UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
For the quarterly period ended
For the transition period from ___________ to ___________
Commission File Number
CEN BIOTECH, INC.
(Exact name of registrant as specified in its charter)
| | - |
| (State or other jurisdiction of | (I.R.S. Employer |
| Canada | |
| (Address of principal executive offices) | (Zip code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 ☐ |
| | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act): Yes
As of May17, 2022, there were
TABLE OF CONTENTS
| PART I | ||
| ITEM 1 | FINANCIAL STATEMENTS | 4 |
| ITEM 2 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 25 |
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 34 |
| ITEM 4 | CONTROLS AND PROCEDURES | 34 |
| PART II | ||
| ITEM 1 | LEGAL PROCEEDINGS | 34 |
| ITEM 1A | RISK FACTORS | 35 |
| ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 35 |
| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 35 |
| ITEM 4 | MINE SAFETY DISCLOSURE | 35 |
| ITEM 5 | OTHER INFORMATION | 35 |
| ITEM 6 | EXHIBITS | 36 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report of CEN Biotech, Inc. (the “Company”) includes “forward-looking statements” that represent our beliefs, projections and predictions about future events. There are statements in this quarterly report that are not historical facts. All statements other than statements of historical fact are “forward-looking statements,” including any projections of earnings, revenue or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. These “forward-looking statements” can be identified by use of terminology such as “anticipate,” “believe,” “estimate,” “expect,” “hope,” “intend,” “may,” “plan,” “positioned,” “project,” “propose,” “should,” “strategy,” “will,” or any similar expressions, as well as statements in the future tense. These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements.
Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Although we believe that our assumptions underlying such forward-looking statements are reasonable, we do not guarantee our future performance, and our actual results may differ materially from those contemplated by these forward-looking statements. Our assumptions used for the purposes of the forward-looking statements made in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances, including the development of our lines of business and any products that we may manufacture or sell and our ability to raise additional funding sufficient to implement our strategy, as well as assumptions regarding Canadian and U.S. laws regarding the consumer or retail sale of hemp products and accessories and the manufacture and distribution of such products and accessories, including zoning and banking regulations. We also assume that we will be able to raise additional capital to fund our operations while we develop a line of business to generate net revenues. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. In light of these numerous risks and uncertainties, we cannot provide any assurance that the results and events contemplated by our forward-looking statements contained in this quarterly report will in fact transpire. These forward-looking statements are not guarantees of future performance. You are cautioned to not place undue reliance on these forward-looking statements. Except as required by applicable laws, we do not undertake any obligation to update or revise any forward-looking statements.
PART I
| ITEM 1. |
FINANCIAL STATEMENTS |
Contents
| CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: | Page |
| Consolidated Balance Sheets as of March 31, 2022, and December 31, 2021 | 5 |
| Consolidated Statements of Operations and Other Comprehensive (Loss) Income for the period ended March 31, 2022, and 2021 | 6 |
| Consolidated Statements of Shareholders’ Deficit for the period ended March 31, 2022, and March 31, 2021 | 7 |
| Consolidated Statements of Cash Flows for the period ended March 31, 2022, and March 31. 2021 | 8 |
| Notes to the Consolidated Financial Statements | 9 |
CEN BIOTECH, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(Unaudited)
| March 31, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other assets | ||||||||
| Income taxes refundable | ||||||||
| Loan receivable from Emergence Global Enterprises Inc. - related party | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other receivable | ||||||||
| Note receivable - CEN Biotech Ukraine LLC - related party | ||||||||
| Advances to CEN Biotech Ukraine LLC - related party | ||||||||
| Property and equipment, net | ||||||||
| Deferred income taxes | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – related parties | ||||||||
| Loans payable | ||||||||
| Loans payable – related parties | ||||||||
| Convertible notes payable, net of unamortized discount | ||||||||
| Convertible notes payable, net of unamortized discount - related parties | ||||||||
| Accrued interest | ||||||||
| Accrued interest – related parties | ||||||||
| Operating lease liabilities | ||||||||
| Governmental assistance payable | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| CEBA loan payable | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Notes 4, 11, 12, 18, 19, 24, and 25) | ||||||||
| Shareholders’ deficit | ||||||||
| Common stock; authorized shares; and issued and outstanding as of March 31, 2022, and December 31, 2021, respectively. par value. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
CEN BIOTECH, INC. AND SUBSIDIARY
Consolidated Statements of Operations and Other Comprehensive (Loss) Income
Period ended March 31, 2022, and 2021
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | $ | $ | ||||||
| Operating expenses | ||||||||
| Consulting fees | ||||||||
| Consulting fees – related parties | ||||||||
| General and administrative | ||||||||
| Stock based compensation | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Gain on derecognition of debt and accrued interest | ||||||||
| Interest expense | ( | ) | ||||||
| Interest expense – related parties | ( | ) | ||||||
| Interest income | ||||||||
| Change in fair value of patent acquisition liability | ||||||||
| Foreign exchange loss | ( | ) | ( | ) | ||||
| Other income (expense), net | ( | ) | ( | ) | ||||
| (Loss) income before income taxes | ( | ) | ||||||
| Income tax benefit | ||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss - Foreign currency translation | ||||||||
| Comprehensive (loss) income | $ | ( | ) | $ | ( | ) | ||
| Net (Loss) Income Per Share: | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Shares Outstanding | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to condensed consolidated financial statements.
CEN BIOTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Deficit
Period ended March 31, 2022 and December 31, 2021
| Accumulated | ||||||||||||||||||||||||
| Common | Additional | Other | Total | |||||||||||||||||||||
| Common | Shares | Paid-in | Accumulated | Comprehensive | Shareholders’ | |||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||||||||
| Balances, January 1, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Issuance of common stock – Interest shares | ||||||||||||||||||||||||
| Issuance of common stock – Settlement of accrued liability | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balances, March 31, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
| Balances, January 1, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balances, March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
See accompanying notes to condensed consolidated financial statements.
CEN BIOTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Period ended March 31, 2022, and 2021
| March 31, 2022 | March 31, 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net (loss) income to net cash used in operating activities | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Lease expense | ||||||||
| Deferred income tax benefit | ||||||||
| Shares issued for interest | ||||||||
| Foreign exchange loss | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other assets | ||||||||
| Operating lease liability | ||||||||
| Other receivable | ( | ) | ||||||
| Accounts payable | ||||||||
| Accounts payable – related parties | ( | ) | ||||||
| Accrued interest – related and non-related parties | ||||||||
| Operating lease payments | ( | ) | ||||||
| Governmental assistance payable | ||||||||
| Accrued expenses | ||||||||
| Ceba Loan Payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Advances to CEN Biotech Ukraine LLC | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| Repayment of convertible notes | ||||||||
| Issuance of convertible notes - related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of year | ||||||||
See accompanying notes to condensed consolidated financial statements.
CEN BIOTECH, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2022, and December 31, 2021
(All amounts are in US dollars unless otherwise stated.)
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the condensed consolidated financial statements of the Company for the year ended December 31, 2021 and notes thereto.
There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s annual report on Form 10-K for the year ended December 31, 2021.
Loss per Share
Net loss per common share is computed pursuant to ASC 260-10-45. Basic loss per share is computed based on the weighted average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the diluted weighted average common shares outstanding, which includes the effect of potentially dilutive securities. During periods when there is a net loss, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of net loss per share. Diluted earnings per share is similarly computed except that the denominator includes the effect, using the treasury stock method, of unvested restricted stock and convertible notes, if including such potential shares of common stock is dilutive. For the three-months ended March 31, 2022, and 2021, the common stock equivalents of the convertible note agreements were not included in diluted earnings per share computations because their effect was antidilutive.
Recent Developments
In April of 2021, the Company’s common stock began to be quoted on the OTC Link alternative trading system (operated by OTC Markets Group Inc.) under the trading symbol “CENBF” on the OTC Pink tier. There is no assurance that an active trading market for our shares will develop or will be sustained if developed.
Recently Adopted Accounting Pronouncements
No pronouncements were adopted by the Company during the three-month period ended March 31, 2022.
Recent Accounting Pronouncements Not Yet Adopted
In August 2020, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement (ASU 2020-06) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity's own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity's own equity. As a smaller reporting company, as defined by the SEC, this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.
NOTE 2 – GOING CONCERN UNCERTAINTY / MANAGEMENT PLANS
The accompanying condensed consolidated financial statements have been prepared in contemplating the continuation of the Company as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, a substantial doubt has been raised with regard to the ability of the Company to continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. The Company had an accumulated deficit of $
The Company’s cash position may not be sufficient to support the Company’s daily operations or its ability to undertake any business activity that will generate net revenue.
NOTE 3 – ADVANCES TO CEN BIOTECH UKRAINE AND ACQUISITION OF CLEAR COM MEDIA
At March 31, 2022 and December 31, 2021, the Company had advances of $
Bahige (Bill) Chaaban, our former Chief Executive Officer and member of our Board of Directors, and Usamakh Saadikh, a former member of our Board of Directors, each directly own
CEN acquired CCM on July 9, 2021. The results of operations for CCM have been included in the accompanying consolidated financial statements from that date forward. The acquisition was made for the purpose of providing revenue to support CEN operations through the development, marketing and sales of certain digital products. Additionally, CCM will provide in-house IT support functions for CEN activities.
The merger was accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (ASC) 805, “Business Combinations” (ASC 805), with CEN representing the accounting acquirer under this guidance. ASC 805 requires, among other things, an assignment of the acquisition consideration transferred to the sellers for the tangible and intangible assets acquired and liabilities assumed, using the bottom-up approach, to estimate their value at acquisition date. Any excess of the fair value of the purchase consideration over these identified net assets is to be recorded as goodwill.
The aggregate consideration for the acquisition of CCM was
| Cash | $ | |||
| Accounts receivable | ||||
| Property and equipment | ||||
| Other assets | ||||
| Identifiable intangibles | ||||
| Current financial liabilities | ( | ) | ||
| Other long-term liabilities | ( | ) | ||
| Total identifiable net assets | ||||
| Goodwill | ||||
| Net assets acquired | $ |
Identified intangible assets acquired include trade names, customer relationships, and product technology whose fair value of $
Amounts recognized as goodwill are expected to be fully deductible for Canadian income tax purposes. All goodwill has been included within the Digital segment.
Costs related to the acquisition, which include legal, accounting, and valuation fees, in the amount of approximately $
Supplemental proforma financial information
The unaudited financial information in the table below summarizes the combined results of operations of CEN and CCM on a pro forma basis, as though the companies had been combined as of the January 1, 2020. These pro forma results were based on estimates and assumptions, which we believe are reasonable. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2020. The pro forma financial information assumes the 4,000,000 shares of CEN common stock were issued on January 1, 2020 and includes adjustments to amortization for acquired intangible assets and income tax expense.
The pro forma financial information for the year ended December 31, 2021 combines the results of CEN and CCM for 2021, which include the results of CCM subsequent to July 9, 2021, and the historical results for CCM for the period of January 1, 2021 to July 8, 2021. The pro forma financial information for the year ended December 31, 2020 combines CEN’s historical results for 2020 with the historical results of CCM for 2020.
The following table summarizes the pro forma financial information (unaudited):
| Years Ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Revenue | $ | $ | ||||||
| Operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income, net | ||||||||
| (Loss) income before income taxes | ( | |||||||
| Income tax expense | ( | ) | ||||||
| Net (loss) income | $ | ( | $ | |||||
| Net (Loss) Income Per Share | ||||||||
| Basic | $ | ( | ) | $ | ||||
| Diluted | $ | ( | ) | $ | ||||
| Weighted Average Number of Shares Outstanding | ||||||||
| Basic | 44,488,649 | 31,264,072 | ||||||
| Diluted | ||||||||
NOTE 4 – INTANGIBLE ASSETS
On September 12, 2016, the Company executed an agreement dated August 31, 2016, to acquire assets, including a patent related to LED Lighting, from Tesla Digital, Inc., a Canadian Corporation, and Stevan (Steve) Pokrajac (the “Sellers”).
Material consideration given by Company was: (a) Shares of CEN common stock equal to $
The patent remains in the name of Tesla Digital, Inc. until full settlement of the terms of the agreement. In the interim, pursuant to an updated agreement executed on April 15, 2019 between the Company and the Sellers, CEN has reaffirmed the rights to use the patented technology.
In addition, the Company agreed to employ Stevan Pokrajac, by an LED subsidiary that the Company plans to form, but which has not yet been formed, in connection with the development of the acquired technology with compensation equal to $
In March 2018, the Tesla agreement was amended to replace the $
date using the current fair value of CEN’s common shares.
On October 7, 2021, the agreement was amended and finalized to increase the number of CEN common shares to be transferred to million. Upon closing of the agreement, the CEN common stock, valued at $
The Company intends to explore using the patented LED Lighting Technology across manufacturing operations and licensing opportunities across multiple industries such as horticultural, automotive, industrial and commercial lighting. The assets acquired, other than the patent, included certain machinery and raw materials, which were old and non-functioning and accordingly, had no fair value.
