Canbiola, Inc. (Form: 10-K, Received: 04/06/2018)

SUPPLEMENTAL CASH FLOW INFORMATION:

Income taxes paid

Interest paid

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, 2017

[ ] 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 $0.00 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, 2017, was $1,473,714, based on the last reported sale price of the registrant’s Common Stock on the OTC Markets on that date.

As of April 3, 2018, the registrant had outstanding 233,122,323 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.	6
Item 1A.	Risk Factors.	9
Item 1B.	Unresolved Staff Comments.	9
Item 2.	Properties.	9
Item 3.	Legal Proceedings.	9
Item 4.	Mine Safety Disclosures.	9

	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	9
Item 6.	Selected Financial Data.	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	13
Item 8.	Financial Statements and Supplementary Data.	13
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	13
Item 9A.	Controls and Procedures.	13
Item 9B.	Other Information.	14

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	15
Item 11.	Executive Compensation.	17
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	18
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	20
Item 14.	Principal Accounting Fees and Services.	21

	PART IV
Item 15.	Exhibits, Financial Statement Schedules.	22

Signatures		23

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.

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, 2017, 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.

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 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 operates several divisions, including document management and email marketing platforms; however, its primary operations are from the development and sale of products containing CBD. The Company’s products contain CBD derived from Hemp and include products such as oils, creams, moisturizers, chews, vapes, isolate, gel caps, concentrate and water. In addition to offering white labeled products, 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 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 and cannabis. 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 0.03% of “THC,” another, but psychoactive, cannabinoid found in cannabis. 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.

In order to facilitate its operations, the Company has entered into a Production Agreement with Pure Health Products, LLC, a New York limited liability company (“PHP”). 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. 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.

The Company’s products are sold via its website and through doctors and other medical professionals with which the Company enters into distribution agreements.

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.

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.

While the Company is seeking additional opportunities to manufacture, market and/or distribute CBD, it continues to operate its Bullseye and WRAPmail divisions and explore ways to grow each, especially in a manner that would be symbiotic with its intended future CBD operation.

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 provides a branding and advertising solution to organizations allowing employee e-mails to be written on company sanctioned trackable e-mail stationary as opposed to using simple, personal e-mail signatures. In essence, WRAPmail turns every e-mail sent by one of our customers into valuable marketing tool by “wrapping” the e-mail with the customer’s letterhead, logo, product offerings, or other information or graphics that the customer wishes to disseminate to the reader.

WRAPmail is a server/cloud ‐ based solution. Users create e-mails just as they always have, and do not see the rich content. Users are not required to change their e ‐ mail address and the administrator can “ construct ” with or without the help of the WRAPmail Production & Design team different e ‐ mail letterheads using the included WRAPmaker that allow for including different graphics, links, promotions, surveys and/or audio. The e-mail either makes a stop after leaving the user ’ s desktop and that “ stop ” is where the e-mail gets wrapped or users use the available WRAPmail toolbars. Currently, toolbars are available for Google Chrome, Microsoft Internet Explorer, Apple Safari and Firefox for Gmail, Yahoo Mail, AOLMail, Microsoft Hotmail/LIVE, GoDaddy webmail, Keller Williams webmail, Salesforce.com webmail and 24sevenoffice.com webmail. WRAPmail software resides in the cloud or for large clients on their own server inside their Firewall. One WRAPmail server can currently process about 100K emails per hour (as we move to multi ‐ threading we believe we can increase the speed ten ‐ fold). WRAPmail has also developed an APP for Android and iPhone where users can send WRAPPED emails from their Gmail, Yahoo Mail, AOL Mail and Microsoft Mail.

We have been only mildly successful in gaining customers for our newest version, “WRAPmail 2.0,” a paid service with B2B and B2C offerings. This limited success in garnering new clients is despite numerous marketing efforts to the contrary and the Company has yet to find the best avenue for marketing WRAPmail 2.0 to potential clients. The Company continues to explore alternative avenues for generating revenues through its WRAPmail 2.0 product offering and intellectual property.

After substantial research, 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.

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.

The Bullseye® Productivity Suite consolidates all necessary office productivity tools into one online experience accessible everywhere you need it. The system has tools that include, but not limited to, close loop Email, CRM marketing, task and project management, document storage and retrieval system, note system, form building, video conferencing, scanning, internet cloud and real ‐ time data use. All functions and features of the Bullseye® Productivity Suite are audited and help our clients with corporate governance and compliance. Flawless organization of personal and professional information as well as the categorizing and archiving of digital files is possible through our Bullseye platform.

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.

Any expiration of our patents or claims could adversely affect our business. However, with regard to the importance and effect of these patents, it is necessary to understand the structure of the Company’s intellectual property. Patents have been relied upon to discourage infringement during the research and development stage of the technology. In that sense we believe that the main purpose of the patents has been that they have served to provide the Company a head start against potential competitors. A significant body of unpublished know-how and trade secrets is closely held by the Company in order to mitigate the risk of competition that could arise from other parties’ reliance merely upon the information contained in the patents. The Company can derive revenue from sub-licensing its know-how without sub-licensing the rights to patents, or it can, as it has the right to do under the agreement, also sublicense the patents as well.

The above patents relate to the document management and email marketing divisions. Due to diminishing revenue it was determined to reduce the fair value of these patents to 0.

Employees

The Company currently has no full-time employee.

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 2016 and 2017 we spent $0 in research and development.

Government Regulation

Through its manufacture and distribution of CBD products, the Company will be subject to federal and state regulations relating to cannabis, including the Federal Controlled Substance Act, which classifies marijuana and its derivatives as a Schedule 1 narcotic. 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.

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.

Transfer Agent

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

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.

Item 3. Legal Proceedings

We are not aware of any pending or threatened legal proceedings in which we are involved.

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 OTC Market’s “Pink” marketplace under the symbol “WRAP.” 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.

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.


		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


		2016
	High		Low
First Quarter	$ 0.15		$ 0.08
Second Quarter	$ 0.13		$ 0.06
Third Quarter	$ 0.13		$ 0.01
Fourth Quarter	$ 0.08		$ 0.01

The last reported sale price of the Company’s common stock as of April 3, 2018 was $0.027 per share.

Record Holders

As April 3, 2018, there were 233,122,323 shares of common stock issued and outstanding to approximately 172 shareholders of record.

Dividends

The Company paid no dividends in 2017 or 2016.

We do not anticipate paying any cash dividends in the foreseeable future.

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 its 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 18, 2016 involving sales of our securities that were not registered under the Securities Act of 1933, as amended (the "Securities Act"). Each offer and sale was exempt from registration under either Section 4(a)(2) of the Securities Act or Rule 506(b) under Regulation D of the Securities Act.

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 (“ MWL”) 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 will be 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 will be charged to officer’s compensation in the three months ended March 31, 2018.

On February 12, 2018, the Company issued 1 share of CANB Series A Preferred Stock to David Posel, pursuant to the Executive Service Agreement signed with Mr. Posel on February 12, 2018.

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 will be 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 will be partially charged to consulting fees in the three months ended March 31, 2018.

On February 16, 2018, the Company issued 3 shares of CANB Series A Preferred Stock to Andrew W Holtmeyer, pursuant to the Executive Service Agreement signed with Mr. Holtmeyer on February 16, 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 will be 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 will be 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 will be charged to consulting fees in the three months ended March 31, 2018.

Item 6. Selected Financial Data

Not required for smaller reporting companies.

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. (“Prosperity”), a New York corporation incorporated on April 2, 2008. We provide document, project, marketing and sales management systems to business clients through our website and proprietary software and also have a division focusing on the development and sale of products containing CBD. The Company is presently in the process of dissolving Prosperity.

The consolidated financial statements include the accounts of CANB and its wholly owned subsidiary Prosperity from the date of its acquisition on January 5, 2015.

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

Results of Operations

Year Ended December 31, 2017 compared with Year Ended December 31, 2016:

Revenues increased $27,601 from $$95,145 in 2016 to $122,746 in 2017. The increase was due to the new business of CBD product.

Cost of product sales increased $44,466 from $0 in 2016 to $44,466 in 2017 due to the launch of new product sales.

Officers and directors compensation and payroll taxes decreased $26,042 from $180,448 in 2016 to $154,406 in 2017. The 2016 expense amount ($180,448) consists of salary paid to our Chief Technology Officer ($93,750) and Chief Executive Officer ($72,000) pursuant to their respective employment agreements and related payroll taxes ($14,698). 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).

Consulting fees increased $184,828 from $99,913 in 2016 to $284,741 in 2017. The 2016 expense amount ($99,913) includes stock-based compensation of $30,000. The 2017 expense amount ($284,741) includes stock-based compensation of ($167,688), resulting from stock issued for the service of consultants.

Advertising expense increased $16,421 from $11,901 in 2016 to $28,322 in 2017.

Hosting expense decreased $10,219 from $32,182 in 2016 to $21,963 in 2017.

Rent expense remained same at $65,060 in 2016 and 2017.

Professional fees increased $48,339 from $47,207 in 2016 to $955,46 in 2017.

Depreciation of property and equipment decreased $40 from $3,267 in 2016 to $3,227 in 2017.

Amortization of intangible assets decreased $2 from $3,974 in 2016 to $3,972 in 2017.

Other operating expenses increased $71,088 from $62,741 in 2016 to $133,829 in 2017. The increase was due largely to higher travel expenses, office expenses and miscellaneous expense in 2017 compared to 2016.

Net loss increased $1,474,669 from $665,050 in 2016 to $2,139,719 in 2017. The increase was due to the $328,839 increase in total operating expenses and the $1,173,431 increase in other expense - net, partially offset by the $27,601 increase in revenues.

Liquidity and Capital Resources

At December 31, 2017, the Company had cash and cash equivalents of $1,652 and a working capital deficit of $1,791,732.

Cash and cash equivalents decreased $28,541 from $30,193 at December 31, 2016 to $1,652 at December 31, 2017. For the year ended December 31, 2017, $332,750 was provided by financing activities, $286,291 was used in operating activities, and $75,000 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, 2017 and 2016 and the report of BMKR, LLP, our independent registered public accounting firm, are set forth on pages F-1 through F-22 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.

Management, with the participation of our Chief Executive Officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2017 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, 2017, 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, 2017 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 3, 2018 are as follows:


Name	Age	Position
Marco Alfonsi	57	CEO, Director, interim Secretary and CFO
Carl Dilley	63	Director
David Posel	39	Chief Operating Officer (COO)

Marco Alfonsi , CEO and director and interim CFO and Secretary, 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.

Carl Dilley , director, is a career entrepreneur serving as an officer or director in many different companies and industries. With key roles at Spartan Securities and Island Stock Transfer, Mr. Dilley has been instrumental in taking over 400 companies public. He is currently a managing partner of Connect X Capital Partners, which owns a group of financial services and other companies including: Island Capital Management, LLC, Spartan Securities Group, Ltd., Proxy and Printing LLC., Endeavour Insurance Partners and Pioneer Recycling LLC. He has served as president of Island Stock Transfer, a division of Island Capital Management, LLC from 2003 to present and currently acts as senior executive officer responsible for oversight of the day to day operations. He has also acted as CEO of Vacation Travel Corp, from 2003 to present, president of Hurricane Motorsports, Inc. from 2008 to present, director and COO of Endurance Exploration Group from January, 2014 to present, director of Perpetual Industries, Inc. from March, 2015 to present. Mr. Dilley was elected director of the Company in 2014. It is Mr. Dilley’s decades of business experience, including serving as officer and director of numerous public and private entities, several in similar industries as the Company that led to the conclusion that he should serve as our director.

Mr. Dilley has been involved in the investment Industry since 1983, and previously held FINRA series 24, 66, and 7 Securities licenses to perform retail, investment banking and new listing services functions for Spartan, where he served as managing partner until January 2015. He stepped down to assume the role as President of Pioneer Recycling in January 2015. He has taken University level courses in accounting, finance, and statistics and holds a Canadian Finance II designation and fellow of Canadian Securities Institute and completed Part I and II of the CFA (Chartered Financial Analyst program) at University of West Virginia.

David Posel , COO, started his earliest years as a metallurgical engineer at AGCO Metalex, a large precious metals refinery in Washington State. The son of a Ph.D. chemist, Boeing engineer and mathematics major, he quickly went on to the Semiconductor manufacturing industry for nearly a decade as a metallic silicon coatings engineer, leaving to attend ASU West in Arizona. With an engineering and metallurgical chemistry background, Mr. Posel switched gears to Organic agricultural production for an additional eight years. Mr. Posel was farm director and chief environmental scientist for what was once the oldest Organic farm in the state of Colorado before moving into the more advanced world of CBD, hemp production and custom product development.

Mr. Posel has spent years earning the respect of CBD market leaders and forming solid business relationships both in the US and abroad. His legacy began by making the first CBD infused consumer product offered in the US with 99% isolate, 'CrystalPure CBD' which is now sold under our brand. As COO of Canbiola, Mr. Posel continues to engage market leaders and takes the lead in producing multiple first-to-market products for the CBD industry, and pushes product boundaries to expand hemp product lines across the board. Mr. Posel was appointed as COO of the Company on or around February 7, 2018.

Board Committees

We have not yet established an audit committee, compensation committee, or nominating committee. During 2017, 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 directors and executive officers were not 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. At this time, Mr. Dilley is an “independent director” as that term is defined under the rules of the NASDAQ Capital Market.

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, 2017, the Reporting Persons met all applicable Section 16(a) filing requirements.

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, 2017.


