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Can B Corp - Quarter Report: 2018 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended September 30, 2018

 

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

 

For the transition period from __________ to __________

 

COMMISSION FILE NUMBER: 333-208293

 

CANBIOLA, INC.

(Exact name of Registrant as specified in its charter)

 

Florida

 

20-3624118

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

960 South Broadway, Suite 120

Hicksville NY 11801

 (Address of principal executive offices)

 

(516) 590-1846

(Registrant’s telephone number, including area code)

 


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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No

 



1



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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging Growth Company

 

 

(Do not check if smaller reporting company)


 

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


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


The number of shares of the registrants only class of common stock issued and outstanding as of November 13, 2018 was 358,301,097 shares.




2




CANBIOLA, INC.

FORM 10-Q

September 30, 2018

 

TABLE OF CONTENTS

 

 

 

Page No.

PART I. - FINANCIAL INFORMATION

Item 1.

Financial Statements  

 

 

Consolidated Balance Sheets September 30, 2018 and December 31, 2017

4

 

Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2018 and 2017

5

 

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2018 and 2017

7

 

Condensed Notes to Unaudited Consolidated Financial Statements.

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

27

Item 3

Quantitative and Qualitative Disclosures About Market Risk.

29

Item 4

Controls and Procedures.

29

 PART II - OTHER INFORMATION

 

 

 

Item 1.  

Legal Proceedings  

30

Item 1A.  

Risk Factors  

30

Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds  

30

Item 3.  

Defaults Upon Senior Securities  

31

Item 4.  

Mine Safety Disclosures  

31

Item 5.

Other Information

31

Item 6.

Exhibits

32

 















3



PART 1 - FINANCIAL INFORMATION

 Item 1.

Financial Statements.

Canbiola, Inc. and Subsidiary

Consolidated Balance Sheets

 

 

September 30,

 

December 31,

 

 

2018

 

 

2017

Assets

 

(Unaudited)

 

 

 

Current assets:

 

 

 

 

 

   Cash and cash equivalents

 

$

380,576 

 

 

$

1,652 

   Accounts receivable, less allowance for doubtful

      accounts of $0 and $0, respectively

 

38,378 

 

 

6,075 

   Inventory

 

4,353 

 

 

9,834 

   Note receivable - current

 

75,000 

 

 

75,000 

   Prepaid expenses - current

 

759,565 

 

 

64,911 

   Total current assets

 

1,257,872 

 

 

157,472 

 

 

 

 

 

 

Property and equipment, at cost less accumulated

 

 

 

 

 

   depreciation of $23,233 and $20,248, respectively

 

46,518 

 

 

11,148 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

   Security Deposit

 

17,687 

 

 

11,687 

   Prepaid expenses - noncurrent

 

221,030 

 

 

 

   Note receivable - noncurrent

 

39,000 

 

 

39,000 

   Total other assets

 

277,717 

 

 

50,687 

 

 

 

 

 

 

Total assets

 

$

1,582,107 

 

 

$

219,307 

 

 

 

 

 

 

Liabilities and Stockholders' Deficiency

 

 

 

 

 

Current liabilities:

 

 

 

 

 

   Notes and loans payable

 

$

135,410 

 

 

$

193,504 

   Derivative Liability

 

444,594 

 

 

1,451,137 

   Accounts payable

 

147,034 

 

 

143,274 

   Accrued officers compensation

 

184,650 

 

 

98,750 

   Other accrued expenses payable

 

46,750 

 

 

62,539 

   Total current liabilities and total liabilities

 

958,438 

 

 

1,949,204 

Commitments and contingencies (Notes 12 and 13)

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficiency:

 

 

 

 

 

   Preferred stock, authorized 5,000,000 shares:

 

 

 

 

 

      Series A Preferred stock, no par value:

 

 

 

 

 

        authorized 20 shares, issued and outstanding

 

 

 

 

 

        13 and 8 shares, respectively

 

1,786,537 

 

 

243,537 

      Series B Preferred stock, $0.001 par value:

 

 

 

 

 

        authorized 500,000 shares, issued and outstanding

 

 

 

 

 

        349,194and 157,985 shares, respectively

 

328 

 

 

150 

   Common stock, no par value; authorized

 

 

 

 

 

      750,000,000 shares, issued and outstanding

 

 

 

 

 

      344,956,364 and 225,572,323 shares, respectively

 

17,791,974 

 

 

12,524,042 

   Additional Paid-in capital

 

331,321 

 

 

149,850 

   Additional Paid-in capital – Stock Options (Note 10)

 

84,000 

 

 

   Accumulated deficit

 

(19,370,491)

 

 

(14,647,476)

   Total stockholders' deficiency

 

623,669 

 

 

(1,729,897)

 

 

 

 

 

 

Total liabilities and stockholders' deficiency

 

$

1,582,107 

 

 

$

219,307 

See notes to consolidated financial statements.

 

 

 

 

 




4






Canbiola, Inc. and Subsidiary

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

Nine Months Ended September 30,

 

Three Months Ended September 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

Revenues

 

 

 

 

 

 

 

 

 

 

 

   Service Revenue

 

$

15,735 

 

 

$

43,507 

 

 

$

2,978 

 

 

$

1,800 

   Product Sales

 

371,553 

 

 

22,433 

 

 

160,350 

 

 

20,298 

Total Revenues

 

387,288 

 

 

65,940 

 

 

163,328 

 

 

22,098 

   Cost of product sales

 

181,077 

 

 

11,698 

 

 

89,638 

 

 

10,559 

Gross profit

 

206,211 

 

 

54,242 

 

 

73,690 

 

 

11,539 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

   Officers compensation

 

212,500 

 

 

58,209 

 

 

76,250 

 

 

19,377 

   Consulting fees (including stock-based compensation of $1,091,094

 

 

 

 

 

 

 

 

 

 

 

       $113,438, $518,317 and $76,209, respectively)

 

1,188,693 

 

 

182,491 

 

 

545,017 

 

 

110,709 

    Directors fees (including stock-based compensation of $185,400,

 

 

 

 

 

 

 

 

 

 

 

       $0, $0 and $0, respectively)

 

185,400 

 

 

 

 

 

 

   Advertising expense

 

62,743 

 

 

35,312 

 

 

25,735 

 

 

13,802 

   Hosting expense

 

9,192 

 

 

17,619 

 

 

1,714 

 

 

2,932 

   Rent expense

 

50,065 

 

 

48,795 

 

 

17,000 

 

 

16,265 

   Professional fees

 

82,498 

 

 

70,706 

 

 

12,159 

 

 

7,970 

   Depreciation of property and equipment

 

2,985 

 

 

2,421 

 

 

1,381 

 

 

807 

   Amortization of intangible assets

 

 

 

2,979 

 

 

 

 

993 

   Other

 

182,174 

 

 

81,161 

 

 

61,347 

 

 

20,642 

 

 

 

 

 

 

 

 

 

 

 

 

   Total operating expenses

 

1,976,250 

 

 

499,693 

 

 

740,603 

 

 

193,497 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(1,770,039)

 

 

(445,451)

 

 

(666,913)

 

 

(181,958)

 

 

 

 

 

 

 

 

 

 

 

 



5






Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

   Interest income

 

7,584 

 

 

879 

 

 

2,560 

 

 

293 

   Income (expense) from derivative liability

 

1,146,543 

 

 

252,010 

 

 

302,492 

 

 

305,665 

   Loss on stock issuance

 

(2,568,560)

 

 

 

 

(2,383,456)

 

