UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER: 333-208293
CANBIOLA. INC.
(Exact name of Registrant as specified in its charter)
Florida |
| 20-3624118 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
960 South Broadway, Suite 120
Hicksville NY 11801
(Address of principal executive offices)
(516) 590-1846
(Registrants telephone number, including area code)
(Former name, former address and former fiscal, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | [x] |
Emerging Growth Company | [x] |
|
|
(Do not check if smaller reporting 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [x] No
The number of shares of the registrants only class of common stock issued and outstanding as of November 16, 2017 was 173,822,323 shares.
1
CANBIOLA, INC.
FORM 10-Q
September 30, 2017
TABLE OF CONTENTS
|
| Page No. |
PART I. - FINANCIAL INFORMATION | ||
Item 1. | Financial Statements |
|
| Consolidated Balance Sheets September 30, 2017 and December 31, 2016 | 3 |
| Consolidated Statements of Operations Three and Nine Months Ended September 30, 2017 and 2016 | 4 |
| Consolidated Statements of Cash Flows Three and Nine Months Ended September 30, 2017 and 2016 | 6 |
| Condensed Notes to Unaudited Consolidated Financial Statements. | 7 |
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. | 18 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 19 |
Item 4. | Controls and Procedures. | 19 |
PART II - OTHER INFORMATION | ||
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|
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Item 1. | Legal Proceedings | 20 |
Item 1A. | Risk Factors | 20 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 20 |
Item 3. | Defaults Upon Senior Securities | 21 |
Item 4. | Mine Safety Disclosures | 21 |
Item 5. | Other Information | 21 |
Item 6. | Exhibits | 21 |
2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
3
4
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|
|
|
|
Other income (expense) net |
| (20,794) |
|
| (502) |
|
| 200,061 |
|
| 167 |
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Income (loss) before provision for income taxes |
| (466,245) |
|
| (342,142) |
|
| 18,103 |
|
| (83,961) |
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Provision for income taxes |
| - |
|
| - |
|
| - |
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| - |
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Net income (loss) and comprehensive income (loss) |
| $ (466,245) |
|
| $ (342,142) |
|
| $ 18,103 |
|
| $ (83,961) |
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Net income (loss) per common share basic and diluted |
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Basic |
| $ (0.00) |
|
| $ (0.00) |
|
| $ 0.00 |
|
| $ (0.00) |
Diluted |
| $ (0.00) |
|
| $ (0.00) |
|
| $ 0.00 |
|
| $ (0.00) |
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Weighted average common shares outstanding |
|
|
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Basic |
| 156,928,795 |
|
| 146,009,710 |
|
| 164,000,506 |
|
| 146,012,598 |
Diluted |
| 273,703,025 |
|
| 146,009,710 |
|
| 289,732,512 |
|
| 146,012,598 |
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See notes to consolidated financial statements. |
5
Canbiola, Inc. and Subsidiary | ||||
Consolidated Statements of Cash Flows (Unaudited) | ||||
|
| Nine Months Ended September 30, | ||
|
| 2017 |
| 2016 |
Operating Activities: |
|
|
|
|
Net income (loss) |
| $ (466,245) |
| $ (342,142) |
Adjustments to reconcile net income (loss) to net |
|
|
|
|
cash used in operating activities: |
|
|
|
|
Stock-based compensation, net of prepaid stock based consulting fees |
| 113,438 |
| 30,000 |
Loss on debt conversion |
| 32,383 |
| - |
Expense (income) from derivative liability |
| (252,010) |
| - |
Depreciation of property and equipment |
| 2,421 |
| 2,460 |
Amortization of intangible assets |
| 2,979 |
| 2,980 |
Amortization of debt discounts |
| 219,288 |
| - |
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
| (8,288) |
| (2,981) |
Inventory |
| (12,417) |
| - |
Prepaid expenses |
| 2,500 |
| 9,671 |
Accounts payable |
| 80,973 |
| 66,819 |
Accrued officers compensation |
| 54,000 |
| 116,750 |
Other accrued expenses payable |
| 25,760 |
| 12,612 |
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Net cash used in operating activities |
| (205,218) |
| (103,831) |
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Investing Activities: |
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Net cash used in investing activities |
| - |
| - |
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Financing Activities: |
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Proceeds received from notes and loans payable |
| 179,250 |
| 86,933 |
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Net cash provided by financing activities |
| 179,250 |
| 86,933 |
|
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Increase (decrease) in cash and cash equivalents |
| (25,968) |
| (16,898) |
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Cash and cash equivalents, beginning of period |
| 30,193 |
| 18,373 |
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Cash and cash equivalents, end of period |
| $ 4,225 |
| $ 1,475 |
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Income taxes paid |
| $ - |
| $ - |
Interest paid |
| $ - |
| $ - |
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NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Issuance of common stock in satisfaction of debt |
| $ 115,000 |
| $ - |
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Issuance of common stock in satisfaction of accrued interest |
| $ 11,168 |
| $ - |
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Issuance of common stock in satisfaction of accounts payable |
| $ - |
| $ 47,174 |
See notes to consolidated financial statements. |
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6
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended September 30, 2017 and 2016
(Unaudited)
NOTE 1 Organization and Description of Business
Canbiola, Inc. was originally incorporated as WrapMail, Inc. (WRAP) in Florida on October 11, 2005. Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (Prosperity), a New York corporation incorporated on April 2, 2008. On May 15, 2017, WRAP changed its name to Canbiola, Inc. (the Company or CANB or Canbiola). The Company operates several divisions, including document management and email marketing platforms and a division specializing in the sale of products containing CBD. The Company used to operate its document and information platform from its wholly owned subsidiary, Prosperity Systems, Inc (Prosperity); however, after the acquisition of Prosperity, the Company transferred Prosperitys operations to WRAP and is presently in the process of dissolving Prosperity. For the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity had no activity for the periods presented. Effective December 27, 2010, WRAP effected a 10 for 1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1 for 10 reverse stock split of its common stock. The accompanying consolidated financial statements retroactively reflect these stock splits.
Canbiola, Inc. is a US Company specializing in the sale of a variety of Cannabidiol (Hemp) based products such as oils, creams, moisturizers, chews, vapes, isolate, gel caps, concentrate and water. Canbiola is developing their own line of proprietary products as well as seeking synergistic value through acquisitions in the Hemp Industry. Canbiola aims to be the premier provider of the highest quality Hemp natural products on the market through sourcing the very best raw material and developing a variety of products we believe will improve people's lives in a variety of areas.
NOTE 2 Going Concern Uncertainty
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in a normal course of business. As of September 30, 2017, the Company had cash and cash equivalents of $4,225 and negative working capital of $731,850. For the nine months ended September 30, 2017 and 2016, the Company had net losses of $466,245 and $342,142, respectively. These factors raise substantial doubt as to the Companys ability to continue as a going concern. The Company plans to improve its financial condition by raising capital through sales of shares of its common stock. Also, the Company plans to start a health supplements business to attain profitable operations. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they may not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The interim financial statements should be read in conjunction with the Companys latest annual financial statement. In the opinion of management, the unaudited financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation. Operating results for the three-month period ended September 30, 2017 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2017.
NOTE 4 Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of CANB and its wholly owned subsidiary Prosperity from the date of its acquisition on January 5, 2015. All intercompany balances and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
7
(c) Fair Value of Financial Instruments
The Companys financial instruments consist of cash and cash equivalents, accounts receivable, note receivable, notes and loans payable, accounts payable, and accrued expenses payable. Except for the note receivable, the fair value of these financial instruments approximate their carrying amounts reported in the consolidated balance sheets due to the short term maturity of these instruments. Based on comparable instruments with similar terms, the fair value of the note receivable approximates its carrying value.
Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
(d) Cash and Cash Equivalents
The Company considers all liquid investments purchased with a maturity of three months or less to be cash equivalents.
(e) Inventory
All inventories are finished goods, and stated at the lower of cost or market. Cost is principally determined using the first-in, first-out (FIFO) method.
(f) Property and Equipment, Net
Property and equipment, net, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to operations as incurred.
(g) Intangible Assets, Net
Intangible assets, net, are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the estimated economic lives of the respective assets.
(h) Goodwill and Intangible Assets with Indefinite Lives
The Company does not amortize goodwill and intangible assets with indefinite useful lives, but instead tests for impairment at least annually. When conducting the annual impairment test for goodwill, the Company compares the estimated fair value of a reporting unit containing goodwill to its carrying value. If the estimated fair value of the reporting unit is determined to be less than its carrying value, goodwill is reduced and an impairment loss is recorded.
(i) Long-lived Assets
The Company reviews long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation of recoverability is required, the estimated undiscounted future cash flows associated with the asset is compared to the assets carrying amount to determine if a write-down is required. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value.
(j) Revenue Recognition
The Company recognizes revenue over agreed periods of services delivered to customers, provided there are no uncertainties regarding customer acceptance, persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable.
8
(k) Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (ASC) Topic 718, Compensation Stock Compensation (ASC718) and ASC 505-50, Equity Based Payments to Non-Employees.
In addition to requiring supplemental disclosures, ASC 718 addresses the accounting for share-based payment transactions in which a company receives goods or services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the companys equity instruments or that may be settled by the issuance of such equity instruments. ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.
In accordance with ASC 505-50, the Company determines the fair value of the stock based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date at which the counterpartys performance is complete.
Options and warrants
The fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:
·
Risk-Free Interest Rate.
We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
·
Expected Volatility.
We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.
·
Dividend Yield.
We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
·
Expected Term.
The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
·
Forfeitures.
Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.
(l) Advertising
Advertising costs are expensed as incurred and amounted to $35,312 and $10,301 for the nine months ended September 30, 2017 and 2016, respectively.