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)	2016	$ 72,000	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 72,000
CEO and Director	2017	$ 84,000	$ 0	$ 63,902	$ 0	$ 0	$ 0	$ 0	$ 147,902

(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 is 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.

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, 2017.


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	2016	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0
Director	2017	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0

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 3, 2018, 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 233,122,323 shares of common stock outstanding as of April 3, 2018, and 12 shares of Series A preferred stock issued and outstanding, which in aggregate are convertible into 120,000,000 shares of common stock at any time and represent 240,000,000 votes. There are a total of approximately 473,122,323 votes eligible to be cast in any Company vote as of April 3, 2018.

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.

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

The 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.

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	30,440,000	13.07%	8	67%	40.27%	0
Carl Dilley[2]	Director	4,085,034	1.75%	0	0%	0.01%	0
Andrew Holtmeyer	Vice President	0	0.00%	3	25%	12.68%	0
David Posel	CTO	0	0.00%	1	8%	4.23%	0
All officers and directors as a group [2 persons]		34,525,034	20.55%	12	100%	57.19%	0

(1) As of April 3, 2018, Marco Alfonsi owns approximately 30,440,000 shares of common stock and 8 shares of Series A preferred stock, which are convertible into 80,000,000 shares and equal 160,000,000 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) Carl Dilley holds 4,085,034 shares in his individual name. In addition, entities in which Mr. Dilley holds a minority interest own shares in the Company—1,000 shares are held by Endurance Exploration Group and 1,000 shares are held by Spartan Securities Group, Ltd.

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 Series B Preferred Shares	% of Series B Preferred Shares	% of Eligible Votes	Number of Warrants currently exercisable or exercisable in the next 60 days
McKenzie Webster Limited[1]	77,003,685	33.07%	0	0%	16.28%	0
RedDiamond Partners LLC [2]	0	0.00%	332,721	100%	0.00%	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)

RedDiamond Partners LLC is controlled by John DeNobile, a non-affiliate of the Company. Each share of Series B Preferred Stock 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. The business address for this shareholder is 156 W Saddle River Rd, Saddle River, NJ 07458.

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.

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 2016 and 2017, 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.

On or around February 1, 2016, the Company issued the CEO’s brother, Paul Alfonsi, a promissory note in the amount of $15,000 in exchange for a loan of $15,000 from Paul Alfonsi. The note has a six month maturity and bears 12% simple interest. On February 13, 2017, the Company issued 1,685,900 shares of WRAP 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.

ProAdvanced Group, Inc. (“PAG”), an entity controlled by the Company’s chief executive officer, is a customer of CANB. As of December 31, 2017, CANB had an account receivable from PAG of $2,240. For the year ended December 31, 2017, CANB had revenues from PAG of $1,050.

Island Stock Transfer (“IST”), an entity controlled by Carl Dilley, a Company director, is both a customer and vendor of CANB. As of December 31, 2017, CANB had an account receivable from IST of $3,035 and an account payable to IST of $3,035. For the year ended December 31, 2017, CANB had revenues from IST of $6,000.

Stock Market Manager, Inc. is also an entity controlled by Mr. Dilley. For the year ended December 31, 2017, CANB had an account payable to Stock Market Manager Inc. of $1,676.

On or around October 3, 2018, the Company entered into an employment agreement with its CEO, Marco Alfonsi for a three-year term at a salary of $10,000 per month. Mr. Alfonsi was also issued one share of Class A Preferred Stock upon execution of the Agreement.

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, 2017, purchase of CBD infused products from PHP totaled $19,095.

At December 31, 2017, we have a note receivable from PHP in the amount of $75,000. PHP is controlled by Pasquale Ferro. At December 31, 2017, we are indebted to Mr. Ferro and his wife Rosemary Ferro in the amount of $93,500.

During 2017 we had products sales to related parties totaling $331.

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, 2017 and December 31, 2016 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, 2017		December 31, 2016
Audit Fees		$ 31,700		$ 24,000
Audited Related Fees		$ -		$ -
Tax Fees		$ -		$ -
All Other Fees		$ -		$ -

PART IV

Item 15.

Exhibits, Financial Statement Schedules.

Exhibits Schedule

The following exhibits are filed with this Annual Report:


Exhibit		Description

2.1 3.1		Share Exchange Agreement with Prosperity* Articles of Incorporation, as amended*
3.2		Bylaws*
10.1		Services Agreement with Romuald Stone
10.2		Amended Promissory Note with Jeff Franz
10.3		Agreement with RedDiamond Partners LLC
10.4		Amended Agreement with RedDiamond Partners LLC
10.5		Agreement with Pure Health Products, LLC
10.6		Service Agreement with David Posel
10.7		Service Agreement with Andrew Holtmeyer
10.8		Executive Services Agreement with Marco Alfonsi
10.9		Consulting Agreement with Christy Davies
10.10		Consulting Agreement with Dr. Channing Coe
10.11		Consulting Agreement with Dr. John Salerno
10.12		Consulting Agreement with Fratellone Associates LLP
10.13		Consulting Agreement with Robert Kornfield
10.14		Advisor Agreement with Dr. Smita Ohri
31.1		Chief Executive and Chief Financial Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Chief Executive and 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.

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 6, 2018	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 6, 2018
Marco Alfonsi

/s/ Carl Dilley	Director	April 6, 2018
Carl Dilley

CANBIOLA, INC. AND SUBSIDIARY

Index to Financial Statements


Years Ended December 31, 2017 and 2016	Pages

Financial Statements

Report of Independent Registered Public Accounting Firm	F-1

Consolidated Balance Sheets	F-2

Consolidated Statements of Operations and Comprehensive Loss	F-3

Consolidated Statements of Stockholders' Equity	F-4

Consolidated Statements of Cash Flows	F-7

Notes to Consolidated Financial Statements	F-9

[F10KCANBIOLA20172.GIF]

_{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 balance sheets of Canbiola Inc. (the Company) as of December 31, 2017 and 2016, and the related statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the (two year) period ended December 31, 2017, 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 31,2017 and 2016, and the results of its operations and its cash flows for each of the years in the (two year) period ended December 31, 2017, 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 opinion 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 free 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 internal 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 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 ($2,139,719) during the year ended December 31, 2017, and as of that date, had a and deficit net worth of ($1,729,897). The Company is in arrears on accounts 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.

BMKR LLP

BMKR, LLP

We have served as the Company's auditor since 2015.

Hauppauge, NY 11788

April 3, 2018

Member American Institute of Certified Public Accounts

Member Public Company Accounting Oversight Board

F-1


Canbiola, Inc. and Subsidiary
Consolidated Balance Sheets
	December 31,	December 31,
	2017		2016
Assets
Current assets:
Cash and cash equivalents	$ 1,652		$ 30,193
Accounts receivable, less allowance for doubtful accounts of $0 and $0, respectively	6,075		13,742
Inventory	9,834		-
Note receivable - current	75,000		-
Prepaid expenses	64,911		2,500
Total current assets	157,472		46,435

Property and equipment, at cost less accumulated
depreciation of $20,248 and $17,021, respectively	11,148		14,375

Other assets:
Security Deposit	11,687		11,687
Note receivable - noncurrent	39,000		39,000
Intangible assets, net of accumulated amortization
of $60,428 and $34,947, respectively	-		25,481
Total other assets	50,687		76,168

Total assets	$ 219,307		$ 136,978

Liabilities and Stockholders' Deficiency
Current liabilities:
Notes and loans payable	$ 193,504		$ 58,315
Derivative Liability	1,451,137		352,688
Accounts payable	143,274		54,714
Accrued officers compensation	98,750		134,750
Other accrued expenses payable	62,539		51,099
Total current liabilities and total liabilities	1,949,204		651,566
Commitments and contingencies (Notes 12 and 13)

Stockholders' deficiency:
Preferred stock, authorized 5,000,000 shares:
Series A Preferred stock, no par value:
authorized 20 shares, issued and outstanding
8 and 10 shares, respectively	243,537		103,664
Series B Preferred stock, $0.001 par value:
authorized 500,000 shares, issued and outstanding
157,985 and 0 shares, respectively	150		-
Common stock, no par value; authorized
750,000,000 shares, issued and outstanding
225,572,323 and 146,008,250
shares, respectively	12,524,042		11,889,505
Additional Paid-in capital	149,850		-
Accumulated deficit	(14,647,476)		(12,507,757)
Total stockholders' deficiency	(1,729,897)		(514,588)

Total liabilities and stockholders' deficiency	$ 219,307		$ 136,978
See notes to consolidated financial statements.

F-2


Canbiola, Inc. and Subsidiary
Consolidated Statements of Operations and Comprehensive Loss
Years Ended December 31, 2017 and 2016
	2017	2016
Revenues
Product Sales	$ 79,030	$ -
Service Revenue	43,716	95,145
Total Revenues	122,746	95,145
Operating costs and expenses:
Cost of product sales	44,466	-
Officers and directors compensation (including stock- based compensation of $63,902 and $0 respectively)	154,406	180,448
Consulting fees (including stock-based compensation of $167,688 and $30,000 respectively)	284,741	99,913
Advertising expense	28,322	11,901
Hosting expense	21,963	32,182
Rent expense	65,060	65,060
Professional fees	95,546	47,207
Depreciation of property and equipment	3,227	3,267
Amortization of intangible assets	3,972	3,974
Other	133,829	62,741

Total operating expenses	835,532	506,693

Loss from operations	(712,786)	(411,548)

Other income (expense):
Cancellation of Debt	10,589	-
Loss on debt conversion	(32,383)	-
Loss on stock issuance	(191,553)	-
Impairment of intangible assets	(21,507)	-
Interest income	2,842	1,170
Income (expense) from derivative liability	(915,700)	(198,438)
Interest expense (including amortization of debt discounts of $250,188 and $50,315, respectively)	(279,221)	(56,234)

Other income (expense) - net	(1,426,933)	(253,502)

Loss before provision for income taxes	(2,139,719)	(665,050)

Provision for income taxes	-	-

Net loss and comprehensive loss	$ (2,139,719)	$ (665,050)

Net loss per common share - basic and diluted	$ (.00)	$ (.00)

Weighted average common shares outstanding –
Basic	165,230,550	145,677,036
Diluted	256,295,851	235,121,480

See notes to consolidated financial statements.

F-3


Canbiola, Inc. and Subsidiary
Consolidated Statements of Stockholders' Deficiency
Years Ended December 31, 2016 and 2017

	Preferred Stock A		Preferred Stock B
	, no par value		, $0.001 par value		Common Stock, no par value		Additional	Accumulated
	Shares	Amount	Shares	Amount	Shares	Amount	Paid-in Capital	Deficit	Total

Balance, December 31, 2015	10	$103,664	-	-	145,363,750	$11,842,331		($11,842,707)	$103,288

Issuance of common stock on
January 2, 2016 for services rendered	-	-	-	-	104,500	12,864		-	12,864

Issuance of common stock on March 9,
2016 for services rendered	-	-	-	-	140,000	8,693		-	8,693

Issuance of common stock on October 6,
2016 for services rendered	-	-	-	-	400,000	25,617		-	25,617

Net loss	-	-	-	-	-	-	-	(665,050)	(665,050)

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

F-4



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

F-5



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)

F-6


Canbiola, Inc. and Subsidiary
Consolidated Statements of Cash Flows
	Year Ended December 31,
	2017	2016
Operating Activities:
Net loss	$ (2,139,719)	$ (665,050)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation, net of prepaid stock-based consulting fees	231,590	30,000
Loss on stock issuance	191,553	-
Loss on debt conversion	32,383	-
Impairment of intangible assets	21,507	-
Expense from derivative liability	915,700	198,438
Depreciation of property and equipment	3,227	3,267
Amortization of intangible assets	3,972	3,974
Amortization of debt discounts	250,188	50,315
Bad debt expense	16,840	31,666
Changes in operating assets and liabilities:
Accounts receivable	(9,173)	(20,935)
Inventory	(9,834)	-
Prepaid expenses	2,500	7,171
Accounts payable	88,566	64,469
Accrued officers compensation	91,803	134,750
Other accrued expenses payable	22,606	19,505

Net cash used in operating activities	(286,291)	(142,430)

Investing Activities:
Note receivable - current	(75,000)	-

Net cash used in investing activities	(75,000)	-

Financing Activities:
Proceeds received from notes and loans payable	182,750	154,250
Proceeds from sale of Series B preferred stock	150,000	-

Net cash provided by financing activities	332,750	154,250

Increase (decrease) in cash and cash equivalents	(28,541)	11,820

Cash and cash equivalents, beginning of period	30,193	18,373

Cash and cash equivalents, end of period	$ 1,652	$ 30,193

F-7



NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock in satisfaction of debt	$ 115,000	$ -

Issuance of Series A preferred stock in satisfaction
of officers compensation	$ 127,803	$ -

Issuance of common stock in satisfaction
of accrued interest	$ 11,168	$ -

Issuance of common stock in satisfaction
of account payable	$ -	$ 47,174

See notes to consolidated financial statements.

F-8

Canbiola, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2017 and 2016

NOTE 1 – Organization and Description of Business

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

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

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

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

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, 2017, the Company had cash and cash equivalents of $1,652 and a working capital deficit of $1,791,732. For the years ended December 31, 2017 and 2016, the Company had net losses of $2,139,719 and $665,050, respectively. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company plans to improve its financial condition by raising capital through sales of shares of its common stock. Also, the Company plans to expand its operation of CBD products to increase its profitability. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 – Summary of Significant Accounting Policies

(a) Principles of Consolidation

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

F-9

(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.

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.

