UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

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

 

For the Fiscal Year Ended December 31, 2018

 

OR

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

 

For the Transition Period From ____________ to ____________

 

Commission File Number: 333-208293

 

CANBIOLA, INC.

(Exact name of registrant as specified in its charter)

 

Florida   20-3624118

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

960 South Broadway, Suite 120, Hicksville NY 11801 ,

(Address of principal executive offices)

 

516-590-1846

Registrant’s telephone number, including area code:

 

None

Securities Registered Pursuant to Section 12(b) of the Act:

 

Common Stock, par value $0.001 per share

Securities Registered Pursuant to Section 12(g) of the Act:

 

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

 

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter time that the registrant was required to submit and post such files). Yes [X] 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]
       
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]
       
Emerging Growth Company [X]    

 

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

 

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

 

The aggregate market value of voting stock held by non-affiliates of the registrant on June 30, 2018, was $4,466,469, based on the last reported sale price of the registrant’s Common Stock on the OTC Markets on that date.

 

As of April 12, 2019, the registrant had outstanding 548,487,714 shares of common stock, $0.00 par value per share.

 

 

 

 
 

 

CANBIOLA, INC.

2017 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

 

Item No.   Description   Page
         
Cautionary Note Regarding Forward-Looking Statements   3
         
    PART I    
Item 1.   Business.   5
Item 1A.   Risk Factors.   8
Item 1B.   Unresolved Staff Comments.   8
Item 2.   Properties.   8
Item 3.   Legal Proceedings.   8
Item 4.   Mine Safety Disclosures.   8
         
    PART II    
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.   8
Item 6.   Selected Financial Data.   10
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.   11
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.   12
Item 8.   Financial Statements and Supplementary Data.   12
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.   12
Item 9A.   Controls and Procedures.   12
Item 9B.   Other Information.   13
         
    PART III    
Item 10.   Directors, Executive Officers and Corporate Governance.   13
Item 11.   Executive Compensation.   15
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.   16
Item 13.   Certain Relationships and Related Transactions, and Director Independence.   18
Item 14.   Principal Accounting Fees and Services.   18
         
    PART IV    
Item 15.   Exhibits, Financial Statement Schedules.   19
         
Signatures   20

 

2
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements contained or incorporated by reference in this Annual Report on Form 10-K are considered forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) concerning our business, results of operations, economic performance and/or financial condition, based on management’s current expectations, plans, estimates, assumptions and projections. Forward-looking statements are included, for example, in the discussions about:

 

  strategy;
  new product discovery and development;
  current or pending clinical trials;
  our products’ ability to demonstrate efficacy or an acceptable safety profile;
  actions by regulatory authorities;
  product manufacturing, including our arrangements with third-party suppliers;
  product introduction and sales;
  royalties and contract revenues;
  expenses and net income;
  credit and foreign exchange risk management;
  liquidity;
  asset and liability risk management;
  the outcome of litigation and other proceedings;
  intellectual property rights and protection;
  economic factors;
  competition; and
  legal risks.

 

Any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Forward-looking statements generally are identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “aims,” “plans,” “may,” “could,” “will,” “will continue,” “seeks,” “should,” “predict,” “potential,” “outlook,” “guidance,” “target,” “forecast,” “probable,” “possible” or the negative of such terms and similar expressions. Forward-looking statements are subject to change and may be affected by risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events, except as required by law, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws and other applicable laws.

 

3
 

 

We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements, and therefore you should not place too much reliance on them. These factors include, among others, those described herein, under “Risk Factors” and elsewhere in this Annual Report and in our other public reports filed with the Securities and Exchange Commission. It is not possible to predict or identify all such factors, and therefore the factors that are noted are not intended to be a complete discussion of all potential risks or uncertainties that may affect forward-looking statements. If these or other risks and uncertainties materialize, or if the assumptions underlying any of the forward-looking statements prove incorrect, our actual performance and future actions may be materially different from those expressed in, or implied by, such forward-looking statements. We can offer no assurance that our estimates or expectations will prove accurate or that we will be able to achieve our strategic and operational goals.

 

Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

 

Moreover, new risks regularly emerge and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this prospectus are based on information available to us on the date of this Annual Report. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Annual Report.

 

JUMPSTART OUR BUSINESS STARTUPS ACT

 

We qualify as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have more than $1,000,000,000 in annual gross revenue and did not have such amount as of December 31, 2018, the last day of our last fiscal year. We are electing to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.

 

As an emerging growth company, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

 

  being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report;
  not being requested to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”);
  reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration 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 will remain an emerging growth company until the earliest to occur of: (i) our reporting $1 billion or more in annual gross revenues; (ii) the end of fiscal year 2019; (iii) our issuance, in a three year period, of more than $1 billion in non-convertible debt; and (iv) the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million on the last business day of our second fiscal quarter.

 

4
 

 

PART I

 

Item 1. Business

 

Company Overview

 

Canbiola, Inc. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005 in order to tap into a largely un-serviced segment of the web-based advertising industry. Effective December 27, 2010, WRAP effected a 10 for 1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1 for 10 reverse stock split of its common stock. The accompanying consolidated financial statements retroactively reflect these stock splits.

 

Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008, in order to acquire Prosperity’s office productivity software suite as a complement to WRAP’s existing intellectual property. After its acquisition, the Company transferred Prosperity’s operations to WRAP and is presently in the process of dissolving Prosperity. For the periods presented, the assets, liabilities, revenues, and expenses are those of the Company. Prosperity had no activity for the periods presented.

 

Around the first quarter of 2017, the Company began to transition into the Hemp CBD industry and now primarily offers health and beauty products and supplements containing CBD. On May 15, 2017, WRAP changed its name to Canbiola, Inc. (the “Company” or “CANB” or “Canbiola”) to reflect its transition.

 

Business

 

The Company’s primary business is the development, production and sale of products and delivery devices containing CBD. The Company’s products contain CBD derived from Hemp and include products such as oils, creams, moisturizers, isolate, and gel caps. In addition to offering white labeled products, Canbiola has developed its own line of proprietary products, as well as seeking synergistic value through acquisitions of products and brands in the Hemp industry. Canbiola aims to be the premier provider of the highest quality natural Hemp CBD products on the market through sourcing the very best raw material and developing a variety of products we believe will improve people’s lives in a variety of areas.

 

“CBD” Business

 

Cannabidiol (“CBD”) is one of nearly 85 naturally occurring compounds (cannabinoids) found in industrial hemp (it is also contained in marijuana, but the Company’s products are derived only from hemp). CBD is non-psychoactive and is thought to have numerous uses, including, but not limited to, for pain, insomnia, epilepsy, anxiety, inflammation, and nausea. Unlike CBD derived from marijuana, CBD derived from the seeds and stalks of industrial hemp is generally considered “legal” in the U.S. so long as it contains less than 0.3% of “THC,” another, but psychoactive, cannabinoid found in cannabis. This purported “legal status” is because the 2018 Farm Bill removed hemp as a Schedule I drug under the Controlled Substances Act and hemp may now be grown as a commodity crop, with restrictions; however, the 2018 Farm Bill did not specifically legalize CBD. Until Congress promulgates rules and regulations relating to hemp derived CBD under the 2018 Farm Bill, the “legal” status of CBD from hemp, or the processes the Company may have to implement (and at what expense), are still unknowns. A similar paradigm exists under various state laws with which the Company will have to comply. In any case, CBD derived from marijuana, marijuana and other marijuana derivatives are federally illegal in the U.S. under the Controlled Substances Act, despite being medically or recreationally legal in numerous states, which is why the Company has established procedures to ensure that its CBD is derived from hemp in compliance with the Farm Bill.The Company has all of its hemp based raw materials (isolate) tested by a 3tf party independent laboratory and those results are posted on the Company web site.

 

In order to facilitate its operations, the Company has (and will) form or acquire a number of subsidiaries. Its goal is to eventually operate a vertically integrated hemp conglomerate that has operations spanning from seed to sale. Currently, the Company’s primary focus is the development, sale and manufacture of CBD products. The Company’s products are marketed under the tradename “Canbiola.,” and sold via its website and through doctors and other medical professionals with which the Company enters into distribution agreements. The Company also manufactures and/or sells separately branded CBD products through its subsidiaries and websites for “Pure Leaf Oil” brand and “Seven Chakras” brand.

 

5
 

 

In December, 2018, the Company acquired 100% of the membership interests in Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”), with which it had had and has an exclusive production agreement, pursuant to an Acquisition Agreement (“PHP Acquisition Agreement”). PHP manufactures and packages the Company’s CBD infused products. PHP may also white label / rebrand or relabel the Company’s products pursuant to “white label agreements” entered into between the Company and/or PHP and third-party customers. Through PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. In January, 2019, PHP acquired certain assets from Seven Chakras, LLC (“Seven Chakras”), a former competitor, which assets included the rights and title to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ CBD products, (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials. The Company believes the acquisition of Seven Chakra’s assets will bring accretive value and expand the Company’s market base. The Severn Chakras has a customer following in the northwest and compliments the Canbiola and Pure Leaf Oil brands with additional new products such as bath bombs, stress relief products, and lotions. Seven Chakras has its own internet website and continues in its direct marketing to its customer base.

 

In November 2018, the Company formed Duramed, Inc., a Nevada corporation (“Duramed”) to facilitate the manufacture and sale of durable medical equipment incorporating CBD. On January 14, 2019, Duramed entered into a Memorandum of Understanding (the “Sam MOU”) with Sam International (“Sam”) and ZetrOZ Systems LLC (“ZetrOZ” and, collectively with Sam, the “Manufacturers”). Pursuant to the Sam MOU, the Manufacturers granted Duramed the exclusive right to distribute sam® Pro 2.0 (SA271) and sam® Gel Coupling Patches (UB-14-72) within the United States for the Personal Injury Protection/No Fault Market during the term of the MOU. Duramed has agreed to purchase monthly minimums from the Manufacturers at a price per Unit of $2,447. The exclusivity of the Distribution License granted to Duramed under the MOU is dependent upon meeting the monthly minimum. In addition, Duramed was granted the right to distribute sam® Gel Capture Patches (UB-14-24). Duramed will get rebates of 2%-3% based on the volume of Products sold by it. The initial term of the Sam MOU expires December 31, 2019 (the “Initial Term”). The agreement contemplated by the MOU will automatically renew for additional one-year terms at the end of each calendar year, provided the monthly minimums have been met. The primary thrust of the Duramed Division is to market to patients via doctors via a device rental program reimbursable by insurance carriers to help patient with pain reductions and faster healing.

 

The CBD and cannabis markets are flooded with competition ranging from mom and pop operations to multi-million-dollar conglomerates, many with longer operating histories, more capital and/or more industry knowledge than the Company. The Company hopes to partner with or engage industry specialists to help set it apart from its numerous competitors. One of those points of differentiation is its 3 rd party independent testing “Certificate of Analysis” conducted on all of the CBD isolate products it purchases and posting of those lab results on its website.

 

The statements found herein have not been evaluated by the Food and Drug Administration (FDA) and the Company’s products are not intended to diagnose, treat, cure or prevent any disease or medical condition.

 

WRAPmail

 

The Company owns a patented technology that combines custom marketing content with organization e-mail to provide a next generation marketing platform for organizations and personal use. WRAPMail had provided software solutions for marketing and is no longer being sold or serviced.

 

We are not aware of any competitors developing a similar solution to WRAPmail, possibly giving us first mover advantage. Nonetheless, we may face competition from stationary letterhead, bulk e-mail and similar product providers.

 

Currently the Company is not pursuing additional customers for WRAPmail but does continue to service current customers using the software.

 

Bullseye

 

The Bullseye Productivity Suite is a cloud-based system that consolidates all necessary office productivity tools into one online experience, accessible everywhere when you need it with full disaster recovery mechanisms built in. All functions and features are audited to help users with corporate governance and compliance issues.

 

6
 

 

The Company is not presently seeking additional customers for Bullseye but continues to service the existing customer base.

 

Intellectual Property

 

We own the following patents for our WRAPmail technology: US patent no. 8572275 issued on October 29, 2013. This patent expires in October 2033. On July 20, 2015, WRAPmail filed for a new patent under the title: Method, System and Software for Dynamically Extracting Content for Integration with Instant Messages, which application is still pending and not being actively pursued by the Company.

 

The above patents relate to the document management and email marketing divisions. Due to diminishing revenue from these divisions, the Company’s accountant determined to reduce the fair value of these patents to $0.

 

The Company employes through its Pure Health Products LLC Division, two full time product researchers and CBD technology experts who, on a daily basis, set the quality standards and new product development status and time-line agendas under the direct supervision of the company’s management team.

 

Employees

 

The Company currently has four full-time employee and seven under services agreements.

 

Reports to Security Holders

 

Our common stock is registered under the Securities Exchange Act of 1934 and we are required to file current, quarterly and annual reports and other information with the SEC. You may read and copy any document that we file at the SEC’s public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings are available to you free of charge at the SEC’s web site at www.sec.gov. We are an electronic filer with the SEC and, as such, our information is available through the Internet site maintained by the SEC that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. This information may be found at www.sec.gov and posted on our website at www.canbiola.com.

 

Research and Development

 

In fiscal year 2017 and 2018 we spent respectively $37,000 and $75,000 in research and development which was expenses as spent.

 

Government Regulation

 

The cultivation and sale of hemp and hemp products is federally regulated under the United States Farm Bill. The 2018 Farm Bill removed hemp as a Schedule 1 Substance under the Controlled Substances Act; however, rules and regulations relating to manufacture and sale of CBD products under the Farm Bill must still be promulgated and are expected to impact the Company’s operations. As the legal CBD industry and our product lines expand, it is uncertain what other statutory schemes and agencies will start to regulate our CBD products. The FDA currently still considers the addition of CBD to food products or supplements to be illegal and prohibits the advertisement of CBD products with health claims. The Company must also comply with each state’s laws relating to the sale of hemp based CBD products. These regulations may affect, among others, the way the Company manufactures and distributes its products, the way the Company is taxed, the way the Company banks, the location of the Company’s facilities, the content and testing of the Company’s products, and the quality of the Company’s services.

 

Through our document management and email marketing platforms, we are also subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing the Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other online services, and increase the cost of providing online services. These regulations and laws may cover sweepstakes, taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet and e-commerce. Unfavorable resolution of these issues may harm our business and results of operations.

 

7
 

 

Transfer Agent

 

We had engaged Island Stock Transfer, located at 15500 Roosevelt Blvd, Suite 301, Clearwater, FL 33760, as our stock transfer agent. Phone: 727.289.0010. Our former director, Carl Dilley, is a principal of Island Stock Transfer.

 

On April 1 st , 2019 we changed Transfer Agents to Transhare Corporation located at 15500 Roosevelt Blvd, Suite 302, Clearwater FL 33760.

 

Item 1A. Risk Factors

 

We are a smaller reporting company and not required to provide the information in this Item.

 

Item 1B. Unresolved Staff Comments

 

Not applicable.

 

Item 2. Properties

 

The Company does not currently own any real property. We do however lease office space in Hicksville, New York. The Company’s wholly-owned subsidiary, Pure Health Products, operates its manufacturing facility in the state of Washington.

 

Item 3. Legal Proceedings

 

We are not aware of any pending or threatened legal proceedings in which we are involved, except as disclosed herein. On or around May 11, 2018, the Company initiated arbitration proceedings against T8 Partners, Inc., a New York Corporation (“T8”), pursuant to the American Arbitration Association (“AAA”) rules, for breach of contract and return of 2.5M shares of the Company’s common stock for non-performance by T8 under a services contract. The case, Case No. 01-18-0001-8823, is being heard in AAA’s Los Angeles Regional Office.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock is listed for quotation on OTCQB Market’s under the symbol “CANB.” Our common stock began trading in April 2011. Trading in our common stock has historically lacked consistent volume, and the market price has been volatile.

 

8
 

 

The following table presents, for the periods indicated, the high and low bid prices of the Company’s common stock and is based upon information provided by OTC Market. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

 

    2018  
    High     Low  
First Quarter   $ 0.05     $ 0.02  
Second Quarter   $ 0.03     $ 0.01  
Third Quarter   $ 0.10     $ 0.01  
Fourth Quarter   $ 0.10     $ 0.03  

 

    2017  
    High     Low  
First Quarter   $ 0.09     $ 0.07  
Second Quarter   $ 0.04     $ 0.03  
Third Quarter   $ 0.03     $ 0.03  
Fourth Quarter   $ 0.04     $ 0.03  

 

The last reported sale price of the Company’s common stock as of April 12, 2019 was $0.039 per share.

 

Record Holders

 

As April 12, 2019, there were 548,487,714 shares of common stock issued and outstanding to approximately 163 shareholders of record.

 

Dividends

 

The Company paid $13,779 in in-kind dividends on its Class B Preferred Stock by the issuance of common stock to the Class B holders in 2018 and $0 in 2017. Each share of Series B Preferred Stock has the first preference to dividends, distributions and payments upon liquidation, dissolution and winding-up of the Company, and is entitled to an accrued cumulative but not compounding dividend at the rate of 5% per annum whether or not declared. After six months of the issuance date, such share and any accrued but unpaid dividends can be converted into common stock at the conversion price which is the lower of (i) $0.0101; or (ii) the lower of the dollar volume weighted average price of CANB common stock on the trading day prior to the conversion day or the dollar volume weighted average price of CANB common stock on the conversion day. The Series B Preferred Stock have no voting rights.

 

We do not anticipate paying any cash dividends in the foreseeable future. Except for its Class B Preferred Stock, the payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit our ability to pay dividends on our common stock other than those generally imposed by applicable state law.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not now have, or plan to have in the near future, an equity incentive plan.

 

Recent Sales of Unregistered Securities

 

The following is a summary of transactions since our previous disclosure on our Form 10-Q filed with the Securities and Exchange Commission on November 14, 2018 involving sales of our securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”). Each offer and sale were exempt from registration under either Section 4(a)(2) of the Securities Act or Rule 506(b) under Regulation D of the Securities Act.

 

From October 2, 2018 to November 7, 2018, the Company issued aggregately 13,094,733 shares of CANB common stock to RedDiamond in exchange for the retirement of 101,736 shares of CANB Series B Preferred Stock.

 

From November 5, 2018 to December 28, 2018, the Company issued aggregately 2,125,000 shares of CANB common stock to multiple consultants for services rendered. The $80,665 fair value of the 2,125,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 30, 2018.

 

From December 3, 2018 to December 28, 2018, the Company issued aggregately 1,500,000 shares of CANB common stock to three board members for services rendered. The $62,342 fair value of the 1,500,000 shares of CANB common stock was charged to director fees in the three months ended December 30, 2018.

 

9
 

 

From December 3, 2018 to December 28, 2018, the Company issued aggregately 22,413,794 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $650,000.

 

On December 11, 2018, the Company issued 891,089 shares of CANB common stock to RedDiamond in satisfaction of dividend payable of $9.000.

 

On December 19, 2018, the Company issued 891,089 shares of CANB common stock to Auctus, LLC pursuant to a cashless exercise of stock options.

 

On December 21, 2018, Company received a conversion notice from a lender. As a result, 9,372,100 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $83,500 and accrued interest payable of $10,221.

 

On December 21, 2018, Company issued aggregately 4,370,629 shares of CANB common stock to four officers and key executives of the Company in satisfaction of accrued compensation of $192,300.

 

On December 28, 2018, the Company issued 3,096,827 shares of CANB common stock for the acquisition of Pure Health Products, LLC.

 

On December 28, 2018, the Company issued 245,789 shares of CANB common stock to a key executive of the Company pursuant to the Employment Agreement dated December 29, 2018 with Andrew Holtmeyer. The $14,207 fair value of the issuance was charged to stock-based compensation in the three months ended December 31, 2018.

 

On December 29, the Company issued 30,000,000 shares of CANB common stock to Marco Alfonsi in exchange for the return of 3 shares of CANB Series A Preferred Stock owned by Marco Alfonsi.

 

On January 28, 2019, the Company issued 10,000,000 shares of CANB common stock to a consultant of the Company in exchange for the return of 1 share of CANB Series A Preferred Stock.

 

From February 21, 2019 to March 12, 2019, the Company issued aggregately 20,221,436 shares of CANB common stock to RedDiamond in exchange for the retirement of 157,105 shares of CANB Series B Preferred Stock.

 

From January 4, 2019 to March 27, 2019, the Company issued aggregately 41,431,994 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $1,196,100.

 

On January 14, 2019, the Company issued 7,500,000 shares of CANB common stock the owner of Hudilab, Inc., pursuant to a License and Acquisition Agreement dated January 14, 2019.

 

From January 18, 2019 to March 17, 2019, the Company issued aggregately 24,600,000 shares of CANB common stock to multiple consultants for services rendered.

 

From January 19, 2019 to March 27, 2019, the Company issued aggregately 1,167,959 shares of CANB common stock to key employees and officers of the Company pursuant to employee agreement and in satisfaction of accrued compensation for the quarter ended March 31, 2019.

 

On February 5, 2019, the Company issued 2,000,000 shares to the owner of TZ Wholesale LLC, pursuant to a Memorandum of Understanding (the “MOU”) dated November 9, 2018.

 

On February 20, 2019, the Company issued 1,000,000 shares of CANB common stock to owners of Seven Chakras pursuant to an Asset Purchase Agreement dated January 31, 2019.

 

Item 6. Selected Financial Data

 

Not required for smaller reporting companies.

 

10
 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

General

 

Canbiola, Inc. was originally formed as a Florida corporation on October 11, 2005, under the name of WrapMail, Inc. Effective January 5, 2015, we acquired 100% ownership of Prosperity Systems, Inc., which the Company is in the process of dissolving. Effective December 28, 2018, we acquired 100% ownership of Pure Health Products. In November 2018, we formed Duramed as a wholly-owned subsidiary. The Company is presently in the process of dissolving Prosperity.

 

We manufacture and sell products containing CBD. We also provide document, project, marketing and sales management systems to our residual business clients through our website and proprietary software, which divisions are being wound-down. The consolidated financial statements include the accounts of CANB and its wholly owned subsidiary Pure Health Products from the date of its acquisition on December 28, 2018.

 

Results of Operations

 

Year Ended December 31, 2018 compared with Year Ended December 31, 2017:

 

Revenues increased $545,857 from $122,746 in 2017 to $668,603 in 2018. The increase was due to the growth of CBD product sales.

 

Cost of product sales increased $361,068 from $44,466 in 2017 to $405,434 in 2018 due to the growth of product sales and outreach into additional market segments such as wholesale and private label opportunities.

 

Officers and director’s compensation and payroll taxes increased $1,324,581 from to $154,406 in 2017 to $1,478,987 in 2018. The 2017 expense amount ($154,406) consists of salaries accrued to our Chief Executive Officer ($84,000) and stock based compensation of ($63,902) pursuant to their respective employment agreements and related payroll taxes ($6,504). The 2018 expense amount ($1,478,987) includes additional stock-based compensation of ($1,255,193) pursuant to their respective employment agreements and related payroll taxes ($2,559).

 

Consulting fees increased $1,384,902 from $284,741 in 2017 to $1,669,443 in 2018. The 2017 expense amount ($284,741) includes stock-based compensation of ($167,688), resulting from stock issued for the service of consultants. The 2018 expense amount ($1,669,443) includes stock-based compensation of ($1,527,107), resulting from stock issued for the service of consultants.

 

Advertising expense increased $55,994 from $28,322 in 2017 to $84,316 in 2018.

 

Hosting expense decreased $7,266 from $21,963 in 2017 to $14,697 in 2018.

 

Rent expense increased $2,105 from $65,060 in 2017 to $67,165 in 2018.

 

Professional fees increased $22,172 from $95,546 in 2017 to $117,718 in 2018.

 

Depreciation of property and equipment increased $2,246 from $3,227 in 2017 to $5,473 in 2018.

 

Amortization of intangible assets decreased $3,972 from $3,972 in 2017 to $0 in 2018.

 

Other operating expenses increased $107,215 from $133,829 in 2017 to $241,044 in 2018. The increase was due largely to higher commission fees, supplies expense and shipping expenses in 2018 compared to 2017.

 

Net loss increased $1,972,558 from $2,139,719 in 2017 to $4,112,277 in 2018. The increase was due to the $2,877,777 increase in total operating expenses offset by the $730,430 decrease in other expense - net, and by the $184,989 increase in gross profit.

 

11
 

 

Liquidity and Capital Resources

 

At December 31, 2018, the Company had cash and cash equivalents of $807,747 and a working capital of $939,582. Cash and cash equivalents increased $806,095 from $1,652 at December 31, 2017 to $807,747 at December 31, 2018. For the year ended December 31, 2018, $1,605,644 was provided by financing activities, $753,569 was used in operating activities, and $45,980 was used in investing activities.

 

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

 

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

 

We have no off-balance sheet arrangements.

 

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

 

Not applicable.

 

Item 8. Financial Statements and Supplementary Data

 

Our Consolidated Financial Statements and Notes thereto, for the fiscal years ended December 31, 2018 and 2017 and the report of BMKR, LLP, our independent registered public accounting firm, are set forth on pages F-1 through F-27 of this Annual Report.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

Not applicable.

 

Item 9A. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer (CEO), as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the CEO has concluded that our disclosure controls and procedures are ineffective to ensure that information disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. This determination was based on the small size of our accounting staff, the lack of segregation of duties and the lack of an audit committee.

 

To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Management Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

Any internal control system, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

12
 

 

Management, with the participation of our Chief Executive Officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2018 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, because of the Company’s limited resources and limited number of employees, and the absence of an audit committee, management concluded that, as of December 31, 2018, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principle, which creates a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness means there is a risk that our financial reports or other filings may contain an error or inaccuracy or not submitted timely.

 

There was a material weakness in the Company’s internal control over financial reporting due to the fact that the Company did not have an adequate process established to ensure appropriate levels of review of accounting and financial reporting matters, which resulted in our closing process not identifying all required adjustments and disclosures in a timely fashion. We expect that the Company will need to hire accounting personnel with the requisite knowledge to improve the levels of review of accounting and financial reporting matters. The Company may experience delays in doing so and any such additional employees would require time and training to learn the Company’s business and operating processes and procedures. For the near-term future, until such personnel are in place, this will continue to constitute a material weakness in the Company’s internal control over financial reporting that could result in material misstatements in the Company’s financial statements not being prevented or detected.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934) during the year ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

Our board of directors is elected annually by our shareholders. The board of directors elects our executive officers annually. Our directors and executive officers as of April __, 2019 are as follows:

 

Name   Age   Position
Marco Alfonsi   57   CEO, Director, Chairman
Stanley L. Teeple   70   CFO, Secretary, Director
Andrew Holtmeyer   57   VP of Business Development

 

Marco Alfonsi, CEO and Chairman Director has been a financial service professional for the past 20 years. Mr. Alfonsi was appointed director and CEO of the Company in or around January 2015. Immediately prior to that, he spent eight years serving as the CEO of Prosperity Systems, Inc.

 

Throughout his career, Mr. Alfonsi was directly and indirectly involved in raising over $100 million dollars for small and medium sized business. Prior to his involvement in the financial services industry, Mr. Alfonsi has owned, operated, financed and sold several businesses. Mr. Alfonsi successfully started and managed two companies (ExecuteDirect.com, and Bakers Express of New York, Inc.), and held senior management positions with a number of financial institutions, including: Global American Investments, Clark Street Capital and Basic Investors.

 

13
 

 

Stanley L. Teeple –Mr. Teeple was engaged from 2017-2018 with Solis Tek, Inc. (OTCQB:SLTK) a California based publicly traded corporation as Senior Vice President, Corporate Secretary, and Chief Compliance Officer. Solis Tek, Inc. a NV Corporation, is a developer of lighting and nutrient products, and most recently in cultivation and processing for the cannabis industry. Previously, from 2015-2016 Mr. Teeple was Chief Financial Officer and Secretary for Zonzia Media, Inc. (OTC:ZONX), a provider of streaming video and content to cable subscribers and hotel networks throughout the eastern US. From 2008 to 2014 Mr. Teeple was Chief Financial Officer and Secretary of Indigo-Energy, Inc. (OTC:IDGG) a publicly traded company in the oil and gas exploration business. Over the prior three plus decades Mr. Teeple through his turnaround consulting business, Stan Teeple, Inc., has held numerous senior management positions in several public and private companies across a broad spectrum of industries. Additionally, he has operated and worked for various court appointed trustees and principals as CEO, COO, and CFO in the entertainment, pharmaceuticals, food, travel, and tech industries. He operated his consulting business on a project-to-project basis and holds various other directorships. His businesses operational strengths include knowing how to manage and maximize the resources and preserve the integrity of a company from start-up through to maturity and corporate compliance in a regulatory environment.

 

Andrew Holtmeyer – Mr. Holtmeyer started his business career in the financial services sector. During his 20 year career on wall street, Mr. Holtmeyer worked at and built several investment firms that employed hundreds of salesmen. During the last 5 years of his career, he concentrated mostly on investment banking. After leaving the financial sector, Mr. Holtmeyer started a highly successful consulting firm, which concentrated on raising capital for small to mid-sized companies that were both private and public. After selling his consulting business, Mr. Holtmeyer started a very successful real estates business which is now run by his family.

 

Carl Dilley, 63, served on our Board of Directors until he resigned for personal reasons on February 21, 2019.

 

David Posel, 39, served as the Company’s COO during 2018, when the Company’s operations were limited to its contractual arrangement with Pure Health Products. After acquiring PHP directly, Mr. Posel was transitioned to COO of PHP.

 

Board Committees

 

We have not yet established an audit committee, compensation committee, or nominating committee. During 2018, the functions ordinarily handled by these committees were handled by our entire Board.