The intangible asset consists of the following at:
| 2022 | 2021 | Estimated Life (years) | ||||||||||
| Lighting patent | $ | $ | ||||||||||
| Product technology | n/a | |||||||||||
| Customer relationships | ||||||||||||
| Capitalized software development costs | n/a | |||||||||||
| Trade names | ||||||||||||
| Total identifiable intangible assets | ||||||||||||
| Less: Accumulated amortization | ||||||||||||
| Net | $ | $ | ||||||||||
As of December 31, 2021 and 2020, there is
NOTE 5 – LOANS PAYABLE
Loans payable consist of the following at March 31, 2022 and December 31 2021:
| 2022 | 2021 | |||||||
| Loans payable, on demand, to a private investor for the original amount of CAD , bearing interest at per annum. | $ | $ | ||||||
| Loans payable in default to multiple private investors bearing an interest at rates of up to per annum, which matured at various dates between and . | ||||||||
| Loan payable in default to an individual, issued April 13, 2018, with a 30-day maturity, bearing share interest of common shares per 30-day period. This is an unsecured loan which matures on . | ||||||||
| Loan payable to Global Holdings International, LLC, which bears interest at per annum after defaulting on the maturity date of . This note was previously secured by equipment that the Company disposed of on August 1, 2020. | ||||||||
| Loan payable to an individual, issued January 17, 2018 with a 30-day maturity, bearing share interest of common shares per 30-day period. This is an unsecured loan which matured on . | ||||||||
| Mortgage payable to ARG & Pals, Inc., for the original amount of CAD 385,000. The mortgage bears interest at 22% per annum, is unsecured, and matured on September 21, 2021. This was assumed on October 7, 2021 by the Sellers as described in Note 8. | - | - | ||||||
| Total loans payable (all current) | $ | $ | ||||||
During 2020, $
During both 2021 and 2020,
During 2021, certain private investors amended their convertible notes payable totaling $
The Canada Emergency Business Account (“CEBA”) loan payable of $
The Canadian government enacted the Canada Emergency Wage Subsidy (“CEWS”) and Canada Emergency Rent Subsidy (“CERS”) in 2020 to provide a wage and rent subsidy to employers that suffered reductions in revenue resulting from the COVID-19 pandemic. CCM received $
NOTE 6 – LOANS PAYABLE- RELATED PARTY
Loans payable - related party consists of the following at March 31, 2022 and December 31 2021:
| 2022 | 2021 | |||||||
| Loan payable in default due to the spouse of Bill Chaaban, former CEO of CEN, which bears an interest at per annum. This loan matured on . | $ | $ | ||||||
| Loans payable in default to a former director of Creative, former parent company, bear interest at per annum. This are unsecured loans that matured on . | ||||||||
| Loan payable in default to R&D Labs Canada, Inc., whose president is Bill Chaaban, also the former CEO of CEN, bearing interest at per annum. This is an unsecured loan that matured on . R&D Labs Canada is a company owned by Bill Chaaban’s spouse. | ||||||||
| Loans payable in default to the spouse of Bill Chaaban, former CEO of CEN, for the original amounts of CAD and USD , bear interest at per annum. These are unsecured loans that matured on . | ||||||||
| Loan payable to the spouse of Joseph Byrne, a shareholder and former CEO, and current President and member of the board of CEN, issued January 12, 2018 with a 30-day maturity, bearing share interest of common shares per 30-day period. This is an unsecured loan that matures on . | ||||||||
| Loan payable to Alex Tarrabain, former CFO and a Director of CEN, issued January 17, 2018 with a 30-day maturity, bearing share interest of common shares per 30-day period. This is an unsecured loan that matures on . | ||||||||
| Loan payable to Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 24, 2018 with a 30-day maturity, bearing share interest of 2,000 common shares per 30-day period. This loan was repaid in June 2021. | - | - | ||||||
| Total loans payable – related party (all current) | $ | $ | ||||||
Attributable related party accrued interest was $
During both 2021 and 2020,
NOTE 7 – CONVERTIBLE NOTES
Convertible notes payable consists of the following at March 31, 2022 and December 31 2021:
| 2022 | 2021 | |||||||
| Convertible notes payable in default to multiple private investors, including certain notes in default, bearing interest at per annum with conversion rights for common shares, which matured at various dates between and . | $ | $ | ||||||
| Convertible notes payable with beneficial conversion features at original issuance to multiple private investors, bearing interest at per annum with conversion rights for common shares, maturing at various dates between and . | ||||||||
| Convertible note payable, due on demand, for the original amount of CAD 1,104,713, bearing interest at 7% per annum which had conversion rights for 335,833 common shares. Effective August 17, 2021, the note was amended and reclassified to loans payable as the conversion feature was removed, see Note 9. | - | - | ||||||
| Total convertible notes payable | ||||||||
| Less unamortized debt discount | ||||||||
| Total convertible notes payable, net of unamortized debt discount | ||||||||
| Less current portion | ||||||||
| Convertible notes payable, less current portion | $ | $ | ||||||
The Company issues convertible notes as a method to raise operating capital. These notes convert to a fixed number of shares specified in the convertible note, at the option of the note holder. Certain of these notes are considered to contain a beneficial conversion feature if in-the-money at the time of issuance. The Company has determined the value associated with the beneficial conversion feature in connection with the notes issued during 2021 to be $
During 2021, certain private investors elected to exercise their convertible notes payable totaling $
During 2021, certain private investors elected to convert $
As of April 14, 2022, we are currently in default of $
NOTE 8 – CONVERTIBLE NOTES – RELATED PARTY
Convertible notes – related party consists of the following at March 31, 2022 and December 31 2021:
| 2022 | 2021 | |||||||
| Convertible notes, in default, due to Joseph Byrne, former CEO, and current President and member of the board of CEN, bearing interest at per annum. This note is convertible to common shares and matured on . | $ | $ | ||||||
| Convertible notes with beneficial conversion features due to the parents of Jeffery Thomas, a Director of CEN, bearing interest at per annum. These notes are convertible to common shares with a maturity date of . | ||||||||
| Convertible note, in default, due to the spouse of Bill Chaaban, former CEO of CEN, which bears an interest at 12% per annum. This note was convertible to 867,576 common shares and matured on August 17, 2020. Effective August 17, 2021, the note was amended and reclassified as the conversion feature was removed, see Note 10. | - | - | ||||||
| Convertible notes due to Harold Aubrey de Lavenu, a Vice President and Director of CEN, bearing interest at 5% per annum. On October 12, 2021, this note was converted to 548,980 common shares. | - | - | ||||||
| Convertible note due to Alex Tarrabain, former CFO and a Director of CEN, bearing interest at 5% per annum. On April 10, 2021, this note was converted to 30,000 common shares. | - | - | ||||||
| Convertible note due to Darren Ferris, brother of Ameen Ferris, a Vice President and a Director of CEN, bearing interest at 5% per annum. On April 26, 2021, this note was converted to 12,500 common shares. | - | - | ||||||
| Total convertible notes payable – related parties | ||||||||
| Less unamortized debt discount | ||||||||
| Total convertible notes payable - related parties (all current) | $ | $ | ||||||
Attributable related party accrued interest was $
The Company issues convertible notes to related parties as a method to raise operating capital. These notes convert to a fixed number of shares specified in the convertible note, at the option of the note holder. Certain of these notes are considered to contain a beneficial conversion feature if in-the-money at the time of issuance.
The Company has determined the value associated with the beneficial conversion feature in connection with the notes issued to related parties during 2021 to be $
During 2021, a convertible note due to Joseph Byrne in the amount of $
As of April 14, 2022, we are currently in default of $
NOTE 9 – INCOME TAXES
The Company has elected to file separate Canadian income tax returns for CEN (growth) and for CCM (digital).
Growth:
As of March 31, 2022, CEN has net operating loss carry forwards of approximately $
| 2021 | 2020 | |||||||
| Deferred tax asset - net operating losses | $ | $ | ||||||
| Deferred tax asset valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
The change in the valuation allowance amounted to $
Digital:
The tax benefit for CCM income taxes consists of the following components:
| December 31, 2021 | ||||
| Current | $ | ( | ) | |
| Deferred | ( | ) | ||
| Net income tax benefit | $ | ( | ) | |
The net deferred income tax asset presented in the consolidated balance sheets is comprised of the following at:
| December 31, | ||||
| 2021 | ||||
| Deferred tax assets | ||||
| SR&ED credits | $ | |||
| Deferred tax liabilities | ||||
| Property and equipment | ( | ) | ||
| Intangible assets, including goodwill | ( | ) | ||
| Total deferred tax liabilities | ( | ) | ||
| Net deferred tax asset | $ | |||
A reconciliation of the income tax benefit and the amount computed by applying the statutory Canadian federal income tax rate to CEN’s and CCM’s income before income tax benefit for the year ended December 31 is as follows:
| 2021 | 2020 | |||||||||||||||||||||||
| Growth | Digital | Total | Growth | Digital | Total | |||||||||||||||||||
| Income tax (benefit) expense at statutory rate of 26.5% | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||
| Valuation allowance | ( | ) | ( | ) | ||||||||||||||||||||
| SR&ED credits | ( | ) | ( | ) | ||||||||||||||||||||
| Other | ( | ) | ( | ) | ||||||||||||||||||||
| Income tax benefit | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
Company management analyzes its income tax filing positions in Canadian federal and provincial jurisdictions where it is required to file income tax returns, for all open tax years in these jurisdictions, to identify potential uncertain tax positions. As of December 31, 2021, there are no uncertain income tax positions taken or expected to be taken that would require recognition of a liability or disclosure in the consolidated financial statements. The Company is subject to routing audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Generally, the Company is no longer subject to income tax examinations for years prior to 2018.
NOTE 10 – SHAREHOLDERS’ DEFICIT / STOCK ACTIVITY
The Company is authorized to issue an unlimited number of common shares and an unlimited number of special voting shares. Common shares have
As of December 31, 2021,
As of December 31, 2021,
NOTE 11 – RELATED PARTY TRANSACTIONS
The Company has received loans from several related parties, as described above in Notes 6 and 8.
A loan totaling $
There are advances of $
During the years ended December 31, 2021 and 2020, the Company incurred consulting expenses with certain Board Members and Officers totaling $
During the year ended December 31, 2021, the Company incurred payroll expenses with Lawrence Lehoux, the Chief Technology Officer, of $
During 2017, the Company purchased equipment from R&D Labs Canada, Inc., whose president is Bill Chaaban, in exchange for a $
As of December 31, 2021 and 2020, the Company owed $
During 2021, the Company utilized an entity owned by Alex Tarrabain, the Chief Financial Officer, for accounting advisory services totaling $
As of December 31, 2021, the Company owed Lawrence Lehoux, the Chief Technology Officer, $
The Company currently leases certain facilities and equipment under noncancelable operating lease agreements that expire at various dates through 2024. Monthly rentals range from CAD
The Company also leased office space in Windsor, Ontario from RN Holdings Ltd. Under the lease agreement effective October 1, 2017, monthly rents of CAD
The operating lease liability as of December 31, 2021 and 2020 was $
Jamaal Shaban (“Lessor”), cousin of Bill Chaaban, leased a property at 20 North Rear Road to the Company under an agreement effective January 2017 for monthly rental payments of CAD
The following is a schedule of future annual minimum rental payments required under operating leases with initial or remaining noncancelable lease terms in excess of one year for the 12 months subsequent to December 31:
| Amount | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total lease payments | $ | |||
| Less imputed interest | ||||
| Present value of lease liability | $ | |||
NOTE 12 – STOCK BASED COMPENSATION
Adoption of Equity Compensation Plan
On November 29, 2017, the Board adopted the 2017 Equity Compensation Plan (the “Plan”) providing for the granting of options to purchase shares of common stock, restricted stock awards and other stock-based awards to directors, officers, employees, advisors and consultants. The Company reserved
On April 2, 2021, the Board of Directors of the Company adopted the 2021 Equity Compensation Plan (the “2021 Plan”) providing for the granting of options to purchase shares of common stock, restricted stock awards and other stock-based awards to directors, officers, employees, advisors and consultants of the Company and reserved an additional
Equity Compensation Grants
On November 30, 2017, the Company granted a one-time equity award (“Equity Award”) of restricted shares of the Company’s common stock pursuant to a Restricted Stock Agreement to certain executives and directors of the company. Donald Strilchuck, Director, received
On April 17, 2020, the Company entered into agreements with three individuals for the payment of business consulting services under which the Company issued
On August 27, 2020 and September 25, 2020, the Company entered into agreements with two individuals for the payment of business consulting services under which the Company issued an aggregate of
On April 2, 2021, a consulting agreement with CONFIEN SAS for business coaching was entered into for a period of 12 months. As payment for these services,
On July 13, 2021, the Company entered into agreements with two individuals for the payment of security and legal consulting services under which the Company issued an aggregate of
Employment Agreements
On November 30, 2017, employment agreements were entered into with four key members of management:
| ● | Under the Employment Agreement with Bahige (Bill) Chaaban, President of the Company, Mr. Chaaban will receive compensation in the form of a base annual salary of $ |
| ● | Under the Employment Agreement with Joseph Byrne, Chief Executive Officer of the Company, Mr. Byrne will receive compensation in the form of a base annual salary of $ |
| ● | Under the Employment Agreement with Richard Boswell, Senior Executive Vice President and Chief Financial Officer of the Company, Mr. Boswell will receive compensation in the form of a base annual salary of $ |
| ● | Under the Employment Agreement with Brian Payne, Vice President of the Company, Mr. Payne will receive compensation in the form of a base annual salary of and a grant of |
On May 16, 2019, an employment agreement, under similar terms, was entered into with Mr. Tarrabain. Under the Employment Agreement with Alex Tarrabain, Chief Financial Officer and as one of the Vice Presidents of the Company, Mr. Tarrabain will receive compensation in the form of a base annual salary of $
On December 6, 2021, the Board of Directors appointed Rick Purdy as its Senior Vice President of Deals and Acquisitions. On this date, an employment agreement, under similar terms, was entered into with Mr. Purdy. Under the Employment Agreement, Mr. Purdy will receive compensation in the form of a base annual salary of $
On April 2, 2021, the Board of Directors appointed Ameen Ferris and Harold Aubrey De Lavenu to serve as Vice Presidents of the Company. Under the associated Executive Employment Agreements, they will each receive compensation in the form of a base annual salary of $
On April 2, 2021, the Company entered into an RSA (the “Boswell RSA”) with Richard Boswell. Pursuant to the Boswell RSA, the Company granted Mr. Boswell
On April 2, 2021, the Company entered into an RSA (the “Chaaban RSA”) with Bahige Chaaban. Pursuant to the Chaaban RSA, the Company granted Mr. Chaaban
On April 2, 2021, the Company entered into an RSA (the “Payne RSA”) with Brian Payne. Pursuant to the Payne RSA, the Company granted Mr. Payne
On April 2, 2021, the Company entered into an RSA (the “Saadikh RSA”) with Usamakh Saadikh. Pursuant to the Saadikh RSA, the Company granted Mr. Saadikh
On April 2, 2021, the Company entered into an RSA (the “Strilchuck RSA”) with Donald Strilchuck. Pursuant to the Strilchuck RSA, the Company granted Mr. Strilchuck
On April 2, 2021 and June 25, 2021, the Company entered into an RSA (the “Tarrabain RSA”) with Alex Tarrabain. Pursuant to the Tarrabain RSA, the Company granted Mr. Tarrabain
Restricted Stock Awards
Restricted stock awards relate to common shares that are subject to applicable securities laws and regulations as set forth in the RSAs and other equity compensation grants.
The total grant-date fair value of the restricted shares granted through employment agreements and equity compensation grants was $
With the exception of immediately vesting portions of awards, shares typically vest pro-rata over the requisite service period, which is generally three years from the grant-date. Non-vested restricted stock awards participate in dividends and recipients are entitled to vote these restricted shares during the vesting period.
During 2021 and 2020,
Compensation expense, broken out by allocation, recognized in connection with the restricted stock awards was as follows for the years ended December 31:
| 2022 | 2021 | |||||||
| Stock Based Compensation | $ | $ | ||||||
| Professional fees | ||||||||
| Total | $ | $ | ||||||
Non-vested restricted stock award activity for the years ended December 31, 2021 and 2020 are as follows:
| Number of | Weighted- | Weighted- | ||||||||||
| Non-vested at January 31, 2021 | $ | |||||||||||
| Granted | - | |||||||||||
| Vested | ( | ) | - | |||||||||
| Forfeited | - | |||||||||||
| Non-vested at December 31, 2021 | $ | |||||||||||
The fair value of the restricted stock grants was based on the valuation of a third-party specialist prior to April 5, 2021. Beginning April 5, 2021, the fair value of the restricted stock grants is based upon the daily closing price per the OTC Link. As of December 31, 2021, unrecognized compensation expense totaled $
NOTE 13 – NET LOSS PER SHARE
During periods when there is a net loss, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of diluted net loss per share. Based on the Company’s application of the as converted and treasury stock methods, all common stock equivalents were excluded from the computation of diluted earnings per share due to net losses as of December 31, 2021. During 2020, the potential common shares from the Tesla Agreement, which were contingent on certain events as described in Note 8, were excluded as the effect of conversion was anti-dilutive. Common stock equivalents that were excluded for the years ended December 31, 2021 and 2020 because they were anti-dilutive are as follows:
| 2021 | 2020 | |||||||
| Convertible debt | ||||||||
| Tesla agreement | ||||||||
The following table shows the computation of basic and diluted earnings per share for 2021:
| Income | Shares | Per-Share | ||||||||||
| (Numerator) | (Denominator) | Amount | ||||||||||
| Basic EPS | ||||||||||||
| Income available to common stockholders | $ | $ | ||||||||||
| Effect of Dilutive Securities | ||||||||||||
| Convertible debt | - | |||||||||||
| Diluted EPS | ||||||||||||
| Income available to common stockholders with assumed conversions | $ | $ | ||||||||||
NOTE 14 – CONTINGENCY
In connection with the distribution by Creative of CEN’s common stock on February 29, 2016 and the Form 10 registration statement filed by CEN to register its shares of common stock under the Exchange Act, CEN received comments by the Staff of the Securities and Exchange Commission, including a letter dated May 4, 2016 in which the Staff noted that they “…continue to question the absence of Securities Act registration of the spin-off distribution”. In the event that the distribution of shares of CEN’s common stock was a distribution that required registration under the Securities Act, then the Company could be subject to enforcement action by the SEC that claims a violation of Section 5 of the Securities Act and could be subject to a private right of action for rescission or damages. Based on management’s estimate, any potential liability related to this matter would not be material.
NOTE 15 – FAIR VALUE DISCLOSURES
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.