F-10

(h) Goodwill and Intangible Assets with Indefinite Lives

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

(i) Long-lived Assets

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

(j) Revenue Recognition

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

(k) Stock-Based Compensation

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

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

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

F-11

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.

(l) Advertising

Advertising costs are expensed as incurred and amounted to $28,322 and $11,901 for the years ended December 31, 2017 and 2016, respectively.

(m) Research and Development

Research and development costs are expensed as incurred.

(n) Income Taxes

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

F-12

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

(o) Net Income (Loss) per Common Share

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

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

(p) Recent Accounting Pronouncements

Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. These include:

In May 2014, the FASB issued ASU 2014-09 "Revenue from Contracts with Customers" (Topic 606) which establishes revenue recognition standards. ASU 2014-19 is effective for annual reporting periods beginning after December 15, 2017. The update establishes management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern including related disclosures.

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

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

(q) Reclassifications

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

F-13

NOTE 4 – Notes Receivable


Notes receivable consist of:
	December 31, 2017	December 31, 2016
Secured Promissory note dated October 17, 2017 due from Pure Health Products, LLC (“PHP”), interest at 12% per annum, due October 17, 2018, secured by assets of PHP	$ 75,000		$ -

Note receivable dated November 30, 2015 from Stock Market Manager, Inc, interest at 3% per annum due November 30, 2020	39,000		39,000

Total	114,000		39,000

Current portion of notes receivable	(75,000)		-
Noncurrent portion of notes receivable	$ 39,000		$ 39,000

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

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

NOTE 5 – Property and Equipment, Net

Property and Equipment, net, consist of:


	December 31,
		2017	2016

Furniture & Fixtures		$ 19,018	$ 19,018

Office Equipment		12,378	12,378

Total		31,396	31,396

Accumulated amortization		(20,248)	(17,021)

Net		$ 11,148	$ 14,375

F-14

NOTE 6 – Intangible Assets, Net

Intangible assets, net, consist of:


	December 31,
	2017	2016

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)	(34,947)

Net	$ 0	$ 25,481

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-15

NOTE 7 – Notes and Loans Payable


Notes and loans payable consist of:
	December 31, 2017	December 31, 2016
Convertible note payable to lender dated February 1, 2016 (as amended December 21, 2016), interest at 12% per annum, due February 1, 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 Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date –fully converted at February 13, 2017	$ -		$ 3,571

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 $1,815 and $34,411, respectively	36,685		39,839

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 $58,095, respectively	65,000		6,905

Convertible notes payable to Pasquale and Rosemary Ferro dated from May 2, 2017 to October 13, 2017, interest at 12% per annum, due from September 16, 2017 to May 7, 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 $19,613 and $0, respectively	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 $15,068 and $0, respectively	9,932		-

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

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	$ 193,504		$ 58,315

F-16

The derivative liability of the convertible notes payable consists of:


	December 31, 2017				December 31, 2016
	Face Value		Derivative Liability		Face Value		Derivative Liability

Convertible note payable to lender dated February 1, 2016 (as amended December 21, 2016), due February 1, 2017		$ -		$ -		$ 15,000		$ 31,429

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		$ 38,500		$ 248,597		$ 74,250		$ 171,841

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		$ 65,000		$ 418,889		$ 65,000		$ 149,418

Convertible notes payable to Pasquale and Rosemary Ferro dated from May 2, 2017 to October 13, 2017, due from September 16, 2017 to May 7, 2018		$ 93,500		$ 611,886		$ -		$ -

Convertible notes payable to lender dated August 8, 2017, due August 8, 2018		$ 25,000		$ 171,765		$ -		$ -

Totals		$ 222,000		$ 1,451,137		$ 154,250		$ 352,688

The above convertible notes contain a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes is indeterminate. Accordingly, we have recorded the fair value of the embedded conversion features as a derivative liability at the respective issuance dates (or amendment dates) of the notes ($445,112 and $629,828 total for the year ended December 31, 2017 and 2016) and charged the applicable amounts to debt discounts ($182,750 and $154,250 total for the year ended December 31, 2017 and 2016) and the remainder to other expense ($262,362 and $475,578 total for the year ended December 31, 2017 and 2016). 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 and $277,140 total decrease for the year ended December 31, 2017 and 2016) 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%. Assumptions used for the calculations of the derivative liability of the notes at December 31, 2016 include (1) stock price of $0.029 per share, (2) exercise price of $0.01 per share, (3) terms ranging from 32 days to 242 days, (4) expected volatility of 243% and (5) risk free interest rates ranging from 0.46% to 0.65%.

F-17

NOTE 8 – Preferred Stock

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.

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.

NOTE 9 – Common Stock

On January 2, 2016, the Company issued 104,500 shares of CANB common stock to a technical consultant in satisfaction of a $12,864 account payable to that vendor.

On March 9, 2016, the Company issued 140,000 shares of CANB common stock to a technical consultant in satisfaction of a $8,693 account payable to that vendor.

On October 6, 2016, the Company issued 400,000 shares of CANB common stock to a technical consultant in satisfaction of a $25,617 account payable to that vendor.

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.

F-18

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

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

On November 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.

F-19

NOTE 10 – Stock Options and Warrants

A summary of stock options and warrants activity follows:


	Shares of Common Stock Exercisable Into
	Stock
	Options	Warrants	Total
Balance, December 31, 2015	200,000	307,500	507,500
Granted in 2016	-	-	-
Expired in 2016	(150,000)	(60,000)	(210,000)

Balance, December 31, 2016	50,000	247,500	297,500
Granted in 1Q, 2Q and 3Q 2017	-	-	-
Cancelled in 1Q, 2Q and 3Q 2017	-	-	-

Balance, December 31, 2017	50,000	247,500	297,500

Issued and outstanding stock options as of December 31, 2017 consist of:


Year	Number Outstanding	Exercise	Year of
Granted	And Exercisable	Price	Expiration

2009	50,000	$ 1.00	2019

Total	50,000

Issued and outstanding warrants as of December 31, 2017 consist of:


Year	Number Outstanding	Exercise	Year of
Granted	And Exercisable	Price	Expiration

2010	247,500	$ 1.00	2020

Total	247,500

F-20

NOTE 11 – Income Taxes

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

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


	Year Ended December 31,
	2017	2016

Expected income tax (benefit) at 35%	$ (748,902)	$ (232,768)

Non-deductible stock-based compensation	81,057	10,500

Non-deductible amortization of debt discounts	87,566	17,610

Non-deductible loss on debt conversion	11,334	-

Non-deductible loss on stock issuance	67,043	-

Non-deductible impairment of intangible assets	7,527	-

Non-deductible expense from derivative liability	320,495	69,453

Increase in deferred income tax assets
valuation allowance	173,879	135,205

Provision for (benefit from) income taxes	$ -	$ -

Deferred income tax assets consist of:


	December 31,
		2017	2016

Net operating loss carryforward		1,394,358	1,220,479

Valuation allowance		(1,394,358)	(1,220,479)

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 $1,394,358 attributable to the future utilization of the $3,973,302 net operating loss carryforward as of December 31, 2017 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the financial statements at December 31, 2017. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036 and 2037 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 and $496,798 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.

F-21

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

The Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest or penalties paid during 2017 and 2016.

NOTE 12 – Commitments and Contingencies

Employment Agreements

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

On August 17, 2015, the Company executed an Employment Agreement with Romuald Stone (“Stone”) for Stone to serve as the Company's Chief Technology Officer for cash compensation of $12,500 per month. Effective August 17, 2016, the agreement terminated.

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

Lease Agreements

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

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

Rent expense for the years ended December 31, 2017 and 2016 was $65,060 and $65,060, respectively.

F-22

At December 31, 2017, the future minimum lease payments under non-cancellable operating leases were:

Year ended December 31, 2018

27,900

Total

$ 27,900

Major Customers

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

For the year ended December 31, 2016, three customers accounted for approximately 36%, 30% and 11%, respectively, of total service revenues.

Public Offering of Units

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

Litigation

On November 25, 2016, the landlord under the lease agreement dated September 11, 2015 (“QPR”) served us a Notice of Default. On December 5, 2016, QPR filed a Petition to Recover Possession of Real Property seeking unpaid rent of $12,540 (as of November 21, 2016) and possession of the premises. The Company subsequently paid QPR and QPR dismissed the action.

NOTE 13 – Related Party Transactions

ProAdvanced Group, Inc. (“PAG”), an entity controlled by the Company’s chief executive officer, is a customer of CANB. For the year ended December 31, 2017, CANB had an account receivable from PAG of $2,240. For the year ended December 31, 2017, CANB had revenues from PAG of $1,050.

Stock Market Manager, Inc. is also an entity controlled by Mr. Dilley. For the year ended December 31, 2017, CANB had an account payable to Stock Market Manager Inc. of $1,676.

F-23

During 2017 we had products sales to related parties totaling $331.

NOTE 14 – Subsequent Events

On January 8, 2018, the Company issued a $10,000 Convertible Promissory Note to a lender for loan proceeds of $10,000. The note bears interest at a rate of 12% per annum, is due on July 8, 2018, and is convertible at the option of the lender into shares of the Company 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.

On January 9, 2018, the Company amended a Securities Purchase Agreement (the “SPA”) with RedDiamond Partners LLC (“RedDiamond”). Pursuant to the amended Agreement, RedDiamond agreed to purchase additional aggregate of $249,000 of Series B Preferred Shares (“Preferred Shares”), at $0.95 per share, for an aggregate of 262,104 Preferred Shares. The SPA provides for the purchase to be conducted through three equal tranches of $83,000 or 87,368 Preferred Shares per tranche. On January 22, 2018, the Company received $83,000 from RedDiamond. Additional two closings are to be conducted on each monthly anniversary following the date of the First Closing (“Additional Closings”) until RedDiamond has purchased an aggregate of 262,104 Preferred Shares for $249,000. The Series B Preferred Shares (designated on November 15, 2017) have no voting rights, are entitled to dividends at a rate of 5% per annum and are convertible into shares of common stock at a Conversion Price (as defined in the SPA), subject to a $20,000 maximum per Monthly Conversion Period.

On February 1, 2018, the Company issued a Promissory Note of $15,000 to a lender for loan proceeds of $15,000. The note bears interest at a rate of 12.99% per annum, are due on February 1, 2021.

On February 7, 2018, the Company issued 150,000 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 will be partially charged to consulting fees in the three months ended March 31, 2018.

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.

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

On March 6, 2018, the Company terminated its consulting agreement with Healthcare Advisory Group due to the nonperformance.

On March 20, 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 will be charged to consulting fees in the three months ended March 31, 2018.

In accordance with FASB ASC 855, Subsequent Events , the Company has evaluated subsequent events through April 3, 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-25

CONSULTING AGREEMENT

This Consulting Agreement (the "Consulting Agreement") made as of April 1, 2017 by and between Romuald Stone, 2915 Arthur Street Hollywood, Florida 33020, ("Consultant") and WRAPmail Inc 960 S. Broadway, Hicksville, NY, 11801 (the "Company").

WITNESSETH

WHEREAS, the Company requires and will continue to require consulting services relating to management, strategic planning and for technology needed to run the company's Bullseye platform and websites as well as Consulting the company in technology aspects in the future in connection with its business; and

WHEREAS, Consultant can provide the Company with strategic planning for technology consulting services and is desirous of performing such services for the Company; and

WHEREAS, the Company wishes to induce Consultant to provide these consulting services to the Company,

NOW, THEREFORE, in consideration of the mutual covenants hereinafter stated, it is agreed as follows:

1. APPOINTMENT.

The Company hereby engages Consultant and Consultant agrees to render services to the Company as a consultant upon the terms and conditions hereinafter set forth.

2. TERM.

The term of this Consulting Agreement began as of the date of this Agreement, and shall terminate on April 1, 2018, unless earlier terminated in accordance with paragraph 7 herein or extended as agreed to between the parties.

3. SERVICES .

During the term of this Agreement, Consultant shall provide advice to, undertake for and consult with the Company concerning management, technology, consulting, strategic planning, corporate organization and structure, financial matters in connection with the operation of the businesses of the Company, expansion of services, acquisitions and business opportunities, and shall review and advise the Company regarding its overall progress, needs and condition. Consultant agrees to provide on a timely basis the following enumerated services plus any additional services contemplated thereby:

(a) The participation of short-range and long-term strategic planning to fully develop and enhance the Company's assets, resources, products and services;

(b) Advise the Company relative to the recruitment and employment of key executives consistent with the expansion of operations of the Company;

(c) Providing emergency on-call availability to assist, investigate and help with resolution of any disruption of services.

4. DUTIES OF THE COMPANY . The Company shall provide Consultant, on a regular and timely basis, with all approved data and information about it, its subsidiaries, its

management, its technology and services and its operations as shall be reasonably requested by Consultant, and shall advise Consultant of any facts which would affect the accuracy of any data and information previously supplied pursuant to this paragraph.

5. COMPENSATION .

The Company shall pay a fee of $1,000.00, Monthly as long as the company has collected payments from existing clients that associated with the technology of bullseye. If Monthly payment by The Company is missed, it shall accumulate and be paid the following month so as long as Company has the financial means to do so. Consultant in providing the foregoing services shall be reimbursed for any pre-approved out-of pocket costs, including, without limitation, travel, lodging, telephone, postage and Federal Express charges.

6. REPRESENTATION AND INDEMNIFICATION .

The Company shall be deemed to have been made a continuing representation of the accuracy of any and all facts, material information and data which it supplies to Consultant and acknowledges its awareness that Consultant will rely on such continuing representation in disseminating such information and otherwise performing its advisory functions. Consultant in the absence of notice in writing from the Company will rely on the continuing accuracy of material, information and data supplied by the Company. Consultant represents that he has knowledge of and is experienced in providing the aforementioned services.