 

   Loss on debt conversion

 

(1,420,523)

 

 

(32,383)

 

 

(1,362,785)

 

 

(32,383)

   Interest expense (including amortization of debt discounts of $93,978,

      $219,288, $39,813 and $66,183, respectively)

 

(118,022)

 

 

(241,300)

 

 

(47,597)

 

 

(73,514)

 

 

 

 

 

 

 

 

 

 

 

 

   Other income (expense) – net

 

(2,952,978)

 

 

(20,794)

 

 

(3,488,786)

 

 

200,061 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

(4,723,017)

 

 

(466,245)

 

 

(4,155,699)

 

 

18,103 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and comprehensive loss

 

$

(4,723,017)

 

 

$

(466,245)

 

 

$

(4,155,699)

 

 

$

18,103 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share – basic and diluted

 

 

 

 

 

 

 

 

 

 

 

   Basic

 

$

(0.00)

 

 

$

(0.00)

 

 

$

(0.02)

 

 

$

(0.00)

   Diluted

 

$

(0.00)

 

 

$

(0.00)

 

 

$

(0.01)

 

 

$

(0.00)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding –

 

 

 

 

 

 

 

 

 

 

 

   Basic

 

246,648,668 

 

 

156,928,795 

 

 

273,584,588 

 

 

164,000,506 

   Diluted

 

391,326,919 

 

 

273,703,025 

 

 

429,839,381 

 

 

289,732,512 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.







6






Canbiola, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

Operating Activities:

 

 

 

 

 

 

 Net income

 

 

$

(4,723,017)

 

 

$

(466,245)

   Adjustments to reconcile net loss to net

 

 

 

 

 

 

      cash used in operating activities:

 

 

 

 

 

 

      Stock-based compensation, net of prepaid stock-based consulting fees

 

 

1,276,494 

 

 

113,438 

      Loss on stock issuance   

 

 

2,568,560 

 

 

      Loss on debt conversion   

 

 

1,420,523 

 

 

32,383 

      Debt issuance expense   

 

 

14,000 

 

 

      Expense from derivative liability   

 

 

(1,146,543)

 

 

(252,010)

      Depreciation of property and equipment   

 

 

2,985 

 

 

2,421 

      Amortization of intangible assets

 

 

 

 

2,979 

      Amortization of debt discounts

 

 

93,978 

 

 

219,288 

   Changes in operating assets and liabilities:

 

 

 

 

 

 

      Accounts receivable

 

 

(32,303)

 

 

(8,288)

      Inventory

 

 

5,481 

 

 

(12,417)

      Security deposit

 

 

(6,000)

 

 

      Prepaid expenses

 

 

 

 

2,500 

      Accounts payable

 

 

3,759 

 

 

80,973 

      Accrued officers compensation

 

 

85,900 

 

 

54,000 

      Other accrued expenses payable

 

 

17,033 

 

 

25,760 

   Net cash used in operating activities

 

 

(419,150)

 

 

(205,218)

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

   Fixed assets additions

 

 

(38,355)

 

 

   Net cash used in investing activities

 

 

(38,355)

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

   Repayments of notes and loans payable

 

 

(2,571)

 

 

   Proceeds received from notes and loans payable

 

 

155,000 

 

 

179,250 

   Proceeds from sale of common stock

 

 

200,000 

 

 

   Proceeds from sale of Series B preferred stock

 

 

484,000 

 

 

   Net cash provided by financing activities

 

 

836,429 

 

 

179,250 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

378,924 

 

 

(25,968)

Cash and cash equivalents, beginning of period

 

 

1,652 

 

 

30,193 

Cash and cash equivalents, end of period

 

 

$

380,576 

 

 

$

4,225 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

    Income taxes paid

 

 

$

 

 

$

Interest paid

 

 

$

 

 

$

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

    Issuance of common stock in satisfaction of debt

 

 

$

178,500 

 

 

$

115,000 

    Issuance of common stock in satisfaction of directors fees

 

 

$

185,400 

 

 

$

     Issuance of common stock in satisfaction of accrued interest

 

 

$

32,822 

 

 

$

11,168 


See notes to consolidated financial statements.



7




Canbiola, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Three Months Ended September 30, 2018 and 2017

(Unaudited)


NOTE 1 – Organization and Description of Business


Canbiola, Inc. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005.  Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008.  On May 15, 2017, WRAP changed its name to Canbiola, Inc. (the “Company” or “CANB” or “Canbiola”). The Company operates several divisions, including document management and email marketing platforms and a division specializing in the sale of products containing CBD. The Company used to operate its document and information platform from its wholly owned subsidiary, Prosperity Systems, Inc; however, after the acquisition of Prosperity, the Company transferred Prosperity’s operations to WRAP and is presently in the process of dissolving Prosperity. For the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity had no activity for the periods presented.  Prosperity had no activity for the periods presented.


Effective December 27, 2010, WRAP effected a 10 for 1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1 for 10 reverse stock split of its common stock. The accompanying consolidated financial statements retroactively reflect these stock splits.


Canbiola, Inc. is a US Company specializing in the sale of a variety of Cannabidiol CBD (Hemp) based products such as oils, creams, moisturizers, isolate, gel caps, concentrate and water. Canbiola is developing their own line of proprietary products as well as seeking synergistic value through acquisitions in the Hemp Industry. Canbiola aims to be the premier provider of the highest quality Hemp natural products on the market through sourcing the very best raw material and developing a variety of products we believe will improve people's lives in a variety of areas.


CANB expects to concentrate its future business activities on the sale of Cannabidiol based products.


NOTE 2 – Going Concern Uncertainty


The consolidated financial statements have been prepared on a “going concern” basis, which contemplates the realization of assets and liquidation of liabilities in a normal course of business. As of September 30, 2018, the Company had cash and cash equivalents of $380,576 and a working capital surplus of $299,434. For the nine months ended September 30, 2018 and 2017, the Company had net loss of $4,723,017 and $466,245, respectively. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company plans to improve its financial condition by raising capital through sales of shares of its common stock. Also, the Company plans to expand its operation of CBD products to increase its profitability. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.


NOTE 3 – Summary of Significant Accounting Policies


(a)  Principles of Consolidation

 

The consolidated financial statements include the accounts of CANB and its wholly owned subsidiary Prosperity from the date of its acquisition on January 5, 2015. All intercompany balances and transactions have been eliminated in consolidation.


The Company considers Pure Health products to be a variable interest entity as prescribed under Accounting guidelines. Due to the fact that the company is not dependent on Pure Health Products solely for manufacture, no consolidation of Pure Heath Products financial information is required.



8




(b)  Use of Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.


(c)  Fair Value of Financial Instruments


The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, notes and loans payable, accounts payable, and accrued expenses payable. Except for the noncurrent note receivable, the fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to the short term maturity of these instruments. Based on comparable instruments with similar terms, the fair value of the noncurrent note receivable approximates its carrying value.


Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:


Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.


Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.


Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


(d)  Cash and Cash Equivalents


The Company considers all liquid investments purchased with a maturity of three months or less to be cash equivalents.


(e)  Inventory


All inventories are finished goods, and stated at the lower of cost or net realizable value. Cost is principally determined using the first-in, first-out (FIFO) method.


(f)  Property and Equipment, Net


Property and equipment, net, is stated at cost less accumulated depreciation.  Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets.  Maintenance and repairs are charged to operations as incurred.


(g)  Intangible Assets, Net


Intangible assets, net, are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the estimated economic lives of the respective assets.



