Sincerity Applied Materials Holdings Corp. - Annual Report: 2016 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended: December 31, 2016

OR

☐	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:  333-177500

SYMBID CORP.

(Exact name of registrant as specified in its charter)

 

Nevada		45-2859440
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

Marconistraat 16, 3029 AK Rotterdam, The Netherlands
(Address of principal executive offices)		(Postal Code)

 

+31(0)108900400

(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par value $0.001 per share

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 Website, 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 ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ☐

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

Large Accelerated Filer  ☐		Accelerated Filer  ☐
Non-Accelerated Filer ☐		Smaller reporting company  ☒
(Do not check if a smaller reporting company)

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

As of June 30, 2016, there were 37,277,039 shares of the registrant's common stock, par value $0.001 per share, issued and outstanding.  Of these, 29,125,391 shares were held by non-affiliates of the registrant. The market value of securities held by non-affiliates on June 30, 2016 was $5,096,943 based upon a closing price of $0.175 per share on June 30, 2016.

As of March 31, 2017, there were 187,329,355 shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable.

 

 

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		1
PART I		2
ITEM 1.	BUSINESS	2
ITEM 1B.	UNRESOLVED STAFF COMMENTS	26
ITEM 2.	PROPERTIES	26
ITEM 3.	LEGAL PROCEEDINGS	26
ITEM 4.	MINE SAFETY DISCLOSURES	26
PART II		26
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
	MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	27
ITEM 6.	SELECTED FINANCIAL DATA	30
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	41
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	41
ITEM 9A.	CONTROLS AND PROCEDURES	41
ITEM 9B.	OTHER INFORMATION	43
PART III		43
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	43
ITEM 11.	EXECUTIVE COMPENSATION	46
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	AND RELATED STOCKHOLDER MATTERS	47
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	48
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	50
PART IV		49
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	50
SIGNATURES		56

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Current Report contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Plan of Operations,” and elsewhere.  Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements.  However, not all forward-looking statements may contain one or more of these identifying terms.  Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, existing or increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies.  A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Report appears in the section captioned “Risk Factors” and elsewhere in this Report.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors.  We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.

Readers should read this Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the SEC.

PART I

Unless the context indicates otherwise, all references in this Annual Report to “Symbid,” the “Company,” “we,” “us” and “our” refer to Symbid Corp. and its wholly-owned consolidated subsidiary, Symbid Holding B.V., FAC B.V. a wholly owned subsidiary of Symbid Holding B.V., Symbid Germany GmbH, a 51% owned subsidiary of Symbid Holding B.V., Symbid B.V., a wholly owned subsidiary of Symbid Holding B.V. and direct and indirect subsidiaries of Symbid B.V. All references in this Annual Report to “Symbid Holding B.V.” refer solely to Symbid Holding B.V. and all references to Symbid B.V. refer solely to Symbid B.V.

Business Developments

Corporate Restructuring

Because we were not able to raise additional capital from investors in the fourth quarter of 2016 we were forced to enter into settlements with our creditors and note holders and restructure the Company. This restructuring caused us to curtail certain business operations and change our focus from the operation of online funding platforms and the provision of software solutions for the alternative financing in the small and medium enterprise (“SME”) market to the licensing of available software packages for which we own or license the intellectual property.

The revised business model requires fewer employees, advisors and consultants and is more economical to operate than our past operations. Over the past few years we have developed several software products suitable for the alternative market which we continue to offer to and operate with third parties. Such products and related services include white label versions of crowdfunding software for investor groups and monitoring software to provide investors with ongoing insight into the performance of SMEs to which they have loaned money. Related licensing fees and subscription agreements may include set fees and yearly contribution fees.

Our goal is to limit our debt, continue to operate our business and negotiate a possible acquisition or other business combination with another operating entity. There can be no assurance that we will be successful in this endeavor or that if a business combination is consummated that it will be on favorable terms. In the interim, we are continuing forward with our business operations under the revised business model.

As the result of the restructuring, our previous crowdfunding platform in the Netherlands will be operated through Symbid Coöperatie UA (“Symbid Coöp”) and we will no longer receive revenues from Symbid Coöp. We previously controlled and operated Symbid Coöp through corporate governance but as the result of the restructuring, Symbid Coöp has become an independent entity. As we did not have the resources available to continue the software development of the online funding platform, Symbid Coöp developed the software for operating the crowdfunding platform under the laws and regulations of The Netherlands. Symbid Coöp has, in return for reimbursing the further development of the software, been granted a non-exclusive license to the intellectual property from Stichting Symbid IP Foundation in order to continue crowdfunding operations in The Netherlands. We will continue to hold an identical non-exclusive license to the intellectual property of the crowdfunding platform whereby we will be allowed to use the most up to date versions of the software and other intellectual property.

Amendments to Employment Agreements

On July 1, 2016, each of Korstiaan Zandvliet, our Chief Executive Officer and President, Maarten van der Sanden, our Chief Financial Officer, Treasurer and Secretary, Robin Slakhorst, our former Vice President, and Jeroen Bontje, a former key employee, executed amendments to their respective employment agreements reducing their respective base annual net salaries by approximately 50% to €19,200. No other changes were made to such employment agreements at that time.

 

Effective October 12, 2016, each of our then executive officers, Korstiaan Zandvliet, Maarten van der Sanden and Robin Slakhorst, executed amendments to their respective employment agreements pursuant to which each executive agreed to have their base salaries reduced to zero retroactive to August 1, 2016. No other changes were made to the employment agreements at that time.

Debt Restructuring

On November 1, 2016 Symbid B.V. entered into agreements with Symbid Coöp and persons having employment agreements with Symbid B.V., providing for the termination of all Symbid B.V. employment agreements and the entry into new agreements between such employees and Symbid Coöp.

On November 15, 2016, we entered into a Note Termination and Conversion Agreement with each of the holders of our 2016 3-year, 8% unsecured convertible notes (the “2016 Notes”), pursuant to which the holders agreed to the termination of their 2016 Notes in exchange for their receipt of equity participation rights in Symbid Coöp. An aggregate of $550,000 in principal amount of 2016 Notes together with all accrued interest due thereon was cancelled and participation rights representing an aggregate of 18.75% of the equity in Symbid Coöp was issued.

On November 15, 2016, we entered into a Note Termination and Conversion Agreement with each of the holders of our 2015 3-year 8% unsecured convertible notes (the “2015 Notes”) pursuant to which the holders agreed to the termination of their respective 2015 Notes in exchange for equity participation rights in Symbid Coöp and/or a right of first refusal with respect to any direct or indirect activities of Symbid Corp. and related entities. Right of First Refusal Agreement (“ROFRA”) requires Symbid Corp. and related parties to inform the note holder in the form of a written detailed business plan of any asset management activities or operations in the SME market to be undertaken by Symbid group companies. Symbid Corp. or any of the related entities is required to provide marketing plans 60 days before asset activities or operations begin. The investor will have a 15 day grace period to veto or refuse such activities to be undertaken by Symbid group or related parties. The ROFRA has a term which runs through December 31, 2020. As to Symbid Corp., the right of first refusal terminates if and when there is a change in control of Symbid Corp. involving another entity with business activities different from those currently undertaken by Symbid Corp. In connection with the foregoing, one note holder of $1,175,000 in principal amount of 2015 Notes agreed to receive the right of first refusal executed on November 15, 2016, in combination with an equity participation in Symbid Coöp while all of the other holders agreed to receive equity participation rights in Symbid Coöp. An aggregate of $1,310,000 in principal amount of 2015 Notes together with all accrued interest due thereon was cancelled and participation rights representing an aggregate of 6.5% of the equity in Symbid Coöp was issued. The Note Termination and Conversion Agreements also provided for the termination of pre-emptive rights which holders of the 2015 Notes had been granted in connection with their purchases of 2015 Notes.

On November 15, 2016 Symbid B.V. entered into an agreement with Voyager Beheer BV (“Voyager”) and Symbid Coöp which provided for the termination of a September 15, 2011 €66,950 promissory note from Symbid B.V. to Voyager, including all accrued interest due thereon, in consideration of the grant to Voyager of a 1.33% equity participation in Symbid Coöp.

On November 15, 2016 Symbid B.V. entered into an agreement with Rabobank Leiden-Katwijk (“Rabobank”), IP Foundation and Symbid Coöp pursuant to which Symbid B.V.’s outstanding €52,959 debt to Rabobank and all accrued interest due thereon are to be transferred to and assumed by Symbid Coöp. The agreement further provided that a related line of credit with an amount due of €60,500 be assumed by Symbid Coöp.

On November 15, 2016 Symbid Coöp assumed certain debts and obligations from Symbid B.V. in consideration of cancellation of the current account between Symbid B.V. and Symbid Coöp and office furniture from Symbid B.V. to be obtained in return by Symbid Coöp, under the suspending condition that all other debts and obligations of Symbid B.V. are settled, with the exception of any liabilities owed to Symbid Corp. or Symbid Holding B.V. by Symbid B.V.

 

On November 18, 2016 we settled approximately €101,000 in debts with two creditors through agreements with Symbid Coöp under which the creditors agreed to the termination of the debts in consideration of receiving equity participation in Symbid Coöp aggregating to 5% of Symbid Coöp.

License Agreements

On November 15, 2016 Symbid B.V. and Symbid Coöp entered into an Intellectual Property License Termination Agreement which terminated the April 13, 2011 License Agreement between them retroactive to November 1, 2016.

On November 15, 2016 IP Foundation and Symbid Holding executed Addendum 2 to their Intellectual Property License and Transfer Agreement dated October 16, 2013 to enable IP Foundation to grant a non-exclusive license to Symbid Coöp in return for Symbid Coöp’s bearing the costs for the further development of the related software, intellectual property rights and know-how. This was done in recognition of the fact that Symbid Holding is no longer able to continue development of the software in compliance with applicable Netherlands laws and regulations due the financial distressed situation of the Company.

On November 15, 2016 Symbid Coöp and IP Foundation entered into an Intellectual Property License and Transfer Agreement (the “Agreement”) with retroactive effect to November 1, 2016 pursuant to which IP Foundation granted Symbid Coöp a perpetual, royalty free license which included the right to grant sublicenses to affiliates of Symbid Coöp to use the Symbid online crowdfunding platform to conduct crowdfunding business worldwide and to further develop and maintain the platform. Any sublicenses granted to Symbid Coöp affiliates are required to provide for the subsequent transfer of any intellectual property rights and know how relating to the Symbid platform created by such affiliates to Symbid Coöp. In the Agreement, Symbid Coöp acknowledged and agreed that all intellectual property rights and other ownership rights in the intellectual property would remain with IP Foundation.

On November 15, 2016 we settled approximately €15,000 in debts with one creditor through a settlement agreement. The creditor is the owner of the FAC monitoring technology intellectual property rights for which we hold through our wholly owned subsidiary FAC B.V. the exclusive perpetual worldwide free of charge license. In consideration of the settlement of €15,000, the terms of the license were changed to a non-exclusive perpetual worldwide free of charge license.

Officer/Director Resignation

Robin Slakhorst resigned as our Chief Commercial Officer and as a Director effective the close of business on November 15, 2016. The resignation of Mr. Slakhorst was not the result of any disagreement with us on any matter related to our operations, policies or practices.

Going Concern Qualification

Our expenses have outpaced our revenues since our inception causing liquidity issues and raising substantial doubt about our ability to continue as a going concern. In recognition thereof, we have implemented strategies to reduce expenses and restructure our operations. Such restructuring, as described elsewhere in this Report, has caused us to curtail certain of our operations and change our business focus from the operation of online funding platforms and the provision of software solutions for the alternative financing market for the SME market to the licensing of available software packages for which we own or license the intellectual property.

 

Company Background

Founded in The Netherlands in April 2011 as the provider of one of the first crowdfunding platforms, our business evolved in 2015 into a fully integrated, data driven, user friendly online funding network consisting of several products and services known as The Funding Network™. The Funding Network™ is intended to give SMEs direct access to all forms of finance, while offering investors full transparency on the potential risks and return of their portfolios and was developed in response to the following funding hurdles affecting entrepreneurs and investors in general and SMEs in particular:

Since 2011, we have been a Dutch leader in equity-based crowdfunding having funded 120 SME’s with over EUR 14.4 million (approximately $15 million) in total crowdfunding volume since inception.

As the result of our corporate restructuring, we no longer offer crowdfunding services in the Netherlands or elsewhere.

Our online funding operations through The Funding Network™ are intended to address the decreasing availability of traditional bank financing options to SMEs in Europe and elsewhere. We are an early mover in online funding having developed in-house investing and monitoring technologies designed to create efficiently structured capital market funding solutions. We believe that we are presently the only European based online funding platform to offer proprietary equity, loan and high quality monitoring services to private SMEs. Certain competitors offer comparable funding services but do not include monitoring services. Others provide equity and loan funding services plus high quality monitoring services but do not currently possess a proprietary user base or internal payment method.

On December 8, 2014 we entered into an agreement (the “Agreement”) with Fortion Holding B.V., a Netherlands limited liability corporation conducting its business under the trade name Credion (“Credion”). Credion provides financial advisory services in the Dutch SME markets and specializes in debt and equity financings for SMEs. The Agreement provides for a strategic alliance between us and Credion in which Credion’s extensive network of investors and entrepreneurs will be connected with each other through our online funding platform. Credion will process the funding for its SME clients through our platform resulting in monthly recurring revenue and transaction fees for us. The alliance is intended to provide more efficient access to capital for SMEs while greatly improving SME data monitoring standards for investors. SMEs utilizing the platform will have direct access to Credion’s investor clients as well as our investors.

 

 

Prior to November 2016, Symbid Coöp was the contractor for all of our crowdfunding business in the Netherlands. We did not own or have any interest in Symbid Coöp. Symbid Coöp was a variable interest entity (“VIE”) which we, through Symbid B.V., effectively controlled through corporate governance rather than through any ownership. Because we owned no interest in Symbid Coöp, we had no right to receive any distributions from Symbid Coöp. The revenues to us from Symbid Coöp came from administrative, success and management fees paid to us by Symbid Coöp. Because of the corporate governance control structure, we consolidated the financial statements of Symbid Coöp with our own. For the fiscal years ended December 31, 2016 and 2015, approximately 90% and 80% of our revenues, respectively, were derived from Symbid Coöp. For the years ended December 31, 2016 and December 31, 2015 we had net losses of $1,507,652 and $2,299,275, respectively.

In August 2014 we incorporated in Germany our indirect, majority owned, subsidiary Symbid Germany GmbH. We contributed capital of $7,749 to this subsidiary, which is currently an entity without operations.

