CFN Enterprises Inc. - Quarter Report: 2022 September (Form 10-Q)

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, 2022

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

For the transition period from ________ to ________

Commission File Number: 000-52635

CFN ENTERPRISES INC.

(Exact name of registrant as specified in its charter)

Delaware	90-1559541
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

600 E. 8TH STREET

WHITEFISH, MT 59937

(Address of principal executive offices) (Zip code)

(833) 420-2636

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

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

The number of shares outstanding of the registrant’s Common Stock, $0.001 par value per share, as of November 8, 2022 was 36,729,179.

When used in this quarterly report, the terms “CFN Enterprises,” “the Company,” “we,” “our,” and “us” refer to CFN Enterprises Inc., a Delaware corporation, and its consolidated subsidiaries, unless the context indicates otherwise.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

This quarterly report on Form 10-Q contains certain forward-looking statements. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. For example, when we discuss our expectations for 2022, our expectations for revenue sources, costs of revenue and expenses going forward, and that we will continue to pursue strategic transactions and opportunities, we are using forward-looking statements. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. These factors include, but are not limited to, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. The business and operations of CFN Enterprises Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under “Item 1A. Risk Factors” contained in our annual report on Form 10-K as filed with the Securities and Exchange Commission, or the SEC, on May 16, 2022. Readers are also urged to carefully review and consider the various disclosures we have made in this report and in our annual report on Form 10-K.

CFN ENTERPRISES INC.

INDEX

	Page

PART I - FINANCIAL INFORMATION:	1

Item 1. Financial Statements and accompanying Notes to the Financial Statements (Unaudited)	1

Item 2. Management’s Discussion and Analysis of Financial Position and Results of Operations	19

Item 4. Controls and Procedures	25

PART II - OTHER INFORMATION:	25

Item 5. Other Information	25

Item 6. Exhibits	25

SIGNATURES	26

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CFN ENTERPRISES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,	December 31,
	2022	2021
	(Unaudited)
ASSETS
Current assets:
Cash	`$108,741`	`$170,015`
Restricted cash	`20,067`	`20,014`
Accounts receivable, net	`54,847`	`142,271`
Inventory	`17,225`	`157,706`
Marketable securities	`2,272`	`46,516`
Prepaid expenses and other current assets	`98,825`	`115,000`
Total current assets	`301,977`	`651,522`

Investments, at cost	`200,000`	`200,000`
Property and equipment, net	`4,808,812`	`5,135,996`
Right of use asset	`515,275`	`663,575`
Other assets	`46,766`	`42,131`
Total assets	`$5,872,830`	`$6,693,224`

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	`$2,536,409`	`$1,997,039`
Accrued liabilities	`2,118,881`	`1,675,230`
Payments made in advance of securities date	`250,000`	`590,020`
Due to related party	`540,707`	`495,264`
Deferred revenue	`33,300`	`39,824`
Current portion of notes payable	`1,374,241`	`2,219,882`
Current portion of right of use liability	`219,305`	`198,869`
Current liabilities of discontinued operations	`79,823`	`79,823`
Total current liabilities	`7,152,666`	`7,295,951`
Right of use liability	`283,342`	`475,325`
Long-term note payable, net of current portion and discounts	`1,889,465`	`1,317,691`
Total liabilities	`9,325,473`	`9,088,967`

Commitments and contingencies

Stockholders' deficit:
Series A preferred stock, $0.001 par value, 500 shares authorized, 500 shares issued and outstanding as of September 30, 2022 and December 31, 2021	`1`	`1`
Series B preferred stock, $0.001 par value, 3,000 shares authorized, 3,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021	`3`	`3`
Common stock, $0.001 par value, 500,000,000 shares authorized, 33,822,379 and 31,679,481 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	`33,822`	`31,679`
Additional paid-in capital	`49,411,944`	`46,399,451`
Accumulated deficit	`(52,904,949)`	`(48,833,880)`
Non-controlling interest	`6,536`	`7,003`
Total stockholders' deficit	`(3,452,643)`	`(2,395,743)`
Total liabilities and stockholders' deficit	`$5,872,830`	`$6,693,224`

See accompanying notes to the unaudited condensed consolidated financial statements

CFN ENTERPRISES INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2022	2021	2022	2021

Net revenues	`$840,970`	`$948,254`	`$3,828,634`	`$1,451,230`
Cost of revenue	`1,309,853`	`730,186`	`5,710,701`	`949,170`
Gross profit (loss)	`(468,883)`	`218,068`	`(1,882,067)`	`502,060`

Operating expenses:
Selling, general and administrative	`513,200`	`847,888`	`1,788,872`	`1,551,790`
Total operating expenses	`513,200`	`847,888`	`1,788,872`	`1,551,790`

Loss from operations	`(982,083)`	`(629,820)`	`(3,670,939)`	`(1,049,730)`

Other income (expense):
Gain on property and equipment	`-`	`-`	`87,933`	`-`
Loss on extinguishment of debt	`-`	`-`	`-`	`(172,500)`
Unrealized loss on marketable securities	`(24,750)`	`23,341`	`(44,244)`	`31,761`
SBA PPP loan forgiveness	`-`	`263,000`	`-`	`263,000`
Interest expense	`(115,257)`	`(23,055)`	`(267,644)`	`(53,723)`
Interest income	`43`	`2`	`52`	`9`
Other income	`0`	`-`	`3,772`	`-`
Total other income (expense), net	`(139,963)`	`263,288`	`(220,130)`	`68,547`

Provision for income taxes	`-`	`-`	`-`	`-`
Net loss	`$(1,122,046)`	`$(366,532)`	`$(3,891,069)`	`$(981,183)`
Preferred stock interest	`60,000`	`60,000`	`180,000`	`180,000`
Net loss available to common shareholders	`$(1,182,046)`	`$(426,532)`	`$(4,071,069)`	`$(1,161,183)`
Net loss attributable to non-controlling interest	`422`	`(26,122)`	`467`	`(34,960)`
Net loss available to CFN Enterprises common shareholders	`$(1,182,468)`	`$(452,654)`	`$(4,071,536)`	`$(1,196,143)`

Net loss per common share - basic and diluted	`$(0.03)`	`$(0.04)`	`$(0.12)`	`$(0.11)`

Weighted average common shares outstanding - basic and diluted	`33,822,379`	`9,136,493`	`32,951,092`	`8,687,687`

See accompanying notes to the unaudited condensed consolidated financial statements

CFN ENTERPRISES INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

Series A

Series B

Common

Additional

Non-

Total
Stockholders'

Preferred Stock

Common Stock

Stock

Paid-in

Accumulated

controlling

Equity

Shares

Amount

Shares

Amount

Shares

Amount

Issuable

Capital

Deficit

Interest

(Deficit)

Balances at December 31, 2020

500

$1

3,000

$3

6,986,147

$6,986

$492,500

$34,379,644

$(36,384,202)

$-

$(1,505,068)

Issuance of common stock

-

810,000

810

(492,500)

501,690

-

10,000

Shares issued as payment for accrued interest

-

116,667

117

-

157,383

-

157,500

Non-controlling interest contribution

-

1,410

Preferred stock interest

-

(60,000)

-

(60,000)

Net loss

-

(331,709)

(15,001)

(346,710)

Balances at March 31, 2021

500

1

3,000

3

7,912,814

7,913

-

35,038,717

(36,775,910)

(13,591)

(1,742,867)

Issuance of common stock

-

133,333

133

-

159,867

-

160,000

Shares issued as exercise of warrant

-

50,000

-

50,000

Preferred stock interest

-

(60,000)

-

(60,000)

Net loss

-

(291,780)

23,839

(267,941)

Balances at June 30, 2021

500

1

3,000

3

8,046,147

8,046

50,000

35,198,584

(37,127,690)