(m) Research and Development
Research and development costs are expensed as incurred.
9
(n) Income Taxes
Income taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.
The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification Topic requires the recognition of potential liabilities as a result of managements acceptance of potentially uncertain positions for income tax treatment on a more-likely-than-not probability of an assessment upon examination by a respective taxing authority. The Company believes that it has not taken any uncertain tax positions and thus has not recorded any liability.
(o) Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation. For the three and nine months ended September 30, 2016, the diluted net loss per share calculation excluded the effect of convertible notes payable, Series A preferred stock and stock options outstanding (see Notes 7, 8 and 10).
(p) Recent Accounting Pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. These include:
In August 2014, the FASB issued ASU 2014-15 Disclosure about an Entitys Ability to Continue as a Going Concern. The update establishes managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern including related disclosures.
In 2016, the FASB issued ASU 2016-2 (topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees will be required to recognize right of use assets and liabilities for most leases having terms of 12 months or more.
The impact on the Companys financial statements has not yet been determined.
(q) Reclassifications
Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current year presentation. These reclassification adjustments had no effect on the Company's previously reported net income.
10
NOTE 5 Note Receivable
At September 30, 2017 and December 31, 2016, the $39,000 note receivable bears interest at a rate of 3% per annum and is due November 30, 2020. The receivable arose from the Companys sale of its 50% interest in Stock Market Manager, Inc. to Endeavour Cooperative Partners, LLC (Endeavour) on November 30, 2015. Endeavour is affiliated with Carl Dilley, a Company director.
NOTE 6 Intangible Assets, Net
Intangible assets, net, consist of:
|
| September 30, 2017 |
| December 31, 2016 |
Video conferencing software acquired by Prosperity in December 2009 |
| $ 30,000 |
| $ 30,000 |
|
|
|
|
|
Enterprise and audit software acquired by Prosperity in April 2008 |
| 20,000 |
| 20,000 |
|
|
|
|
|
Patent costs incurred by CANB |
| 6,880 |
| 6,880 |
|
|
|
|
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Other |
| 3,548 |
| 3,548 |
|
|
|
|
|
Total |
| 60,428 |
| 60,428 |
|
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|
Accumulated amortization |
| (37,926) |
| (34,947) |
|
|
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|
Net |
| $ 22,502 |
| $ 25,481 |
Expected future amortization expense for intangible assets as of September 30, 2017 follows:
|
| Amount |
Year Ending December 31, 2017 |
| $ 995 |
Year Ending December 31, 2018 |
| 3,975 |
Year Ending December 31, 2019 |
| 3,975 |
Year Ending December 31, 2020 |
| 3,975 |
Year Ending December 31, 2021 |
| 3,975 |
Thereafter |
| 5,607 |
|
|
|
Total |
| $ 22,502 |
11
NOTE 7 Notes and Loans Payable
Notes and loans payable consist of:
|
| September 30, 2017 |
| December 31, 2016 | |
Convertible note payable to lender dated February 1, 2016 (as amended December 21, 2016), interest at 12% per annum, due February 1, 2017, convertible into Common Stock at a Conversion Price equal to the Lesser of (i) $0.01 per share or (ii) 50% of the lowest Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date fully converted at February 13, 2017 |
| $ - |
| $ 3,571 | |
|
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| |
Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to September 13, 2017, interest at rates ranging from 12% to 14.99% per annum, due from April 6, 2017 to March 13, 2018, partially converted at March 22, 2017 and the remaining notes convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date net of unamortized debt discount of $1,643 and $34,411, respectively |
| 35,357 |
| 39,839 | |
|
|
|
|
| |
Convertible notes payable to lender dated February 1, 2016 (as amended December 21, 2016) and December 21, 2016, interest at 12% per annum, due February 1, 2017 and May 20, 2017, convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date net of unamortized debt discount of $0 and $58,095, respectively |
| 65,000 |
| 6,905 | |
|
|
|
|
| |
Convertible notes payable to Pasquale and Rosemary Ferro dated from May 2, 2017 to November 3, 2017, interest at 12% per annum, due from September 16, 2017 to May 7, 2018, convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date net of unamortized debt discount of $40,883 and $0, respectively |
| 50,617 |
| - | |
|
|
|
|
| |
Convertible note payable to lender dated August 8, 2017 interest at 12% per annum, due August 8, 2018, convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date net of unamortized debt discount of $21,370 and $0, respectively |
| 3,630 |
| - | |
|
|
|
|
| |
Note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due) |
| 5,000 |
| 5,000 | |
|
|
|
|
| |
Loan payable to Mckenzie Webster Limited (MWL), an entity controlled by the former Chairman of the Board of Directors of the Company, non-interest bearing, due on demand |
| 3,000 |
| 3,000 | |
Total |
| $ 162,604 |
| $ 58,315 |
12
The derivative liability of the convertible notes payable at September 30, 2017 consisted of:
|
| Face Value |
| Derivative Liability |
Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to September 13, 2017, due from April 6, 2017 to March 13, 2018 |
| $ 37,000 |
| $ 39,539 |
|
|
|
|
|
Convertible notes payable to lender dated February 1, 2016 (as amended December 21, 2016) and December 21, 2016, due February 1, 2017 and May 20, 2017 |
| $ 65,000 |
| $ 67,889 |
|
|
|
|
|
Convertible notes payable to Pasquale and Rosemary Ferro dated from May 2, 2017 to November 3, 2017, due from September 16, 2017 to May 7, 2018 |
| $ 91,500 |
| $ 128,056 |
|
|
|
|
|
Convertible notes payable to lender dated August 8, 2017, due August 8, 2018 |
| $ 25,000 |
| $ 44,444 |
|
|
|
|
|
Totals |
| $ 218,500 |
| $ 279,928 |
The above convertible notes contain a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes is indeterminate. Accordingly, we have recorded the fair value of the embedded conversion features as a derivative liability at the respective issuance dates (or amendment dates) of the notes ($437,575 total for the nine months ended September 30, 2017) and charged the applicable amounts to debt discounts ($179,250 total for the nine months ended September 30, 2017) and the remainder to other expense ($258,325 total for the nine months ended September 30, 2017). The increase (decrease) in the fair value of the derivative liability from the respective issuance dates (or amendment dates) of the notes to the measurement date ($236,854 total decrease for the nine months ended September 30, 2017) is charged (credited) to other expense (income). The fair value of the derivative liability of the notes is measured at the respective issuance dates and quarterly thereafter using the Black Scholes option pricing model. Assumptions used for the calculations of the derivative liability of the notes at September 30, 2017 include (1) stock price of $0.0092 per share, (2) exercise price of $0.0045 per share, (3) terms ranging from 0 days to 312 days, (4) expected volatility of 281% and (5) risk free interest rates ranging from 0.00% to 1.28%.
NOTE 8 Preferred Stock
The Company issued a total of 10 shares of CANB Series A Preferred Stock (5 shares to MWL and 5 shares to Marco Alfonsi) in exchange for the retirement of a total of 100,000,000 shares of CANB common stock (50,000,000 shares from MWL and 50,000,000 shares from Marco Alfonsi).
Each share of Series A Preferred Stock is convertible into 10,000,000 shares of CANB common stock and is entitled to 20,000,000 votes.
NOTE 9 Common Stock
On January 2, 2016, the Company issued 104,500 shares of CANB common stock to a technical consultant in satisfaction of a $12,864 account payable to that vendor.
On March 9, 2016, the Company issued 140,000 shares of CANB common stock to a technical consultant in satisfaction of a $8,693 account payable to that vendor.
On October 6, 2016, the Company issued 400,000 shares of CANB common stock to a technical consultant in satisfaction of a $25,617 account payable to that vendor.
On February 2, 2017, the Company issued 200,000 shares of CANB common stock to a financial consultant for services rendered. The $11,000 fair value of the 200,000 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2017.
On February 13, 2017, the Company issued 1,685,900 shares of CANB common stock to the brother of the Chief Executive Officer of the Company in satisfaction of notes payable of $15,000 and accrued interest payable of $1,859.
On March 22, 2017, the Company issued 6,785,316 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $5,979.
13
On April 17, 2017, the Company issued 5,000,000 shares of CANB common stock to a consultant for services rendered. The $103,500 fair value of the 5,000,000 shares of CANB common stock will be charged to consulting fees in the three months ended June 30, 2017.
On June 21, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,975 fair value of the 250,000 shares of CANB common stock will be charged to consulting fees in the three months ended June 30, 2017.
On June 28, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,000 fair value of the 250,000 shares of CANB common stock will be charged to consulting fees in the three months ended June 30, 2017.
On August 25, 2017, the Company issued 7,142,857 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $3,331.
On August 25, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $3,750 fair value of the 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 5, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $4,375 fair value of the 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 7, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $32,750 fair value of the 2,500,000 shares of CANB common stock will be charged to consulting fees in the three months ended September 30, 2017.