 

Family Relationships

 

There are no familial relationships between any of our officers and directors.

 

Director or Officer Involvement in Certain Legal Proceedings

 

Our current directors and executive officers have not been involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.

 

Director Independence

 

The Company is not currently listed on any national securities exchange that has a requirement that the board of directors be independent. None of the Company’s directors are independent.

 

Code of Ethics

 

We have not adopted a Code of Ethics that applies to all of our employees and officers, and the members of our Board of Directors due to the financial constraints of doing so.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive 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 SEC. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on our review of the reports filed by Reporting Persons, we believe that, during the year ended December 31, 2018, the following Reporting Persons did not meet all applicable Section 16(a) filing requirements: (i) Stanley Teeple, (ii) David Posel, and (iii) Carl Dilley. Otherwise, we believe that the Reporting Persons met such filing requirements.

 

14
 

 

Item 11. Executive Compensation

 

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers and directors for all services rendered in all capacities to us during the previous two fiscal years, as of December 31, 2018.

 

Executive Summary Compensation Table
 
Name and principal position   Year     Salary     Bonus     Stock awards     Option awards     Non-equity incentive plan compensation     Non-qualified deferred compensation earnings     All other compensation     Total  
Marco Alfonsi(1)   2017     $ 84,000     $     0     $ 63,902     $ 0     $                0     $             0     $                 0     $ 147,902  
CEO and Director   2018     $ 104,500     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 104,500  
Stanley L. Teeple(2)   2018     $ 45,000     $ 0     $ 144,500     $ 118,200     $ 0     $ 0     $ 0     $ 307,700  
Andrew Holtmeyer(3)   2018     $ 118,400     $ 0     $   1,169,658     $ 0     $ 0     $ 0     $ 0     $   1,288,058  
David Posel (4)   2018     $ 60,000     $ 0     $ 58,720     $ 0     $ 0     $ 0     $ 0     $ 118,720  

 

(1) Pursuant to an employment agreement entered on or around May 14, 2015, Marco Alfonsi was entitled to receive compensation of $6,000 per month through September 31, 2017 when the contract expired. On or around October 3, 2017, the Company entered into a new employment agreement with Mr. Alfonsi whereby he was entitled to receive $10,000 per month for a period of three years. Mr. Alfonsi also received one share of Class A Preferred Stock upon his execution of the new agreement. In addition, on or around October 4, 2017, the Company authorized the issuance of an additional two shares of Class A Preferred Stock to Mr. Alfonsi in consideration for cancellation of approximately $120,000 of deferred income owed to Mr. Alfonsi. The Company entered into a new employment agreement dated October 21, 2018 Mr. Alfonsi, pursuant to which Mr. Alfonsi agreed to continue to serve as the Company’s Chief Executive Officer (“CEO”) and accept appointment as Chairman of the Board of Directors (“Chairman”) for an initial term of four (4) years. He is entitled to receive $15,000 per month and other compensation under the new agreement.

 

(2) Pursuant to an employment agreement entered on or around October 15, 2018, Mr. Teeple services as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The Agreement also provides for compensation to Mr. Teeple of $15,000 cash per month and the issuance of 1 share of Series A Preferred Stock upon execution of the Agreement. The fair value of the Series A preferred Stock is $578,000 and has a vesting period of four years. In 2018, the amortized portion of Series A preferred Stock is $144,500.

 

(3) On February 16, 2018, the Company executed an Executive Service Agreement (“Agreement”) with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 3 years. The Agreement also provides for compensation to Mr. Holtmeyer of $10,000 cash per month and the issuance of 3, 2 and 1 share of Series A Preferred Stock at the beginning of each year. On December 29, 2018, this Agreement was terminated due to the execution of a new Employment Agreement with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 4 years. The Agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 245,789 shares of common stock upon signing of the agreement. In 2018, the Company issued 5 shares of Series A preferred shares valued at $3,910,000 and the amortization in 2018 is $1,169,658.

 

(4) On February 12, 2018, the Company executed an Executive Service Agreement (“Agreement”) with David Posel. The Agreement provides that Mr. Posel services as the Company’s Chief Operating Officer for a term of 4 years. The Agreement also provides for compensation to Mr. Posel of $5,000 cash per month and the issuance of 1 share of Series A Preferred Stock at the inception of the Agreement. In the fourth quarter, this Agreement was terminated due to the execution of a new Employment Agreement between Pure Health Products, LLC and David Posel. The fair value of the Series A preferred Stock is $373,000 and has a vesting period of four years. In 2018, the amortized portion of Series A preferred Stock related to Mr. Posel’s service as an executive is $58,720.

 

15
 

 

We do not have an equity incentive plan and no named executive officer has unexercised outstanding equity awards.

 

The table below summarizes all compensation awarded to, earned by, or paid to our non-interested directors for all services rendered in all capacities to us during the previous two fiscal years, as of December 31, 2018.

 

Non-Interested Director Summary Compensation Table
 
Name and principal position   Year   Fees Earned or Paid in Cash     Stock awards     Option awards     Non-equity incentive plan compensation     Non-qualified deferred compensation earnings     All other compensation     Total  
Carl Dilley(1)   2017   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
Director   2018   $ 0     $ 0     $ 84,000     $ 0     $ 0     $ 0     $ 84,000  

 

  (1) Mr. Dilley resigned from the Company on February 21, 2019.

 

No director has received cash compensation for their directorship. We do not have a compensation committee and compensation for our directors and officers is determined by our board of directors.

 

We reimburse Non-Employee Directors for actual out-of-pocket costs incurred to attend board meetings. No additional compensation is paid for attendance in person or by telephone at board meetings.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following tables set forth the ownership, as of April 12, 2019, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding voting stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control. The Company’s principal office is the business address for each of the named shareholders.

 

There are 548,487,714 shares of common stock outstanding as of April 12, 2019, and 17 shares of Series A preferred stock issued and outstanding, which in aggregate are convertible into 170,000,000 shares of common stock at any time and represent 340,000,000 votes. There is a total of approximately 888,487,714 votes eligible to be cast in any Company vote as of April 15, 2019.

 

On April 12, 2019, Red Diamond Partners LLC (“Red Diamond”) owned 342,853 shares of Series B Preferred Stock, which is convertible into approximately 44,129,594 shares of common stock, subject to ownership percentage limitations; however, Series B Preferred Stock is non-voting.

 

The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities.

 

16
 

 

Except as otherwise indicated and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. Unless stated otherwise, the business address for these shareholders is 960 South Broadway, Suite 120, Hicksville NY 11801.

 

Name   Title   Number of Common Shares     % of Common Shares     Number of Series A Preferred Shares     % of Series A Preferred Shares     % of Eligible Votes     Number of Warrants currently exercisable or exercisable in the next 60 days  
Marco Alfonsi[1]   CEO, Director     59,398,915       10.83 %     5       29.41 %     17.94 %          0  
Stanley L. Teeple[2]   CFO, Director     980,752       0.18 %     1       5.88 %     2.36 %     0  
Andrew Holtmeyer[3]   Vice President     1,107,769       0.20 %     5       29.41 %     11.38 %     0  
All officers and directors as a group [3 persons]         61,487,436       11.21 %     11       64.70 %     31.68 %     0  

 

(1) As of April 12, 2019, Marco Alfonsi owns approximately 59,398,915 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 50,000,000 shares and equal 100,000,000 votes. Prior to October 29, 2015, Mr. Alfonsi owned 81,000,000 shares of the Company’s common stock, at which time it was agreed that he would retire 50,000,000 shares of common stock for 5 shares of Series A Preferred Stock. In addition to the listed shares, four members of Mr. Alfonsi’s family hold an aggregate of 10,000,000 shares of common stock, which shares have not been included in the above calculations.

 

(2) As of April 12, 2019, Stanley L. Teeple owns approximately 980,752 shares of common stock and 1 shares of Series A preferred stock, which are convertible into 10,000,000 shares and equal 20,000,000 votes.

 

(3) As of April 12, 2019, Andrew Holtmeyer owns approximately 1,107,769 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 50,000,000 shares and equal 100,000,000 votes.

 

The following tables set forth the ownership of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding voting stock, excluding our directors and our executive officers

 

Name   Number of Common Shares     % of Common Shares     Number of Preferred A Shares     % of Shares     % of Eligible Votes     Number of Warrants currently exercisable or exercisable in the next 60 days  
McKenzie Webster Limited[1]     64,879,916       11.83 %     0       0 %     7.30 %     0  
Pasquale Ferro [2]     22,172,159       4.04 %     5       29.41 %     13.75 %     0  

 

  (1) McKenzie Webster Limited is controlled by the Company’s former director and CFO, Rolv Heggenhougen. The business address for this shareholder is 445 NE 12 th Ave., Fort Lauderdale, Florida 33301.
  (2) Pasquale Ferro is the President of Pure Health Products, LLC, a wholly owned subsidiary of the Company.

 

The above tables are based upon information derived from our stock records. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown.

 

17
 

 

Item 13. Certain Relationships and Related Party Transactions

 

Except as described herein (or within the section entitled Executive Compensation of this prospectus), none of the following parties (each a “Related Party”) has, in our fiscal years ended 2017 and 2018, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:

 

any of our directors or officers;
any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; or
any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the above persons.

 

ProAdvanced Group, Inc. (“PAG”), an entity controlled by the Company’s chief executive officer, is a customer of CANB. At December 31, 2018, CANB had an account receivable from PAG of $7,240. For the year ended December 31, 2018, CANB had revenues from PAG of $5,000.

 

Island Stock Transfer (“IST”), an entity controlled by Carl Dilley, a Company director, is both a customer and vendor of CANB. At December 31, 2018, CANB had an account receivable from IST of $7,035 and an account payable to IST of $1,454. For the year ended December 31, 2018, CANB had revenues from IST of $4,000.

 

Stock Market Manager, Inc. is also an entity controlled by Mr. Dilley. For the year ended December 31, 2018, CANB had an account payable to Stock Market Manager Inc. of $1,676.

 

In order to facilitate its operations, the Company has entered into a Production Agreement with Pure Health Products, LLC (“PHP”), a New York limited liability company. Pursuant to the Production Agreement, PHP will manufacture, package, and sell the Company’s CBD infused products on an exclusive basis. PHP will not produce or manufacture any product containing any cannabis or hemp derivative for any person or entity other than the Company, and the Company controls the ingredients, recipe, manufacturing processes and procedures and quality and taste parameters for all Products produced at the PHP facility. PHP may also white label / rebrand or relabel the products on the Company’s behalf pursuant to “white label agreements” entered into between the Company and third-party customers. Credit card sales are processed through PHP as well. Through its contractual relationship with PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. In addition, the Company has the option to acquire certain assets of PHP should it elect to take over direct manufacture of its Products. For the year ended December 31, 2018, purchase of CBD infused products from PHP totaled $274,556.50. Effective December 28, 2018, the Company acquired Pure Health Products, LLC.

 

During the year ended December 31, 2018, we had products and service sales to related parties totaling $5,000.

 

Item 14. Principal Accounting Fees and Services

 

The following table sets forth fees billed to us by BMKR, LLP, our independent registered public accounting firm, during the fiscal years ended December 31, 2018 and December 31, 2017 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as audit fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.

 

    December 31, 2018     December 31, 2017  
             
Audit Fees   $ 23,965     $ 31,700  
Audited Related Fees   $     $  
Tax Fees   $     $  
All Other Fees   $     $  

 

18
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

Exhibits Schedule

 

The following exhibits are filed with this Annual Report:

 

Exhibit   Description
     
2.1   Share Exchange Agreement with Prosperity*
3.1   Articles of Incorporation, as amended*
3.2   Bylaws*
10.1   Agreement with RedDiamond Partners LLC
10.2   Amended Agreement with RedDiamond Partners LLC
10.3   Agreement with Pure Health Products, LLC
10.4   Employment Agreement with Marco Alfonsi
10.5   Employment Agreement with Stanley L. Teeple
10.6   Employment Agreement with Andrew Holtmeyer
10.7   Employment Agreement with Pasquale Ferro
10.8   Agreement with Hudilab, Inc.
10.9   Agreement with TZ Wholesale LLC
31.1   Chief Executive Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Chief Financial Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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

 

19
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Canbiola, Inc.
     
Date: April 16, 2019 By: /s/ Marco Alfonsi
  Name: Marco Alfonsi
  Title: Chief Executive Officer
    (Principal Executive Officer and Principal Accounting Officer)

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Person   Capacity   Date
         
/s/ Marco Alfonsi   Director   April 16, 2019
Marco Alfonsi  
         
/s/ Stanley L. Teeple   Director   April 16, 2019
Stanley L. Teeple        

 

20
 

 

CANBIOLA, INC. AND SUBSIDIARY

 

Index to Financial Statements

 

Years Ended December 31, 2018 and 2017 Pages
   
Financial Statements  
   
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets F-3
   
Consolidated Statements of Operations and Comprehensive Loss F-4
   
Consolidated Statements of Stockholders’ Equity F-5
   
Consolidated Statements of Cash Flows F-6
   
Notes to Consolidated Financial Statements F-7

 

F- 1
 

 

BMKR, LLP  
Certified Public Accountants  

T 631 293-5000
1200 Veterans Memorial Hwy., Suite 350

F 631 234-4272
Hauppauge, New York 11788

www.bmkr.com

 

 

Thomas G. Kober, CPA  

Charles W. Blanchfield, CPA (Retired)

Alfred M. Rizzo, CPA

  Bruce A. Meyer, CPA (Retired)
Joseph Mortimer. CPA    

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Canbiola, Inc

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Canbiola Inc. (the Company) as of December 31. 2018 and 2017, and the related consolidated statements of operations, consolidated stockholders’ equity. and cash flows for each of the years in the two year period ended December 3!, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opm1on on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are tree of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its intemal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred a net loss of $4,112,277 during the year ended December 31, 2018, and as of that date, had an accumulated deficit of $18,768,753 The company is in arears with certain vendor creditors which, among other things, cause the balances to become due on demand. The Company is not aware of any alternate sources of capital to meet such demands, if made.

 

As discussed in note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

 

 

We have served as the Company’s auditor since 2014. Hauppauge,

 

NY

 

April 15, 2019

 

Member American Institute of Certified Public Accounts

Member Public Company Accounting Oversight Board

 

F- 2
 

 

Canbiola, Inc. and Subsidiary

Consolidated Balance Sheets

 

    December 31, 2018     December 31, 2017  
Assets                
Current assets:                
Cash and cash equivalents   $ 807,747     $ 1,652  
Accounts receivable, less allowance for doubtful accounts of $0 and $0, respectively     39,172       6,075  
Inventory     87,104       9,834  
Note receivable - current     -       75,000  
Prepaid expenses - current     210,351       64,911  
Total current assets     1,144,374       157,472  
                 
Property and equipment, at cost less accumulated depreciation of $26,775 and $20,248, respectively     59,619       11,148  
                 
Other assets:                
Deposits     48,726       11,687  
Prepaid expenses - noncurrent     2,365,719       -  
Note receivable - noncurrent     19,389       39,000  
Goodwill (Note 4)     55,849       -  
Total other assets     2,489,683       50,687  
                 
Total assets   $ 3,693,675     $ 219,307  
                 
Liabilities and Stockholders’ Deficiency                
Current liabilities:                
Notes and loans payable   $ 19,205     $ 193,504  
Derivative Liability     -       1,451,137  
Accounts payable     73,059       143,274  
Accrued officers compensation     68,750       98,750  
Other accrued expenses payable     43,778       62,539  
Total current liabilities and total liabilities     204,792       1,949,204  
Commitments and contingencies (Notes 14)                
                 
Stockholders’ deficiency:                
Preferred stock, authorized 5,000,000 shares:                
Series A Preferred stock, no par value: authorized 20 shares, issued and outstanding 18 and 8 shares, respectively     4,557,424       243,537  
Series B Preferred stock, $0.001 par value: authorized 500,000 shares, issued and outstanding 499,958 and 157,985 shares, respectively     479       150  
Common stock, no par value; authorized 750,000,000 shares, issued and outstanding 440,566,325 and 225,572,323 shares, respectively     16,624,557       12,524,042  
Additional Paid-in capital     872,976       149,850  
Additional Paid-in capital – Stock Options (Note 12)     202,200       -  
Accumulated deficit     (18,768,753 )     (14,647,476 )
Total stockholders’ deficiency     3,488,883       (1,729,897 )
                 
Total liabilities and stockholders’ deficiency   $ 3,693,675     $ 219,307  

 

See notes to consolidated financial statements.

 

F- 3
 

 

Canbiola, Inc. and Subsidiary

Consolidated Statements of Operations and Comprehensive Loss

Years Ended December 31, 2018 and 2017

 

    2018     2017  
Revenues                
Product Sales   $ 651,978     $ 79,030  
Service Revenue     16,625       43,716  
Total Revenues     668,603       122,746  
Cost of product sales     405,534       44,466  
Gross Profit     263,069       78,280  
                 
Operating costs and expenses:                
               
Officers and directors compensation (including stock-based compensation of $1,255,193 and $63,902 respectively)     1,478,987       154,406  
Consulting fees (including stock-based compensation of $1,524,107 and $167,688, respectively)     1,669,443       284,741  
Advertising expense     84,316       28,322  
Hosting expense     14,697       21,963  
Rent expense     67,165       65,060  
Professional fees     117,718       95,546  
Depreciation of property and equipment     5,473       3,227  
Amortization of intangible assets     -       3,972  
Other     241,044       133,829  
                 
Total operating expenses     3,678,843       791,066  
                 
Loss from operations     (3,415,774 )     (712,786 )
                 
Other income (expense):                
Cancellation of Debt     -       10,589  
Loss on Forgiveness of receivable from Pure Health Products     (85,827 )     -  
Loss on debt conversion     (1,299,369 )     (32,383 )
Loss on stock issuance     (649,259 )     (191,553 )
Impairment of intangible assets     -       (21,507 )
Interest income     10,325       2,842  
Income (expense) from derivative liability     1,591,137       (915,700 )
Interest expense (including amortization of debt discounts of $176,497 and $50,315, respectively)     (263,510 )     (279,221 )
                 
Other income (expense) - net     (696,503 )     (1,426,933 )
                 
Loss before provision for income taxes     (4,112,277 )     (2,139,719 )
                 
Provision for income taxes     -       -  
                 
Net loss and comprehensive loss   $ (4,112,277 )   $ (2,139,719 )
                 
Net loss per common share - basic and diluted   $ (.01 )   $ (.00 )
                 
Weighted average common shares outstanding –                
Basic     276,026,704       165,230,550  
Diluted     423,881,781       256,295,851  

 

F- 4
 

 

Canbiola, Inc. and Subsidiary

Consolidated Statements of Stockholders’ Deficiency

Years Ended December 31, 2017 and 2018

 

    Preferred Stock A,     Preferred Stock B ,     Common Stock,     Additional              
    no par value     $0.001 par value     no par value     Paid-in     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     Total  
                                                       
Balance, December 31, 2016     10     $ 103,664       -       -       146,008,250     $ 11,889,505     $ -     $ ( 12,507,757 )   $ ( 514,588 )
                                                                         
Issuance of common stock on February 2, 2017 for services rendered                                     200,000       11,000                       11,000  
                                                                         
Issuance of common stock on February 13, 2017 in satisfaction of debt and accrued interest                                     1,685,900       67,436                       67,436  
                                                                         
Issuance of common stock on March 22, 2017 in satisfaction of debt and accrued interest                                     6,785,316       154,027                       154,027  
                                                                         
Issuance of common stock on April 17, 2017 for services rendered                                     5,000,000       125,000                       125,000  
                                                                         
Issuance of common stock on June 21, 2017 for services rendered                                     250,000       5,975                       5,975  
                                                                         
Issuance of common stock on June 28, 2017 for services rendered                                     250,000       5,000                       5,000  
                                                                         
Issuance of common stock on August 25, 2017 in satisfaction of debt and accrued interest                                     7,142,857       107,142                       107,142  
                                                                         
Issuance of common stock on August 25, 2017 for services rendered                                     250,000       3,750                       3,750  
                                                                         
Issuance of common stock on September 5, 2017 for services rendered                                     250,000       4,375                       4,375  
                                                                         
Issuance of common stock on September 7, 2017 for services rendered                                     2,500,000       32,750                       32,750  
                                                                         
Issuance of common stock on September 11, 2017 for services rendered                                     500,000       6,700                       6,700  
                                                                         
Issuance of common stock on September 25, 2017 for services rendered                                     250,000       2,525                       2,525  
                                                                         
Issuance of Series A Preferred Stock on October 4, 2017 in satisfaction of accrued officer compensation     3       191,705                                                       191,705  
                                                                         
Sale of Series B Preferred Stock on October 13, 2017 at $0.95 per share                     157,985       150                       149,850               150,000  
                                                                         
Issuance of common stock on November 2, 2017 for services rendered                                     250,000       1,725                       1,725  
                                                                         
Issuance of common stock on November 9, 2017 for services rendered                                     2,500,000       21,250                       21,250  
                                                                         
Issuance of common stock and retirement of Series A preferred stock on November 30, 2017     (5 )     (51,832 )                     50,000,000       51,832                       -  
                                                                         
Issuance of common stock on December 5, 2017 for services rendered                                     500,000       6,000                       6,000  
                                                                         
Issuance of common stock on December 7, 2017 for services rendered                                     250,000       4,500                       4,500  
                                                                         
Issuance of common stock on December 18, 2017 for services rendered                                     500,000       9,050                       9,050  
                                                                         
Issuance of common stock on December 25, 2017 for services rendered                                     500,000       14,500                       14,500  
                                                                         
Net loss     -       -       -       -       -       -               (2,139,719 )     (2,139,719 )
                                                                         
Balance, December 31, 2017     8     $ 243,537       157,985     $ 150       225,572,323     $ 12,524,042     $ 149,850     $ (14,647,476 )   $ (1,729,897 )
                                                                         
Issuance of Series A Preferred Stock in
2018 pursuant to employment and
consulting agreement
    13       4,441,690                                                       4,441,690  
                                                                         
Sale of Series B Preferred Stock in 2018                     761,972       749                       723,126               723,875  
                                                                         
Issuance of common stock in 2018 for services rendered                                     19,345,789       656,306                       656,306  
                                                                         
Issuance of common stock in 2018 for Preferred B dividends                                     891,089       38,379               (9,000 )     29,379  
                                                                         
Issuance of common stock in 2018 in Satisfaction of debt and accrued interest                                     45,263,513       1,604,412               ,       1,604,412  
                                                                         
Issuance of common stock in 2018 for Warrant exercise                                     8,500,000       619,880                       619,880  
                                                                         
Issuance of common stock in 2018 in Satisfaction of accrued compensation                                     4,370,629       192,300                       192,300  
                                                                         
Issuance of common stock in 2018 for Acquisition of PureHealth, LLC                                     3,096,827       112,415                       112,415  
                                                                         
Issuance of stock options for retirement Of common shares                                     (3,000,000 )     (101,400 )     84,000               (17,400 )
                                                                         
Issuance of stock options                                                     118,200               118,200  
                                                                         
Sale of common stocks in 2018                                     29,821,201       850,000                       850,000  
                                                                         
Issuance of common stock and retirement of Series A preferred stock In 2018     (3 )     (127,803 )                     30,000,000       127,803                       -  
                                                                         
Issuance of common stock and retirement of Series B preferred stock In 2018                     (419,999 )     (420 )     76,704,954       420       -               -  
                                                                         
Net loss                                                             (4,112,277 )     (4,112,277 )
                                                                         
Balance, December 31, 2018     18     $ 4,557,424       499,958     $ 479       440,566,325     $ 16,624,557     $ 1,075,176     ($ 18,768,753 )     3,488,883  

 

F- 5
 

 

Canbiola, Inc. and Subsidiary

Consolidated Statements of Cash Flows

 

    Year Ended December 31,  
    2018     2017  
Operating Activities:                
Net loss   $ (4,112,277 )   $ (2,139,719 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock-based compensation, net of prepaid stock- based consulting fees     2,779,300       231,590  
Loss on Forgiveness of receivable from Pure Health Products     85,827       -  
Loss on stock issuance     649,259       191,553  
Loss on debt conversion     1,299,369       32,383  
Debt issuance expense     14,000       -  
Impairment of intangible assets     -       21,507  
Expense from derivative liability     (1,591,137 )     915,700  
Depreciation of property and equipment     5,473       3,227  
Amortization of intangible assets     -       3,972  
Amortization of debt discounts     176,497       250,188  
Bad debt expense     -       16,840  
Changes in operating assets and liabilities:                
Accounts receivable     (33,097 )     (9,173 )
Inventory     2,382       (9,834 )
Security deposit     (34,939 )     -  
Prepaid expenses     -       2,500  
Accounts payable     (115,235 )     88,566  
Accrued officers compensation     85,900       91,803  
Other accrued expenses payable     35,109       22,606  
                 
Net cash used in operating activities     (753,569 )     (286,291 )
                 
Investing Activities:                
                 
Cash received from acquisition of Pure Health Products, LLC     404       -  
Note receivable - current     -       (75,000 )
Fixed assets additions     (46,384 )     -  
                 
Net cash used in investing activities     (45,980 )     (75,000 )
                 
Financing Activities:                
Repayments of notes and loans payable     (123,231 )     -  
Proceeds received from notes and loans payable     155,000       182,750  
Proceeds from sale of common stock     850,000       -  
Proceeds from sale of Series B preferred stock     723,875       150,000  
                 
Net cash provided by financing activities     1,605,644       332,750  
                 
Increase (decrease) in cash and cash equivalents     806,095       (28,541 )
                 
Cash and cash equivalents, beginning of period     1,652       30,193  
                 
Cash and cash equivalents, end of period   $ 807,747     $ 1,652  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:                
Income taxes paid   $ -     $ -  
Interest paid   $ -     $ -  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Issuance of common stock in satisfaction of debt   $ 262,000     $ 115,000  
                 
Issuance of common stock in satisfaction Of officers compensation   $ 282,200     $ 127,803  
                 
Issuance of common stock in acquisition of PureHealth, LLC   $ 178,997     $ -  
                 
Cancellation of note receivable and accrued interest in exchange for service   $ 19,611     $ -  
                 
Cancellation of note receivable and accrued interest in acquisition of PureHealth, LLC   $ 85,827,25     $ -  
                 
Issuance of common stock in satisfaction of accrued interest   $ 43,043     $ 11,168  

 

See notes to consolidated financial statements.

 

F- 6
 

 

Canbiola, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2018 and 2017

 

NOTE 1 – Organization and Description of Business

 

Canbiola, Inc. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005. Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008. The Company is in the process of dissolving Prosperity. The Company acquired 100% of the membership interests in Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”) effective December 28, 2018. The Company formed Duramed, Inc., a Nevada corporation (“Duramed”) in November 2018, to facilitate the manufacture and sale of durable medical equipment incorporating CBD

 

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

 

On May 15, 2017, WRAP changed its name to Canbiola, Inc. (the “Company” or “CANB” or “Canbiola”).

 

Canbiola specializes in the production and sale of a variety of hemp derived Cannabidiol (“CBD”) products such as oils, creams, moisturizers, isolate, gel caps, concentrate and water. Canbiola is developing its own line of proprietary products as well as seeking synergistic value through acquisitions in the Hemp Industry. Canbiola aims to be the premier provider of the highest quality hemp CBD products on the market through sourcing the very best raw material and developing a variety of products we believe will improve people’s lives in a variety of areas.

 

The Company also operates document management and email marketing platforms. The Company used to operate its document and information platform from its wholly owned subsidiary, Prosperity Systems, Inc; however, after the acquisition of Prosperity, the Company transferred Prosperity’s operations to the Company directly.

 

For the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity and Duramed had no activity for the periods presented. Financial information for PHP from December 28, 2018 to December 31, 2018 has been consolidated with the Company’s financials.

 

NOTE 2 – Going Concern Uncertainty

 

The consolidated financial statements have been prepared on a “going concern” basis, which contemplates the realization of assets and liquidation of liabilities in a normal course of business. As of December 31, 2018, the Company had cash and cash equivalents of $807,747 and a working capital of $939,582. For the years ended December 31, 2018 and 2017, the Company had net losses of $4,112,277 and $2,139,719, respectively. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company plans to improve its financial condition by raising capital through sales of shares of its common stock. Also, the Company plans to expand its operation of CBD products to increase its profitability. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 – Summary of Significant Accounting Policies

 

(a) Principles of Consolidation

 

The consolidated financial statements include the accounts of CANB and its wholly owned subsidiaries, Pure Health products (from its acquisition date of December 28, 2018), Duramed, and Prosperity from the date of its acquisition on January 5, 2015. All intercompany balances and transactions have been eliminated in consolidation.

 

F- 7
 

 

(b) Use of Estimates

 

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

 

(c) Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

 

(d) Cash and Cash Equivalents

 

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

 

(e) Inventory

 

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

 

(f) Property and Equipment, Net

 

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

 

(g) Intangible Assets, Net

 

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

 

(h) Goodwill and Intangible Assets with Indefinite Lives

 

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

 

F- 8
 

 

(i) Long-lived Assets

 

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

 

(j) Revenue Recognition

 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criterial standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts.

 

Private Label Customers, Global CBD, LLC and TZ Wholesale, are wholesale distributors of the Company’s product, under their own wholesale private label brand. The products are made to Company specifications, and shipped directly to the wholesaler. The pricing is predicated upon a volume discount negotiated at the time of the placement of the orders. Product is produced and labeled in the Washington manufacturing facility and shipped directly to the Private Label customer who re-distributes to their retail and other customers. The products are fully paid when shipped. For 2018, Global CBD, LLC revenue of $44,602 represents approximately 9% and TZ Wholesale revenue of $17,172 represents approximately 3.5% of total Company revenues for the year ended December 31, 2018.