10,248

(1,860,809)

Issuance of common stock

-

23,600,000

23,600

-

10,596,400

-

10,620,000

Shares issued as for exercise of warrant

-

33,333

33

(50,000)

49,967

-

Preferred stock interest

-

(60,000)

-

(60,000)

Net loss

-

(392,654)

26,122

(366,532)

Balances at September 30, 2021

500

$1

3,000

$3

31,679,481

$31,679

-

$45,844,951

$(37,580,344)

$36,370

$8,332,659

Balances at December 31, 2021

500

$1

3,000

$3

31,679,481

$31,679

$-

$46,399,451

$(48,833,880)

$7,003

$(2,395,743)

Payment of CSIS debt by shareholder

-

415,875

-

415,875

Preferred stock interest

-

(60,000)

-

(60,000)

Net loss

-

(1,302,182)

(23)

(1,302,205)

Balances at March 31, 2022

500

1

3,000

3

31,679,481

31,679

-

46,815,326

(50,196,062)

6,980

(3,342,072)

Issuance of common stock for proceeds

-

1,142,898

1,143

-

798,877

-

800,020

Purchase of property and equipment with common stock

-

1,000,000

1,000

-

699,000

-

700,000

Warrants issued with promissory notes

-

302,537

-

302,537

Payment of CSIS debt by shareholder

-

477,723

-

477,723

Preferred stock interest

-

(60,000)

-

(60,000)

Net loss

-

(1,466,841)

(22)

(1,466,863)

Balances at June 30, 2022

500

1

3,000

3

33,822,379

33,822

-

49,093,462

(51,722,903)

6,958

(2,588,657)

Payment of CSIS debt by shareholder

-

318,482

-

318,482

Preferred stock interest

-

(60,000)

-

(60,000)

Net loss

-

(1,122,046)

(422)

(1,122,468)

Balances at September 30, 2022

500

$1

3,000

$3

33,822,379

$33,822

$-

$49,411,944

$(52,904,949)

$6,536

$(3,452,643)

See accompanying notes to the unaudited condensed consolidated financial statements

CFN ENTERPRISES INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30,
	2022	2021
Cash flows from operating activities:
Net loss	`$(3,891,069)`	`$(981,183)`
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	`1,209,788`	`102,720`
Forgiveness of SBA PPP loan	`-`	`(263,000)`
Loss on extinguishment of debt		`172,500`
Amortization of deferred financing cost	`72,855`	`4,437`
Unrealized loss (gain) on marketable securities	`44,244`	`(31,761)`
Gain on sale of property and equipment	`(87,933)`	`-`
Amortization of right of use asset	`148,300`	`(17,530)`
Non-controlling interest	`(467)`	`1,410`
Changes in operating assets and liabilities:
Accounts receivable, net	`87,424`	`30,635`
Inventory	`140,481`	`312,819`
Prepaid expenses and other assets	`11,540`	`8,000`
Accounts payable and accrued expenses	`805,325`	`517,496`
Deferred revenue	`(6,524)`	`(76,027)`
Payments made in advance of securities date	`250,000`	`-`
Right of use liability	`(171,547)`	`(35,668)`
Net cash used in operating activities	`(1,387,583)`	`(255,152)`
Cash flows from investing activities:
Purchase of property and equipment, net	`(127,588)`	`(5,710)`
Cash acquired in acquisition of CNP operating, LLC.	`-`	`60,590`
Net cash used in (provided by) investing activities	`(127,588)`	`54,880`
Cash flows from financing activities:
Net advances from related parties	`45,443`	`-`
Proceeds from promissory note	`1,233,000`	`161,894`
Repayments of note payable	`(34,493)`	`-`
Proceeds from sale of common stock	`210,000`	`10,000`
Proceeds from warrant exercised	`-`	`50,000`
Net cash provided by financing activities	`1,453,950`	`221,894`
Net change in cash and cash equivalents	`(61,221)`	`21,622`
Cash and restricted cash at beginning of period	`190,029`	`180,115`
Cash and restricted cash at end of period	`$128,808`	`$201,737`

Reconciliation of cash and restricted cash:
Cash at beginning of period	`$170,015`	`$160,115`
Restricted cash at beginning of period	`20,014`	`20,000`
Cash and restricted cash at beginning of period	`$190,029`	`$180,115`

Cash at end of period	`$108,741`	`$181,725`
Restricted cash at end of period	`20,067`	`20,012`
Cash and restricted cash at end of period	`$128,808`	`$201,737`

Supplemental disclosure of cash flow information:
Cash paid for income taxes	`$-`	`$-`
Cash paid for interest	`$-`	`$-`

Supplemental disclosure of non-cash investing and financing activities:
Payment of CSIS debt by shareholder	`$1,212,080`	`$-`
Accrual of preferred stock interest	`$180,000`	`$180,000`
Right of use asset	`$-`	`$181,134`
Purchase of property and equipment with common stock	`$700,000`	`$-`

Purchase of equipment with notes payable	`$55,016`	`$-`
Settlement of accounts payable with sale of equipment	`$212,067`	`$-`
Warrants issued with promissory notes	`$302,537`	`$-`
Issuance of common stock sold in previous year	`$-`	`$492,500`
Investments received for services	`$-`	`$92,175`
Issuance common stock for acquisition of CNP Operating, LLC	`$-`	`$10,620,000`

See accompanying notes to the unaudited condensed consolidated financial statements

CFN ENTERPRISES INC.

NOTES TO UNAUDITED CONDENSED CONSOLDIATED FINANCIAL STATEMENTS

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

Organization

CFN Enterprises Inc., formerly known as Accelerize Inc., or the Company, is a Delaware corporation incorporated on November 22, 2005. Effective October 22, 2019, the Company filed a certificate of amendment to its certificate of incorporation with the Secretary of State of the State of Delaware to change its corporate name to CFN Enterprises Inc.

On May 15, 2019, the Company entered into an asset purchase agreement or the Emerging Growth Agreement with Emerging Growth, LLC, or the Seller or Emerging Growth, pursuant to which the Company acquired certain assets from the Seller related to its sponsored content and marketing business for a purchase price consideration consisting of $420,000 in cash, 30,000,000 shares of the Company’s common stock, and 3,000 shares of Series B preferred stock with a total stated value of $3,000,000 which bears interest at 6% per annum and is convertible into the Company’s common stock at a conversion price to be mutually agreed in the future, without voting rights or a liquidation preference except with respect to default interest. The securities were issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended. The closing of the purchase of the assets pursuant to the Emerging Growth Agreement occurred on June 20, 2019.

The Company’s operations consist of the sponsored content and marketing business from the assets acquired pursuant to the Emerging Growth Agreement.

On January 22, 2021, the Company invested $35,000 in a new joint venture focused on sponsored content and marketing called East West Asset Management or East West. East West was formed as a Limited Liability Company in the State of Nevada on November 13, 2020. CFN owns 50% of the entity and one of its officers holds the title of Member Manager in East West. The Company has concluded that East West is a variable interest entity in accordance with applicable accounting standards and guidance. As such, the accounts and results of East West have been included in the Company’s condensed consolidated financial statements.

On August 23, 2021, the Company entered into securities purchase agreements with CNP Operating, LLC, a Colorado limited liability company, or CNP Operating, and the owners of all of the equity interests of CNP Operating, or the Owners, whereby the Company acquired 100% of CNP Operating from the Owners in exchange for an aggregate of 23.6 million shares of the Company’s common stock. The securities were issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended. On August 25, 2021 the transaction was closed and CNP Operating became a wholly owned subsidiary of the Company.