On September 11, 2017, the Company issued 250,000 and 250,000 shares of CANB common stock to two consultants for services rendered, respectively. The $3,350 fair value of each 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 25, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $2,525 fair value of the 2,500,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
NOTE 10 Stock Options and Warrants
A summary of stock options and warrants activity follows:
| Shares of Common Stock Exercisable Into | ||||
| Stock |
|
|
|
|
| Options |
| Warrants |
| Total |
Balance, December 31, 2015 | 200,000 |
| 307,500 |
| 507,500 |
Granted in 2016 | - |
| - |
| - |
Expired in 2016 | (150,000) |
| (60,000) |
| (210,000) |
|
|
|
|
|
|
Balance, December 31, 2016 | 50,000 |
| 247,500 |
| 297,500 |
Granted in 1Q, 2Q and 3Q 2017 | - |
| - |
| - |
Cancelled in 1Q, 2Q and 3Q 2017 | - |
| - |
| - |
|
|
|
|
|
|
Balance, September 30, 2017 | 50,000 |
| 247,500 |
| 297,500 |
Issued and outstanding stock options as of September 30, 2017 consist of:
Year |
| Number Outstanding |
|
| Exercise |
| Year of |
Granted |
| And Exercisable |
|
| Price |
| Expiration |
2009 |
| 50,000 |
|
| 1.00 |
| 2019 |
|
|
|
|
|
|
|
|
Total |
| 50,000 |
|
|
|
|
|
14
Issued and outstanding warrants as of September 30, 2017 consist of:
Year |
| Number Outstanding |
|
| Exercise |
| Year of |
Granted |
| And Exercisable |
|
| Price |
| Expiration |
2010 |
| 247,500 |
|
| 1.00 |
| 2020 |
|
|
|
|
|
|
|
|
Total |
| 247,500 |
|
|
|
|
|
NOTE 11 Income Taxes
No provisions for income taxes were recorded for the periods presented since the Company incurred net losses in those periods.
The provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal income tax rate of 35% to pretax income (loss) as follows:
|
| Nine Months Ended September 30, | ||
|
| 2017 |
| 2016 |
Expected income tax (benefit) at 35% | $ (163,186) |
| $ (119,750) | |
|
|
|
|
|
Non-deductible stock-based compensation | 39,703 |
| 10,500 | |
|
|
|
|
|
Non-deductible amortization of debt discounts | 76,751 |
| - | |
|
|
|
| |
Non-taxable (income) from derivative liability | (76,869) |
| - | |
|
|
|
| |
Increase in deferred income tax assets valuation allowance |
| 123,601 |
| 109,250 |
|
|
|
|
|
Provision for (benefit from) income taxes |
| $ - |
| $ - |
Deferred income tax assets consist of:
|
| September 30, 2017 |
| December 31, 2016 |
Net operating loss carryforward |
| 1,344,080 |
| 1,220,479 |
|
|
|
|
|
Valuation allowance |
| (1,344,080) |
| (1,220,479) |
|
|
|
|
|
Net |
| $ - |
| $ - |
Based on management's present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of $1,344,080 attributable to the future utilization of the $3,829,650 net operating loss carryforward as of September 30, 2017 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the consolidated financial statements at September 30, 2017. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, and 2037 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511, $338,345, $386,297, and $353,146, respectively.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
The Company's U.S. Federal and state income tax returns prior to 2014 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations on the 2013 tax year returns expired in March 2017.
The Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest or penalties paid during 2017 and 2016.
15
NOTE 12 Commitments and Contingencies
Employment Agreements
On May 14, 2015, the Company executed an Executive Employment Agreement with Marco Alfonsi (Alfonsi) for Alfonsi to serve as the Company's chief executive officer for cash compensation of $5,000 per month (increased to $6,000 per month in August 2015). Pursuant to the agreement, the Company issued 10,000,000 restricted shares of CANB common stock to Alfonsi on June 14, 2015. Alfonsi may terminate his employment upon 30 days written notice to the Company. The Company may terminate Alfonsi's employment upon written notice to Alfonsi by a vote of the Board of Directors.
On August 17, 2015, the Company executed an Employment Agreement with Romuald Stone ("Stone") for Stone to serve as the Company's Chief Technology Officer for cash compensation of $12,500 per month. Effective August 17, 2016, the agreement terminated.
Consulting Agreements
On September 6, 2017, the Company executed a Consulting Agreement with T8 Partners LLC (T8) for T8 to serve as the Company's consultant for stock compensation of a total of 10,000,000 restricted shares. Pursuant to the agreement, the Company issued 2,500,000 restricted shares of CANB common stock to T8 on September 7, 2017. Effective October 27, 2017, the Company terminated the agreement due to non-performance by T8.
Lease Agreements
On December 1, 2014, Prosperity entered into a lease agreement with KLAM, Inc. for office space in Hicksville, New York for an initial term of one year commencing December 1, 2014. The lease provides for monthly rentals of $2,500 and provides Prosperity an option to renew the lease after the initial term. The Company has continued to occupy this space after November 30, 2015 under a month to month arrangement at $2,500 per month. KLAM, Inc. is controlled by the wife of the Company's chief executive officer Marco Alfonsi.
On September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100 for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate taxes.
Rent expense was $48,795 for each of the nine months ended September 30, 2017 and 2016.
At September 30, 2017, the future minimum lease payments under non-cancellable operating leases were:
Year ending December 31, 2017 | 9,391 |
Year ending December 31, 2018 | 27,900 |
|
|
Total | $ 37,291 |
Major Customers
For the nine months ended September 30, 2017, two customers accounted for approximately 45% and 29%, respectively, of total service revenues.
For the nine months ended September 30, 2016, three customers accounted for approximately 36%, 30%, and 15%, respectively, of total service revenues.
Public Offering of Units
On August 2, 2016, the Companys Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. On a self-underwritten basis, the Company was offering up to 40,000,000 Units at a price of $0.05 per Unit or $2,000,000 maximum. Each Unit consisted of one share of Company common stock and one warrant to purchase ½ share of Company common stock of a price of $0.10 per share for a period of three years. There was no minimum offering amount or escrow required as a condition to closing. On May 5, 2017, the Company withdrew the Registration Statement; no units were sold in the offering.
16
Litigation
On November 25, 2016, the landlord under the lease agreement dated September 11, 2015 (QPR) served us a Notice of Default. On December 5, 2016, QPR filed a Petition to Recover Possession of Real Property seeking unpaid rent of $12,540 (as of November 21, 2016) and possession of the premises. The Company subsequently paid QPR and QPR dismissed the action.
NOTE 13 Related Party Transactions
ProAdvanced Group, Inc. (PAG), an entity controlled by the Companys chief executive officer, is a customer of CANB. At September 30, 2017, CANB had an account receivable from PAG of $1,190.
Island Stock Transfer (IST), an entity controlled by Carl Dilley, a Company director, is both a customer and vendor of CANB. As of June 30, 2017, CANB had an account receivable from IST of $3,500 and an account payable to IST of $2,351. For the nine months ended September 30, CANB had revenues from IST of $3,500.
Stock Market Manager, Inc. (see Note 5) is also an entity controlled by Mr. Dilley. At September 30, 2017, CANB had an account payable to Stock Market Manager Inc. of $1,676.
NOTE 14 Subsequent Events
On October 3, 2017, the Company issued a Convertible Promissory Note of $2,000 to a lender for loan proceeds of $2,000. The note bears interest at a rate of 12% per annum, are due on May 7, 2018, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date.
On October 3, 2017, the Company executed an Executive Service Agreement with Marco Alfonsi (Alfonsi) for Alfonsi to serve as the Company's chief executive officer for cash compensation of $10,000 per month. Pursuant to the agreement, the Company issued 1 share of CANB Series A Preferred Stock to Alfonsi on October 4, 2017.
On October 4, 2017, the Company issued 2 shares of CANB Series A Preferred Stock to Alfonsi in consideration of Alfonsis cancellation of accrued salaries payable of $120,000 owed to Alfonsi.
On October 13, 2017, the Company executed a Securities Purchase Agreement (the SPA) with RedDiamond Partners LLC (RedDiamond). Pursuant to the Agreement, RedDiamond agreed to purchase an aggregate of $150,000 of Series B Preferred Shares (Preferred Shares), at $0.95 per share, for an aggregate of 157,895 Preferred Shares. The SPA provides for the purchase to be conducted through multiple closings, with the first closing occurring within ninety (90) days from the execution of the Agreement (First Closing). On October 13, the Company received $100,000 from RedDiamond. Additional closings are to be conducted on each monthly anniversary following the date of the First Closing (Additional Closings) until RedDiamond has purchased an aggregate of $150,000 of Preferred Shares. The Series B Preferred Shares (designated on November 15, 2017) have no voting rights, are entitled to dividends at a rate of 5% per annum, and are convertible into shares of common stock at a Conversion Price (as defined in the SPA), subject to a $20,000 maximum per Monthly Conversion Period.
On October 17, 2017, November 1, 2017 and November 9, 2017, the Company executed three Consulting Agreements with three consultants. Pursuant to the agreements, the Company issued or is required to issue 500,000 (not yet issued), 250,000 and 2,500,000 shares of CANB Common on October 17, 2017, November 2, 2017, and November 9, 2017, respectively.
On October 17, 2017, the Company was issued a Secured Promissory Note of $60,000 from a Borrower for loan proceeds of $60,000. The note bears interest at a rate of 12% per annum, and is due on October 17, 2018. On November 10, 2017, the Company entered into an Agreement for Sale and Purchase of Business Assets with the borrower to purchase its business assets. The consideration of $60,000 was paid via the cancellation of the Secured Promissory Note.
In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through November 17, 2017, the date on which these consolidated financial statements were available to be issued. Except as disclosed above, there were no material subsequent events that required recognition or additional disclosure in these consolidated financial statements.
17
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Canbiola, Inc. was originally formed as a Florida corporation on October 11, 2005, under the name of WrapMail, Inc. Effective January 5, 2015, we acquired 100% ownership of Prosperity Systems, Inc. (Prosperity), a New York corporation incorporated on April 2, 2008. We provide document, project, marketing and sales management systems to business clients through our website and proprietary software and also have a division focusing on the development and sale of products containing CBD. The Company is presently in the process of dissolving Prosperity.
The consolidated financial statements include the accounts of CANB and its wholly owned subsidiary Prosperity from the date of its acquisition on January 5, 2015.