9




(h)  Goodwill and Intangible Assets with Indefinite Lives


The Company does not amortize goodwill and intangible assets with indefinite useful lives, but instead tests for impairment at least annually.  When conducting the annual impairment test for goodwill, the Company compares the estimated fair value of a reporting unit containing goodwill to its carrying value.  If the estimated fair value of the reporting unit is determined to be less than its carrying value, goodwill is reduced, and an impairment loss is recorded.


 (i)  Long-lived Assets


The Company reviews long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  If an evaluation of recoverability is required, the estimated undiscounted future cash flows associated with the asset is compared to the asset’s carrying amount to determine if a write-down is required.  If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value.

 

(j)  Revenue Recognition


The Company recognizes service revenue over agreed periods of services delivered to customers and recognizes product sales upon shipment of the ordered products to customers, provided there are no uncertainties regarding customer acceptance, persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable.

      

(k) Stock-Based Compensation


Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 718, “Compensation – Stock Compensation” (“ASC718”) and ASC 505-50, “Equity – Based Payments to Non-Employees.”


In addition to requiring supplemental disclosures, ASC 718 addresses the accounting for share-based payment transactions in which a company receives goods or services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments.  ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.


In accordance with ASC 505-50, the Company determines the fair value of the stock based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date at which the counterparty’s performance is complete.


Options and warrants


The fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:


Risk-Free Interest Rate.


We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.  



10




Expected Volatility.


We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.

 

Dividend Yield.


We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.

 

Expected Term.


The expected term of options granted represents the period of time that options are expected to be outstanding.  We   estimated the expected term of stock options by using the simplified method.  For warrants, the expected term represents the actual term of the warrant.


Forfeitures.


Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.


(l)  Advertising


Advertising costs are expensed as incurred and amounted to $62,743 and $35,312 for the nine months ended September 30, 2018 and 2017, respectively.


(m) Research and Development


Research and development costs are expensed as incurred.


(n)  Income Taxes


Income taxes are accounted for under the assets and liability method.  Current income taxes are provided in accordance with the laws of the respective taxing authorities.  Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.


The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification.  The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority. The Company believes that it has not taken any uncertain tax positions and thus has not recorded any liability.


(o)  Net Income (Loss) per Common Share


Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.



11




Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options and convertible securities) outstanding.  Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation. For the periods presented, the diluted net loss per share calculation excluded the effect of Series B preferred stocks and stock options outstanding (see Notes 7, 8 and 10).


(p)  Recent Accounting Pronouncements


In May 2014, the FASB issued ASU 2014-09 "Revenue from Contracts with Customers" (Topic 606) which establishes revenue recognition standards. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017. The impact of ASU 2014-09 on the Company’s financial statements has not been significant.


In 2016, the FASB issued ASU 2016-2 (Topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees will be required to recognize right of use assets and liabilities for most leases having terms of 12 months or more. ASU 2016-2 is effective for fiscal years beginning after December 15, 2018.


The impact on the Company's financial statements has not yet been determined.


(q) Reclassifications


Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation. These reclassification adjustments had no effect on the Company's previously reported net income.


NOTE 4 – Notes Receivable


Notes receivable consist of:

 

 

 

 

 

September 30,

 2018

 

December 31,

 2017

Secured Promissory note dated October 17, 2017 due from Pure Health

        Products, LLC (“PHP”), interest at 12% per annum, due October

        17, 2018, secured by assets of PHP

 

$

75,000 

 

$

75,000 

 

 

 

 

 

Note receivable dated November 30, 2015 from Stock Market Manager, Inc, interest at 3% per annum due November 30, 2020      

 

39,000 

 

39,000 

 

 

 

 

 

Total

 

114,000 

 

114,000 

 

 

 

 

 

Current portion of notes receivable

 

(75,000)

 

(75,000)

Noncurrent portion of notes receivable

 

$

39,000 

 

$

39,000 


Pursuant to an option Agreement dated November 10, 2017, the Company has an option expiring November 10, 2027 to purchase certain specified assets of Pure Health for $75,000, payable via cancellation of Pure Health’s obligations under the Secured Promissory Note or in cash or cash equivalent.


Stock Market Manager, Inc is affiliated with Carl Dilley, a Company director.



12




NOTE 5 – Property and Equipment, Net


Property and Equipment, net, consist of:


 

 

September,

 

December 31,

 

 

2018

 

2017

 

 

 

 

 

Furniture & Fixtures

 

$

19,018 

 

$

19,018 

 

 

 

 

 

Office Equipment

 

12,378 

 

12,378 

 

 

 

 

 

Manufacturing Equipment

 

38,355 

 

 

 

 

 

 

Total

 

69,751 

 

31,396 

 

 

 

 

 

Accumulated amortization

 

(23,233)

 

(20,248)

 

 

 

 

 

Net

 

$

46,518 

 

$

11,148 


NOTE 6 – Intangible Assets, Net


Intangible assets, net, consist of:


 

 

September 30,

 

December 31,

 

 

2018

 

2017

 

 

 

 

 

Video conferencing software acquired

 

 

 

 

  by Prosperity in December 2009

 

$

30,000 

 

$

30,000 

 

 

 

 

 

Enterprise and audit software acquired

 

 

 

 

  by Prosperity in April 2008

 

20,000 

 

20,000 

 

 

 

 

 

Patent costs incurred by WRAP

 

6,880 

 

6,880 

 

 

 

 

 

Other

 

3,548 

 

3,548 

 

 

 

 

 

Total

 

60,428 

 

60,428 

 

 

 

 

 

Accumulated amortization and Impairment

 

(60,428)

 

(60,428)

 

 

 

 

 

Net

 

$

 

$


The above intangible assets relate to the document management and email marketing divisions. At December 31, 2017, we do not expect any future positive cash flow from these divisions. Accordingly, we have recorded an impairment expense of $21,509 at December 31, 2017 and reduced the net carrying value of these intangible assets to $0.




13




NOTE 7 – Notes and Loans Payable


Notes and loans payable consist of:

 

 

 

 

 

September 30,

 2018

 

December 31,

 2017

 

 

 

 

 

Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to November 15, 2017, interest at rates ranging from 12% to 14.99% per annum, due from April 6, 2017 to May 15, 2018, partially converted at March 22, 2017 and the remaining notes convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date – net of

        unamortized debt discount of $0 and $1,815, respectively-fully converted

        on August 31, 2018   

 

-

 

36,685

 

 

 

 

 

Convertible notes payable to lender dated February 1, 2016 (as amended

        December 21, 2016) and December 21, 2016, interest at 12% per

        annum, due February 1, 2017 and May 20, 2017, convertible into

        Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per

        share or (ii) 50% of the lowest Closing Bid Price of the Common Stock

        for the 30 Trading Days preceding the Conversion Date – net of

        unamortized debt discount of $0 and $0, respectively. The note date dated  

        February 1, 2016 was fully converted at June 11, 2018 while note dated

        December 21, 2016 was fully converted at September 7, 2018     

 

-

 

65,000

 

 

 

 

 

Convertible notes payable to Pasquale and Rosemary Ferro dated from

        May 2, 2017 to August 10, 2018, interest at 12% per annum, due at June

        30, 2020 (as amended August 13, 2018), convertible into Common Stock

        at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50%

        of the lowest Closing Bid Price of the Common Stock for the 30 Trading

        Days preceding the Conversion Date – net of unamortized debt discount

        of $25,009 and $19,613, respectively. The note date dated  

        May 2, 2017 was fully converted at August 9, 2018      

 








58,490

 








73,887

 

 

 

 

 

Convertible note payable to lender dated August 8, 2017 interest at 12% per

        annum, due August 8, 2018, convertible into Common Stock at a

        Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of

        the lowest Closing Bid Price of the Common Stock for the 30 Trading

        Days preceding the Conversion Date – net of unamortized debt discount

        of $0 and $15,068, respectively. The notes were fully converted at

        August 31, 2018.     