CNP Operating is a leading cannabidiol, or CBD, manufacturer vertically integrated with a 360 degree approach to the processing of high quality CBD products designed for growers, pharmaceutical, wellness providers, and retailers needs. CNP Operating provide toll processing services which includes; extraction, distillation, remediation, isolation and chromatography. CNP Operating has a professional, organized and dedicated team with 30 years of combined experience. CNP Operating’s state of the art facility has 30,000 square feet filled with proprietary technology distillation equipment, in house lab testing, distribution warehouse and white labelling product formulation and design.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis which implies the Company will continue to meet its obligations for the next 12 months as of the date these financial statements are issued.

The Company had a working capital deficit of $6,850,689 and an accumulated deficit of $52,904,949 as of September 30, 2022. The Company also had a net loss of $3,891,069 for the nine months ended September 30, 2022.

Management’s plan to continue as a going concern includes raising capital in the form of debt or equity, growing the CNP Operating business and its existing business acquired under the Emerging Growth Agreement, managing and reducing operating and overhead costs and continuing to pursue strategic transactions and opportunities including launching an e-commerce network focused on the sale of general wellness cannabidiol, or CBD, products

These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

COVID-19

The outbreak of a strain of coronavirus (COVID-19) in the U.S. has had an unfavorable impact on our business operations. Our main customer market suffered its worst decline, decreasing our revenue. Mandatory closures of businesses imposed by the federal, state and local governments to control the spread of the virus disrupted the operations of our management, business and finance teams. In addition, the COVID-19 outbreak has adversely affected the U.S. economy and financial markets, which may result in a long-term economic downturn that could negatively affect future performance. We took steps to diversify our revenue model by creating our CBD ecommerce business which has higher margins during the second half of 2020 and to acquire CNP Operating in August 2021and to reduce our costs. The extent to which COVID-19 will impact our business and our consolidated financial results further will depend on future developments which are highly uncertain and cannot be predicted at this time, but may result in a material adverse impact on our business, results of operations and financial condition.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries CNP Operating, CFN Real Estate, LLC, a Delaware limited liability company, CFN Real Estate II, LLC, a Delaware limited liability company, and East West. All intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.

The accompanying consolidated financial statements also include the results of operations of the Company and Cake Marketing UK Ltd., or the Subsidiary. The Company discontinued its operations associated with its CAKE Business and the operations of its Subsidiary in May 2019. The Subsidiary was officially dissolved in August 2020. These accounts have been presented as discontinued operations in the accompanying consolidated financial statements. Continuing operations presented in periods prior reflect administrative expenses associated with business insurance, legal and accounting fees that the Company will continue to incur.

During the period, the Company concluded that East West is a variable interest entity in accordance with applicable accounting standards and guidance. As such, the accounts and results of East West have been included in the Company’s condensed consolidated financial statements.

These unaudited condensed financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America, or GAAP. These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2021 and 2020, which are included in the Company’s December 31, 2021 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on May 16, 2022. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation of these may be determined in that context. The results of operations for the period ended September 30, 2022 are not necessarily indicative of results for the entire year ending December 31, 2022.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP, 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 date of the financial statements and the reporting amounts of revenues and expenses during the reported period. Actual results will differ from those estimates. Included in these estimates are assumptions about collection of accounts receivable, useful life of fixed assets and intangible assets, borrowing rate considered for operating lease right-of-use asset and related operating lease liability, and assumptions used in Black-Scholes valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.

Financial Statement Reclassification

Certain account balances from prior periods have been reclassified in these consolidated financial statements to conform to current period classifications.

Segment Reporting

The Company’s sponsored content and marketing business acquired from Emerging Growth in June 2019 has historically been its one reportable segment. In late 2020, the Company launched an e-commerce network focused on the sale of general wellness CBD products. As of December 31, 2021, sales of these products and the operating activities associated with the e-commerce business have not been significant. However, management expects this e-commerce business to eventually become a reportable segment under GAAP as the business grows and the activity becomes more significant. The Company’s acquisition of CNP Operating in August 2021 results in an additional reporting segment that will be provided in future periods.

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased, to be cash equivalents. The Company has restricted cash as a result of its corporate card program through its bank, which requires collateral placed in a money market account. At September 30, 2022, the Company had a restricted cash balance of $20,067 included as a component of total cash and restricted cash as presented on the accompanying unaudited condensed consolidated statement of cash flows.

Accounts Receivable

The Company’s account receivables are due from customers relating to contracts to provide investor relation services. Collateral is currently not required. The Company also maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make payments. The Company periodically reviews these estimated allowances, including an analysis of the customers’ payment history and creditworthiness, the age of the trade receivable balances and current economic conditions that may affect a customer’s ability to make payments as well as historical collection trends for its customers as a whole. Based on this review, the Company specifically reserves for those accounts deemed uncollectible or likely to become uncollectible. When receivables are determined to be uncollectible, principal amounts of such receivables outstanding are deducted from the allowance. The allowance for doubtful accounts as of September 30, 2022 and December 31, 2021 amounted to $378,692 and $337,192, respectively.

Inventory

The Company’s inventory consists of finished goods acquired for its e-commerce network business it is currently in the process of launching. The inventory is valued at the lower of cost (first-in, first-out) or estimated net realizable value.

Concentration of Credit Risks

The Company is subject to concentrations of credit risk primarily from cash and cash equivalents and accounts receivable.

The Company’s cash and restricted cash accounts are held at a financial institution and are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to $250,000. From time-to-time, the Company’s bank balances exceed the FDIC insurance limit. To reduce its risk associated with the failure of such financial institutions, the Company periodically evaluates the credit quality of the financial institution in which it holds deposits.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification, or ASC, 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.

The Company accounts for revenues when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Payment terms vary by client and the services offered.

Subsequent to the closing of the Emerging Growth Agreement on June 20, 2019, the Company’s revenue is generated from the sale of promotional service packages to its customers ranging from 3 to 6 months. The Company offers different packages tailored to the type and stage of the potential customer, such as public companies looking to increase their shareholder base, as well as private companies potentially looking to go public and attract capital and publicity. The services provided by the Company include advertising, publishing of interviews and articles across its network and featuring of client content on its newsletters and social media. The packages all have fixed prices that are billed monthly over the terms of the agreement in even amounts. The Company recognizes revenue for its performance obligation associated with its contracts with customers over time as work is performed, which is deemed to occur evenly throughout the duration of the contract. This also reflects the pattern in which costs are incurred on performing the contracts. To the extent revenue recognized on contracts at each period end exceeds collections, the amounts are reflected as accounts receivable. To the extent collections on contracts at each period end exceeds revenue recognized, the amounts are reflected as deferred revenue.

The Company accounts for its CNP Operating revenues when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Payment terms vary by client and the services offered.

Shipping and Handling Fees and Costs

Amounts billed to customers for shipping and handling fees are presented in revenue. Costs incurred for shipping and handling are included in cost of revenue.

Fair Value of Financial Instruments

The Company accounts for assets and liabilities measured at fair value on a recurring basis in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities.

Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Additional Disclosures Regarding Fair Value Measurements

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and lines of credit approximate their fair value due to the short-term maturity of these items. The Company’s notes payable approximate their fair value due to the market rate of interest on the notes.

Advertising

The Company expenses advertising costs as incurred. Advertising expenses for the three months ended September 30, 2022 and 2021 amounted to $4,761 and $12,333, respectively. Advertising expenses for the nine months ended September 30, 2022 and 2021 amounted to $23,172 and $45,677, respectively.

Income Taxes

Income taxes are accounted for in accordance with the provisions of ASC Topic 740, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized, but no less than quarterly.

For interim periods, the Company uses the effective income tax rate method resulting in zero income tax for the nine months ended September 30, 2022 and 2021.

Property and Equipment

Property and equipment are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives of five years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized.

Investments

On December 24, 2020, the Company acquired a 9.8% interest in the outstanding stock of a privately held company for $200,000. As the stock has no readily determinable fair values, the Company accounts for this stock received using the cost method, less adjustments for impairment. At each reporting period, management reviews the status of the investment to determine if any indicators of impairment have occurred.