7. MISCELLANEOUS.

Termination : This Agreement may be terminated by either Party upon written notice to the other Party for any reason which shall be effective five (5) business days from the date of such notice or the failure to pay balance owed to Consultant exceeding 60 days. This Agreement shall be terminated immediately upon written notice for material breach of this Agreement.

As used in this Agreement, the term with cause shall mean, the conviction of any crime involving dishonesty or resulting in imprisonment without the option of a fine, or the material non-observance, or the material breach by Consultant of any of the material provisions of this Agreement, or the neglect, failure or refusal of consultant to carry out the duties contracted by him after due notice to the consultant of such neglect, failure or refusal.

Modification: This Consulting Agreement sets forth the entire understanding of the Parties with respect to the subject matter hereof. This Consulting Agreement may be amended only in writing signed by both Parties.

Notices: Any notice required or permitted to be given hereunder shall be in writing and shall be mailed or otherwise delivered in person or by facsimile transmission at the address of such Party set forth above or to such other address or facsimile telephone number, as the Party shall have furnished in writing to the other Party.

Waiver: Any waiver by either Party of a breach of any provision of this Consulting Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Consulting Agreement. The failure of a Party to insist upon strict adherence to any term of this Consulting Agreement on one or more occasions will not be considered a waiver or deprive that Party of the right thereafter to insist upon adherence to that term of any other term of this Consulting Agreement.

Assignment: The Options under this Agreement are assignable at the discretion of the Consultant. Severability: If any provision of this Consulting Agreement is invalid, illegal, or unenforceable, the balance of this Consulting Agreement shall remain in effect, and if any

provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

Disagreements: Any dispute or other disagreement arising from or out of this Consulting Agreement shall be submitted to arbitration under the rules of the American Arbitration Association and the decision of the arbiter(s) shall be enforceable in any court having jurisdiction thereof. Arbitration shall occur only in New York, NY. The interpretation and the enforcement of this Agreement shall be governed by New York Law as applied to residents of the State of New York relating to contracts executed in and to be performed solely within the State of New York. In the event any dispute is arbitrated, the prevailing Party (as determined by the arbiter(s)) shall be entitled to recover that Party's reasonable attorney's fees incurred (as determined by the arbiter(s)).

IN WITNESS WHEREOF, this Consulting Agreement has been executed by the Parties as of the date first above written.

CONSULTANT

___________________

_____________________________

WRAPmail Inc

Romuald Stone

DEBT AMENDMENT

The Holder (the "Holder") is the holder of an outstanding promissory note issued by WRAPmail Inc. (the "Company"), in the principal amount of $15,000 of which the Company has (the "Note"),

The Holder and the Company now desire to amend certain provisions of the Notes as follows:

(a)

the Note, including all accrued interest thereon, shall be convertible into shares of the Company's common stock at a conversion price equal to the lesser of (i) $0.01, or (ii) fifty percent (50%) of the lowest Closing Bid Price of the Common Stock for the thirty (30) Trading Days preceding the Conversion Date;

(b)

the Maturity Date of the Notes shall be extended to February 1, 2017; and

(c)

The Holder may not convert the Notes to the extent such conversion would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock held by such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of Notes are convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of Notes that would result in the issuance of in excess of the permitted amount hereunder, without regard to any other shares that the Holder or its affiliates may beneficially own, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date and, at the option of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future conversions or return such excess principal amount to the Holder. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company.

This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by the laws of the State of New York, without giving effect to the conflicts of the law principles thereof.

This Agreement may not be modified or changed e x cept by an instrument or instruments in writing executed by the parties hereto.

Dated: December 21 , 2016

[F1021.JPG]

DRAFT

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of October _ , 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 B B Preferred Stock;

WHEREAS, pursuant to the Certificate of Designations, the Company shall issue to the Purchaser certain number of shares of the Series B B 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

1.1

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 1.1:

“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 3.1(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 law or other governmental action to close.

{00837443.DOCX;5 }

“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 to 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 in 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 the 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 instrument 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 3.1(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.

“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 3.1(jj).

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(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 meaning assigned to such term in Section 3.1(b).

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(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.

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

“Public Information Failure Payments” shall have the meaning ascribed to such term 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 funds 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 3.1(e).

“Maximum Convertible Amount” means, as of any date, 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 p er 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.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.

“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.

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 Stated 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 Def14C 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 or cause to be delivered to the Purchaser the following:

(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 and additional Closings are subject to the following conditions being met:

(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 in 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.

(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.

(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, injunction, 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 Purchaser’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.

(g)

Capitalization. The capitalization of the Company is as set forth on Schedule 3.1(g), which Schedule 3.1(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 144(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 and 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.

(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 3.1(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 thereof, 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 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 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.

(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 Subsidiaries 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 of 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 Effect.

(l)

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 each 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.

(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 two (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 3.1(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 Subsidiary 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.

(q)

Sarbanes-Oxley; Internal Accounting Controls. Except as set forth on Schedule 3.1(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 the 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 as contemplated

hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

(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 3.1(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 12(b) or 12(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.

(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, entertainment 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 of FCPA.

(bb)

Accountants. The Company’s accounting firm is set forth on Schedule 3.1(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.

(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 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, 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.

(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 unreasonably 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 Company 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 3.1(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 are 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 of no basis for any such claim.

(ll)

Seniority. As of each Closing Date, except as set forth on Schedule 3.1(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 Purchaser . The Purchaser hereby represents and warrants as of the date hereof and as of the Closing Dat e 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.

(b)

Own Account. The Purchaser understands that the Preferred Shares are “restricted securities” and it is acquiring the Preferred Shares as principal for its own

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 501 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 of 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.

(f)

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 of 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 this Agreement, the Purchaser has maintained the confidentiality of all disclosures made

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

(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 of in 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 of 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.

(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 THAT IS 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 pledgee 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 4.1(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 Commission). 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 4.1(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.

(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 Rule 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 Common 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, are 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.

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)(1) 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 (30 ^th ) 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 are incurred and (ii) the third (3 ^rd ) 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.

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 behalf, 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 in 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 provisions of this Section 4.9, the Company will indemnify 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 any capacity, or any of them or their respective Affiliates, by any stockholder of the Company

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 thereof, 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 willful 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 at such time, as soon as possible and in any event not later than the seventy-fifth (75 ^th ) day after such date .

(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)(10) 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.

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 ROFO 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 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.

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 (4 ^th ) 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

law in connection with any registration statement filed in connection with the resale of the Securities purchased hereunder and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure permitted under this clause (b).

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)(10) 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)(10) 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 to 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).

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 ^nd ) 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.

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 Securities, 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 or 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.

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 within 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.

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 law (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 setoff had 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 be 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)

DRAFT

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 By:__________________________________________ Name: Title:	Address for Notice: 156 West Saddle River Road Saddle River, NJ 07458
COMPANY NAME By:__________________________________________ Name: Marco Alfonsi Title: Chief Executive Officer	Address for Notice:

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
SERIES B CONVERTIBLE PREFERRED STOCK OF CANBIOLA, INC.

I, Marco Alfonsi, hereby certify that I am the Chief Executive Officer of Canbiola, Inc. . (the “ Company ”), a corporation organized and existing under the Florida Business Corporation Act (the “ FBCA ”), and further do hereby certify:

That, pursuant to the authority expressly conferred upon the Board of Directors of the Company (the “ Board ”) by the Company’s Articles of Incorporation, as amended (the “ Articles of Incorporation ”), the Board on October 05, 2017, adopted the following resolutions creating a series of shares of preferred stock designated as Series B Convertible Preferred Stock, none of which shares have been issued:

RESOLVED, that the Board hereby designates the Series B Convertible Preferred Stock and the number of shares constituting such series, and fixes the rights, powers, preferences, privileges and restrictions relating to such series in addition to any set forth in the Articles of Incorporation as follows:

TERMS OF SERIES B CONVERTIBLE PREFERRED STOCK

1. Designation and Number of Shares . There shall hereby be created and established a series of preferred stock of the Company designated as “Series B Convertible Preferred Stock” (the “ Preferred Shares ”). The authorized number of Preferred Shares shall be 500,000 shares. Each Preferred Share shall have a par value of $0.001. Capitalized terms not defined herein shall have the meanings as set forth in Section 23 below.

Ranking . Except with respect to any other future series of preferred stock of senior rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding-up of the Company (collectively, the “ Senior Preferred Stock ”) or any future series of preferred stock of pari passu rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding-up of the Company (collectively, the “ Parity Stock ”), all shares of capital stock of the Company shall be junior in rank to all Preferred Shares with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding-up of the Company (collectively, the “ Junior Stock ”). The rights of all such shares of capital stock of the Company shall be subject to the rights, powers, preferences and privileges of the Preferred Shares. In the event of the merger or consolidation of the Company with or into another corporation, the Preferred Shares shall maintain their relative rights, powers, preferences, privileges, and designations provided for herein and no such merger or consolidation shall result inconsistent therewith.

Dividends .

(a)

From and after the date of issuance of each share of Preferred Shares (the “ Initial Issuance Date ”), each holder of a Preferred Share (each, a “ Holder ” and collectively, the “ Holders ”) shall be entitled to receive dividends (the “ Dividends ”), which Dividends shall be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms hereof, in shares of Common Stock or cash on the Stated Value (as defined below) of such Preferred Share at the Dividend Rate (as defined below), which shall be cumulative but not compounding and shall continue to accrue whether or not declared and whether or not in any fiscal year there shall be net profits or surplus available for the payment of dividends in such fiscal year. Dividends on the Preferred Shares shall commence accumulating on the Initial Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed. Subject to Section 4(c), Dividends shall be payable quarterly, at the Holder’s option, in cash or shares of Common Stock, with the first (1 ^st ) Dividend Date being the date ninety (90) days from the Initial Issuance Date of the first Preferred Share to be issued (each, a “ Dividend Date ”). If a Dividend Date is not a Business Day (as defined below), then the Dividend shall be due and payable on the Business Day immediately following such Dividend Date. Additionally, after the first Dividend Date, the Holder may request the payment of any accrued Dividends on any Conversion Date or the date of any Installment Redemption Payment (each, an “ Optional Dividend Date ”).

(b)

Dividends shall be payable on each Dividend Date, to the Holders of record of the Preferred Shares on the applicable Dividend Date, in shares of Common Stock (the “ Dividend Shares ”) so long as there has been no Equity Conditions Failure and so long as the delivery of Dividend Shares would not violate the provisions of Section 4(e); provided , however , that the Company may, at its option, pay Dividends on any Dividend Date in cash (the “ Cash Dividends ”) or in a combination of Cash Dividends and, so long as there has been no Equity Conditions Failure, Dividend Shares. The Company shall deliver a written notice (each, a “ Dividend Election Notice ”) to each Holder on the Dividend Notice Due Date (the date such notice is delivered to all of the Holders, the “ Dividend Notice Date ”), which notice (1) either (A) confirms that Dividends to be paid on such Dividend Date shall be paid entirely in Dividend Shares or (B) elects to pay Dividends as Cash Dividends, Dividend Shares, or as a combination of Dividend Shares and Cash Dividends and, in any event, specifies the amount of Dividends that shall be paid as Cash Dividends and the amount of Dividends, if any, that shall be paid in Dividend Shares and (2) certifies that there has been no Equity Conditions Failure as of such time, if any portion of the Dividends shall be paid in Dividend Shares. Notwithstanding anything herein to the contrary, if no Equity Conditions Failure has occurred as of the Dividend Notice Date but an Equity Conditions Failure occurs at any time prior to the Dividend Date, (A) the Company shall provide each Holder a subsequent notice to that effect and (B) unless such Holder waives the Equity Conditions Failure, the Dividend payable to such Holder on such Dividend Date

shall be paid as Cash Dividends to be paid to each Holder on a Dividend Date in Dividend Shares shall be paid in a number of fully paid and non-assessable shares (rounded to the nearest whole share, with 0.50 or more of a share being rounded up to the nearest whole share and 0.49 or less of a share being rounded down to the nearest whole share) of Common Stock equal to the quotient of (1) the amount of Dividends payable to such Holder on such Dividend Date less any Cash Dividends paid and (2) the Conversion Price in effect on the applicable Dividend Date.

(c) When any Dividend Shares are to be paid on an Dividend Date to any Holder, the Company shall (i) (A) provided that (x) the Company’s transfer agent (the “ Transfer Agent ”) is participating in the Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer Program and (y) such Dividend Shares to be so issued are eligible for resale pursuant to Rule 144 (as defined in the Securities Purchase Agreement), credit such aggregate number of Dividend Shares to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit and Withdrawal at Custodian system, or (B) if either of the immediately preceding clauses (x) or (y) is not satisfied, issue and deliver on the applicable Dividend Date, to the address set forth in the register maintained by the Company for such purpose pursuant to the Securities Purchase Agreement or to such address as specified by such Holder in writing to the Company at least two (2) Business Days prior to the applicable Dividend Date, a certificate, registered in the name of such Holder or its designee, for the number of Dividend Shares to which such Holder shall be entitled and (ii) with respect to each Dividend Date, pay to such Holder, in cash by wire transfer of immediately available funds, the amount of any Cash Dividend. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Dividend Shares.