 

Revenue from product sales is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred, and collectability is reasonably assured.

 

Additionally, the Company also generates revenue from email marketing and cloud service provided to several existing customers. The service revenue is recognized over agreed periods of services delivered to customers, provided there are no uncertainties regarding customer acceptance, persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable.

 

(k) Cost of Product Sales

 

The cost of product sale is the total cost incurred to obtain a sale and the cost of the goods sold, and the Company’s policy is to recognize it in the same manner as, and in conjunction with, revenue recognition. Cost of product sale primarily consisted of the costs directly attributable to revenue recognized and includes expenses related to the production, packaging and labeling of our CBD products.

 

F- 9
 

 

(l) Stock-Based Compensation

 

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

 

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

 

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

 

Options and warrants

 

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

 

  Risk-Free Interest Rate.
   
  We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
   
  Expected Volatility.
   
  We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.
   
  Dividend Yield.
   
  We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
   
  Expected Term.
   
  The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
   
  Forfeitures.
   
  Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

 

F- 10
 

 

(m) Advertising

 

Advertising costs are expensed as incurred and amounted to $84,316 and $28,322 for the year ended December 31, 2018 and 2017, respectively.

 

(n) Research and Development

 

Research and development costs are expensed as incurred. In fiscal year 2017 and 2018, the Company spent $37,000 and $75,000 in research and development which was expenses as spent, respectively.

 

(o) Income Taxes

 

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

 

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

 

(p) Net Income (Loss) per Common Share

 

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

 

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

 

(q) Recent Accounting Pronouncements

 

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

 

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

 

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

 

(r) Reclassifications

 

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

 

NOTE 4 – Acquisition of Pure Health Products, LLC

 

Effective December 28, 2018, CANB acquired 100% ownership of Pure Health Products, LLC (“Pure Health”) in exchange for the cancellation of CANB’s $75,000 note receivable from Pure Health and $10,827 accrued interest thereon and issuance of 3,096,827 newly issued shares of CANB common stock (valued at the $0.0578 closing trading price on December 28, 2018 or $178,997, see Note 11). The acquisition has been accounted for in the accompanying consolidated financial statements as a purchase transaction. Accordingly, the financial position and results of operations of Pure Health prior to the date of the acquisition have been excluded from the accompanying consolidated financial statements.

 

F- 11
 

 

The estimated fair values of the identifiable net assets of Pure Health at December 28, 2018 (effective date of acquisition), after cancellation of the $75,000 note payable to CANB and $10,827 accrued interest thereon, consisted of:

 

Cash and cash equivalents   $ 404  
Accounts receivable from CANB     16,676  
Inventory     79,652  
Property and equipment, net     7,559  
Security deposit     2,100  
         

Total assets

    106,391  
         
Accounts payable, including $34,419 due to CANB     49,825  
         
Total liabilities     49,825  
         
Identifiable net assets   $ 56,566  

 

Goodwill of $55,849 (excess of the $112,415 fair value of the 3,096,827 shares of CANB common stock issued to Pure Health’s stockholders over the $56,566 identifiable net assets of Pure Health at December 28, 2018 after reflecting the $85,827 cancellation of the $75,000 note payable and $10,827 accrued interest) was recorded from the acquisition.

 

The following pro forma information summarizes the results of operations for the periods indicated as if the acquisition occurred at December 31, 2016. The pro forma information is not necessarily indicative of the results that would have been reported had the transaction actually occurred on December 31, 2016, nor is it intended to project results of operations for any future period.

 

    Year Ended  
    December 31,  
    2018     2017  
             
Product sales   $ 651,978     $ 90,634  
Cost of product sales     224,894       62,958  
Gross profit on product sales     427,084       27,676  
Service revenue     16,625       43,716  
                 
Total gross profit     443,709       71,392  
                 
Operating expenses     4,674,321       812,365  
                 
Loss from operations     (4,203,613 )     (740,973 )
                 
Other income (loss) - net     (2,671,581 )     (1,428,783 )
                 
Net loss   $ (6,875,194 )   $ (2,169,756 )
                 
Net loss per common share- basic and diluted   $ (0.02 )   $ (0.01 )
                 
Weighted average common shares outstanding –                
Basic     276,026,704       165,230,550  
Diluted     423,881,781       256,295,851  

 

F- 12
 

 

NOTE 5 – Inventories

 

Inventories consist of:

 

    December 31,
2018
    December 31,
2017
 
Raw materials   $ 79,652     $ -  
                 
Finished goods     7,452       9,834  
Total   $ 87,104     $ 9,834  

 

NOTE 6 – Notes Receivable

 

Notes receivable consist of:

 

    December 31,
2018
    December 31,
2017
 
Secured Promissory note dated October 17, 2017 due from Pure Health Products, LLC (“PHP”), interest at 12% per annum, due October 17, 2018, secured by assets of PHP. Cancelled in acquisition of Pure Health Products, LLC   $ -     $ 75,000  
                 
Note receivable dated November 30, 2015 from Stock Market Manager, Inc, interest at 3% per annum due November 30, 2020     19,389       39,000  
                 
Total     19,389       114,000  
                 
Current portion of notes receivable     -       (75,000 )
Noncurrent portion of notes receivable   $ 19,389     $ 39,000  

 

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

 

Stock Market Manager, Inc is affiliated with Carl Dilley, a Company director. In 2018, the Company received services from Stock Market Manager valued at $19,611 in exchange for the cancellation of $19,611 in note receivables.

 

F- 13
 

 

NOTE 7 – Property and Equipment, Net

 

Property and Equipment, net, consist of:

    December 31,     December 31,  
    2018     2017  
             
Furniture & Fixtures   $ 19,018     $ 19,018  
                 
Office Equipment     20,992       12,378  
                 
Manufacturing Equipment     46,384       -  
                 
Total     86,394       31,396  
                 
Accumulated amortization     (26,775 )     (20,248 )
                 
Net   $ 59,619     $ 11,148  

 

NOTE 8 – Intangible Assets, Net

 

Intangible assets, net, consist of:

 

    December 31,     December 31,  
    2018     2017  
             
Video conferencing software acquired by Prosperity in December 2009   $ 30,000     $ 30,000  
                 
Enterprise and audit software acquired by Prosperity in April 2008     20,000       20,000  
                 
Patent costs incurred by WRAP     6,880       6,880  
                 
Other     3,548       3,548  
                 
Total     60,428       60,428  
                 
Accumulated amortization and Impairment     (60,428 )     (60,428 )
                 
Net   $ 0     $ 0  

 

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

 

F- 14
 

 

NOTE 9 – Notes and Loans Payable

 

Notes and loans payable consist of:            
    December 31,
2018
    December 31,
2017
 
             
Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to November 15, 2017, interest at rates ranging from 12% to 14.99% per annum, due from April 6, 2017 to May 15, 2018, partially converted at March 22, 2017 and the remaining notes convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date – net of unamortized debt discount of $0 and $1,815, respectively-fully converted on August 31, 2018     -       36,685  
                 
Convertible notes payable to lender dated February 1, 2016 (as amended
December 21, 2016) and December 21, 2016, interest at 12% per
annum, due February 1, 2017 and May 20, 2017, convertible into
Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per
share or (ii) 50% of the lowest Closing Bid Price of the Common Stock
for the 30 Trading Days preceding the Conversion Date – net of
unamortized debt discount of $0 and $0, respectively. The note date dated
February 1, 2016 was fully converted at June 11, 2018 while note dated December 21, 2016 was fully converted at September 7, 2018
    -       65,000  
                 
Convertible notes payable to Pasquale and Rosemary Ferro dated from
May 2, 2017 to August 10, 2018, interest at 12% per annum, due at June
30, 2020 (as amended August 13, 2018), convertible into Common Stock
at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50%
of the lowest Closing Bid Price of the Common Stock for the 30 Trading
Days preceding the Conversion Date – net of unamortized debt discount
of $25,009 and $19,613, respectively. The notes were fully converted at
August 9, 2018 and December 21, 2018.
    -       73,887  
                 
Convertible note payable to lender dated August 8, 2017 interest at 12% per annum, due August 8, 2018, convertible into Common Stock at a
Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of
the lowest Closing Bid Price of the Common Stock for the 30 Trading
Days preceding the Conversion Date – net of unamortized debt discount
of $0 and $15,068, respectively. The notes were fully converted at
August 31, 2018.
    -       9,932  
                 
Convertible note payable to lender dated June 6, 2018, interest at 12% per
annum, due March 6, 2019, convertible into Common Stock at a
Conversion Price equal to the lesser of 55% of the lowest Closing Bid
. Price of the Common Stock for the 25 Trading Days preceding the
(i) Inception date or (ii) the Conversion Date – net of unamortized debt
discount of $57,509 and $0, respectively. The note was fully paid off at
October 19, 2018.
    -       -  
                 
Note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due)     5,000       5,000  
                 
Note payable to Carl Dilley, a director of the Company, interest at 12.99% per annum, due February 1, 2021     10,899       -  
                 
Loan payable to Mckenzie Webster Limited (“MWL”), an entity controlled by the former Chairman of the Board of Directors of the Company, non-interest bearing, due on demand     3,000       3,000  
Total   $ 18,899     $ 193,504  

 

F- 15
 

 

The derivative liability of the convertible notes payable consists of:

 

    December 31, 2018     December 31, 2017  
    Face Value     Derivative Liability     Face Value     Derivative Liability  
                         
Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to November 15, 2017, due from April 6, 2017 to May 15, 2018. Fully converted on August 31, 2018   $ -     $ -       38,500       248,597  
                                 
Convertible notes payable to lender dated February 1, 2016 (as amended December 21, 2016) and December 21, 2016, due February 1, 2017 and May 20, 2017. The notes were fully converted at June 11, 2018 and September 7, 2018     -       -       65,000       418,889  
                                 
Convertible notes payable to Pasquale and Rosemary Ferro dated from May 25, 2017 to January 8, 2018, due at June 30, 2020 (as amended August 13, 2018),     -       -       93,500       611,886  
                                 
Convertible notes payable to lender dated June 6, 2018, due March 6, 2019. Fully paid off at October 19, 2018.     -       -       -       -  
Convertible notes payable to lender dated August 8, 2017, due August 8, 2018. Fully converted at August 31, 2018     -       -       25,000       171,765  
Totals   $ -     $ -     $ 222,000     $ 1,451,137  

 

The above convertible notes outstanding at December 31, 2017 contained a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes was indeterminate. Accordingly, we recorded the fair value of the embedded conversion features as a derivative liability at the respective issuance dates (or amendment dates) of the notes ($445,112 total for the year ended December 31, 2017) and charged the applicable amounts to debt discounts of ($182,750 total for the year ended December 31, 2017) and the remainder to other expense ($262,362 total for the year ended December 31, 2017). The increase (decrease) in the fair value of the derivative liability from the respective issuance dates (or amendment dates) of the notes to the measurement date ($926,819 total increase for the year ended December 31, 2017) are charged (credited) to other expense (income). The fair value of the derivative liability of the notes is measured at the respective issuance dates and quarterly thereafter using the Black Scholes option pricing model. Assumptions used for the calculations of the derivative liability of the notes at December 31, 2017 include (1) stock price of $0.0335 per share, (2) exercise price of $0.0045 per share, (3) terms ranging from 0 days to 220 days, (4) expected volatility of 287% and (5) risk free interest rates ranging from 0.00% to 1.58%.

 

In 2018, all convertible notes containing embedded conversion features were satisfied and the Company recognized income from derivative liability of $1,591,137

 

NOTE 10 – Preferred Stock

 

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

 

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

 

F- 16
 

 

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

 

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

 

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

 

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

 

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

 

On February 12, 2018, the Company issued 1 share of CANB Series A Preferred Stock to David Posel pursuant to a service agreement. The fair value of the issuance is $257,370 and will be amortized over the vesting period of four years.

 

On February 16, 2018, the Company issued 3 shares of CANB Series A Preferred Stock to Andrew Holtmeyer pursuant to a service agreement. The fair value of the issuance is $703,800 and will be amortized over the vesting period of one year.

 

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

 

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

 

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

 

On May 14, 2018, the Company issued 1 share of CANB Series A Preferred Stock to a consultant pursuant to a Consulting Agreement dated May 11, 2018. The $105,000 fair value of the issuance was partially charged to consulting fees in the three months ended September 30, 2018.

 

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

 

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

 

From October 2, 2018 to November 7, 2018, RedDiamond Partners converted aggregately 101,736 shares of CANB Series B Preferred Stock to 13,094,733 shares of CANB common stock.

 

On October 23, 2018 and November 14, 2018, the Company issued 200,000 shares and 52,500 shares of CANB Series B Preferred Stock, respectively, to RedDiamond Partners LLC (“RedDiamond”) in exchange for proceeds of $190,000 and $49,875, respectively, or $0.95 per CANB Series B Preferred share.

 

F- 17
 

 

On December 28,2018, Marco Alfonsi converted 3 shares of CANB Series A Preferred Stock to 30,000,000 shares of CANB common stock.

 

On December 29, the Company issued 8 shares of CANB Series A Preferred Stock to three officers of the company (1 share to Stanley L. Teeple, 5 shares to Pasquale Ferro and 2 shares to Andrew Holtmeyer), pursuant to the employment agreements with them. The fair value of the issuance totaled at $3,375,520 and will be amortized over the vesting period of four years.

 

NOTE 11 – Common Stock

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

F- 18
 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

F- 19
 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

F- 20
 

 

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

 

On September 6, 2018, the Company issued 8,430,331 shares of CANB common stock to a lender in satisfaction of notes payable of $38,500 and accrued interest payable of $7,867.

 

On September 7, 2018, the Company issued 5,121,694 shares of CANB common stock to a lender in satisfaction of notes payable of $25,000 and accrued interest payable of $3,169.

 

On September 7, 2018, the Company issued 10,045,667 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $10,274.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

From October 2, 2018 to November 7, 2018, the Company issued aggregately 13,094,733 shares of CANB common stock to RedDiamond in exchange for the retirement of 101,736 shares of CANB Series B Preferred Stock.

 

From November 5, 2018 to December 28, 2018, the Company issued aggregately 2,125,000 shares of CANB common stock to multiple consultants for services rendered. The $80,665 fair value of the 2,125,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 30, 2018.

 

From December 3, 2018 to December 28, 2018, the Company issued aggregately 1,500,000 shares of CANB common stock to three board members for services rendered. The $62,342 fair value of the 1,500,000 shares of CANB common stock was charged to director fees in the three months ended December 30, 2018.

 

From December 3, 2018 to December 28, 2018, the Company issued aggregately 22,413,794 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $650,000.

 

F- 21
 

 

On December 11, 2018, the Company issued 891,089 shares of CANB common stock to RedDiamond in satisfaction of dividend payable of $9.000.

 

On December 19, 2018, the Company issued 891,089 shares of CANB common stock to Auctus, LLC pursuant to a cashless exercise of stock options.

 

On December 21, 2018, Company received a conversion notice from a lender. As a result, 9,372,100 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $83,500 and accrued interest payable of $10,221.

 

On December 21, 2018, Company issued aggregately 4,370,629 shares of CANB common stock to four officers of the Company in satisfaction of accrued compensation of $192,300.

 

On December 28, 2018, the Company issued 3,096,827 shares of CANB common stock for the acquisition of Pure Health Products, LLC.

 

On December 28, 2018, the Company issued 245,789 shares of CANB common stock to an officer of the Company pursuant to the Employment Agreement dated December 29, 2018 with Andrew Holtmeyer. The $10,371 fair value of the issuance was charged to stock-based compensation in the three months ended December 31, 2018.

 

On December 29, the Company issued 30,000,000 shares of CANB common stock to Marco Alfonsi in exchange for the return of 3 shares of CANB Series A Preferred Stock owned by Marco Alfonsi.

 

NOTE 12 – Stock Options and Warrants

 

A summary of stock options and warrants activity follows:

 

    Shares of Common Stock Exercisable Into  
    Stock              
    Options     Warrants     Total  
Balance, December 31, 2016     50,000       247,500       297,500  
Granted in 2017     -       -       -  
Expired in 2017     -       -       -  
                         
Balance, December 31, 2017     50,000       247,500       297,500  
Granted in 2018     6,000,000       2,850,000       8,850,000  
Cancelled in 2018     -       -       -  
Exercised in 2018     -       (850,000 )     (850,000 )
                         
Balance, December 31, 2018     6,050,000       2,247,500       8,297,500  

 

Issued and outstanding stock options as of December 31, 2018 consist of:

 

Year   Number Outstanding
And
    Exercise     Year of  
Granted   Exercisable     Price     Expiration  
                   
2009     50,000     $ 1.000       2019  
2018     6,000,000     $ 0.001       2023  
                         
Total     6,050,000                  

 

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

 

F- 22
 

 

On October 21, 2018, the Company granted 3,000,000 options of CANB common stock to Stanley L. Teeple, an officer and Director of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.001 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire October 1, 2023. The values of the Stock Options ($118,200) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $0.0395 share price, (ii) 5 years term, (iii) 221.96% expected volatility, (iv) 3.05% risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2018

 

Issued and outstanding warrants as of December 31, 2018 consist of:

 

Year   Number Outstanding
And
    Exercise     Year of  
Granted   Exercisable     Price     Expiration  
                   
2010     247,500     $ 1.00       2020  
2018     2,000,000     $ 0.04345 (a)     2023  
                         
Total     2,247,500                  

 

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

 

NOTE 13 – Income Taxes

 

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

 

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

 

    Year Ended December 31,  
    2018     2017  
             
Expected income tax (benefit) at 21% and 35%   $ (663,578 )   $ (748,902 )
                 
Loss on forgiveness of receivable from Pure Health products     18,024          
                 
Loss on stock issuance     36,344       67,043  
                 
Loss on debt conversion     272,867       11,334  
                 
Non-deductible stock-based compensation     583,653       81,057  
                 
Non-deductible amortization of debt discounts     37,064       87,566  
                 
Non-deductible impairment of intangible assets     -       7,527  
                 
Non-deductible expense from derivative liability     (334,139 )     320,495  
                 
Increase in deferred income tax assets valuation allowance     250,235       173,879  
                 
Provision for (benefit from) income taxes   $ -     $ -  

 

F- 23
 

 

Deferred income tax assets consist of:

 

    December 31,     December 31,  
    2018     2017  
             
Net operating loss carryforward     1,644,593       1,394,358  
                 
Valuation allowance     (1,644,593 )     (1,394,358 )
                 
Net   $ -     $ -  

 

Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of $1,644,593 attributable to the future utilization of the $4,786,934 net operating loss carryforward as of December 31, 2018 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the financial statements at December 31, 2018. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, 2037 and 2038 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511, $338,345, $386,297, $496,798 and $713,162, respectively.

 

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

 

The Company’s U.S. Federal and state income tax returns prior to 2014 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations on the 2014 tax year returns expired in September 2018.

 

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

 

NOTE 14 – Commitments and Contingencies

 

Employment Agreements

 

On October 3, 2017, the Company executed an Executive Employment Agreement with Marco Alfonsi (“Alfonsi”) for Alfonsi to serve as the Company’s chief executive officer and interim chief financial officer and secretary for cash compensation of $10,000 per month. Pursuant to the agreement, the Company issued a share of CANB Series A Preferred Stock to Alfonsi on October 4, 2017 (see Note 8). Alfonsi may terminate his employment upon 30 days written notice to the Company. The Company may terminate Alfonsi’s employment upon written notice to Alfonsi by a vote of the Board of Directors. At November 12, 2018, this Agreement was terminated due to the execution of a new Employment Agreement with Marco Alfonsi for Alfonsi to serve as the Company’s chief executive officer for cash compensation of $15,000 per month. Pursuant to the agreement, three of the eight previously issued shares of CANB Series A Preferred Stock will be returned to the Company and converted into 30,000,000 common shares. On December Alfonsi may terminate his employment upon 30 days written notice to the Company. The Agreement has an initial term of four years and can be terminated upon the resignation or death of Mr. Alfonsi, and also can be terminated by the Company due to the failure or neglect of Mr. Alfonsi to perform his duties, or due to the misconduct of Mr. Alfonsi in connection with the performance.

 

F- 24
 

 

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

 

On February 16, 2018, the Company executed an Executive Service Agreement (“Agreement”) with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 3 years. The Agreement also provides for compensation to Mr. Holtmeyer of $10,000 cash per month and the issuance of 3, 2 and 1 share of Series A Preferred Stock at the beginning of each year. The Agreement can be terminated upon the resignation or death of Mr. Holtmeyer, and also can be terminated by the Company due to the failure or neglect of Mr. Holtmeyer to perform his duties, or due to the misconduct of Mr. Holtmeyer in connection with the performance. At December 29, 2018, this Agreement was terminated due to the execution of a new Employment Agreement with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 4 years. The Agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 245,789 shares of common stock upon signing of the agreement.

 

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

 

On December 28, 2018, the Company executed an Employment Agreement (“Agreement”) with Pasquale Ferro for Mr. Ferro to serve as Pure Health Products’ president for cash compensation of $15,000 per month and the total issuance of 5 share of Series A Preferred Stock proportionately vesting at the beginning of each year for a term of 4 years. Mr. Ferro may terminate his employment upon 30 days written notice to the Company. The Agreement has an initial term of four years and can be terminated upon the resignation or death of Mr. Ferro, and also can be terminated by the Company due to the failure or neglect of Mr. Ferro to perform his duties, or due to the misconduct of Mr. Ferro in connection with the performance.

 

Consulting Agreements

 

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

 

On September 6, 2017, the Company executed a Consulting Agreement with T8 Partners LLC (“T8”) for T8 to serve as the Company’s consultant for stock compensation of a total of 10,000,000 restricted shares. Pursuant to the agreement, the Company issued 2,500,000 restricted shares of CANB common stock to T8 on September 7, 2017. Effective October 27, 2017, the Company terminated the agreement due to non-performance by T8. On July 12, 2018, the Company received a response from T8 Partners LLC (“T8”) confirming that the 2,500,000 shares requested to be returned by the Company in an arbitration filed on May 11, 2018 will be returned to the Company. The Company is awaiting the result of that arbitration.

 

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

 

F- 25
 

 

Lease Agreements

 

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

 

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

 

Rent expense for the year ended December 31, 2018 and 2017 was $67,165 and $65,060, respectively.

 

At December 31, 2018, the future minimum lease payments under non-cancellable operating leases were:

 

Year ended December 31, 2019     38,508  
Year ended December 31, 2020     39,666  
Year ended December 31, 2021     33,880  
         
Total   $ 112,054  

 

Major Customers

 

For the year ended December 31, 2018, one customer accounted for approximately 16% of total revenues.

 

For the year ended December 31, 2017, three customers accounted for approximately 45%, 29% and 14%, respectively, of total service revenues.

 

Public Offering of Units

 

On August 2, 2016, the Company’s Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. On a self-underwritten basis, the Company was offering up to 40,000,000 Units at a price of $0.05 per Unit or $2,000,000 maximum. Each Unit consisted of one share of Company common stock and one warrant to purchase ½ share of Company common stock at a price of $0.10 per share for a period of three years. There was no minimum offering amount or escrow required as a condition to closing. The offering terminated May 17, 2017.

 

NOTE 15 – Related Party Transactions

 

ProAdvanced Group, Inc. (“PAG”), an entity controlled by the Company’s chief executive officer, is a customer of CANB. At December 31, 2018, CANB had an account receivable from PAG of $7,240. For the year ended December 31, 2018, CANB had revenues from PAG of $5,000.

 

Island Stock Transfer (“IST”), an entity controlled by Carl Dilley, a former Company director, is both a customer and vendor of CANB. At December 31, 2018, CANB had an account receivable from IST of $7,035 and an account payable to IST of $1,454. For the year ended December 31, 2018, CANB had revenues from IST of $4,000.

 

Stock Market Manager, Inc. is also an entity controlled by Mr. Dilley. For the year ended December 31, 2018, CANB had an account payable to Stock Market Manager Inc. of $1,676.

 

F- 26
 

 

In order to facilitate its operations, the Company has entered into a Production Agreement with Pure Health Products, LLC (“PHP”), a New York limited liability company. Pursuant to the Production Agreement, PHP will manufacture, package, and sell the Company’s CBD infused products on an exclusive basis. PHP will not produce or manufacture any product containing any cannabis or hemp derivative for any person or entity other than the Company, and the Company controls the ingredients, recipe, manufacturing processes and procedures and quality and taste parameters for all Products produced at the PHP facility. PHP may also white label / rebrand or relabel the products on the Company’s behalf pursuant to “white label agreements” entered into between the Company and third-party customers. Credit card sales are processed through PHP as well. Through its contractual relationship with PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. In addition, the Company has the option to acquire certain assets of PHP should it elect to take over direct manufacture of its Products. For the year ended December 31, 2018, purchase of CBD infused products from PHP totaled $274,556.50. Effective December 28, 2018, the Company acquired Pure Health Products, LLC.

 

During the year ended December 31, 2018, we had products and service sales to related parties totaling $5,000.

 

NOTE 16 – Subsequent Events

 

On January 28, 2019, the Company issued 10,000,000 shares of CANB common stock to a consultant of the Company in exchange for the retirement of 1 share of CANB Series A Preferred Stock.

 

From February 21, 2019 to March 12, 2019, the Company issued aggregately 20,221,436 shares of CANB common stock to RedDiamond in exchange for the retirement of 157,105 shares of CANB Series B Preferred Stock.

 

From January 4, 2019 to March 27, 2019, the Company issued aggregately 41,431,994 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $1,196,100.

 

On January 14, 2019, the Company and PHP (collectively, the “buyer”) entered into a License and Acquisition Agreement (the “LAA”) with Hudilab, Inc. (“HUDI”). Pursuant to the LAA, HUDI will sell the technology owned by it to the buyer in exchange for 7,500,000 shares of CANB common stock. On January 14, 2019, the shares were issued to the owner of HUDI.

 

From January 18, 2019 to March 17, 2019, the Company issued aggregately 24,600,000 shares of CANB common stock to multiple consultants for services rendered.

 

From January 19, 2019 to March 27, 2019, the Company issued aggregately 1,167,959 shares of CANB common stock to employee and officers of the Company pursuant to employee agreement and in satisfaction of accrued compensation for the quarter ended March 31, 2019.

 

On January 31, 2019, PHP entered into an Asset Purchase Agreement (the “Agreement”) with Seven Chakras, LLC (“Seven Chakras”). Pursuant to the Agreement, PHP purchased the rights and title to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ products containing cannabidiol (“CBD”), (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials (collectively, the “Assets”). On February 20, 2019, the Company issued 1,000,000 shares of CANB common stock to owners of Seven Chakras pursuant to the agreement.

 

On February 5, 2019, the Company issued 2,000,000 shares to the owner of TZ Wholesale LLC, pursuant to a Memorandum of Understanding (the “MOU”) dated November 9, 2018.

 

As a result of Canbiola’s acquisition of Pure Health products, it conducted a corporate re-alignment including naming Pasquale Ferro President and moving David Possel from Chief Operating Officer of Canbiola to Chief Operations Officer Pure Health Products.

 

In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through October 30, 2018, the date on which these consolidated financial statements were available to be issued. Except as disclosed above, there were no material subsequent events that required recognition or additional disclosure in these consolidated financial statements.

 

F- 27
 

 

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of October 12, 2017, between Canbiola, Inc., a Florida corporation (the “Company”), and RedDiamond Partners LLC, a limited liability company formed under the laws of Delaware (the “Purchaser”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) promulgated thereunder, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, convertible preferred stock of the Company designated as Series BB Preferred Stock and as more fully described in this Agreement;

 

WHEREAS, the Board of Directors of the Company has approved the creation and authorization of the Series BB Preferred Stock;

 

WHEREAS, pursuant to the Certificate of Designations, the Company shall issue to the Purchaser certain number of shares of the Series BB Preferred Stock (the “Preferred Shares”) in accordance with this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

I.I Definitions . In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Certificate of Designations (as defined herein), and (b) the following terms have the meanings set forth in this Section I. I:

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.6.

 

“Action” shall have the meaning ascribed to such term in Section 3.l(j).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by Jaw or other governmental action to close.

 

     
 

 

“Certificate of Designations” means that certain Certificate of Designations, Preferences and Rights of the Series B Convertible Preferred Stock of the Company.

 

“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto in connection with a Closing, and all conditions precedent to (i) the Purchaser’s obligations to pay the applicable Purchase Price as lo such Closing and (ii) the Company’s obligations to deliver the Securities as to such Closing, in each case, have been satisfied or waived.

 

“Closing” means one or more closings of the purchase and sale of the Securities pursuant to Section 2.2.

 

“Closing Statement” means the Closing Statement m the form on Annex A attached hereto.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value Nil per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or tht’. Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instment that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company Counsel” means Austin Legal Group, APC.

 

“Redemption Price” shall have the meaning ascribed to such term in the Certificate of Designations.

 

“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

 

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.l(q).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors, advisors or independent contractors of the Company pursuant to any stock or option plan duly adopted for such purpose, (b) shares of Common Stock, warrants or options to advisors or independent contractors of the Company for compensatory purposes, (c) securities upon the exchange of or redemption of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of filing of the Certificate of Designations with the Secretary of State of the State of Florida, provided that the Certificate of Designation has not been amended since such date to increase the authorized number of such securities or to decrease the redemption price or exchange price of such securities, (d) securities issuable pursuant to any contractual anti dilution obligations of the Company in effect as of the date of filing of the Certificate of Designations with the Secretary of State of the State of Florida, provided that such obligations have not been materially amended since such date, and (e) securities issued pursuant to acquisitions or any other strategic transactions approved by the Board of Directors, provided that any such issuance shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

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“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h). “Indebtedness” shall have the meaning ascribed to such term in Section 3.l(jj).