Results of Operations
Three Months Ended September 30, 2017 compared with Three Months Ended September 30, 2016:
Revenues decreased $2,229 from $24,327 in 2016 to $22,098 in 2017.
Cost of product sales increased $10,559 from $0 in 2016 to $10,559 in 2017 due to the launch of new product sales.
Officers and directors compensation and payroll taxes decreased $19,520 from $38,897 in 2016 to $19,377 in 2017. The 2016 expense amount ($38,897) consists of salary paid to our Chief Technology Officer ($18,750) and Chief Executive Officer ($18,000) pursuant to their respective employment agreements and related payroll taxes ($2,147). The 2017 expense amount ($19,377) consists of salaries accrued to our Chief Executive Officer ($18,000) pursuant to their respective employment agreements and related payroll taxes ($1,377).
Consulting fees increased $106,065 from $4,104 in 2016 to $110,709 in 2017. The 2016 expense amount ($4,104) includes stock-based compensation of $0. The 2017 expense amount ($110,709) includes stock-based compensation of $76,209, resulting from stock issued for the service of consultants.
Advertising expense increased $8,251 from $5,551 in 2016 to $13,802 in 2017.
Hosting expense decreased $5,393 from $8,325 in 2016 to $2,932 in 2017.
Rent expense remained same at $16,265 in 2016 and 2017.
Professional fees decreased $12,080 from $20,050 in 2016 to $7,970 in 2017.
Depreciation of property and equipment increased $1 from $806 in 2016 to $807 in 2017.
Amortization of intangible assets remained same at $993 in 2016 and 2017.
Other operating expenses increased $7,178 from $13,464 in 2016 to $20,642 in 2017. The increase was due largely to higher conference expense and travel expenses in 2017 compared to 2016.
Net loss decreased $102,064 from a loss of $83,961 in 2016 to an income of $18,103 in 2017. The decrease was due to the $95,601 increase in total operating expenses and the increase of $199,894 in other income net from $167 other income net in 2016 to $200,061 other income net in 2017, and the $2,229 decrease in revenues.
Nine Months Ended September 30, 2017 compared with Nine Months Ended September 30, 2016:
Revenues decreased $6,050 from $71,990 in 2016 to $65,940 in 2017.
Cost of product sales increased $11,698 from $0 in 2016 to $11,698 in 2017 due to the launch of new product sales.
18
Officers and directors compensation and payroll taxes decreased $101,254 from $159,463 in 2016 to $58,209 in 2017. The 2016 expense amount ($159,463) consists of salary paid to our Chief Technology Officer ($93,750,000) and Chief Executive Officer ($54,000) pursuant to their respective employment agreements and related payroll taxes ($11,713). The 2017 expense amount ($58,209) consists of salaries accrued to our Chief Executive Officer ($54,000) pursuant to their respective employment agreements and related payroll taxes ($4,209).
Consulting fees increased $84,018 from $98,473 in 2016 to $182,491 in 2017. The 2016 expense amount ($98,473) includes stock-based compensation of $30,000. The 2017 expense amount ($182,491) includes stock-based compensation of $113,438, resulting from stock issued for the service of consultants.
Advertising expense increased $25,011 from $10,301 in 2016 to $35,312 in 2017.
Hosting expense decreased $2,846 from $20,465 in 2016 to $17,619 in 2017.
Rent expense remained same at $48,795 in 2016 and 2017.
Professional fees increased $33,919 from $36,787 in 2016 to $70,706 in 2017.
Depreciation of property and equipment decreased $38 from $2,459 in 2016 to $2,421 in 2017.
Amortization of intangible assets decreased $1 from $2,980 in 2016 to $2,979 in 2017.
Other operating expenses increased $46,250 from $34,911 in 2016 to $81,161 in 2017. The increase was due largely to higher office expenses and conference expenses in 2017 compared to 2016.
Net loss increased $124,103 from a loss of $342,142 in 2016 to a loss of $466,245 in 2017. The increase was due to the $96,757 increase in total operating expenses and the decrease of $21,296 in other income net from $502 other income net in 2016 to $20,794 other expense net in 2017, and the $6,050 decrease in revenues.
Liquidity and Capital Resources
At September 30, 2017, we had cash and cash equivalents of 4,225 and negative working capital of $731,850.
Cash and cash equivalents decreased $25,968 from $30,193 at December 31, 2016 to $4,225 at September 30, 2017. For the nine months ended September 30, 2017, $179,250 was provided by financing activities and $205,218 was used in operating activities.
We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
We currently have no commitments with any person for any capital expenditures.
We have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of September 30, 2017, our principal executive officer and principal financial officer conducted an evaluation regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon the evaluation of these controls and procedures, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
(B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting in our first fiscal quarter for the period ended September 30, 2017 covered by this Quarterly Report on Form 10-Q, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
19
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide risk factors in this Form 10-Q.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Sales of unregistered securities during the quarterly period ended September 30, 2017 follows:
On February 2, 2017, the Company issued 200,000 shares of CANB common stock to a financial consultant as payment in full for $11,000 of services rendered for the period January 1, 2016 through March 31, 2017.
On February 13, 2017, the Company issued 1,685,900 shares of CANB common stock to the brother of the Chief Executive Officer of the Company in satisfaction of notes payable of $15,000 and accrued interest payable of $1,859.
On March 22, 2017, the Company issued 6,785,316 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $5,979.
On April 17, 2017, the Company issued 5,000,000 shares of CANB common stock to a consultant as payment in full for $103,500 of services rendered for the period April 1, 2016 through June 30, 2017.
On June 21, 2017, the Company issued 250,000 shares of CANB common stock to a financial consultant as payment in full for $5,975 of services rendered for the period April 1, 2016 through June 30, 2017.
On June 28, 2017, the Company issued 250,000 shares of CANB common stock to a financial consultant as payment in full for $5,000 of services rendered for the period April 1, 2016 through June 30, 2017.
On August 25, 2017, the Company issued 7,142,857 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $3,331.
On August 25, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $3,750 fair value of the 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 5, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $4,375 fair value of the 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 7, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $32,750 fair value of the 2,500,000 shares of CANB common stock will be charged to consulting fees in the three months ended September 30, 2017.
On September 11, 2017, the Company issued 250,000 and 250,000 shares of CANB common stock to two consultants for services rendered, respectively. The $3,350 fair value of each 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 25, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $2,525 fair value of the 2,500,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
With respect to the transactions noted above, each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a sophisticated person, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(a)(2) of the Securities Act of 1933.
20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| Articles of Incorporation, as amended* | |
| Bylaws* | |
| Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer | |
| Section 1350 certification of Chief Executive Officer | |
| Amendment to Articles of Incorporation and Certificate of Designations for Series B Preferred Stock ** | |
| Certificate of Designations for Series B Preferred Stock*** | |
101.INS |
| XBRL Instance Document |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
* filed with the Form S-1 Registration Statement filed with the SEC on December 2, 2015 and incorporated herein by reference. ** filed with the Form 8-K filed with the SEC on November 15, 2017 and incorporated herein by reference. *** filed with the Form 8-K filed with the SEC on October 18, 2017 and incorporated herein by reference. |
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 20, 2017
CANBIOLA, INC. | |
|
|
By: | /s/ Marco Alfonsi |
| Marco Alfonsi, Chief Executive Officer |
22
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Marco Alfonsi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Canbiola, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)
disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting;
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting.