 

-

 

9,932

 

 

 

 

 

Convertible note payable to lender dated June 6, 2018, interest at 12% per

        annum, due March 6, 2019, convertible into Common Stock at a

        Conversion Price equal to the lesser of 55% of the lowest Closing Bid  

.       Price of the Common Stock for the 25 Trading Days preceding the

       (i) Inception date or (ii) the Conversion Date – net of unamortized debt

        discount of $57,509 and $0, respectively. The note was fully paid off at

        October 19, 2018.

 

56,491

 

-

 

 

 

 

 

Note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due)

 

5,000

 

5,000

 

 

 

 

 

Note payable to Carl Dilley, a director of the Company, interest at 12.99% per annum, due February 1, 2021

 

12,429

 

-



14




 

 

 

 

 

Loan payable to Mckenzie Webster Limited (“MWL”), an entity controlled by the former Chairman of the Board of Directors of the Company, non-interest bearing, due on demand

 

3,000

 

3,000

Total

 

$

135,410

 

$

193,504


The derivative liability of the convertible notes payable consists of:


 

 

September 30, 2018

 

December 31, 2017

 

 

Face Value

 

Derivative Liability

 


Face Value

 

Derivative Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible notes payable to lender dated

       from March 15, 2016 (as amended June

       2, 2016) to November 15, 2017, due

       from April 6, 2017 to May 15, 2018.

       Fully converted on August 31, 2018   

 





$





-

 





$





-

 








38,500

 

 





 248,597

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible notes payable to lender dated    

        February 1, 2016 (as amended

        December 21, 2016) and December 21,

        2016, due February 1, 2017 and May

        20, 2017. The notes were fully   

        converted at June 11, 2018 and

        September 7, 2018          

 

 







-

 

 







-

 

 







65,000

 

 







418,889

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible notes payable to Pasquale and

        Rosemary Ferro dated from May 25,

        2017 to January 8, 2018, due at June

        30, 2020 (as amended August 13,

        2018),

 

 





83,500

 

 





288,075

 

 





93,500

 

 





611,886

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible notes payable to lender dated

        June 6, 2018, due March 6, 2019. Fully

        paid off at October 19, 2018.

 

 


114,000

 

 


156,519

 

 


-

 

 


-


Convertible notes payable to lender dated

        August 8, 2017, due August 8, 2018.

         Fully converted at August 31, 2018

 

 




-

 

 




-

 

 




25,000

 

 




171,765

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

197,500

 

$

444,594

 

$

222,000

 

$

1,451,137




15




The above convertible notes contain a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes is indeterminate. Accordingly, we have recorded the fair value of the embedded conversion features as a derivative liability at the respective issuance dates (or amendment dates) of the notes ($505,493 total for the nine months ended September 30, 2018) and charged the applicable amounts to debt discounts ($140,000 total for the nine months ended September 30, 2018) and the remainder to other expense ($365,493 total for the nine months ended September 30, 2018). The increase (decrease) in the fair value of the derivative liability from the respective issuance dates (or amendment dates) of the notes to the measurement date ($1,171,568 total decrease for the nine months ended September 30, 2018) is charged (credited) to other expense (income). The fair value of the derivative liability of the notes is measured at the respective issuance dates and quarterly thereafter using the Black Scholes option pricing model. Assumptions used for the calculations of the derivative liability of the notes at September 30, 2018 include (1) stock price of $0.037 per share, (2) exercise price of $0.0100 and $0.0185 per share, (3) terms ranging from 0 days to 639 days, (4) expected volatility of 221% and (5) risk free interest rates ranging from 0.00% to 2.76%.


NOTE 8 – Preferred Stock


Each share of Series A Preferred Stock is convertible into 10,000,000 shares of CANB common stock and is entitled to 20,000,000 votes.


Each share of Series B Preferred Stock has the first preference to dividends, distributions and payments upon liquidation, dissolution and winding-up of the Company, and is entitled to an accrued cumulative but not compounding dividend at the rate of 5% per annum whether or not declared. After six months of the issuance date, such share and any accrued but unpaid dividends can be converted into common stock at the conversion price which is the lower of (i) $0.0101; or (ii) the lower of the dollar volume weighted average price of CANB common stock on the trading day prior to the conversion day or the dollar volume weighted average price of CANB common stock on the conversion day. The share of Series B Preferred Stock has no voting rights.


The Company issued a total of 10 shares of CANB Series A Preferred Stock (5 shares to Mckenzie Webster Limited and 5 shares to Marco Alfonsi) in exchange for the retirement of a total of 100,000,000 shares of CANB common stock (50,000,000 shares from Mckenzie Webster Limited and 50,000,000 shares from Marco Alfonsi).


On October 4, 2017, the Company issued 3 shares of CANB Series A Preferred Stock to Alfonsi: 2 shares were the consideration for Alfonsi’s cancellation of accrued salaries payable of $127,803 owed to Alfonsi and 1 share (valued at $63,902) was issued pursuant to the new employment agreement with Alfonsi.


On November 30, 2017, MWL converted its 5 shares of CANB Series A Preferred Stock to 50,000,000 shares of CANB common stock.


On December 5, 2017, the Company issued 157,985 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to a Securities Purchase Agreement (the “SPA”) dated October 13, 2017, in exchange for proceeds of $150,000, or $0.95 per CANB Series B Preferred share.


On January 22, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.


On February 12, 2018, the Company issued 1 share of CANB Series A Preferred Stock to David Posel pursuant to a service agreement. The fair value of the issuance is $373,000 and will be amortized over the vesting period of four years.


On February 16, 2018, the Company issued 3 shares of CANB Series A Preferred Stock to Andrew Holtmeyer pursuant to a service agreement. The fair value of the issuance is $1,020,000 and will be amortized over the vesting period of one year.



16




On February 16, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.


On March 20, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.


On April 13, 2018, April 25, 2018, May 3, 2018, June 19, 2018 and June 25, 2018, RedDiamond Partners converted its 10,000 shares, 10,000 shares, 10,000 shares, 15,000 shares and 10,000 shares of CANB Series B Preferred Stock to 1,287,129 shares, 1,287,129 shares, 1,287,129 shares, 3,545,455 shares, and 2,363,636 shares of CANB common stock, respectively.


On May 14, 2018, the Company issued 1 share of CANB Series A Preferred Stock to a consultant pursuant to a Consulting Agreement dated May 11, 2018. The $150,000 fair value of the issuance was partially charged to consulting fees in the three months ended September 30, 2018.


From July 24, 2018 to September 26, 2018, RedDiamond Partners converted aggregately 263,263 shares of CANB Series B Preferred Stock to 53,839,743 shares of CANB common stock.


On August 28, 2018, September 14, 2018 and September 19, 2018, the Company issued 36,842 shares, 105,263 shares, and 105,263 shares of CANB Series B Preferred Stock, respectively, to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $35,000, $100,000 and $100,000, respectively, or $0.95 per CANB Series B Preferred share.


NOTE 9 – Common Stock


On February 2, 2017, the Company issued 200,000 shares of CANB common stock to a financial consultant for services rendered. The $11,000 fair value of the 200,000 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2017.