(d)

In the event that a Holder requests the payment of Dividends on any Optional Dividend Date, such Dividends shall be payable in accordance with mechanisms set forth in Sections 4(c)(i)-(ii) and Section 5(b), as applicable. The Dividends shall be paid, at the Holder’s option in cash, in Dividend Shares, or any combination of cash and Dividend Shares, so long as there has been no Equity Conditions Failure and so long as the delivery of Dividend Shares would not violate the provisions of Section 4(e). Dividends to be paid to such Holder on an Optional Dividend Date in Dividend Shares shall be paid in a number of fully paid and non-assessable shares (rounded to the nearest whole share) of Common Stock equal to the quotient of (1) the amount of Dividends payable to such Holder on such Optional Dividend Date less any Dividends paid in cash and (2) the Conversion Price in effect on the applicable Optional Dividend Date.

4. Conversion . Each Preferred Share shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined below) on the terms and conditions set forth in this Section 4.

(a) Holder’s Conversion Right . Subject to the provisions of Section 4(e) and Section 5, at any time or times after the date (the “ Initial Conversion Date ”) that is six (6) months after the Initial Issuance Date, each Holder shall be entitled to convert any whole number of Preferred Shares and any accrued but unpaid Dividends into validly issued, fully paid and non-assessable shares of Common Stock in accordance with Section 4(c) at the Conversion Rate (as defined below); provided , however , the maximum number of Preferred Shares that may be converted by such Holder during the five (5) Trading Day period following the Initial Conversion Date and every five (5) Trading Day period thereafter (each a “ Monthly Conversion Period ”) shall be no greater than that number of Preferred Shares with an aggregate Stated Value equal to $20,000 (the “ Maximum Conversion Shares ”) unless the Company and the Holder agree in writing to increase the Maximum Conversion Shares for each respective Monthly Conversion Period.

(b) Conversion Rate . The number of validly issued, fully paid and non-assessable shares of Common Stock issuable upon conversion (the “ Conversion Shares ”) of each Preferred Share pursuant to Section 4(a) shall be determined according to the following formula (the “ Conversion Rate ”):

(Conversion Amount x Conversion Premium)
Conversion Price

No fractional shares of Common Stock are to be issued upon the conversion of any Preferred Shares. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.

(c)

Mechanics of Conversion . The conversion of each Preferred Share shall be conducted in the following manner:

(i) Holder’s Conversion . Subject to the provisions of Section 4(e) and Section 5, to convert Preferred Shares into validly issued, fully paid and non-assessable shares of Common Stock on any date (a “ Conversion Date ”), a Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of Preferred Shares subject to such conversion in the form attached hereto as Exhibit I (the “ Conversion Notice ”) to the Company, which Conversion Notice shall be subject to an adjustment to the Conversion Price set forth on such Conversion Notice upon the close of the Principal Market on the Conversion Date. If required by Section 4(c)(vi), within three (3) Trading Days following a conversion of any such Preferred Shares into Common Shares as aforesaid, such Holder shall surrender to a nationally

recognized overnight delivery service for delivery to the Company the original certificates representing the share(s) of Preferred Shares (the “ Preferred Share Certificates ”) so converted as aforesaid.

(ii) Company’s Response . On or before the second ( ^2nd ) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile or electronic mail an acknowledgment of confirmation, in the form attached hereto as Exhibit II , of receipt of such Conversion Notice to such Holder and the Transfer Agent, which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second ( ^2nd ) Trading Day following the date of receipt by the Company of such Conversion Notice, the Company shall (1) provided that (x) the Transfer Agent is participating in DTC Fast Automated Securities Transfer Program and (y) such Conversion Shares and Dividend Shares (as applicable) to be so issued are eligible for resale pursuant to Rule 144 (as defined in the Securities Purchase Agreement) credit such aggregate number of Conversion Shares and Dividend Shares (as applicable) to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if either of the immediately preceding clauses (x) or (y) are not satisfied, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of Conversion Shares and Dividend Shares (as applicable) to which such Holder shall be entitled. If the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for conversion pursuant to Section 4(c)(vi) is greater than the number of Preferred Shares being converted, then the Company shall if requested by such Holder, as soon as practicable and in no event later than three (3) Trading Days after receipt of the Preferred Share Certificate(s) and at its own expense, issue and deliver to such Holder (or its designee) a new Preferred Share Certificate representing the number of Preferred Shares not converted.

(iii) Record Holder . The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

(iv) Company’s Failure to Timely Convert . If the Company shall fail, for any reason or for no reason, to issue to a Holder within two (2) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise) (the “ Share Delivery Deadline ”), a certificate for the number of shares of Common Stock to which such

Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit such Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion of any Preferred Shares (as the case may be) (a “ Conversion Failure ”), then, in addition to all other remedies available to such Holder, such Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned (as the case may be) any Preferred Shares that have not been converted pursuant to such Holder’s Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to the terms of this Certificate of Designations or otherwise.

(v) Pro Rata Conversion; Disputes . In the event the Company receives a Conversion Notice from more than one Holder for the same Conversion Date and the Company can convert some, but not all, of such Preferred Shares submitted for conversion, the Company shall convert from each Holder electing to have Preferred Shares converted on such date a pro rata amount of such Holder’s Preferred Shares submitted for conversion on such date based on the number of Preferred Shares submitted for conversion on such date by such Holder relative to the aggregate number of Preferred Shares submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to a Holder in connection with a conversion of Preferred Shares, the Company shall issue to such Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 22.

(vi) Book-Entry . Notwithstanding anything to the contrary set forth in this Section 4, upon conversion of any Preferred Shares in accordance with the terms hereof, no Holder thereof shall be required to physically surrender the certificate representing the Preferred Shares to the Company following conversion thereof unless (A) the full or remaining number of Preferred Shares represented by the certificate are being converted (in which event such certificate(s) shall be delivered to the Company as contemplated by this Section 4(c)(vi)) or (B) such Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of Preferred Shares upon physical surrender of any Preferred Shares. Each Holder and the Company shall maintain records showing the number of Preferred Shares so converted by such Holder and the dates of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of the certificate representing the Preferred Shares upon each such

conversion. In the event of any dispute or discrepancy, such records of such Holder establishing the number of Preferred Shares to which the record holder is entitled shall be controlling and determinative in the absence of manifest error. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any Preferred Shares, the number of Preferred Shares represented by such certificate may be less than the number of Preferred Shares stated on the face thereof. Each certificate for Preferred Shares shall bear the following legend:

ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 4(c)(vi) THEREOF. THE NUMBER OF SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES A PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(vi) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE.

(d) Taxes . The Holder shall pay any and all documentary, stamp, transfer (but only in respect of the registered holder thereof), issuance and other similar taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon the conversion of Preferred Shares.

(e) Limitation on Beneficial Ownership .

(i) Notwithstanding anything to the contrary contained in this Certificate of Designations, the Preferred Shares held by a Holder shall not be convertible by such Holder, and the Company shall not effect any conversion of any Preferred Shares held by such Holder, to the extent (but only to the extent) that such Holder or any of its affiliates would beneficially own in excess of 4.99% (the “ Maximum Percentage ”) of the then issued and outstanding shares of Common Stock. To the extent the above limitation applies, the determination of whether the Preferred Shares held by such Holder shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by such Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by such Holder and its affiliates) shall, subject to such Maximum

Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability of a Holder to convert Preferred Shares, or of the Company to issue shares of Common Stock to such Holder, pursuant to this Section 4(e) shall have any effect on the applicability of the provisions of this Section 4(e) with respect to any subsequent determination of convertibility or issuance (as the case may be). For purposes of this Section 4(e), beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. The provisions of this Section 4(e) shall be implemented in a manner otherwise in strict conformity with the terms of this Section 4(e) to correct this Section 4(e) (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this Section 4(e) shall apply to a successor holder of Preferred Shares. The holders of Common Stock shall be third party beneficiaries of this Section 4(e) and the Company may not waive this Section 4(e) without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of a Holder, the Company shall within one (1) Business Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Certificate of Designations or securities issued pursuant to the other Transaction Documents. By written notice to the Company, any Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the 61 ^st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to such Holder sending such notice and not to any other Holder.

Notwithstanding anything contained in this Section 4(e) to the contrary and subject to the other provisions of this Certificate of Designations, the Holder may, at its option and in its sole discretion, determine (A) whether the Preferred Shares held by such Holder shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by such Holder or any of its affiliates) and (B) of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by such Holder and its affiliates) on any

basis, order, or amounts for conversion, exercise or exchange (as the case may be).

(ii) Principal Market Regulation . Notwithstanding anything herein to the contrary, the Company shall not issue any shares of Common Stock upon conversion of any Preferred Shares or otherwise pursuant to this Certificate of Designations, until the Company obtains the Stockholder Approval, to the extent such Stockholder Approval is necessary for such issuance.

(f)

Anti-Dilution . If, at any time during the period twelve (12) months from a Holder’s Initial Issuance Date, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “ Base Conversion Price ” and such issuances, collectively, a “ Dilutive Issuance ”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 4(f) in respect of an Exempt Issuance. The Company shall notify the Holders in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 4(f), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “ Dilutive Issuance Notice ”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 4(f), upon the occurrence of any Dilutive Issuance, the Holders will be entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

5. Optional and Triggered Redemption

(a)

Company One-Time Redemption . In addition to the Company’s Monthly Redemption right as set forth in Section 5(c), at any time before the date six (6) months from a Holder’s Initial Issuance Date and provided that no Equity Conditions Failure (as defined below) exists, the Company shall have the

right to redeem all, but not less than all, of the Preferred Shares then outstanding, plus the then accrued and unpaid Dividends (the “ Company One-Time Redemption Amount ”). The Preferred Shares subject to redemption described herein shall be redeemed by the Company, in cash at a price per Preferred Share (the “ Company One-Time Redemption Price ”) equal to (1) one hundred and fifteen percent (115%) of the Stated Value, plus (2) all Additional Amounts, plus (3) all Make-Whole Amounts, plus (4) any accrued and unpaid Late Charges (as defined in Section 22(b)(ii)) with respect to such Stated Value as of such date of determination. The Company may exercise its redemption option under this Section 5(a) by delivering a written notice thereof by facsimile or electronic mail to all, but not less than all, of the Holders (the “ Company One-Time Redemption Notice ” and the date all of the Holders received such notice is referred to as the “ Company One-Time Redemption Notice Date ”). The Company may deliver only one Company One-Time Redemption Notice hereunder and such Company One-Time Redemption Notice shall be irrevocable. The Company One-Time Redemption Notice shall (x) state the date on which the Company One-Time Redemption shall occur (the “ Company One-Time Redemption Date ”) which date shall not be less than sixty (60) Trading Days nor more than seventy- five (75) Trading Days following the Company One-Time Redemption Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Company One-Time Redemption Amount of the Preferred Shares which is being redeemed in such Company Optional Redemption from such Holder and all of the other Holders of the Preferred Shares pursuant to this Section 5(a) on the Company Optional Redemption Date. Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Company Optional Redemption Notice Date but an Equity Conditions Failure occurs at any time prior to the Company One-Time Redemption Date, (A) the Company shall provide each Holder a subsequent notice to that effect and (B) unless such Holder waives the Equity Conditions Failure, the Company One-Time Redemption with respect to such Holder shall be cancelled and the applicable Company One-Time Redemption Notice shall be null and void and (ii) at any time prior to the date the Company One-Time Redemption Price is paid, in full, the Company One-Time Redemption Amount may be converted, in whole or in part, by any Holder into shares of Common Stock pursuant to Section 4. All Conversion Amounts converted by a Holder after the Company One-Time Redemption Notice Date shall reduce the Company One-Time Redemption Amount of the Preferred Shares of such Holder required to be redeemed on the Company One-Time Redemption Date. Redemptions made pursuant to this Section 5(a) shall be made in accordance with Section 5(d). In the event of the Company’s redemption of any of the Preferred Shares under this Section 5(a), a Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder. Accordingly, any redemption premium due under this Section 5(a) is intended by the parties to be, and shall be deemed,

a reasonable estimate of such Holder’s actual loss of its investment opportunity and not as a penalty. For the avoidance of doubt, the Company shall have no right to effect a Company One-Time Redemption if any Triggering Event has occurred and is continuing, but any Triggering Event shall have no effect upon any Holder’s right to convert Preferred Shares in its discretion.

(b)

Triggering Event Redemptions.

