instead.

From September to December 2022, the Company issued 125,000 shares of common stock in exchange for services.

From January to March 2023, the Company issued 62,500 shares of common stock for a total dollar value of $21,875 for prior period services, 187,500 shares of common stock for a total dollar value of $65,626 for current period services, 777,932 shares of common stock for a total dollar value of $50,000 for vested RSUs for current period services, and 1,100,000 shares of common stock for a total dollar value of $197,890 for vested RSUs for prior period services.

From April to June 2023, the Company issued 187,500 shares of common stock for current period services, as follows: 62,500 shares were issued at $0.091 per share for a total dollar value of $5,687, 62,500 shares were issued at $0.0909 per share for a total dollar value of $5,681, and 62,500 shares were issued at $0.1399 per share for a total dollar value of $8,744, all related to compensation to a consultant. The Company issued 802,000 shares of common stock for vested RSUs for current period services, as follows: 550,000 shares were issued at $0.098 per share for a total dollar value of $53,900, 187,000 shares were issued at $0.0995 per share for a total dollar value of $18,607, 10,000 shares were issued at $0.1088 per share for a total dollar value of $1,088, and 55,000 shares were issued at $0.115 per share for a total dollar value of $6,325, all relating to employee compensation.

From July to September 2023, the Company issued 14,875 shares of common stock for vested RSUs for current period services for a total dollar value of $1,384 relating to employee compensation. The Company issued 4,148,889 shares from the sale of the Common Stock Subscription Agreements, as follows: 400,000 shares were issued for a total dollar value of $50,000 and 3,748,889 shares were issued for a total dollar value of $337,400. The Company issued 100,000 shares from exercised stock options for a total dollar value of $16,000.

From October to December 2023, the Company issued no shares of common stock.

F-17

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Unit Awards

The Company adopted its 2019 Omnibus Stock Incentive Plan (the “2019 Plan”), which provides for the issuance of stock options, stock grants and RSUs to employees, directors and consultants. The primary purpose of the 2019 Plan was to enhance the ability to attract, motivate, and retain the services of qualified employees, officers and directors. Any RSUs granted under the 2019 Plan were at the discretion of the Compensation Committee of the Board of Directors. On January 10, 2022, the shareholders approved the 2022 Stock Incentive Plan which then replaced the 2019 Plan.

A summary of the Company’s RSU award activity for the years ended December 31, 2023 and 2022, respectively, is as follows:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		1,453,857		$	0.30
Granted		3,516,160			0.16
Vested		(2,784,807	)		0.20
Forfeited		-			-
Outstanding at December 31, 2023		2,185,210		$	0.20

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021		2,200,000		$	0.45
Granted		2,189,386			0.29
Vested		(2,885,529	)		0.40
Forfeited		(50,000	)		0.17
Outstanding at December 31, 2022		1,453,857		$	0.30

The total fair value of RSUs vested during the year ending December 31, 2023 was $351,375. As of December 31, 2023, there was $106,183 of unrecognized stock-based compensation cost related to non-vested RSUs, which is expected to be recognized over the remaining vesting period.

Stock-based compensation expense relating to RSUs was $364,441 for the year ending December 31, 2023. Expenses for stock-based compensation are included on the accompanying consolidated statements of operations in general and administrative expense.

F-18

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Stock Option Awards

A summary of the Company’s stock option activity for the years ended December 31, 2023 and 2022, respectively, is as follows:

	Stock Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2022		8,500,000		$	0.18		8.5	$	1,579,108
Granted		3,113,214			0.15		-		382,909
Forfeited		-			-		-		-
Exercised		(100,000	)		0.16		-		-
Outstanding at December 31, 2023		11,513,214		$	0.17		7.3	$	1,962,017

	Stock Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2021		8,500,000	$	0.18		9.2	$	1,579,108
Granted		-		-		-		-
Forfeited		-		-		-		-
Outstanding at December 31, 2022		8,500,000	$	0.18		9.0	$	1,579,108

Warrants

A summary of the Company’s warrant activity for the years ended December 31, 2023 and 2022, respectively, is as follows:

	Warrant Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Fair Value
Outstanding at December 31, 2022		73,950,000		$	0.40		1.0	$	1,867,754
Granted		29,162,689			0.49		-		949,670
Exercised		-			-		-		-
Expired		(51,450,000	)		0.40		-		-
Outstanding at December 31, 2023		51,662,689		$	0.45		2.9	$	2,817,424

	Warrant Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Fair Value
Outstanding at December 31, 2021		80,975,898		$	0.39		1.9	$	1,867,754
Granted		-			-		-		-
Exercised		(220,500	)		0.30		0.3		-
Expired		(6,805,398	)		0.28		-		-
Outstanding at December 31, 2022		73,950,000		$	0.40		1.0	$	1,867,754

F-19

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2023, the Company issued warrants with the option to purchase 3,381,300 common shares at an exercise price of $0.25 per share and 2,032,500 common shares at an exercise price of $0.09 per share through the Promissory Notes as well as 3,748,889 common shares at an exercise price of $0.18 per shares through the Common Stock Subscription agreements.

The Company also issued four tranches of common stock purchase warrants to CRYM Co-Invest as part of an amended loan agreement that are exercisable up until February 8, 2029 and include a cashless exercise option. The total number of warrant shares issued was 20,000,000 (each tranche for 5,000,000 shares, respectively). The exercise prices of each tranche are $0.25, $0.50, $0.75, and $1.00, respectively.

The fair value of these warrants was $811,533, which was recorded to additional paid in capital during the year ended December 31, 2023.

11. INCOME TAXES

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in the tax laws and rates on the date of enactment. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense.

The provision (benefit) for income taxes for the years ended December 31, 2023 and 2022 consists of:

	2023			2022
Current (benefit) provision
Federal	$	-		$	-
State		-			-
Total Current		-			-

Deferred (benefit) provision
Federal	$	22,267		$	(6,262	)
State		(479	)		(15,526	)
Total Deferred	$	21,788		$	(21,788	)

Total Provision	$	21,788		$	(21,788	)

F-20

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The statutory federal income tax rate (21 percent) for the years ended December 31, 2023 and 2022 is reconciled to the effective income tax rate as follows:

	2023						2022
	Tax			Percentage			Tax			Percentage
Income Taxes At Statutory Federal Income Tax Rate	$	(2,716,127	)		21.00	%	$	(2,193,341	)		21.00	%
State Taxes, Net Of Federal Income Tax Benefit		(479	)		(0.00	)		(15,527	)		0.15
Return to Provision Adjustment - Permanent Items		(21,847	)		0.17			(433,010	)		4.15
Prior Year True-Up		163,579			(1.26	)		-			-
Deferred Only Adjustment		-			0.00			(360,713	)		3.45
Change in Valuation Allowance		2,584,136			(19.98	)		2,984,005			(28.57	)
Perms		12,526			(0.10	)		(3,203	)		0.03
Effective tax	$	21,788			(0.17	)%	$	(21,788	)		0.21	%

Deferred tax assets and liabilities by type at December 31, 2023 and 2022 are as follows:

Deferred Tax Assets (Liabilities):	2023			2022
Stock Compensation - RSU	$	277,595		$	122,132
Stock Compensation - Options		420,658			256,288
Accrued Salary & Payroll Taxes		203,494			-
Accrued Board Fees		57,113			-
Accrued Expenses		38,048			-
Depreciation		(151,246	)		(73,637	)
Section 174		203,337			-
Internal Use Software		7,621			-
Patent		209,324			10,687
In-Process Research & Development		865,370			(28,129	)
Goodwill - CryoCann		298,593			(16,862	)
Book vs. Tax Difference on Debt Issuance Cost and Modifications		486,584			-
General Business Tax Credit Carryforward		21,847			-
NOL - Federal Pre-2018		-			43,367
NOL - Federal Post-2017		5,930,410			5,233,548
NOL - State		1,181,241			1,086,609
Deferred Tax Assets (Liabilities)	$	10,049,989		$	6,690,261

Valuation Allowance		(10,049,989	)		(6,693,634	)

Net Deferred Tax Assets (Liabilities)	$	-		$	(3,373	)