There were no impairment charges recorded related to investments during the three and nine months ended September 30, 2022.

Long-Lived Assets

In accordance with ASC 360-10, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.

Basic and Diluted Earnings Per Share

Basic earnings per share are calculated by dividing income available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method). As of September 30, 2022, the Company had 0 outstanding stock options and 988,500 outstanding warrants which were excluded from the calculation of diluted earnings per share because their effects were anti-dilutive. As of September 30, 2021, the Company had 210,667 outstanding stock options and 312,500 outstanding warrants which were excluded from the calculation of diluted earnings per share because their effects were anti-dilutive. As a result, the basic and diluted earnings per share are the same for each of the periods presented.

Share-Based Payment

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, or ASC 718. Under the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.

The Company has elected to use the Black-Scholes option-pricing model to estimate the fair value of its options, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of stock option awards. Compensation expense recognized in the statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Common Stock Awards

The Company has granted common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash.

Warrants

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 6, Stockholders’ Deficit.

Leases

The Company adopted Accounting Standards Update No. 2016-02, Leases (“Topic 842”) using the modified retrospective method. This accounting standard requires a lessee to recognize an asset and liability for most leases on its balance sheet. Upon adoption, right-of-use (ROU) assets and lease liabilities for operating leases were recorded in the amount of $181,134 and $181,134, respectively.

The Company elected the practical expedient method permitted under the transition guidance, which allows a carryforward of historical lease classification, the assessment on whether a contract was or contains a lease, and the initial direct costs for any leases that existed prior to July 1, 2019. The Company also elected to recognize the associated lease payments in the consolidated statements of operations on a straight-line basis over the lease term.

Under Topic 842, the Company determines if an arrangement is a lease at inception. ROU assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement and leases with an initial term of 12 months or less are not included in lease liabilities or ROU asset. As most leases do not provide an implicit rate, a rate which approximates the Company’s incremental borrowing rate is used, based on the information available at commencement date, in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs. Variable lease costs are expensed as incurred. Lease agreements generally do not contain residual value guarantees or restrictive covenants. Over the lease term, the Company uses the effective interest rate method to account for the lease liability as lease payments are made and the ROU asset is amortized in a manner that results in straight-line expense recognition.

NOTE 3: PROPERTY AND EQUIPMENT

The Company’s property and equipment relating to continuing operations consisted of the following:

	September 30,	December 31,
	2022	2021
Machinery & equipment	`$7,299,568`	`$7,732,643`
Building	`1,154,152`	`-`
Land	`22,719`	`-`
Furniture and equipment and leasehold improvements	`550,103`	`411,294`
	`9,026,542`	`8,143,937`
Less: Accumulated depreciation	`(4,217,730)`	`(3,007,941)`
	`$4,808,812`	`$5,135,996`

On April 29, 2022, the Company issued 1,000,000 shares of common stock in connection with the closing of the purchase of property and equipment in Wray, Colorado, by the Company’s subsidiary CFN Real Estate II, LLC. The total purchase price of the property was $700,000 or $0.70 per share. The Company allocated $521,810 to the building, $22,719 to the land and $155,471 to the equipment purchased.

In June 2022, CNP sold equipment with a value of $212,067 for settlement of accounts payable of $300,000. Accordingly, the Company recorded a $87,933 gain on the sale.

Depreciation expense for the nine months ended September 30, 2022 and 2021 amounted to $1,209,788 and $102,720, respectively. Depreciation expense for the three months ended September 30, 2022 and 2021 amounted to $421,336 and $102,148, respectively.

NOTE 4: MARKETABLE SECURITIES

During the first quarter of 2021, the Company began offering customers of its East West Venture who purchase services the option to pay the contract price in securities issued by the Customer which could be a common stock, preferred stock or convertible debentures. In accordance with ASC 606 - Revenue Recognition, the Company will value the shares received at the fair market value of the date the contract is executed. The shares received will be accounted for in accordance with ASC 320 – Investments – Debt and Equity Securities, as such the shares will be classified as available-for-sale securities and will be measured at each reporting period at fair value with the unrealized gain or (loss) as a component of other income (expense). Upon the sale of the shares, the Company will record the gain or (loss) in the consolidated statement of operations as a component of net income (loss).

	Marketable Securities
Balance, beginning of period	`$46,516`
Additions	`-`
Sale of marketable securities	`-`
Change in fair value	`(44,244)`
Balance, end of period	`$2,272`

The Company accounts for its investments in equity securities in accordance with ASC 321-10 Investments - Equity Securities. The equity securities may be classified into two categories and accounted for as follows:

·	Equity securities with a readily determinable fair value are reported at fair value, with unrealized gains and losses included in earnings. Any dividends received are recorded in interest income, the fair value of equity investments with fair values is primarily obtained from third-party pricing services.

·	Equity securities without a readily determinable fair value are reported at their cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer and their impact on fair value. Any dividends received are recorded in interest income. For equity investments without readily determinable fair values, when an orderly transaction for the identical or similar investment of the same issuer is identified, we use the valuation techniques permitted under ASC 820 Fair Value Measurement to evaluate the observed transaction(s) and adjust the fair value of the equity investment.

NOTE 5: FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash and accounts payable and accrued expenses, approximate their respective fair values due to the short-term nature of such instruments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis.

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The Company considers marketable securities quoted on the NASDAQ, Canadian Stock Exchange and OTC Pink sheets and then discounts the value after considering Rule 144 restrictions and market liquidity to be fair valued with Level 1 inputs. The Company had the following financial assets of September 30, 2022:

	Balance as of	Significant Unobservable Inputs
	September 30, 2022	Level 1	Level 2	Level 3
Marketable Securities	`2,272`	`2,272`
Total Assets	`$2,272`	`$2,272`	`$-`	`$-`

NOTE 6: NOTES PAYABLE

On September 10, 2019, the Company entered into a promissory note payable whereby the Company borrowed $500,000 bearing interest at 8% per annum. Interest on the note is payable quarterly on the first business day of December, March, June and September commencing December 1, 2019. In May 2021, the Company and the holder of the promissory note reached an agreement to extend the maturity date of the note from September 30, 2022 to September 30, 2024. In connection with the extension, the Company issued 133,333 shares of its common stock to the noteholder in lieu of $40,000 of interest accrued and accruing on the promissory note through September 30, 2022.

In connection with the promissory note on September 10, 2019, the Company issued warrants to purchase 33,333 shares of the Company’s common stock at an exercise price of $0.10 per share. The warrants were exercised on September 30, 2021 and the Company received $50,000.

The note was discounted by $17,624 allocated from the valuation of the warrants issued. The discount recorded on the note is being amortized as interest expense through the maturity date, which amounted to $4,023 and $4,427 for the three months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the net book value of the promissory note amounted to $500,000, including the principal amount of $50,000 which was fully amortized.

On June 24, 2020, the Company entered into a Loan Authorization and Agreement with the SBA under which the Company borrowed $150,000 and issued to the SBA a note and security agreement for the amount borrowed. Outstanding borrowings accrue interest at a rate of 3.75% per annum, and installment payments, including principal and interest, of $731 are due monthly and begin 12 months from the date of the loan agreement. The balance of any remaining principal and interest is due 30 years from the date of the loan agreement. As collateral for the borrowing, the Company granted the SBA a security interest in substantially all assets of the Company.

On October 28, 2019, the Company’s subsidiary CNP Operating entered into a promissory note payable with Complete Business Solutions Group, Inc (“CBSG”) whereby the Company borrowed $3,050,000. The outstanding balance of the note was $905,920 at September 30, 2022.