Dated: November 20, 2017
By: |
| /s/ Marco Alfonsi |
|
| Marco Alfonsi, Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Canbiola, Inc. (the Company) on Form 10-Q for the period ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), Marco Alfonsi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 20, 2017
By: | /s/ Marco Alfonsi |
| Marco Alfonsi Chief Executive Officer |
| (Principal Executive Officer) |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Document and Entity Information |
9 Months Ended |
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Sep. 30, 2017
shares
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Document and Entity Information: | |
Entity Registrant Name | Canbiola, Inc. |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2017 |
Trading Symbol | canb |
Amendment Flag | false |
Entity Central Index Key | 0001509957 |
Current Fiscal Year End Date | --12-31 |
Entity Common Stock, Shares Outstanding | 171,072,323 |
Entity Filer Category | Smaller Reporting Company |
Entity Current Reporting Status | Yes |
Entity Voluntary Filers | No |
Entity Well-known Seasoned Issuer | No |
Document Fiscal Year Focus | 2017 |
Document Fiscal Period Focus | Q3 |
Canbiola, Inc. - Consolidated Balance Sheets - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
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Current Assets: | |||||||||||||||
Cash and cash equivalents | $ 4,225 | $ 30,193 | |||||||||||||
Accounts receivable, less allowance for doubtful accounts | [1] | 22,030 | 13,742 | ||||||||||||
Inventory | 12,417 | ||||||||||||||
Prepaid expenses | 62,134 | 2,500 | |||||||||||||
TOTAL CURRENT ASSETS | 100,806 | 46,435 | |||||||||||||
Property and equipment, less accumulated depreciation | [2] | 11,954 | 14,375 | ||||||||||||
Other Assets: | |||||||||||||||
Security Deposit | 11,687 | 11,687 | |||||||||||||
Note receivable | 39,000 | 39,000 | |||||||||||||
Intangible assets, net of accumulated amortization | [3] | 22,502 | 25,481 | ||||||||||||
Total other assets | 73,189 | 76,168 | |||||||||||||
Total Assets | 185,949 | 136,978 | |||||||||||||
Current Liabilities: | |||||||||||||||
Notes and loans payable | 162,604 | 58,315 | |||||||||||||
Derivative Liability | 279,928 | 352,688 | |||||||||||||
Accounts payable | 135,683 | 54,714 | |||||||||||||
Accrued officers compensation | 188,750 | 134,750 | |||||||||||||
Other accrued expenses payable | 65,691 | 51,099 | |||||||||||||
Total current liabilities and total liabilities | 832,656 | 651,566 | |||||||||||||
Commitments and Contingencies | [4] | ||||||||||||||
Stockholders' Equity (deficit): | |||||||||||||||
Preferred stock | [5] | 103,664 | 103,664 | ||||||||||||
Common stock | [6] | 12,223,631 | 11,889,505 | ||||||||||||
Accumulated deficit | (12,974,002) | (12,507,757) | |||||||||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | (646,707) | (514,588) | |||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 185,949 | $ 136,978 | |||||||||||||
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Statement of Financial Position - Parenthetical - $ / shares |
Sep. 30, 2017 |
Dec. 31, 2016 |
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Statement of Financial Position | ||
Preferred Stock, Par Value | ||
Preferred Stock, Shares Authorized | 20 | 20 |
Preferred Stock, Shares Issued | 10 | 10 |
Preferred Stock, Shares Outstanding | 10 | 10 |
Common Stock, Par Value | ||
Common Stock, Shares Authorized | 750,000,000 | 750,000,000 |
Common Stock, Shares Issued | 171,072,323 | 146,008,250 |
Common Stock, Shares Outstanding | 171,072,323 | 146,008,250 |
Canbiola, Inc. - Consolidated Statements of Operations and Comprehensive Loss - USD ($) |
3 Months Ended | 9 Months Ended | |||||||||
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Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
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Revenues | |||||||||||
Service Revenue | $ 1,800 | $ 24,327 | $ 43,507 | $ 71,990 | |||||||
Product Sales | 20,298 | 22,433 | |||||||||
Total Revenues | 22,098 | 24,327 | 65,940 | 71,990 | |||||||
Operating cost and expenses: | |||||||||||
Cost of product sales | 10,559 | 11,698 | |||||||||
Officers and directors compensation and payroll taxes | [1] | 19,377 | 38,897 | 58,209 | 159,463 | ||||||
Consulting fees | [2] | 110,709 | 4,104 | 182,491 | 98,473 | ||||||
Advertising expense | 13,802 | 5,551 | 35,312 | 10,301 | |||||||
Hosting expense | 2,932 | 8,325 | 17,619 | 20,465 | |||||||
Rent expense | 16,265 | 16,265 | 48,795 | 48,795 | |||||||
Professional fees | 7,970 | 20,050 | 70,706 | 36,787 | |||||||
Depreciation of property and equipment | 807 | 806 | 2,421 | 2,459 | |||||||
Amortization of intangible assets | 993 | 993 | 2,979 | 2,980 | |||||||
Other | 20,642 | 13,464 | 81,161 | 34,911 | |||||||
TOTAL OPERATING EXPENSES | 204,056 | 108,455 | 511,391 | 414,634 | |||||||
Loss from operations | (181,958) | (84,128) | (445,451) | (342,644) | |||||||
Other income (expense): | |||||||||||
Interest income | 293 | 292 | 879 | 877 | |||||||
Loss on debt conversion | (32,383) | (32,383) | |||||||||
Income (expense) from derivative liability | 305,665 | 252,010 | |||||||||
Interest expense | [3] | (73,514) | (125) | (241,300) | (375) | ||||||
Other income (expense) - net | 200,061 | 167 | (20,794) | (502) | |||||||
Income (loss) before provision for income taxes | 18,103 | (83,961) | (466,245) | (342,142) | |||||||
Provision for income taxes | |||||||||||
Net income (loss) and comprehensive income (loss) | $ 18,103 | $ (83,961) | $ (466,245) | $ (342,142) | |||||||
Net income (loss) per common share, basic | $ (0.00) | $ (0.00) | $ (0.00) | $ (0.00) | |||||||
Net income (loss) per common share, diluted | $ (0.00) | $ (0.00) | $ (0.00) | $ (0.00) | |||||||
Weighted average common shares outstanding, basic | 164,000,506 | 146,012,598 | 156,928,795 | 146,009,710 | |||||||
Weighted average common shares outstanding, diluted | 289,732,512 | 146,012,598 | 273,703,025 | 146,009,710 | |||||||
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Note 1 - Organization and Description of Business |
9 Months Ended |
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Sep. 30, 2017 | |
Notes | |
Note 1 - Organization and Description of Business | NOTE 1 Organization and Description of Business
Canbiola, Inc. was originally incorporated as WrapMail, Inc. (WRAP) in Florida on October 11, 2005. Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (Prosperity), a New York corporation incorporated on April 2, 2008. On May 15, 2017, WRAP changed its name to Canbiola, Inc. (the Company or CANB or Canbiola). The Company operates several divisions, including document management and email marketing platforms and a division specializing in the sale of products containing CBD. The Company used to operate its document and information platform from its wholly owned subsidiary, Prosperity Systems, Inc (Prosperity); however, after the acquisition of Prosperity, the Company transferred Prosperitys operations to WRAP and is presently in the process of dissolving Prosperity. For the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity had no activity for the periods presented. Effective December 27, 2010, WRAP effected a 10 for 1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1 for 10 reverse stock split of its common stock. The accompanying consolidated financial statements retroactively reflect these stock splits.
Canbiola, Inc. is a US Company specializing in the sale of a variety of Cannabidiol (Hemp) based products such as oils, creams, moisturizers, chews, vapes, isolate, gel caps, concentrate and water. Canbiola is developing their own line of proprietary products as well as seeking synergistic value through acquisitions in the Hemp Industry. Canbiola aims to be the premier provider of the highest quality Hemp natural products on the market through sourcing the very best raw material and developing a variety of products we believe will improve people's lives in a variety of areas. |
Note 2 - Going Concern Uncertainty |
9 Months Ended |
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Sep. 30, 2017 | |
Notes | |
Note 2 - Going Concern Uncertainty | NOTE 2 Going Concern Uncertainty
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in a normal course of business. As of September 30, 2017, the Company had cash and cash equivalents of $4,225 and negative working capital of $731,850. For the nine months ended September 30, 2017 and 2016, the Company had net losses of $466,245 and $342,142, respectively. These factors raise substantial doubt as to the Companys ability to continue as a going concern. The Company plans to improve its financial condition by raising capital through sales of shares of its common stock. Also, the Company plans to start a health supplements business to attain profitable operations. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. |
Note 3 - Interim Financial Statements |
9 Months Ended |
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Sep. 30, 2017 | |
Notes | |
Note 3 - Interim Financial Statements | NOTE 3 Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they may not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The interim financial statements should be read in conjunction with the Companys latest annual financial statement. In the opinion of management, the unaudited financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation. Operating results for the three-month period ended September 30, 2017 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2017. |
Note 4 - Summary of Significant Accounting Policies |
9 Months Ended |
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Sep. 30, 2017 | |
Notes | |
Note 4 - Summary of Significant Accounting Policies | NOTE 4 Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of CANB and its wholly owned subsidiary Prosperity from the date of its acquisition on January 5, 2015. All intercompany balances and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
(c) Fair Value of Financial Instruments
The Companys financial instruments consist of cash and cash equivalents, accounts receivable, note receivable, notes and loans payable, accounts payable, and accrued expenses payable. Except for the note receivable, the fair value of these financial instruments approximate their carrying amounts reported in the consolidated balance sheets due to the short term maturity of these instruments. Based on comparable instruments with similar terms, the fair value of the note receivable approximates its carrying value.
Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
(d) Cash and Cash Equivalents
The Company considers all liquid investments purchased with a maturity of three months or less to be cash equivalents.
(e) Inventory
All inventories are finished goods, and stated at the lower of cost or market. Cost is principally determined using the first-in, first-out (FIFO) method.
(f) Property and Equipment, Net
Property and equipment, net, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to operations as incurred.
(g) Intangible Assets, Net
Intangible assets, net, are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the estimated economic lives of the respective assets.
(h) Goodwill and Intangible Assets with Indefinite Lives
The Company does not amortize goodwill and intangible assets with indefinite useful lives, but instead tests for impairment at least annually. When conducting the annual impairment test for goodwill, the Company compares the estimated fair value of a reporting unit containing goodwill to its carrying value. If the estimated fair value of the reporting unit is determined to be less than its carrying value, goodwill is reduced and an impairment loss is recorded.
(i) Long-lived Assets
The Company reviews long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation of recoverability is required, the estimated undiscounted future cash flows associated with the asset is compared to the assets carrying amount to determine if a write-down is required. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value.
(j) Revenue Recognition
The Company recognizes revenue over agreed periods of services delivered to customers, provided there are no uncertainties regarding customer acceptance, persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable.
(k) Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (ASC) Topic 718, Compensation Stock Compensation (ASC718) and ASC 505-50, Equity Based Payments to Non-Employees.
In addition to requiring supplemental disclosures, ASC 718 addresses the accounting for share-based payment transactions in which a company receives goods or services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the companys equity instruments or that may be settled by the issuance of such equity instruments. ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.
In accordance with ASC 505-50, the Company determines the fair value of the stock based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date at which the counterpartys performance is complete.
Options and warrants
The fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:
Risk-Free Interest Rate.
We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
Expected Volatility.
We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.
Dividend Yield.
We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
Expected Term.
The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
Forfeitures.
Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.
(l) Advertising
Advertising costs are expensed as incurred and amounted to $35,312 and $10,301 for the nine months ended September 30, 2017 and 2016, respectively.
(m) Research and Development
Research and development costs are expensed as incurred.
(n) Income Taxes
Income taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.