The fair value of the Company’s financial instruments are as follows:
| Fair Value Measured at Reporting Date Using | ||||||||||||||||||||
| Carrying Amount | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||
| At March 31, 2022: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Note receivable – CEN Biotech Ukraine, LLC – related party | $ | $ | $ | $ | $ | |||||||||||||||
| Advances to CEN Biotech Ukraine, LLC - related party | $ | $ | $ | $ | $ | |||||||||||||||
| Loans payable | $ | $ | $ | $ | $ | |||||||||||||||
| Loans payable – related parties | $ | $ | $ | $ | $ | |||||||||||||||
| Convertible notes payable | $ | $ | $ | $ | $ | |||||||||||||||
| Convertible notes payable – related parties | $ | $ | $ | $ | $ | |||||||||||||||
| CEBA loan payable | $ | $ | $ | $ | $ | |||||||||||||||
| Carrying Amount | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||
| At December 31, 2020: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Note receivable – CEN Biotech Ukraine, LLC – related party | $ | $ | $ | $ | $ | |||||||||||||||
| Advances to CEN Biotech Ukraine, LLC - related party | $ | $ | $ | $ | $ | |||||||||||||||
| Loans payable | $ | $ | $ | $ | $ | |||||||||||||||
| Loans payable – related parties | $ | $ | $ | $ | $ | |||||||||||||||
| Convertible notes payable | $ | $ | $ | $ | $ | |||||||||||||||
| Convertible notes payable – related parties | $ | $ | $ | $ | $ | |||||||||||||||
| CEBA loan payable | $ | $ | $ | $ | $ | |||||||||||||||
The fair values of other receivables (including related accrued interest), note receivable - CEN Biotech Ukraine, LLC, and advances to Emergence Global and CEN Biotech Ukraine, LLC approximate carrying value due to the terms of the instruments.
The fair value of the loans payable approximates carrying value due to the terms of such instruments and applicable interest rates.
The fair value of convertible notes payable is based on the par value plus accrued interest through the date of reporting due to the terms of such instruments and interest rates.
It is not practicable to estimate the fair value of loans payable – related parties and convertible notes payable – related parties due to their related party nature.
The fair value of the patent acquisition liability is based upon the fair value of the common stock, which was obtained from a 3rd party valuation specialist prior to April 5, 2021. This valuation report utilized a cash-free asset value model to estimate enterprise value based upon similar companies. Beginning April 5, 2021, the fair value of the patent acquisition liability was based upon the OTC closing price and accordingly was transferred from Level 3 to Level 1 due to the availability of published prices for CEN’s common stock during 2021. Effective October 7, 2021, the liability was settled with delivery of the associated common shares, see Note 8.
NOTE 16 – SUBSEQUENT EVENTS
On April 14, 2022, the following persons resigned from the following positions from Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022.
The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above name persons no longer hold any positions with the Company.
The Resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by any of the above persons.
Appointments of Officers and Directors
On April 14, 2022, the Company’s Board of Directors (the “Board”) appointed Brian S. Payne as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors and appointed Lawrence Lehoux as the Company’s President, effective at the close of business on April 14, 2022.
On April 19, 2022, Dr. Usamakh Saadikh resigned from his position as a director on the Board of Directors (the “Board”) of the “Company as well as all other positions with the Company effective immediately. Dr. Usamakh Saadikh, was a member of our Board and the Vice President of International Business Development since June 2018. The foregoing resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by Dr. Saadikh.
Appointment of Directors
On April 18, 2022, the Board appointed the following persons as members of its Board effective April 18, 2022:
| ● | Josef Tukacs; and |
| ● | George Dragicevic |
Settlement Agreements with Departing Officers and Directors
As reported by the Company on its Current Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2022, on April 14, 2022, the following persons resigned from the following positions from the Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022. The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above named persons no longer hold any positions with the Company. In connection with the Resignations, the Company has entered into the settlement agreements described below with the following persons.
On April 19, 2022, the Company, entered into a settlement agreement with Bahige (Bill) Chaaban (the “Chaaban Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Chaaban
On April 19, 2022, the Company, entered into a settlement agreement with Alex Tarrabain (the “Tarrabain Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Tarrabain
On April 19, 2022, the Company, entered into a settlement agreement with Rick Purdy (the “Purdy Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Purdy
On April 19, 2022, the Company, entered into a settlement agreement with Ameen Ferris (the “Ferris Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Ferris
On April 19, 2022, the Company, entered into a settlement agreement with Richard Boswell (the “Boswell Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Boswell
Dismissal of Independent Registered Accounting Firm
On May 2, 2022, the Board of Directors of the Company approved the dismissal of Mazars USA LLP (“Mazars”), as its independent registered accounting firm, effective immediately. Mazars was engaged by the Company on January 16, 2018. No audit report of Mazars for the years ended December 31, 2021 or December 31, 2020, contained an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, with the exception of providing an explanatory paragraph stating there was substantial doubt about the Company’s ability to continue as a going concern. During the Company’s two most recent fiscal years and through May 2, 2022, (i) there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Mazars on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Mazars, would have caused Mazars to make reference to the subject matter of such disagreement in connection with its reports on the financial statements for such periods and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).
Engagement of New Independent Registered Accounting Firm
On May 2, 2022, the Company’s Board approved the appointment of Olayinka Oyebola & Co (“OOC”) as the Company’s new independent registered public accounting firm effective immediately. During the Company’s two most recent fiscal years ended December 31, 2021 and 2020, and the subsequent interim period through May 2, 2022, neither the Company nor anyone acting on its behalf consulted with OOC regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, in connection with which either a written report or oral advice was provided to the Company that OOC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the Notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Special Note Regarding Forward-Looking Statements. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Background and Overview
CEN Biotech, Inc. (“we,” “us,” “our” or “CEN” or the “Company”) is a Canadian holding company, incorporated in Canada on August 4, 2013, as a subsidiary of Creative Edge Nutrition, Inc. (“Creative”), a Nevada corporation. Creative separated its planned specialty pharmaceutical business located in Canada by transferring substantially all of the assets and liabilities of the planned specialty pharmaceutical business to CEN and effecting a distribution (the “Spin-Off Distribution”) of CEN common stock to Creative shareholders on February 29, 2016. The Spin-Off Distribution was intended to be tax free for U.S. federal income tax purposes.
Prior to the Spin Off Distribution, the Company initially pursued the cannabis business in Canada and obtained funding to build the initial phase of its comprehensive seed-to-sale facility and applied to obtain a license in Canada to begin operating its state-of-the-art medical marijuana cultivation, processing, and distribution facility in Lakeshore, Ontario. On March 11, 2015, the Company’s application for a license to produce marijuana for medical purposes was formally rejected by Canadian regulatory authority. On February 1, 2016 the Company commenced legal action against the Attorney General of Canada in the Ontario Superior Court of Justice for damages for detrimental reliance, economic loss, and prejudgment and post judgment interest, costs of the proceeding and other relief that the court may seem just. As of May 12, 2022 the action in the Ontario Superior Court of Justice is still ongoing. In the meantime, the Company decided to develop and pursue other businesses that are related to Light Emitting Diode (“LED”) lighting and hemp-based industrial, medical and food products that have a tetrahydrocannabinol (“THC”) that is below 0.3%.
We are currently focused on the manufacturing, production and development of LED lighting technology and hemp-based products. The Company intends to continue to explore the usage of hemp, which it now intends to cultivate for usage in industrial, medical and food products.
On April 20, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with Clear Com Media Inc., an Ontario, Canada corporation (“CCM”), each of the shareholders of CCM as set forth on the signature pages of the Agreement (the “CCM Shareholders”) and Lawrence Lehoux as the Representative of the CCM Shareholders (the “Shareholders’ Representative”, each of CCM and the CCM Shareholders may be referred to collectively herein as the “CCM Parties”). Pursuant to the Agreement, the Company agreed to acquire from the CCM Shareholders, all of the common shares of CCM, which is 10,000 shares of CCM common shares (the “CCM Stock”) held by the CCM Shareholders in exchange (the “Exchange”) for the issuance by the Company to the CCM Shareholders of 4,000,000 restricted shares of the Company’s common stock, no par value per share (the “Company Common Stock”). The Agreement closed on July 9, 2021 (the “Closing”). At Closing, the CCM Shareholders delivered the CCM Stock to the Company and the Company delivered the Company Common Stock to the CCM Shareholders, and CCM became a wholly owned subsidiary of the Company. At Closing, the Company increased the number of members on its Board of Directors (the “Board”) by one and to appoint and named the Shareholder Representative as a member of the Board of the Company. Additionally, at Closing, the Company appointed and named the Shareholder Representative as the Company’s Chief Technology Officer. At Closing, the Company entered into an employment agreement (the “Employment Agreement”) with Mr. Lehoux. Pursuant to the Employment Agreement, during the term of the Employment Agreement, the Company agreed to employ, and Mr. Lehoux agreed to accept employment with the Company as the Company’s Chief Technology Officer. Pursuant to the Employment Agreement, the Company agreed to pay Mr. Lehoux a base salary of $31,200.
Clear Com Media Inc. is a Windsor, Ontario based data management, digital marketing and Ecommerce company founded on the premise that we are not satisfied until our customers are. Clear Com is entirely committed to delivering a positive customer experience while continuing to grow and gaining the trust of the online community. Clear Com seeks to let nothing stop it from delivering a positive personal experience by focusing on data driven decision making. By exemplifying professionalism and expertise in technology Clear Com seeks to ensure customer satisfaction every step of the way. The aggregate consideration for the acquisition of CCM was 4,000,000 restricted shares of CEN common stock, which were valued at $2,120,000 based upon the closing stock price on July 9, 2021. The following represents the fair values of the assets acquired and the liabilities assumed by CEN in the transaction, including from the originally reported estimates, an increase in accounts receivable of approximately $8,000, a decrease of identifiable intangibles by approximately $168,000, and an increase in current financial liabilities by approximately $23,000, with a corresponding increase to goodwill of approximately $184,000 reflected as of July 9, 2021:
| Cash |
259,470 | |||
| Accounts receivable |
210,536 | |||
| Property and equipment |
97,911 | |||
| Other assets |
244,540 | |||
| Identifiable intangibles |
456,855 | |||
| Current financial liabilities |
(344,591 | ) | ||
| Other long-term liabilities |
(140,078 | ) | ||
| Total identifiable net assets |
784,643 | |||
| Goodwill |
1,335,357 | |||
| Net assets acquired |
$ | 2,120,000 |
Effective with the acquisition of Clear Com Media, Inc. on July 9, 2021, the Company reports in two business segments, Growth and Digital. The Growth segment encompasses the activities of CEN Biotech, Inc. and focuses on the planned manufacturing, production and development of LED lighting technology and hemp-based products. The Digital segment encompasses the activities of Clear Com Media, Inc. and focuses on providing digital marketing and web design related services. Substantially all of the Company’s operations are conducted within the United States of America and Canada.
Our principal office is located at 300-3295 Quality Way, Windsor, Ontario, Canada, N8T 3R9 and our phone number is (519) 419-4958. Our corporate website is located at http://www.cenbiotechinc.com. The information contained on or connected to our website is not part of this report and is not incorporated herein.
The Company did not have any operating revenue until the acquisition of Clear Com Media, Inc. on July 9, 2021 and such amounts are not expected to be sufficient to sustain ongoing operations. Our consolidated financial statements have been prepared assuming that we will continue as a going concern; however, given our recurring losses from operations, management, as well as our auditors, have determined there is substantial doubt about our ability to continue as a going concern.
At March 31, 2022 and December 31, 2021, the Company had advances of $1,299,328 and $1,299,328, respectively, to CEN Ukraine which is a related party. The advances were for the purpose of funding the operations of CEN Ukraine. These advances were substantially used as follows:
| ● |
Approximately $350,000 to operate its office in Kiev; |
| ● |
Approximately $445,328 to employ several workers; |
| ● |
Approximately $350,000 for performing multiple test crops; |
| ● |
Approximately $75,000 for oil processing activities; and |
| ● |
Approximately $9,000 for payment of rent. |
Plan of Operations
Our monthly “burn rate,” the amount of expenses we expect to incur on a monthly basis, is approximately $150,000 for a total of $1,800,000 for the maximum of 12 months. We have relied and will continue to rely on capital raised from third parties to fund our operating expenses during the following 12 months.
In order to complete our plan of operations, we estimate that $5,000,000 in funds will be required. The source of such funds is anticipated to be from capital raised from third parties. If we fail to generate $5,000,000 of funds from capital raised, we may not be able to fully carry out our plan of operations.
Generally, the funds are planned to be invested as follows: $2.0 million in digital development, $1.2 million in LED lighting manufacturing, and $1.8 million in general operating costs. There can be no assurance that the Company will be able to raise the foregoing funds or proceed as planned.
We hope to reach the following milestones in the next 12 months:
| ● |
May 2022 to December 2024 – The Company intends to explore using the LED Lighting across manufacturing operations and licensing opportunities across multiple industries such as the horticultural industry, as well as the automotive, industrial and commercial lighting industries as follows: |
| o |
Lease production facility expected to take place in June 2022 and we estimate the costs of this to be $400,000 annually. |
| o |
Lease equipment expected to take place in July, 2022 and we estimate the costs of this to be $400,000 |
| o |
Hire staff expected to take place in August, 2022 and we estimate the costs of this to be $600,000 annually. |
| o |
Initial raw materials expected to take place in August, 2022 and we estimate the costs of this to be $500,000 one time. |
| o |
Marketing and delivery expected to take place in October, 2022 and we estimate the costs of this to be $300,000 annually. |
| o |
May 2022 to June 2023 – The Company will continue to develop digital media programs and services to accentuate its current service offerings and we estimate the costs of this to be $2,000,000. |
Plan of Operations of Clear Com Media, Inc.
The current burn rate for CCM inclusive of all wages and operating costs are approximately $120,000 CDN per month or $1,440,000 CDN per year (Approx. $1,152,000 USD) per year. We anticipate a decrease of 30% in this burn rate with the elimination of some staff members that provide the SEO and custom development services that are no longer being performed by CCM. We will potentially rehire some of these people in order to retool the focus of the business and pivot to the development of some products as soon as it is financially viable to do so.
The following highlights the major goals and activities planned for the next twelve months:
| o |
Expansion of CCM’s enterprise hosting infrastructure for CCM’s client services and CCM products to address the ongoing growth needs of the business. |
| o |
The pace of development of the Chatter product has been modified to meet the changing needs of the business and to address new market realities. Progress continues but a refocus on core deliverables that delivers a new phased approach to product roll out is being implemented. Recent changes in sales, the competitive landscape and modified revenue forecasts have triggered a pivot in terms of priorities and timing. |
| o |
The development of the Block Chain Permission Platform has been modified to solely focus on the R&D elements of the offering. Commercialization of the product has been reorganized to be addressed later once we have achieved new internal goals and milestones; however, work continues on the core offering with clear goals and objectives in mind. |
| o |
Continued development of internal efficiency processes and automated systems for tasks such as workflow, billing, subscriptions, security and internal cloud computing. |
| o |
The marketing of both the Chatter and Block Chain product and service are being refined based on new and ongoing information that is being gathers from our target markets and the rapidly changing landscape of the verticals we operate in. As our research continues, we hope to commence marketing efforts in the third quarter of this year when the products are in a completed and in a commercially viable state. |
| o |
The development of digital community project remains at the discovery stage and research continues about the participants and nuances of this space and how we feel we can best serve this vertical. Once a plan is formalized new hires will be recruited to address the specific development needs of this product and service. |
| o |
Continued support and a modest expansion of the core services offered by to our key business partners and direct customers. These services include but are not limited to responsive website design, online chat, social media marketing and landing page development. |
| o |
As part of our renegotiation with Postmedia as are no longer providing the SEO and custom development services going forward. |
| o |
No acquisitions are being considered at this time until the proper financing in place to do so. |
Achievement of the milestones will depend highly on our funds and the availability of those funds. There can be no assurance that we will be able to successfully complete such milestones.
Recent Developments
The continued outbreak of a novel coronavirus (COVID-19), which the World Health Organization declared in March 2020 to be a pandemic, continues to spread throughout the United States of America and the globe. Many State Governors issued temporary Executive Orders that, among other stipulations, effectively prohibiting in-person work activities for most industries and businesses, having the effect of suspending or severely curtailing operations. The extent of the ultimate impact of the pandemic on the Company's operational and financial performance will depend on various developments, including the continued duration and spread of the outbreak, and its impact on potential customers, employees, and vendors, all of which cannot be reasonably predicted at this time. While management reasonably expects the COVID-19 outbreak to negatively impact the Company's financial condition, operating results, and timing and amounts of cash flows, the related financial consequences and duration are highly uncertain.
Resignations of Officers and Directors
On April 14, 2022, the following persons resigned from the following positions from the Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022.
The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above name persons no longer hold any positions with the Company.
The Resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by any of the above persons.
Appointments of Officers and Directors
On April 14, 2022, the Company’s Board of Directors (the “Board”) appointed Brian S. Payne as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors and appointed Lawrence Lehoux as the Company’s President, effective at the close of business on April 14, 2022.