Further to the planned European expansion of our equity crowdfunding operations, on February 20, 2015, Symbid Italia SPA (“Symbid Italia”), an Italian corporation created to develop the business of equity crowdfunding in Italy, was formed by our wholly owned subsidiary, Symbid Holding B.V., together with Banca Sella Holding SPA (“Banca Sella”) and Marco Bicocchi Pichi. Through Symbid Italia, we intended to create a new online funding platform, based on our existing crowdfunding technology, in which Italian investors and entrepreneurs could connect, fund and grow together and to digitalize financial services for Italian SME’s. At the direction of the Symbid Italia board of directors, a special Symbid Italia shareholder meeting was held on April 29, 2016, at which it was determined to liquidate Symbid Italia and return the residual capital to the Symbid Italia shareholders. On May 26, 2016, Symbid Italia was liquidated and the Company received $44,922 for its 50.1% interest and recognized a loss of $2,986. The results of Symbid Italia’s operations have been included in the consolidated financial statements

In June 2015, our loan crowdfunding program was launched, and in the beginning of July 2015 our first successful loan crowdfunding campaign was realized. The launch of this peer-to-business lending service complemented our existing equity crowdfunding service and supported the development of our online funding platform for start-ups and SME’s, The Funding Network.

To operate the loan crowdfunding Symbid Coöp obtained an exemption to mediate in redeemable funds from the Dutch Authority Financial Markets.

Overview

We were incorporated as HapyKidz.com, Inc. in Nevada on July 28, 2011 with the intention to become an e-commerce marketplace that connects merchants to consumers by offering daily discounts on goods and services through a proprietary website. We were not successful in this endeavor.

On September 4, 2013, we filed a Certificate of Amendment to our Articles of Incorporation with the Nevada Secretary of State to change our name from HapyKidz.com, Inc. to Symbid Corp.

On December 6, 2013, we closed a share exchange (the “Share Exchange”) pursuant to which the 19 shareholders of Symbid Holding B.V. sold all of their capital stock in Symbid Holding B.V. to us in exchange for 21,170,000 shares of our common stock, $0.001 par value per share (the “Common Stock”). As a result of the Share Exchange, Symbid Holding B.V. became a wholly owned subsidiary of ours.

As the result of the Share Exchange, we became engaged in the business of creating and operating online, equity based crowdfunding platforms, through our wholly owned subsidiary, Symbid Holding B.V. In 2015, we expanded our operations to include an online platform for SME funding, connecting new and traditional sources of finance in one integrated network built around our technology or elsewhere. As the result of the corporate restructuring in November 2016, we no longer offer crowdfunding services in the Netherlands or elsewhere.

 

In connection with the Share Exchange and pursuant to a December 6, 2013 Split-Off Agreement (the “Split-Off Agreement”), we transferred our pre-Share Exchange business to Holli Morris, our pre-Share Exchange majority stockholder, in exchange for the surrender by her and cancellation of 187,500,000 shares of our Common Stock.

As a result of the Share Exchange and Split-Off, we discontinued our pre-Share Exchange business and acquired the business of Symbid Holding B.V. and we have continued the existing business operations of Symbid Holding B.V. as a publicly-traded company under the name Symbid Corp.

Also on December 6, 2013, we completed an initial closing of a private placement offering of 3,098,736 units at $0.50 per unit, for aggregate gross proceeds of $1,549,368 (before deducting placement agent fees and expenses of the offering estimated at approximately $64,895). Each of these units consisted of one share of our common stock and one warrant to purchase one share of our common stock. The warrants were exercisable for a period of three (3) years at a purchase price of $0.75 per share. The private placement was exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions provided by Regulation D and Regulation S promulgated by the SEC thereunder. The private placement was sold to “accredited investors,” as defined in Regulation D and/or to “non-U.S. Persons” in accordance with Rule 903 of Regulation S under the Securities Act. On February 5, 2014, we completed a second closing of the private placement for aggregate additional gross proceeds of $186,992. On May 20, 2014, we completed a third and final closing of the private placement for aggregate additional gross proceeds of $1,190,405.

The Share Exchange was treated as a recapitalization of the Company for financial accounting purposes and Symbid Holding B.V. was considered the acquiror for accounting purposes.

In accordance with “reverse acquisition” accounting treatment, our historical financial statements as of period ends, and for periods ended, prior to the Share Exchange have been replaced with the historical financial statements of Symbid Holding B.V. prior to the Share Exchange in our post Share Exchange filings with the SEC.

Prior to the Share Exchange, we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result of the Share Exchange, we ceased to be a shell company.

On January 28, 2015, we completed the initial closing under a private placement offering in which we offered shares of our common stock at a purchase price of $0.50 per share. In connection therewith, we sold 1,248,232 shares for aggregate proceeds of $624,116. Effective June 30, 2015, we sold an additional 200,000 shares for aggregate proceeds of $100,000 and completed the offering.

On July 14, 2015 and September 8, 2015, we closed on the sale of $250,000 and $1,250,000, respectively, in principal amount of three-year, 8% unsecured convertible promissory notes (the “Notes”). Interest was payable on the first, second and third anniversaries of the issuance date. At any time after issuance, the holders could, at their option, convert all or a portion of the principal and interest then due into shares of common stock at a price of $0.25 per share. On July 14, 2015, we received conversion notices from four persons holding an aggregate of $190,000 in principal amount of Notes of their determination to convert all of such principal into an aggregate of 760,000 shares and subsequently issued such shares. As set forth under Debt Restructuring above, the balance of the Notes were terminated on November 15, 2016 pursuant to Note Termination and Conversion Agreements.

On June 1, 2016, we closed on the sale of $550,000 in principal amount of three-year 8% unsecured convertible promissory notes (the “2016 Notes”). Interest was payable on the first, second and third anniversaries of the issuance date. If, during the term of the 2016 Notes, we completed an equity offering (a “Qualified Offering”) for gross proceeds of not less than $1,500,000, the holders could, at their option, convert all or a portion of the principal and interest then due into shares of common stock at a price per share equal to 50% of the price at which our common stock was sold in the Qualified Offering. As set forth under Debt Restructuring above, the 2016 Notes were terminated on November 15, 2016 pursuant to Note Termination and Conversion Agreements.

 

On December 9, 2016, we entered into a Securities Purchase Agreement with CKR Law LLP (“CKR”) pursuant to which we issued 149,863,484 shares of our restricted common stock to CKR and its designees for (i) the cancellation of an aggregate of $86,456.41 due from the Company to CKR for legal services and expense reimbursements; (ii) a cash payment of $43,614 and (iii) the commitment of CKR to fund certain future operating expenses of the Company.

Although Symbid Holding B.V., Symbid B.V. and their subsidiaries maintain their books and records in their functional currency, the Euro (“EUR” or “€”), the currency of The Netherlands, for financial reporting purposes Symbid Corp. uses the United States dollar (“U.S. dollars,” “USD” or “$”). For purposes of describing metrics or certain business related numbers in the Business description or MD&A Section an exchange rate of $1.05 for €1 as of December 31, 2016 has been applied.

Share Exchange and Related Transactions

Share Exchange Agreement

On December 6, 2013 we, Symbid Holding B.V. and the shareholders of Symbid Holding B.V., entered into a Share Exchange Agreement (the “Share Exchange Agreement”), which closed on the same date. Pursuant to the terms of the Share Exchange Agreement, the 19 shareholders of Symbid Holding B.V. sold all of their capital stock in Symbid Holding B.V. to us in exchange for 21,170,000 shares of our Common Stock. As a result of the Share Exchange, Symbid Holding B.V. became a wholly-owned subsidiary of ours.

Prior to the Share Exchange, we ceased being an e-commerce marketplace that offered daily discounts on goods and services through a proprietary website and became a “shell company”. Pursuant to the Share Exchange, we acquired the business of Symbid Holding B.V., to engage in the creation and operation of online investment “crowd funding” platforms.

At the closing of the Share Exchange, an aggregate of 11,400,000 shares of our Common Stock were issued to the holders of Symbid Holding B.V.’s common stock and 9,770,000 shares of our Common Stock were delivered in escrow, 600,000 of which were initially being held in escrow in accordance with the indemnification provisions of the Share Exchange Agreement. The remaining 9,170,000 shares in escrow were being held in connection with Symbid’s prospective acquisitions of additional interests in Gambitious B.V. and Equidam Holding B.V. On June 6, 2014 we determined not to proceed with the purchase of additional shares in Gambitious B.V. As a consequence, thereof, 5,000,000 of the 9,170,000 shares, representing the shares which had been allocated to the prospective purchase of additional shares of Gambitious B.V. were returned from escrow and subsequently cancelled. An additional 300,000 shares allocated to our existing ownership interest in Gambitious B.V. at the time of the Share Exchange were similarly returned from escrow and subsequently cancelled due to the reduction in our indirect ownership interest in Gambitious B.V. from 18% to 12%. 600,000 of the shares of our common stock delivered into escrow and allocated to our existing ownership in Gambitious B.V. were distributed to the former shareholders of Symbid Holding B.V., subject to a 5% hold back to further secure the indemnification obligations of the former Symbid Holding B.V. shareholders under the Share Exchange Agreement. The 5% hold back shares were subsequently released from escrow.

On September 2, 2014 we determined not to proceed with the purchase of additional shares of Equidam Holding B.V. Until March 2017, we held a 7% ownership interest in Equidam Holding B.V. which we sold for EUR 15,000. Until August 2014, we held a 9% ownership interest in Equidam Holding B.V., which was diluted in connection with an equity financing by Equidam Holding B.V. in which we determined not to participate. As a consequence of the foregoing, the 3,000,000 shares of our common stock allocated to the prospective purchase of additional shares of Equidam Holding B.V. delivered into escrow were returned to us and cancelled. 270,000 of the shares of our common stock delivered into escrow and allocated to our existing ownership interest in Equidam Holding B.V. were distributed to the former shareholders of Symbid Holding B.V., subject to a 5% holdback to further secure the indemnification obligations of the former Symbid Holding B.V. shareholders under the Share Exchange Agreement. The 5% hold back shares we subsequently released from escrow.

 

On February 9, 2015, we sold our remaining 12% interest in Gambitious B.V. for €18,000 due to Gambitious B.V. having incurred continuing losses in 2014, Gambitious B.V. having switched its business focus to that of the publishing of games, Gambitious B.V. requiring capital contributions from its existing owners and Gambitious B.V. no longer constituting a strategic fit with our evolving operations.

The Share Exchange Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions. Breaches of the representations and warranties were subject to customary indemnification provisions, subject to specified aggregate limits of liability.

In connection with the Share Exchange, the parties took all actions necessary to ensure that the Share Exchange was treated as a tax-free exchange under Section 351 of the Internal Revenue Code of 1986, as amended.

The issuance of shares of our common stock to holders of Symbid Holding B.V.’s capital stock in connection with the Share Exchange was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering and/or Regulation S promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

2013 Equity Incentive Plan

Before the Share Exchange, our Board of Directors adopted, and our stockholders approved, our 2013 Equity Incentive Plan (the “2013 Plan”), which provides for the issuance of incentive awards of up to 5,000,000 shares of our Common Stock to officers, key employees, consultants and directors. For a description of the awards made under the 2013 Plan, see “Securities Authorized for Issuance under Equity Compensation Plans”.

Forward Stock Split

We effected a 25-for-1 forward stock split on our common stock in the form of a dividend with a record date of September 16, 2013 and a payment date of September 17, 2013. All share amounts referenced in this Annual Report, including those applicable to periods prior to the forward stock split, give effect to the forward stock split unless otherwise indicated.

FAC B.V. Acquisition

On July 29, 2014, we entered into a Share Purchase Agreement with our wholly owned subsidiary, Symbid Holding B.V., and FAC 2 B.V., a limited liability corporation incorporated in The Netherlands.  Pursuant to the Share Purchase Agreement, we acquired FAC B.V. (“Acquiree”), a limited liability corporation incorporated in The Netherlands from FAC 2 B.V. in exchange for 2,750,000 shares of our restricted common stock.  Acquiree owns a perpetual, worldwide, exclusive license to infrastructure technology upon which we have developed a platform to enable cloud based financing solutions for SME’s, expanding on our current equity based crowdfunding solutions in the Netherlands.  Acquiree was formed by FAC 2 B.V. for the specific purpose of holding the license and has no customers, employees, operations or revenues. Acquiree’s only assets are its proprietary software and technology.

Fortion Agreement

On December 8, 2014 we entered into an agreement (the “Agreement”) with Fortion Holding B.V., a Netherlands limited liability corporation conducting its business under the trade name Credion (“Credion”). Credion provides financial advisory services in the Dutch SME markets and specializes in debt and equity financings for SMEs. The Agreement provides for a strategic alliance between us and Credion in which Credion’s extensive network of investors and entrepreneurs will be connected with each other through an online funding platform of ours. Credion will process the funding for its SME clients through our platform resulting in monthly recurring revenue and transaction fees for us. The alliance is intended to provide more efficient access to capital for SMEs while greatly improving SME data monitoring standards for investors. SMEs utilizing the platform will have direct access to Credion’s investor clients as well as our investors.

 

We will charge SMEs utilizing the platform a service fee for the start package related thereto (€350) with part of such fee being utilized to purchase advisory services from Credion in its capacity as a preferred supplier.

Financing proposals generated by Credion within the platform can be offered to investors (i) by means of a private placement with the professional financing parties affiliated by service level agreements or (ii) by means of an offer on the online direct funding platform enabling investors to invest online utilizing standardized financial products. For (i) above, the settlement of potential transactions will be finalized outside of the platform. For successful transactions under (ii) above, a percentage of the applicable success fee will be paid to Credion. Financiers will be encouraged, but not required, to purchase monitoring services from us. The financier will pay us a monthly fee for such monitoring services. Entrepreneurs that are introduced to the platform by us will be charged a fee of €300 for a monitoring start package.

The Agreement provides that commencing January 1, 2015 all financings facilitated and brokered by Credion and its advisors will be registered on our platform. In connection therewith, Credion will add us on a best efforts basis as a contractual party to all service level agreements it has signed and will sign. Notwithstanding the foregoing, Credion has the right to utilize other direct online funding platforms. Similarly, we have the right to facilitate financings brokered by other corporate finance companies, but we must continue to offer the Credion services within the financing process via our platform on a preferred supplier basis.

As consideration for Credion’s obligations under the Agreement, we issued 1,500,000 shares of our restricted common stock to Credion following execution of the Agreement. For the period January 1, 2015 through December 31, 2017, we are required to issue up to an additional 1,000,000 shares of our restricted common stock to Credion, up to 250,000 of which shares are payable as at December 31, 2015 for the period January 1, 2015 through December 31, 2015, up to 500,000 of which shares are payable as at December 31, 2016 for the period January 1, 2016 through December 31, 2016 and up to 250,000 of which shares are payable as at December 31, 2017 for the period January 1, 2017 through December 31, 2017. The number of shares to be issued for each of 2015, 2016 and 2017 will be based upon the number of monitoring start packages of €300 times the number of companies purchasing those packages from us that have been introduced to us by Credion. During both 2015 and 2016 no monitoring start packages were sold to customers of Credion and no shares were payable as at December 31, 2016.