On February 13, 2017, the Company issued 1,685,900 shares of CANB common stock to the brother of the Chief Executive Officer of the Company in satisfaction of notes payable of $15,000 and accrued interest payable of $1,859.


On March 22, 2017, the Company issued 6,785,316 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $5,979.


On April 17, 2017, the Company issued 5,000,000 shares of CANB common stock to a consultant for services rendered. The $125,000 fair value of the 5,000,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2017.


On June 21, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,975 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2017.


On June 28, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,000 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2017.


On August 25, 2017, the Company issued 7,142,857 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $3,331.



17




On August 25, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $3,750 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2017.


On September 5, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $4,375 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2017.


On September 7, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $32,750 fair value of the 2,500,000 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2017. On July 12, 2018, the consultant agreed to return the 2,500,000 shares

to the Company due to the lack of service after an arbitration was filed on May 11,2018.


On September 11, 2017, the Company issued 250,000 and 250,000 shares of CANB common stock to two consultants for services rendered, respectively. The $3,350 fair value of each 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2017.


On September 25, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $2,525 fair value of the 2,500,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2017.


On November 2, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $1,725 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended December 31, 2017.


On November 9, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $21,250 fair value of the 2,500,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.


On November 30, 2017, the Company issued 50,000,000 shares of CANB common stock to Mckenzie Webster Limited in exchange for the retirement of 5 shares of CANB Series A Preferred Stock.


On December 5, 2017, the Company issued 250,000 and 250,000 shares of CANB common stock to two consultants for services rendered, respectively. The $3,000 fair value of each 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.


On December 7, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $4,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.


On December 18, 2017, the Company issued 500,000 shares of CANB common stock to a consultant for services rendered. The $9,050 fair value of the 500,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.


On December 25, 2017, the Company issued 250,000 and 250,000 shares of CANB common stock to two consultants for services rendered, respectively. The $7,250 fair value of each 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.


On February 7, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $9,825 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.



18




On February 9, 2018, the Company issued 3,000,000 and 3,000,000 shares of CANB common stock to its two directors for services rendered, respectively. The $101,400 fair value of each 3,000,000 shares of CANB common stock was charged to directors fees in the three months ended March 31, 2018. The shares issued to one of the directors were converted to options at June 11, 2018 (see Note 10).


On February 13, 2018, the Company issued 150,000 shares of CANB common stock to a consultant for services rendered. The $5,085 fair value of the 150,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.


On February 14, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $8,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.


On February 19, 2018, the Company issued 150,000 shares of CANB common stock to a consultant for services rendered. The $5,280 fair value of the 150,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.


On February 26, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $11,375 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.


On March 1, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $10,900 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2018.


On March 20, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $6,500 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2018.


On April 13, 2018, April 25, 2018, May 3, 2018, June 19, 2018 and June 25, 2018, the Company issued 1,287,129 shares, 1,287,129 shares, 1,287,129 shares, 3,545,455 shares, and 2,363,636 shares of CANB common stock to RedDiamond in exchange for the retirement of 10,000 shares, 10,000 shares, 10,000 shares, 15,000 shares and 10,000 shares of CANB Series B Preferred Stock, respectively.


On May 9, 2018, the Company issued 125,000 shares of CANB common stock to a consultant for services rendered.. The $1,812 fair value of the 125,000 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.


On May 29, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,000 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.


On May 31, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $4,600 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2018.


On June 4, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,750 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.



19




On June 11, 2018, the Company agreed to issue 2,749,429 shares of CANB common stock to a lender in satisfaction of notes payable of $15,000 and accrued interest payable of $4,246. The shares was issued at August 24, 2018.


On June 18, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $6,250 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.


On June 22, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $8,250 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2018.


From July 24, 2018 to September 26, 2018, the Company issued aggregately 53,839,743 shares of CANB common stock to RedDiamond in exchange for the retirement of 263,263 shares of CANB Series B Preferred Stock.


On July 31, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $3,225 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.


On August 9, 2018, Company received a conversion notice from a lender. As a result, 9,544,292 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $50,000 and accrued interest payable of $7,266 at August 21, 2018.


On August 28, 2018, the Company issued 2,000,000 shares of CANB common stock to a consultant for services rendered. The $159,600 fair value of the 2,000,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 6, 2018, the Company issued 300,000 shares of CANB common stock to a consultant for services rendered. The $16,500 fair value of the 300,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 6, 2018, the Company issued 500,000 shares of CANB common stock to a consultant for services rendered. The $27,500 fair value of the 500,000 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.


On September 6, 2018, the Company issued 8,430,331 shares of CANB common stock to a lender in satisfaction of

notes payable of $38,500 and accrued interest payable of $7,867.


On September 7, 2018, the Company issued 5,121,694 shares of CANB common stock to a lender in satisfaction of

notes payable of $25,000 and accrued interest payable of $3,169.


On September 7, 2018, the Company issued 10,045,667 shares of CANB common stock to a lender in satisfaction of

notes payable of $50,000 and accrued interest payable of $10,274.


On September 8, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $11,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 10, 2018, the Company issued 500,000 shares of CANB common stock to a consultant for services rendered. The $19,950 fair value of the 500,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 17, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $10,750 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.



20




On September 18, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $13,725 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 20, 2018, the Company issued 7,407,407 shares of CANB common stock to an investor pursuant to an Stock Purchase Agreement dated September 17, 2018, in exchange for proceeds of $200,000, or $0.027 per CANB common share.


On September 21, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $14,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 25, 2018, the Company issued 2,000,000 shares of CANB common stock to a consultant for services rendered. The $97,400 fair value of the 2,000,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


NOTE 10 – Stock Options and Warrants


A summary of stock options and warrants activity follows:


 

Shares of Common Stock Exercisable Into

 

Stock

 

 

 

 

 

Options

 

Warrants

 

Total

Balance, December 31, 2016

50,000

 

247,500

 

297,500

Granted in 2017

-

 

-

 

-

Expired in 2017

-

 

-

 

-

 

 

 

 

 

 

Balance, December 31, 2017

50,000

 

247,500

 

297,500

Granted in 1Q, 2Q, 3Q 2018

3,000,000

 

2,850,000

 

5,850,000

Cancelled in 1Q, 2Q, 3Q 2018

-

 

-

 

-

 

 

 

 

 

 

Balance, September 30, 2018

3,050,000

 

3,097,500

 

6,147,500


Issued and outstanding stock options as of September 30, 2018 consist of:


Year

 

Number Outstanding

 

 

Exercise

 

Year of

Granted

 

And Exercisable

 

 

Price

 

Expiration

 

 

 

 

 

 

 

 

2009

 

50,000

 

$

1.000

 

2019

2018

 

3,000,000

 

$

0.001

 

2023

 

 

 

 

 

 

 

 

Total

 

3,050,000

 

 

 

 

 


On June 11, 2018, the Company granted 3,000,000 options of CANB common stock to Carl Dilley, a director of the Company, in exchange for the retirement of a total of 3,000,000 shares of CANB common stock from Carl Dilley. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.001 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire June 11, 2023. The value of the Stock Options ($84,000) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $0.028 share price, (ii) 5 years term, (iii) 262.00% expected volatility, (iv) 2.80% risk free interest rate and the difference between this value and the fair value of retired shares was expensed in the quarterly period ended June 30, 2018.