Resignation of Director
On April 19, 2022, Dr. Usamakh Saadikh resigned from his position as a director on the Board of Directors of the Company as well as all other positions with the Company effective immediately. Dr. Usamakh Saadikh, was a member of our Board and the Vice President of International Business Development since June 2018. The foregoing resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by Dr. Saadikh.
Appointment of Directors
On April 18, 2022, the Board appointed the following persons as members of its Board effective April 18, 2022:
| ● |
Josef Tukacs; and |
| ● |
George Dragicevic |
Settlement Agreements with Departing Officers and Directors
As reported by the Company on its Current Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2022, on April 14, 2022, the following persons resigned from the following positions from the Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022. The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above named persons no longer hold any positions with the Company. In connection with the Resignations, the Company has entered into the settlement agreements described below with the following persons.
On April 19, 2022, the Company, entered into a settlement agreement with Bahige (Bill) Chaaban (the “Chaaban Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Chaaban 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Chaaban as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Chaaban Settlement Agreement, Mr. Chaaban’s Employment Agreement with the Company dated November 30, 2017, was terminated as of April 14, 2022. Pursuant to the Chaaban Settlement Agreement, Mr. Chaaban agreed to release the Company from any claims, as such term is defined thereunder, that Mr. Chaaban may have against the Company.
On April 19, 2022, the Company, entered into a settlement agreement with Alex Tarrabain (the “Tarrabain Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Tarrabain 1,196,673 restricted shares of its common stock in exchange for the accrued salary of $89,682.19 owed to Mr. Tarrabain as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Tarrabain Settlement Agreement, Mr. Tarrabain’s Employment Agreement with the Company dated May 21, 2019, was terminated as of April 14, 2022. Pursuant to the Tarrabain Settlement Agreement, Mr. Tarrabain agreed to release the Company from any claims, as such term is defined thereunder, that Mr. Tarrabain may have against the Company.
On April 19, 2022, the Company, entered into a settlement agreement with Rick Purdy (the “Purdy Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Purdy 150,483 restricted shares of its common stock in exchange for the accrued salary of $11,286.19 owed to Mr. Purdy as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Purdy Settlement Agreement, Mr. Purdy’s Employment Agreement with the Company dated December 6, 2021, was terminated as of April 14, 2022.
On April 19, 2022, the Company, entered into a settlement agreement with Ameen Ferris (the “Ferris Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Ferris 433,096 restricted shares of its common stock in exchange for the accrued salary of $32,482.19 owed to Mr. Ferris as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Ferris Settlement Agreement, Mr. Ferris’s Employment Agreement with the Company dated April 2, 2021, was terminated as of April 14, 2022.
On April 19, 2022, the Company, entered into a settlement agreement with Richard Boswell (the “Boswell Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Boswell 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Boswell as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Boswell Settlement Agreement, Mr. Boswell’s Employment Agreement with the Company dated November 30, 2017, was terminated as of April 15, 2022.
Dismissal of Independent Registered Accounting Firm
On May 2, 2022, the Board of the Company approved the dismissal of Mazars USA LLP (“Mazars”), as its independent registered accounting firm, effective immediately. Mazars was engaged by the Company on January 16, 2018. No audit report of Mazars for the years ended December 31, 2021 or December 31, 2020, contained an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, with the exception of providing an explanatory paragraph stating there was substantial doubt about the Company’s ability to continue as a going concern. During the Company’s two most recent fiscal years and through May 2, 2022, (i) there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Mazars on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Mazars, would have caused Mazars to make reference to the subject matter of such disagreement in connection with its reports on the financial statements for such periods and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).
Engagement of New Independent Registered Accounting Firm
On May 2, 2022, the Company’s Board approved the appointment of Olayinka Oyebola & Co (“OOC”) as the Company’s new independent registered public accounting firm effective immediately. During the Company’s two most recent fiscal years ended December 31, 2021 and 2020, and the subsequent interim period through May 2, 2022, neither the Company nor anyone acting on its behalf consulted with OOC regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, in connection with which either a written report or oral advice was provided to the Company that OOC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
Results of Operations
We have incurred recurring losses and have not commenced revenue generating operations to date. Our expenses to date are primarily our general and administrative expenses and fees, costs and expenses related to acquisitions and operations. Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
The accompanying condensed consolidated financial statements have been prepared in contemplating continuation of the Company as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, a substantial doubt has been raised with regard to the ability of the Company to continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. The Company had an accumulated deficit of $46,221,218 at March 31, 2022 and had no committed source of debt or equity financing. The Company did not have any operating revenue until the acquisition of Clear Com Media, Inc. on July 9, 2021 and such amounts are not expected to be sufficient to sustain ongoing operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company has relied on the issuance of loans payable and convertible debt instruments to finance its expenses, including notes that are in default, as described in Notes 5, 6, 7, and 8. The Company will continue to raise additional capital through placement of our common stock, notes or other securities in order to implement its business plan or additional borrowings, including from related parties. The COVID-19 pandemic has hindered the Company’s ability to raise capital. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company’s cash position may not be sufficient to support the Company’s daily operations or its ability to undertake any business activity that will generate net revenue.
Results of Operations for the Three-Months Ended March 31, 2022 and 2021::
The following tables reflect our operating results for the three-months ended March 31, 2022 and 2021, respectively:
| Three-months ended |
||||||||||||
| Operating Summary |
March 31, 2022 |
March 31, 2021 |
Change |
|||||||||
| Revenues, net |
$ | 340,260 | $ | - | 100 | % | ||||||
| Cost of Goods Sold |
- | - | - | |||||||||
| Gross Profit |
340,260 | - | - | |||||||||
| Operating Expenses |
480,136 | 344,840 | (39.2 | %) | ||||||||
| Loss from Operations |
139,876 | 344,840 | 59.4 | % | ||||||||
| Other Expense |
118,993 | 278,195 | 57.2 | % | ||||||||
| Net Loss |
$ | 258,869 | $ | 623,035 | 58.4 | % | ||||||
Revenue
We have not recognized revenue during the three-months ended March 31, 2021 and 2020, as we have not commenced revenue generating operations to date.
Operating Expenses
During the three months ended March 31, 2022, our operating expenses were $480,260 compared to $344,480 during the three months ended March 31, 2021. During the three months ended March 31, 2022, our operating expenses were comprised of salary and consulting fees of $47,011, and general and administrative expenses of $433,125. By comparison, during the three months ended March 31, 2021, our operating expenses were comprised of salary and consulting fees of $31,200, stock-based compensation expense of $75,750, and general and administrative expenses of $237,890. Expenses incurred during the three months ended March 31, 2022 compared to three months ended March 31, 2021 increased primarily due to the acquisition of Clear Com Media and its associated expenses.
Other Income and Expense Items
During the three months ended March 31, 2022, our other expense, net was $117,159 compared to $278,195 during the three months ended March 31, 2021. During the three months ended March 31, 2022, our other income and expense items were comprised of interest expense of $124,236, foreign exchange loss of $7,077. By comparison, during the three months ended March 31, 2021, our other income and expense items were comprised of interest expense of $253,264, interest income of $594, and foreign exchange loss of $24,725. The decrease during the period is due to a decrease in interest expense driven by the conversion of certain debt instruments to shares in 2021
Income Taxes
As of March 31, 2022, the Company has net operating loss carryforwards of approximately $46,221,218 that may be available to reduce future years’ taxable income. As of March 31, 2022, the Company has a deferred tax asset of approximately $3,500,000 which has been completely offset by a valuation allowance. The Company believes that it is more likely than not that the carryforwards will expire unused as the Company has not been able to commence revenue-generating activities to date.
Net Loss
Our net loss during the three months ended March 31, 2022 was $258,869 compared to a net loss of $623,035 during the three months ended March 31, 2021 due to the factors discussed above.
Liquidity and Capital Resources
As of March 31, 2022 and December 31, 2021, our liquid assets consisted of cash of $135,178 and $193,198, respectively.
As of March 31, 2022, our indebtedness includes accrued interest of $1,396,563, accrued interest to related parties of $1,962,816, as well as loans payable, loans payable to related parties, convertible notes, and convertible notes to related parties totaling $5,196,349. We expect our operating and administrative expenses to be at least $1,800,000 annually.
Loans payable - related party consists of the following at March 31, 2022 and December 31 2021:
| 2022 |
2021 |
|||||||
| Loan payable in default due to the spouse of Bill Chaaban, former CEO of CEN, which bears an interest at 12% per annum. This loan matured on August 17, 2020. |
$ | 1,388,122 | $ | 1,388,122 | ||||
| Loans payable in default to a former director of Creative, former parent company, bear interest at 10% per annum. This are unsecured loans that matured on December 31, 2018. |
601,500 | 601,500 | ||||||
| Loan payable in default to R&D Labs Canada, Inc., whose president is Bill Chaaban, also the former CEO of CEN, bearing interest at 8% per annum. This is an unsecured loan that matured on October 2, 2019. R&D Labs Canada is a company owned by Bill Chaaban’s spouse. |
300,000 | 300,000 | ||||||
| Loans payable in default to the spouse of Bill Chaaban, former CEO of CEN, for the original amounts of CAD 48,630 and USD $198,660, bear interest at 10% per annum. These are unsecured loans that matured on December 31, 2018. |
237,019 | 237,019 | ||||||
| Loan payable to the spouse of Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 12, 2018 with a 30-day maturity, bearing share interest of 4,000 common shares per 30-day period. This is an unsecured loan that matures on April 16, 2022. |
100,000 | 100,000 | ||||||
| Loan payable to Alex Tarrabain, former CFO and a Director of CEN, issued January 17, 2018 with a 30-day maturity, bearing share interest of 3,000 common shares per 30-day period. This is an unsecured loan that matures on April 16, 2022. |
75,000 | 75,000 | ||||||
| Loan payable to Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 24, 2018 with a 30-day maturity, bearing share interest of 2,000 common shares per 30-day period. This loan was repaid in June 2021. |
- | - | ||||||
| Total loans payable - related party (all current) |
$ | 2,701,641 | $ | 2,701,641 | ||||
Convertible notes payable consists of the following at March 31, 2022 and December 31 2021:
| 2022 |
2021 |
|||||||
| Convertible notes payable in default to multiple private investors, including certain notes in default, bearing interest at 5% per annum with conversion rights for 363,767 common shares, which matured at various dates between May 2018 and October 2021. |
$ | 576,472 | $ | 576,472 | ||||
| Convertible notes payable with beneficial conversion features at original issuance to multiple private investors, bearing interest at 5% per annum with conversion rights for 550,965 common shares, maturing at various dates between June 2022 and December 2022. |
145,000 | 145,000 | ||||||
| Convertible note payable, due on demand, for the original amount of CAD 1,104,713, bearing interest at 7% per annum which had conversion rights for 335,833 common shares. Effective August 17, 2021, the note was amended and reclassified to loans payable as the conversion feature was removed, see Note 9. |
- | - | ||||||
| Total convertible notes payable |
721,472 | 721,472 | ||||||
| Less unamortized debt discount |
78,142 | 78,142 | ||||||
| Total convertible notes payable, net of unamortized debt discount |
643,330 | 643,330 | ||||||
| Less current portion |
643,330 | 643,330 | ||||||
| Convertible notes payable, less current portion |
$ | - | $ | - | ||||
Convertible notes - related party consists of the following at March 31, 2022 and December 31 2021:
| 2022 |
2021 |
|||||||
| Convertible notes, in default, due to Joseph Byrne, former CEO, and current President and member of the board of CEN, bearing interest at 12% per annum. This note is convertible to 76,123 common shares and matured on August 17, 2020. |
$ | 121,796 | $ | 121,796 | ||||
| Convertible notes with beneficial conversion features due to the parents of Jeffery Thomas, a Director of CEN, bearing interest at 5% per annum. These notes are convertible to 94,488 common shares with a maturity date of May 24, 2022. |
48,000 | 48,000 | ||||||
| Convertible note, in default, due to the spouse of Bill Chaaban, former CEO of CEN, which bears an interest at 12% per annum. This note was convertible to 867,576 common shares and matured on August 17, 2020. Effective August 17, 2021, the note was amended and reclassified as the conversion feature was removed, see Note 10. |
- | - | ||||||
| Convertible notes due to Harold Aubrey de Lavenu, a Vice President and Director of CEN, bearing interest at 5% per annum. On October 12, 2021, this note was converted to 548,980 common shares. |
- | - | ||||||
| Convertible note due to Alex Tarrabain, former CFO and a Director of CEN, bearing interest at 5% per annum. On April 10, 2021, this note was converted to 30,000 common shares. |
- | - | ||||||
| Convertible note due to Darren Ferris, brother of Ameen Ferris, a Vice President and a Director of CEN, bearing interest at 5% per annum. On April 26, 2021, this note was converted to 12,500 common shares. |
- | - | ||||||
| Total convertible notes payable – related parties |
169,796 | 169,796 | ||||||
| Less unamortized debt discount |
7,157 | 7,157 | ||||||
| Total convertible notes payable - related parties (all current) |
$ | 162,639 | $ | 162,639 | ||||
We intend to fund our expenses through the issuance and sale of additional securities. We do not have any commitments from any persons to purchase any securities and there can be no assurance that we will be able to raise sufficient funds to pay our liabilities as they become due and payable.
Three-months ended March 31, 2022 and 2021
Cash Flows from Operating Activities
During the three months ended March 31, 2022, we used $58,020 in operating activities compared to $61,128 used in operating activities during the three months ended March 31, 2021. The decrease in the use of operating cash between the two periods related primarily to a decrease in our overall net loss driven by decreased levels of interest expense and collections on other receivables, as offset by an unfavorable change in exchange rates.
Cash Flows from Investing Activities
Our use of cash flow for investing activities during the three months ended March 31, 2022 was $0 compared to $50,000 during the three months ended March 31, 2021. During the three months ended March 31, 2021, our use of cash flows for investing activities were comprised of advances to CEN Ukraine of $50,000. By comparison, during the three months ended March 31, 2022, we did not have any cash flows from investing activities.
Cash Flows from Financing Activities
During the three months ended March 31, 2022, we received $0 through issuance of convertible notes to investors to fund our working capital requirements. During the three months ended March 31, 2021, we received $110,000 through issuance of convertible notes to investors to fund our working capital requirements.
CEN has no committed source of debt or equity financing. Our Executive team and Board are seeking additional financing from their business contacts, but no assurances can be given that such financing will be obtained or, if obtained, on what terms.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a reporting company that will increase our operating costs or cash requirements in the future.
Jumpstart Our Business Startups Act of 2012
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) provides that an emerging growth company can take advantage of certain exemptions from various reporting and other requirements that are applicable to public companies that are not emerging growth companies. We currently take advantage of some, but not all, of the reduced regulatory and reporting requirements that are available to us for as long as we qualify as an emerging growth company. Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting for as long as we qualify as an emerging growth company.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
No pronouncements were adopted by the Company during the quarter ended March 31, 2022.
Recent Accounting Pronouncements Not Yet Adopted
In August 2020, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement (ASU 2020-06) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity's own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity's own equity. As a smaller reporting company, as defined by the SEC, this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.
Critical Accounting Policies
The preparation of condensed consolidated financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the condensed consolidated financial statements.
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made. Note 1 to the consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to provide the information called for by this Item.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure and controls and procedures.
We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Exchange Act. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of March 31, 2022, our disclosure controls and procedures were not effective.
Management recognized the need for additional resources in the area of accounting and financial reporting controls and procedures. As a result, we have outsourced the accounting and financial reporting oversight roles to a qualified accounting firm with public company reporting expertise.
(b) Changes in internal control over financial reporting.
In April of 2022, the Company had management changes to its officers and directors, including the resignations of the Company’s Chief Executive Officer and Chief Financial Officer, and Brian S. Payne was appointed as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, as further described in the Company’s 8-K filings and elsewhere in this quarterly report. Additionally, in May of 2022, the Company changed its independent registered accounting firm as further described in the Company’s 8-K filings and elsewhere in this quarterly report. Further, in May of 2022, the Company changed its outside accounting service provider to a new third party firm.