SME entrepreneurs will be charged a success fee equal to 5% of the amount raised from the direct online funding platform, 20% of which will be payable to Credion. For private placements with SME entrepreneurs introduced by us, SME entrepreneurs will be charged a success fee of €250. If the entrepreneur has been introduced through the Credion network, no success fee will be charged on the private placement.

As the result of our November 2016 corporate restructuring, we do not expect to realize any future revenues from this Agreement.

Symbid Overview Corporate Structure

Symbid B.V. derived until and including October 2016 income from its crowdfunding business in The Netherlands through revenue streams from Symbid Coöperatie U.A. (“Symbid Coöp”), a Dutch limited liability cooperative that licenses Symbid’s crowdfunding platform.  Symbid B.V. does not own or have any equity interest in Symbid Coöp. Symbid Coöp was a variable interest entity (“VIE”) which Symbid B.V. effectively controlled through corporate governance rather than through equity ownership.

It was Symbid Coöp’s status as a VIE that allowed Symbid B.V. to consolidate the financial statements of Symbid Coöp as if Symbid Coöperatie U.A. were a subsidiary of Symbid B.V. As the result of our November 2016 corporate restructuring, we are no longer able to consolidate Symbid Coöp’s financial results with our own. As of December 31, 2016, Symbid B.V.’s fiscal year end, approximately 90% of Symbid B.V.’s revenues were derived from Symbid Coöp. As of December 31, 2015, Symbid B.V.’s fiscal year end, approximately 80% of Symbid B.V.’s revenues were derived from Symbid Coöp. Prior to November 1, 2016 we received administrative, success and management fees from Symbid Coöp. For the year ended December 31, 2016, these fees totaled: Administrative - $44,634, Success - $150,999 and Management - $0. For the year ended December 31, 2015, these fees totaled: Administrative - $62,632, Success - $219,523 and Management - $0.

 

The intellectual property (“IP”) underlying Symbid B.V.’s crowdfunding platform is not owned by Symbid B.V.  It is owned by Stichting Symbid IP Foundation, a Dutch foundation that was formed in October 2013 to hold that property as part of Symbid’s restructuring.  In addition to the software IP relating to the crowdfunding platform technology, Stichting Symbid IP Foundation’s IP consists primarily of two internet domain names (www.symbid.com and www.symbid.nl) and does not include any patents. Stichting Symbid IP Foundation licensed the crowdfunding platform technology to Symbid Holding B.V. on a perpetual basis. Symbid Holding B.V., in turn, licenses the technology, on a perpetual basis, to Symbid B.V. Without the primary license of the crowdfunding platform technology from Stichting Symbid IP Foundation, Symbid would not be able to continue its business. By transferring the Symbid crowdfunding technology to Stichting Symbid IP Foundation, Symbid believes that it has insulated and protected that property from various types of claims that otherwise might possibly arise if the property had remained in a corporate entity.

Our subsidiary, FAC B.V. is the owner of the perpetual, worldwide, exclusive license to infrastructure technology upon which we have developed a platform to enable cloud based financing solutions for SME’s. Per addendum dated November 15, 2016 the license agreement had been amended to a non-exclusive license.

History and Organizational Structure

Symbid B.V. was incorporated on March 29, 2011, as a privately held besloten vennootschap (private limited liability company) organized under the laws of The Netherlands. Through October 3, 2013, Symbid B.V. was our primary operating company managing all of our activities including our crowdfunding platform in The Netherlands.  Until October 16, 2013, Symbid B.V. was the owner of our intellectual property (the “IP”).  This entity was also the contractor for all material agreements related to the IP. Additionally, Symbid B.V nominates for appointment, by the Symbid Foundation board, the board of directors of Symbid Foundation. Until March 2017, Symbid B.V. also held ownership interests in Equidam Holding B.V. (7%). Such interests were sold for €15,000.

A schematic overview of our corporate structure as of March 1, 2017 is set forth below. In March 2017, we sold our 7% interest in Equidam Holding B.V.

Neither Symbid Corp., Symbid Holding B.V., Symbid B.V. nor any of their affiliates have any ownership interests in Stichting Symbid IP Foundation, Symbid Foundation or Symbid Coöp.

 

Reorganization of Corporate Structure in 2013

Because of the December 6, 2013 Share Exchange and Symbid’s plans to enter various new markets, Symbid determined to restructure the legal organization of its business as described below.

Symbid Holding B.V. was incorporated on October 3, 2013, as a privately held besloten vennootschap (private limited liability company) organized under the laws of The Netherlands.  Symbid Holding B.V. was organized to serve as the holding company for all of Symbid’s business activities in The Netherlands and in other countries. As such, on October 3, 2013, the holders of the capital shares of Symbid B.V. exchanged their shares for capital shares of Symbid Holding B.V. and, as a result, Symbid B.V. became a wholly owned subsidiary of Symbid Holding B.V. Symbid B.V. is now the Symbid operating entity for the Company’s business in The Netherlands. As such, Symbid B.V. will continue to hold the ownership interests in Equidam Holding B.V. FAC B.V. operates as of July 2014 as a 100% subsidiary of Symbid Holding B.V. In conjunction with this reorganization, Symbid’s IP, which includes all of the software relating to the Symbid crowdfunding internet platform, was transferred to a new entity organized in The Netherlands on October 3, 2013, Stichting Symbid IP Foundation. We do not have an ownership interest in Stichting Symbid IP Foundation but maintain management control over Stichting Symbid IP Foundation through our control of Stichting Symbid IP Foundation’s board of directors. See “Risk Factors. Our intellectual property is owned by Stichting Symbid IP Foundation, a Dutch entity that we do not own”. Pursuant to the organizational documents of Stichting Symbid IP Foundation, the board of directors of Stichting Symbid IP Foundation must be composed of at least two members, one of whom must always be Symbid B.V. or one of its directors and the other must always be Symbid Corp. or one of its directors. The size of the board of directors of Stichting Symbid IP Foundation is established by the board itself, giving Symbid B.V. and Symbid Corp. full control over the Stichting Symbid IP Foundation board.] Stichting Symbid IP Foundation has granted a perpetual license in the IP to Symbid Holding B.V. which, in turn, has granted a perpetual, license in the IP to Symbid B.V. Symbid B.V. previously sublicensed the IP to Symbid Coöp but in connection with the corporate restructure and the November 15, 2016 Intellectual Property License and Transfer Agreement, Symbid Stichting IP Foundation directly granted a perpetual, royalty free license to Symbid Corp. With respect to future Symbid crowdfunding platform business projects in other countries, Symbid Holding B.V. will grant IP licenses to the new legal entities established for these business purposes.

Reorganization of Corporate Structure in 2016

Because we were not able to raise additional capital in the fourth quarter of 2016 we were forced to enter into settlements with our creditors and note holders and restructure the Company. This restructuring caused us to curtail certain business operations and change our focus from the operation of online funding platforms and the provision of software solutions for the alternative financing in the SME market to the licensing of available software packages for which we own or license the intellectual property.

The revised business model will require fewer employees, advisors and consultants and will be more economical to operate than our past operations. Over the past few years we have developed several software products suitable for the alternative market which we will continue to offer to and operate with third parties. Such products and related services include white label versions of crowdfunding software for investor groups and monitoring software to provide investors with ongoing insight into the performance of SMEs to which they have loaned money. Related licensing fees and subscription agreements may include set fees and yearly contribution fees.

Our goal is to substantially reduce or eliminate our debt, continue to operate our business and negotiate a possible acquisition or other business combination with another operating entity. There can be no assurance that we will be successful in this endeavor or that if a business combination is consummated that it will be on favorable terms. In the interim, we will continue forward with our business operations under the revised business model.

 

As the result of the restructuring, our previous crowdfunding platform in the Netherlands will be operated through Symbid Coöp. We previously controlled and operated Symbid Coöp through corporate governance but as the result of the restructuring, Symbid Coöp has become an independent entity. As we did not have the resources available to continue the software development of the online funding platform, Symbid Coöp was required to further develop the software for operating the crowdfunding platform under the laws and regulations of The Netherlands before January 1, 2017 in order to remain compliant, which it did. Symbid Coöp has, in return for reimbursing the further development of the software, been granted a non-exclusive license to the intellectual property from IP Foundation in order to continue crowdfunding operations in The Netherlands. We continue to hold an identical non-exclusive license to the intellectual property of the crowdfunding platform whereby we are allowed to use the most up to date versions of the software and other intellectual property.

Market Need - The Problem Definition

SMEs are crucial engines of economic growth, job creation and social cohesion. In many countries SMEs represent approximately 99% of all business entities. However, entrepreneurs and investors in the SME backbone of our economies experience obstacles and barriers when seeking to connect, fund and grow. Recent financial crises and stricter banking regulations are contributing to this vacuum in the life cycle of SME financing. Access to capital remains one of the biggest challenges in the creation, survival and growth of SMEs.

In their report “Financing SMEs and Entrepreneurs 2016”, which monitors SMEs’ and entrepreneurs’ access to finance in 37 countries over the period 2007-2014, with the pre-crisis year 2007 serving as a benchmark, The Organization for Economic Co-operation and Development indicates that the ongoing economic recovery between 2012 and 2015 has had a moderately positive effect on SME financing. These improvements in the macroeconomic environment, which are expected to continue in the forthcoming years, as well as improved financial conditions led to a rise in lending volumes in the majority of participating countries. Despite these general positive developments, many small innovative businesses continue to face difficulties in accessing external financing. Credit conditions are expected to remain tight, regulatory requirements are likely to continue to discourage lending to SMEs, venture capital investments are generally still below pre-crisis levels and bank financing is often not suited to the needs of start-ups. The report consequently suggests that SMEs could further benefit from the ongoing recovery through tapping into a diverse range of financing instruments.

Results from the 15th round of the Survey on the Access to Finance of Enterprises (SAFE) also confirm the above-described improvement in overall income situations of SMEs. In the period April – September 2016, Euro area enterprises reported overall improvements in their debt situations and declines in interest expenses. The SAFE survey additionally showed that SMEs in the euro area see access to finance as less of a burden compared to other business activities. In the Netherlands, where Symbid was incorporated in 2011, access to finance however remains the predominant problem according to the surveyed SMEs. Contrary to 3 years ago, the “external financing gap”, measuring the perceived difference at firm level between needed and available funds, records as a negative value for the third consecutive time. This indicates that SMEs in most Euro countries communicated that the potential supply of external funds topped the internal need for financing. The SAFE survey finally revealed that, although there is a slight increase, the use of equity as an external source of financing remains non relevant for many SMEs.

However, according to a previous SAFE report, ‘innovative’ businesses active in the online industries have the poorest access to finance across the different types of business entities surveyed. This is due primarily to the difficulties associated with the valuation of companies that lack well-defined material assets but whose core business is based mostly upon intellectual property. Therefore, in our digital age, it is the more forward-thinking, online-oriented businesses that are suffering most from the lack of bank finance for SMEs.

 

The lack of access to capital for SMEs, which was to a higher degree existent in the years after the financial crisis in 2007, was also recognized in the United States where the Jumpstart Our Business Startups Act (JOBS Act) was enacted into law in April 2012. The JOBS Act is intended to encourage the funding of small businesses located in the United States by easing various federal and state securities regulations. It is expected that once the SEC promulgates regulations required under the JOBS Act, entrepreneurs will be able to engage an online crowd of investors through equity crowdfunding. Title II went into effect on September 23, 2013. Title III rulings enabling the general solicitation of unaccredited investors, thereby effectively legalizing equity crowdfunding in the U.S. as is already the case in most European countries, went into effect on January 29, 2016.

Although the above-mentioned research shows that financial markets and access to finance for SMEs have significantly improved over the past years, pre-financial crisis conditions are yet to be reached. In particular, innovative start-ups suffer from the tight credit conditions and increased regulatory requirements. It is also these companies for which traditional loans are not viable due to for example lacking revenue streams, leading to a demand for different forms of alternative financing.

Online Funding Operations

The launch of The Funding Network™ took place in early March 2015. Built around our investing and monitoring technology, The Funding Network™ gives entrepreneurs access to various types of finance, while offering (private and institutional) investors risk/reward transparency. Entrepreneurs connecting to our online funding platform are guided towards the type of funding best suited to their needs by our professional advisors. Investors can personalize their deal flow according to key business criteria, pinpointing the investment opportunities that matter to them. This is intended to produce a more efficient capital allocation service, underpinned by standardized XBRL data streamed from the financial reporting system. Our platform is designed to connect entrepreneurs, start-ups and small businesses to all types of funding.

Our platform breaks down the funding process from beginning to end. We connect entrepreneurs to investors via sound financial advice. Investors seek new opportunities, then monitor the performance of their investments. Financial advisors give support to entrepreneurs along the way, while accountants provide the real-time financial data. The funding process consists of the following steps:

CREATE: The entrepreneur and advisor together create a funding request in a standardized deal format. SHARE: The standardized funding request can be shared with a variety of institutional investors, and a network of over 36,000 private (crowdfunding) investors, who can invest from as little as € 20 ($22). Deals can be shared publically (open) or privately (closed). MATCH: We match deals with the right investors based on personalized preferences and can facilitate the settlement if required. MONITOR: Ongoing financial analysis of private companies, resulting in reporting for optimal risk and return management. Financial data can be imported into our monitoring from the accountant reporting system. Standardized data allows for comparing the performance of companies. Investors and entrepreneurs both use a personalized dashboard based on pre-set Key Performance Indication (“KPI”) relating to a particular company.

 

 

Symbid’s Product/Service Portfolio

Crowdfunding

As the result of our November 2016 corporate restructuring, we no longer offer crowdfunding services.

Monitoring Services

We offer our monitoring technology as part of The Funding Network™ and as a standalone product for business partners. The technology provides insights for investors and entrepreneurs with the periodical financial results of a portfolio of companies. The product is an online application fully integrated into The Funding Network™ by Symbid, handling XBRL (eXtensible Business Reporting Language) data in order to calculate KPIs and inform users of the key performance trends of a particular business. Entrepreneurs connecting to The Funding Network™ register to have their company’s data monitored and encourage their investors to subscribe to their company’s monitoring portal access. The product was conceived with its target user being an investor, but will also be marketed to entrepreneurs focused on assessing and improving the performance of their own business.

A brief overview of service companies currently related to our crowdfunding eco-system is provided below.