On September 30, 2019, the Company’s subsidiary CNP Operating entered into a promissory note payable with Eagle Six Consultants, Inc. (“Eagle”) whereby the Company borrowed $550,000 bearing interest at 16% per annum. The outstanding balance of the note was $302,489 at September 30, 2022.

On May 12, 2021, the Company’s subsidiary CNP Operating restructured the CSBG note payable of $2,957,000, the Eagle #1 note payable of $550,000 and the Eagle #2 note payable of $300,000 by entering into a payment and indemnification agreement with the receivers/trustee of CBSG and Eagle. The receiver has agreed that the balance of the outstanding amounts will be paid over the course of 24 months in equal payments of $158,625. Further, the Company shall pay $20,000 per month toward the balance and Anthony Zingarelli (“Zingarelli”) and Colorado Sky Industrial Supply LLC (“CSIS”), agree to personally pay the sum of $138,625 per month. Zingarelli is the only prior member of CNP Operating that signed a personal guarantee on the loans and Zingarelli is the sole member of CSIS. Zingarelli and CSIS has agreed to indemnify and hold the Company harmless from any and all losses, liabilities and claims. If a loss is incurred by the Company with respect to any claims, Zingarelli shall reimburse the Company for the amount of any such loss. The Company has recorded the Zingarelli payments, totaling $1,212,080 in the nine months ended September 30, 2022, as contributions to additional paid in capital.

On January 10, 2020, the Company’s subsidiary CNP Operating purchased a distillation machine for $248,000. The company paid $108,000 and entered into a promissory note with company owned by one of the partners. The original value of the note was $140,000 and has no terms such as interest rate, maturity or monthly payments. Imputed interested was not material. The outstanding balance of the note was $20,795 at September 30, 2022.

On November 19, 2020, the Company’s subsidiary CNP Operating purchased equipment for $58,095 which was financed at zero interest rate. The monthly payments of $968 will be made for the next 60 months and mature on Nov 19, 2025. Imputed interested was not material. The outstanding balance of the note was $36,829 at September 30, 2022.

On October 19, 2021, the Company borrowed $250,000 from a lender and issued a promissory note for the repayment of the amount borrowed. The promissory note is unsecured, has a maturity date of December 31, 2024 and all principal is due upon maturity. The amount borrowed accrues interest at 12% per annum and accrued interest is payable monthly commencing on December 1, 2021. The promissory note contains customary events of default permitting acceleration of repayment for nonpayment of amounts due, a bankruptcy related proceeding, breach of representations or covenants, sale of substantially all assets, and change of control.

On April 8, 2022, the Company entered into two promissory notes for aggregate proceeds of $726,000. The promissory note is unsecured, has a maturity date of April 30, 2024 and all principal is due upon maturity. The notes bear interest at 18% per annum and accrued interest is payable monthly commencing on August 1, 2022. In connection with the notes, the Company granted 676,000 warrants to the lenders with an exercise price of $1.00 per share. The warrants were valued using the Black-Scholes model and determined a fair value of $302,537, which was recorded as a debt discount and will be amortized to interest expense over the life of the notes. During the nine months ended September 30, 2022, $70,400 of the debt discount was amortized.

On May 11, 2022, the Company’s subsidiary, CFN Real Estate II, LLC, entered into a promissory note with a lender for the repayment of $500,000 in connection with the $500,000 refinancing of the Company’s property located in Wray, Colorado. The company received the proceeds from the refinancing on May 16, 2022. Accrued interest at the rate of 12% is payable monthly commencing on June 15, 2022, and the principal of the promissory note is payable upon maturity on June 15, 2024. The lender received a security interest in the property and equipment contained therein as collateral for the promissory note. The promissory note contains customary events of default and other conditions.

Future scheduled maturities of long-term debt are as follows:

						Year Ended
						December 31,
2022						`$1,374,241`
2023						`224,235`
2024						`1,249,650`
2025						`504,480`
2026						`3,153`
Thereafter						`140,173`
						`$3,495,932`

The aggregate current portion of long-term debt as of September 30, 2022 amounted to $1,374,241, which represents the contractual principal payments due during the remainder of 2022.

NOTE 7: STOCKHOLDERS’ DEFICIT

Common Stock

On December 6, 2021, the Company effected a reverse split of its outstanding common stock in the ratio of 1-for-15.

Effective April 3, 2020, the Company granted 33,333 of restricted shares of its common stock to a consultant for services as an advisory board member, with 16,667 shares vesting immediately and the remainder vesting in four equal quarterly installments commencing on July 1, 2020. During 2020, the Company recorded $15,625 of share-based compensation expense. The arrangement was terminated on July 17, 2020, and the unvested portion of the restricted stock grant of 12,500 shares were forfeited.

Effective August 6, 2020, the Company and Emerging Growth reached an agreement whereby the Company issued 320,000 shares of its common stock with a value of $240,000 to Emerging Growth as payment for outstanding liabilities due to Emerging Growth totaling $209,931. The outstanding liabilities due to Emerging Growth included $104,931 in outstanding accrued interest on the Series B Preferred Stock through August 31, 2020, as well as $105,000 of outstanding payables. The additional $30,069 was recorded as loss on extinguishment of debt during 2020.

Effective October 13, 2020, the Company and the holder of its $500,000 promissory note payable issued on September 10, 2019 (see Note 5) reached an agreement whereby the Company agreed to issue 110,000 shares of its common stock with a value of $82,500 to the noteholder as payment of $41,192 of accrued interest on the promissory note. This resulted in a loss on extinguishment of debt of $41,308 in 2020. The common shares were issued on January 2, 2021 and are reflected as common shares issuable as of December 31 2020.

In December 2020, the Company received $410,000 in cash in respect of a sale of an aggregate total of 700,000 shares of its common stock for proceeds of $420,000. The Company received the remaining $10,000 for the sale in January 2021 and the common shares were issued in January 2021. The Company has reflected the $410,000 received in common shares issuable in the statement of shareholders equity.

In January 2021, the Company issued 810,000 shares of common stock, of which 793,333 were issuable on December 31, 2020 and 16,667 were sold in 2021 for $10,000.

In March 2021, the Company issued 116,667 shares of common stock in exchange for $105,000 of interest accrued to Emerging Growth as a result of holding the Series B Preferred stock. The fair value of the shares was $157,500 and the Company recognized a loss on extinguishment of debt in the amount of $52,500.

In May 2021, in connection with the maturity extension of the $500,000 promissory note (Note 4), the Company issued 133,333 shares of its common stock to the noteholder in lieu of $40,000 of interest accrued and accruing on the promissory note through December 31, 2021. The fair value of the shares was $160,000 and the Company recognized a loss on extinguishment of debt in the amount of $120,000.

In June 2021, the Company received $50,000 in cash in respect to an exercise of warrants by a Note holder. The Company has reflected the $50,000 received in common shares issuable in the statement of stockholder’s equity as the Company issued 33,333 shares of common stock on July 7, 2021.

On August 23, 2021, the Company entered into securities purchase agreements with CNP Operating, whereby the Company acquired 100% of CNP Operating from the Owners in exchange for an aggregate of 23,600,000 shares of Company common stock. The securities were issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended.

On April 14, 2022, the Company entered into securities purchase agreements with investors for the purchase of an aggregate of 1,142,898 shares of common stock at a purchase price of $0.70 per share for gross proceeds of $800,020. The shares were issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended.

On April 29, 2022, the Company issued 1,000,000 shares of common stock in connection with the closing of the purchase of property and equipment in Wray, Colorado, by the Company’s subsidiary CFN Real Estate II, LLC. The shares were issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended. The shares were issued at a purchase price of $0.70 per share for a purchase price of $700,000.

Preferred Stock

The Company is authorized to issue 2,000,000 shares of preferred stock with a par value of $0.001 per share, of which 500 have been authorized as Series A Preferred Stock and 3,000 have been authorized as Series B Preferred Stock.