Other than the foregoing, there were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we may become party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operation if determined adversely to us.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three-months ended March 31, 2022, the Company made the following issuances of shares of its common stock pursuant to certain Settlement Agreements:
| ● |
Pursuant to the Bahige (Bill) Chaaban (the “Chaaban Settlement Agreement”) the Company issued Mr. Chaaban 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Chaaban as of the date of his resignation from the Company pursuant to his employment agreement with the Company. |
| ● |
Pursuant to the Alex Tarrabain (the “Tarrabain Settlement Agreement”) the Company issued Mr. Tarrabain 1,196,673 restricted shares of its common stock in exchange for the accrued salary of $89,682.19 owed to Mr. Tarrabain as of the date of his resignation from the Company pursuant to his employment agreement with the Company. |
| ● |
Pursuant to the Rick Purdy (the “Purdy Settlement Agreement”) the Company the Company issued Mr. Purdy 150,483 restricted shares of its common stock in exchange for the accrued salary of $11,286.19 owed to Mr. Purdy as of the date of his resignation from the Company pursuant to his employment agreement with the Company. |
| ● |
Pursuant to the Ameen Ferris (the “Ferris Settlement Agreement”) the Company issued Mr. Ferris 433,096 restricted shares of its common stock in exchange for the accrued salary of $32,482.19 owed to Mr. Ferris as of the date of his resignation from the Company pursuant to his employment agreement with the Company. |
| ● |
Pursuant to the Richard Boswell (the “Boswell Settlement Agreement”) the Company issued Mr. Boswell 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Boswell as of the date of his resignation from the Company pursuant to his employment agreement with the Company. |
During the three-months ended March 31, 2022, CEN entered into loans and associated extension agreements with various parties and also settled an accrued liability. In consideration for such loans and associated extensions, along with the settlement of an accrued liability, CEN granted various individuals a total aggregate amount of 418,667 unregistered shares of common stock of CEN during the three -months ended March 31, 2022.
The above issuances of shares of common stock were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended and the provisions of Regulation D promulgated thereunder or in reliance on the provisions of Regulation S promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
CEN has a payment default with respect to certain unsecured convertible loans payable to private investors and related parties, in the principal amount of $805,969 and which bear interest at 5% per annum which were due prior to March 31, 2022. The aggregate amounts due under these loans as of March 31, 2022, including accrued interest, is approximately $1,500,000. Interest and default interest and related fees currently accrue at approximately $96,000 per quarter.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
The exhibits listed on the Exhibit Index below are provided as part of this report.
| Exhibit No. |
Description |
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| 3.1 |
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| 3.2 |
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| 10.1 |
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| 10.2 |
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| 10.3 |
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| 10.4 |
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| 10.5 |
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| 31.1 |
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| 32.1 |
| 101.INS |
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).* |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document.* |
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document.* |
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document.* |
| 101.LAB |
Inline XBRL Taxonomy Extension Labels Linkbase Document.* |
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document.* |
| 104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).* |
* Filed herewith.
b. Financial Statement Schedules
None
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 20, 2022
| CEN BIOTECH, INC. |
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| By: |
/s/ Brian S. Payne |
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| Name: |
Brian S. Payne |
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| Title: |
Chief Executive Officer (Principal Executive Officer) |
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| Dated: May 20, 2022 | /s/ Brian S. Payne | ||
| Name: Brian S. Payne | |||
| Title: Chief Financial Officer (Principal Financial and Accounting Officer) | |||
Exhibit 31.1
CERTIFICATIONS
I, Brian S. Payne, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, of CEN Biotech 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 report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 20, 2022 |
/s/ Brian S. Payne |
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Brian S. Payne Chief Executive Officer and Chief Financial Officer (Principal Executive, Financial and Accounting Officer) |
Exhibit 32.1
Section 1350 Certification
In connection with the Quarterly Report on Form 10-Q of CEN Biotech Inc. (the “Company”) for the quarter ended March 31, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Brian S. Payne, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
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 result of operations of the Company.
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Date: May 20, 2022 |
/s/ Brian S. Payne |
|
Brian S. Payne Chief Executive Officer and Chief Financial Officer (Principal Executive, Financial and Accounting Officer) |
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares $ / shares in Thousands |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Common stock, par value (in dollars per share) | $ 0 | $ 0 |
| Common stock, shares issued (in shares) | 55,597,743 | 55,597,743 |
| Common stock, shares outstanding (in shares) | 55,597,743 | 55,597,743 |
| Common stock, authorized | Unlimited | Unlimited |
Consolidated Statements of Shareholders' Deficit - USD ($) |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
AOCI Attributable to Parent [Member] |
Total |
|---|---|---|---|---|---|
| Balances (in shares) at Dec. 31, 2020 | 27,557,363 | ||||
| Balances at Dec. 31, 2020 | $ 0 | $ 17,068,810 | $ (27,060,527) | $ 0 | $ (9,991,717) |
| Stock-based compensation (in shares) | 0 | ||||
| Stock-based compensation | $ 0 | 75,750 | 0 | 0 | 75,750 |
| Issuance of common stock – Interest shares (in shares) | 45,000 | ||||
| Issuance of common stock – Interest shares | $ 0 | 62,100 | 0 | 0 | 62,100 |
| Issuance of common stock – Settlement of accrued liability (in shares) | 8,369 | ||||
| Issuance of common stock – Settlement of accrued liability | $ 0 | 13,390 | 0 | 0 | 13,390 |
| Net loss | $ 0 | 0 | (623,035) | 0 | (623,035) |
| Balances (in shares) at Mar. 31, 2021 | 27,610,732 | ||||
| Balances at Mar. 31, 2021 | $ 0 | 17,220,050 | (27,683,562) | 0 | (10,463,512) |
| Balances at Mar. 31, 2021 | $ 0 | (17,220,050) | 27,683,562 | 0 | 10,463,512 |
| Net (loss) income | (623,035) | ||||
| Balances (in shares) at Dec. 31, 2020 | 27,557,363 | ||||
| Balances at Dec. 31, 2020 | $ 0 | 17,068,810 | (27,060,527) | 0 | (9,991,717) |
| Balances (in shares) at Dec. 31, 2021 | 55,597,743 | ||||
| Balances at Dec. 31, 2021 | $ 0 | 44,339,973 | (45,964,183) | (33,921) | (1,658,131) |
| Balances at Dec. 31, 2021 | $ 0 | (44,339,973) | 45,964,183 | 33,921 | 1,658,131 |
| Net loss | (258,869) | ||||
| Balances (in shares) at Mar. 31, 2022 | 55,597,743 | ||||
| Balances at Mar. 31, 2022 | $ 0 | 44,339,973 | (46,223,052) | (35,755) | (1,917,000) |
| Balances at Mar. 31, 2022 | 0 | (44,339,973) | 46,223,052 | 35,755 | 1,917,000 |
| Net (loss) income | $ 0 | $ 0 | $ (258,869) | $ (1,834) | $ (258,869) |
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Notes to Financial Statements | |
| Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] |
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the condensed consolidated financial statements of the Company for the year ended December 31, 2021 and notes thereto.
There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s annual report on Form 10-K for the year ended December 31, 2021.
Loss per Share
Net loss per common share is computed pursuant to ASC 260-10-45. Basic loss per share is computed based on the weighted average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the diluted weighted average common shares outstanding, which includes the effect of potentially dilutive securities. During periods when there is a net loss, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of net loss per share. Diluted earnings per share is similarly computed except that the denominator includes the effect, using the treasury stock method, of unvested restricted stock and convertible notes, if including such potential shares of common stock is dilutive. For the three-months ended March 31, 2022, and 2021, the common stock equivalents of the convertible note agreements were not included in diluted earnings per share computations because their effect was antidilutive.
Recent Developments
In April of 2021, the Company’s common stock began to be quoted on the OTC Link alternative trading system (operated by OTC Markets Group Inc.) under the trading symbol “CENBF” on the OTC Pink tier. There is no assurance that an active trading market for our shares will develop or will be sustained if developed.
Recently Adopted Accounting Pronouncements
No pronouncements were adopted by the Company during the three-month period ended March 31, 2022.
Recent Accounting Pronouncements Not Yet Adopted
In August 2020, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement (ASU 2020-06) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity's own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity's own equity. As a smaller reporting company, as defined by the SEC, this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the consolidated financial statements. |
Note 2 - Going Concern Uncertainty / Management Plans |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Notes to Financial Statements | |
| Substantial Doubt about Going Concern [Text Block] |
NOTE 2 – GOING CONCERN UNCERTAINTY / MANAGEMENT PLANS
The accompanying condensed consolidated financial statements have been prepared in contemplating the continuation of the Company as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, a substantial doubt has been raised with regard to the ability of the Company to continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. The Company had an accumulated deficit of $46,221,218 at March 31, 2022 and had no committed source of additional debt or equity financing. The Company has not had any operating revenue and does not foresee any operating revenue in the near term. The Company has relied on the issuance of loans payable and convertible debt instruments to finance its expenses, including notes that are in default, as described in Notes 5, 6, 7, and 8. The Company will continue to raise additional capital through placement of our common stock, notes or other securities in order to implement its business plan or additional borrowings, including from related parties. The COVID-19 pandemic has hindered the Company’s ability to raise capital. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company’s cash position may not be sufficient to support the Company’s daily operations or its ability to undertake any business activity that will generate net revenue. |
Note 3 - Advances to CEN Biotech Ukraine and Acquisition of Clear Com Media |
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination Disclosure [Text Block] |
NOTE 3 – ADVANCES TO CEN BIOTECH UKRAINE AND ACQUISITION OF CLEAR COM MEDIA
At March 31, 2022 and December 31, 2021, the Company had advances of $1,299,328 and $1,299,328, respectively, to CEN Biotech Ukraine, LLC, a related party (see Note 11). The advances were for the purpose of funding the operations of CEN Biotech Ukraine, LLC.
Bahige (Bill) Chaaban, our former Chief Executive Officer and member of our Board of Directors, and Usamakh Saadikh, a former member of our Board of Directors, each directly own 25.5% of CEN Ukraine respectively. The remaining 49% of CEN Ukraine is owned by XN Pharma, which is an entity jointly owned by Bahige (Bill) Chaaban and Usamakh Saadikh. Bahige (Bill) Chaaban and Usamakh Saadikh do not currently hold any positions with CEN Ukraine. CEN Ukraine is operated and controlled by its sole director. Pursuant to Ukrainian law, shareholders of a company do not have the ability to control the company or the actions of its director. CEN Ukraine is operated under the direction of its management pursuant to the guidelines of Ukrainian law. These loans are unsecured, non-interest bearing, and are due on demand.
CEN acquired CCM on July 9, 2021. The results of operations for CCM have been included in the accompanying consolidated financial statements from that date forward. The acquisition was made for the purpose of providing revenue to support CEN operations through the development, marketing and sales of certain digital products. Additionally, CCM will provide in-house IT support functions for CEN activities.
The merger was accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (ASC) 805, “Business Combinations” (ASC 805), with CEN representing the accounting acquirer under this guidance. ASC 805 requires, among other things, an assignment of the acquisition consideration transferred to the sellers for the tangible and intangible assets acquired and liabilities assumed, using the bottom-up approach, to estimate their value at acquisition date. Any excess of the fair value of the purchase consideration over these identified net assets is to be recorded as goodwill.
The aggregate consideration for the acquisition of CCM was 4,000,000 shares of CEN common stock, which were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Act”), in reliance upon exemptions from the registration requirements of the Act in transactions not involving a public offering, and which were valued at $2,120,000 based upon the closing stock price on July 9, 2021. The purchase price accounting was still in process as of September 30, 2021, our most recently reported quarterly interim reporting. However, as of December 31, 2021, subsequent adjustments to the initial purchase price accounting due to receipt of final appraisal reports and other adjustments resulted in an increase in accounts receivable of approximately $8,000, a decrease of identifiable intangibles by approximately $168,000, and an increase in current financial liabilities by approximately $23,000, with a corresponding increase to goodwill of approximately $184,000. The decreased value of identifiable intangibles, had it been reflected in the September 30, 2021 reporting, would have resulted in a decrease to accumulated amortization and associated amortization expense of approximately $15,000. The following represents the adjusted fair values of the assets acquired and the liabilities assumed by CEN in the transaction:
Identified intangible assets acquired include trade names, customer relationships, and product technology whose fair value of $456,855 is based on an appraisal report utilizing a combination of market, income, and multi-period excess earnings methods. These trade names and customer relationships are being amortized over useful lives ranging of 3 and 7 years, respectively, and the product technology is not yet being amortized as not yet in service. These identifiable intangible assets will be reviewed for impairment at least annually or more frequently if indicators of impairment exist.
Amounts recognized as goodwill are expected to be fully deductible for Canadian income tax purposes. All goodwill has been included within the Digital segment.
Costs related to the acquisition, which include legal, accounting, and valuation fees, in the amount of approximately $80,000 have been charged directly to operations and are included in general and administrative expenses in the 2021 consolidated statement of operations.
Supplemental proforma financial information
The unaudited financial information in the table below summarizes the combined results of operations of CEN and CCM on a pro forma basis, as though the companies had been combined as of the January 1, 2020. These pro forma results were based on estimates and assumptions, which we believe are reasonable. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2020. The pro forma financial information assumes the 4,000,000 shares of CEN common stock were issued on January 1, 2020 and includes adjustments to amortization for acquired intangible assets and income tax expense.
The pro forma financial information for the year ended December 31, 2021 combines the results of CEN and CCM for 2021, which include the results of CCM subsequent to July 9, 2021, and the historical results for CCM for the period of January 1, 2021 to July 8, 2021. The pro forma financial information for the year ended December 31, 2020 combines CEN’s historical results for 2020 with the historical results of CCM for 2020.
The following table summarizes the pro forma financial information (unaudited):
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Note 4 - Intangible Assets |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets Disclosure [Text Block] |
NOTE 4 – INTANGIBLE ASSETS
On September 12, 2016, the Company executed an agreement dated August 31, 2016, to acquire assets, including a patent related to LED Lighting, from Tesla Digital, Inc., a Canadian Corporation, and Stevan (Steve) Pokrajac (the “Sellers”).
Material consideration given by Company was: (a) Shares of CEN common stock equal to $5 million upon commencement of public trading (b) The transfer of real properties located at 135 North Rear Road, Lakeshore, Ontario, Canada having a fair value of $2,161,467 and 1517-1525 Ridge Road having a purchase cost (including other related disbursements) to the Company of $202,666.
The patent remains in the name of Tesla Digital, Inc. until full settlement of the terms of the agreement. In the interim, pursuant to an updated agreement executed on April 15, 2019 between the Company and the Sellers, CEN has reaffirmed the rights to use the patented technology.
In addition, the Company agreed to employ Stevan Pokrajac, by an LED subsidiary that the Company plans to form, but which has not yet been formed, in connection with the development of the acquired technology with compensation equal to $200,000 per year, commencing with the start of operations.
In March 2018, the Tesla agreement was amended to replace the $5 million stock consideration commitment with a commitment to issue registered shares of CEN common stock with a closing date of September 30, 2018. On October 4, 2018, this agreement was amended to extend the closing date to December 15, 2018. On April 3, 2019, the Company entered into an amendment which extended the closing date of the agreement to December 31, 2019. On March 16, 2020 the Company entered into an amendment extending the closing date until December 31, 2021. The March 2018 modification of the agreement converted a fixed value of shares to a fixed number of shares. Accordingly, the liability was reduced and additional paid in capital was increased by $4,380,000 to reflect the fair value of the shares committed at the date of the amendment. As of both March 31, 2021 and December 31, 2020, the fair value of this liability was $1,380,000. This liability will be remeasured at each reporting date using the current fair value of CEN’s common shares.
On October 7, 2021, the agreement was amended and finalized to increase the number of CEN common shares to be transferred to million. Upon closing of the agreement, the CEN common stock, valued at $2,042,500 based upon the October 7, 2021 closing market price, was transferred to the Sellers and the transfer of the patent and real property was completed. Of this amount, $1,634,000 represented additional stock compensation expense for the additional four million shares issued. In addition, the Sellers assumed the mortgage and associated accrued interest on certain real property that was included in the original agreement, of $302,186, resulting in a net loss on final settlement of the lighting patent purchase of $1,331,814.