The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification Topic requires the recognition of potential liabilities as a result of managements acceptance of potentially uncertain positions for income tax treatment on a more-likely-than-not probability of an assessment upon examination by a respective taxing authority. The Company believes that it has not taken any uncertain tax positions and thus has not recorded any liability.
(o) Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation. For the three and nine months ended September 30, 2016, the diluted net loss per share calculation excluded the effect of convertible notes payable, Series A preferred stock and stock options outstanding (see Notes 7, 8 and 10).
(p) Recent Accounting Pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. These include:
In August 2014, the FASB issued ASU 2014-15 Disclosure about an Entitys Ability to Continue as a Going Concern. The update establishes managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern including related disclosures.
In 2016, the FASB issued ASU 2016-2 (topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees will be required to recognize right of use assets and liabilities for most leases having terms of 12 months or more.
The impact on the Companys financial statements has not yet been determined.
(q) Reclassifications
Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current year presentation. These reclassification adjustments had no effect on the Company's previously reported net income. |
Note 5 - Note Receivable |
9 Months Ended |
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Sep. 30, 2017 | |
Notes | |
Note 5 - Note Receivable | NOTE 5 Note Receivable
At September 30, 2017 and December 31, 2016, the $39,000 note receivable bears interest at a rate of 3% per annum and is due November 30, 2020. The receivable arose from the Companys sale of its 50% interest in Stock Market Manager, Inc. to Endeavour Cooperative Partners, LLC (Endeavour) on November 30, 2015. Endeavour is affiliated with Carl Dilley, a Company director. |
Note 6 - Intangible Assets, Net |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6 - Intangible Assets, Net | NOTE 6 Intangible Assets, Net
Intangible assets, net, consist of:
Expected future amortization expense for intangible assets as of September 30, 2017 follows:
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Note 7 - Notes and Loans Payable |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 7 - Notes and Loans Payable | NOTE 7 Notes and Loans Payable
The derivative liability of the convertible notes payable at September 30, 2017 consisted of:
The above convertible notes contain a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes is indeterminate. Accordingly, we have recorded the fair value of the embedded conversion features as a derivative liability at the respective issuance dates (or amendment dates) of the notes ($437,575 total for the nine months ended September 30, 2017) and charged the applicable amounts to debt discounts ($179,250 total for the nine months ended September 30, 2017) and the remainder to other expense ($258,325 total for the nine months ended September 30, 2017). The increase (decrease) in the fair value of the derivative liability from the respective issuance dates (or amendment dates) of the notes to the measurement date ($236,854 total decrease for the nine months ended September 30, 2017) is charged (credited) to other expense (income). The fair value of the derivative liability of the notes is measured at the respective issuance dates and quarterly thereafter using the Black Scholes option pricing model. Assumptions used for the calculations of the derivative liability of the notes at September 30, 2017 include (1) stock price of $0.0092 per share, (2) exercise price of $0.0045 per share, (3) terms ranging from 0 days to 312 days, (4) expected volatility of 281% and (5) risk free interest rates ranging from 0.00% to 1.28%. |
Note 8 - Preferred Stock |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Notes | |
Note 8 - Preferred Stock | NOTE 8 Preferred Stock
The Company issued a total of 10 shares of CANB Series A Preferred Stock (5 shares to MWL and 5 shares to Marco Alfonsi) in exchange for the retirement of a total of 100,000,000 shares of CANB common stock (50,000,000 shares from MWL and 50,000,000 shares from Marco Alfonsi).
Each share of Series A Preferred Stock is convertible into 10,000,000 shares of CANB common stock and is entitled to 20,000,000 votes. |
Note 9 - Common Stock |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Notes | |
Note 9 - Common Stock | NOTE 9 Common Stock
On January 2, 2016, the Company issued 104,500 shares of CANB common stock to a technical consultant in satisfaction of a $12,864 account payable to that vendor.
On March 9, 2016, the Company issued 140,000 shares of CANB common stock to a technical consultant in satisfaction of a $8,693 account payable to that vendor.
On October 6, 2016, the Company issued 400,000 shares of CANB common stock to a technical consultant in satisfaction of a $25,617 account payable to that vendor.
On February 2, 2017, the Company issued 200,000 shares of CANB common stock to a financial consultant for services rendered. The $11,000 fair value of the 200,000 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2017.
On February 13, 2017, the Company issued 1,685,900 shares of CANB common stock to the brother of the Chief Executive Officer of the Company in satisfaction of notes payable of $15,000 and accrued interest payable of $1,859.
On March 22, 2017, the Company issued 6,785,316 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $5,979.
On April 17, 2017, the Company issued 5,000,000 shares of CANB common stock to a consultant for services rendered. The $103,500 fair value of the 5,000,000 shares of CANB common stock will be charged to consulting fees in the three months ended June 30, 2017.
On June 21, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,975 fair value of the 250,000 shares of CANB common stock will be charged to consulting fees in the three months ended June 30, 2017.
On June 28, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,000 fair value of the 250,000 shares of CANB common stock will be charged to consulting fees in the three months ended June 30, 2017.
On August 25, 2017, the Company issued 7,142,857 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $3,331.
On August 25, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $3,750 fair value of the 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 5, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $4,375 fair value of the 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 7, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $32,750 fair value of the 2,500,000 shares of CANB common stock will be charged to consulting fees in the three months ended September 30, 2017.
On September 11, 2017, the Company issued 250,000 and 250,000 shares of CANB common stock to two consultants for services rendered, respectively. The $3,350 fair value of each 250,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017.
On September 25, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $2,525 fair value of the 2,500,000 shares of CANB common stock will be partially charged to consulting fees in the three months ended September 30, 2017. |
Note 10 - Stock Options and Warrants |
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Note 10 - Stock Options and Warrants | NOTE 10 Stock Options and Warrants
A summary of stock options and warrants activity follows:
Issued and outstanding stock options as of September 30, 2017 consist of:
Issued and outstanding warrants as of September 30, 2017 consist of:
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Note 11 - Income Taxes |
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Note 11 - Income Taxes | NOTE 11 Income Taxes
No provisions for income taxes were recorded for the periods presented since the Company incurred net losses in those periods.
The provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal income tax rate of 35% to pretax income (loss) as follows:
Deferred income tax assets consist of:
Based on management's present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of $1,344,080 attributable to the future utilization of the $3,829,650 net operating loss carryforward as of September 30, 2017 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the consolidated financial statements at September 30, 2017. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, and 2037 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511, $338,345, $386,297, and $353,146, respectively.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
The Company's U.S. Federal and state income tax returns prior to 2014 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations on the 2013 tax year returns expired in March 2017.
The Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest or penalties paid during 2017 and 2016. |
Note 12 - Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2017 | |
Notes | |
Note 12 - Commitments and Contingencies | NOTE 12 Commitments and Contingencies
Employment Agreements
On May 14, 2015, the Company executed an Executive Employment Agreement with Marco Alfonsi (Alfonsi) for Alfonsi to serve as the Company's chief executive officer for cash compensation of $5,000 per month (increased to $6,000 per month in August 2015). Pursuant to the agreement, the Company issued 10,000,000 restricted shares of CANB common stock to Alfonsi on June 14, 2015. Alfonsi may terminate his employment upon 30 days written notice to the Company. The Company may terminate Alfonsi's employment upon written notice to Alfonsi by a vote of the Board of Directors.
On August 17, 2015, the Company executed an Employment Agreement with Romuald Stone ("Stone") for Stone to serve as the Company's Chief Technology Officer for cash compensation of $12,500 per month. Effective August 17, 2016, the agreement terminated.
Consulting Agreements
On September 6, 2017, the Company executed a Consulting Agreement with T8 Partners LLC (T8) for T8 to serve as the Company's consultant for stock compensation of a total of 10,000,000 restricted shares. Pursuant to the agreement, the Company issued 2,500,000 restricted shares of CANB common stock to T8 on September 7, 2017. Effective October 27, 2017, the Company terminated the agreement due to non-performance by T8.
Lease Agreements
On December 1, 2014, Prosperity entered into a lease agreement with KLAM, Inc. for office space in Hicksville, New York for an initial term of one year commencing December 1, 2014. The lease provides for monthly rentals of $2,500 and provides Prosperity an option to renew the lease after the initial term. The Company has continued to occupy this space after November 30, 2015 under a month to month arrangement at $2,500 per month. KLAM, Inc. is controlled by the wife of the Company's chief executive officer Marco Alfonsi.
On September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100 for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate taxes.
Rent expense was $48,795 for each of the nine months ended September 30, 2017 and 2016.
At September 30, 2017, the future minimum lease payments under non-cancellable operating leases were:
Year ending December 31, 2017 9,391 Year ending December 31, 2018 27,900
Total $ 37,291
Major Customers
For the nine months ended September 30, 2017, two customers accounted for approximately 45% and 29%, respectively, of total service revenues.
For the nine months ended September 30, 2016, three customers accounted for approximately 36%, 30%, and 15%, respectively, of total service revenues.
Public Offering of Units
On August 2, 2016, the Companys Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. On a self-underwritten basis, the Company was offering up to 40,000,000 Units at a price of $0.05 per Unit or $2,000,000 maximum. Each Unit consisted of one share of Company common stock and one warrant to purchase ½ share of Company common stock of a price of $0.10 per share for a period of three years. There was no minimum offering amount or escrow required as a condition to closing. On May 5, 2017, the Company withdrew the Registration Statement; no units were sold in the offering.