21




Issued and outstanding warrants as of September 30, 2018 consist of:


Year

 

Number Outstanding

 

 

Exercise

 

Year of

Granted

 

And Exercisable

 

 

Price

 

Expiration

 

 

 

 

 

 

 

 

2010

 

247,500

 

$

1.00

 

2020

2018

 

2,850,000

 

$

0.04345

(a)

2023

 

 

 

 

 

 

 

 

Total

 

3,097,500

 

 

 

 

 


(a) 110% of the closing price of the Company’s common stock on the date that the Holder funds the full purchase price of the Note.


NOTE 11 – Income Taxes


No provisions for income taxes were recorded for the periods presented since the Company incurred net losses in those periods.


The provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal income tax rate of 21% and 35% to pretax income (loss) as follows:


 

 

Nine Months September 30,

 

 

2018

 

2017

 

 

 

 

 

Expected income tax (benefit) at 21% and 35%

$

(991,834)

 

$

(163,186)

 

 

 

 

 

Loss on stock issuance

 

539,398 

 

 

 

 

 

 

Loss on debt conversion

 

298,310 

 

 

 

 

 

 

Non-deductible stock-based compensation

268,064 

 

39,703 

 

 

 

 

 

Non-deductible amortization of debt discounts

19,735 

 

76,751 

 

 

 

 

Non-deductible expense from derivative liability

(240,774)

 

(76,869)

 

 

 

 

Increase in deferred income tax assets 

 

 

 

 

  valuation allowance

 

107,101 

 

123,601 

 

 

 

 

 

 

 

 

 

 

Provision for (benefit from) income taxes

 

$

 

$




22




Deferred income tax assets consist of:


 

 

September 30,

 

December 31,

 

 

2018

 

2017

 

 

 

 

 

Net operating loss carryforward

 

1,501,459 

 

1,394,358 

 

 

 

 

 

Valuation allowance

 

(1,501,459)

 

(1,394,358)

 

 

 

 

 

Net

 

$

 

$


Based on management's present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of $1,501,459 attributable to the future utilization of the $4,483,307 net operating loss carryforward as of June 30, 2018 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the financial statements at December 31, 2017. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, 2037 and 2038 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511, $338,345, $386,297, $496,798 and $510,005 respectively.

 

Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs.  Therefore, the amount available to offset future taxable income may be limited.


The Company’s U.S. Federal and state income tax returns prior to 2013 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations on the 2013 tax year returns expired in March 2017.


The Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest or penalties paid during 2018 and 2017.


NOTE 12 – Commitments and Contingencies


Employment Agreements


On October 3, 2017, the Company executed an Executive Employment Agreement with Marco Alfonsi (“Alfonsi”) for Alfonsi to serve as the Company's chief executive officer and interim chief financial officer and secretary for cash compensation of $10,000 per month. Pursuant to the agreement, the Company issued a share of CANB Series A Preferred Stock to Alfonsi on October 4, 2017 (see Note 8). Alfonsi may terminate his employment upon 30 days written notice to the Company. The Company may terminate Alfonsi's employment upon written notice to Alfonsi by a vote of the Board of Directors. At November 1, 2018, this Agreement was terminated due to the execution of a new Employment Agreement with Marco Alfonsi (See Note 14).


On February 12, 2018, the Company executed an Executive Service Agreement (“Agreement”) with David Posel. The Agreement provides that Mr. Posel services as the Company’s Chief Operating Officer for a term of 4 years. The Agreement also provides for compensation to Mr. Posel of $5,000 cash per month and the issuance of 1 share of Series A Preferred Stock at the inception of the Agreement. The Agreement can be terminated upon the resignation or death of Mr. Posel, and also can be terminated by the Company due to the failure or neglect of Mr. Posel to perform his duties, or due to the misconduct of Mr. Posel in connection with the performance. On February 12, 2018, 1 share of CANB Series A Preferred Stock were issued to Mr. Posel (see Note 8).



23




On February 16, 2018, the Company executed an Executive Service Agreement (“Agreement”) with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 3 years. The Agreement also provides for compensation to Mr. Holtmeyer of $10,000 cash per month and the issuance of 3, 2 and 1 share of Series A Preferred Stock at the beginning of each year. The Agreement can be terminated upon the resignation or death of Mr. Holtmeyer, and also can be terminated by the Company due to the failure or neglect of Mr. Holtmeyer to perform his duties, or due to the misconduct of Mr. Holtmeyer in connection with the performance. On February 16, 2018, 3 shares of CANB Series A Preferred Stock were issued to Mr. Holtmeyer (see Note 8).


Consulting Agreements


On July 29, 2017, the Company executed a Consulting Agreement with Andrew W Holtmeyer for Mr. Holtmeyer to serve as the Company's consultant for monthly cash payment of $5,000 through July 29, 2018. Effective February 16, 2018, the Company terminated the agreement due to the replacement of an Executive Service Agreement.


On September 6, 2017, the Company executed a Consulting Agreement with T8 Partners LLC (“T8”) for T8 to serve as the Company's consultant for stock compensation of a total of 10,000,000 restricted shares. Pursuant to the agreement, the Company issued 2,500,000 restricted shares of CANB common stock to T8 on September 7, 2017. Effective October 27, 2017, the Company terminated the agreement due to non-performance by T8. On July 12,

2018, the Company received a response from T8 Partners LLC (“T8”) confirming that the 2,500,000 shares

requested to be returned by the Company in an arbitration filed on May 11, 2018 will be returned to the Company.


On November 9, 2017, the Company executed a Consulting Agreement with Healthcare Advisory Group Company (“Healthcare”) for Healthcare to serve as the Company's consultant for stock compensation of a total of 5,000,000 restricted shares. Pursuant to the agreement, the Company issued 2,500,000 restricted shares of CANB common stock to Healthcare on November 9, 2017. Effective March 6, 2018, the Company terminated the agreement due to non-performance by Healthcare.


Lease Agreements


On December 1, 2014, Prosperity entered into a lease agreement with KLAM, Inc. for office space in Hicksville, New York for an initial term of one year commencing December 1, 2014. The lease provides for monthly rentals of $2,500 and provides Prosperity an option to renew the lease after the initial term. The Company has continued to occupy this space after November 30, 2015 under a month to month arrangement at $2,500 per month. KLAM, Inc. is controlled by the wife of the Company's chief executive officer Marco Alfonsi.


On September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100 for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate taxes. On August 6, 2018, the Company renewed the lease agreement for a term of 36 months starting November 1, 2018. The lease provides for monthly rentals of $3,193 for lease year 1, $3,289 for lease year 2, and $3,388 for lease year 3.


Rent expense for the nine months ended September 30, 2018 and 2017 was $50,065 and $48,795, respectively.


At September 30, 2018, the future minimum lease payments under non-cancellable operating leases were:


Year ended December 31, 2018

  $    6,387

Year ended December 31, 2019

      38,508

Year ended December 31, 2020

      39,666

Year ended December 31, 2021

      33,880


Total

                $ 118,441



24




Major Customers


For the nine months ended September 30, 2018, one customer accounted for approximately 15% of total revenues.


For the nine months ended September 30, 2017, two customers accounted for approximately 45% and 29%, respectively, of total service revenues.


Public Offering of Units


On August 2, 2016, the Company’s Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. On a self-underwritten basis, the Company is offering up to 40,000,000 Units at a price of $0.05 per Unit or $2,000,000 maximum. Each Unit consists of one share of Company common stock and one warrant to purchase ½ share of Company common stock at a price of $0.10 per share for a period of three years. There is no minimum offering amount or escrow required as a condition to closing and the Company may sell significantly fewer Units than those offered. The offering will terminate on August 2, 2018 unless earlier terminated or extended by the Company’s filing of an amendment to the Registration Statement. To date, no Units have been sold.