The Company intends to explore using the patented LED Lighting Technology across manufacturing operations and licensing opportunities across multiple industries such as horticultural, automotive, industrial and commercial lighting. The assets acquired, other than the patent, included certain machinery and raw materials, which were old and non-functioning and accordingly, had no fair value.
The intangible asset consists of the following at:
As of December 31, 2021 and 2020, there is no impairment expense recognized based on the Company’s expectations that it will be able to monetize the intangible assets. Expected amortization expense for the lighting patent is $424,812 per year through 2031, with the remaining $283,215 to be amortized in 2032. Expected amortization expense for the customer relationships and trade names acquired as part of the CCM acquisition on July 9, 2021 are expected to be approximately $29,300 per year through 2023, 25,400 in 2024, $21,400 in 2025 and 2026, with the remaining $32,100 to be amortized through 2028. The product technology and capitalized software development costs are not yet available for general release to customers and thus are not yet amortized. |
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Note 5 - Loans Payable |
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| Short-Term Debt [Text Block] |
NOTE 5 – LOANS PAYABLE
Loans payable consist of the following at March 31, 2022 and December 31 2021:
During 2020, $9,600,000 plus $11,579,043 in associated accrued interest payable to Global Holdings International, LLC (“GHI”) was derecognized. The note matured on June 30, 2016 and the Company was in default. As at no time since the default on the loan did GHI, its principal, agent or its attorneys reach out via mail, e-mail, text or phone to demand payment on the loan. The Company reached out numerous times and never received a response or demand for payment or notice of default on the loan. CEN’s last attempt occurred in November 2020. The note, related interest and venue for the agreement are governed by Ontario Law and according to the Ontario Limitations Act (Limitations Act, 2002, S.O. 2002, c. 24, Sched. B) the statute of limitations is 2 years from the date of default under the note. The date of default was June 30, 2016, which is over the 2-year Statute of Limitation (SOL) period, and therefore the lender is outside of the SOL and cannot bring an action in Court against the Company for the debt. As a result of the legal finding, and having exhausted all reasonable efforts to contact GHI, the Company exercised its legal rights to derecognize the principal and interest obligations related to the related note with GHI which in accordance with ASC 405-20-40-1(b), is when CEN is judicially released from its obligations under the note.
During both 2021 and 2020, 62,000 and 72,000 common shares, respectively, were issued to individuals in connection with interest terms of the above loans. As of December 31, 2021, 10,000 common shares earned by an individual in connection with one of the above loans were not yet issued totaling $4,012 and is included within accrued expenses. Accordingly, during 2021 and 2020, $57,876 and $63,720 in interest expense and $53,864 and $63,720 in additional paid-in capital was recorded, respectively.
During 2021, certain private investors amended their convertible notes payable totaling $1,463,793, which were convertible into 677,955 common shares. As a result of the amendments, these notes no longer contain a conversion feature and have been reclassified to loans payable from convertible notes payable.
The Canada Emergency Business Account (“CEBA”) loan payable of $31,552 (CAD 40,000) as of December 31, 2021, to Royal Bank of Canada is unsecured, non-interest bearing until December 2022 and interest bearing at 5% thereafter. If the loan is not repaid by December 31, 2023, the principal balance increases by $15,776 (CAD 20,000). The loan principal is due in full at the maturity date of December 2025.
The Canadian government enacted the Canada Emergency Wage Subsidy (“CEWS”) and Canada Emergency Rent Subsidy (“CERS”) in 2020 to provide a wage and rent subsidy to employers that suffered reductions in revenue resulting from the COVID-19 pandemic. CCM received $171,078 during 2021 related to CEWS and CERS and has included as a governmental assistance payable on the consolidated balance sheet as of December 31, 2021 as this represents an overpayment which is due back to the government. |
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Note 6 - Loans Payable- Related Party |
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| Loans Payable to Related Party [Text Block] |
NOTE 6 – LOANS PAYABLE- RELATED PARTY
Loans payable - related party consists of the following at March 31, 2022 and December 31 2021:
Attributable related party accrued interest was $671,665 and $568,969 as of December 31, 2021 and 2020, respectively. Interest expense attributable to related party loans was $189,182 and $202,640 in 2021 and 2020, respectively.
During both 2021 and 2020, 96,000 and 108,000 common shares, respectively, were issued to related parties in connection with interest terms of the above loans made to CEN. Accordingly, during 2021 and 2020, $81,302 and $95,580 in related party interest expense and additional paid-in capital was recorded, respectively. |
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Note 7 - Convertible Notes |
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| Long-Term Debt [Text Block] |
NOTE 7 – CONVERTIBLE NOTES
Convertible notes payable consists of the following at March 31, 2022 and December 31 2021:
The Company issues convertible notes as a method to raise operating capital. These notes convert to a fixed number of shares specified in the convertible note, at the option of the note holder. Certain of these notes are considered to contain a beneficial conversion feature if in-the-money at the time of issuance. The Company has determined the value associated with the beneficial conversion feature in connection with the notes issued during 2021 to be $180,098. This value has been recorded as a component of equity during 2021 and the aggregate original issue discount is accreted and charged to interest expense as a financing expense from the date of issuance until maturity. Upon conversion, any remaining unaccreted discount is charged to interest expense. No convertible notes with beneficial conversion features were issued during 2020. These notes may be converted at the option of the note holder upon written notice by the note holder. These notes are convertible into a total of 914,732 common shares.
During 2021, certain private investors elected to exercise their convertible notes payable totaling $5,173,785 in exchange for 3,488,883 common shares. As a result, the associated convertible notes have been extinguished and reclassified as additional paid in capital. There were no such elections to convert any of the convertible notes payable during 2020.
During 2021, certain private investors elected to convert $78,893 of accrued interest owed on convertible notes into 94,357 shares of common stock. There were no such elections to convert any of the accrued interest on convertible notes payable during 2020.
As of April 14, 2022, we are currently in default of $576,472 of convertible notes payable, which are convertible into 363,767 shares of common stock. There were no new notes issued during Q1 2022.
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Note 8 - Convertible Notes - Related Parties |
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| Long-term Convertible Notes Related Party [Text Block] |
NOTE 8 – CONVERTIBLE NOTES – RELATED PARTY
Convertible notes – related party consists of the following at March 31, 2022 and December 31 2021:
Attributable related party accrued interest was $1,201,790 and $1,046,911 as of December 31, 2021 and 2020, respectively. Interest expense attributable to related party convertible notes was $229,318 and $240,797 in 2021 and 2020, respectively.
The Company issues convertible notes to related parties as a method to raise operating capital. These notes convert to a fixed number of shares specified in the convertible note, at the option of the note holder. Certain of these notes are considered to contain a beneficial conversion feature if in-the-money at the time of issuance.
The Company has determined the value associated with the beneficial conversion feature in connection with the notes issued to related parties during 2021 to be $18,141. This value has been recorded as a component of equity during 2021 and the aggregate original issue discount is accreted and charged to interest expense as a financing expense from the date of issuance until maturity. Upon conversion, any remaining unaccreted discount is charged to interest expense. No convertible notes to related parties with beneficial conversion features were issued during 2020. These notes may be converted at the option of the note holder upon written notice by the note holder. These notes are convertible into a total of 170,611 common shares.
During 2021, a convertible note due to Joseph Byrne in the amount of $102,395, convertible into 63,997 shares, was transferred to a private investor and reclassified.
As of April 14, 2022, we are currently in default of $121,796 of convertible notes payable, which are convertible into 76,123 shares of common stock. |
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Note 9 - Income Taxes |
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| Income Tax Disclosure [Text Block] |
NOTE 9 – INCOME TAXES
The Company has elected to file separate Canadian income tax returns for CEN (growth) and for CCM (digital).
Growth:
As of March 31, 2022, CEN has net operating loss carry forwards of approximately $46,221,218 that may be available to reduce future years’ taxable income. Such carry forwards typically expire after 20 years. CEN currently has carry forwards that begin to expire in 2034. Future tax benefits which may arise as a result of these losses have not been recognized in these consolidated financial statements, because CEN believes that it is more likely than not that the carryforwards will expire unused and accordingly, CEN has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. The deferred tax asset and associated valuation allowance are as follows for the years ended December 31:
The change in the valuation allowance amounted to $4,900,000 and $3,400,000 for the years ended December 31, 2021 and 2020, respectively. All other temporary differences are immaterial both individually and in the aggregate to the consolidated financial statements.
Digital:
The tax benefit for CCM income taxes consists of the following components:
The net deferred income tax asset presented in the consolidated balance sheets is comprised of the following at:
A reconciliation of the income tax benefit and the amount computed by applying the statutory Canadian federal income tax rate to CEN’s and CCM’s income before income tax benefit for the year ended December 31 is as follows:
Company management analyzes its income tax filing positions in Canadian federal and provincial jurisdictions where it is required to file income tax returns, for all open tax years in these jurisdictions, to identify potential uncertain tax positions. As of December 31, 2021, there are no uncertain income tax positions taken or expected to be taken that would require recognition of a liability or disclosure in the consolidated financial statements. The Company is subject to routing audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Generally, the Company is no longer subject to income tax examinations for years prior to 2018. |
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Note 10 - Shareholders' Deficit / Stock Activity |
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| Stockholders' Equity Note Disclosure [Text Block] |
NOTE 10 – SHAREHOLDERS’ DEFICIT / STOCK ACTIVITY
The Company is authorized to issue an unlimited number of common shares and an unlimited number of special voting shares. Common shares have no stated par value.
As of December 31, 2021, 10,000 common shares earned by an individual in connection with one of the loans, as described in Note 9, were not yet issued.
As of December 31, 2021, 1,085,343 shares of common stock are committed to the holders of the convertible notes. |
Note 11 - Related Party Transactions |
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| Related Party Transactions Disclosure [Text Block] |
NOTE 11 – RELATED PARTY TRANSACTIONS
The Company has received loans from several related parties, as described above in Notes 6 and 8.
A loan totaling $17,901 was made to Emergence Global as of December 31, 2020. The loan was made for the business purpose of assisting Emergence with operating expenses. Emergence Global’s Chief Executive Officer is Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN. Joseph Byrne, previously served as the Chief Executive Officer and member of the Board of Directors of the Company from July 2017 until November 13, 2019. This note was repaid on May 6, 202.
There are advances of $1,299,328 and $1,179,328 to CEN Ukraine as of December 31, 2021 and 2020, respectively. Such advances were made for the purpose of funding the operations of CEN Ukraine as summarized in Note 7. CEN Ukraine was founded by Bill Chaaban. Prior to December 3, 2017, Bill Chaaban directly owned 51% of CEN Ukraine. CEN Ukraine was founded to seek agricultural and pharmaceutical opportunities in Ukraine. Bill Chaaban personally funded the establishment and initial phases of CEN Ukraine. On December 14, 2017, the Company entered into a controlling interest purchase agreement with Bill Chaaban, our interim Chief Executive Officer and member of our board of directors, and another shareholder of CEN Ukraine, Usamakh Saadikh, a member of our board of directors, for 51% of the outstanding equity interests of CEN Ukraine. The consideration will be paid by issuing common shares of the Company. The agreement, which is subject to certain conditions, has not closed as of April 14, 2022, as the Company needs to raise additional funds in order to proceed with the closing. Bahige (Bill) Chaaban, our Interim Chief Executive Officer and member of our Board of Directors, and Usamakh Saadikh, a member of our Board of Directors, each directly own 25.5% of CEN Ukraine respectively. The remaining 49% of CEN Ukraine is owned by XN Pharma, which is an entity jointly owned by Bahige (Bill) Chaaban and Usamakh Saadikh. Bahige (Bill) Chaaban and Usamakh Saadikh do not currently hold any positions with CEN Ukraine. CEN Ukraine is operated and controlled by its sole director. Pursuant to Ukrainian law, shareholders of a company do not have the ability to control the company or the actions of its director. CEN Ukraine is operated under the direction of its management per the guidelines of Ukrainian law.
During the years ended December 31, 2021 and 2020, the Company incurred consulting expenses with certain Board Members and Officers totaling $188,718 and $124,800, respectively. As of December 31, 2021 and 2020, $518,918 and $330,200 was payable to these related parties for consulting charges, which are included within accrued expenses.
During the year ended December 31, 2021, the Company incurred payroll expenses with Lawrence Lehoux, the Chief Technology Officer, of $94,553, which is included within general and administrative expenses.
During 2017, the Company purchased equipment from R&D Labs Canada, Inc., whose president is Bill Chaaban, in exchange for a $300,000 note payable. This equipment was then sold to CEN Ukraine for a loss of $255,141 in exchange for a $44,859 note receivable, payable in 10 equal installments beginning in 2017 through 2026. No payments have been received as of December 31, 2021. See Note 25 for a discussion of subsequent events in Ukraine.
As of December 31, 2021 and 2020, the Company owed $8,347 to Joe Byrne, a Director, for advances made to the Company, which is included within accounts payable – related parties.
During 2021, the Company utilized an entity owned by Alex Tarrabain, the Chief Financial Officer, for accounting advisory services totaling $13,320. As of December 31, 2021, the Company owed $13,320 to this entity and also owed Mr. Tarrabain $30,795 for reimbursable expenses, which are included within accounts payable – related parties.
As of December 31, 2021, the Company owed Lawrence Lehoux, the Chief Technology Officer, $48,960 for reimbursable expenses, which is included within accounts payable – related parties.
The Company currently leases certain facilities and equipment under noncancelable operating lease agreements that expire at various dates through 2024. Monthly rentals range from CAD 844 to CAD 5,595. In addition, the facilities lease calls for variable charges for common area usage which are expensed as incurred.
The Company also leased office space in Windsor, Ontario from RN Holdings Ltd. Under the lease agreement effective October 1, 2017, monthly rents of CAD 2,608 are due through September 2022, at which point monthly rents of CAD 3,390 are due. Effective August 1, 2020, the Company ceased making payments and abandoned the leased space. Accordingly, the Company determined that there was no future economic value to the associated right-of-use asset and recognized a full impairment loss of $146,795 on August 1, 2020. Effective with the August 1, 2020 lease termination and abandonments, all property, plant, and improvements which were located at these properties were abandoned. As of April 14, 2022, the Company has not reached an agreement with RN Holdings Ltd to modify or to settle the remaining contractual liability, which therefore remains recorded as of December 31, 2021 under its original contractual terms. As of December 31, 2021 and 2020 the associated liability was $177,686 and $164,997, respectively. During 2021 and 2020, lease expenses of approximately $13,000 and $35,000, respectively related to this agreement were recognized within general and administrative expenses.
The operating lease liability as of December 31, 2021 and 2020 was $310,671 and $164,997, respectively, utilizing a weighted average discount rate of approximately 6.76% over a weighted average remaining lease term of approximately 4.4 years. During 2021 and 2020, lease expenses of approximately $46,000 and $35,000, respectively, related to these agreements were recognized within general and administrative expenses.
Jamaal Shaban (“Lessor”), cousin of Bill Chaaban, leased a property at 20 North Rear Road to the Company under an agreement effective January 2017 for monthly rental payments of CAD 4,000 plus taxes for a period of years. This lease was assigned by the Lessor to Jamsyl Group, a third-party, when Jamsyl Group purchased the property from Jamaal Shaban in October 2019. Effective August 1, 2020, the Company entered into a mutual termination and release agreement with Jamsyl Group in exchange for 36,500 shares of CEN common stock, valued at $50,700, which vested immediately, based upon remaining lease payments owed. The lease had been accounted for as an operating lease. All remaining associated right-of-use assets as of August 1, 2020 of $48,110 and associated liabilities of $45,118, which had utilized an 8% discount rate, were written off in conjunction, resulting in a loss on lease termination of $53,692. During 2020, lease expenses of approximately $20,000 related to this agreement were recognized within general and administrative expenses.
The following is a schedule of future annual minimum rental payments required under operating leases with initial or remaining noncancelable lease terms in excess of one year for the 12 months subsequent to December 31:
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Note 12 - Stock Based Compensation |
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| Share-Based Payment Arrangement [Text Block] |
NOTE 12 – STOCK BASED COMPENSATION
Adoption of Equity Compensation Plan
On November 29, 2017, the Board adopted the 2017 Equity Compensation Plan (the “Plan”) providing for the granting of options to purchase shares of common stock, restricted stock awards and other stock-based awards to directors, officers, employees, advisors and consultants. The Company reserved 20,000,000 shares of common stock for issuance under the Plan. The Plan is intended to provide equity incentives to persons retained by our Company.