Litigation
On November 25, 2016, the landlord under the lease agreement dated September 11, 2015 (QPR) served us a Notice of Default. On December 5, 2016, QPR filed a Petition to Recover Possession of Real Property seeking unpaid rent of $12,540 (as of November 21, 2016) and possession of the premises. The Company subsequently paid QPR and QPR dismissed the action. |
Note 13 - Related Party Transactions |
9 Months Ended |
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Sep. 30, 2017 | |
Notes | |
Note 13 - Related Party Transactions | NOTE 13 Related Party Transactions
ProAdvanced Group, Inc. (PAG), an entity controlled by the Companys chief executive officer, is a customer of CANB. At September 30, 2017, CANB had an account receivable from PAG of $1,190.
Island Stock Transfer (IST), an entity controlled by Carl Dilley, a Company director, is both a customer and vendor of CANB. As of June 30, 2017, CANB had an account receivable from IST of $3,500 and an account payable to IST of $2,351. For the nine months ended September 30, CANB had revenues from IST of $3,500.
Stock Market Manager, Inc. (see Note 5) is also an entity controlled by Mr. Dilley. At September 30, 2017, CANB had an account payable to Stock Market Manager Inc. of $1,676. |
Note 14 - Subsequent Events |
9 Months Ended |
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Sep. 30, 2017 | |
Notes | |
Note 14 - Subsequent Events | NOTE 14 Subsequent Events
On October 3, 2017, the Company issued a Convertible Promissory Note of $2,000 to a lender for loan proceeds of $2,000. The note bears interest at a rate of 12% per annum, are due on May 7, 2018, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date.
On October 3, 2017, the Company executed an Executive Service Agreement with Marco Alfonsi (Alfonsi) for Alfonsi to serve as the Company's chief executive officer for cash compensation of $10,000 per month. Pursuant to the agreement, the Company issued 1 share of CANB Series A Preferred Stock to Alfonsi on October 4, 2017.
On October 4, 2017, the Company issued 2 shares of CANB Series A Preferred Stock to Alfonsi in consideration of Alfonsis cancellation of accrued salaries payable of $120,000 owed to Alfonsi.
On October 13, 2017, the Company executed a Securities Purchase Agreement (the SPA) with RedDiamond Partners LLC (RedDiamond). Pursuant to the Agreement, RedDiamond agreed to purchase an aggregate of $150,000 of Series B Preferred Shares (Preferred Shares), at $0.95 per share, for an aggregate of 157,895 Preferred Shares. The SPA provides for the purchase to be conducted through multiple closings, with the first closing occurring within ninety (90) days from the execution of the Agreement (First Closing). On October 13, the Company received $100,000 from RedDiamond. Additional closings are to be conducted on each monthly anniversary following the date of the First Closing (Additional Closings) until RedDiamond has purchased an aggregate of $150,000 of Preferred Shares. The Series B Preferred Shares (designated on November 15, 2017) have no voting rights, are entitled to dividends at a rate of 5% per annum, and are convertible into shares of common stock at a Conversion Price (as defined in the SPA), subject to a $20,000 maximum per Monthly Conversion Period.
On October 17, 2017, November 1, 2017 and November 9, 2017, the Company executed three Consulting Agreements with three consultants. Pursuant to the agreements, the Company issued or is required to issue 500,000 (not yet issued), 250,000 and 2,500,000 shares of CANB Common on October 17, 2017, November 2, 2017, and November 9, 2017, respectively.
On October 17, 2017, the Company was issued a Secured Promissory Note of $60,000 from a Borrower for loan proceeds of $60,000. The note bears interest at a rate of 12% per annum, and is due on October 17, 2018. On November 10, 2017, the Company entered into an Agreement for Sale and Purchase of Business Assets with the borrower to purchase its business assets. The consideration of $60,000 was paid via the cancellation of the Secured Promissory Note.
In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through November 17, 2017, the date on which these consolidated financial statements were available to be issued. Except as disclosed above, there were no material subsequent events that required recognition or additional disclosure in these consolidated financial statements. |
Note 4 - Summary of Significant Accounting Policies: (a) Principles of Consolidation (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(a) Principles of Consolidation | (a) Principles of Consolidation
The consolidated financial statements include the accounts of CANB and its wholly owned subsidiary Prosperity from the date of its acquisition on January 5, 2015. All intercompany balances and transactions have been eliminated in consolidation. |
Note 4 - Summary of Significant Accounting Policies: (b) Use of Estimates (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(b) Use of Estimates | (b) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
Note 4 - Summary of Significant Accounting Policies: (c) Fair Value of Financial Instruments (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(c) Fair Value of Financial Instruments | (c) Fair Value of Financial Instruments
The Companys financial instruments consist of cash and cash equivalents, accounts receivable, note receivable, notes and loans payable, accounts payable, and accrued expenses payable. Except for the note receivable, the fair value of these financial instruments approximate their carrying amounts reported in the consolidated balance sheets due to the short term maturity of these instruments. Based on comparable instruments with similar terms, the fair value of the note receivable approximates its carrying value.
Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
Note 4 - Summary of Significant Accounting Policies: (d) Cash and Cash Equivalents (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(d) Cash and Cash Equivalents | (d) Cash and Cash Equivalents
The Company considers all liquid investments purchased with a maturity of three months or less to be cash equivalents. |
Note 4 - Summary of Significant Accounting Policies: (e) Inventory (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(e) Inventory | (e) Inventory
All inventories are finished goods, and stated at the lower of cost or market. Cost is principally determined using the first-in, first-out (FIFO) method. |
Note 4 - Summary of Significant Accounting Policies: (f) Property and Equipment, Net (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(f) Property and Equipment, Net | (f) Property and Equipment, Net
Property and equipment, net, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to operations as incurred. |
Note 4 - Summary of Significant Accounting Policies: (g) Intangible Assets, Net (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(g) Intangible Assets, Net | (g) Intangible Assets, Net
Intangible assets, net, are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the estimated economic lives of the respective assets. |
Note 4 - Summary of Significant Accounting Policies: (h) Goodwill and Intangible Assets With Indefinite Lives (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(h) Goodwill and Intangible Assets With Indefinite Lives | (h) Goodwill and Intangible Assets with Indefinite Lives
The Company does not amortize goodwill and intangible assets with indefinite useful lives, but instead tests for impairment at least annually. When conducting the annual impairment test for goodwill, the Company compares the estimated fair value of a reporting unit containing goodwill to its carrying value. If the estimated fair value of the reporting unit is determined to be less than its carrying value, goodwill is reduced and an impairment loss is recorded. |
Note 4 - Summary of Significant Accounting Policies: (i) Long-lived Assets (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(i) Long-lived Assets | (i) Long-lived Assets
The Company reviews long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation of recoverability is required, the estimated undiscounted future cash flows associated with the asset is compared to the assets carrying amount to determine if a write-down is required. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value. |
Note 4 - Summary of Significant Accounting Policies: (j) Revenue Recognition (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(j) Revenue Recognition | (j) Revenue Recognition
The Company recognizes revenue over agreed periods of services delivered to customers, provided there are no uncertainties regarding customer acceptance, persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable. |
Note 4 - Summary of Significant Accounting Policies: (k) Stock-based Compensation (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(k) Stock-based Compensation | (k) Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (ASC) Topic 718, Compensation Stock Compensation (ASC718) and ASC 505-50, Equity Based Payments to Non-Employees.
In addition to requiring supplemental disclosures, ASC 718 addresses the accounting for share-based payment transactions in which a company receives goods or services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the companys equity instruments or that may be settled by the issuance of such equity instruments. ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.
In accordance with ASC 505-50, the Company determines the fair value of the stock based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date at which the counterpartys performance is complete.
Options and warrants
The fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:
Risk-Free Interest Rate.
We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
Expected Volatility.
We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.
Dividend Yield.
We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
Expected Term.
The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
Forfeitures.
Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods. |
Note 4 - Summary of Significant Accounting Policies: (l) Advertising (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(l) Advertising | (l) Advertising
Advertising costs are expensed as incurred and amounted to $35,312 and $10,301 for the nine months ended September 30, 2017 and 2016, respectively. |
Note 4 - Summary of Significant Accounting Policies: (m) Research and Development (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(m) Research and Development | (m) Research and Development
Research and development costs are expensed as incurred. |
Note 4 - Summary of Significant Accounting Policies: (n) Income Taxes (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(n) Income Taxes | (n) Income Taxes
Income taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.
The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification Topic requires the recognition of potential liabilities as a result of managements acceptance of potentially uncertain positions for income tax treatment on a more-likely-than-not probability of an assessment upon examination by a respective taxing authority. The Company believes that it has not taken any uncertain tax positions and thus has not recorded any liability. |
Note 4 - Summary of Significant Accounting Policies: (o) Net Income (loss) Per Common Share (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(o) Net Income (loss) Per Common Share | (o) Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation. For the three and nine months ended September 30, 2016, the diluted net loss per share calculation excluded the effect of convertible notes payable, Series A preferred stock and stock options outstanding (see Notes 7, 8 and 10). |
Note 4 - Summary of Significant Accounting Policies: (p) Recent Accounting Pronouncements (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(p) Recent Accounting Pronouncements | (p) Recent Accounting Pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. These include:
In August 2014, the FASB issued ASU 2014-15 Disclosure about an Entitys Ability to Continue as a Going Concern. The update establishes managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern including related disclosures.
In 2016, the FASB issued ASU 2016-2 (topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees will be required to recognize right of use assets and liabilities for most leases having terms of 12 months or more.