 

“Intellectual Property Rights” shall have the meaning ascribed to such term m Section 3.l(o).

 

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material. Adverse Effect” shall have the mcanmg assigned to such term m Section 3. I (b).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.l(m).

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Preferred Shares” means the shares of Series B Convertible Preferred Stock issued to the Purchaser.

 

“Preferred Stock Certificate” means one or more certificates representing Preferred Shares issued to the Purchaser at a Closing.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

  3  
 

 

“Public Information Failure” shall have the meanmg ascribed to such tenn m Section 4.3(b).

 

“Public Information Failure Payments” shall have the meaning ascribed to such terrp in Section 4.3(b).

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.9.

 

“Purchase Price” in aggregate shall mean $150,000, and as to each Closing shall mean the respective actual amounts of fonds the Purchaser will transfer to the Company at the Closing.

 

‘“Registrable Securities” means all Underlying Shares and any other shares of Common Stock issuable under the Certificate of Designations.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.I ( e ).

 

“Maximum Convertible Amount” means, as of any dale, the maximum aggregate number of shares of Common Stock then issued or potentially issuable or convertible in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon the conversion in full of all Preferred Shares or all, respectively, (including Underlying Shares issuable as payment of dividends, late-charges, make-whole amounts, and any other amounts described in the Certificate of Designations).

 

‘“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h). ‘“Securities” means the Preferred Shares and the Underlying Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Series B Preferred Stock” means the Series B Convertible Preferred Stock, par value $0.001 per share, of the Company that can be issued pursuant to the Certificate of Designations.

 

“Shell Company” means an entity that fits within the definition of a “shell company” under Section 12b-2 of the Exchange Act and Rule 144.

 

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“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under “Stated Value” means the face value of the Series B Preferred Stock, based on which the number of shares of common stock of the Company will be calculated together with the conversion price. The Stated Value per Preferred Share is $1.00, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the Initial Issuance Date with respect to the Preferred Shares.

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global Select Market; the New York Stock Exchange; the NYSE MKT, any level of the OTC Markets operated by OTC Markets Group, Inc. or the OTC Bulletin Board (or any successors to any of the foregoing).

 

“Transaction Documents” means this Agreement, the Certificate of Designations, the legal opinion of Company Counsel, the Transfer Agent Instruction Letter, all exhibits and schedules. thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Island Stock Transfer, the current transfer agent of. the Company, with a mailing address of 15500 Roosevelt Blvd Clearwater Fl 33760 and a telephone number of 727-289-0010, and any successor transfer agent of the Company.

 

“Transfer Agent Instruction Letter” means the letter from the Company to the Transfer Agent which instructs the Transfer Agent to issue Underlying Shares pursuant to the Transaction Documents, in the form of Exhibit A attached hereto.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion of the Preferred Shares (including, without limitation, any shares of Common Stock issuable as payment of dividends, late-charges, make-whole amounts, and any other amounts described in the Certificate of Designations) and issued and issuable in lieu of the cash payment of dividends on the Preferred Shares in accordance with the terms of the Certificate of Designations.

 

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ARTICLE II.

PURCHASE AND SALE; EXCHANGE

 

2.1 Purchase. The Purchaser agrees to purchase from the Company and the Company agrees to sell to the Purchaser an aggregate of $15000 of Preferred Shares at a purchase price equal to $0.95 per share, for an aggregate of 157,895 Preferred Shares. The Purchaser shall not be required to purchase additional shares of Preferred Share subsequent to the First Closing if (a) the Company, its Subsidiaries, or any of the directors or officers of the Company or its Subsidiaries commit fraud; (b) the Company or its Subsidiaries breach any covenant contained herein or in the other Transaction Documents; or (c) a Triggering Event (as defined in the Certificate of Designations) occurs on or before any Closing Day unless the Company cures such Triggering Event within the applicable period set forth in the Certificate of Designations.

 

2.2 Closings. At each Closing, (i) the Purchaser shall deliver to the Company, via wire transfer to an account designated by the Company, immediately available funds equal to the Purchase Price, which, for such respective Closing, shall be equal to the number of Preferred Shares to be purchased and sold multiplied by ninety-five percent (95%) of the Staied Value per share; (ii) the Company shall deliver to the Purchaser its Preferred Stock Certificate representing the Preferred Shares purchased and sold at such Closing; and (iii) the Company and the Purchaser shall deliver all other items set forth in Section 2.3. Upon satisfaction of the covenants and conditions set forth in Sections 2.3 and 2.4for each Closing, each Closing shall occur electronically or at such other location as the parties shall mutually agree, and may by agreement be undertaken remotely by electronic exchange of Closing documentation. Within ninety (90) days from the execution and delivery of this Agreement by the parties hereto, the Company and the Purchaser shall conduct a Closing at which the Purchaser shall purchase and the Company shall sell $100,000 of Preferred Shares (the “First Closing”). Subsequent to the First Closing, the Company and the Purchaser shall conduct additional Closings on each monthly anniversary following the date of the First Closing until the Purchaser has purchased and the Company has sold an aggregate of $150,000 of Preferred Shares hereunder. At the sole discretion of the Purchaser, the Purchaser shall have the option to accelerate the date of any and all additional Closings by providing the Company notice of such intent to conduct a Closing at least three (3) Trading Days prior to the date of such accelerated Closing.

 

Notwithstanding anything to the contrary stated herein, Purchaser acknowledges that pursuant to the Exchange Act, the Company is required to file forms Pre14C and Def!4C with the Commission at least forty (40) days prior to filing forms designating the Preferred Shares with the state of Florida and that the failure to file the Certificate of Designations for the Preferred Shares shall not, under any circumstance, constitute a breach of any provision of this Agreement until the date at least ninety (90) days from the date of this Agreement and that Purchaser may nonetheless tender the Company a portion of the Purchase Price prior to such filing.

 

2.3 Deliveries Upon Closing.

 

(a) On or prior to the applicable Closing Date, the Company shall deliver ?.r cause to

be <kll red <o U., P=h oc <he followl:g,

 

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(i) as to the First Closing, this Agreement duly executed by the Company;

 

(ii) as to the First Closing, a legal opinion of Company Counsel, substantially in the form of Exhibit B attached hereto;

 

(iii) as to the First Closing, a stamped copy of the Certificate of Designations that is filed with the Secretary of State of the State of Florida;

 

(iii) as to the First Closing, the Transfer Agent Instruction Letter duly executed by the Company and the Transfer Agent; and

 

(v) a certificate representing the requisite amount of Preferred Shares equal to the Purchaser’s Purchase Price as to the applicable Closing, registered in the name of the Purchaser.

 

(b) On or prior to the applicable Closing Date, the Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:

 

(i) as to the First Closing, this Agreement duly executed by the Purchaser; and

 

(ii) the Purchaser’s Purchase Price as to the applicable Closing, by wire transfer to the account specified in writing by the Company.

 

2.4 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the First Closing and additional Closings are subject to the following conditions being met:

 

(i) the accuracy in all material respects, on the applicable Closing Date, of the representations and warranties of the Purchaser contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii) all obligations, covenants and agreements of the Purchaser required to be performed at or prior to the applicable Closing Date shall have been performed; and

 

(iii) the delivery by the Purchaser of the items set forth in Section 2.3(b) of.this Agreement.

 

(b) The obligations of the Purchaser hereunder in connection with the First Closing

, addi,iorutl Closiogs , sabjoci ‘“ Ore fullowiog ooodilioos bciog met “})\

 

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(i) the accuracy in all material respects when made and on the applicable Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);

 

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the applicable Closing Date shall have been performed;

 

(iii) the delivery by the Company of the items set forth in Section 2.3(a) of this Agreement;

 

(iv) the Certificate of Designations has been filed with the Secretary of State of the State of Florida;

 

(v) there is no Triggering Event (as defined m the Certificate. of Designations);

 

(vi) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

 

(vii) from the date hereof to the applicable Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market and, at any time prior to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Purchaser, and without regard to any factors unique to the Purchaser, makes it impracticable or inadvisable to purchase the Preferred Stock at the applicable Closing.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to the Purchaser as of the date hereof:

 

(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

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(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of.the Company and the Subsidiaries, taken as a whole; or (iii) a material adverse effect on. the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with” the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

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(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien (except Liens in favor of the Purchaser) upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, iajunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.15 of this Agreement, (ii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby and (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved under the Purcha er’s name from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to 300% of the Maximum Convertible Amount on the date hereof.

 

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(g) Capitalization. The capitalization of the Company is as set forth on Schedule 3.l(g), which Schedule 3.l(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as disclosed to or known by Purchaser, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Preferred Stock will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule l 44(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise· specified in such financial statements. or the notes thereto nd except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

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(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect; (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission; (iii) the Company has not altered its method of accounting; (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock; and (v) the Company has not issued any equity securities to any officer, director or Affiliate. Except for the issuance of the Preferred Stock contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made.

 

(j) Litigation. Except as set forth on Schedule 3.l(j), there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary, nor any director or officer thereot; is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not b en, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company that is likely to lead to action that can reasonably be expected to result in a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

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(k) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiari.es believe that their relationships with their employees are good To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor or”any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Eftect.

 

(I) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in e.ach case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(m) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any· notice of proceedings relating to the revocation or modification of any Material Permit.

 

  13  
 

 

(n) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the. use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(o) Intellectual Property. The Company and the Subsidiaries have. or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or required for use in connection with their respective businesses as presently conducted and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(p) Transactions with Affiliates and Employees. Except as set forth on Schedule 3.l(p), none of the officers or directors of the Company or any Subsidiary and, to .the knowledge of the Company, none of the employees of the Company or any Subsidiar.y is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from providing for the borrowing of money from or lending of money to, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $160,000 other than for: (i) payment of salary or consulting fees for services rendered; (ii) reimbursement for expenses incurred on behalf of the Company; and (iii) other employee benefits.

 

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(q) Sarbanes-Oxley; Internal Accounting Controls. Except as set forth on Schedule 3.l(q), the Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the applicable Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of th,: period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

(r) Certain Fees. Other than as set forth on Schedule 3.1(r), no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchaser shall have no obligation with respect to any fees or with respect to any claims made by or on behalf ·of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(s) Private Placement. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchaser a contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

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(t) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of. an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(u) Registration Rights. Except in Schedule 3.l(u), no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiaries.

 

(v) Listing and Maintenance Requirements. The class of Common Stock is registered pursuant to Section l 2(b) or l 2(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has not, in the twelve (12) months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

(w) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Articles of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchaser as a result of the Purchaser and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchaser’s ownership of the Securities.

 

(x) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Purchaser or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Purchaser will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchaser regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that the Purchaser does not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

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(y) No Integrated Offering. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable stockholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(z) No General Solicitation. In connection with the transaction contemplated herein, neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchaser and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(aa) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertaimnent or other unlawful expenses related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law; or (iv) violated in any material respect any provision ofFCPA.

 

(bb) Accountants. The Company’s accounting firm is set forth on Schedule 3.l(bb) of the Disclosure Schedules. To the knowledge and belief of the Company, such accounting firm is a registered public accounting firm as required by the Exchange Act.

 

(cc) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

 

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(dd) Acknowledgment Regarding Purchaser’s Purchase of Securities. The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchaser’s purchase of the Securities. The Company further represents to the Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(ee) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases ot: any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.

 

(ff) Reserved.

 

(gg) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to·any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.

 

(hh) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.

 

(ii) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

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(jj) Solvency. Based on the consolidated financial condition of the Company as of the applicable Closing Date after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute umeasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Comi:iany does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the applicable Closing Date. Schedule 3.l(jj) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same arc or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by ·endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor ·any Subsidiary is in default with respect to any Indebtedness.

 

(kk) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. Except as set forth on Schedule 3 .1 (kk), there are no unpaid taxes in any material amount claimed to .be due by the taxing authority of any jurisdiction, and the officers of the Company know ofno basis for any such claim.

 

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(11) Seniority. As of each Closing Date, except as set forth on Schedule 3.l(ll). no Indebtedness or other claim against the Company is senior to the Preferred Shares in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).

 

(mm) Shell Company Status. The Company is not presently and has not been since December 31, 2010, an issuer identified as a “Shell Company”.

 

(nn) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator . involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

 

3.2 Representations and Warranties of the Purch aser. The Purchaser hereby represents ‘and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a) Organization; Authority. The Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by the Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of the Purchaser. Each Transaction Document to which it is a party has been duly executed by the Purchaser and, when delivered by the Purchaser in accordance with the terms hereof. will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

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(b) Own Account. The Purchaser understands that the Preferred Shares are

“=trided s,crri<i “ , i< IB aeq”iri:: ili, Prefo,red Sh=s p,ioeip \”‘ owo

account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting the Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws). The Purchaser is acquiring Preferred Shares hereunder in the ordinary course of its business.

 

(c) Purchaser Status. At the time the Purchaser was offered the applicable Securities, it was, and as of the date hereof it is, and on each date on which it converts any Preferred Shares, it will be an “accredited investor” as defined in Rule 50I under the Securities Act.

 

(d) Experience of the Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks or the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e) General Solicitation. The Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(t) Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, the Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with the Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as or the time that the Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and will not engage in such activities during any period in which it holds the Preferred Shares or Underlying Shares. Notwithstanding the foregoing, in the case of a Purchaser that is a multi managed investment vehicle whereby separate portfolio managers manage separate portions of the Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of the Purchaser’s assets, the representation set forth above shall only apply with respect to.the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to

<his A,reeme”‘• d,., P•ch=,< h,,smai”:”ol tire eoruidMti,11,y of <I =de

to it in connection with this transaction (including the existence and terms of this transaction).

 

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(g) Regulation M Compliance. The Purchaser has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company.

 

The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect the Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.

 

(a) The Preferred Stock may only be disposed ofin compliance with state and federal securities laws. In connection with any transfer of Preferred Stock other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of the Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such Preferred Stock under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations 11f a Purchaser under this Agreement.

 

(i) Right of First Refusal . Purchaser hereby grants to the Company, and the Company hereby accepts, the right of first refusal of any bona fide offer to purchase Preferred Shares (the “Right of First Refusal. In the event that Purchaser receives a bona fide offer from a third party to purchase all or a portion of the Preferred Shares (an “Offer”) and Purchaser intends to accept such offer, Purchaser shall notify the Company in writing of the terms, conditions, warranties, and all other material information included in the Offer. Upon receipt, the Company shall have the Right of First Refusal to purchase the Preferred Shares subject to the Offer on the same terms contained in the Offer (the “Option”). The Company shall exercise the Option granted hereby by providing a written notice to Purchaser of the Company’s intent to purchase the Preferred Shares according to the Offer. If the Company provides notice to Purchaser of its intent to purchase the Preferred Shares according to the terms of the Offer within fourteen (14) days, the parties shall enter into s standard stock purchase agreement for the Preferred Shares based on the terms of the Offer. If the Company fails to exercise the Option within fourteen (14) days from receipt from Purchaser of notice of the Offer, Purchaser may sell the Preferred Shares subject to the terms of the Offer.

 

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(b) The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON [REDEMPTION] OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION IHA T JS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that the Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Preferred Stock to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, the Purchaser may transfer pledged or secured Preferred Stock to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the Purchaser’s expense, the Company will execute and deliver such documentation as a plcdgee or secured party of Preferred Stock may reasonably request in connection with a pledge or transfer of the Preferred Stock.

 

(c) Certificates evidencing the Underlying Shares . Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.l(b) hereof): (a) while a registration statement covering the resale of such security is effective under the Securities Act; (b) following any sale of such Underlying Shares pursuant to Rule 144; or (c) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Conunission). The Company shall, upon request of a Purchaser and at the Company’s expense, cause Company Counsel to issue a legal opinion to the Transfer Agent promptly after any of the events described in (a)-(d) in the preceding sentence if required by the Transfer Agent to effect the removal of the legend hereunder (with a copy to the Purchaser and its broker). If Underlying Shares are sold under Rule 144 or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission), then such Underlying Shares shall be issued free of all legends. The Company agrees that, at such time as such legend is no longer required under this Section 4.l(c), it will, no later than three (3) Trading Days following the delivery by the Purchaser to the Company or the Transfer Agent of a certificate representing such Underlying Shares and an opinion acceptable to the Company for the availability of a resale exemption with a restrictive legend (such third Trading Day, the “Preferred Share Legend Removal Date”), instruct the Transfer Agent to deliver or cause to be delivered to the Purchaser a certificate representing such Shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by the Purchaser.

 

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(d) Intentionally Omitted.

 

(e) The Company shall provide an opinion letter from legal counsel confirming that the Common stock issuable pursuant to the conversion of the Preferred Stock is exempt from the registration requirements under Rule 144 so long as the requirements of E.ule 144 are satisfied. The Purchaser shall accept such opinion letter that covers all Preferred Shares and is satisfactory to the Company’s Transfer Agent. Should the Company seek recommendation of legal counsel who may provide such opinion letter, the Purchaser may provide recommendation on choice of counsel and the Company bears the legal fees relating to the opinion letter.

 

4.2 Acknowledgment of Dilution . The Company acknowledges that the issuance or conversion of the Preferred Stock may result in dilution of the outstanding shares of Conunon Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, arc unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution ·or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

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4.3 Furnishing of Information; Public Information.

 

(a) The Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act.

 

(b) At any time during the period commencing from the six (6)-month anniversary of the date hereof and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(l) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”), then, in addition to the Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate Stated Value of the Purchaser’s Preferred Stock then owned by the Purchaser on the day of a Public Information Failure and on every thirtieth (301h ) day (pro-rated for periods totaling less than thirty days) thereafter until the earlier of (i) the date such Public Information Failure is cured and (ii) such time that such public information is no longer required for, the Purchaser to transfer the Underlying Shares pursuant to Rule 144. The payments to which the Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments arc incurred and (ii) the third (3’d) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit the Purchaser’s right to pursue actual damages for the Public Information Failure, and the Purchaser shall have the right to pursue all remedies available to it at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief.

 

4.4 Integration . Except as set forth on Schedule 4.4, the Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.

 

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4.5 One-Time Redemption . At any time before the third month anniversary from the date hereof, the Company may redeem the total outstanding Preferred Stock for an aggregate of one hundred and fifteen percent (115%) of its Stated Value and one hundred percent (100%) of accrued and unpaid dividends of the outstanding Preferred Stock and any other amounts due pursuant to the Certificate of Designations. The form of the Redemption Notice included in the Certificate of Designations sets forth the totality of the procedures required of the Company in order to redeem the Preferred Shares. No additional legal opinion, other information or instructions shall be required of the Company to redeem all of its outstanding Preferred Shares. The Purchaser shall honor redemptions of the Preferred Stock and shall deliver the certificate representing all such Preferred Stock outstanding in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

4.6 Stockholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchaser.

 

4.7 Non-Public Information . Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalt will provide the Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto the Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use .of such information. The Company understands and confirms that the Purchaser shall be relying on the foregoing covenant m effecting transactions in the Company’s Securities.

 

4.8 Use of Proceeds . The Company may use the net proceeds hereunder at its sole and absolute discretion.

 

4.9 Indemnification of the Purchaser . Subject to the prov1s10ns of this Section 4.9, the Company will indenmify and hold the Purchaser and its directors, officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against any Purchaser Party in

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who is not an Affiliate of the Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of the Purchase’s representations, warranties or covenants under the Transaction Documents or ‘any agreements or understandings the Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by the Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, the Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choice that is reasonably acceptable to the Purchaser Party being sued. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereoC but the fees and expenses of such counsel shall be at the expense of the Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of the Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (x) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (y) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser’s breach of any of the representations, warranties, covenants or agreements made by the Purchaser in this Agreement or in the other Transaction Documents or the Purchaser Party’s negligence or wiliful misconduct. The indemnification required by this Section 4.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnification contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to under applicable laws.

 

4.10 Reservation and Listing of Securities .

 

(a) The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than 300% of the Maximum Convertible Amount on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least 300% of the Maximum Convertible Amount al such time, as soon as possible and in any event not later than the seventy-fifth (751h ) day after such date.

 

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(c) The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Maximum Convertible Amount on the date of such application; (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter; (iii) provide to the Purchaser evidence of such listing or quotation; and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Maximum Convertible Amount on such date on such Trading Market or another Trading Market.

 

4.11 Prohibition on Variable Securities . So long as any of the Preferred Shares are outstanding, the Company shall not, without written consent of the Purchaser, issue any Variable Security (as defined herein), unless (i) the Company is permitted to redeem all outstanding Preferred Shares in cash at the time of the issuance of the respective Variable Security and (ii) the Company has the option to and does redeem all outstanding Preferred Shares, pursuant to the terms of the Certificate of Designations, in cash at the time of the issuance of the respective Variable Security. A Variable Security shall mean any security issued by the Company that (i) has or may have conversion rights of any kind, contingent, conditional or otherwise in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Company’s common stock; (ii) is or may become convertible into the Company’s common stock (including without limitation convertible .debt, warrants or convertible preferred stock), with a conversion or exercise price that varies with the market price of the common stock, even if such security only becomes convertible or exercisable following an event of default, the passage of time, or another trigger event or condition; or (iii) was issued or may be issued in, the future in exchange for or in connection with any contract, security, or instrument, whether convertible or not, where the number of shares of common stock issued or to be issued is based upon or related in any way to the market price of the common stock, including, but not limited to, common stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(IO) settlement, or any other similar settlement or exchange.

 

4.12 Treatment of Obligations and Prohibition on Senior Obligations . All obligations hereunder and pursuant to the Certificate of Designation, including those to pay dividends, fees, expenses or redemption amounts upon the occurrence of a Triggering Event (as defined in the Certificate of Designations), and any premiums, whether or not allowed as a claim under bankruptcy or similar laws) with respect to the Preferred Shares and other obligations, and fees and expenses in connection therewith and hereunder (collectively, the ‘“Obligations”), shall rank senior to any debt, payment obligations or similar arrangement (‘“Indebtedness”) in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding-up of the Company and the incurrence of any Indebtedness that ranks senior to the Obligations shall be prohibited unless the Purchaser expressly consents in writing to such incurrence of Indebtedness.

 

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4.13 Right of First Offer . From the date hereof until the date that is the twelve (12) month anniversary of the date of the First Closing, in the event that the Company desires to consummate a transaction with any Person with respect to a bona fide offer of capital or financing, including without limitation, the issuance of Common Stock, Common Stock Equivalents or debt for cash consideration, Indebtedness or a combination of units thereof (a “ROFO Financing”), then the Company shall first offer such opportunity to the Purchaser, in writing (a “ROFO Notice”). The ROH) Notice must be sent Purchaser pursuant to Section 5.4. Such ROFO Notice shall contain the material economic terms that the Company would, in good faith, expect to receive in the market for transactions similar in type to the ROFO Financing being sought (the “Material Economic Terms”). If Purchaser is unwilling or unable to provide such ROFO Financing to the Company within three (3) Trading Days from Purchaser’s receipt of the ROFO Notice, then the Company may obtain such ROFO Financing from any other Person upon the exact same Material Economic Terms, which such ROFO Financing must be completed within ninety (90) calendar days after the date of the ROFO Notice. If the Company does not receive the ROFO Financing from such Person within ninety (90) calendar days after the date of the respective ROFO Notice, then the Company must again offer the ROFO Financing opportunity to Purchaser as described above, and the process detailed above shall be repeated. Additionally, in the event that the Company proceeds to a ROFO Financing with another PeFson and then the Material Economic Terms are altered or modified in any way, then the Company must again offer the ROFO Financing opportunity (on such altered or modified Material Economic Terms) to the Purchaser as described above, and the process detailed above shall be repeated.

 

4.14 Certain Transactions and Confidentiality . The Purchaser, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending on the date that the Preferred Shares are no longer outstanding.

 

4.15 Securities Laws Disclosure; Publicity . The Company shall (a) by 9:30 a.m. (New York City time) on the Trading Day immediately following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby and (b) by the fourth (4111) Trading Day immediately following the date hereof file a Current Report on Form 8,K, including the Transaction Documents as exhibits thereto, with the Commission. From and after the issuance of such press release, the Company represents to the Purchaser that it shall have publicly disclosed all material, non-public information delivered to the Purchaser by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. The Company and the Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Purchaser, or without the prior consent of the Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld, delayed, denied, or conditioned except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Purchaser, or include the name of the Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of the Purchaser, except: (a) as required by federal securities financing, including without limitation, the issuance· of Common Stock, Common Stock Eqµivalents·or .debt for cash consideration, 1ndebtedness or a combination .of units. thereof (a “ROFO Financfog’’), then the Company shall first offer such opportunity to the Purchaser, in writing (a “RQJ;’O Notice”). The ROFO·Notice must be sem Purchaser pursuant io Section 5.4. S ch ROFO N iice.shall contain the material economic terms that the Company wouid, in good faith, expect fo-,recei’ve in the market for transactiohs ·similar in type. to the ROFO. Financing being soughqihe”‘Material Economic Terms”).. If Purchaser is unwil!ing or unalJle to provide stich) OFO .Fimu:icing to the Company within three (3) Trading Days’frorii”Purcha ef’s receipt of the ROFO Noficc;-,th n the Company may obtain such ROFO Financiqg from !\11:,t·other Person upon lhe exact same Material Economic Terms, which such.ROH) Financing mUst,be completed within ninety (90)·carendat days after the·date of the ROFC) Notice.’ Ifjlie’compimy does. not receive the ROFO Financing from such Person within ninety (90) calendar days after the date of the respective ROFO Notice, then the Company must again offer the ROFO Financing opportunity to Purchaser as described above, and the process detailed above shall be repeated. Additionally, in the event that the Company proceeds to a ROFO Financing with another Person and then the Material Economic Terms are altered or modified in any way, then the Company must again offer the ROFO Financing opportunity (on such altered or modified Material Economic Terms) to the Purchaser as described above, and the process detailed above shall be repeated.

 

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4.16 Form D; Blue Sky Filings . The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of the Purchaser. The Company shall also take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchaser on the applicable dates under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of the Purchaser.

 

4.17 Exchange Transactions . During the period commencing on the date hereof and for so long as any of the Preferred Shares remain outstanding, neither the Company nor any of its affiliates or Subsidiaries, nor any of its or their respective officers, employees, directors, agents or other representatives, will, without the prior written consent of the Purchaser (which consent may be withheld, delayed or conditioned in the Purchaser’s reasonable discretion), directly or indirectly: (a) solicit, initiate, encourage or accept any other inquiries, proposals or offers from any Person (other than the Purchaser) relating to any exchange of any indebtedness or other securities of, or claim against, the Company or any of its Subsidiaries relying on the exemption provided by Section 3(a)(l 0) of the Securities Act (any such transaction described in clause (a), an “Exchange Transaction”); (b) enter into, effect, alter, amend, announce or recommend to its stockholders any Exchange Transaction with any Person (other than the Purchaser); or (c) participate in any discussions, conversations, negotiations or other communications with any Person (other than the Purchaser) regarding any Exchange Transaction, or furnish to any Person (other than the Purchaser) any information with respect to any Exchange Transaction, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any Person (other than the Purchaser) to seek an Exchange Transaction involving the Company or any of its Subsidiaries. In addition, for so long as any of the Preferred Shares remain outstanding, neither the Company nor any of its affiliates or Subsidiaries, nor any of its or their respective officers, employees, directors, agents or other representatives, will, without the prior written consent of the Purchaser (which consent may be withheld, delayed or conditioned in the Purchaser’s sole discretion), directly or indirectly, cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any Person (other than the Purchaser) to effect any acquisition of securities or indebtedness of, or claim against, the Company by such Person from an existing holder of such securities, indebtedness or claim in connection with a proposed exchange of such securities or indebtedness of, or claim against, the Company (whether pursuant to Section 3(a)(9) or 3(a)(]O) of the Securities Act or otherwise) (a "Third Party Exchange Transfer"). The Company, its affiliates and Subsidiaries, and each of its and their respective officers, employees, directors, agents or other representatives shall immediately cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons.(other than the Purchaser) with respect lo any of the foregoing. The Company shall promptly (and in no event later than twenty-four (24) hours after receipt) notify (which notice shall be provided orally and in writing and shall identify the Person making the inquiry, request, proposal or offer and set forth the material terms thereof) the Purchaser after receipt of any inquiry, request, proposal or offer relating to any Exchange Transaction or Third Party Exchange Transfer, and shall promptly (and in no event later than twenty-four (24) hours after receipt) provide copies to the Purchaser of any written inquiries, requests, proposals or offers relating thereto. The Company agrees that it and. its affiliates and Subsidiaries, and each of its and their respective officers, employees, directors, agents or other representatives Subsidiaries will not enter into any agreement with any Person subsequent to the date hereof which prohibits the Company from providing any information to the Purchaser in accordance with this provision. For all purposes of this Agreement, violations of the restrictions set forth in this Section 4.17 by any Subsidiary or affiliate of the Company, or any officer, employee, director, agent or other representative of the Company or any of its Subsidiaries or affiliates shall be deemed a direct breach of this Section 4.17 by the Company. For the avoidance of doubt, the Company shall not without the prior written consent of the Purchaser (which consent may be withheld, delayed or conditioned in the Purchaser’s sole discretion), directly or indirectly consummate an Exchange Transaction or a Third Party Exchange Transfer if such exchange involves a third party (i.e., a Person that is neither the Company nor any existing security or debt holder of the Company).

 

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ARTICLE V.