On April 2, 2021, the Board of Directors of the Company adopted the 2021 Equity Compensation Plan (the “2021 Plan”) providing for the granting of options to purchase shares of common stock, restricted stock awards and other stock-based awards to directors, officers, employees, advisors and consultants of the Company and reserved an additional 20,000,000 shares of the Company’s common stock for issuance under the 2021 Plan.
Equity Compensation Grants
On November 30, 2017, the Company granted a one-time equity award (“Equity Award”) of restricted shares of the Company’s common stock pursuant to a Restricted Stock Agreement to certain executives and directors of the company. Donald Strilchuck, Director, received 1,000,000 restricted shares of the Company's common stock for security consulting services, of which 550,000 vested immediately and the remaining vesting ratably each month over the next 36 months until November 2020. Other individuals received a total of 1,870,000 restricted shares of the Company's common stock for consulting services performed, of which 1,330,000 vested immediately and the remaining vesting ratably each month over the next 36 months until November 2020. The expense related to the restricted stock awarded to non-employees for services rendered was recognized on the grant date.
On April 17, 2020, the Company entered into agreements with three individuals for the payment of business consulting services under which the Company issued 225,000 shares of its common stock. These awards vested immediately. The expense related to the restricted stock awarded to non-employees for services rendered of $162,000 was recognized on the grant date.
On August 27, 2020 and September 25, 2020, the Company entered into agreements with two individuals for the payment of business consulting services under which the Company issued an aggregate of 162,500 shares of its common stock. These awards vested immediately. The expense related to the restricted stock awarded to non-employees for services rendered of $117,000 was recognized on the grant date.
On April 2, 2021, a consulting agreement with CONFIEN SAS for business coaching was entered into for a period of 12 months. As payment for these services, 650,000 restricted shares, subject to applicable securities laws and regulations as set forth in the Restricted Stack Agreement, of the Company’s common stock were granted. Such shares vested immediately. The expense related to the restricted stock awarded to non-employees for services previously rendered of $897,000 was recognized on the grant date.
On July 13, 2021, the Company entered into agreements with two individuals for the payment of security and legal consulting services under which the Company issued an aggregate of 500,000 shares of its common stock. These awards vested immediately. The expense related to the restricted stock awarded to non-employees for services rendered of $275,000 was recognized on the grant date.
Employment Agreements
On November 30, 2017, employment agreements were entered into with four key members of management:
On May 16, 2019, an employment agreement, under similar terms, was entered into with Mr. Tarrabain. Under the Employment Agreement with Alex Tarrabain, Chief Financial Officer and as one of the Vice Presidents of the Company, Mr. Tarrabain will receive compensation in the form of a base annual salary of $31,200 and a grant of 1,250,000 shares of restricted stock of the Company, of which 350,000 vested immediately and the remaining vesting ratably each month over the next 36 months until May 2022.
On December 6, 2021, the Board of Directors appointed Rick Purdy as its Senior Vice President of Deals and Acquisitions. On this date, an employment agreement, under similar terms, was entered into with Mr. Purdy. Under the Employment Agreement, Mr. Purdy will receive compensation in the form of a base annual salary of $31,200 and a grant of 2,500,000 shares of restricted stock of the Company, of which 700,000 vested immediately and the remaining vesting ratably each month over the next 36 months until December 2024. The expense related to the restricted stock awarded to employees for services previously rendered of $238,000 was recognized on the grant date. Remaining expenses will be recognized ratably monthly as the restricted stock award vests.
On April 2, 2021, the Board of Directors appointed Ameen Ferris and Harold Aubrey De Lavenu to serve as Vice Presidents of the Company. Under the associated Executive Employment Agreements, they will each receive compensation in the form of a base annual salary of $31,200. In addition, Ameen Ferris was granted 1,000,000 and Harold Aubrey De Lavenu was granted 1,041,250 restricted shares, subject to applicable securities laws and regulations, as set forth in the Restricted Stock Agreement, of the Company’s common stock. Such shares vested immediately. The expense related to the restricted stock awarded to employees for services previously rendered of $2,816,925 was recognized on the grant date.
On April 2, 2021, the Company entered into an RSA (the “Boswell RSA”) with Richard Boswell. Pursuant to the Boswell RSA, the Company granted Mr. Boswell 2,185,679 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $3,016,237 was recognized on the grant date.
On April 2, 2021, the Company entered into an RSA (the “Chaaban RSA”) with Bahige Chaaban. Pursuant to the Chaaban RSA, the Company granted Mr. Chaaban 3,106,122 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $4,286,435 was recognized on the grant date.
On April 2, 2021, the Company entered into an RSA (the “Payne RSA”) with Brian Payne. Pursuant to the Payne RSA, the Company granted Mr. Payne 1,435,000 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $1,980,300 was recognized on the grant date.
On April 2, 2021, the Company entered into an RSA (the “Saadikh RSA”) with Usamakh Saadikh. Pursuant to the Saadikh RSA, the Company granted Mr. Saadikh 1,000,000 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $1,380,000 was recognized on the grant date.
On April 2, 2021, the Company entered into an RSA (the “Strilchuck RSA”) with Donald Strilchuck. Pursuant to the Strilchuck RSA, the Company granted Mr. Strilchuck 341,250 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $470,925 was recognized on the grant date.
On April 2, 2021 and June 25, 2021, the Company entered into an RSA (the “Tarrabain RSA”) with Alex Tarrabain. Pursuant to the Tarrabain RSA, the Company granted Mr. Tarrabain 300,000 and 1,000,000, respectively, restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $899,000 was recognized on the grant date.
Restricted Stock Awards
Restricted stock awards relate to common shares that are subject to applicable securities laws and regulations as set forth in the RSAs and other equity compensation grants.
The total grant-date fair value of the restricted shares granted through employment agreements and equity compensation grants was $29,885,063 and $13,013,241 as of December 31, 2021 and 2020, respectively. During 2021 and 2020, 15,059,291 restricted shares with a grant date fair value of $16,871,822 and 387,500 restricted shares with a grant date fair value of $279,000, respectively, were awarded. Prior to the start of trading on April 5, 2021 via the OTC Link alternative trading system (operated by OTC Markets Group Inc.), the grant-date fair value was calculated utilizing an enterprise valuation model as of the date the awards are granted. Beginning April 5, 2021, the grant-date fair value is calculated utilizing the daily closing price as published via the OTC Link.
With the exception of immediately vesting portions of awards, shares typically vest pro-rata over the requisite service period, which is generally three years from the grant-date. Non-vested restricted stock awards participate in dividends and recipients are entitled to vote these restricted shares during the vesting period.
During 2021 and 2020, 13,559,291 and 1,987,500 of these shares vested, respectively. The fair value of the restricted stock which vested amounted to $16,562,822 and $1,237,250 for 2021 and 2020, respectively.
Compensation expense, broken out by allocation, recognized in connection with the restricted stock awards was as follows for the years ended December 31:
Non-vested restricted stock award activity for the years ended December 31, 2021 and 2020 are as follows:
The fair value of the restricted stock grants was based on the valuation of a third-party specialist prior to April 5, 2021. Beginning April 5, 2021, the fair value of the restricted stock grants is based upon the daily closing price per the OTC Link. As of December 31, 2021, unrecognized compensation expense totaled $738,250, which will be recognized on a straight-line basis over the vesting period or requisite service period through December 2024. |
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| Earnings Per Share [Text Block] |
NOTE 13 – NET LOSS PER SHARE
During periods when there is a net loss, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of diluted net loss per share. Based on the Company’s application of the as converted and treasury stock methods, all common stock equivalents were excluded from the computation of diluted earnings per share due to net losses as of December 31, 2021. During 2020, the potential common shares from the Tesla Agreement, which were contingent on certain events as described in Note 8, were excluded as the effect of conversion was anti-dilutive. Common stock equivalents that were excluded for the years ended December 31, 2021 and 2020 because they were anti-dilutive are as follows:
The following table shows the computation of basic and diluted earnings per share for 2021:
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Note 14 - Contingency |
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| Notes to Financial Statements | |
| Commitments and Contingencies Disclosure [Text Block] |
NOTE 14 – CONTINGENCY
In connection with the distribution by Creative of CEN’s common stock on February 29, 2016 and the Form 10 registration statement filed by CEN to register its shares of common stock under the Exchange Act, CEN received comments by the Staff of the Securities and Exchange Commission, including a letter dated May 4, 2016 in which the Staff noted that they “…continue to question the absence of Securities Act registration of the spin-off distribution”. In the event that the distribution of shares of CEN’s common stock was a distribution that required registration under the Securities Act, then the Company could be subject to enforcement action by the SEC that claims a violation of Section 5 of the Securities Act and could be subject to a private right of action for rescission or damages. Based on management’s estimate, any potential liability related to this matter would not be material. |
Note 15 - Fair Value Disclosures |
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| Fair Value Disclosures [Text Block] |
NOTE 15 – FAIR VALUE DISCLOSURES
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.
The fair value of the Company’s financial instruments are as follows:
The fair values of other receivables (including related accrued interest), note receivable - CEN Biotech Ukraine, LLC, and advances to Emergence Global and CEN Biotech Ukraine, LLC approximate carrying value due to the terms of the instruments.
The fair value of the loans payable approximates carrying value due to the terms of such instruments and applicable interest rates.
The fair value of convertible notes payable is based on the par value plus accrued interest through the date of reporting due to the terms of such instruments and interest rates.
It is not practicable to estimate the fair value of loans payable – related parties and convertible notes payable – related parties due to their related party nature.
The fair value of the patent acquisition liability is based upon the fair value of the common stock, which was obtained from a 3rd party valuation specialist prior to April 5, 2021. This valuation report utilized a cash-free asset value model to estimate enterprise value based upon similar companies. Beginning April 5, 2021, the fair value of the patent acquisition liability was based upon the OTC closing price and accordingly was transferred from Level 3 to Level 1 due to the availability of published prices for CEN’s common stock during 2021. Effective October 7, 2021, the liability was settled with delivery of the associated common shares, see Note 8. |
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Note 16 - Subsequent Events |
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Mar. 31, 2022 | |||||||
| Notes to Financial Statements | |||||||
| Subsequent Events [Text Block] |
NOTE 16 – SUBSEQUENT EVENTS
On April 14, 2022, the following persons resigned from the following positions from Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022.
The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above name persons no longer hold any positions with the Company.
The Resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by any of the above persons.
Appointments of Officers and Directors
On April 14, 2022, the Company’s Board of Directors (the “Board”) appointed Brian S. Payne as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors and appointed Lawrence Lehoux as the Company’s President, effective at the close of business on April 14, 2022.
On April 19, 2022, Dr. Usamakh Saadikh resigned from his position as a director on the Board of Directors (the “Board”) of the “Company as well as all other positions with the Company effective immediately. Dr. Usamakh Saadikh, was a member of our Board and the Vice President of International Business Development since June 2018. The foregoing resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by Dr. Saadikh.
Appointment of Directors
On April 18, 2022, the Board appointed the following persons as members of its Board effective April 18, 2022:
Settlement Agreements with Departing Officers and Directors
As reported by the Company on its Current Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2022, on April 14, 2022, the following persons resigned from the following positions from the Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022. The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above named persons no longer hold any positions with the Company. In connection with the Resignations, the Company has entered into the settlement agreements described below with the following persons.
On April 19, 2022, the Company, entered into a settlement agreement with Bahige (Bill) Chaaban (the “Chaaban Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Chaaban 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Chaaban as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Chaaban Settlement Agreement, Mr. Chaaban’s Employment Agreement with the Company dated November 30, 2017, was terminated as of April 14, 2022. Pursuant to the Chaaban Settlement Agreement, Mr. Chaaban agreed to release the Company from any claims, as such term is defined thereunder, that Mr. Chaaban may have against the Company.
On April 19, 2022, the Company, entered into a settlement agreement with Alex Tarrabain (the “Tarrabain Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Tarrabain 1,196,673 restricted shares of its common stock in exchange for the accrued salary of $89,682.19 owed to Mr. Tarrabain as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Tarrabain Settlement Agreement, Mr. Tarrabain’s Employment Agreement with the Company dated May 21, 2019, was terminated as of April 14, 2022. Pursuant to the Tarrabain Settlement Agreement, Mr. Tarrabain agreed to release the Company from any claims, as such term is defined thereunder, that Mr. Tarrabain may have against the Company.
On April 19, 2022, the Company, entered into a settlement agreement with Rick Purdy (the “Purdy Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Purdy 150,483 restricted shares of its common stock in exchange for the accrued salary of $11,286.19 owed to Mr. Purdy as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Purdy Settlement Agreement, Mr. Purdy’s Employment Agreement with the Company dated December 6, 2021, was terminated as of April 14, 2022.
On April 19, 2022, the Company, entered into a settlement agreement with Ameen Ferris (the “Ferris Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Ferris 433,096 restricted shares of its common stock in exchange for the accrued salary of $32,482.19 owed to Mr. Ferris as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Ferris Settlement Agreement, Mr. Ferris’s Employment Agreement with the Company dated April 2, 2021, was terminated as of April 14, 2022.
On April 19, 2022, the Company, entered into a settlement agreement with Richard Boswell (the “Boswell Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Boswell 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Boswell as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Boswell Settlement Agreement, Mr. Boswell’s Employment Agreement with the Company dated November 30, 2017, was terminated as of April 15, 2022.
Dismissal of Independent Registered Accounting Firm
On May 2, 2022, the Board of Directors of the Company approved the dismissal of Mazars USA LLP (“Mazars”), as its independent registered accounting firm, effective immediately. Mazars was engaged by the Company on January 16, 2018. No audit report of Mazars for the years ended December 31, 2021 or December 31, 2020, contained an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, with the exception of providing an explanatory paragraph stating there was substantial doubt about the Company’s ability to continue as a going concern. During the Company’s two most recent fiscal years and through May 2, 2022, (i) there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Mazars on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Mazars, would have caused Mazars to make reference to the subject matter of such disagreement in connection with its reports on the financial statements for such periods and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).
Engagement of New Independent Registered Accounting Firm
On May 2, 2022, the Company’s Board approved the appointment of Olayinka Oyebola & Co (“OOC”) as the Company’s new independent registered public accounting firm effective immediately. During the Company’s two most recent fiscal years ended December 31, 2021 and 2020, and the subsequent interim period through May 2, 2022, neither the Company nor anyone acting on its behalf consulted with OOC regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, in connection with which either a written report or oral advice was provided to the Company that OOC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
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Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |
| Earnings Per Share, Policy [Policy Text Block] | Loss per Share
Net loss per common share is computed pursuant to ASC 260-10-45. Basic loss per share is computed based on the weighted average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the diluted weighted average common shares outstanding, which includes the effect of potentially dilutive securities. During periods when there is a net loss, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of net loss per share. Diluted earnings per share is similarly computed except that the denominator includes the effect, using the treasury stock method, of unvested restricted stock and convertible notes, if including such potential shares of common stock is dilutive. For the three-months ended March 31, 2022, and 2021, the common stock equivalents of the convertible note agreements were not included in diluted earnings per share computations because their effect was antidilutive.
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| New Accounting Pronouncements, Policy [Policy Text Block] | Recently Adopted Accounting Pronouncements
No pronouncements were adopted by the Company during the three-month period ended March 31, 2022.