On June 20, 2019, the Company issued to certain of its promissory noteholders an aggregate of 500 shares of Series A Preferred Stock, each with a stated value per share of $1,000, as conversion of $500,000 worth of outstanding promissory notes. The Series A Preferred Stock accumulate dividends at 12% per annum, and is convertible into the Company’s common stock at the election of the holder at a conversion price per share to be mutually agreed between the Company and the holder in the future, and be redeemable at the Company’s option following the third year after issuance, without voting rights or a liquidation preference.

On June 20, 2019, the Company issued 3,000 shares of Series B Preferred Stock to Emerging Growth each with a stated value of $1,000 per share, as part of the Emerging Growth Agreement. The aggregate fair value of $687,000 was recorded as part of the acquisition price of the net assets acquired from Emerging Growth. The Series B Preferred Stock accumulates dividends at 6% per annum and is convertible into the Company’s common stock at the election of Emerging Growth at a conversion price per share to be mutually agreed between the Company and Emerging Growth in the future, without voting rights or a liquidation preference, except with respect to accrued penalty interest.

For the nine months ending September 30, 2022 and 2021, the Company incurred $180,000 and $180,000, respectively, of interest from the outstanding preferred stock.

Warrants

The following summarizes the Company’s warrant activity for the nine months ended September 30, 2022:

			Weighted-Average
		Weighted-	Remaining
		Average	Contractual Life
	Warrants	Exercise Price	(Years)
Outstanding at December 31, 2021	312,500	`$4.95`	2.61
Granted	676,000	`1.00`
Forfeited	-
Outstanding at September 30, 2022	988,500	`$2.25`	2.80

Vested and expected to vest at September 30, 2022	988,500	`$2.25`	2.80
Exercisable at September 30, 2022	988,500	`$2.25`	2.80

In April 2022, the Company granted 676,000 warrants in connection with the issuance of promissory notes (see Note 6). The warrants have an exercise price of $1.00 per share, expire in three years and are immediately exercisable.

As of September 30, 2022, all outstanding warrants were fully vested and there was no remaining unrecorded compensation expense.

Options

The Company had a Stock Option Plan, or the Plan, under which the total number of shares of capital stock of the Company that may be subject to options under the Plan was 1,500,000 shares of Common Stock from either authorized but unissued shares or treasury shares. The Plan expired on December 14, 2016.

The following summarizes the Company’s stock option activity for the nine months ended September 30, 2022:

			Weighted-Average
		Weighted-	Remaining
		Average	Contractual Life
	Options	Exercise Price	(Years)
Outstanding at December 31, 2021	210,667	`$4.95`	0.94
Granted/forfeited/cancelled	(210,667)	`4.95`
Outstanding at September 30, 2022	-

As of September 30, 2022, there were no outstanding options.

NOTE 8: LEASES

On June 20, 2019, the Company entered into a Lease Agreement with Emerging Growth for the lease of office space in Whitefish, Montana, for a period of one year at a rate of $1,500 per month. On August 5, 2020, the Company entered into a lease agreement with Emerging Growth for additional office space in Whitefish, Montana, replacing its previous lease from June 20, 2019. The term of the lease commenced on September 1, 2020 for a period of one year at a rate of $4,500 per month. The lease contains an option for the Company to renew the lease for a period of one additional year at a monthly rent subject to a 3% increase. Management has elected a policy to exclude leases with an initial term of 12 months or less from the balance sheet presentation required under ASC 842. As a result, the office lease has been excluded from balance sheet presentation as it has an original term of 12 months or less.

On March 30, 2021, the Company entered into a new lease with Emerging Growth, which took the place of the old lease effective April 1, 2021. The lease provides for payments of $4,500 per month and has a term of three years and contains an option for the Company to renew the lease for a period of one additional year at a monthly rent subject to a 3% increase.

On June 4, 2019, the Company’s subsidiary CNP Operating entered into a Lease Agreement with Blair Investments, LLC for the lease of office space in Centennial Colorado, for a period of 3 year at a rate of $10,521 per month. On September 26, 2019 this agreement was terminated and replaced with a new agreement starting October 1, 2019 and expiring on June 30, 2023.

On October 26, 2020 the Company’s subsidiary CNP Operating entered into an amendment to the previous agreement to extend the lease to June 30, 2024, adjust the monthly rent schedule, the landlord agreed to install additional HVAC equipment and the Company agreed to reimburse the landlord $40,000 over a 4-year period with a monthly payment amount of $835.

On December 9, 2021, CFN Real Estate LLC, a Delaware limited liability company, and wholly-owned subsidiary of the Company, entered into a Lease Agreement (with Option to Purchase), or the Lease, with H2S2 LLC, a Colorado limited liability company, for property in Eaton, Colorado, consisting of 9.53 acres of agricultural land zoned with use for special review for hemp processing and storage, an 8,500 square foot C1D1 rated steel building, triple tunnel green houses with a total of 8,712 square feet, a shop building consisting of 3,825 square feet and a 2,280 square foot residence. The Lease has an eleven month term and contains an option to purchase the premises, each terminating on November 30, 2022. The total monthly rent under the lease during the term is an aggregate of $354,000, consisting of a $14,000 monthly lease payment, and an aggregate of $200,000 in non-refundable payments towards the option. The total purchase price for the premises under the option is $1.2 million, inclusive of the $200,000 in payments made during the term of the lease. If the option is exercised, the lease contains a 30-day automatic extension of the term at $14,000.

In January 2022, the Company’s subsidiary CNP Operating entered into a lease agreement with Wyott Capital Group for the lease of storage and manufacturing space in Cheyenne, Wyoming for a 3-year term including a base rent of $6,825.

On August 12, 2022, the Company’s subsidiary, CFN Real Estate LLC, entered into a First Amendment to Lease Agreement, or the Amendment, to the Lease, with H2S2 LLC, a Colorado limited liability company, for property in Eaton, Colorado. The Amendment amends the Lease to (i) provide for payment of the final non-refundable deposit in the amount of $34,000 on or before the earlier of November 30, 2022 or exercise of the option to purchase, (ii) provide for payment of the July 2022 monthly base rent in the amount of $14,000 on or before November 30, 2022, (iii) amend the payment date for monthly base rent from the 1st to the 15th of each month, (iv) to delete the seller financing provisions of the lease, and (v) to provide for an amendment fee of $20,000, on or before November 30, 2022, or upon exercise of the option to purchase, on or before the earlier of December 31, 2022 or closing on the purchase of the premises.

NOTE 9: COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company is not presently a party to any legal proceedings that it currently believes, if determined adversely to the Company, would individually or taken together have a material adverse effect on the Company’s business, operating results, financial condition or cash flows.

On October 18, 2021 the Company settled a vendor dispute in the amount of $100,000 of which the initial payment of $40,000 was paid on the execution of the settlement and balance to paid in 48 equal monthly payments of $1,250. The balance as of September 30, 2022 is $48,750.

NOTE 10: SUBSEQUENT EVENTS

On October 4, 2022, the Company converted $726,700 in principal and interest on its convertible notes into an aggregate of 2,906,800 shares of common stock.

On October 31, 2022, the Company converted $40,000 in principal on an outstanding note into 160,000 shares of common stock.

Management has evaluated subsequent events through November 8, 2022, the date the consolidated financial statements were available to be issued. Based on this evaluation, no additional material events were identified which require adjustment or disclosure in these financial statements.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2021. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements. See “Cautionary Statement Regarding Forward Looking Information’’ elsewhere in this report. Because this discussion involves risk and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We own and operate CNP Operating, a leading CBD manufacturer vertically integrated with a 360 degree approach to the processing of high quality CBD products designed for growers, pharmaceutical, wellness providers, and retailers’ needs, and a cannabis industry focused sponsored content and marketing business, or the CFN Business. Our ongoing operations currently consist primarily of CNP Operating and the CFN Business and we will continue to pursue strategic transactions and opportunities. We are currently in the process of launching an e-commerce network focused on the sale of general wellness CBD products.