(i)

Triggering Event . Each of the following events shall constitute a “ Triggering Event ” and each of the events in clauses (ix), (x) and (xi) shall constitute a “ Bankruptcy Triggering Event ”:

any of the shares of Common Stock issuable upon conversion of the Preferred Shares are not freely tradable without restriction by any of the Holders due to a breach by the Company which remains uncured for a period of five (5) consecutive Trading Days;

the suspension from trading or failure of the Common Stock to be traded or listed (as applicable) on an Eligible Market for a period of five (5) consecutive Trading Days;

the Company’s written notice to the holder of the Preferred Shares, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of any Preferred Shares into shares of Common Stock that is requested in accordance with the provisions of this Certificate of Designations, other than pursuant to Section 4(e) hereof;

at any time following the fifth (5 ^th ) consecutive day following written notice that a Holder’s pro rate authorized share allocation (as defined in Section 9 below) is less than 300% of the number of shares of Common Stock that such Holder would be entitled to receive upon a conversion in full of the Preferred Shares held by such Holder (without regard to any limitations on conversion set forth in this Certificate of Designations) and the Company’s shareholders have not voted to increase the authorized Common Shares to cure such defect;

the Company’s Board of Directors fails to declare any Dividend to be paid on the applicable Dividend Date in accordance with Section 3;

the Company’s failure to pay to the Holder any Dividend (whether or not declared by the Board of Directors) or any other amount when and as due under this Certificate of Designations (including, without

limitation, the Company’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby (in each case, as permitted pursuant to the FBCA), except, in the case of a failure to pay Dividends and Late Charges (as defined in Section 22(b)(ii)) when and as due, in each such case only if such failure remains uncured for a period of at least three (3) Trading Days;

the Company, on three or more occasions, either (A) fails to cure a Conversion Failure by delivery of the required number of shares of Common Stock within two (2) Trading Days after the applicable Conversion Date or (B) fails to remove any restrictive legend on any certificate for any shares of Common Stock issued to such Holder upon conversion of any Preferred Shares acquired by such Holder as and when required with respect to such securities in accordance with applicable federal securities laws, and any such failure remains uncured for at least three (3) Trading Days;

the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $500,000 of Indebtedness of the Company or any Subsidiaries;

bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within thirty (30) days of their initiation;

the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition

of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;

the entry by a court of (A) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (B) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (C) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of thirty (30) consecutive days;

a final judgment or judgments for the payment of money aggregating in excess of $250,000 are rendered against the Company and/or any of its subsidiaries and which judgments are not, within thirty (30) days after the entry thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged within thirty (30) days after the expiration of such stay; provided, however, any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $250,000 amount set forth above so long as the Company provides each Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to each Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment;

the Company and/or any Subsidiary, individually or in the aggregate fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $250,000 due to any third party (other than, with respect to payments contested by the

Company and/or such subsidiary (as the case may be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $250,000, which breach or violation causes the other party thereto to declare a default or otherwise accelerate amounts due thereunder;

other than as specifically set forth in another clause of this Section 5(b), the Company or any Subsidiary breaches any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of five (5) consecutive Trading Days, unless such breach does not have a Material Adverse Effect (as defined below);

a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that either (A) the Equity Conditions are satisfied, (B) there has been no Equity Conditions Failure, or (C) as to whether any Triggering Event has occurred, and such Holder suffers economic damage thereby;

any breach or failure in any respect by the Company or any Subsidiary to comply with any covenants of this Certificate of Designations, unless such breach does not have a Material Adverse Effect;

occurrence of any Material Adverse Effect;

the occurrence or continuance of an Event of Default under any Transaction Document and such Event of Default has not been cured during the applicable cure period; or

any Equity Condition Failure.

(ii) Notice of a Triggering Event; Redemption Right . Upon the occurrence of a Triggering Event with respect to the Preferred Shares, the Company shall within two (2) Business Days deliver written notice thereof via facsimile or electronic mail (a “ Triggering Event Notice ”) to each Holder. At any time after the earlier of a Holder’s receipt of a Triggering Event Notice and such Holder becoming aware of a Triggering Event (such earlier date, the “ Triggering Event Right Commencement Date ”) and ending (such ending date, the “ Triggering Event Right Expiration Date ”, and each such period, a “ Triggering Event Redemption Right Period ”) on the tenth (10 ^th ) Trading Day

after the later of (x) the date such Triggering Event is cured (notwithstanding, the Company shall only have five (5) calendar days to cure any Equity Conditions Failure) and (y) such Holder’s receipt of a Triggering Event Notice that includes (I) a reasonable description of the applicable Triggering Event, (II) a certification as to whether, in the opinion of the Company, such Triggering Event is capable of being cured and, if applicable, a reasonable description of any existing plans of the Company to cure such Triggering Event and (III) a certification as to the date the Triggering Event occurred and, if cured on or prior to the date of such Triggering Event Notice, the applicable Triggering Event Right Expiration Date, such Holder may require the Company to redeem (regardless of whether such Triggering Event has been cured on or prior to the Triggering Event Right Expiration Date) all or any of the Preferred Shares held by such Holder by delivering written notice thereof (the “ Triggering Event Redemption Notice ”) to the Company, which Triggering Event Redemption Notice shall indicate the number of the Preferred Shares such Holder is electing to redeem. Each of the Preferred Shares subject to redemption by the Company pursuant to this Section 5(b) shall be redeemed by the Company, at the Holder’s option, for shares of Common Stock at a price equal to the lesser of (i) the product of (A) the Conversion Amount to be redeemed multiplied by (B) one hundred thirty five percent (135%) (the “ Triggering Event Redemption Premium ”) and (ii) the product of (X) the Conversion Rate with respect to the Conversion Amount in effect at such time as such Holder delivers a Triggering Event Redemption Notice multiplied by (Y) the product of (1) the Trigger Event Redemption Premium multiplied by (2) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Triggering Event and ending on the date the Company makes the entire payment required to be made under this Section 5(b) (the “ Triggering Event Redemption Price ”). In the event that the Company elects to pay the Trigger Event Redemption Price in shares of Common Stock, the Company shall issue the shares of Common Stock at a conversion price equal to 90% of the then applicable Conversion Price (the “ Triggering Event Redemption Conversion Price ”). For the avoidance of doubt, if Holders are requesting redemptions at the Triggering Event Redemption Conversion Price due to an Equity Conditions Failure, upon a cure of the Equity Conditions Failure, the Company shall not be required to pay to the Holders the redemptions described in this Section 5(b) in shares of Common Stock at the Triggering Event Conversion Redemption Price. Triggering Redemptions required by this Section 5(b) shall be made in accordance with the provisions of Section 5. To the extent redemptions required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Preferred Shares by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 5(b), but subject to Section 4(e), until the Triggering Event Redemption Price (together with any Late Charges (as defined in Section 22(b)(ii)) thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 5(b) (together

with any Late Charges (as defined in Section 22(b)(ii)) thereon) may be converted, in whole or in part, by such Holder into Common Stock pursuant to the terms of this Certificate of Designations. In the event of the Company’s redemption of any of the Preferred Shares under this Section 5(b), a Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder. Accordingly, any redemption premium due under this Section 5(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of such Holder’s actual loss of its investment opportunity and not as a penalty.

(iii)

Notwithstanding anything to the contrary contained in this Section 5(b), upon a Trigger Event, each Holder shall have the option to redeem all of its Preferred Shares in accordance with this Section 5(b). Additionally, following a Triggering Event, interest shall accrue on the amount due to a Holder at a rate of two percent (2%) per month until such Holder is paid in full.

(iv) Mandatory Redemption upon Bankruptcy Triggering Event . Notwithstanding anything to the contrary herein, and notwithstanding any conversion that is then required or in process, upon any Bankruptcy Triggering Event, the Company shall immediately redeem, in cash, each of the Preferred Shares then outstanding at a redemption price equal to the applicable Triggering Event Redemption Price (calculated as if such Holder shall have delivered the Triggering Event Redemption Notice immediately prior to the occurrence of such Bankruptcy Triggering Event), without the requirement for any notice or demand or other action by any Holder or any other person or entity, provided that a Holder may, in its sole discretion, waive such right to receive payment upon a Bankruptcy Triggering Event, in whole or in part, and any such waiver shall not affect any other rights of such Holder or any other Holder hereunder, including any other rights in respect of such Bankruptcy Triggering Event, any right to conversion, and any right to payment of such Triggering Event Redemption Price or any other Redemption Price, as applicable.

(c) Company Monthly Redemption. On or after the date that is six (6) months from the Initial Issuance Date, on each Business Day before the Monthly Conversion Period as described in Section 4(a), the Company, at its sole discretion, shall have the right to redeem all or a portion of the Maximum Conversion Shares (the “ Monthly Redemption Shares ”), in cash at a price per Maximum Conversion Share (the “ Company Monthly Redemption Price ”) equal to (1) one hundred twenty percent (120%) of the Stated Value of such Monthly Redemption Shares, plus (2) all Additional Amounts with respect to such Monthly Redemption Shares, plus (3) all Make-Whole Amounts with respect to such Monthly Redemption Shares, plus (4) any accrued and unpaid Late Charges (as defined in Section 22(b)(ii)) with respect to the Stated Value of such Monthly Redemption Shares as of such date of determination. The

Company may exercise its redemption option under this Section 5(c) by delivering a written notice thereof by facsimile or electronic mail to all, but not less than all, of the Holders (the “ Company Monthly Redemption Notice ” and the date all of the Holders received such notice is referred to as the “ Company Monthly Redemption Notice Date ”). The Company may deliver only one Company Monthly Redemption Notice with respect to any Monthly Conversion Period hereunder and such Company Monthly Redemption Notice shall be irrevocable. The Company Monthly Redemption Notice shall (x) state the date on which the Company One-Time Redemption shall occur (the “ Company Monthly Redemption Date ”) which date shall be no more than three (3) Trading Days following the Company Monthly Redemption Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) state the aggregate Company Monthly Redemption Shares which is being redeemed in such Company Monthly Redemption from such Holder and all of the other Holders of Monthly Redemption Shares pursuant to this Section 5(c) on the Company Monthly Redemption Date. Redemptions made pursuant to this Section 5(c) shall be made in accordance with Section 5(d). In the event of the Company’s redemption of any of the Preferred Shares under this Section 5(c), a Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder. Accordingly, any redemption premium due under this Section 5(c) is intended by the parties to be, and shall be deemed, a reasonable estimate of such Holder’s actual loss of its investment opportunity and not as a penalty. For the avoidance of doubt, the Company shall have no right to effect a Company Monthly Redemption if any Triggering Event has occurred and is continuing, but any Triggering Event shall have no effect upon any Holder’s right to convert Preferred Shares in its discretion.

(d)

Redemptions .

(i)

General . If a Holder has submitted a Triggering Event Redemption Notice in accordance with Section 5(b)(ii), the Company shall deliver the applicable Triggering Event Redemption Price to such Holder in cash within five (5) Business Days after the Company’s receipt of such Holder’s Triggering Event Redemption Notice. If the Company has deliver Monthly Redemption Notice in accordance with Section 5(c), the Company shall deliver the Monthly Redemption Price, in cash, within three (3) Trading Days following the Company Monthly Redemption Notice Date. In the event of a redemption of less than all of the Preferred Shares held by such Holder, the Company shall promptly cause to be issued and delivered to such Holder a new Preferred Certificate (likewise to the procedure set forth in Section 14) representing the number of Preferred Shares which have not been redeemed. In the event that the Company does not pay the applicable Redemption Price to a Holder

within the time period required for any reason (except if such payment is prohibited pursuant to the FBCA), at any time thereafter and until the Company pays such unpaid Redemption Price in full, such Holder shall have the option, in lieu of redemption, to require the Company to promptly return to such Holder all or any of the Preferred Shares that were submitted for redemption and for which the applicable Redemption Price has not been paid. Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such Preferred Shares, (y) the Company shall immediately return the applicable Preferred Share Certificate, or issue a new Preferred Share Certificate (likewise to the procedure set forth in Section 14), to such Holder.

(ii)

Redemption by Multiple Holders . Upon the Company’s receipt of a Redemption Notice from any Holder for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 5(b)(ii), the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to each other Holder by facsimile or electronic mail a copy of such notice. If the Company receives one or more Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three (3) Business Days prior to the Company’s receipt of the initial Redemption Notice and ending on and including the date which is three (3) Business Days after the Company’s receipt of the initial Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such initial Redemption Notice and such other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each Holder based on the principal amount of the Preferred Shares submitted for redemption pursuant to such Redemption Notices received by the Company during such seven (7) Business Day period.

(iii)

Triggering Event Redemptions . Notwithstanding anything to the contrary in Sections 5(b)(ii) or 5(b)(iv), the Company shall have no obligation to comply with such Sections 5(b)(ii) or 5(b)(iv) at any time that (x) the Company does not have surplus as described under the FBCA or funds legally available to redeem all outstanding Preferred Shares, (y) the Company’s capital is impaired as described under the FBCA or (z) the redemption of any Preferred Shares would result in an impairment of the Company’s capital as described under FBCA; provided, however that in the event that the Company does not comply with the provisions of Sections 5(b)(ii) or 5(b)(iv) by virtue of the restrictions in this Section 5(d)(iii), the Company will comply with

the provisions of Sections 5(b)(ii) or 5(b)(iv) promptly after such restrictions are no longer applicable.

6. Rights Upon Fundamental Transactions . The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Certificate of Designations and the other Transaction Documents in accordance with the provisions of this Section 6 pursuant to written agreements, including agreements to deliver to each holder of Preferred Shares in exchange for such Preferred Shares a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Certificate of Designations, including, without limitation, having a Stated Value and Dividend Rate equal to the stated value and dividend rate of the Preferred Shares held by the Holders and having similar ranking to the Preferred Shares, and reasonably satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose shares of common stock are quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designations and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Certificate of Designations and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein and therein. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to each Holder confirmation that there shall be issued upon conversion of the Preferred Shares at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 7(a) and 12, which shall continue to be receivable thereafter)) issuable upon the conversion of the Preferred Shares prior to such Fundamental Transaction, such shares of publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which each Holder would have been entitled to receive upon the consummation of such Fundamental Transaction had all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designations), as adjusted in accordance with the provisions of this Certificate of Designations. The provisions of this Section 6 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of the Preferred Shares.

7. Rights Upon Issuance of Purchase Rights and Other Corporate Events .

(a) Intentionally Omitted.

(b) Other Corporate Events . In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that each Holder will during the period sixty (60) days following the Corporate Event have the right to receive upon a conversion of all the Preferred Shares held by such Holder (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which such Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by such Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares contained in this Certificate of Designations) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as such Holder would have been entitled to receive had the Preferred Shares held by such Holder initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. The provisions of this Section 7 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designations.