Recent Accounting Pronouncements Not Yet Adopted
In August 2020, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement (ASU 2020-06) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity's own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity's own equity. As a smaller reporting company, as defined by the SEC, this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the consolidated financial statements. |
Note 3 - Advances to CEN Biotech Ukraine and Acquisition of Clear Com Media (Tables) |
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| Schedule of Business Acquisitions, by Acquisition [Table Text Block] |
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Note 4 - Intangible Assets (Tables) |
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| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Finite-Lived Intangible Assets [Table Text Block] |
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Note 5 - Loans Payable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Short-Term Debt [Table Text Block] |
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Note 6 - Loans Payable- Related Party (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Loans Payable to Related Party [Table Text Block] |
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Note 7 - Convertible Notes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Long-Term Debt Instruments [Table Text Block] |
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Note 8 - Convertible Notes - Related Parties (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Convertible Notes Payable to Related Party [Table Text Block] |
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Note 9 - Income Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Deferred Tax Assets and Liabilities [Table Text Block] |
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| Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] |
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| Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] |
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Note 11 - Related Party Transactions (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Lease, Liability, Maturity [Table Text Block] |
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Note 12 - Stock Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block] |
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| Nonvested Restricted Stock Shares Activity [Table Text Block] |
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Note 13 - Net Loss Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] |
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| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 15 - Fair Value Disclosures (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value, by Balance Sheet Grouping [Table Text Block] |
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Note 2 - Going Concern Uncertainty / Management Plans (Details Textual) - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Retained Earnings (Accumulated Deficit), Total | $ (46,221,218) | $ (45,964,183) |
Note 3 - Acquisition of Clear Com Media, Inc - Estimate of Assets Acquired and Liabilities Assumed (Details) - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Goodwill | $ 1,314,134 | $ 1,314,134 |
| Clear Com Media, Inc [Member] | ||
| Cash | 259,470 | |
| Accounts receivable | 210,536 | |
| Property and equipment | 97,911 | |
| Other assets | 244,540 | |
| Identifiable intangibles | 456,855 | |
| Current financial liabilities | (344,591) | |
| Other long-term liabilities | (140,078) | |
| Total identifiable net assets | 784,643 | |
| Goodwill | 1,335,357 | |
| Net assets acquired | $ 2,120,000 |
Note 3 - Acquisition of Clear Com Media, Inc - Proforma Results of Operations (Details) - Clear Com Media, Inc [Member] - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Revenue | $ 1,305,985 | $ 1,242,676 |
| Operating expenses | 20,437,863 | 3,720,279 |
| Loss from operations | (19,131,878) | (2,477,603) |
| Other income, net | 57,949 | 16,950,653 |
| (Loss) income before income taxes | (19,073,929) | 14,473,050 |
| Income tax expense | (61,032) | 32,892 |
| Net (loss) income | $ (19,012,897) | $ 14,440,158 |
| Basic (in dollars per share) | $ (0.43) | $ 0.46 |
| Diluted (in dollars per share) | $ (0.43) | $ 0.39 |
| Diluted (in shares) | 44,488,649 | 36,732,510 |
Note 4 - Intangible Assets - Intangible Assets (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2022 |
|
| Finite-lived intangible assets, gross | $ 7,352,346 | $ 7,352,346 |
| Less: Accumulated amortization | 2,280,315 | 2,364,221 |
| Net | 5,072,031 | 4,988,125 |
| Lighting Patent [Member] | ||
| Finite-lived intangible assets, gross | $ 6,797,000 | 6,797,000 |
| Finite-Lived Intangible Asset, Useful Life (Year) | 16 years | |
| Technology-Based Intangible Assets [Member] | ||
| Finite-lived intangible assets, gross | $ 276,080 | 276,080 |
| Customer Relationships [Member] | ||
| Finite-lived intangible assets, gross | $ 149,872 | 149,872 |
| Finite-Lived Intangible Asset, Useful Life (Year) | 7 years | |
| Computer Software, Intangible Asset [Member] | ||
| Finite-lived intangible assets, gross | $ 105,730 | 105,730 |
| Trade Names [Member] | ||
| Finite-lived intangible assets, gross | $ 23,664 | $ 23,664 |
| Finite-Lived Intangible Asset, Useful Life (Year) | 3 years |
Note 5 - Loans Payable - Loans Payable (Details) (Parentheticals) - CAD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Short-term Loan Payable to Private Investors [Member] | ||
| Original Amount | $ 1,104,713 | $ 1,104,713 |
| Interest Rate | 7.00% | 7.00% |
| Short-term Loan Payable to Multiple Investors [Member] | ||
| Interest Rate | 12.00% | 12.00% |
| Maturity Date, start | Jun. 01, 2018 | Jun. 01, 2018 |
| Maturity Date, end | May 31, 2021 | May 31, 2021 |
| Second Short-term Loan Payable to an Individual [Member] | ||
| Share Interest (in shares) | 4,000 | 4,000 |
| Maturity date | Apr. 16, 2022 | Apr. 16, 2022 |
| Short-term Loan Payable to Global Holdings International, LLC [Member] | ||
| Interest Rate | 15.00% | 15.00% |
| Maturity date | Jun. 30, 2016 | Jun. 30, 2016 |
| Short-term Loan Payable to an Individual [Member] | ||
| Share Interest (in shares) | 2,000 | 2,000 |
| Maturity date | Jul. 16, 2021 | Jul. 16, 2021 |
Note 6 - Loans Payable- Related Party (Details Textual) - USD ($) |
3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Interest Expense, Related Party | $ 89,361 | $ 123,236 | ||
| Stock Issued During Period, Value, New Issues | $ 62,100 | |||
| Related Parties Lenders [Member] | ||||
| Stock Issued During Period, Shares, New Issues (in shares) | 96,000 | 108,000 | ||
| Stock Issued During Period, Value, New Issues | $ 81,302 | $ 95,580 | ||
| Loans Payable to Related Party [Member] | ||||
| Interest Payable, Related Party | 671,665 | 568,969 | ||
| Interest Expense, Related Party | $ 189,182 | $ 202,640 | ||
Note 6 - Loans Payable - Related Party - Loans Payable to Related Parties (Details) - Loans Payable to Related Party [Member] - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Long-term Debt | $ 2,701,641 | $ 2,701,641 |
| Mr. Chaaban [Member] | ||
| Long-term Debt | 1,388,122 | 1,388,122 |
| Creative Edge [Member] | ||
| Long-term Debt | 601,500 | 601,500 |
| R&D Labs Canada, Inc [Member] | ||
| Long-term Debt | 300,000 | 300,000 |
| Bill Chaaban, President of Cen Biotech [Member] | ||
| Long-term Debt | 237,019 | 237,019 |
| Spouse of Joseph Byrne, CEO of CEN Biotech [Member] | ||
| Long-term Debt | 100,000 | 100,000 |
| Director, Alex Tarrabain [Member] | ||
| Long-term Debt | $ 75,000 | $ 75,000 |
Note 6 - Loans Payable - Related Party - Loans Payable to Related Parties (Details) (Parentheticals) - Loans Payable to Related Party [Member] |
3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
|
Mar. 31, 2022
USD ($)
shares
|
Dec. 31, 2021
USD ($)
shares
|
Mar. 31, 2022
CAD ($)
shares
|
Dec. 31, 2021
CAD ($)
shares
|
|
| Mr. Chaaban [Member] | ||||
| Interest Rate | 12.00% | 12.00% | 12.00% | 12.00% |
| Maturity date | Aug. 17, 2020 | Aug. 17, 2020 | ||
| Creative Edge [Member] | ||||
| Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% |
| Maturity date | Dec. 31, 2018 | Dec. 31, 2018 | ||
| R&D Labs Canada, Inc [Member] | ||||
| Interest Rate | 8.00% | 8.00% | 8.00% | 8.00% |
| Maturity date | Oct. 02, 2019 | Oct. 02, 2019 | ||
| Bill Chaaban, President of Cen Biotech [Member] | ||||
| Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% |
| Maturity date | Dec. 31, 2018 | Dec. 31, 2018 | ||
| Original Amount | $ 198,660 | $ 198,660 | $ 48,630 | $ 48,630 |
| Spouse of Joseph Byrne, CEO of CEN Biotech [Member] | ||||
| Maturity date | Apr. 16, 2022 | Apr. 16, 2022 | ||
| Share Interest (in shares) | 4,000 | 4,000 | 4,000 | 4,000 |
| Related Party Interest | 5.00% | 5.00% | 5.00% | 5.00% |
| Director, Alex Tarrabain [Member] | ||||
| Maturity date | Apr. 16, 2022 | Apr. 16, 2022 | ||
| Share Interest (in shares) | 3,000 | 3,000 | 3,000 | 3,000 |
Note 7 - Convertible Notes (Details Textual) |
12 Months Ended | ||
|---|---|---|---|
|
Apr. 14, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
shares
|
Dec. 31, 2020
USD ($)
|
|
| Conversion of Convertible Notes into Common Stock [Member] | |||
| Debt Conversion, Original Debt, Amount | $ 5,173,785 | ||
| Debt Conversion, Converted Instrument, Shares Issued (in shares) | shares | 3,488,883 | ||
| Debt Conversion, Accrued Interest, Amount | $ 78,893 | ||
| Stock Issued During Period, Shares, Settlement of Accrued Interest (in shares) | shares | 94,357 | ||
| Convertible Debt Payable to Non-related Party [Member] | |||
| Debt Instrument, Convertible, Beneficial Conversion Feature | $ 180,098 | ||
| Convertible Debt [Member] | |||
| Debt Instrument, Convertible, Beneficial Conversion Feature | $ 0 | ||
| Debt Instrument, Convertible, Number of Equity Instruments | 914,732 | ||
| Convertible Debt [Member] | Subsequent Event [Member] | |||
| Debt Instrument, Convertible, Number of Equity Instruments | 363,767 | ||
| Debt Instrument, Debt Default, Amount | $ 576,472 | ||
Note 7 - Convertible Notes - Convertible Notes (Details) - Convertible Debt [Member] - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Long-term Debt, gross | $ 721,472 | $ 721,472 |
| Less unamortized debt discount | 78,142 | 78,142 |
| Long-term Debt | 643,330 | 643,330 |
| Less current portion | 643,330 | 643,330 |
| Convertible notes payable, less current portion | 0 | 0 |
| Convertible Notes 1[Member] | ||
| Long-term Debt, gross | 576,472 | 576,472 |
| Convertible Notes 2 [Member] | ||
| Long-term Debt, gross | $ 145,000 | $ 145,000 |
Note 7 - Convertible Notes - Convertible Notes (Details) (Parentheticals) - Convertible Debt [Member] |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Conversion Rights | 914,732 | |
| Convertible Notes 1[Member] | ||
| Interest Rate | 5.00% | 5.00% |
| Conversion Rights | 363,767 | 363,767 |
| Maturity Date, start | May 01, 2018 | May 01, 2018 |
| Maturity Date, end | Oct. 31, 2021 | Oct. 31, 2021 |
| Convertible Notes 2 [Member] | ||
| Interest Rate | 5.00% | 5.00% |
| Conversion Rights | 550,965 | 550,965 |
| Maturity Date, start | Jun. 01, 2022 | Jun. 01, 2022 |
| Maturity Date, end | Dec. 31, 2022 | Dec. 31, 2022 |
Note 8 - Convertible Notes Payable - Related Parties - Convertible Notes Payable to Related Parties (Details) - Convertible Debt Payable to Related Party [Member] - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Long-term Debt, gross | $ 169,796 | $ 169,796 |
| Less unamortized debt discount | 7,157 | 7,157 |
| Long-term Debt | 162,639 | 162,639 |
| Joseph Byrne [Member] | ||
| Long-term Debt, gross | 121,796 | 121,796 |
| Jeff Thomas [Member] | ||
| Long-term Debt, gross | $ 48,000 | $ 48,000 |
Note 8 - Convertible Notes Payable - Related Parties - Convertible Notes Payable to Related Parties (Details) (Parentheticals) - Convertible Debt Payable to Related Party [Member] |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Joseph Byrne [Member] | ||
| Interest Rate | 12.00% | 12.00% |
| Conversion Rights | 76,123 | 76,123 |
| Maturity date | Aug. 17, 2020 | Aug. 17, 2020 |
| Jeff Thomas [Member] | ||
| Interest Rate | 5.00% | 5.00% |
| Conversion Rights | 94,488 | 94,488 |
| Maturity date | May 24, 2022 | May 24, 2022 |
Note 9 - Income Taxes (Details Textual) - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Mar. 31, 2022 |
|
| Operating Loss Carryforwards | $ 46,221,218 | ||
| Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount | $ 4,900,000 | $ 3,400,000 | |
Note 9 - income Taxes - Schedule of Deferred Tax Assets (Details) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Deferred tax asset - net operating losses | $ 8,300,000 | $ 3,400,000 |
| Deferred tax asset valuation allowance | (8,300,000) | (3,400,000) |
| Net deferred tax asset | 0 | $ 0 |
| Deferred tax assets | ||
| SR&ED credits | 39,464 | |
| Deferred tax liabilities | ||
| Property and equipment | (11,357) | |
| Intangible assets, including goodwill | (25,387) | |
| Total deferred tax liabilities | (36,744) | |
| Net deferred tax asset | $ 2,720 |
Note 9 - Income Taxes - The Tax Benefit for CCM Income Taxes (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Current | $ (33,621) | |||
| Deferred income tax benefit | $ 0 | $ 0 | (2,735) | |
| Net income tax benefit | $ 0 | $ 0 | $ (36,356) | |
Note 9 - Income Taxes - Reconciliation of Effective Tax Rate (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Income tax (benefit) expense at statutory rate of 26.5% | $ (5,019,103) | $ 3,776,156 | ||
| Valuation allowance | 5,020,280 | (3,776,156) | ||
| SR&ED credits | (19,198) | |||
| Other | (18,335) | |||
| Income tax benefit | $ 0 | $ 0 | (36,356) | |
| Growth [Member] | ||||
| Income tax (benefit) expense at statutory rate of 26.5% | (5,020,280) | 3,776,156 | ||
| Valuation allowance | 5,020,280 | (3,776,156) | ||
| SR&ED credits | 0 | 0 | ||
| Other | 0 | 0 | ||
| Income tax benefit | 0 | 0 | ||
| Digital [Member] | ||||
| Income tax (benefit) expense at statutory rate of 26.5% | 1,177 | 0 | ||
| Valuation allowance | 0 | 0 | ||
| SR&ED credits | (19,198) | 0 | ||
| Other | (18,335) | 0 | ||
| Income tax benefit | $ (36,356) | $ 0 | ||
Note 9 - Income Taxes - Reconciliation of Effective Tax Rate (Details) (Parentheticals) |
12 Months Ended |
|---|---|
Dec. 31, 2020 | |
| income tax | 26.50% |
Note 10 - Shareholders' Deficit / Stock Activity (Details Textual) - $ / shares $ / shares in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Mar. 31, 2022 |
|
| Common Stock, No Par Value (in dollars per share) | $ 0 | $ 0 |
| Common Stock, Earned (in shares) | 10,000 | |
| Common Stock, Capital Shares Reserved for Future Issuance (in shares) | 1,085,343 |
Note 11 - Related Party Transactions - Future Minimum Operating Lease Payments (Details) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| 2022 | $ 119,543 | |
| 2023 | 90,325 | |
| 2024 | 61,897 | |
| 2025 | 32,088 | |
| 2026 | 32,088 | |
| Thereafter | 24,066 | |
| Total lease payments | 360,007 | |
| Less imputed interest | 49,336 | |
| Present value of lease liability | $ 310,671 | $ 164,997 |
Note 12 - Stock Based Compensation - Compensation Expenses (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Stock Based Compensation [Member] | ||
| Compensation expense | $ 0 | $ 15,390,822 |
| Professional Fees [Member] | ||
| Compensation expense | 0 | 1,172,000 |
| Stock Based Compensation and Professional Fees [Member] | ||
| Compensation expense | $ 0 | $ 16,562,822 |
Note 13 - Net (Loss) Income Per Share - Antidilutive Securities (Details) - shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Convertible Debt Securities [Member] | ||
| Antidilutive Securities (in shares) | 1,085,343 | 0 |
| Tesla Agreement Securities [Member] | ||
| Antidilutive Securities (in shares) | 0 | 1,000,000 |
Note 13 - Net Income (Loss) Per Share - Schedule of Earnings Per Share (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Income available to common stockholders | $ 18,937,577 | |||
| Shares, Basic (in shares) | 42,417,416 | 27,582,095 | 42,417,416 | |
| Per share, Basic (in dollars per share) | $ (0.00) | $ (0.02) | $ 0.45 | |
| Effect of Dilutive Securities, Convertible debt | 0 | |||
| Shares, Convertible debt (in shares) | 0 | |||
| Income available to common stockholders with assumed conversions | $ 18,937,577 | |||
| Shares, Diluted (in shares) | 42,417,416 | 27,582,095 | 42,417,416 | |
| Per share, Diluted (in dollars per share) | $ (0.00) | $ (0.02) | $ 0.45 | |