CNP Operating provides toll processing services which includes extraction, distillation, remediation, isolation and chromatography. CNP Operating has a professional, organized and dedicated team with 30 years of combined experience. CNP Operating’s state of the art facility has 30,000 square feet filled with proprietary technology distillation equipment, in house lab testing, distribution warehouse and white labelling product formulation and design.

The CFN Business generates revenue through sponsored content, including articles, press releases, videos, podcasts, advertisements and other media, email advertisements and other marketing campaigns run on behalf of public and private companies in the cannabis industry, helping them reach accredited, retail and institutional investors. Most revenue is generated through contracts involving a monthly cash payment.

The CFN Business’ primary expenses come from advertising on platforms like Twitter and Facebook and from employee salaries and contractor fees. The CFN Business’ content is primarily produced by a team of freelance writers and video content is produced through various vendors. The CFN Business also incurs hosting and development costs associated with maintaining and improving its website, web applications, and mobile applications. The CFN Business operates several media platforms, including CannabisFN.com, the CannabisFN iOS app, the CFN Media YouTube channel, the CFN Media podcast, and other venues. These properties are designed to educate and inform investors interested in the cannabis industry, as well as provide a platform for the clients of the CFN Business to reach investors. The CFN Business distributes content across numerous online platforms, including the CannabisFN.com website, press releases, financial news syndicates, search engines, YouTube, iTunes, Twitter, Instagram, Facebook, LinkedIn, and others.

The CFN Business targets the legal cannabis industry. According to Grand View Research, the global cannabis industry is expected to reach $146.4 billion by 2025, driven by the legalization of medical and adult-use cannabis across a growing number of jurisdictions. According to the Marijuana Index, there are approximately 400 public companies involved in the cannabis industry, which represents the primary target market of the CFN Business. The CFN Business’ services are designed to help private companies prepare to go public and public companies grow their shareholder base through sponsored content and marketing outreach. The success of the CFN Business depends on the legal status of cannabis, investor demand for cannabis investments, and numerous other external factors.

The CFN Business competes with other public relations firms for clients, as well as online publishers for investors. Public relations competition includes investor awareness firms like Stockhouse Publishing, Catalyst Xchange, Stonebridge Partners and Midan Ventures. Online publisher competition includes firms like New Cannabis Ventures, Leafly and High Times. The CFN Business is regulated by rules established by the SEC, FINRA, and certain federal and state cannabis regulations

Our corporate website is: www.cfnenterprisesinc.com, the contents of which are not part of this quarterly report.

Our Common Stock is quoted on the OTCQB Marketplace under the symbol "CNFN."

Results of Operations for the Three Months Ended September 30, 2022 and 2021

The following are the results of our operations for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021:

	Three Months Ended
	September 30,
	2022	2021	Change
Net revenues	`$840,970`	`$948,254`	`$(107,284)`
Cost of revenue	`1,309,853`	`730,186`	`579,667`
Gross profit (loss)	`(468,883)`	`218,068`	`(686,951)`

Operating expenses:
Selling, general and administrative	`513,200`	`847,888`	`(334,688)`
Total operating expenses	`513,200`	`847,888`	`(334,688)`

Loss from operations	`(982,083)`	`(629,820)`	`(352,263)`

Other income (expense):
Gain on property and equipment	`-`	`-`	`-`
Loss on extinguishment of debt	`-`	`-`	`-`
Unrealized loss on marketable securities	`(24,750)`	`23,341`	`(48,091)`
SBA PPP loan forgiveness	`-`	`263,000`	`(263,000)`
Interest expense	`(115,257)`	`(23,055)`	`(92,202)`
Interest income	`43`	`2`	`41`
Other income		`-`
Total other income (expense), net	`(139,963)`	`263,288`	`(403,251)`

Provision for income taxes	`-`	`-`	`-`
Net loss	`$(1,122,046)`	`$(366,532)`	`$(755,514)`

Net Revenues

The Company’s revenues are generated from the sale of promotional service packages to customers ranging from 3 to 6 months. The Company offers different packages tailored to the type and stage of the potential customer, such as public companies looking to increase their shareholder base, as well as private companies potentially looking to go public and attract capital and publicity.

During the three months ended September 30, 2022, the Company realized $109,698 of campaign revenue compared to $168,254 in 2021. The decrease was primarily due to a shift in efforts in 2022 to the CNP Operating business.

During the three months ended September 30, 2022, the Company’s subsidiary CNP Operating generated revenue of $0.7 million from the sale of products produced from hemp material and manufactured into CBD distillate, compared to $0.8 million in 2021. The decrease was due to less inventory in 2022.

Cost of Revenue

The costs of revenue consist primarily of labor, fees paid for production of content for clients and the costs of placement of the content on various platforms. In 2022, the contracts required less production services and related labor than the contracts in 2021. As a result, the cost of revenue in 2022 was lower as a percentage of the revenue recognized during the quarter.

The Company’s cost of revenue for the three months ended September 30, 2022 were higher than those in the corresponding year in 2021 due largely to the acquisition of CNP Operating which occurred in August 2021. Cost of revenue related to CNP Operating was $1.3 million in the three months ended September 30, 2022 as compared to $0.6 million in 2021 from the date of its acquisition. Cost of revenue primarily represents the cost of hemp material, manufacturing material such as solvent, fuel and equipment depreciation.

Operating Expenses

The Company’s operating expenses for the three months ended September 30, 2022 were higher than those in the corresponding three months in 2021 due largely to the acquisition of CNP Operating in August 2021.

Other Income/Expense

Other expenses during the three months ended September 30, 2022 were primarily due to interest expense related to notes payable and amortization of debt discount. The Company recorded a $24,750 unrealized loss on marketable securities in 2022 an unrealized gain of $23,341 in 2021. In the three months ended September 30, 2021, the Company recorded PPP forgiveness income of $263,000.

Results of Operations for the Nine months Ended September 30, 2022 and 2021

The following are the results of our operations for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021:

	Nine Months Ended
	September 30,
	2022	2021	Change
Net revenues	`$3,828,634`	`$1,451,230`	`$2,377,404`
Cost of revenue	`5,710,701`	`949,170`	`4,761,531`
Gross profit (loss)	`(1,882,067)`	`502,060`	`(2,384,127)`

Operating expenses:
Selling, general and administrative	`1,788,872`	`1,551,790`	`237,082`
Total operating expenses	`1,788,872`	`1,551,790`	`237,082`

Loss from operations	`(3,670,939)`	`(1,049,730)`	`(2,621,209)`

Other income (expense):
Gain on property and equipment	`87,933`	`-`	`87,933`
Loss on extinguishment of debt	`-`	`(172,500)`	`172,500`
Unrealized loss on marketable securities	`(44,244)`	`31,761`	`(76,005)`
SBA PPP loan forgiveness	`-`	`263,000`	`(263,000)`
Interest expense	`(267,644)`	`(53,723)`	`(213,921)`
Interest income	`52`	`9`	`43`
Other income	`3,772`	`-`	`3,772`
Total other income (expense), net	`(220,130)`	`68,547`	`(288,677)`

Provision for income taxes	`-`	`-`	`-`
Net loss	`$(3,891,069)`	`$(981,183)`	`$(2,909,886)`

Net Revenues

During the nine months ended September 30, 2022, the Company realized $289,344 of campaign revenue compared to $471,230 in 2021. The decrease was primarily due to a shift in efforts in 2022 to the CNP Operating business.