MISCELLANEOUS

 

5.1 Termination . This Agreement may be terminated by any party by written notice to the other parties if the First Closing has not been consummated on or before the date ninety (90) days from the date of this Agreement; provided, however, that such termination will not affect the right of any party to sue for any breach by any other party (or parties).

 

5.2 Fees and Expenses . The parties shall pay their own fees and expenses relating to the transactions contemplated hereby The Company shall deliver to the Purchaser, prior to each applicable Closing, a completed and executed copy of the Closing Statement, attached hereto as Annex A . Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

 

5.3 Entire Agreement . The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 12:00 noon (New York City time) on a Trading Day; (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 12:00 noon (New York City time) on any Trading Day; or (iii) the second (2”d) Trading Day following the date of physical transmittal, if sent by a United States nationally recognized overnight courier service or upon actual receipt of the physically transmitted notice by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

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5.5 Amendments; Waivers . No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser, and in the case of a waiver, by the party against whom, the enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6 Headings . The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser (other than by merger). The Purchaser may assign any or all of its rights under this Agreement to any Person to whom the Purchaser assigns or transfers any Securit.ies, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the Purchaser as defined herein. ·

 

5.8 No Third-Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.9.

 

5.9 Governing Law . All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.9, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

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5.10 Survival . The representations and warranties contained herein shall survive each Closing and the deliveries of the Securities.

 

5.11 Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf’ format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf’ signature page was an original thereof.

 

5.12 Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms. provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13 Rescission and Withdrawal Right . Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations \Vithin the periods therein provided, then the Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

 

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5.14 Replacement of Securities . If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15 Remedies . In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchaser and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16 Payment Set Aside . To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any )aw (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoffhad not occurred.

 

5.17 Reserved .

 

5.18 Liquidated Damages . The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.19 Reserved .

 

5.20 Saturdays. Sundays, Holidays. etc. If the last or appointed day for the taking of ·any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.21 Construction . The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to he resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.22 WAIVER OF JURY TRIAL . IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY. IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

RedDiamond Partners LLC Address for Notice:
   
By: __________________________________ 156 West Saddle River Road
Name: Saddle River, NJ 07458
Title:  
   
Address for Notice:

 

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AMENDMENT TO SECURITIES PURCHASE AGREEMENT

 

This Amendment to Securities Purchase Agreement (the “Amendment”) is entered into this 19th day January, 2018, by and between Canbiola, Inc., a Florida corporation (the “Company”), and RedDiamond Partners LLC, a limited liability company formed under the laws of Delaware (the “Purchaser”).

 

R E C I T A L S

 

WHEREAS, the parties entered into a Securities Purchase Agreement on or around October 13, 2017 (the “Purchase Agreement”), whereby the Company agreed to sell to Purchaser, and the Purchaser agreed to purchase from the Company, 157,895 shares of the Company’s Series B Convertible Preferred Stock at a price per share of $0.95, or $150,000 total, pursuant to the terms of the Purchase Agreement.

 

WHEREAS, the parties have consummated the transactions contemplated by the Purchase Agreement and wish to extend the Purchase Agreement to the purchase of an additional 262,104 Preferred Shares for $0.95 per share, or $249,000 total, pursuant to the terms of this Amendment.

 

WHEREAS, the parties wish to hereby amend the Purchase Agreement to provide for the above detailed purchase and sale of Preferred Shares.

 

The Agreement is amended as follows:

 

1 . Purchase . The Purchaser agrees to purchase from the Company and the Company agrees to sell to the Purchaser an aggregate of an additional $249,000 of Preferred Shares at a purchase price equal to $0.95 per share, for an aggregate of 262,104 Preferred Shares. The purchase of Preferred Shares as contemplated by this Amendment shall be made in three equal tranches of $83,000 or 87,368 Preferred Shares per tranche.

 

2. Closings . Concurrent with the execution and delivery of this Amendment by the parties hereto, the Company and the Purchaser shall conduct a Closing at which the Purchaser shall purchase and the Company shall sell 87,368 Preferred Shares for $83,000 (the “First Amended Closing”). Subsequent to the First Amended Closing, the Company and the Purchaser shall conduct two (2) additional identical Closings on each monthly anniversary following the date of the First Amended Closing until the Purchaser has purchased and the Company has sold an aggregate of 262,104 Preferred Shares for $249,000. At the sole discretion of the Purchaser, the Purchaser shall have the option to accelerate the date of any and all additional Closings by providing the Company notice of such intent to conduct a Closing at least three (3) Trading Days prior to the date of such accelerated Closing.

 

3. Fixed Conversion Price . The parties agree that the “Fixed Conversion Price,” as defined in the Purchase Agreement, for each Preferred Share to be issued hereunder shall be based upon the result of 110% multiplied by the VWAP of the common stock of the Company on the First Closing Date of the Purchase Agreement, which equals $0.0101, and not the First Amended Closing.

 

 

 

 

4. Representations . The parties each affom, as of the date hereof, the accuracy of their respective representations and warranties contained in the Purchase Agreement.

 

5. Misc. Provisions . All terms and conditions of the Purchase Agreement remain unchanged and shall apply hereto except as specifically hereby amended. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Purchase Agreement. This Amendment is specifically incorporated into the Purchase Agreement. This Amendment may be executed in counterparts, each of which shall be deemed to be an original instrument, but all such counterparts together shall constitute one and the same instrument. The parties may execute this Amendment by delivery of signature by facsimile transmittal, which shall be deemed binding on the parties.

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date set forth above.

 

 

 

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AGREEMENT FOR SALE AND PURCHASE

OF BUSINESS ASSETS

 

This AGREEMENT FOR SALE AND PURCHASE OF BUSINESS ASSETS (this “Agreement”), dated as of March ___, 2017 (the “Closing Date”), is between Pure Health Products, LLC, located at 5507-10 Nesconset Highway suite 125 Mount Sinai, NY 11761 (the “Seller”), and Wrapmail, Inc., a Florida corporation (the “Buyer”).

 

RECITALS

 

A. The Seller has Assets the Buyer wishes to purchase and Seller desires to sell to Buyer, subject to the terms and conditions of this Agreement.

 

AGREEMENT

 

The parties agree as follows:

 

Article I. ASSETS PURCHASED; LIABILITIES ASSUMED

 

Section 1.01 Assets Purchased. Subject to the terms and conditions set forth in this Agreement, the Seller agrees to sell to the Buyer and the Buyer agrees to purchase from the Seller the following assets (the “Assets”), which shall exclude all cash held by Seller on the Closing Date:

 

  (a) The Seller’s domain name, “pureleafoil.com;” and
     
  (b) All patents, trademarks, trade names, copyrights, service marks, and domain names of the Seller as listed on Schedule 1.01, all registrations for them, all applications pending for them, and all other proprietary rights and intangible property of the Seller, including trade secrets, inventions, technology, software, operating systems, customer lists, customer relationships, customer agreements, customer understandings, drawings, blueprints, know-how, formulae, slogans, processes, and operating rights and all other similar items and all such items acquired by the Seller or coming into existence on or before the Closing Date.

 

Section 1.02 Liabilities Not Assumed.

 

  (a) The Buyer will not assume and will not be liable for any liabilities of the Seller, known or unknown, contingent or absolute, accrued or other, and the Assets will be free of all liabilities, obligations, liens, and encumbrances. Without limiting the generality of the foregoing and except as otherwise provided above, the Buyer will not be responsible for any of the following:
     
  (i) Liabilities, obligations, or debts of the Seller, whether fixed, contingent, or mixed, and whether based on events occurring before or after the Closing, including without limitation those based on tort, contract, statutory, or other claims or involving fines or penalties payable to any governmental authority;

 

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  (ii) Liabilities, obligations, or debts of the Seller for any federal, state, or local tax, including without limitation federal income taxes, state income and excise taxes, state and local real and personal property taxes, and federal, state, and local withholding and payroll taxes;
     
  (iii) Liabilities or obligations of the Seller to employees for salaries, bonuses, or health and welfare benefits or with respect to any profit-sharing, stock bonus, pension, retirement, stock purchase, option, bonus, or deferred compensation plan or for any other benefits or compensation (including without limitation accrued vacation);
     
  (iv) Liabilities or obligations of the Seller for employee severance payments or arrangements resulting from termination of the Seller’s employees;
     
  (v) Liabilities or obligations of the Seller relating to issuances of securities;
     
  (vi) Liabilities or obligations of the Seller incurred in connection with distributions to members or any corporate dissolution; or
     
  (vii) Liabilities or obligations of the Seller under any environmental law.

 

Article II. PURCHASE PRICE

 

The Purchase Price for the Assets (the “Purchase Price”) will be 5,000,000 restricted shares of the Company’s Common Stock (“Shares”). Seller acknowledges that the shares constitute “restricted securities,” as that term is defined in Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and cannot be resold unless such resale is registered under the Securities Act and applicable state securities laws or exempt from such registration provisions.

 

Article III. ALLOCATION OF PURCHASE PRICE

 

The Purchase Price will be as agreed between Buyer and Seller, and the Buyer and the Seller will be bound by that allocation in reporting the transactions contemplated by this Agreement to any governmental authority (including without limitation the Internal Revenue Service).

 

Article IV. CLOSING

 

Section 4.01 The transactions contemplated hereby shall close (“Closing”) on or before March ___, 2017 (“Closing Date”). On or before the Closing Date, the following documents shall be delivered:

 

(a) The Seller shall receive a certificate from the Buyer for 5,000,000 restricted Shares of the Company’s Common Stock.

 

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(b) The Buyer shall receive a Bill of Sale for all Assets from the Seller in such form as agreed to between Seller and Buyer.

 

(c) Both the Buyer and the Seller shall receive a copy of this Agreement, duly executed by the other party.

 

Article V. SELLER’S REPRESENTATIONS AND WARRANTIES

 

The Seller represents and warrants to the Buyer as follows:

 

Section 5.01 Corporate Existence. The Seller is a limited liability company duly incorporated and legally existing under the laws of the state of New York and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. The Seller has all requisite corporate power and authority and all material licenses, permits, and authorizations necessary to own and operate the Assets and to carry on its business as now conducted. The copies of the Seller’s charter documents and operating agreement that have been furnished to the Buyer’s counsel reflect all amendments made thereto at any time before the Closing Date and are correct and complete.

 

Section 5.02 Authorization. The Seller has duly authorized the execution, delivery, and performance of this Agreement and all other agreements contemplated by this Agreement to which the Seller is a party, as the case may be. This Agreement and other documents referenced herein, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Seller, enforceable against the Seller in accordance with their respective terms except as the enforceability thereof may be limited by the application of bankruptcy, insolvency, moratorium, or similar laws affecting the rights of creditors generally or judicial limits on the right of specific performance. The execution and delivery by the Seller of this Agreement and the fulfillment of and compliance with the respective terms hereof and thereof by the Seller, do not and will not (a) conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any Contract; (b) result in the creation of any lien, security interest, charge, or encumbrance on the Assets; (c) result in a violation of the operating agreement of the Seller or any law, statute, rule, or regulation to which the Seller is subject; or (d) result in a violation of any order, judgment, or decree to which the Seller is subject; or (e) require any authorization, consent, approval, exemption, or other action by or notice to any court or administrative or governmental body.

 

Section 5.03 Distribution. The Shares are being acquired for the Seller’s own benefit without a view towards distribution.

 

Section 5.04 Investment. The Seller understands and accepts that an investment in the Shares is highly speculative and involves substantial risks, including those risks concerning illiquidity, transfer restrictions, governmental regulations and uncontrollable market conditions. The Seller is prepared to bear the economic risk of an investment in the Shares and is able to withstand a total loss of the Seller’s investment in Shares.

 

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Section 5.05 Brokers and Finders. Seller has not employed any broker or finder in connection with the transactions contemplated by this Agreement, or taken action that would give rise to a valid claim against any party for a brokerage commission, finder’s fee, or other like payment.

 

Section 5.06 Transfer Not Subject to Encumbrances or Third-Party Approval. The execution and delivery of this Agreement by the Seller, and the consummation of the contemplated transactions, will not result in the creation or imposition of any valid lien, charge, or encumbrance on any of the Assets, and will not require the authorization, consent, or approval of any third party, including any governmental subdivision or regulatory agency.

 

Section 5.07 Litigation. No action, suit, proceeding, order, investigation, or claim is pending or, to the best of the Seller’s knowledge, threatened against the Seller or its property, at law or in equity, or before or by any governmental department, commission, board, bureau, agency, or instrumentality; the Seller is not subject to any arbitration proceedings under collective bargaining agreements or otherwise or, to the best of the Seller’s knowledge, any governmental investigations or inquiries; and, to the best knowledge of the Seller, no basis exists for any of the foregoing.

 

Section 5.08 Accuracy of Representations and Warranties. None of the representations or warranties of the Seller contain or will at Closing contain any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make statements in this Agreement not misleading.

 

Article VI. REPRESENTATIONS OF BUYER

 

The Buyer represents and warrants to the Seller as follows:

 

Section 6.01 Company Existence. The Buyer is duly organized and legally existing under the laws of the state of Florida. The Buyer has all requisite corporate or individual power and authority to enter into this Agreement and to perform its obligations under it.

 

Section 6.02 Authorization. The execution, delivery, and performance of this Agreement have been duly authorized and approved by the board of directors and members of the Buyer. This Agreement constitutes a valid and binding agreement of the Buyer, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, reorganization, insolvency, or similar laws affecting the enforcement of creditors’ rights or by the application of general principles of equity.

 

Section 6.03 Brokers and Finders. The Buyer has not employed any broker or finder in connection with the transactions contemplated by this Agreement and has taken no action that would give rise to a valid claim against any party for a brokerage commission, finder’s fee, or other like payment.

 

Section 6.04 No Conflict with Other Instruments or Agreements. The execution, delivery, and performance by the Buyer of this Agreement will not result in a breach or violation of, or constitute a default under, the Buyer’s Articles of Incorporation or Bylaws or any material agreement to which the Buyer is a party or by which the Buyer is bound.

 

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Section 6.05 Opinion Letters . Once the shares to be issued to Seller hereunder are eligible to be sold pursuant to Rule 144 under the Securities Act, Buyer shall have its attorney, or shall pay for an attorney of Buyer’s choosing to, draft an opinion letter that the shares are eligible to be sold pursuant to Rule 144.

 

Section 6.06 Accuracy of Representations and Warranties. None of the representations or warranties of the Buyer contain or will contain at Closing any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make the statements contained herein not misleading.

 

Article VII. COVENANTS OF SELLER

 

Section 7.01 Seller’s Operation of Business Before Closing. The Seller agrees that between the date of this Agreement and the Closing, the Seller will:

 

  (a) Continue to operate the business that is the subject of this Agreement in the usual and ordinary course and in substantial conformity with all applicable laws, ordinances, regulations, rules, or orders, and will use its best efforts to preserve its business organization and to preserve the continued operation of its business with its customers, suppliers, and others having business relations with the Seller;
     
  (b) Not assign, sell, lease, or otherwise transfer or dispose of any of the Assets used in the performance of its business, whether now owned or hereafter acquired, except in the normal and ordinary course of business and in connection with its normal operation;
     
  (c) Maintain all the Assets other than inventory in their present condition, reasonable wear and tear and ordinary usage excepted, and maintain the inventory at levels normally maintained; and
     
  (d) Notify the Buyer promptly in the event of any material change in the Assets or the Seller’s business before Closing or any material adverse change in the financial condition of the Seller or of any breach of a representation or warranty provided in this Agreement.

 

Section 7.02 Access to Premises and Information. At reasonable times before the Closing, the Seller will provide the Buyer and its representatives with reasonable access during business hours to the assets, titles, contracts, and records of the Seller and will furnish such additional information concerning the Seller’s business as the Buyer from time to time may reasonably request.

 

Section 7.03 Conditions and Best Efforts. The Seller will use their best efforts to effectuate the transactions contemplated by this Agreement and to fulfill all the conditions of their obligations under this Agreement, and will do all acts and things as may be required to carry out their respective obligations under this Agreement.

 

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Section 7.04 No Negotiations with Others. Except as otherwise permitted by this Agreement, or with the Buyer’s prior written consent, the Seller will refrain, and will cause the Seller’s officers, directors, and employees and any investment banker, lawyer, accountant, or other agent retained by the Seller to refrain, from initiating or soliciting any inquiries or making any proposals with respect to, or engaging in negotiations concerning, or providing any confidential information or data to, or having any discussions with any person relating to, any acquisition, business combination or purchase of all or any significant portion of the assets of, or any equity interest in, the Seller. The Seller will immediately cease and cause to be terminated any existing activities, discussions, or negotiations with any parties conducted heretofore with respect to any of the foregoing.

 

Section 7.05 Press Releases. No notice to customers, press release, or other public announcement concerning the transactions contemplated by this Agreement will be made by the Seller without the Buyer’s prior written consent, which consent will not be unreasonably withheld; but, however, nothing in this section will prevent a party from supplying such information or making statements as required by governmental authority or as necessary for a party to satisfy its legal obligations (prompt notice of which must in any such case be given to the other party or parties).

 

Article VIII. CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS

 

The obligation of the Buyer to purchase the Assets is subject to the fulfillment, before or at the Closing, of each of the following conditions, any one or portion of which may be waived in writing by the Buyer:

 

Section 8.01 Representations, Warranties, and Covenants of Seller. All representations and warranties made in this Agreement by the Seller will be true in all material respects through the Closing and the Seller will not have violated or will have failed to perform in accordance with any covenant contained in this Agreement.

 

Section 8.02 Licenses and Permits. The Buyer will have obtained all licenses and permits from public authorities necessary to authorize the ownership and operation of a business using the Assets.

 

Section 8.03 No Suits or Actions. At the time of the closing, no action, suit, or proceeding before any court or any governmental or regulatory authority will have been commenced and be continuing, and no investigation by any governmental or regulatory authority will have been commenced and be continuing, and no action, investigation, suit, or proceeding will be threatened, against the Seller or the Buyer or any of their affiliates, associates, officers, or directors, seeking to restrain or prevent or questioning the validity of the transactions contemplated by this Agreement.

 

Section 8.04 Material Adverse Change. From the date of this Agreement to the Closing, the Seller will not have suffered any material adverse change (whether or not such change is referred to or described in any supplement to any Schedule to this Agreement) in its business prospects, financial condition, working capital, assets, liabilities (absolute, accrued, contingent, or otherwise), or operations.

 

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Section 8.05 Corporate Action. The Seller will have furnished to the Buyer a copy, certified by the Seller’s secretary or assistant secretary, of the resolutions of the Seller authorizing the execution, delivery, and performance of this Agreement.

 

Article IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

 

The obligations of the Seller to consummate the transactions contemplated by this Agreement and the Related Agreements are subject to the fulfillment, before or at the Closing, of each of the following conditions, any one or a portion of which may be waived in writing by the Seller:

 

Section 9.01 Representation, Warranties, and Covenants of Buyer. All representations and warranties made in this Agreement by the Buyer will be true in all material respects through the Closing, and the Buyer will have neither violated nor failed to perform in accordance with any covenant contained in this Agreement.

 

Section 9.02 Corporate Action. The Buyer will have furnished to the Seller a copy, certified by the Buyer’s secretary or assistant secretary, of the resolutions of the Buyer authorizing the execution, delivery, and performance of this Agreement.

 

Article X. RISK OF LOSS

 

The risk of loss, damage, or destruction to any of the Assets will be borne by the Seller before the Closing. In the event of such loss, damage, or destruction, the Seller, to the extent reasonable, will replace the lost property or will repair or cause to repair the damaged property to its condition before the damage. If replacement, repairs, or restorations are not completed before the Closing, then the purchase price will be adjusted by an amount agreed on by the Buyer and the Seller that will be required to complete the replacement, repair, or restoration after the Closing. If the Buyer and the Seller are unable to agree, then the Buyer, at its sole option and notwithstanding any other provision of this Agreement, and on notice to the Seller, may rescind this Agreement and declare it to be of no further force and effect, in which event there will be no closing of this Agreement and all the terms and provisions of this Agreement will be deemed null and void.

 

Article XI. INDEMNIFICATION AND SURVIVAL

 

Section 11.01 Survival of Representations and Warranties. All representations and warranties made in this Agreement will survive the Closing of this Agreement. The representations and warranties in this Agreement will terminate two years after the Closing Date, and such representations or warranties will thereafter be without force or effect, except for any claim with respect to which notice has been given to the potentially indemnifying party before such expiration date.

 

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Section 11.02 Seller’s Indemnification.

 

  (a) The Seller agrees to indemnify, defend, and hold the Buyer, its successors, and assigns harmless from and against any and all claims, liabilities, obligations, costs, expenses, and reasonable attorney fees (collectively, “Damages”) arising out of or related to:
     
  (i) Any breach or inaccuracy of any representation or warranty of the Seller made in this Agreement;
     
  (ii) Any failure by the Seller to perform any covenant required to be performed by it pursuant to this Agreement; and
     
  (iii) Any liability or obligation of the Seller arising out of or in connection with the ownership, use, condition, maintenance, or operation of the Seller’s business or the Assets by the Seller or its members on or before the Closing.
     
  (b) If any claim is asserted against the Buyer that would give rise to a claim by the Buyer against the Seller for indemnification under this Section 11.02, then the Buyer will promptly give written notice to the Seller concerning such claim and the Seller will, at no expense to the Buyer, defend the claim.

 

Section 11.03 In the event of any Damages for which the Buyer has a right to indemnity under this Agreement, the Buyer will be entitled to offset the amount of such Damages against any unpaid amount of the Purchase Price remaining payable. On giving notice of a claim for indemnity pursuant to this Section 11.03, the Buyer will have the right to withhold payment of that portion of the Purchase Price that equals the amount of the estimated Damages, and such withholding will not constitute a default under this Agreement. The right to indemnification for the Buyer will not be limited to the amount of setoff under this section.

 

Article XII. TERMINATION OF AGREEMENT

 

Section 12.01 Right of Parties to Terminate. Either party may terminate this Agreement prior to Closing if the other party breaches any of its obligations or representations under this Agreement in any material respect.

 

Section 12.02 Effect of Termination. If either the Buyer or the Seller decides to terminate this Agreement, such party will promptly give written notice to the other party to this Agreement of such decision. In the event of a termination of this Agreement, the parties to this Agreement will be released from all liabilities and obligations arising under this Agreement with respect to the matters contemplated by this Agreement, other than for damages arising from a breach of this Agreement.

 

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Article XIII. MISCELLANEOUS PROVISIONS

 

Section 13.01 Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties relating to the subject matter hereof and supersedes any and all prior understandings, agreements, negotiations and discussions, both written and oral, between the parties hereto with respect to the subject matter hereof.

 

Section 13.02 Waiver. Any provision or condition of this Agreement may be waived at any time, in writing, by the party entitled to the benefit of such provision or condition. Waiver of any breach of any provision will not be a waiver of any succeeding breach of the provision or a waiver of the provision itself or any other provision.

 

Section 13.03 Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with, and shall be governed by, the laws of the State of New York without reference to, and regardless of, any applicable choice or conflicts of laws principles.

 

Section 13.04 Execution of Agreement; Counterparts; Electronic Signatures.

 

(d) This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument, and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Parties; it being understood that all Parties need not sign the same counterparts.

 

(e) The exchange of copies of this Agreement and of signature pages by facsimile transmission (whether directly from one facsimile device to another by means of a dial-up connection or whether mediated by the worldwide web), by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

 

Section 13.05 Further Assurances. Each of the parties hereto shall from time to time at the request of the other party hereto, and without further consideration, execute and deliver to such other party such further instruments of assignment, transfer, conveyance and confirmation and take such other action as the other party may reasonably request in order to more effectively fulfill the purposes of this Agreement.

 

Section 13.06 Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof. If any provision hereof is determined by a court of competent jurisdiction or an arbitrator to be invalid or unenforceable, such provision shall be limited to the extent necessary to make it valid and enforceable, or if necessary, severed from this Agreement, and the remainder of the Agreement shall be in full force and effect.

 

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    Initials:

 

 

Section 13.07 Attorneys’ Fees. If either party brings a claim or lawsuit against the other party to this Agreement to interpret or enforce any of the terms of this Agreement, the prevailing party shall, in addition to all other damages, be entitled to reasonable attorneys’ fees and costs, costs of witnesses, and costs of investigation from the non-prevailing party.

 

Section 13.08 Amendment and Termination. This Agreement may be amended or terminated only upon a writing executed by both Buyer and Seller.

 

Section 13.09 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Buyer and Sellers and their respective successors and assigns. Whenever appropriate in this Agreement, references to Buyer or Sellers shall be deemed to refer to such company’s successors or assigns. Notwithstanding, neither Party may assign this Agreement without the written consent of the other Party

 

Section 13.10 Equitable Relief. Each Party is entitled to bring an action for temporary or preliminary injunctive relief at any time in any court of competent jurisdiction in order to prevent irreparable injury that might result from a breach of this Agreement.

 

The parties enter into this Agreement as of the date first written above.

 

Wrapmail, Inc.  
     
By:  
Marco Alfonsi, its CEO  

 

Pure Health Products, LLC Pure Health Products, LLC

 

By:   By:
         
Printed:   Printed:
         
Title:   Title:

 

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    Initials:

 

 

 

 

EMPLOYMENT AGREEMENT

 

This Employee Services Agreement (“Agreement”) is entered as of Oct 15, 2018 (“Effective Date”) by and between Canbiola, Inc., a Florida corporation (the “Company”), and Marco Alfonsi, a resident of New York located at 44 East End Avenue, Hicksville, NY 11801 (“Employee”) and collectively as the Parties (“Parties”). The Parties agree as follows:

 

I. Services Provided .

 

Company hereby appoints Employee to serve as its Chairman and Chief Executive Officer (CEO), and Employee hereby accepts such appointment. Employee shall provide those services required of an officer of like title of a company of similar size and industry, under the law of the State of Florida, the federal securities laws and other state and federal laws and regulations, as applicable.

 

II. Nature of Relationship

 

The Employee is entitled to all of the rights and benefits along with the responsibilities and obligations of an Employee and shall devote whatever time and effort as required to fulfill his responsibilities. This Agreement shall supersede all prior services and employment agreements between the parties including the Executive Services Agreement dated October 3, 2017.

 

III. Employee’s Warranties

 

Throughout the term of this agreement and for a period of one (1) year thereafter, the Employee agrees he will not, without obtaining Company’s prior written consent, directly or indirectly engage or prepare to engage in any activity in competition with any Company business or product, including products in the development stage, accept employment or provide services to (including service as a member of a board of directors), or establish a business in competition with Company.

 

IV. Compensation

 

A. Base Salary. As compensation for Employee’s services, Employee shall receive ten thousand dollars ($10,000.00) per month (“Base Salary”). The Base Salary shall be paid in accordance with the Company’s standard payroll procedure. In any month that the full Base Salary cannot be paid, due solely to cash flow considerations as determined by the Company, the difference (“Difference”) between actual amount paid and the Base Salary paid shall be paid by issuance of common stock in the Company within 15 days of the end of each calendar quarter in an amount equal to the Difference and at a price equal to 110% of the average 5 trading day lowest price of the day for the 5 trading days immediately preceding the end of each quarter.

 

B. Base Salary Increase. At each annual anniversary of the Agreement, the Base Salary shall be increased at the greater of three percent (3%), or the prior year-end annual percentage increase in EBITDA as reported in the SEC 10K filing.

 

C. Incentive Bonus. Employee will be eligible to receive an annual cash and or stock bonus which will be determined by mutually agreed performance goals which shall be payable upon achievement of performance goals mutually agreed between Employee and the Company.

 

D. Benefits. During the Term, from the Effective Date through the date of termination of Employee’s engagement with the Company for any reason, Employee shall be entitled to participate in any welfare, health and life insurance and pension benefit and incentive programs as may be adopted from time to time by the Company on the same basis as that provided to similarly situated Employees or Employees of the Company generally. Without limiting the generality of the foregoing, Employee/ Employee shall be entitled to the following benefits:

 

1. Vacation and Sick Pay. Employee shall be entitled to four weeks paid vacation time and 5 paid days for illness each year. Unused vacation and sick days will roll-over to and be accrued and used in the following years. Further, Employee may take additional paid-time-off, holidays, and sick leave in accordance with the Company Employee Handbook policies. Employee shall be credited with four weeks paid vacation from his prior Executive Services Agreement which shall roll-over until used or paid.

 

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2. Reimbursement for Business Expenses. During the Term, the Company shall reimburse Employee for all reasonable expenses incurred by Employee in performing Employee’s duties for the Company, on the same basis as similarly situated Employees of the Company generally and in accordance with the Company’s policies as in effect from time to time. This reimbursement shall include office and internet expenses, cell phone, and health insurance coverage.

 

E. Preferred Share Issuance. As additional compensation, Employee has been issued one (1) share of the Company’s Series A Preferred Stock from his prior Executive Services Agreement, which shall be considered fully earned upon issuance which shall be one-quarter Preferred A share at December 31 2018, 2019, 2020, and 2021 and may be convertible at (.25 or one-quarter shares of Preferred A or two million five hundred thousand (2,500,000) shares of common stock each year-end commencing 12-31-2018 for 4 years of the agreement.

 

V. Indemnification and Insurance

 

The Company hereby fully agrees to hold harmless and indemnify Employee as authorized or permitted by law and the Company’s governing documents, as the same may be amended from time to time, except for acts constituting negligence or willful misconduct by Employee. The current Indemnity Agreement is attached as Exhibit A to this Agreement.

 

VI. Term of Agreement

 

This Agreement shall be in effect from the Effective Date hereof and continue for an initial term of four years (“Term”). This Agreement shall be renewed for consecutive three-year Terms unless either party gives notice of its intent to terminate the Agreement at least 30 days prior to the expiration of the applicable term.