As of December 31, 2023 and 2022, the Company had federal net operating loss carryforwards of approximately $28,240,046 and $25,128,168. As result of the 2017 Tax Cuts and Jobs Act (“TCJA”) and the 2020 Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), any federal net operating losses generated in years beginning after December 31, 2017 can be carried forward indefinitely to offset taxable income in future periods. The amount of federal net operating losses with an indefinite carryforward totaled $28,240,046 as of December 31, 2023. State net operating losses were approximately $29,246,910 and $31,260,334 at December 31, 2023 and 2022, respectively. State net operating losses will begin to expire in 2039. The deferred tax assets before valuation allowance for the net operating losses were $7,111,651 and $6,363,524 as of December 31, 2023 and 2022. Certain net operating loss carryforward are subject to an annual limitation as a result of previous changes in ownership as defined under Internal Revenue Code Section 382. These net operating losses have been fully reserved.

F-21

CRYOMASS TECHNOLOGIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, as of December 31, 2023, the Company has recorded a full valuation allowance against its net deferred tax asset position. The valuation allowance is estimated to be approximately $10,049,989 and $6,693,634 for the years ended December 31, 2023 and 2022, respectively. However, because deferred tax liabilities related to indefinite lived intangibles cannot be used as a source of income to recognize deferred tax assets with definite lives, the recorded valuation allowance exceeded the net deferred assets resulting in an overall net deferred tax liability, as reflected in the table above for December 31, 2022. The Goodwill has been fully impaired in 2023 as a result no overall net deferred tax liability exists as of December 31, 2023.

The Company has adopted the provisions of ASC 740 which prescribe the procedures for recognition and measurement of tax positions taken or expected to be taken in income tax returns. As of December 31, 2023, the Company does not have an accrual relating to uncertain tax positions. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.

12. COMMITMENTS & CONTINGENCIES

Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

On December 31, 2023, the Company entered into a net revenue sharing agreement with CRYM Co-Invest in which the Company is obligated to pay royalties equal to 10% of its net revenues. Management determined its best estimate of future expected liability as of December 31, 2023 and recognized a $1,185,000 contingent royalty liability included in long-term liabilities on its balance sheet.

13. SUBSEQUENT EVENTS

On January 9, 2024 and again on February 28, 2024, we amended a license agreement with RubberRock Inc that was originally executed on August 18, 2023. The amendments adjusted the royalty percentage and calculation, as well as the territory license fee to be collected.

Effective February 26, 2024, the Employment Agreements of CEO Christian Noel, CFO Philip Blair Mullin and General Counsel Patricia Kovacevic were amended to reduce Base Salary of each person to $315,000, $250,000 and 250,000 respectively.

On February 29, 2024, Cryomass entered into an Equipment Purchase And Sale Agreement wherein CRYM Co-Invest Unit #1 LLP (“CRYM1”), a special purpose vehicle created for the purpose, agreed to purchase one CryoSift Separator Unit for C$1.62 million. In turn, CRYM1 entered into a lease agreement with Vmax Canna Solutions Inc of Ontario, Canada to lease the CryoSift Separator for three years with two one-year options. To date, no funds have been received from CRYM1.

On April 23, 2024, a holder of a $250,000 promissory note agreed to cancel the note and accrued interest in exchange for 7,647,494 common shares and 7,647,494 warrants exercisable at $0.07 per share for four years.

On May 9, 2024, Cryomass entered into an Equipment Purchase And Sale Agreement wherein CRYM Co-Invest Unit #2 LLP (“CRYM2”), a special purpose vehicle created for the purpose, agreed to purchase one CryoSift Separator Unit for $1.2 million. In turn, CRYM2 entered into a lease agreement with a wholly-owned US subsidiary of Leef Brands Inc of Vancouver, Canada to lease the CryoSift Separator for three years with one three-year options to renew. To date, a substantial portion of the proceeds of the sale have been received from CRYM2.

On June 11, 2024, the Company entered into equity subscription agreements with two private investors for $500,000. Per terms of the agreement, upon receipt of proceeds, the Company will issue 8,000,000 shares of common stock, 12,500,000 common stock purchase warrants at an exercise price of $0.06, and 4,500,000 common stock purchase warrants at an exercise price of $0.0001 per share.

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Cryomass Technologies, Inc. 10-K