FAC B.V.	On July 29, 2014, we entered into a Share Purchase Agreement with our wholly owned subsidiary, Symbid Holding B.V., and FAC 2 B.V., a limited liability corporation incorporated in The Netherlands. Pursuant to the Share Purchase Agreement, we acquired FAC B.V. (“Acquiree”), a limited liability corporation incorporated in The Netherlands from FAC 2 B.V. in exchange for 2,750,000 shares of our restricted common stock. Acquiree owns a perpetual, worldwide, exclusive license to infrastructure technology upon which we intend to develop a platform to enable cloud based financing solutions for SME’s, expanding on our current equity based crowdfunding solutions in the Netherlands. The license provides the required technology for ongoing monitoring of private companies. Financial data can be imported into Symbid monitoring from the accountant reporting system resulting in powerful reporting for optimal risk and return management. Standardized data allows for comparing the performance of companies. Investors and entrepreneurs get a personal dashboard with KPI’s for key variables and covenants.
Equidam Holding B.V.	Equidam Holding B.V., founded in August 2013, is one of the first companies to be organized in any country as a crowdfunding service provider. Started as an online valuation tool for private companies with a particular focus on SMEs, Equidam Holding B.V. now also offers monitoring services to investors on the Symbid platform. In addition to Equidam Holding B.V.’s relationship with Symbid, this company has entered partnerships with European crowdfunding platforms to provide its services to these platforms as well. Symbid owned a 7% direct interest in Equidam Holding B.V. following an additional round of financing by Equidam Holding B.V. in which we determined not to participate. In March 2017, this 7% interest was sold for €15,000.
Kredietpaspoort Coöperatie UA	The Kredietpaspoort (Credit Passport) is an online “passport” which provides up-to date information about entrepreneurs and their business. The product is designed to be used by private investors to quickly assess the prospects and reliability of start-ups, SMEs and their owners before making an investment. In essence, the Credit Passport is a simple-to-use yet comprehensive online tool which provides the necessary information for all lenders.

 

 

Meanwhile, entrepreneurs gain insight into their funding potential with specific information about the types of investor attracted to their business and why they choose to invest or not. Furthermore, entrepreneurs are immersed in investment terminology and can learn how to target investors more effectively. The service enables investors and entrepreneurs to do business in a more efficient, streamlined fashion and reduces uncertainty for both sides.

The Credit Passport complements The Funding Network by enabling entrepreneurs to create an online summary of critical investor information, thereby eliminating the costly paper trails which currently inhibit entrepreneurs in raising funds. We are currently a minority shareholder in the Kredietpaspoort initiative.

The Market

Driven by various factors, including the financial crisis, the ubiquity of mobile devices, increased transparency, significant decreases in the costs of computing powers as well as new regulatory law (JOBS Act), the alternative finance industry has grown exponentially over the past years. According to the report “The 2nd European Alternative Finance Industry Report” by The University of Cambridge and KPMG, in Europe, where the market for alternative finance has been growing at an impressive pace for several years, the total market volume for online alternative finance reached €5,431million in 2015. This represents an annual growth rate of 92%. The majority of the European market is comprised by the United Kingdom, which accounts for €4,348 million of the total alternative finance volume. The Netherlands represented the fourth largest market in alternative finance with a total market volume of €111 million. Furthermore, the per capita market volume in 2015 for the Netherlands was the highest in Europe (excl. the UK), amounting to €6.53.

The report published by the University of Cambridge furthermore shows that in 2015, €536 million of business finance was raised through online alternative funding models, providing capital to a total of 9,442 SMEs (excluding the UK). This represents a year-on-year growth of 167% and 63% respectively.

Currently Peer-to-Peer lending and reward-based crowdfunding account for 71% of the total European market volume (excl. UK). In 2015, equity-based crowdfunding comprised with €159 million, 16% of the market volume, and had an average three-year growth rate of 83%. In the Netherlands, the alternative finance volume through equity-based crowdfunding totaled €16,6 million.

According to the University of Cambridge/KPMG report, a major trend within the alternative finance industry is the increased rates of participation rates of institutional investments. The percentage of institutional investors participating in online alternative finance platforms has grown from 33% in 2014 to 44% in 2015, and is expected to grow further in the coming years.

In terms of risk perception, the survey conducted by the University of Cambridge pointed out that the Dutch rate “the collapse of one or more well-known platforms due to malpractice” as the highest crowdfunding risk. Fraud, increased business failure rates and changed to regulation were other risks considered by respondents.

The Symbid Business Model

Our business is intended to facilitate the full funding process for SMEs from prospective creation through and including, the monitoring process. We expect that our business will lead to revenue generation from the following sources:

Create process related revenues

 

 

Matchmaking related revenues

Public Funding (Offered until November 2016)

Private funding

Monitoring related revenues

Licensing related revenues

Symbid may sublicense the platform technology in the forms discussed below in The Netherlands and to country partners.

The Competitive Environment

The crowdfunding industry has developed rapidly since 2000 when several non-governmental organizations and companies started raisings funds online. The concept of online fundraising was quickly adapted to various forms of collective funding over the internet, now all being labelled as crowdfunding.

 

There are several different forms of crowdfunding. The main categories are:

 

 

 

 

Globally, thousands of crowdfunding platforms are currently active in the marketplace. However, the majority of these platforms are involved in donation- or reward-based (pre-sales) crowdfunding. The low barriers to entry in this sector allow many vendors to establish crowdfunding platforms, but, typically, their scope is limited to a specific geography or nice industry, such as books or movies. According to the Massolution “Crowdfunding Industry 2015” report, the total global crowdfunding industry was estimated to be $34 billion, a 112% growth compared to 2014. This furthermore represents an enormous growth compared to 2012, where the global fundraising volume totaled only $2.7 billion.

Many of the existing crowdfunding platforms struggle in this growth environment with respect to their ability to professionalize their systems and legal frameworks and otherwise manage their growth. Reward- and loan-based crowdfunding (e.g. peer-to-peer lending) currently account for approximately 90% of this industry, but equity crowdfunding is expected to further enlarge its market share in the short- to mid-term future. In 2015 $2.5 billion was fundraised through equity, whereas in 2012, the global equity crowdfunding market was worth just $116 million.

Currently the UK has the largest equity crowdfunding market. The two leading UK platforms, Seedrs and Crowdcube, currently account for more than all other European platforms combined according to their own funding volume totals. To our knowledge, there are currently approximately 40 crowdfunding platforms active in The Netherlands. Due to regulatory changes there are at the moment no domestic platforms that offer all-equity deals on their platforms. There are however some foreign equity-crowdfunding platforms active in The Netherlands, including Seedrs and Ourcrowd.

The 28 countries of the European Union are a very long way from offering a homogeneous regulatory environment for crowdfunding. This is particularly true of equity crowdfunding which touches on multiple heavily regulated areas of finance such as investment advice, securities trading, retail banking and corporate finance. Few European countries have, like France, issued new regulations that are specific to investment crowdfunding. In the Netherlands, as of April 1, 2016, the regulatory framework applicable to equity based crowdfunding was amended. Investment limits are doubled to €40,000 and platforms need to conduct an investors test in order to assess whether the investment is sound for this particular retail investor. Additionally, as of 2017 equity-based crowdfunding platforms are required to have an investment license. Due to these tightened regulations, we do not expect a significant increase in crowdfunding enterprises in the near future.

 

Employees

As of March 31, 2017 we had 2 employees involved through contractual relationships with the Company. Our contractual relationships with employees consist of employment agreements. We have never experienced a work stoppage and believe our relationship with our employees is good.

Description of Properties

Our principal executive offices are located at Marconistraat 16, 3029 AK Rotterdam, The Netherlands. We are currently co-using this office space.

Regulatory Framework

During the development of the Symbid crowdfunding platform in 2010, we were in close contact with the Authority Financial Markets in The Netherlands (the “AFM”) to discuss the Symbid crowdfunding model, the structure of our crowdfunding platform and its relationship to the Dutch regulatory framework. In our correspondence with the AFM, we primarily focused on the equity based crowdfunding model rather than the pledge or donation based models which do not implicate securities law considerations. In an email correspondence to Symbid, the AFM acknowledged that, although it is Symbid’s responsibility to identify activities requiring government authorization, as described to the AFM by Symbid, the AFM saw, on the basis of the information provided, no indication that the crowdfunding activities of Symbid would require permission under the Dutch Act on Financial Supervision. Although we did not specifically address our partnering/affiliate programs in our correspondence with the AFM, it is our understanding and belief that the same AFM considerations would apply to these activities to the extent that they make use of Symbid’s legal structure and model. The activities of Symbid have not materially changed in comparison with the information provided to the AFM in 2010. During the expansion of our product offerings to include debt based crowdfunding, we have been in discussions with AFM regarding the classification of our activities. In agreement with the AFM, Symbid applied for an exemption for its activities under the Dutch financial regulatory framework at the AFM, which was provided in the second quarter of 2015. Additional changes in the regulatory framework are expected in the future whereby crowdfunding will become a regulated business, however as of November 2016 the Company is not offering any crowdfunding services in the Netherlands, or elsewhere.

Symbid’s restructuring in 2013 in which it established Symbid Holding B.V. as a holding company for its crowdfunding activities and transferred its intellectual property to Stichting Symbid IP Foundation did not have an impact on Symbid’s legal structure at the operating level. Symbid established its operational model in The Netherlands such that all crowdfunding activities would be conducted at the Symbid Coöperatie U.A. level with management control exercised by Symbid Foundation. This operational structure was designed to function independently from the legal structure and changes in the ownership structure of Symbid B.V. or Symbid Holding B.V. Because of this operation versus ownership structure, Symbid believes that its corporate reorganization will have no impact on the application of the AFM’s considerations or other aspects of the Dutch regulatory framework.

Our crowdfunding platform encompasses other activities which, in The Netherlands, could require a license or specific regulatory compliance under certain circumstances. These activities relate to (i) the holding of redeemable funds and (ii) securities offerings to the public without a prospectus.

Redeemable funds – Our financial partner InterSolve (FEET EGI B.V.) holds a license from the Dutch Central Bank as an Electronic Money Institution, is supervised by the Authority Financial Markets (“AFM”), being the Dutch equivalent of the SEC, and the Dutch Central Bank and is, therefore, allowed to redeem funds to the public. On the Symbid crowdfunding platform, investors can re-claim, i.e., redeem, their electronic money at any time prior to the funding target having been reached of a business idea to which they have allocated their electronic money. InterSolve will exchange upon request by such an investor the amount of electronic money being redeemed into scriptural money on the bank account of the investor. Symbid partners with InterSolve to ensure that Symbid cannot be deemed to hold redeemable funds of investors itself. Because an investor’s funds are held in an electronic wallet with Intersolve and released to a particular project only when that project actually funds, and any funds that an investor allocates to a project that the investor redeems prior to a project funding remain in that investor’s account (electronic wallet) with Intersolve, which, in effect, acts as an escrow agent for the investor’s funds and particular project fundings, Symbid does not record any success fee revenues on its books until a project funding actually closes and Symbid’s earned fees are transferred to it. As a result of this structure, any funds that may be redeemed by an investor prior to a project funding and returned to that investor’s electronic wallet do not appear, and are not reported, on the financial statements of Symbid.  If, however, an investor decides to remove funds from his electronic wallet and return them to his personal bank account, effectively taking these funds out of the Symbid crowdfunding system, Symbid pays Intersolve a fee of approximately $16.50 (€15).

 

Offerings to the public without a prospectus – Under Dutch law, as long as the target capital raised for a particular business over a period of 12 consecutive months remains below €2.5 million (approximately $2.75 million), there is an exemption from the prospectus delivery requirements. Under the current regulations, a prospectus must be prepared and approved by the AFM for capital raises planned or expected to exceed the €2.5 million (approximately $2.75 million) within a 12-month period.

Separately, membership interests in a Dutch cooperative, if not freely tradable, are not considered securities under Dutch law. Symbid has taken the business decision to ensure that all membership interests in Symbid Coöperatie U.A. are not freely tradable; thus Symbid Coöperatie U.A. is not required to be licensed to sell securities under the Dutch Act on Financial Supervision.

Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.

We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.

ITEM 1A.   RISK FACTORS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN STATEMENTS RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF OUR COMPANY.  YOU ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY.  IN EVALUATING SUCH STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS ANNUAL REPORT ON FORM 10-K, INCLUDING THE MATTERS SET FORTH BELOW, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.

AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.  YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE DECIDING TO INVEST IN OUR COMPANY.  IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS FOR GROWTH WOULD LIKELY SUFFER.  AS A RESULT, YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT IN OUR COMPANY.

GENERAL RISKS RELATING TO OUR BUSINESS, OPERATIONS AND FINANCIAL CONDITION

We have a limited operating history and are subject to the risks encountered by early-stage companies.

We were organized in The Netherlands in April 2011. Because our operating company has a limited operating history, you should consider and evaluate our operating prospects in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets. For us, these risks include:

 

 

These risks are described in more detail below. Our future growth will depend substantially on our ability to address these and the other risks described in this Annual Report. If we do not successfully address these risks, our business would be significantly harmed.

We have a history of net losses, may incur substantial net losses in the future and may not achieve profitability.

Although we have generated revenues, we have incurred significant losses since inception. If our revenues do not increase, or if we experience increases in operating expenses, we will continue to incur significant losses and will not become profitable. If we are not able to significantly increase our revenues, we will likely not be able to achieve profitability in the future.

Our operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.

Our operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern.  If we do not generate revenues, do not achieve profitability and do not have other sources of financing for our business, we may have to curtail or cease our development plans and operations, which could cause investors to lose the entire amount of their investment.

Our Management Team Does Not Have Prior Experience In U.S. Public Company Matters, Which Could Impair Our Ability To Comply With Legal And Regulatory Requirements.

Our management team has had no prior U.S. public company management experience, which could impair our ability to comply with legal and regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable U.S. federal securities laws, including filing required reports and other information on a timely basis.  There can be no assurance that our management will be able to implement and affect programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations.  Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and result in the deterioration of our business.

Civil liabilities may not be able to be enforced against us.

Substantially all of our assets and our officers and directors are located outside of the United States. As a result of this, it may be difficult or impossible to effect service of process and enforce judgments awarded by a court in the United States against our assets or those of our officers and directors who are located in The Netherlands.

Our intellectual property is owned by Stichting Symbid IP Foundation, a Dutch entity that we do not own.

In October 2013, Symbid B.V. transferred the Symbid crowdfunding platform intellectual property to Stichting Symbid IP Foundation, a Dutch foundation with, according to its organizational documents, at least two directors one of whom must always be Symbid B.V. or one of its directors and the other must always be Symbid Corp. or one of its directors. Stichting Symbid IP Foundation licenses the Symbid crowdfunding technology on a perpetual, exclusive basis to Symbid Holding B.V. which, in turn, licenses the technology to Symbid B.V. for sublicense to Symbid Coöperatie U.A.  Because Symbid does not own Stichting Symbid IP Foundation, it cannot assure that the board of directors of the foundation will not be expanded or changed in such a way as to challenge the interests of Symbid Holding B.V. to the crowdfunding platform license. Any such change could negatively impact Symbid’s ability to sublicense its crowdfunding platform and negatively impact Symbid’s results of operations and financial condition. As of November 2016 the IP license agreement has been revised to a non-exclusive basis, providing also Symbid Coöperatie UA with an equal IP license.

 

Our business is subject to risks generally associated with fluctuating economic tendencies in the capital markets.

The demand for our products can change over time due to fluctuations in the global and local economies and in the related capital requirements of SMEs.  These fluctuations could negatively impact our future revenue streams.