 

VII. Employee Termination

 

  A. Death. Upon termination of Employee’s employment prior to the expiration of the Term by reason of Employee’s death, the Company shall pay Employee’s designated beneficiary or beneficiaries, within 30 days of Employee’s death in a lump sum in cash, (i) Employee’s Base Salary and pro-rated Incentive Bonus from the date of Employee’s death through the end of the quarter in which Employee’s death occurs and (ii) any accrued obligations owed the Employee.
     
  B. Disability. If, as a result of Employee’s incapacity due to physical or mental illness (“Disability”), Employee shall have been absent from the full-time performance of Employee’s duties with the Company for a period of four consecutive months and, within 30 days after written notice is provided to Employee by the Company, Employee’s employment under this Agreement may be terminated by the Company for Disability and paid in the same manner as in termination by Death per section VII. A. above.
     
  C. Termination for Cause. The Company may terminate Employee’s employment under this Agreement with or without Cause at any time and Employee may resign under this Agreement with or without Good Reason at any time. As used herein, “Cause” shall mean: (i) the plea of guilty or nolo contendere to, conviction for, or the commission of, a felony offense by Employee that is not in connection with Employee’s duties or services to the Company and which will reasonably be expected to have a material adverse impact on the Company; (ii) a willful material breach by Employee of a fiduciary duty owed to the Company or any of its subsidiaries; (iii) a knowing and material violation by Employee of any Company policy pertaining to legal compliance or conflicts of interest. Upon Employee’s (A) termination of employment by the Company for Cause prior to the expiration of the Term or (B) resignation without Good Reason prior to the expiration of the Term, this Agreement shall terminate without further obligation by the Company, except for the payment of any accrued obligations in a lump sum in cash within 30 days of such termination.

 

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  D. Termination by the Employee by the Company for other than Cause. Upon termination of Employee’s employment prior to the expiration of the Term by the Company without Cause or by Employee for Good Reason then:
     
    (i) the Company shall continue to pay Employee the Base Salary through the longer of the end of the Term over the course of the then remaining Term plus 12 months in accordance with the Company’s payroll and payment practices plus an amount equal to the premiums charged by the Company to maintain COBRA benefits continuation coverage for Employee and his eligible dependents to the extent such coverage is then in place;
     
    (ii) the Company shall pay Employee within 30 days of the date of such termination in a lump sum in cash any accrued obligations.
     
  E. Termination by acquisition or merger. In the event of a merger or acquisition involving the Company where this Agreement is terminated, the Company shall arrange to pay Employee according to Section VII D. of this Agreement.
     
  F. Return of Materials. In the event of any termination of this Agreement, the Employee agrees to return any materials and confidential information of the Company.

 

VIII. Sole Agreement

 

This Agreement supersedes all prior or contemporaneous written or oral understandings or agreements, and may not be added to, modified, or waived, in whole or in part, except by a writing signed by the party against whom such addition, modification or waiver is sought to be asserted.

 

IX. Assignment

 

This Agreement and all of the provisions hereof shall be binding upon and insure to the benefit of the parties hereto and their respective successors and permitted assigns and, except as otherwise expressly provided herein, neither this agreement, nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party.

 

X. Notices

 

Any and all notices, requests and other communications required or permitted hereunder shall be in writing, registered mail or by facsimile, to each of the parties at the addresses set forth herein or as otherwise provided in writing by such party.

 

Any such notice shall be deemed given when received and notice given by certified mail shall be considered to have been given on the tenth (10th) day after having been sent in the manner provided for above.

 

XI. Survival of Obligations

 

Notwithstanding the expiration of termination of this Agreement, neither party hereto shall be released hereunder from any liability or obligation to the other which has already accrued as of the time of such expiration or termination or which thereafter might accrue in respect of any act or omission of such party prior to such expiration or termination.

 

XII. Severability

 

Any provision of this Agreement which is determined to be invalid or unenforceable shall not affect the remainder of this Agreement, which shall remain in effect as though the invalid or unenforceable provision had not been included herein, unless the removal of the invalid or unenforceable provision would substantially defeat the intent, purpose or spirit of this agreement.

 

XIII. Governing Laws

 

This Agreement will be construed in accordance with the laws of the state of New York, without resort to conflict of law principles.

 

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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized officers, as of the date first written above.

 

CANBIOLA, INC.  
   
   
Stanley L. Teeple, CFO  
   
EMPLOYEE  
   
   
Marco Alfonsi, CEO  

 

  4  

 

 

EXHIBIT A

 

INDEMNITY AGREEMENT

 

This Indemnity Agreement (“ Agreement ”) is made and entered into this 1st day of October 2018 by and between Canbiola, Inc., a Florida corporation (the “ Company ”), and Stanley L. Teeple (“ Employee ”).

 

RECITALS

 

WHEREAS, Employee performs a valuable service to the Company in his capacity as Chief Financial Officer (CEO) and Secretary;

 

WHEREAS, the Company has adopted Bylaws (the “Bylaws”) providing for the indemnification of the directors, officers, Employees and other agents, including persons serving at the request of the Company in such capacities with other corporations or enterprises; and

 

WHEREAS, in order to induce Employee to continue to serve as CFO and Secretary of the Company, the Company has determined and agreed to enter into this Agreement with Employee;

 

NOW, THEREFORE, in consideration of Employee’s continued service after the date hereof, the parties hereto agree as follows:

 

AGREEMENT

 

1. Indemnity of Employee. The Company hereby agrees to hold harmless and indemnify Employee to the fullest extent authorized or permitted by the provisions of the Bylaws and applicable law against any and all expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Employee becomes legally obligated to pay because of any claim or claims made against or by him in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative (including an action by or in the right of the Company) to which Employee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Employee is, was or at any time becomes a director, officer, Employee or other agent of Company, or is or was serving or at any time serves at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise.

 

2. Limitations on Indemnity. No indemnity shall be paid by the Company:

 

(a) on account of any claim against Employee solely for an accounting of profits made from the purchase or sale by Employee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;

 

(b) on account of Employee’s conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

 

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(c) on account of Employee’s conduct that is established by a final judgment as constituting a breach of Employee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Employee was not legally entitled;

 

(d) for which payment is actually made to Employee under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement;

 

(e) if indemnification is not lawful (and, in this respect, both the Company and Employee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or

 

(f) in connection with any proceeding (or part thereof) initiated by Employee, or any proceeding by Employee against the Company or its directors, officers, Employees or other agents, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the board of directors of the Company, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the NYCRR, or (iv) the proceeding is initiated pursuant to Section 9 hereof.

 

3. Continuation of Indemnity. All agreements and obligations of the Company contained herein shall continue during the period Employee is a director, officer, Employee or other agent of the Company (or is or was serving at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise) and shall continue thereafter so long as Employee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Employee was serving in the capacity referred to herein.

 

4. Partial Indemnification. Employee shall be entitled under this Agreement to indemnification by the Company for a portion of the expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Employee becomes legally obligated to pay in connection with any action, suit or proceeding referred to in Section 1 hereof even if not entitled hereunder to indemnification for the total amount thereof, and the Company shall indemnify Employee for the portion thereof to which Employee is entitled.

 

5. Notification and Defense of Claim. Not later than thirty (30) days after receipt by Employee of notice of the commencement of any action, suit or proceeding, Employee will, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve it from any liability which it may have to Employee otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Employee notifies the Company of the commencement thereof:

 

(a) the Company will be entitled to participate therein at its own expense;

 

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(b) except as otherwise provided below, the Company may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Employee. After notice from the Company to Employee of its election to assume the defense thereof, the Company will not be liable to Employee under this Agreement for any legal or other expenses subsequently incurred by Employee in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Employee shall have the right to employ separate counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Employee unless (i) the employment of counsel by Employee has been authorized by the Company, (ii) Employee shall have reasonably concluded, and so notified the Company, that there is an actual conflict of interest between the Company and Employee in the conduct of the defense of such action or (iii) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of Employee’s separate counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which Employee shall have made the conclusion provided for in clause (ii) above; and

 

(c) the Company shall not be liable to indemnify Employee under this Agreement for any amounts paid in settlement of any action or claim affected without its written consent, which shall not be unreasonably withheld. The Company shall be permitted to settle any action except that it shall not settle any action or claim in any manner which would impose any penalty or limitation on Employee without Employee’s written consent, which may be given or withheld in Employee’s sole discretion.

 

6. Expenses. The Company shall advance, prior to the final disposition of any proceeding, promptly following request therefore, all expenses incurred by Employee in connection with such proceeding upon receipt of an undertaking by or on behalf of Employee to repay said amounts if it shall be determined ultimately that Employee is not entitled to be indemnified under the provisions of this Agreement, the Bylaws, applicable law or otherwise.

 

7. Enforcement. Any right to indemnification or advances granted by this Agreement to Employee shall be enforceable by or on behalf of Employee in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefore. Employee, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under Section 1 hereof (other than an action brought to enforce a claim for expenses pursuant to Section 6 hereof, provided that the required undertaking has been tendered to the Company) that Employee is not entitled to indemnification because of the limitations set forth in Section 2 hereof. Neither the failure of the Company (including its board of directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Employee is proper in the circumstances, nor an actual determination by the Company (including its board of directors or its stockholders) that such indemnification is improper shall be a defense to the action or create a presumption that Employee is not entitled to indemnification under this Agreement or otherwise.

 

8. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Employee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

 

9. Non-Exclusivity of Rights. The rights conferred on Employee by this Agreement shall not be exclusive of any other right which Employee may have or hereafter acquire under any statute, provision of the Company’s Articles of Incorporation or Bylaws, agreement, vote of stockholders or directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding office.

 

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10. Survival of Rights.

 

(a) The rights conferred on Employee by this Agreement shall continue after Employee has ceased to be a director, officer, Employee or other agent of the Company or to serve at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise and shall inure to the benefit of Employee’s heirs, executors and administrators.

 

(b) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

11. Severability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Company shall nevertheless indemnify Employee to the fullest extent provided by the Bylaws, the NYCRR or any other applicable law.

 

12. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of New York.

 

13. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

 

14. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.

 

15. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

 

16. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed or (ii) upon the third business day after the date on which such communication was mailed if mailed by certified or registered mail with postage prepaid to the parties address of record, or to such other address as may have been furnished to Employee by the Company.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

 

CANBIOLA, INC.  
   
     
By: Marco Alfonsi, CEO  
   
EMPLOYEE  
   
   
Stanley L. Teeple  

 

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EMPLOYMENT AGREEMENT

 

This Employee Services Agreement (“Agreement”) is entered as of Oct 1, 2018 (“Effective Date”) by and between Canbiola, Inc., a Florida corporation (the “Company”), and Stanley L. Teeple, a resident of Nevada located at 2872 Sumter Valley Cir., Henderson, NV 89052 (“Employee”) and collectively as the Parties (“Parties”). The Parties agree as follows:

 

I. Services Provided .

 

Company hereby appoints Employee to serve as its Chief Financial Officer (CFO) and Secretary, and Employee hereby accepts such appointment. Employee shall provide those services required of an officer of like title of a company of similar size and industry, under the law of the State of Florida, the federal securities laws and other state and federal laws and regulations, as applicable.

 

II. Nature of Relationship

 

The Employee is entitled to all of the rights and benefits along with the responsibilities and obligations of an Employee and shall devote whatever time and effort as required to fulfill his responsibilities.

 

III. Employee’s Warranties

 

Throughout the term of this agreement and for a period of one (1) year thereafter, the Employee agrees he will not, without obtaining Company’s prior written consent, directly or indirectly engage or prepare to engage in any activity in competition with any Company business or product, including products in the development stage, accept employment or provide services to (including service as a member of a board of directors), or establish a business in competition with Company.

 

IV. Compensation

 

A. Base Salary. As compensation for Employee’s services, Employee shall receive ten thousand dollars ($10,000.00) per month (“Base Salary”). The Base Salary shall be paid on the 1 st and 15 th of each month unless modified by the Company. In any month that the full Base Salary cannot be paid, due solely to cash flow considerations as determined by the Company, the difference (“Difference”) between actual amount paid and the Base Salary paid shall be paid by issuance of common stock in the Company within 15 days of the end of each calendar quarter in an amount equal to the Difference and at a price equal to 110% of the average 5 trading day lowest price of the day for the 5 trading days immediately preceding the end of each quarter.

 

B. Base Salary Increase. At each annual anniversary of the Agreement, the Base Salary shall be increased at the greater of three percent (3%), or the prior year-end annual percentage increase in EBITDA as reported in the SEC 10K filing.

 

C. Incentive Bonus. Employee will be eligible to receive an annual cash and or stock bonus which will be determined by mutually agreed performance goals which shall be payable upon achievement of performance goals mutually agreed between Employee and the Company.

 

D. Benefits. During the Term, from the Effective Date through the date of termination of Employee’s engagement with the Company for any reason, Employee shall be entitled to participate in any welfare, health and life insurance and pension benefit and incentive programs as may be adopted from time to time by the Company on the same basis as that provided to similarly situated Employees or Employees of the Company generally. Without limiting the generality of the foregoing, Employee/ Employee shall be entitled to the following benefits:

 

1. Vacation and Sick Pay. Employee shall be entitled to four weeks paid vacation time and 5 paid days for illness each year. Unused vacation and sick days will roll-over to and be accrued and used in the following years. Further, Employee may take additional paid-time-off, holidays, and sick leave in accordance with the Company Employee Handbook policies.

 

1
 

 

2. Reimbursement for Business Expenses. During the Term, the Company shall reimburse Employee for all reasonable expenses incurred by Employee in performing Employee’s duties for the Company, on the same basis as similarly situated Employees of the Company generally and in accordance with the Company’s policies as in effect from time to time. This reimbursement shall include office and internet expenses, cell phone, and health insurance coverage.

 

E. Preferred Share Issuance. As additional compensation, Employee shall be issued one (1) share of the Company’s Series A Preferred Stock upon execution of this Agreement, which shall be considered fully earned upon issuance which shall be one-quarter Preferred A share at December 31 2018, 2019, 2020, and 2021 and may be convertible at (.25 or one-quarter shares of Preferred A or two million five hundred thousand (2,500,000) shares of common stock each year-end commencing 12-31-2018 for 4 years of the agreement.

 

V. Indemnification and Insurance

 

The Company hereby fully agrees to hold harmless and indemnify Employee as authorized or permitted by law and the Company’s governing documents, as the same may be amended from time to time, except for acts constituting negligence or willful misconduct by Employee. The current Indemnity Agreement is attached as Exhibit A to this Agreement.

 

VI. Term of Agreement

 

This Agreement shall be in effect from the Effective Date hereof and continue for an initial term of four years (“Term”). This Agreement shall be renewed for consecutive three-year Terms unless either party gives notice of its intent to terminate the Agreement at least 30 days prior to the expiration of the applicable term.

 

VII. Employee Termination

 

  A. Death. Upon termination of Employee’s employment prior to the expiration of the Term by reason of Employee’s death, the Company shall pay Employee’s designated beneficiary or beneficiaries, within 30 days of Employee’s death in a lump sum in cash, (i) Employee’s Base Salary and pro-rated Incentive Bonus from the date of Employee’s death through the end of the quarter in which Employee’s death occurs and (ii) any accrued obligations owed the Employee.
  B. Disability. If, as a result of Employee’s incapacity due to physical or mental illness (“Disability”), Employee shall have been absent from the full-time performance of Employee’s duties with the Company for a period of four consecutive months and, within 30 days after written notice is provided to Employee by the Company, Employee’s employment under this Agreement may be terminated by the Company for Disability and paid in the same manner as in termination by Death per section VII. A. above.
  C. Termination for Cause. The Company may terminate Employee’s employment under this Agreement with or without Cause at any time and Employee may resign under this Agreement with or without Good Reason at any time. As used herein, “Cause” shall mean: (i) the plea of guilty or nolo contendere to, conviction for, or the commission of, a felony offense by Employee that is not in connection with Employee’s duties or services to the Company and which will reasonably be expected to have a material adverse impact on the Company; (ii) a willful material breach by Employee of a fiduciary duty owed to the Company or any of its subsidiaries; (iii) a knowing and material violation by Employee of any Company policy pertaining to legal compliance or conflicts of interest. Upon Employee’s (A) termination of employment by the Company for Cause prior to the expiration of the Term or (B) resignation without Good Reason prior to the expiration of the Term, this Agreement shall terminate without further obligation by the Company, except for the payment of any accrued obligations in a lump sum in cash within 30 days of such termination.

 

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  D. Termination by the Employee by the Company for other than Cause. Upon termination of Employee’s employment prior to the expiration of the Term by the Company without Cause or by Employee for Good Reason then:
    (i) the Company shall continue to pay Employee the Base Salary through the longer of the end of the Term over the course of the then remaining Term plus 12 months in accordance with the Company’s payroll and payment practices plus an amount equal to the premiums charged by the Company to maintain COBRA benefits continuation coverage for Employee and his eligible dependents to the extent such coverage is then in place;
    (ii) the Company shall pay Employee within 30 days of the date of such termination in a lump sum in cash any accrued obligations.
  E. Termination by acquisition or merger. In the event of a merger or acquisition involving the Company where this Agreement is terminated, the Company shall arrange to pay Employee according to Section VII D. of this Agreement.
  F. Return of Materials. In the event of any termination of this Agreement, the Employee agrees to return any materials and confidential information of the Company.

 

VIII. Sole Agreement

 

This Agreement supersedes all prior or contemporaneous written or oral understandings or agreements, and may not be added to, modified, or waived, in whole or in part, except by a writing signed by the party against whom such addition, modification or waiver is sought to be asserted.

 

IX. Assignment

 

This Agreement and all of the provisions hereof shall be binding upon and insure to the benefit of the parties hereto and their respective successors and permitted assigns and, except as otherwise expressly provided herein, neither this agreement, nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party.

 

X. Notices

 

Any and all notices, requests and other communications required or permitted hereunder shall be in writing, registered mail or by facsimile, to each of the parties at the addresses set forth herein or as otherwise provided in writing by such party.

 

Any such notice shall be deemed given when received and notice given by certified mail shall be considered to have been given on the tenth (10th) day after having been sent in the manner provided for above.

 

XI. Survival of Obligations

 

Notwithstanding the expiration of termination of this Agreement, neither party hereto shall be released hereunder from any liability or obligation to the other which has already accrued as of the time of such expiration or termination or which thereafter might accrue in respect of any act or omission of such party prior to such expiration or termination.

 

XII. Severability

 

Any provision of this Agreement which is determined to be invalid or unenforceable shall not affect the remainder of this Agreement, which shall remain in effect as though the invalid or unenforceable provision had not been included herein, unless the removal of the invalid or unenforceable provision would substantially defeat the intent, purpose or spirit of this agreement.

 

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XIII. Governing Laws

 

This Agreement will be construed in accordance with the laws of the state of New York, without resort to conflict of law principles.

 

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized officers, as of the date first written above.

 

CANBIOLA, INC.  
   
   
Marco Alfonsi, CEO  

 

EMPLOYEE  
   
   
Stanley L. Teeple  

 

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EXHIBIT A

 

INDEMNITY AGREEMENT

 

This Indemnity Agreement (“ Agreement ”) is made and entered into this 1 st day of October 2018 by and between Canbiola, Inc., a Florida corporation (the “ Company ”), and Stanley L. Teeple (“ Employee ”).

 

RECITALS

 

WHEREAS, Employee performs a valuable service to the Company in his capacity as Chief Financial Officer (CEO) and Secretary;

 

WHEREAS, the Company has adopted Bylaws (the “Bylaws”) providing for the indemnification of the directors, officers, Employees and other agents, including persons serving at the request of the Company in such capacities with other corporations or enterprises; and

 

WHEREAS, in order to induce Employee to continue to serve as CFO and Secretary of the Company, the Company has determined and agreed to enter into this Agreement with Employee;

 

NOW, THEREFORE, in consideration of Employee’s continued service after the date hereof, the parties hereto agree as follows:

 

AGREEMENT

 

1. Indemnity of Employee. The Company hereby agrees to hold harmless and indemnify Employee to the fullest extent authorized or permitted by the provisions of the Bylaws and applicable law against any and all expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Employee becomes legally obligated to pay because of any claim or claims made against or by him in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative (including an action by or in the right of the Company) to which Employee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Employee is, was or at any time becomes a director, officer, Employee or other agent of Company, or is or was serving or at any time serves at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise.

 

2. Limitations on Indemnity. No indemnity shall be paid by the Company:

 

(a) on account of any claim against Employee solely for an accounting of profits made from the purchase or sale by Employee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;

 

(b) on account of Employee’s conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

 

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(c) on account of Employee’s conduct that is established by a final judgment as constituting a breach of Employee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Employee was not legally entitled;

 

(d) for which payment is actually made to Employee under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement;

 

(e) if indemnification is not lawful (and, in this respect, both the Company and Employee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or

 

(f) in connection with any proceeding (or part thereof) initiated by Employee, or any proceeding by Employee against the Company or its directors, officers, Employees or other agents, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the board of directors of the Company, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the NYCRR, or (iv) the proceeding is initiated pursuant to Section 9 hereof.

 

3. Continuation of Indemnity. All agreements and obligations of the Company contained herein shall continue during the period Employee is a director, officer, Employee or other agent of the Company (or is or was serving at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise) and shall continue thereafter so long as Employee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Employee was serving in the capacity referred to herein.

 

4. Partial Indemnification. Employee shall be entitled under this Agreement to indemnification by the Company for a portion of the expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Employee becomes legally obligated to pay in connection with any action, suit or proceeding referred to in Section 1 hereof even if not entitled hereunder to indemnification for the total amount thereof, and the Company shall indemnify Employee for the portion thereof to which Employee is entitled.

 

5. Notification and Defense of Claim. Not later than thirty (30) days after receipt by Employee of notice of the commencement of any action, suit or proceeding, Employee will, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve it from any liability which it may have to Employee otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Employee notifies the Company of the commencement thereof:

 

(a) the Company will be entitled to participate therein at its own expense;

 

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(b) except as otherwise provided below, the Company may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Employee. After notice from the Company to Employee of its election to assume the defense thereof, the Company will not be liable to Employee under this Agreement for any legal or other expenses subsequently incurred by Employee in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Employee shall have the right to employ separate counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Employee unless (i) the employment of counsel by Employee has been authorized by the Company, (ii) Employee shall have reasonably concluded, and so notified the Company, that there is an actual conflict of interest between the Company and Employee in the conduct of the defense of such action or (iii) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of Employee’s separate counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which Employee shall have made the conclusion provided for in clause (ii) above; and

 

(c) the Company shall not be liable to indemnify Employee under this Agreement for any amounts paid in settlement of any action or claim affected without its written consent, which shall not be unreasonably withheld. The Company shall be permitted to settle any action except that it shall not settle any action or claim in any manner which would impose any penalty or limitation on Employee without Employee’s written consent, which may be given or withheld in Employee’s sole discretion.

 

6. Expenses. The Company shall advance, prior to the final disposition of any proceeding, promptly following request therefore, all expenses incurred by Employee in connection with such proceeding upon receipt of an undertaking by or on behalf of Employee to repay said amounts if it shall be determined ultimately that Employee is not entitled to be indemnified under the provisions of this Agreement, the Bylaws, applicable law or otherwise.

 

7. Enforcement. Any right to indemnification or advances granted by this Agreement to Employee shall be enforceable by or on behalf of Employee in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefore. Employee, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under Section 1 hereof (other than an action brought to enforce a claim for expenses pursuant to Section 6 hereof, provided that the required undertaking has been tendered to the Company) that Employee is not entitled to indemnification because of the limitations set forth in Section 2 hereof. Neither the failure of the Company (including its board of directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Employee is proper in the circumstances, nor an actual determination by the Company (including its board of directors or its stockholders) that such indemnification is improper shall be a defense to the action or create a presumption that Employee is not entitled to indemnification under this Agreement or otherwise.

 

8. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Employee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

 

9. Non-Exclusivity of Rights. The rights conferred on Employee by this Agreement shall not be exclusive of any other right which Employee may have or hereafter acquire under any statute, provision of the Company’s Articles of Incorporation or Bylaws, agreement, vote of stockholders or directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding office.

 

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10. Survival of Rights.

 

(a) The rights conferred on Employee by this Agreement shall continue after Employee has ceased to be a director, officer, Employee or other agent of the Company or to serve at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise and shall inure to the benefit of Employee’s heirs, executors and administrators.

 

(b) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

11. Severability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Company shall nevertheless indemnify Employee to the fullest extent provided by the Bylaws, the NYCRR or any other applicable law.

 

12. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of New York.

 

13. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

 

14. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.

 

15. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

 

16. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed or (ii) upon the third business day after the date on which such communication was mailed if mailed by certified or registered mail with postage prepaid to the parties address of record, or to such other address as may have been furnished to Employee by the Company.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

 

CANBIOLA, INC.  
   
   
By: Marco Alfonsi, CEO  

 

EMPLOYEE  
   
   
Stanley L. Teeple  

 

9
 

 

EMPLOYEE SERVICES AGREEMENT

 

This Employee Services Agreement (“Agreement”) is entered as of December 29 th , 2018 (“Effective Date”) by and between Canbiola, Inc., a Florida corporation (the “Company”), and Andrew Holtmeyer a resident of New York located at 65 Lauren Ave, Dix Hills, NY 11746 (“Employee”) and collectively as the Parties (“Parties”). The Parties agree as follows:

 

I. Services Provided .

 

Company hereby appoints Employee to serve as its Executive Vice President of Sales and Employee hereby accepts such appointment. Employee shall provide those services required of an officer of like title of a company of similar size and industry, under the law of the State of Florida, the federal securities laws and other state and federal laws and regulations, as applicable.

 

II. Nature of Relationship

 

The Employee is entitled to all of the rights and benefits along with the responsibilities and obligations of an Employee and shall devote whatever time and effort as required to fulfill his responsibilities.

 

III. Employee’s Warranties

 

Throughout the term of this agreement and for a period of one (1) year thereafter, the Employee agrees he will not, without obtaining Company’s prior written consent, directly or indirectly engage or prepare to engage in any activity in competition with any Company business or product, including products in the development stage, accept employment or provide services to (including service as a member of a board of directors), or establish a business in competition with Company.

 

IV. Compensation

 

A. Base Salary. As compensation for Employee’s services, Employee shall receive fifteen thousand dollars ($15,000.00) per month (“Base Salary”). The Base Salary shall be paid according to the standard payroll procedures in effect at the Company. In any month that the full Base Salary cannot be paid, due solely to cash flow considerations as determined by the Company, the difference (“Difference”) between actual amount paid and the Base Salary paid shall be paid by issuance of common stock in the Company within 15 days of the end of each calendar quarter in an amount equal to the Difference and at a price equal to 110% of the average 5 trading day lowest price of the day for the 5 trading days immediately preceding the end of each quarter.

 

B. Base Salary Increase. At each annual anniversary of the Agreement, the Base Salary shall be increased at the greater of three percent (3%), or the prior year-end annual percentage increase in EBITDA as reported in the SEC 10K filing.

 

C. Incentive Bonus. Employee will be eligible to receive an annual cash and or stock bonus which will be determined by mutually agreed performance goals which shall be payable upon achievement of performance goals mutually agreed between Employee and the Company.

 

D. Benefits. During the Term, from the Effective Date through the date of termination of Employee’s engagement with the Company for any reason, Employee shall be entitled to participate in any welfare, health and life insurance and pension benefit and incentive programs as may be adopted from time to time by the Company on the same basis as that provided to similarly situated Employees or Employees of the Company generally. Without limiting the generality of the foregoing, Employee/ Employee shall be entitled to the following benefits:

 

1. Vacation and Sick Pay. Employee shall be entitled to four weeks paid vacation time and 5 paid days for illness each year. Unused vacation and sick days will roll-over to and be accrued and used in the following years. Further, Employee may take additional paid-time-off, holidays, and sick leave in accordance with the Company Employee Handbook policies.

 

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2. Reimbursement for Business Expenses. During the Term, the Company shall reimburse Employee for all reasonable expenses incurred by Employee in performing Employee’s duties for the Company, on the same basis as similarly situated Employees of the Company generally and in accordance with the Company’s policies as in effect from time to time. This reimbursement shall include office and internet expenses, cell phone, and health insurance coverage.

 

E. Preferred Share Issuance. As additional compensation, Employee shall be issued two (2) additional shares of the Company’s Series A Preferred Stock, for a total of five Preferred A shares, upon execution of this Agreement, which shall be considered fully earned upon issuance which may be converted at one and one-quarter Preferred A share at December 31 2018, 2019, 2020, and 2021 (twelve million five hundred thousand (12,500,000) shares of common stock each year-end commencing 12-31-2018 for 4 years of the agreement).

 

F. Common Share Issuance. As additional consideration and compensation, Employee shall be issued 245,789 shares of common stock of the Company, said shares to be restricted by SEC rule 144 and be immediately issuable upon signing of this agreement.

 

V. Indemnification and Insurance

 

The Company hereby fully agrees to hold harmless and indemnify Employee as authorized or permitted by law and the Company’s governing documents, as the same may be amended from time to time, except for acts constituting negligence or willful misconduct by Employee. The current Indemnity Agreement is attached as Exhibit A to this Agreement.

 

VI. Term of Agreement

 

This Agreement shall be in effect from the Effective Date hereof and continue for an initial term of four years (“Term”). This Agreement shall be renewed for consecutive three-year Terms unless either party gives notice of its intent to terminate the Agreement at least 30 days prior to the expiration of the applicable term.