The impact on the Companys financial statements has not yet been determined. |
Note 4 - Summary of Significant Accounting Policies: (q) Reclassifications (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Policies | |
(q) Reclassifications | (q) Reclassifications
Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current year presentation. These reclassification adjustments had no effect on the Company's previously reported net income. |
Note 6 - Intangible Assets, Net: Schedule of Intangible Assets and Goodwill (Tables) |
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Schedule of Intangible Assets and Goodwill |
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Note 6 - Intangible Assets, Net: Schedule of Expected Amortization Text Block (Tables) |
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Note 7 - Notes and Loans Payable: Schedule of Notes and Loans Payable Text Block (Tables) |
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Note 10 - Stock Options and Warrants: Schedule of Stockholders Equity (Tables) |
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Schedule of Stockholders Equity |
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Note 10 - Stock Options and Warrants: Schedule of Issued and Outstanding Stock OptionsText Block (Tables) |
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Schedule of Issued and Outstanding Stock OptionsText Block |
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Note 10 - Stock Options and Warrants: Schedule of Issued and Outstanding Warrants Text Block (Tables) |
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Schedule of Issued and Outstanding Warrants Text Block |
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Note 11 - Income Taxes: Schedule of Share-based Compensation, Activity (Tables) |
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Tables/Schedules | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation, Activity |
|
Note 11 - Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||
Tables/Schedules | ||||||||||||||||||||||||||||||||||||
Schedule of Deferred Tax Assets and Liabilities |
|
Note 2 - Going Concern Uncertainty (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Details | ||
Cash Equivalents, at Carrying Value | $ 4,225 | |
Working Capital | 731,850 | |
Net income (loss) | $ 466,245 | $ 342,142 |
Note 4 - Summary of Significant Accounting Policies: (l) Advertising (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Details | ||||
Advertising expense | $ 13,802 | $ 5,551 | $ 35,312 | $ 10,301 |
Note 6 - Intangible Assets, Net: Schedule of Intangible Assets and Goodwill (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Finite-Lived Patents, Gross | $ 6,880 | $ 6,880 |
Other Finite-Lived Intangible Assets, Gross | 3,548 | 3,548 |
Total Intangible Assets net | 60,428 | 60,428 |
Accumulated Amortization of Intangible Assets | (37,926) | (34,947) |
Intangible Assets net | 22,502 | 25,481 |
Video Conferencing Software | ||
Capitalized Computer Software, Gross | 30,000 | 30,000 |
Enterprise and Audit Software | ||
Capitalized Computer Software, Gross | $ 20,000 | $ 20,000 |
Note 6 - Intangible Assets, Net: Schedule of Expected Amortization Text Block (Details) |
Sep. 30, 2017
USD ($)
|
---|---|
2017 | |
Expected Future Amortization Expense | $ 995 |
2018 | |
Expected Future Amortization Expense | 3,975 |
2019 | |
Expected Future Amortization Expense | 3,975 |
2020 | |
Expected Future Amortization Expense | 3,975 |
2021 | |
Expected Future Amortization Expense | 3,975 |
Thereafter | |
Expected Future Amortization Expense | 5,607 |
Total | |
Expected Future Amortization Expense | $ 22,502 |
Note 7 - Notes and Loans Payable: Schedule of Notes and Loans Payable Text Block (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Notes payable dated February 1, 2016, interest at 12% per annum, due February 1, 2017 | ||
Notes Payable | $ 3,571 | |
Notes payable dated March 15, 2016, interest at 14.99% per annum, due April 6, 2017 | ||
Notes Payable | $ 35,357 | 39,839 |
Convertible Notes Payable to Lender dated February 1, 2016 and December 21, 2016, interest at 12% per annum, due February 1, 2017 and May 20, 2017 | ||
Notes Payable | 65,000 | 6,905 |
Notes payable to Pasquale and Rosemary Ferro, interest at 14.99% per annum, due September 16, 2017 | ||
Notes Payable | 50,617 | |
Notes payable to lender, interest at 12% per annum, due August 8, 2018 | ||
Notes Payable | 3,630 | |
Convertible note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 | ||
Notes Payable | 5,000 | 5,000 |
Loan payable to Mckenzie Webster Limited ("MWL"), an entity controlled by the Chairman of the Board of Directors of the Company, non-interest bearing, due on demand | ||
Notes Payable | 3,000 | 3,000 |
Total | ||
Notes Payable | $ 162,604 | $ 58,315 |
Note 7 - Notes and Loans Payable (Details) |
Sep. 30, 2017
USD ($)
|
---|---|
Convertible Note Payable to Lender dated March 15, 2016 | Face Value | |
Derivative Liability of Convertible Note | $ 37,000 |
Convertible Note Payable to Lender dated March 15, 2016 | Derivative Liability | |
Derivative Liability of Convertible Note | 39,539 |
Convertible Note Payable to Lender dated February 1, 2016 | Face Value | |
Derivative Liability of Convertible Note | 65,000 |
Convertible Note Payable to Lender dated February 1, 2016 | Derivative Liability | |
Derivative Liability of Convertible Note | 67,889 |
Convertible Note Payable to Pasquale and Rosemary Ferro Dated May 2, 2017 | Face Value | |
Derivative Liability of Convertible Note | 91,500 |
Convertible Note Payable to Pasquale and Rosemary Ferro Dated May 2, 2017 | Derivative Liability | |
Derivative Liability of Convertible Note | 128,056 |
Convertible Note Payable to lender Dated August 8, 2017 | Face Value | |
Derivative Liability of Convertible Note | 25,000 |
Convertible Note Payable to lender Dated August 8, 2017 | Derivative Liability | |
Derivative Liability of Convertible Note | 44,444 |
Total | Face Value | |
Derivative Liability of Convertible Note | 218,500 |
Total | Derivative Liability | |
Derivative Liability of Convertible Note | $ 279,928 |
Note 8 - Preferred Stock (Details) - shares |
Sep. 30, 2017 |
Dec. 31, 2016 |
Oct. 29, 2015 |
---|---|---|---|
Details | |||
Preferred Stock, Shares Issued | 10 | 10 | 10 |
Convertible Preferred Stock, Shares Issued upon Conversion | 10,000,000 |
Note 9 - Common Stock (Details) - shares |
Sep. 30, 2017 |
Sep. 25, 2017 |
Sep. 11, 2017 |
Sep. 07, 2017 |
Sep. 05, 2017 |
Aug. 25, 2017 |
Jun. 28, 2017 |
Jun. 21, 2017 |
Apr. 17, 2017 |
Mar. 22, 2017 |
Feb. 13, 2017 |
Feb. 02, 2017 |
Dec. 31, 2016 |
Oct. 06, 2016 |
Mar. 09, 2016 |
Jan. 02, 2016 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Common Stock, Shares Issued | 171,072,323 | 146,008,250 | ||||||||||||||
Technical Consultant | ||||||||||||||||
Common Stock, Shares Issued | 400,000 | 140,000 | 104,500 | |||||||||||||
Financial Consultant | ||||||||||||||||
Common Stock, Shares Issued | 200,000 | |||||||||||||||
Brother of Chief Executive Officer | ||||||||||||||||
Common Stock, Shares Issued | 1,685,900 | |||||||||||||||
Lender | ||||||||||||||||
Common Stock, Shares Issued | 7,142,857 | 6,785,316 | ||||||||||||||
Consultant | ||||||||||||||||
Common Stock, Shares Issued | 2,500,000 | 2,500,000 | 250,000 | 250,000 | 250,000 | 250,000 | 5,000,000 | |||||||||
Two Consultants | ||||||||||||||||
Common Stock, Shares Issued | 250,000 |
Note 10 - Stock Options and Warrants: Schedule of Stockholders Equity (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2017 |
Dec. 31, 2015 |
|
Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 50,000 | 50,000 | 200,000 |
Share Based Compensation Arrangement by Share Based Payment Award Options, Cancelled | (150,000) | ||
Warrants | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 247,500 | 247,500 | 307,500 |
Share Based Compensation Arrangement by Share Based Payment Award Options, Cancelled | (60,000) | ||
Total | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 297,500 | 297,500 | 507,500 |
Share Based Compensation Arrangement by Share Based Payment Award Options, Cancelled | (210,000) |
Note 10 - Stock Options and Warrants: Schedule of Issued and Outstanding Stock OptionsText Block (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017
$ / shares
shares
| |
2009 Stock Options | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 50,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ / shares | $ 1.00 |
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period | 2019 years |
Total 2 Stock Options | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 50,000 |
Note 10 - Stock Options and Warrants: Schedule of Issued and Outstanding Warrants Text Block (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017
$ / shares
shares
| |
2010 Warrants | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 247,500 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ / shares | $ 1.00 |
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period | 2020 years |
Total Warrants | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 247,500 |
Note 11 - Income Taxes: Schedule of Share-based Compensation, Activity (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Details | ||
Income Tax Expense (Benefit) | $ (163,186) | $ (119,750) |
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-based Compensation Cost, Amount | 39,703 | 10,500 |
Non-deductible Amortization of Debt Discounts | 76,751 | |
Non-deductible Expense From Derivative Liability | (76,869) | |
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount | $ 123,601 | $ 109,250 |
Note 11 - Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Details | ||
Operating Loss Carryforwards | $ 1,344,080 | $ 1,220,479 |
Deferred Tax Assets, Valuation Allowance | $ (1,344,080) | $ (1,220,479) |
Note 12 - Commitments and Contingencies (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Sep. 14, 2017 |
Sep. 12, 2016 |
Dec. 02, 2015 |
Aug. 17, 2015 |
May 14, 2015 |
|
Rent expense | $ 16,265 | $ 16,265 | $ 48,795 | $ 48,795 | $ 27,900 | $ 9,391 | $ 3,009 | $ 2,922 | $ 2,500 | ||
Marco Alfonsi | |||||||||||
Employee Cash Compensation | $ 5,000 | ||||||||||
Romauld Stone | |||||||||||
Employee Cash Compensation | $ 12,500 |
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