If we lose the services of the members of our senior management team, we may not be able to execute our business strategy.

Our success depends in a large part upon the continued service of our management team. The continued service of Korstiaan Zandvliet our Chief Executive Officer and Maarten van der Sanden our Chief Financial Officer is critical to our vision, strategic direction, culture, products and technology. We do not maintain key-man insurance for any of the members of our management team. The loss of any member of management could harm our business.

We may not be able to adequately protect our proprietary technology, and our competitors may be able to offer similar products and services, which would harm our competitive position.

Our success depends in part upon our proprietary technology. We rely primarily on trademark, copyright, service mark and trade secret laws, confidentiality procedures, license agreements and contractual provisions to establish and protect our proprietary rights. Despite these precautions, third parties could copy or otherwise obtain and use our technology without authorization, or develop similar technology independently. We also pursue the registration of our domain names, trademarks, and service marks in the United States. We cannot assure you that the protection of our proprietary rights will be adequate or that our competitors will not independently develop similar technology, duplicate our products and services or design around any intellectual property rights we hold.

If third parties claim that we infringe their intellectual property, it may result in costly litigation.

We cannot assure you that third parties will not claim our current or future products infringe their intellectual property rights. Any such claims, with or without merit, could cause costly litigation that could consume significant management time. As the number of product and services offerings in the crowdfunding market increases and functionalities increasingly overlap, companies such as ours may become increasingly subject to infringement claims. Such claims also might require us to enter into royalty or license agreements. If required, we may not be able to obtain such royalty or license agreements, or obtain them on terms acceptable to us.

We will need additional financing. Any limitation on our ability to obtain such additional financing could have a material adverse effect on our future business, financial condition and results of operations.

We will require additional capital to fund our future growth. The raising of additional capital could result in dilution to our stockholders.  In addition, there is no assurance that we will be able to obtain additional capital, or that if available, it will be available to us on favorable or reasonable terms.  Any limitation on our ability to obtain additional capital as and when needed could have a material adverse effect on our business, financial condition and results of operations.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business.  We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

 

Currency fluctuations may adversely affect our business.

All of our present operations take place in Europe. Accordingly, we receive revenues in Euros and maintain our books and records in Euros. However, for financial reporting purposes, we use the U.S. dollar. To the extent the U.S. dollar strengthens against the Euro, the translation of foreign currency denominated transactions will result in reduced revenue, operating expenses and net income for us. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transaction may be limited, and we may not be able to successfully hedge our exchange rate risks.

RISKS RELATING TO OUR SECURITIES

Because we are a former shell company, Rule 144 of the General Rules and Regulations under the Securities Act of 1933, as amended, is available to our shareholders only during such times that we remain current with our SEC reporting requirements and satisfy other Rule 144 requirements applicable to former shell companies.

We were a shell company at the time of the December 6, 2013 Share Exchange. As the result of the Share Exchange, we were no longer a shell company and on December 12, 2013 we filed a Current Report on Form 8-K containing Form 10 type information which, among other things, announced that we were no longer a shell company. Rule 144 of the General Rules and Regulations under the Securities Act of 1933, as amended (the “Securities Act”) provides conditions under which restricted and control securities of issuers can be sold without registration under the Securities Act. Rule 144(i) limits the availability of Rule 144 to shareholders of former shell companies to circumstances where former shell companies have ceased to be shell companies, have filed Form 10 type information, one year has elapsed since the filing of such Form 10 type information and the former shell company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and has filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 month period or such shorter period that the former shell company was subject to such reporting requirements. Should we fail to continue to satisfy the requirements of Rule 144(i), absent registration or other exemption therefrom, holders of our restricted and control shares will not be able to sell their shares in the public market.

Because the Share Exchange was deemed a reverse acquisition, we may not be able to attract the attention of major brokerage firms, which may limit the liquidity of our common stock and may make it more difficult for us to raise additional capital in the future.

Additional risks may exist because the Share Exchange is considered a “reverse acquisition” under accounting and securities regulations. Certain SEC rules are more restrictive when applied to reverse acquisition companies, such as the ability of stockholders to resell their shares of our common stock pursuant to Rule 144. In addition, securities analysts of major brokerage firms may not provide coverage of our common stock because there may be little incentive for brokerage firms to recommend the purchase of our common stock. As a result, our common stock may have limited liquidity and investors may have difficulty selling it. In addition, we cannot assure you that brokerage firms will want to conduct any secondary offerings on our behalf if we seek to raise additional capital in the future. Our inability to raise additional capital may have a material adverse effect on our business.

There is not now, and there may not ever be, an active market for our common stock.

There currently is no active public market for our common stock. The limited trading in our common stock is extremely sporadic. For example, several days may pass before any shares may be traded. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our common stock. Accordingly, investors must assume they may have to bear the economic risk of an investment in our common stock for an indefinite period of time. There can be no assurance that a more active market for our common stock will develop, or if one should develop, there is no assurance that it will be sustained. This severely limits the liquidity of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital.

 

We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

Until our common stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our common stock to remain eligible for quotation on the OTC Markets QB Tier. In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our common stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of the common stock. This would also make it more difficult for us to raise capital.

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.

The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.

We do not anticipate dividends to be paid on our common stock, and investors may lose the entire amount of their investment.

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

You may experience dilution of your ownership interests because of the future issuance of additional shares of our common stock.

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders and the purchasers of common stock offered hereby. We are currently authorized to issue an aggregate of 300,000,000 shares of capital stock consisting of 290,000,000 shares of common stock and 10,000,000 shares of preferred stock with preferences and rights to be determined by our Board of Directors. As of December 31, 2016, there were 187,329,355 shares of our common stock and no shares of our preferred stock outstanding. As of December 31, 2016, there were no outstanding warrants, no outstanding restricted stock units and no outstanding securities convertible into or exercisable for shares of our common stock. We may issue additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, future sales of its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of our common stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts.

 

We are an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in this Annual Report and our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company until December 31, 2017, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of any fiscal year end before that time or if we have total annual gross revenue of $1.0 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of fiscal year end or, if we issue more than $1.0 billion in non-convertible debt during any three year period before that time, we would cease to be an emerging growth company immediately.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this Annual Report and our periodic reports and proxy statements. Some investors may find our common stock less attractive because we rely on these exemptions, there may be a less active trading market for our common stock and our stock price may be more volatile.

We have elected not to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. Section 107 provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

None.

Our principal executive offices are located at Marconistraat 16, 3029 AK Rotterdam, The Netherlands. We are currently co-using this office.

We know of no materials, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.

Not applicable.

 

PART II

Market Information

Our common stock has been quoted on the OTC Bulletin Board (OTCBB) and the OTC Markets QB Tier (OTCQB), since September 25, 2013, under the symbol “SBID.” Prior to that date, our symbol was “HKDZ.”

Shares of our common stock began trading on a very limited basis in late January 2014.

As of March 31, 2017, we had 187,329,355 shares of common stock outstanding held by 113 stockholders of record.

The following table sets forth the high and low bid prices for our common stock for the fiscal quarter indicated as reported on OTC Markets. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Our common stock is very thinly traded and, thus, pricing of our common stock on OTC Markets does not necessarily represent its fair market value.

Period	High	Low
Quarter ended March 31, 2015	0.34	0.18
Quarter ended June 30, 2015	0.33	0.16
Quarter ended September 30, 2015	0.30	0.15
Quarter ended December 31, 2015	0.37	0.191
Quarter ended March 31, 2016	0.50	0.25
Quarter ended June 30, 2016	0.251	0.07
Quarter ended September 30, 2016	0.15	0.04
Quarter ended December 31, 2016	0.04	0.0082
Quarter ending March 31, 2017*	0.015	0.011
* Through March 21, 2017

Dividends

We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant. Other than provisions of the Nevada Revised Statutes requiring post-dividend solvency according to certain measures, there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock.

Recent Sale of Unregistered Securities

On June 1, 2016 we closed on the sale of $550,000 in principal amount of 8% unsecured convertible promissory notes to three persons.

Effective July 1, 2016 we issued an aggregate of 34,455 restricted stock units under our 2013 Equity Incentive Plan to two employees.

On December 8, 2016 we issued an aggregate of 188,832 shares of our restricted common stock to three advisors and four former board members in connection with the vesting of restricted stock units.

On December 9, 2016 we entered into a Securities Purchase Agreement with CKR, pursuant to which we issued 149,863,484 shares of our restricted common stock to CKR and its designees for (i) the cancellation of an aggregate of $86,456.41 due from the Company to CKR for services and expense reimbursements; (ii) a cash payment of $43,614 to be used to pay an aggregate of $37,614 to creditors of the Company, and (iii) the commitment of CKR to fund, to the extent future net revenues of the Company prove insufficient, additional operating expenses of the Company necessary to ensure its continuing operation and existence until such time that the Company can fund operations independently or until the Company completes an acquisition, business continuation, or similar transaction with an operating entity in a transaction that results in a change of control.

All of the issuances of restricted stock units were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, for transactions by an issuer not involving a public offering.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of December 31, 2016, with respect to the shares of common stock that may be issued under our existing equity compensation plans:

Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants, units and rights	Weighted-average exercise price of outstanding options, warrants, units and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column)
Equity compensation plans approved by security holders (1)	0	N/A	3,724,432
Equity compensation plans not approved by security holders	N/A	N/A	N/A
Total	0	N/A	0

(1)  2013 Equity Incentive Plan

On December 6, 2013, our Board of Directors adopted, and on December 6, 2013, our stockholders approved, the 2013 Equity Incentive Plan, which reserves a total of 5,000,000 shares of our common stock for issuance under the 2013 Plan. If an incentive award granted under the 2013 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2013 Plan.

In addition, the number of shares of our common stock subject to the 2013 Plan, any number of shares subject to any numerical limit in the 2013 Plan, and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding our common stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.

 

Administration

The compensation committee of the Board, or the Board in the absence of such a committee, will administer the 2013 Plan. Subject to the terms of the 2013 Plan, the compensation committee or the Board has complete authority and discretion to determine the terms of awards under the 2013 Plan.

Grants

The 2013 Plan authorizes the grant to participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code (as amended, the “Code”) and stock appreciation rights, as described below:

Duration, Amendment, and Termination

The Board has the power to amend, suspend or terminate the 2013 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year. Unless sooner terminated, the 2013 Plan will terminate on December 6, 2023.

As of December 31, 2014, 982,250 restricted stock units were issued and outstanding under the 2013 Plan, which number reflects the forfeiture and cancellation of 140,000 restricted stock units during the year ended December 31, 2014.

 

As of December 31, 2015, 1,643,458 restricted stock units were issued and outstanding under the 2013 Plan, which number reflects the forfeiture and cancellation of 9,750 restricted stock units during the year ended December 31, 2015.

As of December 31, 2016, no restricted stock units were outstanding under the 2013 plan, which number reflects the forfeiture and cancellation of 367,890 restricted stock units during the year ended December 31, 2016.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

The following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this report. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in this Form 10-K, that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report.

The following discussion highlights the Company’s results of operations and the principal factors that have affected our financial condition, as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on the Company’s audited financial statements contained in this Annual Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.

Basis of Presentation

The audited financial statements for our fiscal years ended December 31, 2016 and 2015 include a summary of our significant accounting policies and should be read in conjunction with the discussion below.

Overview 2016

To mitigate the conditions that raised substantial doubt about the Company’s ability to continue as a going concern management sought out new and current strategic institutional investors. However, the Company was unable to raise additional funds during the first quarter of 2016. To avoid bankruptcy due to the cash flow position of the Company, management decided to implement a cost reduction program during the second quarter of 2016. The following cost reduction actions have been successfully implemented and have provided a positive impact on the cost structure of the Company:

 

During the second half of 2016, the Company was still unable to raise additional capital from investors and was forced to enter settlement agreements with its creditors and note holders to restructure the Company. Because of the restructuring, the Company curtailed certain operations and changed its business focus from the operation of online funding platforms and the provision of software solutions for SMEs in the alternative financing market to the licensing of available software packages that the Company owns and licenses.

In addition to the measures implemented in the first nine months of 2016, the Company also implemented the following cost reductions in connection with the restructuring during the fourth quarter of 2016:

As the result of the restructuring, the Company’s crowdfunding platform in the Netherlands is now operated through Symbid Coop. The Company previously controlled and operated Symbid Coop through corporate governance but as the result of the restructuring, Symbid Coop has become an independent entity. Because the Company no longer has the resources to continue the software development of the online funding platform, Symbid Coop took over the development of software for the crowdfunding platform during the fourth quarter of 2016 in order to remain compliant under the laws and regulations of The Netherlands. Symbid Coop has, in return for reimbursing the further development of the software, been granted a non-exclusive license to the intellectual property from IP Foundation in order to continue crowdfunding operations in The Netherlands. The Company will continue to hold an identical non-exclusive license to the intellectual property of the crowdfunding platform whereby we will be allowed to use the most up to date versions of the software and other intellectual property.

On December 9, 2016, the Company entered into a Securities Purchase Agreement to issue shares constituting upon issuance 80% of its outstanding shares in consideration for the cancellation of $86,456 due from the Company to the subscriber, a cash payment of $43,614 to be used to pay off Company debts to third parties and the subscribers commitment to fund certain future operating expenses of the Company.

Going Concern

The Company suffered recurring losses during the years ended December 31, 2016 and 2015, of $1,507,652 and $2,299,275, respectively. At December 31, 2016 and December 31, 2015, the Company had a working capital deficit of $11,371 and working capital of $164,209, respectively. As of December 31, 2016, the Company had cash on hand of $9,677. The recurring losses raise substantial doubt about the Company’s ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which in turn, is dependent upon the Company’s ability to raise capital and/or generate positive cash flows from operations. The financial statements do not include any adjustments related to the recoverability and classification of recorded assets and classifications that might be necessary in the event the Company cannot continue in existence.

 

Additionally, our independent registered public accounting firm included an explanatory paragraph in their report for the years ended December 31, 2016 and 2015 regarding concerns about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our generating operating cash flow and raising capital sufficient to fund operations.  We have discussed our strategy and plans relating to these matters elsewhere in this Annual Report although the consolidated financial statements included herein do not include any adjustments that might result from the outcome of these uncertainties. On December 9, 2016, we signed a Securities Purchase Agreement under which the subscriber has agreed to fund ongoing operation expenses of the Company until such time that the Company can independently fund its operations or until the Company completes an acquisition, business combination or similar transaction with an operating entity which results in a change of control of the Company. Our business strategy may not be successful in addressing these issues, however, and if we cannot continue as a going concern, our stockholders may lose their entire investment in us.

Strategy

Our revised business model requires fewer employees, advisors and consultants and is more economical to operate. The Company has developed several software products suitable for the alternative market which it will continue to offer to third parties. Such products and related services include white label versions of crowdfunding software for investor groups and monitoring software to provide investors with ongoing insight into the performance of SMEs to which they have loaned money. Related licensing fees and subscription agreements may include set fees and yearly contribution fees.