NOTE 13 – Related Party Transactions


ProAdvanced Group, Inc. (“PAG”), an entity controlled by the Company’s chief executive officer, is a customer of CANB. At September 30, 2018, CANB had an account receivable from PAG of $7,240. For the nine months ended September 30, 2018, CANB had revenues from PAG of $5,000.


Island Stock Transfer (“IST”), an entity controlled by Carl Dilley, a Company director, is both a customer and vendor of CANB. At September 30, 2018, CANB had an account receivable from IST of $7,035 and an account payable to IST of $2,138. For the nine months ended September 30, 2018, CANB had revenues from IST of $4,000.


Stock Market Manager, Inc. is also an entity controlled by Mr. Dilley. For the nine months ended September 30, 2018, CANB had an account payable to Stock Market Manager Inc. of $1,676.


In order to facilitate its operations, the Company has entered into a Production Agreement with Pure Health Products, LLC (“PHP”), a New York limited liability company. Pursuant to the Production Agreement, PHP will manufacture, package, and sell the Company’s CBD infused products on an exclusive basis. PHP will not produce or manufacture any product containing any cannabis or hemp derivative for any person or entity other than the Company, and the Company controls the ingredients, recipe, manufacturing processes and procedures and quality and taste parameters for all Products produced at the PHP facility. PHP may also white label / rebrand or relabel the products on the Company’s behalf pursuant to “white label agreements” entered into between the Company and third-party customers. Credit card sales are processed through PHP as well. Through its contractual relationship with PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. In addition, the Company has the option to acquire certain assets of PHP should it elect to take over direct manufacture of its Products. For the nine months ended September 30, 2018, purchase of CBD infused products from PHP totaled $141,811. At September 30, 2018, CANB had an account receivable from PHP of $17,801.36 and an account payable to PHP of $12,222.27.


At September 30, 2018, we have a note receivable from PHP in the amount of $75,000. PHP is controlled by Pasquale Ferro. At September 30, 2018, we are indebted to Mr. Ferro and his wife Rosemary Ferro in the amount of $83,500. At September 30, 2018, CANB has accrued account payable of $65,000 to Pasquale Ferro, pursuant to a consulting agreement dated April 13, 2017. The consulting agreement was expired in April, 2018.


The Company considers Pure Health products to be a variable interest entity as prescribed under Accounting guidelines. Due to the fact that the company is not dependent on Pure Health Products solely for manufacture, no consolidation of Pure Heath Products financial information is required.



25




During the nine months ended September 30, 2018, we had products sales to related parties totaling $0.


NOTE 14 – Subsequent Events


From October 2, 2018 to October 22, 2018, RedDiamond Partners converted aggregately 86,736 shares of CANB Series B Preferred Stock to 11,164,040 shares of CANB common stock.


On October 15, 2018, the Company executed an Employment Agreement (“Agreement”) with Stanley L. Teeple. The Agreement provides that Mr. Teeple services as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The Agreement also provides for compensation to Mr. Teeple of $15,000 cash per month and the issuance of 1 share of Series A Preferred Stock upon execution of the Agreement. The Agreement can be terminated upon the resignation or death of Mr. Teeple, and also can be terminated by the Company due to the failure or neglect of Mr. Teeple to perform his duties, or due to the misconduct of Mr. Teeple in connection with the performance.


On October 19, 2018, the Company paid off the note dated June 6, 2018 to a lender. The note carries a principal of $114,000, 12 % annum interest rate and due at March 9, 2019. The difference between carrying value of the notes at October 19, 2018 and repayment of $179,000 will be charged to interest expense in the three months ended December 31, 2018.


On October 23, 2018, the Company issued 200,000 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated October 18, 2018, in exchange for proceeds of $190,000, or $0.95 per CANB Series B Preferred share.


On November 12, 2018, the Company executed an Employment Agreement (“Agreement”) with Marco Alfonsi

(“Alfonsi”) for Alfonsi to serve as the Company's chief executive officer for cash compensation of $15,000 per month. Pursuant to the agreement, three of the eight previously issued shares of CANB Series A Preferred Stock will be returned to the Company. Alfonsi may terminate his employment upon 30 days written notice to the Company. The Agreement has an initial term of four years and can be terminated upon the resignation or death of Mr. Alfonsi, and also can be terminated by the Company due to the failure or neglect of Mr. Alfonsi to perform his duties, or due to the misconduct of Mr. Alfonsi in connection with the performance.


On November 5, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $8,475 fair value of the 250,000 shares of CANB common stock will be charged to consulting fees in the three months ended December 31, 2018.


On October 10, 2018, Canbiola and International Spirits and Beverage Group, Inc. (ISBG) have signed a definitive agreement whereby Canbiola will manufacture products containing CBD in our manufacturing facility in WA to meet ISBG’s specification.  Once operational, the agreement is anticipated to allow for additional flavored beverages and incrementally increase in volume with new products being developed.  


On October 11, 2018, the Company issued 3,000,000 stock options to the Company’s Chief Officer. The options are exercisable at an exercise price of $0.001 per share and expire October 11, 2022.


In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through November 13, 2018, the date on which these consolidated financial statements were available to be issued. Except as disclosed above, there were no material subsequent events that required recognition or additional disclosure in these consolidated financial statements.



26



ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


General


Canbiola was originally formed as a FL Corporation on October 11, 2005, as Prosperity Systems, Inc., subsequently merged with WrapMail, Inc. January 5, 2015 and operated as an email management company and which products are no longer being used.  In mid 2015, the company changed its name and its business model as formulator, developer, manufacturer, and distributor of a variety of Cannabidiol (CBD) based products. Canbiola has developed its own line of proprietary products including Nano pure hemp oil drops, hemp slave, and CBD Cryogel.   Cannabis is currently federally illegal and has legalized for medical purposes in some form in a limited number of states, but pure CBD products are legal in all 50 states. The company has hundreds of doctors using and recommending its products and looks to expand into additional markets and products in the near future.


Results of Operations


Three Months Ended September 30, 2018 compared with Three Months Ended September 30, 2017:


Revenues increased $141,230 from $22,098 in 2017 to $163,328 in 2018.


Cost of product sales increased $79,079 from $10,559 in 2017 to $89,638 in 2018 due to the launch of new product sales.


Officers compensation and payroll taxes increased $56,873 from $19,377 in 2017 to $76,250 in 2018. The 2018 expense amount ($76,250 consists of compensations accrued to our Chief Executive Officer ($30,000), Executive Vice President Business Development ($30,000) and compensation paid to Chief operating Officer ($16,250) pursuant to their respective employment or service agreements. The 2017 expense amount ($19,377) consists of salaries accrued to our Chief Executive Officer ($18,000) pursuant to their respective employment agreements and related payroll taxes ($1,377).


Consulting fees increased $434,308 from $110,709 in 2017 to $545,017 in 2018. The 2018 expense amount ($545,017) includes stock-based compensation of $518,317, resulting from stock issued for the service of consultants. The 2017 expense amount ($110,709) includes stock-based compensation of $76,209, resulting from stock issued for the service of consultants.


Directors fees remained as $0 in 2017 and 2018.


Advertising expense increased $11,933 from $13,802 in 2017 to $25,735 in 2018.  


Hosting expense decreased $1,218 from $2,932 in 2017 to $1,714 in 2018.