 

VII. Employee Termination

 

  A. Death. Upon termination of Employee’s employment prior to the expiration of the Term by reason of Employee’s death, the Company shall pay Employee’s designated beneficiary or beneficiaries, within 30 days of Employee’s death in a lump sum in cash, (i) six months of Employee’s Base Salary and pro-rated Incentive Bonus from the date of Employee’s death, and (ii) any accrued obligations or benefits owed the Employee for that same period of time.
     
  B. Disability. If, as a result of Employee’s incapacity due to physical or mental illness (“Disability”), Employee shall have been absent from the full-time performance of Employee’s duties with the Company for a period of three consecutive months and, within 30 days after written notice is provided to Employee by the Company, Employee’s employment under this Agreement may be terminated by the Company for Disability and paid in the same manner as in termination by Death per section VII. A. above.
     
  C. Termination for Cause. The Company may terminate Employee’s employment under this Agreement with or without Cause at any time and Employee may resign under this Agreement with or without Good Reason at any time. As used herein, “Cause” shall mean: (i) the plea of guilty or nolo contendere to, conviction for, or the commission of, a felony offense by Employee that is not in connection with Employee’s duties or services to the Company and which will reasonably be expected to have a material adverse impact on the Company; (ii) a willful material breach by Employee of a fiduciary duty owed to the Company or any of its subsidiaries; (iii) a knowing and material violation by Employee of any Company policy pertaining to legal compliance or conflicts of interest. Upon Employee’s (A) termination of employment by the Company for Cause prior to the expiration of the Term or (B) resignation without Good Reason prior to the expiration of the Term, this Agreement shall terminate without further obligation by the Company, except for the payment of any accrued obligations in a lump sum in cash within 30 days of such termination.

 

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  D. Termination by the Employee by the Company for other than Cause. Upon termination of Employee’s employment prior to the expiration of the Term by the Company without Cause or by Employee for Good Reason then:
     
    (i) the Company shall continue to pay Employee the Base Salary through the longer of the end of the Term over the course of the then remaining Term plus 12 months in accordance with the Company’s payroll and payment practices plus an amount equal to the premiums charged by the Company to maintain COBRA benefits continuation coverage for Employee and his eligible dependents to the extent such coverage is then in place;
     
    (ii) the Company shall pay Employee within 30 days of the date of such termination in a lump sum in cash any accrued obligations.
     
  E. Termination by acquisition or merger. In the event of a merger or acquisition involving the Company where this Agreement is terminated, the Company shall arrange to pay Employee according to Section VII D. of this Agreement.
     
  F. Return of Materials. In the event of any termination of this Agreement, the Employee agrees to return any materials and confidential information of the Company.

 

VIII. Sole Agreement

 

This Agreement supersedes all prior or contemporaneous written or oral understandings or agreements, and may not be added to, modified, or waived, in whole or in part, except by a writing signed by the party against whom such addition, modification or waiver is sought to be asserted.

 

IX. Assignment

 

This Agreement and all of the provisions hereof shall be binding upon and insure to the benefit of the parties hereto and their respective successors and permitted assigns and, except as otherwise expressly provided herein, neither this agreement, nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party.

 

X. Notices

 

Any and all notices, requests and other communications required or permitted hereunder shall be in writing, registered mail or by facsimile, to each of the parties at the addresses set forth herein or as otherwise provided in writing by such party.

 

Any such notice shall be deemed given when received and notice given by certified mail shall be considered to have been given on the tenth (10th) day after having been sent in the manner provided for above.

 

XI. Survival of Obligations

 

Notwithstanding the expiration of termination of this Agreement, neither party hereto shall be released hereunder from any liability or obligation to the other which has already accrued as of the time of such expiration or termination or which thereafter might accrue in respect of any act or omission of such party prior to such expiration or termination.

 

XII. Severability

 

Any provision of this Agreement which is determined to be invalid or unenforceable shall not affect the remainder of this Agreement, which shall remain in effect as though the invalid or unenforceable provision had not been included herein, unless the removal of the invalid or unenforceable provision would substantially defeat the intent, purpose or spirit of this agreement.

 

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XIII. Governing Laws

 

This Agreement will be construed in accordance with the laws of the state of California, without resort to conflict of law principles.

 

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized officers, as of the date first written above.

 

CANBIOLA, INC.  
   
   
Marco Alfonsi, CEO  
   
EMPLOYEE  
   
   
Andrew Holtmeyer  

 

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EXHIBIT A

 

INDEMNITY AGREEMENT

 

This Indemnity Agreement (“ Agreement ”) is made and entered into this 29 th day of December 2018 by and between Canbiola, Inc., a Florida corporation (the “ Company ”), and Andrew Holtmeyer (“ Employee ”).

 

RECITALS

 

WHEREAS, Employee performs a valuable service to the Company in his capacity as Executive Vice President Sales for Canbiola, Inc.

 

WHEREAS, the Company has adopted Bylaws (the “Bylaws”) providing for the indemnification of the directors, officers, Employees and other agents, including persons serving at the request of the Company in such capacities with other corporations or enterprises; and

 

WHEREAS, in order to induce Employee to continue to serve as Executive Vice President Sales of Canbiola, Inc., the Company has determined and agreed to enter into this Agreement with Employee;

 

NOW, THEREFORE, in consideration of Employee’s continued service after the date hereof, the parties hereto agree as follows:

 

AGREEMENT

 

1. Indemnity of Employee. The Company hereby agrees to hold harmless and indemnify Employee to the fullest extent authorized or permitted by the provisions of the Bylaws and applicable law against any and all expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Employee becomes legally obligated to pay because of any claim or claims made against or by him in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative (including an action by or in the right of the Company) to which Employee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Employee is, was or at any time becomes a director, officer, Employee or other agent of Company, or is or was serving or at any time serves at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise.

 

2. Limitations on Indemnity. No indemnity shall be paid by the Company:

 

(a) on account of any claim against Employee solely for an accounting of profits made from the purchase or sale by Employee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;

 

(b) on account of Employee’s conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

 

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(c) on account of Employee’s conduct that is established by a final judgment as constituting a breach of Employee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Employee was not legally entitled;

 

(d) for which payment is actually made to Employee under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement;

 

(e) if indemnification is not lawful (and, in this respect, both the Company and Employee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or

 

(f) in connection with any proceeding (or part thereof) initiated by Employee, or any proceeding by Employee against the Company or its directors, officers, Employees or other agents, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the board of directors of the Company, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the NYCRR, or (iv) the proceeding is initiated pursuant to Section 9 hereof.

 

3. Continuation of Indemnity. All agreements and obligations of the Company contained herein shall continue during the period Employee is a director, officer, Employee or other agent of the Company (or is or was serving at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise) and shall continue thereafter so long as Employee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Employee was serving in the capacity referred to herein.

 

4. Partial Indemnification. Employee shall be entitled under this Agreement to indemnification by the Company for a portion of the expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Employee becomes legally obligated to pay in connection with any action, suit or proceeding referred to in Section 1 hereof even if not entitled hereunder to indemnification for the total amount thereof, and the Company shall indemnify Employee for the portion thereof to which Employee is entitled.

 

5. Notification and Defense of Claim. Not later than thirty (30) days after receipt by Employee of notice of the commencement of any action, suit or proceeding, Employee will, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve it from any liability which it may have to Employee otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Employee notifies the Company of the commencement thereof:

 

(a) the Company will be entitled to participate therein at its own expense;

 

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(b) except as otherwise provided below, the Company may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Employee. After notice from the Company to Employee of its election to assume the defense thereof, the Company will not be liable to Employee under this Agreement for any legal or other expenses subsequently incurred by Employee in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Employee shall have the right to employ separate counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Employee unless (i) the employment of counsel by Employee has been authorized by the Company, (ii) Employee shall have reasonably concluded, and so notified the Company, that there is an actual conflict of interest between the Company and Employee in the conduct of the defense of such action or (iii) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of Employee’s separate counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which Employee shall have made the conclusion provided for in clause (ii) above; and

 

(c) the Company shall not be liable to indemnify Employee under this Agreement for any amounts paid in settlement of any action or claim affected without its written consent, which shall not be unreasonably withheld. The Company shall be permitted to settle any action except that it shall not settle any action or claim in any manner which would impose any penalty or limitation on Employee without Employee’s written consent, which may be given or withheld in Employee’s sole discretion.

 

6. Expenses. The Company shall advance, prior to the final disposition of any proceeding, promptly following request therefore, all expenses incurred by Employee in connection with such proceeding upon receipt of an undertaking by or on behalf of Employee to repay said amounts if it shall be determined ultimately that Employee is not entitled to be indemnified under the provisions of this Agreement, the Bylaws, applicable law or otherwise.

 

7. Enforcement. Any right to indemnification or advances granted by this Agreement to Employee shall be enforceable by or on behalf of Employee in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefore. Employee, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under Section 1 hereof (other than an action brought to enforce a claim for expenses pursuant to Section 6 hereof, provided that the required undertaking has been tendered to the Company) that Employee is not entitled to indemnification because of the limitations set forth in Section 2 hereof. Neither the failure of the Company (including its board of directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Employee is proper in the circumstances, nor an actual determination by the Company (including its board of directors or its stockholders) that such indemnification is improper shall be a defense to the action or create a presumption that Employee is not entitled to indemnification under this Agreement or otherwise.

 

8. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Employee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

 

9. Non-Exclusivity of Rights. The rights conferred on Employee by this Agreement shall not be exclusive of any other right which Employee may have or hereafter acquire under any statute, provision of the Company’s Articles of Incorporation or Bylaws, agreement, vote of stockholders or directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding office.

 

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10. Survival of Rights.

 

(a) The rights conferred on Employee by this Agreement shall continue after Employee has ceased to be a director, officer, Employee or other agent of the Company or to serve at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise and shall inure to the benefit of Employee’s heirs, executors and administrators.

 

(b) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

11. Severability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Company shall nevertheless indemnify Employee to the fullest extent provided by the Bylaws, the NYCRR or any other applicable law.

 

12. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of New York.

 

13. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

 

14. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.

 

15. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

 

16. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed or (ii) upon the third business day after the date on which such communication was mailed if mailed by certified or registered mail with postage prepaid to the parties address of record, or to such other address as may have been furnished to Employee by the Company.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

 

CANBIOLA, INC.  
   
   
By: Marco Alfonsi, CEO  
   
EMPLOYEE  
   
   
Andrew Holtmeyer  

 

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EMPLOYMENT AGREEMENT

 

This Employee Services Agreement (“Agreement”) is entered as of December 28, 2018 (“Effective Date”) by and between Pure Health Products, LLC, a New York Corporation (“Company”), and Canbiola, Inc., a Florida corporation (the “Guarantor”), and Pasquale Ferro a resident of New York located at 5507-10 Nesconset Hwy Suite 125 Mount Sinai, New York 11766 (“Employee”) and collectively as the Parties (“Parties”). The Parties agree as follows:

 

I. Services Provided .

 

Company hereby appoints Employee to serve as its President and Employee hereby accepts such appointment. Employee shall provide those services required of an officer of like title of a company of similar size and industry, under the law of the State of Florida, the federal securities laws and other state and federal laws and regulations, as applicable.

 

II. Nature of Relationship

 

The Employee is entitled to all of the rights and benefits along with the responsibilities and obligations of an Employee and shall devote whatever time and effort as required to fulfill his responsibilities.

 

III. Employee’s Warranties

 

Throughout the term of this agreement and for a period of one (1) year thereafter, the Employee agrees he will not, without obtaining Company’s prior written consent, directly or indirectly engage or prepare to engage in any activity in competition with any Company business or product, including products in the development stage, accept employment or provide services to (including service as a member of a board of directors), or establish a business in competition with Company.

 

IV. Compensation

 

In all matters of this Section IV through and inclusive of Section VII, Guarantor shall provide a guaranty of fulfillment which shall survive any action with regards to the Company for the full term of this Agreement.

 

A. Base Salary. As compensation for Employee’s services, Employee shall receive fifteen thousand dollars ($15,000.00) per month (“Base Salary”). The Base Salary shall be paid according to the standard payroll procedures in effect at the Company. In any month that the full Base Salary cannot be paid, due solely to cash flow considerations as determined by the Company, the difference (“Difference”) between actual amount paid and the Base Salary paid shall be paid by issuance of common stock in the Company within 15 days of the end of each calendar quarter in an amount equal to the Difference and at a price equal to 110% of the average 5 trading day lowest price of the day for the 5 trading days immediately preceding the end of each quarter.

 

B. Base Salary Increase. At each annual anniversary of the Agreement, the Base Salary shall be increased at the greater of three percent (3%), or the prior year-end annual percentage increase in EBITDA as reported in the SEC 10K filing.

 

C. Incentive Bonus. Employee will be eligible to receive an annual cash and or stock bonus which will be determined by mutually agreed performance goals which shall be payable upon achievement of performance goals mutually agreed between Employee and the Company.

 

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D. Benefits. During the Term, from the Effective Date through the date of termination of Employee’s engagement with the Company for any reason, Employee shall be entitled to participate in any welfare, health and life insurance and pension benefit and incentive programs as may be adopted from time to time by the Company on the same basis as that provided to similarly situated Employees or Employees of the Company generally. Without limiting the generality of the foregoing, Employee/ Employee shall be entitled to the following benefits:

 

1. Vacation and Sick Pay. Employee shall be entitled to four weeks paid vacation time and 5 paid days for illness each year. Unused vacation and sick days will roll-over to and be accrued and used in the following years. Further, Employee may take additional paid-time-off, holidays, and sick leave in accordance with the Company Employee Handbook policies.

 

2. Reimbursement for Business Expenses. During the Term, the Company shall reimburse Employee for all reasonable expenses incurred by Employee in performing Employee’s duties for the Company, on the same basis as similarly situated Employees of the Company generally and in accordance with the Company’s policies as in effect from time to time. This reimbursement shall include office and internet expenses, cell phone, and health insurance coverage.

 

E. Preferred Share Issuance. As additional compensation, Employee shall be issued and Guarantor shall provide five (5) shares of the Guarantor’s Series A Preferred Stock upon execution of this Agreement, which shall be considered fully earned upon issuance which shall be one and one-quarter Preferred A share at December 31 2018, 2019, 2020, and 2021 and may be convertible at (.25 or one-quarter shares of the total Preferred A or twelve million five hundred thousand (12,500,000) shares of common stock each year-end commencing 12-31-2018 for 4 years of the agreement.

 

V. Indemnification and Insurance

 

The Company hereby fully agrees to hold harmless and indemnify Employee as authorized or permitted by law and the Company’s governing documents, as the same may be amended from time to time, except for acts constituting negligence or willful misconduct by Employee. The current Indemnity Agreement is attached as Exhibit A to this Agreement.

 

VI. Term of Agreement

 

This Agreement shall be in effect from the Effective Date hereof and continue for an initial term of four years (“Term”). This Agreement shall be renewed for consecutive three-year Terms unless either party gives notice of its intent to terminate the Agreement at least 30 days prior to the expiration of the applicable term.

 

VII. Employee Termination

 

  A. Death. Upon termination of Employee’s employment prior to the expiration of the Term by reason of Employee’s death, the Company shall pay Employee’s designated beneficiary or beneficiaries, within 30 days of Employee’s death in a lump sum in cash, (i) six months of Employee’s Base Salary and pro-rated Incentive Bonus from the date of Employee’s death, and (ii) any accrued obligations or benefits owed the Employee for that same period of time.
     
  B. Disability. If, as a result of Employee’s incapacity due to physical or mental illness (“Disability”), Employee shall have been absent from the full-time performance of Employee’s duties with the Company for a period of three consecutive months and, within 30 days after written notice is provided to Employee by the Company, Employee’s employment under this Agreement may be terminated by the Company for Disability and paid in the same manner as in termination by Death per section VII. A. above.
     
  C. Termination for Cause. The Company may terminate Employee’s employment under this Agreement with or without Cause at any time and Employee may resign under this Agreement with or without Good Reason at any time. As used herein, “Cause” shall mean: (i) the plea of guilty or nolo contendere to, conviction for, or the commission of, a felony offense by Employee that is not in connection with Employee’s duties or services to the Company and which will reasonably be expected to have a material adverse impact on the Company; (ii) a willful material breach by Employee of a fiduciary duty owed to the Company or any of its subsidiaries; (iii) a knowing and material violation by Employee of any Company policy pertaining to legal compliance or conflicts of interest. Upon Employee’s (A) termination of employment by the Company for Cause prior to the expiration of the Term or (B) resignation without Good Reason prior to the expiration of the Term, this Agreement shall terminate without further obligation by the Company, except for the payment of any accrued obligations in a lump sum in cash within 30 days of such termination.

 

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  D. Termination by the Employee by the Company for other than Cause. Upon termination of Employee’s employment prior to the expiration of the Term by the Company without Cause or by Employee for Good Reason then:
     
    (i) the Company shall continue to pay Employee the Base Salary through the longer of the end of the Term over the course of the then remaining Term plus 12 months in accordance with the Company’s payroll and payment practices plus an amount equal to the premiums charged by the Company to maintain COBRA benefits continuation coverage for Employee and his eligible dependents to the extent such coverage is then in place;
     
    (ii) the Company shall pay Employee within 30 days of the date of such termination in a lump sum in cash any accrued obligations.
     
  E. Termination by acquisition or merger. In the event of a merger or acquisition involving the Company where this Agreement is terminated, the Company shall arrange to pay Employee according to Section VII D. of this Agreement.
     
  F. Return of Materials. In the event of any termination of this Agreement, the Employee agrees to return any materials and confidential information of the Company.

 

VIII. Sole Agreement

 

This Agreement supersedes all prior or contemporaneous written or oral understandings or agreements, and may not be added to, modified, or waived, in whole or in part, except by a writing signed by the party against whom such addition, modification or waiver is sought to be asserted.

 

IX. Assignment

 

This Agreement and all of the provisions hereof shall be binding upon and insure to the benefit of the parties hereto and their respective successors and permitted assigns and, except as otherwise expressly provided herein, neither this agreement, nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party.

 

X. Notices

 

Any and all notices, requests and other communications required or permitted hereunder shall be in writing, registered mail or by facsimile, to each of the parties at the addresses set forth herein or as otherwise provided in writing by such party.

 

Any such notice shall be deemed given when received and notice given by certified mail shall be considered to have been given on the tenth (10th) day after having been sent in the manner provided for above.

 

XI. Survival of Obligations

 

Notwithstanding the expiration of termination of this Agreement, neither party hereto shall be released hereunder from any liability or obligation to the other which has already accrued as of the time of such expiration or termination or which thereafter might accrue in respect of any act or omission of such party prior to such expiration or termination.

 

XII. Severability

 

Any provision of this Agreement which is determined to be invalid or unenforceable shall not affect the remainder of this Agreement, which shall remain in effect as though the invalid or unenforceable provision had not been included herein, unless the removal of the invalid or unenforceable provision would substantially defeat the intent, purpose or spirit of this agreement.

 

XIII. Governing Laws

 

This Agreement will be construed in accordance with the laws of the state of California, without resort to conflict of law principles.

 

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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized officers, as of the date first written above.

 

GUARANTOR, CANBIOLA, INC.  
   
   
Marco Alfonsi, CEO  
   
FOR THE COMPANY PURE HEALTH PRODUCTS, LLC  
   
   
Marco Alfonsi, Canbiola, Inc. CEO  
   
EMPLOYEE  
   
   
Pasquale Ferro  

 

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EXHIBIT A

 

INDEMNITY AGREEMENT

 

This Indemnity Agreement (“ Agreement ”) is made and entered into this 28 th day of December 2018 by and between Canbiola, Inc., a Florida corporation (the “ Company ”), and Pasquale Ferro (“ Employee ”).

 

RECITALS

 

WHEREAS, Employee performs a valuable service to the Company in his capacity as President of its manufacturing facility Pure Health Products, LLC.

 

WHEREAS, the Company has adopted Bylaws (the “Bylaws”) providing for the indemnification of the directors, officers, Employees and other agents, including persons serving at the request of the Company in such capacities with other corporations or enterprises; and

 

WHEREAS, in order to induce Employee to continue to serve as President of Pure Health Products, LLC, the Company has determined and agreed to enter into this Agreement with Employee;

 

NOW, THEREFORE, in consideration of Employee’s continued service after the date hereof, the parties hereto agree as follows:

 

AGREEMENT

 

1. Indemnity of Employee. The Company hereby agrees to hold harmless and indemnify Employee to the fullest extent authorized or permitted by the provisions of the Bylaws and applicable law against any and all expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Employee becomes legally obligated to pay because of any claim or claims made against or by him in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative (including an action by or in the right of the Company) to which Employee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Employee is, was or at any time becomes a director, officer, Employee or other agent of Company, or is or was serving or at any time serves at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise.

 

2. Limitations on Indemnity. No indemnity shall be paid by the Company:

 

(a) on account of any claim against Employee solely for an accounting of profits made from the purchase or sale by Employee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;

 

(b) on account of Employee’s conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

 

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(c) on account of Employee’s conduct that is established by a final judgment as constituting a breach of Employee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Employee was not legally entitled;

 

(d) for which payment is actually made to Employee under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement;

 

(e) if indemnification is not lawful (and, in this respect, both the Company and Employee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or

 

(f) in connection with any proceeding (or part thereof) initiated by Employee, or any proceeding by Employee against the Company or its directors, officers, Employees or other agents, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the board of directors of the Company, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the NYCRR, or (iv) the proceeding is initiated pursuant to Section 9 hereof.

 

3. Continuation of Indemnity. All agreements and obligations of the Company contained herein shall continue during the period Employee is a director, officer, Employee or other agent of the Company (or is or was serving at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise) and shall continue thereafter so long as Employee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Employee was serving in the capacity referred to herein.

 

4. Partial Indemnification. Employee shall be entitled under this Agreement to indemnification by the Company for a portion of the expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Employee becomes legally obligated to pay in connection with any action, suit or proceeding referred to in Section 1 hereof even if not entitled hereunder to indemnification for the total amount thereof, and the Company shall indemnify Employee for the portion thereof to which Employee is entitled.

 

5. Notification and Defense of Claim. Not later than thirty (30) days after receipt by Employee of notice of the commencement of any action, suit or proceeding, Employee will, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve it from any liability which it may have to Employee otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Employee notifies the Company of the commencement thereof:

 

(a) the Company will be entitled to participate therein at its own expense;

 

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(b) except as otherwise provided below, the Company may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Employee. After notice from the Company to Employee of its election to assume the defense thereof, the Company will not be liable to Employee under this Agreement for any legal or other expenses subsequently incurred by Employee in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Employee shall have the right to employ separate counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Employee unless (i) the employment of counsel by Employee has been authorized by the Company, (ii) Employee shall have reasonably concluded, and so notified the Company, that there is an actual conflict of interest between the Company and Employee in the conduct of the defense of such action or (iii) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of Employee’s separate counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which Employee shall have made the conclusion provided for in clause (ii) above; and

 

(c) the Company shall not be liable to indemnify Employee under this Agreement for any amounts paid in settlement of any action or claim affected without its written consent, which shall not be unreasonably withheld. The Company shall be permitted to settle any action except that it shall not settle any action or claim in any manner which would impose any penalty or limitation on Employee without Employee’s written consent, which may be given or withheld in Employee’s sole discretion.

 

6. Expenses. The Company shall advance, prior to the final disposition of any proceeding, promptly following request therefore, all expenses incurred by Employee in connection with such proceeding upon receipt of an undertaking by or on behalf of Employee to repay said amounts if it shall be determined ultimately that Employee is not entitled to be indemnified under the provisions of this Agreement, the Bylaws, applicable law or otherwise.

 

7. Enforcement. Any right to indemnification or advances granted by this Agreement to Employee shall be enforceable by or on behalf of Employee in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefore. Employee, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under Section 1 hereof (other than an action brought to enforce a claim for expenses pursuant to Section 6 hereof, provided that the required undertaking has been tendered to the Company) that Employee is not entitled to indemnification because of the limitations set forth in Section 2 hereof. Neither the failure of the Company (including its board of directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Employee is proper in the circumstances, nor an actual determination by the Company (including its board of directors or its stockholders) that such indemnification is improper shall be a defense to the action or create a presumption that Employee is not entitled to indemnification under this Agreement or otherwise.

 

8. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Employee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

 

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9. Non-Exclusivity of Rights. The rights conferred on Employee by this Agreement shall not be exclusive of any other right which Employee may have or hereafter acquire under any statute, provision of the Company’s Articles of Incorporation or Bylaws, agreement, vote of stockholders or directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding office.

 

10. Survival of Rights.

 

(a) The rights conferred on Employee by this Agreement shall continue after Employee has ceased to be a director, officer, Employee or other agent of the Company or to serve at the request of the Company as a director, officer, Employee or other agent of another corporation, partnership, joint venture, trust, Employee benefit plan or other enterprise and shall inure to the benefit of Employee’s heirs, executors and administrators.

 

(b) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

11. Severability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Company shall nevertheless indemnify Employee to the fullest extent provided by the Bylaws, the NYCRR or any other applicable law.

 

12. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of New York.

 

13. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

 

14. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.

 

15. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

 

16. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed or (ii) upon the third business day after the date on which such communication was mailed if mailed by certified or registered mail with postage prepaid to the parties address of record, or to such other address as may have been furnished to Employee by the Company.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

 

CANBIOLA, INC.  
     
     
By: Marco Alfonsi, CEO  
     
EMPLOYEE  
     
     
Pasquale Ferro  

 

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LICENSE AND ACQUISITiON AGREEMENT

 

This LICENSE AND ACQUISITION AGREEMENT (this “Agreement”). dated as of January 14, 2019 (the “Effective Date”), is between Hudilab, Inc. d/b/a/ Endless Relief, a Colorado corporation (“Sellet”), on the one hand and Pure Health Products, LLC, a New York limited liability company (“Buyer”), and Canbiola, Inc., a Florida corporation (“CANB”) on the other band.

 

RECITALS

 

A. Buyer is a wholly owned subsidiary of CANB and in lhe business of manufacturing products containing cannabidiol (“CBD”).

 

B. CANB’s common stock is publicly traded and quoted on OTC Markets’ QB marketplace (“OTCQB”).

 

C. Seller has developed proprietary technology and methods to infuse CBD into TENS electrode and other non-electrode pads for pain management and soreness (collectively, the “Pads”) whereby the adhesion is not affected, the CBD penetrates lhe skin, and the pads are reusable (lhe “Technology”).

 

D. The Technology is comprised of (among other things) lhree liquid components (parts A+B+C) (lhe “Components”) that get mixed together and added to Pads together with up to 400mg CBD and 200tng terpenes (the final product of which being referred to herein as, “Products”).

 

E. Buyet desires to acquire from Seller, and Seller desires to license and sell to Buyer, the Technology pursuant to the terms and conditions of this Agreement.

 

AGREEMENT

 

The parties agree as follows:

 

Article L TECHNOLOGY ACQUISITION

 

Section 1.0 I Assets Purchased. Subject to the terms and conditions set forth in this Agreement, Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller the Technology, including all patents, formulations, know-how, trademarks, trade names, copyrights, service marks, all registrations for them, all applications pending for them, and all other proprietary rights and intangible property of Seller relating to the Technology and Components, including trade secrets, inventions, technology, software, operating systems, customer lists, customer relationships, customer agreements, customer understandings, drawings, blueprints, know-how, formulae, slogans, processes, and operating rights and all olher similar items such items used by Seller for lhe production of the Technology and Components, including all derivative works of the foregoing (the “Assets”).

 

 

 

 
 

 

Section 1.02 Liabilities. Buyer shall not assume any liabilities of Seller and the Assets will be free of all liabilities, obligations, liens, and encumbrances.

 

Section 1.03 Purchase Price. The purchase price for the Assets (the “Purchase Price”) will be as follows:

 

  (a) Shares. CANB shall issue 7,500,000 shares of its common stock (the “Shares”) to Buyer.
     
  (b) Royalty. Buyer shall pay to Seller a portion of Buyer’s Gross Margin (a “Royalty”) from the sale of Products by Buyer or CANB equal to: (a) I0% for all sales of Products to customers not introduced to Buyer or CANB by Seller, and 20”/o for all sales of Products to customers that were introduced to Buyer or CANB by Seller. As used herein, “Gross Margin” shall mean the amount equal to all revenues received by Buyer from the sale of Products, less all costs and expenses of manufacturing the Products, fulfilling and shipping Product orders, returns and replacements of Product , license fees, taxes, and other direct expenses, the cost of any defense of liability claims or legal defense related directly to the Products, and direct marketing and packaging costs such as table displays, trade show participation, advertising, and similar activities, but not corporate overhead or burden. The Royalty will be paid on the  fifteenth (151h) day of each month following the Closing to the account designated by Seller. Buyer shall further provide Seller with an auditable accounting of each Royalty in conjunction with the above payments.

 

Section 1.04 Closing. The closing of the Purchase of the Assets (“Closing”) will occur not later than January 31, 2019 (“Closing Date”) electronically or at such time and place as agreed to by the parties. At Closing, Buyer shall deliver a duly executed certificate(s) for the Shares to Seller as specified by the Seller, and Seller shall deliver the Assets, including the exact formula and process for making and combining the Components and all documentation and written know-how relating to the Assets into escrow with an escrow agent agreed by all parties pursuant to escrow instructions mutually agreed by the parties. The escrow agent will be instructed to release the Assets to Buyer on the date ten (10) years from the Closing Date or once Seller is no longer able to provide Buyer with the Components as agreed herein or the date on which Buyer or CANB ceases production of Products or divests itself of its Product division and the Assets, whichever occurs first (“Escrow Termination Date”). Upon the Escrow Termination Date, once the Assets have been released to Buyer, all obligations of the parties to one another will cease, except for Buyer’s obligation to pay Seller its Royalty.