8. Adjustment of Conversion Price upon Subdivision or Combination of Common Stock . Without limiting any provision of Section 7 or Section 12, if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 7 or Section 12, if the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 8 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 8 occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

9. Authorized Shares .

(a) Reservation . The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock equal to the sum of (i) 300% of the Conversion Rate with respect to the Conversion Amount of each Preferred Share as of the Initial Issuance Date (assuming for purposes hereof, that all the Preferred Shares issuable pursuant to the Securities Purchase have been issued, such Preferred Shares are convertible at the Conversion Price and without taking into account any limitations on the conversion of such Preferred Shares set forth in herein) and (ii) the maximum number of Dividend Shares issuable pursuant to the terms of this Certificate of Designations from the Initial Issuance Date through the fifth (5 ^th ) anniversary of the Initial Issuance Date (assuming for purposes hereof, that all the Preferred Shares issuable pursuant to the Second Securities Purchase Agreement have been issued and without taking into account any limitations on the issuance of securities set forth herein). So long as any of the Preferred Shares are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares, as of any given date, the sum of (i) 300% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Preferred Shares issued or issuable pursuant to the Securities Purchase Agreement and (ii) the maximum number of Dividend Shares issuable pursuant to the terms of this Certificate of Designations from such date through the fifth (5 ^th ) anniversary of such given date, assuming for purposes hereof, that all the Preferred Shares issuable pursuant to the Securities Purchase Agreement have been issued and without taking into account any limitations on the issuance of securities set forth herein), provided that at no time shall the number of shares of Common Stock so available be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions contained in this Certificate of Designations) (the “ Required Amount ”). The initial number of shares of Common Stock reserved for conversions of the Preferred Shares and for issuance as Dividend Shares and each increase in the number of shares so reserved shall be allocated pro rata among the Holders based on the number of Preferred Shares held by each Holder on the Initial Issuance Date or increase in the number of reserved shares (as the case may be) (the “ Authorized Share Allocation ”). In the event a Holder shall sell or otherwise transfer any of such Holder’s Preferred Shares, each transferee shall be allocated a pro rata portion of such Holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Preferred Shares shall be allocated to the remaining Holders of Preferred Shares, pro rata based on the number of Preferred Shares then held by such Holders.

(b) Insufficient Authorized Shares . If, notwithstanding Section 9(a) and not in limitation thereof, at any time while any of the Preferred Shares remain outstanding the Company does not have a sufficient number of authorized and unissued shares of Common Stock to satisfy its obligation to have available for issuance upon conversion of the Preferred Shares at least a number of shares of Common Stock equal to the Required Amount (an “ Authorized Share Failure ”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve and have available the Required Amount for all of the Preferred Shares then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting or obtain written consent of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement or information statement, as applicable, and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its Board to recommend to the stockholders that they approve such proposal.

(c)

Increases in Reserved Share Ratio . With respect to a particular date of determination, that the quotient of (x) the sum of the VWAP of the Common Stock for each Trading Day in the Ten (10) consecutive Trading Day period ending and including the Trading Day immediately preceding such date of determination, divided by (y)ten (10) is less than $0.005 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions) then the Company is required to reserve no less than 1,000% of the number of shares of Common Stock that such Holder would be entitled to receive upon a conversion in full of the Preferred Shares held by such Holder (without regard to any limitations on conversion set forth in this Certificate of Designations);

10. Voting Rights . Holders of Preferred Shares shall have no voting rights, except as required by law (including without limitation, the FBCA) and as expressly provided in this Certificate of Designations. To the extent that under the FBCA the vote of the holders of the Preferred Shares, voting separately as a class or series as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of all of the Preferred Shares, voting together in the aggregate and not in separate series unless required under the FBCA, represented at a duly held meeting at which a quorum is presented or by written consent of all of the Preferred Shares (except as otherwise may be required under the FBCA), voting together in the aggregate and not in separate series unless required under the FBCA, shall constitute the approval of such action by both the class or the series, as applicable. Subject to Section

4(e), to the extent that under the FBCA holders of the Preferred Shares are entitled to vote on a matter with holders of shares of Common Stock, voting together as one class, each Preferred Share shall entitle the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible (subject to the ownership limitations specified in Section 4(e) hereof) using the record date for determining the stockholders of the Company eligible to vote on such matters as the date as of which the Conversion Price is calculated. Notwithstanding, anything to the contrary herein, to the extent that under the FBCA holders of the Preferred Shares are entitled to vote on a matter with holders of shares of Common Stock, no Holder of Preferred Shares shall be entitled to cast votes representing more than 4.99% of the votes entitled to be cast in the matter. Holders of the Preferred Shares shall be entitled to written notice of all stockholder meetings or written consents (and copies of proxy materials and other information sent to stockholders) with respect to which they would be entitled by vote, which notice would be provided pursuant to the Company’s bylaws and the FBCA).

11. Liquidation, Dissolution, Winding-Up . In the event of a Liquidation Event, the Holders shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the “ Liquidation Funds ”), before any amount shall be paid to the holders of any of shares of Junior Stock, an amount per Preferred Share equal to the greater of (A) 100% of the Stated Value and (B) the amount per share such Holder would receive if such Holder converted such Preferred Shares into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the Holders and holders of shares of Parity Stock, then each Holder and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such Holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Preferred Shares and all holders of shares of Parity Stock. To the extent necessary, the Company shall cause such actions to be taken by each of its Subsidiaries so as to enable, to the maximum extent permitted by law, the proceeds of a Liquidation Event to be distributed to the Holders in accordance with this Section 11. All the preferential amounts to be paid to the Holders under this Section 11 shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Company to the holders of shares of Junior Stock in connection with a Liquidation Event as to which this Section 11 applies.

12. Participation . In addition to any adjustments pursuant to Section 8, the Holders shall, as holders of Preferred Shares, be entitled to receive such dividends paid and distributions made to the holders of shares of Common Stock to the same extent as if such Holders had converted each Preferred Share held by each of them into shares of Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and

distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of shares of Common Stock (provided, however, to the extent that a Holder’s right to participate in any such dividend or distribution would result in such Holder exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such dividend or distribution to such extent (or the beneficial ownership of any such shares of Common Stock as a result of such dividend or distribution to such extent) and such dividend or distribution to such extent shall be held in abeyance for the benefit of such Holder until such time, if ever, as its right thereto would not result in such Holder exceeding the Maximum Percentage).

13. Vote to Change the Terms of or Issue Preferred Shares . In addition to any other rights provided by law, except where the vote or written consent of the holders of a greater number of shares is required by law or by another provision of the Articles of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders, voting together as a single class, the Company shall not amend or repeal any provision of, or add any provision to, its Articles of Incorporation or bylaws, or file any certificate of designations or articles of amendment of any series of shares of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Preferred Shares, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or by merger, consolidation or otherwise; provided, however, the Company shall be entitled, without the consent of the Required Holders unless such consent is otherwise required by the FBCA, to (a) amend the Articles of Incorporation to effectuate one or more reverse stock splits of its issued and outstanding Common Stock for purposes of maintaining compliance with the rules and regulations of the Principal Market; (b) purchase, repurchase or redeem any shares of capital stock of the Company junior in rank to the Preferred Shares (other than pursuant to equity incentive agreements (that have in good faith been approved by the Board) with employees giving the Company the right to repurchase shares upon the termination of services); or (c) issue any preferred stock that is junior in rank to the Preferred Shares.

14. Lost or Stolen Certificates . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificates representing Preferred Shares (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of an indemnification undertaking by the applicable Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of the certificate(s), the Company shall execute and deliver new certificate(s) of like tenor and date.

15. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designations shall be cumulative and in addition to all other remedies available under this Certificate of Designations and any of the other Transaction Documents, at law or in equity (including a decree of

specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy. Nothing herein shall limit any Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Certificate of Designations. The Company covenants to each Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by a Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, each Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required, to the extent permitted by applicable law. The Company shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Company’s compliance with the terms and conditions of this Certificate of Designations.

16. Noncircumvention . The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Designations, and will at all times in good faith carry out all the provisions of this Certificate of Designations and take all action as may be required to protect the rights of the Holders. Without limiting the generality of the foregoing or any other provision of this Certificate of Designations, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the conversion of any Preferred Shares above the Conversion Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of Preferred Shares and (iii) shall, so long as any Preferred Shares are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of the Preferred Shares then outstanding (without regard to any limitations on conversion contained herein).

17. Failure or Indulgence Not Waiver . No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized

representative of the waiving party. This Certificate of Designations shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed against any Person as the drafter hereof.

18. Notices . The Company shall provide each Holder of Preferred Shares with prompt written notice of all actions taken pursuant to the terms of this Certificate of Designations, including in reasonable detail a description of such action and the reason therefor. Whenever notice is required to be given under this Certificate of Designations, unless otherwise provided herein, such notice must be in writing and shall be given in accordance with the signature page of the Securities Purchase Agreement. Without limiting the generality of the foregoing, the Company shall give written notice to each Holder (i) promptly following any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to all holders of shares of Common Stock as a class or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided, in each case, that such information shall be made known to the public prior to, or simultaneously with, such notice being provided to any Holder.

19. Transfer of Preferred Shares . Subject to the restrictions set forth in the Securities Purchase Agreement, a Holder may transfer some or all of its Preferred Shares with the Company having first right of refusal provided in the Securities Purchase Agreement.

20. Preferred Shares Register . The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holders), a register for the Preferred Shares, in which the Company shall record the name, address and facsimile number of the Persons in whose name the Preferred Shares have been issued, as well as the name and address of each transferee. The Company may treat the Person in whose name any Preferred Shares is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any properly made transfers.

21. Stockholder Matters; Amendment .

(a) Stockholder Matters . Any stockholder action, approval or consent required, desired or otherwise sought by the Company pursuant to the FBCA, the Articles of Incorporation, this Certificate of Designations or otherwise with respect to the issuance of Preferred Shares may be effected by written consent of the Company’s stockholders or at a duly called meeting of the Company’s stockholders, all in accordance with the applicable rules and regulations of the FBCA. This provision is intended to comply with the applicable sections of the

FBCA permitting stockholder action, approval and consent affected by written consent in lieu of a meeting.

(b) Amendment . This Certificate of Designations or any provision hereof may be amended by obtaining the affirmative vote at a meeting duly called for such purpose, or written consent without a meeting in accordance with the FBCA, of the Required Holders, voting separate as a single class, and with such other stockholder approval, if any, as may then be required pursuant to the FBCA and the Articles of Incorporation.

22. Dispute Resolution .

(a) Submission to Dispute Resolution .

(i) In the case of a dispute relating to a Closing Sale Price, a Conversion Price, a VWAP or a fair market value or the arithmetic calculation of a Conversion Rate (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the applicable Holder (as the case may be) shall submit the dispute to the other party via facsimile (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by such Holder at any time after such Holder learned of the circumstances giving rise to such dispute. If such Holder and the Company are unable to promptly resolve such dispute relating to such Closing Sale Price, such Conversion Price, such VWAP or such fair market value, or the arithmetic calculation of such Conversion Rate (as the case may be), at any time after the second (2 ^nd ) Business Day following such initial notice by the Company or such Holder (as the case may be) of such dispute to the Company or such Holder (as the case may be), then such Holder may, at its sole option, select an independent, reputable investment bank to resolve such dispute.

(ii) Such Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 22 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5 ^th ) Business Day immediately following the date on which such Holder selected such investment bank (the “ Dispute Submission Deadline ”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “ Required Dispute Documentation ”) (it being understood and agreed that if either such Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no

longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and such Holder or otherwise requested by such investment bank, neither the Company nor such Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation) .

(iii) The Company and such Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and such Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.

(b) Miscellaneous .

(i)

Whenever any payment of cash is to be made by the Company to any Person pursuant to this Certificate of Designations, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing, provided that such Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and such Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Certificate of Designations is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.

23. Certain Defined Terms . For purposes of this Certificate of Designations, the following terms shall have the following meanings:

(a)

“ 1934 Act ” means the Securities Exchange Act of 1934, as amended.

(b)

“ Additional Amount ” means, as of the applicable date of determination, with respect to each Preferred Share, all declared and unpaid Dividends on such Preferred Share.

(c)

“ Approved Share Plan ” means any employee benefit plan which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer or director for services provided to the Company in their capacity as such.

(d)

“ Bloomberg ” means Bloomberg, L.P.

(e)

“ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(f)

“ Closing Sale Price ” means, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price (as the case may be) then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the applicable Holder. If the Company and such Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 22. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

(g)

“ Common Stock ” means (i) the Company’s shares of common stock, Nil par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

(h)

“ Common Stock Equivalents ” means any securities of the Company or the 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 instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

(i)

“ Contingent Obligation ” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

(j)

“ Conversion Amount ” means, with respect to each Preferred Share, as of the applicable date of determination, the sum of (1) the Stated Value thereof, plus (2) the Additional Amount thereon as of such date of determination, plus (3) the Make-Whole Amount.

(k)

“ Conversion Premium ” means One Hundred Thirty Percent (130%).

(l)

“ Conversion Price ” means, with respect to each Preferred Share, the lower of (i) the Fixed Conversion Price; or (ii) the lower of the VWAP of the Common Stock on the Trading Day prior to the Conversion Date or the VWAP of the Common Stock on the Conversion Date, subject to changes as set forth herein.

(m)

“ Convertible Securities ” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

(n)

“ Dividend Notice Due Date ” means the eleventh (11 ^th ) Trading Day immediately prior to the applicable Dividend Date.

(o)

“ Dividend Rate ” means five percent (5.0%) per annum.

(p)

“ Eligible Market ” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.