Rent expense increased $735 from $16,265 in 2017 to $17,000 in 2018.


Professional fees increased $4,189 from $7,970 in 2017 to $12,159 in 2018.


Depreciation of property and equipment increased $573 from $807 in 2017 to $1,381 in 2018.  


Amortization of intangible assets decreased $993 from $993 in 2017 to $0 in 2018.


Other operating expenses increased $40,705 from $20,642 in 2017 to $61,347 in 2018. The increase was due largely to higher travel expense and office expenses in 2018 compared to 2017.


Net income decreased from income of $18,103 in 2017 to a loss of $4,155,699 in 2018. The decrease was due to the $626,185 increase in total operating expenses and the decrease of $3,688,845 in other income – net from $200,061 other income – net in 2017 to $3,488,786 other expense– net in 2018, offset by the $141,230 increase in revenues.



27




Nine Months Ended September 30, 2018 compared with Nine Months Ended September 30, 2017:


Revenues increased $321,348 from $65,940 in 2017 to $387,288 in 2018.


Cost of product sales increased $169,379 from $11,698 in 2017 to $181,077 in 2018 due to the launch of new product sales.


Officers compensation and payroll taxes increased $154,291 from $58,209 in 2017 to $212,500 in 2018. The 2018 expense amount ($212,500 consists of compensations accrued to our Chief Executive Officer ($90,000), Executive Vice President Business Development ($82,500) and compensation paid to Chief operating Officer ($40,000) pursuant to their respective employment or service agreements. The 2017 expense amount ($58,209) consists of salaries accrued to our Chief Executive Officer ($54,000) pursuant to their respective employment agreements and related payroll taxes ($4,209).


Consulting fees increased $1,006,202 from $182,491 in 2017 to $1,188,693 in 2018. The 2018 expense amount ($1,188,693) includes stock-based compensation of $1,091,094, resulting from stock issued for services of consultants. The 2017 expense amount ($182,491) includes stock-based compensation of $113,438, resulting from stock issued for the services of consultants.


Directors fees increased $185,400 from $0 in 2017 to $185,400 in 2018. The 2018 expense amount ($185,400) are stock-based compensation paid to two directors of the Company.


Advertising expense increased $27,431from $35,312 in 2017 to $62,743 in 2018.  


Hosting expense decreased $8,427 from $17,619 in 2017 to $9,192 in 2018.


Rent expense increased $1,270 from $48,795 in 2017 to $50,065 in 2018.


Professional fees increased $11,792 from $70,706 in 2017 to $82,498 in 2018.


Depreciation of property and equipment increased $564 from $2,421 in 2017 to $2,985 in 2018.  


Amortization of intangible assets decreased $2,979 from $2,979 in 2017 to $0 in 2018.


Other operating expenses increased $101,013 from $81,161 in 2017 to $182,174 in 2018. The increase was due largely to higher travel expense and office expenses in 2018 compared to 2017.


Net loss increased $4,256,722 from $466,245 in 2017 to $4,723,017 in 2018. The increase was due to the $1,476,557 increase in total operating expenses, and the increase of $2,932,184 in other expense – net from $20,794 other expense – net in 2017 to $2,952,978 other expense– net in 2018 and offset by the $321,348 increase in revenues.


Liquidity and Capital Resources


At September 30, 2018, we had cash and cash equivalents of $380,576 and positive working capital of $299,434.


Cash and cash equivalents increased $378,924 from $1,652 at December 31, 2017 to $380,576 at September 30, 2018. For the nine months ended September 30, 2018, $836,429 was provided by financing activities, $38,355 was used in investing activities, and $419,150 was used in operating activities.


We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.



28




We currently have no commitments with any person for any capital expenditures.


We have no off-balance sheet arrangements.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

None.

 

ITEM 4. CONTROLS AND PROCEDURES

 

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

As of September 30, 2018, our principal executive officer and principal financial officer conducted an evaluation regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon the evaluation of these controls and procedures, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

 

(B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

There were no changes in our internal control over financial reporting in our fiscal quarter for the period September 30, 2018 covered by this Quarterly Report on Form 10-Q, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

 




29




PART II-OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently a party to any legal proceedings.

 

ITEM 1A. RISK FACTORS

 

As a smaller reporting company, we are not required to provide risk factors in this Form 10-Q.

  

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Sales of unregistered securities during the quarterly period ended September 30, 2018 follows:


From July 24, 2018 to September 26, 2018, the Company issued aggregately 53,839,743 shares of CANB common stock to RedDiamond in exchange for the retirement of 263,263 shares of CANB Series B Preferred Stock.


On July 31, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $3,225 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.


On August 9, 2018, Company received a conversion notice from a lender. As a result, 9,544,292 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $50,000 and accrued interest payable of $7,266 at August 21, 2018.


On August 28, 2018, the Company issued 2,000,000 shares of CANB common stock to a consultant for services rendered. The $159,600 fair value of the 2,000,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 6, 2018, the Company issued 300,000 shares of CANB common stock to a consultant for services rendered. The $16,500 fair value of the 300,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 6, 2018, the Company issued 500,000 shares of CANB common stock to a consultant for services rendered. The $27,500 fair value of the 500,000 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.


On September 6, 2018, the Company issued 8,430,331 shares of CANB common stock to a lender in satisfaction of

notes payable of $38,500 and accrued interest payable of $7,867.


On September 7, 2018, the Company issued 5,121,694 shares of CANB common stock to a lender in satisfaction of

notes payable of $25,000 and accrued interest payable of $3,169.


On September 7, 2018, the Company issued 10,045,667 shares of CANB common stock to a lender in satisfaction of

notes payable of $50,000 and accrued interest payable of $10,274.


On September 8, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $11,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 10, 2018, the Company issued 500,000 shares of CANB common stock to a consultant for services rendered. The $19,950 fair value of the 500,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.



30




On September 17, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $10,750 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 18, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $13,725 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 20, 2018, the Company issued 7,407,407 shares of CANB common stock to an investor pursuant to a Stock Purchase Agreement dated September 17, 2018, in exchange for proceeds of $200,000, or $0.027 per CANB common share.


On September 21, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $14,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


On September 25, 2018, the Company issued 2,000,000 shares of CANB common stock to a consultant for services rendered. The $97,400 fair value of the 2,000,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.


With respect to the transactions noted above, each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a “sophisticated person”, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(a)(2) of the Securities Act of 1933.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 



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ITEM 6. EXHIBITS


3.1

 

Articles of Incorporation, as amended*

3.2

 

Bylaws*

31.1

 

Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer

31.2

 

Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer

32.1

 

Section 1350 certification of Chief Executive Officer

32.2

 

Section 1350 certification of Chief Financial Officer

99.1

 

Amendment to Articles of Incorporation and Certificate of Designations for Series B Preferred Stock **

99.2

 

Certificate of Designations for Series B Preferred Stock***

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

*         filed with the Form S-1 Registration Statement filed with the SEC on December 2, 2015 and incorporated

           herein by reference.


**       filed with the Form 8-K filed with the SEC on November 15, 2017 and incorporated herein by reference.


***     filed with the Form 8-K filed with the SEC on October 18, 2017 and incorporated herein by reference.

 




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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

CANBIOLA, INC.

 

 

 

Date: November 14, 2018

By:

/s/ Marco Alfonsi

 

 

Marco Alfonsi, Chief Executive Officer

 

 

 

Date: November 14, 2018

By:

/s/ Stanley L. Teeple

 

 

Stanley L. Teeple, Chief Financial Officer

 

 

 

 







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