The Company’s goal is to substantially reduce and eliminate its debt while continuing to operate its business and negotiate a possible acquisition or other business combination with another operating entity. There can be no assurance that the Company will be successful in this endeavor or that if a business combination is consummated that it will be on favorable terms. In the interim, the Company will continue forward with its ongoing operations under the revised business model.

Highlights

The following is a summary of our financial performance for the financial year 2016:

Share Exchange and PPO closings

On December 6, 2013, we closed a Share Exchange pursuant to which the 19 shareholders of Symbid Holding B.V. sold all of their capital stock in Symbid Holding B.V. to us in exchange for 21,170,000 shares of our common stock, $0.001 par value per share. Concurrent with the closing of the Share Exchange, we completed a closing of a PPO in which we sold 3,089,736 units of our common stock and warrants, at a price of $0.50 per unit for a total consideration of $1,549,368. On February 5, 2014, a second closing of the private placement offering was completed in which an additional 373,984 units were sold which generated gross proceeds of $186,987. In connection with the second closing, we incurred advisory and professional fees of $80,251, of which issuance costs of $7,750 were allocated to equity issuance costs and deducted from additional paid in capital. On May 20, 2014, a third closing of the private placement offering was completed in which an additional 2,380,810 units were sold generating gross proceeds of $1,190,405. In connection with the third closing, we incurred advisory and professional fees of $81,724, none of which were allocated to equity issuance costs and deducted from additional paid- in capital.

 

 

On January 28, 2015, we completed the initial closing under a private placement offering in which we offered shares of our common stock at a purchase price of $0.50 per share. In connection therewith, we sold 1,248,232 shares for aggregate proceeds of $624,116. Effective June 30, 2015, we sold an additional 200,000 shares for aggregate proceeds of $100,000 and completed the offering.

On July 14, 2015 and September 8, 2015, we closed on the sale of $250,000 and $1,250,000, respectively, in principal amount of 8% unsecured convertible promissory notes (the “Notes”). Subject to earlier prepayment or conversion, the Notes were scheduled to mature three years from issuance. Interest was payable on the first, second and third anniversaries of the issuance date. At any time after issuance, the holders could, at their option, convert all or a portion of the principal and interest then due into shares of common stock at a price of $0.25 per share. On July 14, 2015, we received conversion notices from four persons holding an aggregate of $190,000 in principal amount of Notes of their determination to convert all of such principal into an aggregate of 760,000 shares and subsequently issued such shares. The balance of the Notes were terminated on November 15, 2016 pursuant to Note Termination and Conversion Agreements.

On June 1, 2016, we closed on the sale of $550,000 in principal amount of 8% unsecured convertible promissory notes (the “Notes”) to three persons. Subject to earlier prepayment or conversion, the Notes were scheduled to mature three years from issuance. Interest was payable on the first, second and third anniversaries of the issuance date. If, during the term of the Notes, we completed an equity offering (a “Qualified Offering”) for gross proceed of not less than $1,500,000, the holders could, at their option, convert all or a portion of the principal and interest then due on the Notes into shares of our common stock at a price per share equal to 50% of the price at which our common stock was sold in the Qualified Offering. The Notes were terminated on November 15, 2016 pursuant to Note Termination and Conversion Agreements.

2013 Equity Incentive Plan

Before the Share Exchange on December 6, 2013, our Board of Directors adopted and our stockholders approved, the 2013 Equity Incentive Plan (the “2013 Plan”), which provides for the issuance of incentive awards of up to 5,000,000 shares of common stock to officers, key employees, consultants and directors.

Shares Issued for Services

On December 8, 2014, the Company entered into an agreement with Fortion Holding B.V. and issued 1,500,000 shares of common stock valued at $645,000 for Credion's obligations under the agreement.

Shares Issued for Asset Acquisition

On July 29, 2014, our wholly owned subsidiary Symbid Holding, a limited liability Corporation in the Netherlands, acquired all the issued and outstanding shares of FAC B.V. (“acquiree”) in exchange for 2,750,000 shares of our restricted common stock. Acquiree owns a perpetual, worldwide, exclusive license to infrastructure technology upon which we intend to develop a platform to enable cloud based financing solutions for SMEs, expanding on our current equity based crowdfunding solutions in the Netherlands. FAC B.V. was formed by FAC 2 B.V. for the specific purpose of holding the license and has no customers, employees, operations or revenues. Acquiree’s only assets are its proprietary software and technology.  Prior to our acquisition of Acquiree, (i) an indirect employee of ours who is a member of Symbid B.V. (a wholly owned subsidiary of Symbid Holding B.V.) management and is also the managing director of a 5% shareholder of ours indirectly owned 20% of Acquiree; (ii) an indirect employee of ours who is a member of Symbid B.V. management indirectly owned 20% of Acquiree; and (iii) a minority shareholder of ours indirectly owned 10% of Acquiree. (See for more detail Note 7 to the Financial Statements).

 

 

Incorporation of Symbid Germany GmbH

In August 2014 we incorporated in Germany our subsidiary Symbid Germany GmbH. We contributed capital of $7,749 to this subsidiary which is currently an entity without operations.

Incorporation Symbid Italia SPA

On February 20, 2015, Symbid Italia SPA (“Symbid Italia”), an Italian corporation created to develop the business of equity crowdfunding in Italy, was formed by our wholly owned subsidiary, Symbid Holding B.V., together with Banca Sella Holding SPA (“Banca Sella”) and Marco Bicocchi Pichi. Through Symbid Italia, we intended to create a new online funding platform, based on our existing crowdfunding technology, in which Italian investors and entrepreneurs could connect, fund and grow together and to digitalize financial services for Italian SMEs. In connection with the formation of Symbid Italia, we paid €250,000 for a 50.1% ownership interest. Banca Sella held a 29.94% ownership interest and Mr. Pichi held a 19.96% interest.

From the date of formation through December 31, 2015, Symbid Italia incurred operating losses, of approximately $118,000. Based thereon and following an extensive review of the prospects of Symbid Italia developing profitable operations in the near future and beyond, the board of directors and shareholders of Symbid Italia determined that further investment in Symbid Italia was not warranted. This conclusion was based upon an assessment of the then current and expected medium term Italian equity crowdfunding market, the view that the current European regulatory framework for equity crowdfunding reflects a country by country market rather than a pan European market which greatly limits expected synergies and economies of scale and because the Italian equity crowdfunding regulations restrict the ability to attract non-domestic investors. At the direction of the Symbid Italia board of directors, a special Symbid Italia shareholder meeting was held on April 29, 2016, at which it was determined to liquidate Symbid Italia and return the residual capital to the Symbid Italia shareholders. On May 26, 2016, Symbid Italia was liquidated and we received proceeds of $44,744 and recognized a loss on derecognition of $2,986. The loss represents the difference between the fair value of the proceeds received, the carrying amount of the noncontrolling interest and the carrying amount of Symbid Italia’s net assets at May 26, 2016.

Gambitious interest sale

On February 9, 2015, we sold our remaining 12% indirect interest in Gambitious B.V. for €18,000 due to Gambitious B.V. having incurred continuing losses in 2014, Gambitious B.V. having switched its business focus to that of the publishing of games, Gambitious B.V. requiring capital contributions from its existing owners and Gambitious B.V. no longer constituting a strategic fit with our evolving operations.

December 9, 2016 Securities Purchase Agreement

On December 9, 2016 we entered into a Securities Purchase Agreement with CKR Law LLP ("CKR"), pursuant to which we issued 149,863,484 shares of our restricted common stock to CKR and its designees for (i) the cancellation of an aggregate of $86,456 due from the Company to CKR for legal services and expense reimbursements; (ii) a cash payment of $43,614 to be used to pay an aggregate of $37,614 to creditors of the Company, including payments required to enable the filing of our September 30, 2016 Quarterly Report; and (iii) the commitment of CKR to fund, to the extent future net revenues of the Company prove insufficient, additional operating expenses of the Company necessary to ensure its continuing operation and existence until such time that the Company can fund operations independently or until the Company completes an acquisition, business continuation, or similar transaction with an operating entity in a transaction that results in a change of control.

 

 

Critical Accounting Estimates

We regularly evaluate the accounting estimates that we use to prepare our financial statements. A complete summary of these policies is included in the Notes to our audited financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

We believe that of our significant accounting policies, which are described in Note 2 to our consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition

In 2014 we generated substantially all our revenue from administration and success fees from transactions on the Crowdfunding platform. Revenue from these transactions is accounted for at the moment an investment is made or a proposition is successfully funded. Until the end of year 2015 there has been no credit risk since the success fees were collected directly at the moment that the transaction takes place on the platform. As of January 2016 we had to change the policy for collecting the success fees and there will be a credit risk going forward. Administration fees have no credit risk since the fees are collected directly at the moment the transaction takes place on the platform.

At the start of a funding campaign, the entrepreneur signs a contract with Symbid pursuant to which he or she agrees to pay Symbid a success fee once a successful fund raising campaign for that entrepreneur closes. Once the funding campaign has closed, Symbid’s success fee is transferred by Intersolve, the third party banking entity that holds all funds in escrow until closing, and the net proceeds of the funding are transferred by Intersolve to the notary or directly to the entrepreneur. Upon completion of the funding campaign on Symbid’s platform, services delivered under the contract with the entrepreneur have been completed and Symbid recognizes its success fee revenues at the time the campaign has been closed successfully. Also, because the success fee percentage is stated in the contract with the entrepreneur prior to the start of the funding campaign, Symbid believes that this amount is fixed and, assuming the successful conclusion of the funding campaign, collectible from the entrepreneur. This revenue recognition policy complies with ASC 605-10-S99-1 in that it is based on written agreements with the entrepreneurs, contractual services have been completed, pricing is fixed and determinable based on agreements with the customer and collectability is reasonably assured as the customers of Symbid have just received their new funding.

Effectively Symbid has the following refund policy. The cash which is collected from investors is held in a third party bank account with Intersolve, which cannot be used or accessed by Symbid. With funds in this bank account, an investor buys crowdfunding credits which are accounted for in an electronic wallet and allocated by the investor to the investor’s funding projects of choice. Allocated funds can only be refunded to an investor from his electronic wallet if a particular project is not fully funded and the funding campaign is terminated. In that situation the investor project allocated funds are credited by Intersolve back to his electronic wallet, from where he can invest again in another project or request a refund of his money from Intersolve. Investors can refund to their bank accounts free of any charge, however InterSolve is currently charging us $15.5 (€15) for each refund by an investor.

Other revenue is generated by licensing the platform to third parties. Revenue is accounted for on a monthly basis for the agreed monthly licensed fee. There is limited credit risk. If the monthly licensed fee is not paid, we are entitled to set the platform offline.

We provide a description of the different types of revenue below.

 

 

Create process related revenues

Matchmaking related revenues

Public funding (Not applicable after October 2016)

Private funding

Monitoring related revenues

Licensing related revenues

Symbid may sublicense the platform technology in the forms discussed below in The Netherlands and to country partners.

 

Concentrations of Credit Risk

The Company has cash balances at financial institutions located in the Netherlands. Balances at financial institutions in the Netherlands may, from time to time, exceed insured limits. Currently the insured limit amounts to EUR 100,000 ($105,252). We have not experienced any losses in such accounts.

Accounts Receivable: Customer accounts typically are collected within a short period of time, and based on its assessment of current conditions and its experience collecting such receivables, management believes it has a minimal risk related to its concentration within its accounts receivable.

Components of Results of Operations

Revenues

We generated our revenues partly from crowdfunding related fees like administration fees and success fees and for the other part from revenues from The Funding Network.

Research and development

Research and development expenses consist primarily of fees we are being charged for developing the source code of the software platform enabling us to build new products as well as improve existing products. We expense substantially all of our research and development costs as they are incurred.

Selling, General and Administrative

Our selling, general and administrative expenses consist primarily of legal and accounting services and other supporting overhead costs.

Distinct Characteristics of The Dutch Model

Symbid B.V. had until November 2016 a variable interest in Symbid Coöperatie U.A. Symbid Coöperatie U.A. licensed from Symbid B.V. its online crowdfunding platform in exchange for 100% of the administration fees and success fees earned by Symbid Coöperatie U.A. In addition, Symbid Coöperatie U.A. has entered into a perpetual platform management service agreement with Symbid B.V. for customer support, software updates and content management system control for approximately $6,000 per year. The management team of Symbid Coöperatie U.A. is the same as the management team of Symbid B.V.

The Company consolidates any variable interest entity (“VIE”) for which the Company is considered the primary beneficiary.1

 

1 AVIE is an entity in which either a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or b) the voting rights of the equity investors are not proportional to their obligations to absorb the expected losses of the entity or their rights to receive the expected residual returns of the entity. The Company evaluates whether entities in which it has an interest are VIEs and whether the Company qualifies as the primary beneficiary of any VIEs identified in its analysis.

 

Symbid B.V. was deemed to be the primary beneficiary of Symbid Coöperatie U.A. Symbid B.V. had a controlling financial interest in Symbid Coöperatie U.A. because it had the power to direct the activities of Symbid Coöperatie U.A. that most significantly impact Symbid Coöperatie U.A.’s economic performance. Symbid B.V., through its control of Symbid Foundation, was able to appoint the majority of the members’ council of Symbid Coöperatie U.A. which, in turn, appoints the management board of Symbid Coöperatie U.A. The Management Board of Symbid Coöperatie U.A. controls the activities that are most significant to Symbid Coöperatie U.A.  In addition, by virtue of the license agreement and management service agreement between Symbid Coöperatie U.A. and Symbid B.V., substantially all revenue earned by Symbid Coöperatie U.A. was remitted to Symbid B.V.

As a result of this VIE structure, Symbid B.V. consolidated until November 2016 the financial statements of Symbid Coöperatie U.A. Every reporting period Symbid B.V. reassesses its relationship with Symbid Coöperatie U.A. to determine whether consolidation is required. As such, our conclusion regarding our status as the primary beneficiary of Symbid Coöperatie U.A. is subject to change.

On November 15, 2016, Symbid B.V. and Symbid Coop entered into an Intellectual Property License Termination Agreement which terminated the April 13, 2011 License Agreement between both companies retroactive to November 1, 2016. Symbid B.V. had controlled and operated Symbid Coop through corporate governance under the license agreement pursuant to which the online crowdfunding platform was leased. As of November 1, 2016, the effective date of the Intellectual Property License Termination Agreement, the Company gave up its board control in Symbid Coop and Symbid Coop became an independent entity. Upon deconsolidation at November 1, 2016, the carrying amount of the noncontrolling interest and the carrying amount of Symbid Coop’s net assets were equal to each other and no gain or loss was recorded.