 

 

 

 
 

 

Section 1.05 New Products. If Seller develops any derivative works or products from or using the Assets prior to the Escrow Termination Date (“Derivative Assets”), such Derivative Assets will be considered an Asset of Buyer’s and immediately placed in escrow and subject to the below License granted in Section 1.07 and the other provisions of this Agreement, and Buyer will owe Seller Royalty for Products containing the Derivative Assets. Seller may not create Derivative Assets following the Escrow Termination Date.

 

Section 1.06 Supply of Components. Until the Escrow Termination Date, Seller agrees to produce and provide to Buyer as much of the Components as requested by Buyer for integration in its Products; provided that, Buyer must request the Components from Seller in writing at least three (3) weeks prior to the date the Components are to be delivered to Buyer. Buyer will pay Seller for the actual documented cost of Seller’s production of the Components, including all reasonable out of pocket expenses, raw materials, shipping and reasonable labor with fifteen (15) days from delivery of the invoice for such Components. If Seller is unable to provide any requested Components to Buyer for sixty (60) consecutive days, the Escrow Termination Date will occur on the 60”’ such day and the Assets will be released to Buyer. Seller agrees not to provide any third party with Components or any products containing or derived from the Assets. Until the Escrow Termination Date, Buyer agrees to acquire Components solely from Seller, in the amount of at least $50,000 per year.

 

Section 1.07 License. Seller hereby grants to Buyer and CANB an exclusive, irrevocable license to use the Assets in the manufacture, promotion and sale of Products until the Escrow Termination Date when the Assets transfer to Buyer.

 

Section 1.08 Title. Title to the Assets will transfer at the Escrow Termination Date. The risk of loss, damage, or destruction to or infringement upon or from any of the Assets will be borne by Seller before the Escrow Termination Date, after which time such risk will be borne by Buyer.

 

Section 1.09 Seller’s Assistance. Upon Closing, Seller will provide Buyer and its employees with training for the blending, application and packaging of Products using the Technology. Buyer shall pay for Seller’s reasonable travel and lodging costs associated with such training, provided that Buyer has prior approved such expenses in writing. In addition, Buyer may, from time to time and at any time prior to the Escrow Termination Date, request the assistance of Seller, which assistance will not be unreasonably withheld, to answer Product formula-related questions, technical questions, and general business questions. Buyer shall cover all reasonable out-of-pocket and other related expenses for Seller’s assistance. To the extent that any new Products are developed through the above assistance of Seller, they shall be considered Derivative Assets and subject to the Royalty.

 

Article II. SELLER’S REPRESENTATIONS AND WARRANTIES

 

Seller represents and warrants to Buyer and CANB as follows (which will be true as of Closing and Escrow Termination Date):

 

 

 

 
 

 

Section 2.0I Corporate Existence. Seller is a corporation duly incorporated and legally existing under the laws of the state of Colorado and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. Seller has all requisite corporate power and authority and all material licenses, permits, and authorizations necessary to own and operate the Assets and to carry on its business as now conducted.

 

Section 2.02 Authorization. Seller has duly authorized the execution, delivery, and performance of this Agreement and all other agreements contemplated by this Agreement to which Seller is a party, as the case may be. This Agreement and the Related Agreements, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with their respective terms except as the enforceability thereof may be limited by the application of bankruptcy, insolvency, moratorium, or similar laws affecting the rights of creditors generally or judicial limits on the right of specific performance. The execution and delivery by Seller of this Agreement, and the fulfillment of and compliance with the respective terms hereof by Seller, do not and will not (a) conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract; (b) result in the creation of any lien, security interest, charge, or encumbrance on the Assets; (c) result in a violation of the operating agreement of Seller or any law, statute, rule, or regulation to which Seller is subject; or (d) result in a violation of any order, judgment, or decree to which Seller is subject; or (e) require any authorization, consent, approval, exemption, or other action by or notice to any court or administrative or governmental body.

 

Section 2.03 Brokers and Finders. Seller has not employed any broker or finder in connection with the transactions contemplated by this Agreement, or taken action that would give rise to a valid claim against any party for a brokerage commission, finder’s fee, or other like payment.

 

Section 2.04 Transfer Not Subject to Encumbrances or Third-Party Approval. The execution and delivery of this Agreement by Seller, and the consummation of the contemplated transactions, will not result in the creation or imposition of any valid lien, charge, or encumbrance on any of the Assets, and will not require the authorization, consent, or approval of any third party, including any governmental subdivision or regulatory agency.

 

Section 2.05 Compliance with Codes and Regulations. Seller has all licenses and permits required to legally manufacture the Components and has no knowledge, after reasonable investigation, that the Assets violate any provisions of any applicable local or state ordinances, orders, or regulations.

 

Section 2.06 Litigation. No action, suit, proceeding, order, investigation, or claim is pending or, to the best of Seller’s knowledge, threatened against Seller or its property, at law or in equity, or before or by any governmental department, commission, board, bureau, agency, or instrumentality; Seller is not subject to any arbitration proceedings under collective bargaining agreements or otherwise or, to the best of Seller’s knowledge, any governmental investigations or inquiries; and, to the best knowledge of Seller, no basis exists for any of the foregoing.

 

 

 

 
 

 

Section 2.07 Compliance with Laws. To the best of Seller’s knowledge, (a) Seller has at all relevant times conducted its business in compliance with its articles of incorporation and bylaws, and is in compliance with the laws of the State of Colorado, and local ordinances and zoning laws; and (b) Seller is not in violation of the laws of the State of Colorado or local ordinances and zoning laws. Seller is not subject to any outstanding order, writ, injunction, decree, or judgment and Seller has not been charged with, or threatened with a charge of, a violation of any provision of federal, state, or local law or regulation.

 

Section 2.08 Title to and Condition of Assets.

 

(a) Seller owns all the Assets free and clear of all liens, pledges, security interests, options, claims, charges, or other encumbrances or restrictions of any kind.
     
(b) Seller has (and at Escrow Temrination Date will have) good and marketable title to the Assets.
     
(c) There are no defects or liabilities that might detract from the value of the Assets, interfere with any present or intended use of any of the Assets, or affect the marketability of the Assets.
     
(d) Seller is not aware of any claim of infringement relating to the Assets.

 

Section 2.09 Shelf Life. The Components have a shelflife of one (1) year.

 

Section 2.10 Investment.

 

(a) The Seller understands that the Shares are a speculative investment and involves a risk of loss of Seller’s investment.
     
(b) The Seller understands that the Shares are “restricted securities” and Seller may be unable to liquidate its investment in the Shares, however, should the Buyer file a registration statement at any time in the future, registering any common stock for any purpose, Sellers shall be entitled to “Piggy-Back” Registration rights to have any remaining Seller shares registered in that offering.
     
  (c) The Seller has the knowledge and experience in financial and business matters necessary to make Seller capable of evaluating the merits and risks of an investment in the Shares.
     
(d) The Seller has had the opportunity to ask questions and receive answers concerning CANB and the terms and conditions of the issuance of the Shares, and to obtain any of an investment in the Shares. The Seller has obtained all the infonnation it desires in connection with the Shares.

 

     

 

 
 

 

(e) The Seller is acquiring the Shares solely for the Shareholders’ own account and not with a view to or for resale in connection with any distribution of the Shares.

 

(f) The Seller is an “accredited investor” as that term is defined in Rule 501 of Regulation D under the Securities Act of 1933.

 

Section 2.11 Accuracy of Representations and Warranties. None of the representations or warranties of Seller contain or will contain as of Closing or Escrow Termination Date any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make statements in this Agreement not misleading.

 

Article m. REPRESENTATIONS OF BUYER

 

Buyer and CANB (“Buyer Parties”) represents and warrants to Seller as follows:

 

Section 3.0I Company Existence. Buyer is a limited liability company duly organized and legally existing under the laws of the state of New York. CANB is a corporation duly organized and legally existing under the laws of the state of Florida. Buyer Parties have all requisite corporate or individual power and authority to enter into this Agreement and to perform their obligations hereunder.

 

Section 3.02 Authorization. The execution, delivery, and performance of this Agreement and the related agreements have been duly authorized and approved by the respective management of Buyer Parties. This Agreement constitutes a valid and binding agreement of Buyer Parties, enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, reorganization, insolvency, or similar laws affecting the enforcement of creditors’ rights or by the application of general principles of equity.

 

Section 3.03 Brokers and Finders. Buyer Parties have not employed any broker or finder in connection with the transactions contemplated by this Agreement and has taken no action that would give rise to a valid claim against any party for a brokerage commission, finder’s fee, or other like payment.

 

Section 3.04 No Conflict with Other Instruments or Agreements. The execution, delivery, and performance by Buyer Parties of this Agreement will not result in a breach or violation of, or constitute a default under, Buyer Parties’ respective governing documents or any material agreement to which Buyer Parties are bound.

 

Section 3.05 Shares. At Closing the Shares will be newly issued and valid! authorized.

 

 

 

 
 

 

Section 3.06 Accuracy of Representations and Warranties. None of the representations or warranties of Buyer contain or will contain any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make the statements contained herein not misleading.

 

Article IV. COVENANTS OF SELLER

 

Section 4.01 Seller’s Use of Assets Before Escrow Termination Date. Seller agrees that between the date of this Agreement and the Escrow Termination Date:

 

(a) Continue to use the Assets in substantial conformity with all applicable laws, ordinances, regulations, rules, or orders, and will use its best efforts to preserve its business organization and continued operation;
     
(b) Not assign, sell, lease, license or otherwise transfer or dispose of any of the Assets;
     
(c) Use the Assets and create Derivative Assets solely for Buyer’s benefit; and
     
(d) Notify Buyer promptly in the event of any material change in the Assets or Seller’s business or any material adverse change in the financial condition of Seller or of any breach of a representation or warranty provided in this Agreement.

 

Section 4.02 Conditions and Best Efforts. Seller will use its best efforts to effectuate the transactions contemplated by this Agreement and to fulfill all the conditions of its obligations under this Agreement, and will do all acts and things as may be required to carry out its obligations under this Agreement.

 

Section 4.03 No Negotiations with Others. Except as otherwise permitted by this Agreement, or with Buyer’s prior written consent, Seller will refrain, and will cause Seller’s officers, directors, and employees and any investment banker, lawyer, accountant, or other agent retained by Seller to refrain, from initiating or soliciting any inquiries or making any proposals with respect to, or engaging in negotiations concerning, or providing any confidential information or data to, or having any discussions with any person relating to, any acquisition, business combination or purchase of all or any significant portion of the assets of, or any equity interest in, Seller.

 

Section 4.04 Non-Competition and Non-Solicitation. Seller understands that Buyer Parties will incur substantial costs, time and expense in establishing relationships and goodwill with various persons and businesses. Seller acknowledges that this goodwill is the property of Buyer Parties. Seller acknowledges that this section is necessary to protect investment and goodwill of Buyer Parties in their businesses and in these relationships.

 

(a) Seller agrees for itself and its principals that they shall not in any way, from execution of this Agreement until the date two (2) years following the Escrow Termination Date, enter into any competing business or, directly or indirectly, own or participate in the the Assets, or pad production containing CBD. For purposes of this Agreement, the term “competing business” means any person, business, service provider, operation or other program that offers products or services similar to those offered by Buyer Parties.

 

 

 

 
 

 

(b) Seller agrees not to solicit any third party for the pwpose of creating any business relationship that competes with the business of Buyer, or the sale any products which compete with or are similar in pmpose to the Products or contain CBD to any person, business or entity as of the date of closing.

 

Section 4.05 Potential Customers. If Seller receives knowledge of a potential customer for the Products, it will not engage the potential customer directly and will promptly notify Buyer of such potential customer, and if the potential customer’s needs cannot be met for reasons of quality, price, volume, and delivery or similar issues, then Seller is clear and free to further engage Potential Customers at will for any reason with no colflict with Buyer.

 

Section 4.06 Press Releases. No notice to customers, press release, or other public announcement concerning the transactions contemplated by this Agreement will be made by Seller without Buyer’s prior written consent.

 

Article V. INDEMNIFICATION AND SURVIVAL

 

Section 5.01 Survival of Representations and Warranties. All representations and warranties made in this Agreement will survive the Closing and Escrow Termination Date of this Agreement.

 

Section 5.02 Seller’s Indemnification. Seller agrees to indemnify, defend, and hold Buyer Parties and their respective directors, officers, principals, shareholders, agents, successors, and assigns harmless from and against any and all claims, liabilities, obligations, costs, expenses, and reasonable attorney fees (collectively, “Damages”) arising out of or related to:

 

(a) Any breach or inaccuracy of any obligation, representation or warranty of Seller made in this Agreement;
     
(b) Any failure by Seller to perform any covenant required to be performed by it pursuant to this Agreement;
     
(c) Any liability or obligation of Seller arising out of or in connection with the ownership, use, condition, maintenance, or operation of the Assets by Seller prior to the Escrow Termination Date; and
     
(d) Any infringement claims relating to the Assets prior to the Escrow Termination Date.

 

 

 

 
 

 

(e) The forgoing indemnification will not apply to any Damage caused by Buyer Parties’ willful misconduct or gross negligence.

 

Section 5.03 Buyer’s Indemnification. Buyer agrees to defend, indemnify, and hold harmless Seller its directors, officers, principals, shareholders, agents, successors and assigns from and against all Damages arising out of or related to:

 

(a) Any breach or inaccuracy of any representation or warranty of Buyer made in this Agreement;
     
(b) Any failure by Buyer to perform any covenant required to be performed by it pursuant to this Agreement; and
     
(c) Any liability or obligation relating to the Assets that arises following the Escrow Termination Date.
     
(d) The forgoing indemnification will not apply to any Damage caused by Seller’s willful misconduct or gross negligence.

 

Section 5.04 Indemnification Procedure.

 

(a) Third-Party Claims.

 

(i) Each indemnified party will, with reasonable promptness after obtaining knowledge thereof, provide the indemnifying party with written notice of all third-party actions, suits, proceedings, claims, demands, or assessments that may be subject to the indemnification provisions of this Section (collectively, “Third-Party Claims”), including, in reasonable detail, the basis for the claim, the nature of Damages, and a good-faith estimate of the amount of Damages.
     
(ii) The indemnifying party will have fifteen (15) days after its receipt of the claim notice to notify the indemnified party in writing whether the indemnifying party agrees that the claim is subjj)Ct to Section and, if so, whether the indemnifying party elects to undertake, conduct, and control, through counsel of its choosing (subject to the consent of the indemnified party, such consent not to be withheld unreasonably), and at its sole risk and expense, the good-faith settlement or defense of the Third-Party Claim.
     
(iii)

If within fifteen (15) days after its receipt of the claim notice, the indemnifying party notifies the indemnified party that it elects to undertake the good-faith settlement or defense of the Third-Party Claim, the indemnified party will reasonably cooperate with the indemnifying party in connection therewith, including, without limitation, by making available to the indemnifying party all relevant information material to the defense of the Third-Party Claim. The indemnified party will be entitled to participate in the settlement or defense of the Third-Party Claim, at its own expense, through counsel chosen by the indemnified party. The indemnified party will have the right.to review any proposed settlement that would impose an obligation or duty on the indemnified party, and, if the indemnified party objects to such a settlement, the settlement may not be undertaken. As long as the indemnifying party is contesting the Third-Party Clai in good faith and with reasonable diligence, the indemnified party will not pay settle the Third-Party Claim. Notwithstanding the foregoing, the indemnified party will have the right to pay or settle any Third-Party Claim at any time as long as the indemnified party waives any right to indemnification for such claim from the indemnifying party.

 

 

 

 
 

 

(iv) If the indemnifying party fails to provide notice that it elects to undertake the good-faith settlement or defense of the Third-Party Claim, or if the indemnifying party fails to contest the Third-Party Claim or to undertake or approve settlement in good faith and with reasonable diligence, the indemnified party will thereafter have the right to contest, settle, or compromise the Third-Party Claim at its exclusive discretion, at the risk and expense of the indemnifying party, and the indemnifying party will thereby waive any claim, defense, or argument that the indemnified party’s defense or settlement of such Third-Party Claim is in any respect inadequate or unreasonable.
     
(v) A party’s failure to give timely notice will not constitute a defense (in part or in whole) to any claim for indemnification by such party, except if, and only to the extent that, such failure results in any material prejudice to the indemnifying party.

 

(b) Claims Other than Third-Party Claims.
(i) Each indemnified party will, with reasonable promptness, deliver to the indemnifying party written notice of all claims for indemnification under this Section, other than Third-Party Claims, including, in reasonable detail, the basis for the claim, the nature of the Damages, and a good-faith estimate of the amount of the Damages.
     
(ii) The indemnifying party will have thirty (30) days after its receipt of the claim notice to notify the indemnified party in writing regarding :whether the indemnifying party accepts or disputes liability for all or any part of the Damages described in the claim notice. If the indemnifying party does not so notify the indemnified party, the indemnifying party will be deemed to accept liability for all the Damages described in the claim notice.
     
(iii) A party’s failure to give timely notice will not constitute a defense (in part or in whole) to any claim for indemnification by such party, except if, and only to the extent that, such failure results in any material prejudice to the indemnifying party.

 

Section 5.05 In the event of any Damages for which Buyer has a right to indemnity under this Agreement, Buyer will be entitled to offset the amount of such Damages against any unpaid amount of the Purchase Price remaining payable. On giving notice of a claim for indemnity pursuant to this Section, Buyer will have the right to withhold payment of that portion of the Purchase Price that equals the amount of the estimated Damages, and such withholding will not constitute a default under this Agreement. The right to indemnification for Buyer will not be limited to the amount of setoff under this section.

 

 

 

 
 

 

Article VI. TERMINATION OF AGREEMENT

 

Section 6.01 Right of Parties to Terminate.

 

(a) This Agreement may be terminated by Buyer if Seller breaches any of its obligations under this Agreement in any material respect, including not supplying the Components as requested by Buyer, which breach is not cured within sixty (60) days from the date of breach. Upon termination by Buyer or by Seller for any reason other than those listed in Subsection (b) below, the Escrow Termination Date will be triggered, and the Assets will be released from Escrow to Buyer.
     
(b) This Agreement may be terminated by Seller in writing if Buyer fails to purchase at least $50,000.00 of Components per year from Seller, in which case the Assets will be returned to Seller and the parties will have no further obligations to each other.

 

Article VII. MISCELLANEOUS PROVISIONS

 

Section 7.01 Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties relating to the subject matter hereof and supersede any and all prior understandings, agreements, negotiations and discussions, both written and oral, between the parties hereto with respect to the subject matter hereof.

 

Section 7.02 Waiver. Any provision or condition of this Agreement may be waived at any time, in writing, by the party entitled to the benefit of such provision or condition. Waiver of any breach of any provision will not be a waiver of any succeeding breach of the provision or a waiver of the provision itself or any other provision.

 

Section 7.03 Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with, and shall be governed by, the laws of the State of New York without reference to, and regardless of, any applicable choice or conflicts oflaws principles.

 

Section 7.04 Execution of Agreement; Counterparts; Electronic Signatures.

 

(a) This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument, and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties; it being undeistood that all parties need not sign the same counterparts.
     
(b) The exchange of copies of this Agreement and of signature pages by facsimile transmission (whether directly from one facsimile device to another by means of a dial-up connection or whether mediated by the worldwide web), by electronic mail in “portable document format” (“.pdf’) fonn, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all pUipOSes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

 

 
 

 

Section 7.05 Further Assurances. Each of the parties hereto shall from time to time at the request of another party hereto, and without further consideration, execute and deliver to such other party such further instruments of assignment, transfer, conveyance and confirmation and taice such other action as the other party may reasonably request in order to more effectively fulfill the purposes of this Agreement.

 

Section 7.06 Effect of Headings, Schedules and Exhibits. The subject headings of the paragraphs of this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions. All schedules and exhibits to this Agreement are incorporated into and made part of this Agreement as if set forth in their entirety in this Agreement.

 

Section 7.07 Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof. If any provision hereof is determined by a court of competent jurisdiction or an arbitrator to be invalid or unenforceable, such provision shall be limited to the extent necessary to make it valid and enforceable, or if necessary, severed from this Agreement, and the remainder of the Agreement shall be in full force and effect.

 

Section 7.08 Attorneys’ Fees. If either party brings a claim or lawsuit against the other party to this Agreement to interpret or enforce any of the terms of this Agreement, the prevailing party shall, in addition to all other damages, be entitled to reasonable attorneys’ fees and costs, costs of witnesses, and costs of investigation from the non-prevailing party(ies).

 

Section 7.09 Amendment and Termination. Except as provided in Section 4.04 of, this Agreement may be amended or terminated only upon a writing executed by both Buyer and Seller.

 

Section 7.10 Equitable Relief. Each party is entitled to bring an action for temporary or preliminary injunctive relief at any time in any court of competent jurisdiction in order to prevent irreparable injury that might result from a breach of this Agreement.

 

Section 7.11 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Buyer and Sellers and their respective successors and assigns. Whenever appropriate in this Agreement, references to Buyer or Sellers shall be deemed to refer to such company’s successors or assigns. Notwithstanding, no party may assign this Agreement without the written consent of the other parties.

 

 

 

 
 

 

[SIGNATURE PAGE FOLLOWS]

 

SIGNATURE PAGE TO

LICENSE AND ACQUISITION AGREEMENT

 

IN WITNESS WHEREOF, the parties enter into this Agreement as of the Effective Date first above written.

 

“SELLER”   “BUYER”
Hudilab, Inc. d/b/a/ Endless Relief, a Colorado corporation  

Pure Health Products, LLC,

a New York limited liability company

     
By:     By:  
Printed:     Printed: Pasquale, Ferro
Title:     Title: President
         
      “CANB”
      Canbiola, Inc.,
      a Florida corporation
         
      By:  
      Printed: Marco Alfonsa
      Title: CEO

 

 
 

 

 

Memorandum of Understanding

 

This Memorandum of Understanding (“MOU” or “Agreement”)) is entered into on the 9 th day of November 2018 (“Effective Date”) by and between Canbiola, Inc. (“CANB”), a Florida Corporation located at 960 S. Broadway, Suite 120, Hicksville, NY 11801, and TZ Wholesale LLC (“TZ”), d.b.a. Pure Wholesale, located at 1538 Middleneck Road, Port Washington, NY 11050 or collectively referred to as the Parties (“Parties”).

 

RECITALS

 

  1- CANB is one of the leading providers of proprietary non-psychoactive cannabinoid extracted from the hemp plant (“CBD” or “Products”) and a proprietary therapy using Transcutaneous Electrical Nerve Stimulation (“TENS”) and Electrode Pads to relieve and reduce muscle and joint pain.
     
  2- TZ is a wholesale distributor of various goods and products to both sub-distributors and retailers (“Customers”) worldwide.
     
  3- TZ has indicated interest in the sale and placement of Products into their Customers locations providing certain branding and pricing parameters can be met.
     
  4- CANB is a publicly traded (OTCQB:CANB) and supplier of Products for sale into medical, retail, and online consumers.
     
  5- CANB maintains a corporate office and shipping facility in Hicksville, NY.
     
  6- CANB is desirous of expanding its industry relationships to the TZ Customers.
     
  7- The Parties represent that they have sufficient resources to allow for expansion and growth into additional related markets and the TZ Customer base.
     
  8- CANB has provided sufficient Product samples to allow TZ to make an informed decision as to the purchase and subsequent sale of the Products.
     
  9- TZ confirms that all deliveries shall be made to their warehouse location at 4756 Glen Woods Street, Littleneck, NY 11362 with shipping charges the responsibility of TZ.
     
  10- This Agreement and subsequent manufacturing and distribution of Product by TZ is on a non-exclusive basis subject to the additional terms of this agreement including section B. b.

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Initial   

 

 
 

 

NOW THEREFORE the Parties agree as follows:

 

  A- Upon of signing of this agreement:

 

    a. CANB will provide and confirm:

 

    i. A final cost FOB factory of products per below:

 

    1. Pure Ultra Hemp Oil Drops 250 mg 1 oz (30ml) $10.95
    2. Pure Ultra Hemp Oil Drops 500 mg 1 oz (30ml) $16.99
    3. Pure Ultra Hemp Oil Drops 1,000mg 1 oz (30ml) $26.89
    4. Pure Ultra Hemp Oil Drops 1,500mg 1 oz (30ml) $31.99
    5. Cryo-Gel 125mg 3 oz (90ml) $15.00
    6. Cryo-Gel 300mg 3 oz (90ml) $30.00
    7. Muscle & Joint Hemp Salve 100mg .5 oz (15ml) $12.50
    8. Muscle & Joint Hemp Salve 200mg .5 oz (15ml) $20.00
    9. Pet Pure Hemp Drops- Price TBD
    10. TENS unit and CBD Patched TBD

 

    ii. Prices are subject to change with 30 days written notice.
       
    iii. A $10,000 credit at wholesale cost per above. on the first order of Product.

 

  b. TZ will provide:

 

    i. Camera ready art and materials to CANB to allow the production of labels for products.

 

    1. Both the design and printing of the labels shall be at TZ’s sole expense as we discussed, and the price will be passed through at CANB actual cost.

 

    a. For clarity, EACH plate/ dye/ and set-up charges directly form the printer is approximately $400 per SKU.  Once TZ pays for these plates, they are the property of TZ.
    b. Each SKU label run at the anticipated quantities is approximately $.17 per label at 2,500 labels or approximately $400. TZ is free to have labels produced at any printer provided the labels fit the CANB labeling machines and meet with label compliance requirements.

 

    2. CANB shall apply the labels to all Products at no additional cost.
       
    3. TZ has the option to use additional private labels for the Products but any and all labels shall comply with the CANB design and regulatory requirements prior to printing and use and shall be at TZ’s sole expense.

_______

Initial   

 

 
 

 

    ii. An initial order over ten thousand dollars ($10,000) for delivery to TZ’s warehouse location at the first Product availability opportunity.
       
    iii. Identifying the initial products for the launch.

 

  B- General Terms and Conditions.

 

    a. All marketing materials, brochures, posters, sell sheets, window displays, door stickers tri-fold pamphlets, educational materials, ”swag” such as shirts etc. (“Marketing Materials”) shall be approved by both parties for quality, quantity and cost and, once approved the actual cost shall be split 50/50.  CANB may pay for its 50% portion of the actual cost of the Marketing Materials in Product shipped to TZ.   
       
    b. Shipment terms are 10 business days date of order received from TZ.
       
    c. Sale terms are NET 10 days. Subsequent orders will not be shipped unless account is current.  Late fees per the CANB policy will be enforced.
       
    d. The Parties agree to non-circumvention and no-raid provisions for the term of this agreement whereas CANB agrees not to directly sell Products to any TZ Customers and TZ agrees not to contact any of the CANB suppliers or vendors used in production and procurement of the Products.
       
    e. Should TZ discontinue use or stop shipment of any single Product for 3 months or longer, the Product in inventory shall be shipped to and paid for by TZ under the usual terms of sale.
       
    f. Minimum order requirements for each manufacturing run and delivery shall be $5,000.
       
    g. The term of this agreement shall be for 5 years from Effective Date.

 

  C- This MOU shall be binding upon the Parties and may be replaced with a definitive agreement signed by the Parties.   
     
  D- This MOU shall supersede all agreements, both oral and written, between the Parties.
     
  E- Whenever TZ places any product in 50 of their customer’s stores, CANB shall issue TZ or its principles two million (2,000,000) shares of common stock of the Corporation, said stock shall be issued under the SEC ’34 act as Rule 144 Restricted Shares of stock.  

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Initial   

 

 
 

 

REPRESENTATIONS AND WARRANTIES

 

  A. TZ will hold CANB, including all employees, officers, and employees harmless for any delay in shipping or availability of Products potentially causing any business interruption.
     
  B- Each Party represents that they have been represented by counsel, have the authority to execute this MOU and that it is understood it is binding in every respect.
     
  C- The Parties will or have executed a Non-Disclosure and Non-Circumvention Agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of Understanding to be binding and effective as of the day and your first written above.

 

********Signature page follows********

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Initial   

 

 
 

 

****Signature Page to Memorandum of Understanding TZ Wholesale LLC / CANB****

 

Canbiola, Inc.  
     
By:  
  Marco Alfonsi, CEO  
     
TZ Wholesale LLC  
     
By:    
  Ken Tawfik, Principal and Managing Member  

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Initial   

 

 
 

 

 

 

 

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Marco Alfonsi, certify that:

 

1. I have reviewed this Annual Report on Form 10-K of Canbiola, Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: April 16, 2019 By: /s/ Marco Alfonsi
    Marco Alfonsi
   

Chief Executive Officer

(Principal Executive Officer)

 

 
 

 

Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Stanley L. Teeple, certify that:

 

1. I have reviewed this Annual Report on Form 10-K of Canbiola, Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: April 16, 2019 By: /s/ Stanley L. Teeple
    Stanley L. Teeple
   

Chief Financial Officer

(Principal Financial Officer)

 

 
 

 

Exhibit 32.1

 

CERTIFICATION 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

 

In connection with the Annual Report of Canbiola, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marco Alfonsi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: April 16, 2019 By: /s/ Marco Alfonsi
    Marco Alfonsi
    Chief Executive Officer

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 
 

 

Exhibit 32.2

 

CERTIFICATION 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

 

In connection with the Annual Report of Canbiola, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanley L. Teeple, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: April 16, 2019 By: /s/ Stanley L. Teeple
    Stanley L. Teeple
    Chief Financial Officer

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.