During the nine months ended September 30, 2022 and 2021, the Company’s subsidiary CNP Operating generated revenue of $3.5 million and $0.8 million, respectively, from the sale of products produced from hemp material and manufactured into CBD distillate.

Cost of Revenue

The Company’s cost of revenue for the nine months ended September 30, 2022 were higher than those in the corresponding year in 2021 due largely to the acquisition of CNP Operating in August 2021. CNP cost of revenue was approximately $5.6 million in 2022, which primarily represents the cost of hemp material, manufacturing material such as solvent, fuel and equipment depreciation.

Operating Expenses

The Company’s operating expenses for the nine months ended September 30, 2022 were higher than those in the corresponding nine months in 2021 due largely to the acquisition of CNP Operating in August 2021.

Other Income/Expense

Other expenses during the nine months ended September 30, 2022 were primarily due to interest expense related to notes payable and amortization of debt discount. In 2022, the Company recorded a $87,933 gain on the sale of property and equipment. The Company also recorded a $44,244 unrealized loss on marketable securities in 2022 an unrealized gain of $31,761 in 2021. In the nine months ended September 30, 2021, the Company recorded PPP forgiveness income of $263,000. In the nine months ended September 30, 2021, the Company recorded a $172,500 loss on extinguishment of debt the Company incurred as it issued common stock in payment of interest payable and extension of the maturity date on a note payable.

Liquidity, Capital Resources and Going Concern

Our plan to continue as a going concern includes raising additional capital in the form of debt or equity, growing the CNP Operating business and the business acquired under the Emerging Growth Agreement and managing and reducing operating and overhead costs. We cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase the need for us to raise additional capital on an immediate basis.

These matters, among others, raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

The following is a summary of our cash flows from operating, investing and financing activities for the nine months ended September 30, 2022 and 2021:

	Nine Months Ended
	September 30,
	2022	2021
Cash flows used in operating activities	`$(1,387,583)`	`$(255,152)`
Net cash used in (provided by) investing activities	`$(127,588)`	`$54,880`
Cash flows provided by financing activities	`$1,453,950`	`$221,894`

As of September 30, 2022, we had unrestricted cash of $108,741.

Net cash used in operating activities was $1.4 million during the nine months ended September 30, 2022, compared to cash used in operating activities of $0.3 million during the same period in 2021. The increase in cash used in operating activities was primarily driven by the Company’s higher net loss in 2022, partially offset by non-cash charges.

Net cash used in investing activities during the nine months ended September 30, 2022 primarily consisted of the purchase of property and equipment. In 2021, net cash provided by investing activities was due to CNP cash acquired.

Net cash provided by financing activities during the nine months ended September 30, 2022 was $1.4 million, including $1.2 million in proceeds from promissory notes, proceeds from common stock of $210,000 and net advances from related parties of $45,443, partially offset by note repayments of $34,493. Net cash provided by financing activities during the nine months ended September 30, 2021 of $221,894 was the result of proceeds from a second PPP loan of $263,000, the sale of common stock for $10,000 and the exercise of $50,000 of warrants. In 2020 net cash provided from investing activities related of $353,000 was the result of proceeds from notes payable of $413,000, offset by the payment of preferred stock interest of $45,000.

Description of Indebtedness

Future scheduled maturities of long-term debt are as follows:

						Year Ended
						December 31,
2022						`$1,374,241`
2023						`224,235`
2024						`1,249,650`
2025						`504,480`
2026						`3,153`
Thereafter						`140,173`
						`$3,495,932`

The aggregate current portion of long-term debt as of September 30, 2022 amounted to $1,374,241, which represents the contractual principal payments due during the remainder of 2022.

Obligations Under Preferred Stock

On June 20, 2019, existing debtholders were issued an aggregate of 500 shares of Series A Preferred Stock, each with a stated value per share of $1,000, as conversion of $500,000 worth of outstanding promissory notes. The Series A Preferred Stock bears interest at 12% per annum, and is convertible into our common stock at the election of the holder at a conversion price per share to be mutually agreed between us and the holder in the future, and be redeemable at our option following the third year after issuance, without voting rights or a liquidation preference.

On June 20, 2019, we issued 3,000 shares of Series B Preferred Stock, each with a stated value of $1,000 per share, to Emerging Growth, LLC as part of the Emerging Growth Agreement. The aggregate fair value of $687,000 was recorded as part of the acquisition price of the net assets acquired from Emerging Growth, LLC. The Series B Preferred Stock bears interest at 6% per annum and is convertible into our common stock at the election of Emerging Growth, LLC at a conversion price per share to be mutually agreed between us and Emerging Growth, LLC in the future, without voting rights or a liquidation preference, except with respect to accrued penalty interest.

Other Outstanding Obligations at September 30, 2022

Warrants

As of September 30, 2022, 988,500 shares of our common stock are issuable pursuant to the exercise of warrants.

Options

As of September 30, 2022, 0 shares of our common stock are issuable pursuant to the exercise of options.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

COVID-19

In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including each of the areas in which we operate. While to date we have not been required to stop operating, COVID-19 has had and is expected to continue to have an adverse effect on the financial condition of us and our customers. The outbreak of COVID-19 in the U.S. has had an unfavorable impact on our business operations. Our main customer market suffered its worst decline, decreasing our revenue. Mandatory closures of businesses imposed by the federal, state and local governments to control the spread of the virus is disrupting the operations of our management, business and finance teams. In addition, the COVID-19 outbreak has adversely affected the U.S. economy and financial markets, which may result in a long-term economic downturn that could negatively affect future performance. We took steps to diversify our revenue model by creating our CBD ecommerce business which has higher margins during the second half of 2020 and to acquire CNP Operating in August 2021 and reduce our costs. The extent to which COVID-19 will impact our business and our consolidated financial results further will depend on future developments which are highly uncertain and cannot be predicted at this time, but may result in a material adverse impact on our business, results of operations and financial condition.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer, who is our principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our principal executive officer and principal financial officer concluded that as of September 30, 2022, our disclosure controls and procedures were not effective.

Changes in Internal Control Over Financial Reporting

During 2019, in order to remediate the segregation of duties and other deficiencies initially created by the departure of our accounting department in June 2019, we hired accounting consultants to perform our account reconciliations and other day-to-day accounting requirements. The internal control structure was also documented and assessed in the areas of financial reporting and disclosure controls as it relates to our continuing operations. In addition, we revised and improved the use of our systems for getting appropriate approvals for purchases and other activities that require authorization. However, our ability to file timely reports is heavily dependent on having the necessary financial resources to pay consultants and other outside service providers involved with performing key elements of our disclosure and financial reporting controls. Our current financial condition, brought on in-part by COVID-19, has temporarily hindered our ability to file timely reports for this reason. As a result, we have assessed our disclosure controls and controls over financial reporting as not effective.

PART II - OTHER INFORMATION

Item 5. Other Information

Given the timing of events, the following information is included in this Form 10-Q pursuant to Item 5.02 of Form 8-K “Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers” in lieu of filing a Form 8-K.

On November 4, 2022, Spiro Kandis, the Chief Product Officer of CNP Operating, resigned from his position.

Item 6. Exhibits

10.1	First Amendment to Lease Agreement, dated August 12, 2022, by and between H2S2 LLC and CFN Real Estate LLC (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on August 15, 2022).

31.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14(a) and15d-14(a).*

32.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350.**

101.	The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Comprehensive Loss, (iv) the Statements of Changes in Stockholders’ Deficit, (v) the Statements of Cash Flows, and (vi) related notes to these financial statements.*

*Filed herewith.

**Furnished herewith.

SIGNATURES

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

	CFN ENTERPRISES INC.

Dated: November 9, 2022	By:	/s/ Brian Ross
		Brian Ross
		President and Chief Executive Officer
		(Principal Executive Officer and Principal Financial Officer)