 

Results of Operations

Fiscal Years Ended December 31, 2016 and 2015

The following table summarizes our historical consolidated financial statements:

	Year ended December 31,
	2016	2015
Revenues
Crowdfunding	$195,632	$282,155
The Funding Network	22,399	47,975
Other	631	22,946
Total revenues	218,662	353,076
Operating expenses
Selling, general and administrative	1,104,614	1,543,827
Professional fees	376,720	721,963
Research and development costs	32,869	59,930
Depreciation and amortization	76,600	145,543
Bad debt expense (recoveries)	(32,911)	36,292
Impairment expense	747,871	-
Total operating expenses	2,305,763	2,507,555
Operating loss	(2,087,101)	(2,154,479)
Other income (expense)
Interest expense and amortization of debt discount	(294,599)	(148,509)
Gain on troubled debt restructuring	1,169,253	-
Loss on cumulative translation adjustment	(292,219)	-
Other income	-	11,504
Other expense	(2,986)	(7,791)
Total other income (expense)	579,449	(144,796)
Net loss	(1,507,652)	(2,299,275)
Net loss attributable to noncontrolling interests	(17,029)	(99,761)
Net loss attributable to Symbid Corp. stockholders	$(1,490,623)	$(2,199,514)
Basic and diluted net loss per common share	$(0.03)	$(0.06)
Weighted average number of shares outstanding
Basic and diluted	46,166,536	35,263,977
Share-based compensation expense included in operating expenses:
Selling, general and administrative	$33,187	286,298
Professional fees	-	152,711
Research and development costs	(942)	33,791
	$32,245	$472,800

 

Revenues

Total revenue for 2016 was $218,662 and for 2015 was $353,076 representing a year on year decrease of approximately 38% or approximately $134,000. In line with those results, Crowdfunding revenue decreased by approximately $87,000 during the same period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for 2016 totaled $1,104,614 compared to $1,543,847 for 2015, a decrease of $439,233. The decrease was primarily due to the cost reduction program and restructuring programs implemented during the year.

 

We anticipate that Selling, General and Administrative expenses for 2017 will decrease significantly until we have entered into a potential transaction with a new business combination.

Professional fees

Professional fees decreased for the year ended 2016 to a total of $376,720 compared to $721,963 for 2015, a decrease of $345,243. The decrease in professional fees was primarily due to the stoppage in further roll-out of the services, as well as cash flow did not allow for further expenses.

We anticipate professional fees will remain a substantial percentage of the operating costs in 2017. We anticipate incurring these costs in relation to the Company’s continued listing on the OTC markets and the cost reduction program and restructuring programs implemented during the year.

Research and development

Research and development expenses for the year ended 2016 were $32,869 compared to $59,930 for the year ended 2015, a decrease of $27,061. The decrease is primarily attributable to the cost reduction program and restructuring programs implemented during the year.

We anticipate the research and developments costs for 2017 will decrease until we have entered into a potential transaction with a new business combination.

Foreign Currency Translation Adjustment

In connection with the cessation of platform operations in 2016, and in accordance with ASC 830-30, “Foreign Currency Matters – Translation of Financial Statements”, the cumulative foreign currency translation adjustment was released into loss during 2016.

Income and other expenses

For 2016, total income was $579,449 an increase of $724,245 compared to the same period in 2015. This increase was caused by the restructuring of the company as a result of which a gain on troubled debt restructuring was recognized.

Financial Condition, Liquidity and Capital Resources

As of December 31, 2016, we had cash on hand of $9,677 and a working capital deficit of $11,371.

Our principal sources of liquidity have been fund raising through Private Placement Offerings. Before we were a public company our principal source of liquidity was funds raised from private investors.

Our cash position in 2016 decreased as compared to 2015 by $544,019 from $553,696 to $9,677. This decrease in cash can be attributed to cash used as working capital in the operations.

On December 6, 2013, we completed an initial closing of a private placement offering of 3,098,736 units at $0.50 per unit, for aggregate gross proceeds of $1,549,368 (before deducting placement agent fees and expenses of the offering estimated at approximately $64,895). Each of these units consisted of one share of our common stock and one warrant to purchase one share of our common stock. On February 5, 2014, we completed a second closing of the private placement for aggregate additional gross proceeds of $186,992. On May 20, 2014, we completed a third and final closing of the private placement for aggregate additional gross proceeds of $1,190,405.

 

On January 28, 2015, we completed the initial closing under a private placement offering in which we offered shares of our common stock at a purchase price of $0.50 per share. In connection therewith, we sold 1,248,232 shares for aggregate proceeds of $624,116. Effective June 30, 2015, we sold an additional 200,000 shares for aggregate proceeds of $100,000 and completed the offering.

On July 14, 2015 and September 8, 2015, we closed on the sale of $250,000 and $1,250,000, respectively, in principal amount of 8% unsecured convertible promissory notes (the “Notes”). On July 14, 2015, we received conversion notices from four persons holding an aggregate of $190,000 in principal amount of Notes of their determination to convert all of such principal into an aggregate of 760,000 shares and subsequently issued such shares. The balance of the Notes were terminated on November 15, 2016 pursuant to Note Termination and Conversion Agreements.

On June 1, 2016 we closed on the sale of $550,000 in principal amount of 8% unsecured convertible promissory notes (the “Notes”). The Notes were terminated on November 15, 2016 pursuant to Note Termination and Conversion Agreements.

On December 9, 2016, the Company entered into a Securities Purchase Agreement to issue shares constituting upon issuance 80% of its outstanding shares in consideration for the cancellation of $86,456.41 due from the Company to the subscriber, a cash payment of $43,614 to be used to pay off Company debts to third parties and the subscriber’s commitment to fund certain future operation expenses of the Company.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of December 31, 2016 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Our consolidated financial statements are included beginning immediately following the signature page to this report.  See Item 15 for a list of the consolidated financial statements included herein.

None.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2016.  Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our senior management concluded that our disclosure controls and procedures were not effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of December 31, 2016, our senior management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated 2013 Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, we believe that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our senior management in connection with the review of our financial statements as of December 31, 2016.

 

Management’s Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to initiate the following series of measures:

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2016, that occurred during our fourth quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

None.

PART III

Directors and Executive Officers

Below are the names of and certain information regarding our current executive officers and directors:

Name		Age		Position		Date Named to Board of Directors
Korstiaan Zandvliet		32		Director, Chief Executive Officer and President		December 6, 2013
Maarten van der Sanden		31		Chief Executive Officer, Chief Operating Officer, Treasurer and Secretary		N/A

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.

A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

The presently authorized number of directors to constitute our Board of Directors is one. Executive officers are appointed by the Board of Directors and serve at its pleasure.

 

The principal occupation and business experience during at least the past five years for our executive officers and directors is as follows:

Korstiaan Zandvliet – Director and Chief Executive Officer.  Korstiaan Zandvliet has served as our Chief Executive Officer and a director since December 6, 2013. Mr. Zandvliet is a founder of Symbid B.V. and has been a Managing Director of Symbid B.V. since December 2010.  From July 2008 to December 2010, Mr. Zandvliet was the Global Marketing Director for Mendix B.V. – Rotterdam, a software start-up offering a fully integrated model-driven platform to build enterprise-class business applications. At Mendix, Mr. Zandvliet was responsible for, among other things,  (i) budgeting and implementing all company communications strategies, both external and internal, (ii) editorial direction, design and production of all company publications, (iii) implementing marketing campaigns for trade shows and company marketing events, (iv) streamlining and optimizing the inside sales process, including organizing and staffing of webinars and CRM-system optimization, (v) market research and roll-out for the company’s international locations (Sweden, Thailand, USA, Abu Dhabi and UK) and (vi) capture and cataloging competitive intelligence from other model-driven organizations and competitors.  Since July 2010, Mr. Zandvliet has been an expert consultant and writer for Crowdsourcing Inc., a company whose website provides authoritative information and other content relating to crowdfunding and related formats. Because of Mr. Zandvliet’s years of international experience and management skills working with start-up organizations, including his role as a founder and Managing Director of Symbid B.V., we have concluded that Mr. Zandvliet should serve as a director of Symbid Corp. Mr. Zandvliet received a Bachelor’s Degree in business administration from RSM Erasmus University in 2007 and a Master’s Degree in Entrepreneurship and New Business Venturing from Erasmus University Rotterdam in 2010.

Maarten van der Sanden – Secretary, Treasurer, Chief Financial Officer and Chief Operating Officer.  Maarten van der Sanden has served as our Chief Operating Officer since December 6, 2013.  Mr. van der Sanden served as our Chief Financial Officer and Treasurer from December 6, 2013 until April 15, 2014 and also served as our Chief Financial Officer and Treasurer from March 16, 2015 until November 16, 2015. Since May 6, 2016 he has again been serving as our Chief Executive Officer and Treasurer. He has served as our Secretary since November 16, 2015. Mr. van der Sanden has been a member of the board of directors of Symbid B.V. since January 2012. From July 2008 through December 2012, Mr. van der Sanden was a founder and Managing Director of RotaSocio Holding B.V. - Amsterdam, a developer of innovative mobility solutions whose first project, StudentCar, a car-sharing provider for students in the Netherlands, was launched in Rotterdam in January 2009, with an electric shared car introduced in June 2009.  At RotaSocio, Mr. van der Sanden was responsible for the operations and finance functions and the roll-out of StudentCar.  RotoSocio was sold in 2012 to the second largest car-sharing provider in the Netherlands. Since September 2012, Mr. van der Sanden has also been the Managing Director and owner of Sanden Beheer B.V. - Amsterdam, an investment company that invests in and provides management services to SMEs.  Mr. van der Sanden received a Bachelor’s Degree in business administration from RSM Erasmus University in 2006 and a Master’s Degree in Finance and Investments in 2007 and a Master’s Degree in Entrepreneurship and New Business Venturing in 2009, both from Erasmus University Rotterdam.

Director Independence

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” We do not presently have any independent directors.

Family Relationships

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

 

Involvement in Certain Legal Proceedings

None of our directors or executive officers has been involved in any of the following events during the past ten years:

Board Committees

The Company currently has not established any committees of the Board of Directors.  Subject to our appointment of additional directors, our Board of Directors may designate from among its members an executive committee and one or more other committees in the future.  We do not have a nominating committee or a nominating committee charter.  Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders.  To date, other than as described above, no security holders have made any such recommendations.  Our sole director performs all functions that would otherwise be performed by committees.  Given the present size of our board it is not practical for us to have committees.  If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.

Audit Committee Financial Expert

We have no separate audit committee at this time.  Our sole director oversees our audits and auditing procedures. At this time none of our directors are an “audit committee financial expert” within the meaning of Item 407(d)(5) for SEC regulation S-K.

Code of Ethics

We have adopted a written code of ethics (the “Code of Ethics”) that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We believe that the Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.  To request a copy of the Code of Ethics, please make written request to our Secretary, at Symbid Corp., Marconistraat 16, 3029 AK Rotterdam, The Netherlands.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our directors, officers and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Directors, officers and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon our review of the copies of such forms that we received with respect to the year ended December 31, 2016, we believe that each person who at any time during the year was a director, officer or beneficial owner of more than 10% of our Common Stock satisfied their Section 16(a) filing requirements, although certain reports were filed on a late basis.

 

Shareholder Communications

Currently, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations.

The following table sets forth information concerning the total compensation paid or accrued by us during the fiscal year ended December 31, 2016 to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2016 and (ii) all individuals that served as executive officers of ours at any time during the fiscal year ended December 31, 2016 that received annual compensation during the fiscal year ended December 31, 2016 in excess of $100,000. None of our executive officers received annual compensation during the fiscal year ended December 31, 2016 in excess of $100,000.

Summary Compensation Table

Name & Principal Position		Fiscal Year ended December 31,	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation	Non-Qualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Korstiaan Zandvliet, CEO(1)(2)		2016	$23,843	0	0	0	0	0	0	$23,843
		2015	$60,396	0	31,303(3)	0	0	0	0	$91,699

Outstanding Equity Awards at Fiscal Year-End

We have one compensation plan approved by our stockholders, the 2013 Plan. As of December 31, 2016, we had no restricted stock units issued and outstanding. 130,000 restricted stock units granted to the named executive officer under the 2013 Plan vested on June 30, 2015. We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

 

Employment Agreements

On December 6, 2013, we entered into employment service agreements with each of Korstiaan Zandvliet and Maarten van der Sanden, respectively, pursuant to which they presently serve as our Chief Executive Officer and President and Chief Executive Officer, Treasurer, Secretary and Chief Commercial Officer, respectively. Mr. van der Sanden served as our Chief Financial Officer and Treasurer from December 6, 2013 until April 15, 2014 and from March 16, 2015 until November 16, 2015. He resumed these roles again on May 6, 2016. The employment agreements provided for a net annual base salary of €50,000 ($55,000 per year) and €50,000 ($55,000 per year) for each of Messrs. Zandvliet and van der Sanden, respectively. Effective July 24, 2014, each of Messrs. Zandvliet and van der Sanden executed amendments to their respective employment agreements pursuant to which each agreed to have their base net salaries reduced by one third resulting in a net annual salary of €33.333 ($44,300 per year). Effective November 1, 2015, we determined to raise the base annual salary that we were paying to each of Korstiaan Zandvliet and Maarten van der Sanden to €57,000 (approximately $63,600 based on the Euro to US Dollar conversion rate as of November 1, 2015). On July 1, 2016, Korstiaan Zandvliet and Maarten van der Sanden executed amendments to their employment agreements to reduce their respective base salaries from €57,000 to €22,392 (approximately $24,631 based on the Euro to US Dollar conversion rate as of July 1, 2016). Effective October 12, 2016. Korstiaan Zandvliet and Maarten van der Sanden executed further amendments to their employment agreements to reduce their respective base salaries to zero retroactive to August 1, 2016. All salary payments were paid in Euros and were exclusive of an 8% holiday allowance. In addition, each of Messrs. Zandvliet and van der Sanden are eligible to earn an annual bonus at such time and in such amount as may be determined by the Company’s Board of Directors. The Board of Directors may determine that some or all of an annual bonus shall be based upon the achievement of operational, financial or other milestones. Effective November 5, 2015, each of Messrs. Zandvliet and van der Sanden received restricted stock units valued at 10% of their respective annual base salaries each of which vested on November 5, 2016.

Director Compensation

We currently do not pay any cash compensation to members of our board of directors for their services as directors of the Company. However, we reimburse our directors for all reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the board of directors. We may also determine to grant to each non-employee director, awards under our equity incentive plans.

The following table sets forth information with respect to the beneficial ownership of our Common Stock as of March 31, 2017, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock (our only class of voting securities), (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. Other than the Share Exchange, to our knowledge, there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.

 

Unless otherwise indicated in the following table, the address for each person named in the table is c/o Symbid Corp., Marconistraat 16, 3029 AK Rotterdam, The Netherlands.

Name and Address of Beneficial Owner	Common Stock Beneficially Owned	Percent of Common Stock Beneficially Owned(1)
Korstiaan Zandvliet	1,376,096(2)	0.73%
Maarten van der Sanden	1,420,039(3)	0.76%
All directors and executive officers as a group (2 persons)	2,796,135	1.49%
CKR Law LLP 1330 Avenue of the Americas, 14th Floor New York, NY 10019	140,515,750(4)	75.01%

SEC rules require us to disclose any transaction or currently proposed transaction in which we are a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000 or one percent of the average of our total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of our common stock, or an immediate family member of any of those persons.

Following the Share Exchange on December 6, 2013, the three executive officers of the Company at that time entered into employment agreements and became salaried employees of Symbid Corp. During the years ended December 31, 2016 and 2015, total expenses recorded under these agreements were approximately $150,000 and $181,000, respectively. As of December 31, 2016 and 2015, $0 has been accrued and recorded in accounts payable and accrued expenses.

 

Loans to Symbid B.V.

Voyager B.V., beneficially owned by Maarten Timmerman, loaned approximately $81,000 to the Company in September 2011. This loan, as extended, is due on December 31, 2016 with interest only payments of 4% per annum. The loan is subordinate to the interests of a bank working capital facility and is unsecured. On November 15, 2016 Symbid B.V. entered into an agreement with Voyager Beheer BV (“Voyager”) and Symbid Coöp which provided for the termination of a September 15, 2011 €66,950 promissory note from Symbid B.V. to Voyager, including all accrued interest due thereon, in consideration of the grant to Voyager of a 1.33% equity participation in Symbid Coöp.

Acquisition of FAC B.V.

On July 29, 2014, we entered into a Share Purchase Agreement with our wholly owned subsidiary, Symbid Holding B.V., and FAC 2 B.V., a limited liability corporation incorporated in The Netherlands.  Pursuant to the Share Purchase Agreement, we acquired FAC B.V. (“Acquiree”), a limited liability corporation incorporated in The Netherlands from FAC 2 B.V. in exchange for 2,750,000 shares of our restricted common stock.  Acquiree owns a perpetual, worldwide, exclusive license to infrastructure technology upon which we intend to develop a platform to enable cloud based financing solutions for SMEs, expanding on our current equity based crowdfunding solutions in the Netherlands.  Acquiree was formed by FAC 2 B.V. for the specific purpose of holding the license and has no customers, employees, operations or revenues.  Acquiree’s only assets are its proprietary software and technology.  Prior to our acquisition of Acquiree, (i) an indirect employee of ours who is a member of Symbid B.V. (a wholly owned subsidiary of Symbid Holding B.V.) management and is also the managing director of a 5% shareholder of ours indirectly owned 20% of Acquiree; (ii) an indirect employee of ours who is a member of Symbid B.V. management indirectly owned 20% of Acquiree; and (iii) a minority shareholder of ours indirectly owned 10% of Acquiree.

RSU Issuances

During the year ended December 31, 2016 we awarded no shares of restricted stock units to our employees.

Director Independence

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.”

Audit Fees

The aggregate fees billed to us by our principal accountants for professional services rendered during the years ended December 31, 2016 and December 31, 2015 are set forth in the table below:

Fee Category	Year ended December 31, 2016	Year ended December 31, 2015
Audit fees(1)	$69,600	$75,000
Audit-related fees(2)	0	5,675
Tax fees(3)	0	0
All other fees(4)	0	0
Total fees	$69,600	$80,675

 

Audit Committee’s Pre-Approval Practice

Prior to our engagement of our independent auditor, such engagement was approved by our board of directors.  The services provided under this engagement may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Pursuant our requirements, the independent auditors and management are required to report to our board of directors at least quarterly regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. Our board of directors may also pre-approve particular services on a case-by-case basis. All audit-related fees, tax fees and other fees incurred by us for the year ended December 31, 2016, were approved by our board of directors.

PART IV

Financial Statements

See Index to Financial Statements immediately following the signature page of this report.

Financial Statement Schedules

All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

Exhibits

In reviewing the agreements included as exhibits to this Form 10-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

The following exhibits are included as part of this report:

Exhibit Number		SEC Report Reference Number		Description
2.1		2.1		Share Exchange Agreement dated December 6, 2013, by and among Registrant, Symbid Holding B.V. and the Shareholders of Symbid Holding B.V (1)
3.1		3.1		Articles of Incorporation of the Registrant (2)
3.2		3.1		Certificate of Amendment to the Articles of Incorporation of the Registrant (3)
3.3		3.2		By-Laws of the Registrant  (2)
3.4		3.4		Articles of Association of Symbid Cooperatie U.A. (Unofficial English Translation)  (4)
3.5		3.5		Articles of Association of Symbid Foundation. (Unofficial English Translation)  (4)
3.6		3.6		Articles of Association of Symbid IP Foundation. (Unofficial English Translation)  (4)
4.1		4.1		Form of Investor Warrant of the Registrant (1)
4.2		4.2		Form of Broker Warrant of the Registrant (1)
4.3		4.1		Form of 2015 8% Convertible Promissory Note (9)
10.1		10.1		Split-Off Agreement, dated as of December 6, 2013, by and among the Registrant, Symbid Split Corp. and Holli Morris (1)
10.2		10.2		General Release Agreement, dated as of December 6, 2013, by and among the Registrant, Symbid Split Corp. and Holli Morris (1)
10.3		10.3		Form of Lock-Up and No Short Selling Agreement between the Registrant and the officers, directors and shareholders party thereto (1)
10.4		10.4		Form of Securities Purchase Agreement between the Registrant and the investors party thereto (1)
10.5		10.5		Form of Notice to Investors dated November 25, 2013 (1)
10.6		10.6		Placement Agency Agreement, dated September 9, 2013, between the Registrant and Gottbetter Capital Markets, LLC (1)
10.7		10.7		Placement Agency Agreement, First Amendment, dated October 14, 2013, between the Registrant and Gottbetter Capital Markets, LLC (1)
10.8		10.8		Placement Agency Agreement, Second Amendment, dated November 15, 2013, between the Registrant and Gottbetter Capital Markets, LLC (1)

 

 

10.9		10.9		Placement Agency Agreement, Third Amendment, dated February 6, 2014, between the Registrant and Gottbetter Capital Markets, LLC (6)
10.10		10.10		Placement Agency Agreement, Fourth Amendment, dated March 25, 2014, between the Registrant and Gottbetter Capital Markets, LLC (6)
10.11		10.11		Placement Agency Agreement, Fifth Amendment, dated April 30, 2014, between the Registrant and Gottbetter Capital Markets, LLC (6)
10.12		10.12		Placement Agency Agreement, Sixth Amendment, dated May 9, 2014, between the Registrant and Gottbetter Capital Markets, LLC (6)
10.13		10.9		Subscription Escrow Agreement, dated as of September 9, 2013, among the Registrant, CSC Trust Company of Delaware and Gottbetter Capital Markets, LLC (1)
10.14		10.10		Subscription Escrow Agreement, First Amendment dated as of November 15, 2013, among the Registrant, CSC Trust Company of Delaware and Gottbetter Capital Markets, LLC (1)
10.15		10.15		Subscription Escrow Agreement, Second Amendment dated as of February 6, 2014, among the Registrant, CSC Trust Company of Delaware and Gottbetter Capital Markets, LLC (6)
10.16		10.16		Subscription Escrow Agreement, Third Amendment dated as of March 25, 2014, among the Registrant, CSC Trust Company of Delaware and Gottbetter Capital Markets, LLC (6)
10.17		10.17		Subscription Escrow Agreement, Fourth Amendment dated as of April 30, 2014, among the Registrant, CSC Trust Company of Delaware and Gottbetter Capital Markets, LLC (6)
10.18		10.18		Subscription Escrow Agreement, Fifth Amendment dated as of May 9, 2014, among the Registrant, CSC Trust Company of Delaware and Gottbetter Capital Markets, LLC (6)
10.19		10.11		Escrow Agreement dated as of December 6, 2013 by and among the Registrant, the Indemnification and Shareholder Representative named therein and Gottbetter & Partners, LLP (1)
10.20		10.12		Employment Services Agreement, dated December 6, 2013, between the Registrant and Korstiaan Zandvliet (1)
10.21		10.13		Employment Services Agreement, dated December 6, 2013, between the Registrant and Robin Slakhorst (1)
10.22		10.14		Employment Services Agreement, dated December 6, 2013, between the Registrant and Maarten van der Sanden (1)
10.23		10.1		Employment Services Agreement, dated April 15, 2014 between the Registrant and Philip Cooke (5)
10.24		10.15		Registrant’s 2013 Equity Incentive Plan (1)
10.25		10.16		Form of Registration Rights Agreement (1)
10.26		10.17		License Agreement dated April 13, 2011 by and between Symbid B.V. and Symbid Cooperatie U.A. (1)

 

 

10.27		10.18		Platform Management Services Agreement April 6, 2011 by and between Symbid B.V. and Symbid Cooperatie U.A. (1)
10.28		10.19		Intellectual Property Transfer Agreement dated October 16, 2013 by and between Symbid B.V. and Stichting Symbid IP Foundation (1)
10.29		10.20		Intellectual Property License and Transfer Agreement dated October 16, 2013 by and between Stichting Symbid IP Foundation and Symbid Holding B.V. (1)
10.30		10.21		Addendum 1 dated December 5, 2013 to Intellectual Property License and Transfer Agreement dated October 16, 2013 by and between Stichting Symbid IP Foundation and Symbid Holding B.V. (1)
10.31		10.22		Intellectual Property Sublicense and Transfer Agreement dated December 5, 2013 by and between Symbid Holding B.V. and Symbid B.V. (1)
10.32		10.1		Share Purchase Agreement dated July 29, 2014, between the Registrant, Symbid Holding B.V., and FAC 2 B.V (7)
10.33		10.25		Agreement dated December 8, 2014 by and between the Registrant and Fortion Holding B.V. (8)
10.34		10.26		Subscription and shareholder agreement dated December, 2014, between the Registrant, Banca Sella Holding SPA and Marco Bicocchi Pichi (8)
10.35		10.1		Employment Services Agreement dated as of November 1, 2015 between Registrant and Dick Kooij (10)
10.36		10.2		Amendment No. 1 dated as of November 16, 2015 to Employment Services Agreement between Registrant and Dick Kooij (10)
10.37		10.1		Financial Public Relations Agreement dated as of July 1, 2015 between Registrant and Dynasty Wealth LLC (11)
10.38		10.1		First Amendment dated as of November 11, 2015 to Financial Public Relations Agreement dated as of July 1, 2015 between Registrant and Dynasty Wealth LLC (9)
10.39		10.2		Form of Restricted Stock Unit Agreement of Registrant (12)
10.40		10.1		Resignation Letter of Hendrik Kasteel dated April 5, 2016 (13)
10.41		10.2		Resignation Letter of Vincent Lui dated April 5, 2016 (13)
10.42		10.3		Resignation Letter of Jerome Koelewijn dated April 5, 2016 (13)
10.43		10.1		Form of November 15, 2016 Note Termination and Conversion Agreement (2016 Notes) (14)
10.44		10.2		Form of November 15, 2016 Note Termination and Conversion Agreement (2015 Notes) (14)
10.45		10.3		Right of First Refusal Agreement dated November 15, 2016 (14)
10.46		10.4		Intellectual Property License Termination Agreement dated November 15, 2016 between Symbid B.V. and Symbid Coöperatie U.A.  (14)
10.47		10.5		Addendum 2 dated November 15, 2016 to October 16, 2013 Intellectual Property License and Transfer Agreement between Stichting Symbid IP Foundation and Symbid Holding B.V.  (14)
10.48		10.6		Intellectual Property License and Transfer Agreement dated November 15, 2016 between Symbid Coöperatie U.A. and Stichting Symbid IP Foundation (14)

 

 

10.49		10.7		Securities Purchase Agreement dated as of December 9,2016 between Registrant and CKR Law LLP (14)
14.1		14.1		Code of Ethics (2)
21.1*				Subsidiaries of Registrant
23.1*				Consent of Independent Registered Public Accounting Firm
31.1*				Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
31.2*				Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
32.1*				Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2*				Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
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***

 

 

 

*  Filed herewith

**  This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

***  Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

SIGNATURES

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

	Symbid Corp.
Dated: March 31, 2017	By:	/s/  Korstiaan Zandvliet
		Korstiaan Zandvliet
		Chief Executive Officer and President
		(Principal Executive Officer)

Dated: March 31, 2017	By:	/s/  Maarten van der Sanden
		Maarten van der Sanden
		Chief Financial Officer, Treasurer and Secretary
		(Principal Financial Officer)

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

Signature		Title		Date
/s/ Korstiaan Zandvliet		Chief Executive Officer and President (Principal		March 31, 2017
Korstiaan Zandvliet		Executive Officer) and Director

 

 

FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2016 and 2015	F-2
Consolidated Statements of Operations for the Years Ended December 31, 2016 and 2015	F-3
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2016 and 2015	F-4
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2016 and 2015	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2015	F-6
Notes to Consolidated Financial Statements	F-7

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Symbid Corp.

We have audited the accompanying consolidated balance sheets of Symbid Corp. (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for each of the years in the two year period ended December 31, 2016. Symbid Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Symbid Corp. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred operating losses during the year ended December 31, 2016, and has negative cash flows from operations of $1,094,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. If the Company is unable to successfully refinance or raise capital to fund ongoing operations there would be a material adverse effect to the consolidated financial statements. 

 

 

/s/ Friedman LLP
East Hanover, New Jersey
March 31, 2017

 

 

 SYMBID CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN US DOLLARS)

 

	December 31,	December 31,
	2016	2015
ASSETS
Current assets
Cash	$9,677	$553,696
Accounts receivable, less allowance for doubtful accounts of $-0- and $39,847 respectively	-	64,639
Prepaid expenses and other current assets	32,544	42,553
Total current assets	42,221	660,888
Property and equipment, at cost, less accumulated depreciation	-	15,108
Investments in associated companies	1,095	1,134
Intangible assets, net	-	785,070
Total assets	$43,316	$1,462,200
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current liabilities
Accounts payable	$16,515	$88,774
Accrued expenses and other current liabilities	37,077	301,896
Current maturities of notes payable	-	32,993
Subordinated loan – related party	-	73,016
Total current liabilities	53,592	496,679
Notes payable, less current maturities	-	49,476
8% Convertible promissory notes payable, net of $-0- and $722,622 discount, respectively	-	587,378
Total liabilities	53,592	1,133,533
Commitments
Stockholders' (Deficiency) Equity
Preferred stock
Authorized: $0.001 par value, 10,000,000 shares authorized	-	-
Issued and outstanding: nil preferred shares
Common stock
Authorized: $0.001 par value, 290,000,000 shares authorized
Issued and outstanding: 187,329,355 and 36,909,472, respectively	187,329	36,909
Additional paid-in capital	8,287,292	7,635,104
Accumulated other comprehensive loss	-	(322,183)
Accumulated deficit	(8,484,897)	(6,994,274)
Total Symbid Corp. stockholders' (deficiency) equity	(10,276)	355,556
Noncontrolling interests	-	(26,889)
Total stockholders' (deficiency) equity	(10,276)	328,667
Total liabilities and stockholders' equity	$43,316	$1,462,200