(q)

“ Equity Conditions ” means: (i) with respect to the applicable date of determination all of the shares of Common Stock issuable upon conversion of all of the Preferred Shares are freely tradable without the need for registration under any applicable federal or state securities laws (in each case,

disregarding any limitation on conversion contained herein); (ii) on each day during the period beginning thirty (30) days prior to the applicable date of determination and ending on and including the applicable date of determination (the “ Equity Conditions Measuring Period ”), the Common Stock (including all of the shares of Common Stock issuable upon conversion of all of the Preferred Shares) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company); (iii) on each day during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of Preferred Shares on a timely basis as set forth in Section 4 hereof, and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (iv) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 4(e) hereof (each Holder acknowledges that the Company shall be entitled to assume that this condition has been met for all purposes hereunder absent written notice from such Holder); (v) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) the Company shall have no knowledge of any fact that would reasonably be expected to cause any of the shares of Common Stock issuable upon conversion of any Preferred Shares to not be freely tradable without the need for registration under any applicable state securities laws (disregarding any limitation on conversion contained herein); (viii) no Holder shall be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (ix) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in material compliance with each, and shall not have breached any, provision, covenant, representation or warranty of any Transaction Document; (x) on each day during the Equity Conditions Measuring Period, there shall not have occurred any Volume Failure or Price Failure; (xi) there shall be no Triggering Events; (xii) The Company’s Common Stock must be DWAC eligible and not subject to “DTC chill”; (xiii) the Company must be current on all of its filings under the 1934 Act; (xiv) the Preferred Shares must be able to be delivered via an “Automatic Conversion” of principal and/or interest.

(r)

“ Equity Conditions Failure ” means, with respect to any date of determination, that on any day during the period commencing twenty (20)

Trading Days immediately prior to such date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Required Holders).

(s)

“ 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 exercise or exchange of or conversion 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 Initial Issuance Date, provided that such securities have not been amended since the Initial Issuance Date to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (d) securities issuable pursuant to any contractual anti-dilution obligations of the Company in effect as of the Initial Issuance Date, provided that such obligations have not been materially amended since the Initial Issuance 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.

(t)

“Fixed Conversion Price ” means, with respect to each Preferred Share, the result of 110% multiplied by the VWAP of the common stock of the Company on the First Closing Date of the Securities Purchase Agreement relating to the purchase and sale of the Preferred Shares as described herein, subject to changes as set forth herein.

(u)

“ Fundamental Transaction ” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than fifty percent (50%) of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than fifty percent (50%)

of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) (I) reorganize, recapitalize or reclassify the Common Stock, (II) effect or consummate a stock combination, reverse stock split or other similar transaction involving the Common Stock or (III) make any public announcement or disclosure with respect to any stock combination, reverse stock split or other similar transaction involving the Common Stock (including, without limitation, any public announcement or disclosure of (x) any potential, possible or actual stock combination, reverse stock split or other similar transaction involving the Common Stock or (y) board or stockholder approval thereof, or the intention of the Company to seek board or stockholder approval of any stock combination, reverse stock split or other similar transaction involving the Common Stock), or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of fifty percent (50%) of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

(v)

“ GAAP ” means United States generally accepted accounting principles, consistently applied.

(w)

“ Indebtedness ” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and

contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above.

(x)

“ Liquidation Event ” means, whether in a single transaction or series of transactions, the voluntary or involuntary liquidation, dissolution or winding up of the Company or such Subsidiaries the assets of which constitute all or substantially all of the assets of the business of the Company and its Subsidiaries, taken as a whole.

(y)

“ Make-Whole Amount ” means as of any given date, the amount of any Dividend that, but for any conversion hereunder on such given date, would have accrued with respect to the Conversion Amount being redeemed hereunder at the Dividend Rate then in effect for the period from such given date through the following Dividend Date.

(z)

“ Material Adverse Effect ” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any subsidiary, either individually or taken as a whole, (ii) the transactions contemplated hereunder or (iii) the authority or ability of the Company to perform any of its obligations hereunder.

(aa)

“ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

(bb)

“ Parent Entity ” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

(cc)

“ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

(dd)

“ Price Failure ” means, with respect to a particular date of determination, that the quotient of (x) the sum of the VWAP of the Common Stock for each Trading Day in the thirty (30) consecutive Trading Day period ending and including the Trading Day immediately preceding such date of determination, divided by (y) thirty (30) is less than $0..001 (as adjusted for

stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions).

(ee)

“ Principal Market ” means the OTCPINK, OTCQB or OTCQX.

(ff)

“ Redemption Notices ” means, collectively, the Triggering Event Redemption Notice, the Company Monthly Redemption Notice and each of the foregoing, individually, a “ Redemption Notice ”.

(gg)

“ Redemption Premium ” means One Hundred Thirty Percent (130%).

(hh)

“ Redemption Prices ” means, collectively, the Triggering Event Redemption Price, the Company One-Time Redemption Price and the Monthly Redemption Price, and each of the foregoing, individually, a “ Redemption Price ”.

(ii)

“ Required Holders ” means the holders of at least 51% of the outstanding Preferred Shares.

(jj)

“ Rule 144 ” means Rule 144 promulgated by the SEC pursuant to the Securities Act of 1933, as amended, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

(kk)

“ SEC ” means the Securities and Exchange Commission or the successor thereto.

(ll)

“ Securities ” means, collectively, the Preferred Shares and the shares of Common Stock issuable upon conversion of the Preferred Shares.

(mm)

“ Securities Purchase Agreement ” for each Holder shall mean the Securities Purchase Agreement and between the Company and the Holder.

(nn)

“ Stated Value ” shall mean $1.00 per share, 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.

(oo)

“ Stockholder Approval ” means, for the purposes of this Certificate of Designations and any other Transaction Document, the affirmative approval of the stockholders of the Company providing for the Company’s issuance of all of the Securities as described in the Transaction Documents in accordance with applicable law and the rules and regulations of the Principal Market.

(pp)

“ Subscription Date ” of a holder means the date the Securities Purchase Agreement is duly executed by all parties thereto.

(qq)

“ Subsidiary ” or “ Subsidiaries ” means any subsidiary of the Company, including, where applicable, any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

(rr)

“ Successor Entity ” means the Person (or, if so elected by the Required Holders, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

(ss)

“ Trading Day ” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Required Holders.

(tt)

“ Transaction Documents ” for any Holder means this Certificate of Designations, the Securities, the Securities Purchase Agreement and each of the other agreements and instruments entered into or delivered by the Company or the Holder in connection with the transactions contemplated thereby, all as may be amended from time to time in accordance with the terms hereof or thereof.

(uu)

“ Volume Failure ” means for any date one hundred eighty (180) from the Initial Issuance Date, with respect to a particular date of determination, the aggregate dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market of any Trading Day in the twenty (20) consecutive Trading Day period ending on the Trading Day immediately preceding such date of determination is less than $10,000 (adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period). No Volume Failure shall be deemed to have occurred on any date prior to the date one hundred eighty (180) from the Initial Issuance Date.

(vv)

“ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general

voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers, trustees or other similar governing body of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

(ww)

“ VWAP ” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and such Holder. If the Company and such Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 22. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

24. Disclosure . Upon receipt or delivery by the Company of any notice in accordance with the terms of this Certificate of Designations, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall simultaneously with any such receipt or delivery publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to each Holder contemporaneously with delivery of such notice, and in the absence of any such indication, each Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the Company or its Subsidiaries. Nothing contained in this Section 24 shall limit any obligations of the Company, or any rights of any Holder.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations of Series B Convertible Preferred Stock to be signed by its Chief Executive Officer on this 5th day of October, 2017.



COMPANY

By:
	Name:	Marco Alfonsi
	Title:	Chief Executive Officer

EXHIBIT I

COMPANY NAME

CONVERSION NOTICE

Reference is made to the Certificate of Designations, Preferences and Rights of the Series B Convertible Preferred Stock of Canbiola, Inc. (the “ Certificate of Designations ”). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series B Convertible Preferred Stock, $0.001 par value per share (the “ Preferred Shares ”), of Canbiola, Inc., a Florida corporation (the “ Company ”), indicated below into shares of common stock, $0.001 value per share (the “ Common Stock ”), of the Company, as of the date specified below.

Date of Conversion: _________________________________________________________________________

Number of Preferred Shares to be converted: ______________________________________________________

Share certificate no(s). of Preferred Shares to be converted: ___________________________________________

Tax ID Number (If applicable): _________________________________________________________________

Conversion Price**: _________________________________________________________________

Number of shares of Common Stock to be issued: ___________________________________________________

Please issue the shares of Common Stock into which the Preferred Shares are being converted in the following name and to the following address:

Issue to: _______________________________________________________________

_______________________________________________________________

Address: _______________________________________________________________

Telephone Number: ____________________________________________________

Facsimile Number: _______________________________________________________

Holder: ______________________________________________________________

By: ___________________________________________________

Title: _________________________________________________

Dated: _______________________________________________

Account Number (if electronic book entry transfer): _____________________________________________

Transaction Code Number (if electronic book entry transfer): ________________________________________

** Conversion Price may be based on the VWAP of the Trading Day prior to the Conversion Date and remains subject to adjustment upon the close of the Principal Market on the Conversion Date.

EXHIBIT II

ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs [ ] to issue the above indicated number of shares of Common Stock in accordance with the Irrevocable Transfer Agent Instructions dated __________, 2017 from the Company and acknowledged and agreed to by [ ].

COMPANY NAME


	By:
	Name:
	Title:

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:

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.

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.

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.

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

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.

RedDiamond Partners LLC

By:__________________________________________

Name:

Title:

Canbiola, Inc.

By:__________________________________________

Name: Marco Alfonsi

Title: Chief Executive Officer

PRODUCTION AGREEMENT

THIS PRODUCTION AGREEMENT (this “Agreement”) is effective this 23 day of January, 2018 (the “Effective Date”), by and between Pure Health Products, LLC, with an address at 5507-10 Nesconset Highway, Suite 125, Mount Sinai, New York 11766 (“Manufacturer”), and Canbiola, Inc., a Florida corporation (“Canbiola”).

BACKGROUND

Manufacturer is in the business of manufacturing products containing Cannabinol (“CBD”).

Canbiola is in the business of developing, producing and selling products containing CBD.

Canbiola has provided Manufacturer with financing to build out a manufacturing facility located at 5815 Lacey Blvd SE, Lacey, WA 98503 (“Facility”) including all fixtures and equipment necessary for Manufacturer’s business.

Canbiola has developed proprietary formulas for its CBD infused products (the “Products”).

The parties have agreed that Manufacturer shall produce Products for Canbiola on an exclusive basis, subject to the terms and conditions of this Agreement.

AGREEMENT

Manufacturer and Canbiola agree as follows:

Purchase and Sale Obligations.

1.1

Products . During the term of this Agreement, and in accordance with the terms and conditions set forth herein, Manufacturer agrees to manufacture, package and sell to Canbiola the Products specified in Schedule A hereto, which schedule may be amended by Canbiola from time-to-time in writing acknowledged by Manufacturer, on an exclusive basis. Manufacturer shall not produce or manufacture any product containing any cannabis or hemp derivative for any person or entity other than Canbiola. All Products shall be brewed and packaged according to Canbiola’s written specifications, including the maintenance of standards and quality control programs. All specifications shall be provided to Manufacturer in writing and Manufacturer shall not be responsible for manufacturing or packaging the Canbiola’s Products according to any specifications not provided in writing. Canbiola may modify its specifications only with at least thirty (30) days’ advance notice to Manufacturer. Canbiola shall have the right, at any time, to monitor and review the practices and procedures of Manufacturer in the production and packaging of Products and to inspect the Facility. Manufacturer and Canbiola will, in any and all public statements or comments, recognize that Canbiola controls the ingredients, recipe, brewing processes and procedures and quality and taste parameters for all Products produced at the Facility and that Canbiola is the manufacturer of all such Products. Neither party will make any public statements inconsistent with the foregoing.

1.2

Minimum Order Requirement . There are no minimum order requirements.

Orders, Payment and Delivery.

2.1

Orders. Canbiola shall order Products from Manufacturer under this Agreement by submitting to

Manufacturer a written purchase order specifying the Products, quantities and requested delivery dates required to enable Manufacturer to fill the order. Manufacturer will be obligated to fulfill any orders for Products which do not require any modifications or additions, other than the modifications specified in Section 3.1 (Customization). The purpose of the purchase order to be issued under this Agreement is for specifying the Products, quantities and requested delivery dates only; no terms and conditions of Canbiola's purchase orders, Manufacturer's order acknowledgment or any other document or instrument of Canbiola or Manufacturer shall be binding upon the other party or amend or modify this Agreement in any manner.

2.2

Prices. Canbiola shall be responsible for all costs associated with manufacture of the Products, at Manufacturer’s cost, with no mark-up or margin due Manufacturer. Manufacturer agrees to provide Canbiola prior to beginning any order with a written estimate of all costs of producing the requested Products. All sales and risk of loss are F.O.B. destination; however, Canbiola agrees to separately pay all expenses incurred by Manufacturer in the shipment and delivery of ordered Products, including without limitation freight charges, import duties and insurance premiums, and any federal and state excise taxes, which Manufacturer may pass along to Canbiola if Manufacturer pays such taxes in compliance with Federal laws. Canbiola shall determine, in its sole discretion, the price at which Canbiola resells Products to Canbiola's customers.

2.3

Shipment and Delivery . Shipments will be made to the warehouse facilities identified by Canbiola in advance of each shipment. Shipments will be made as requested by Canbiola’s carrier. In the event Canbiola requests express delivery or shipment by air instead of by truck or by courier service, Canbiola agrees to pay all additional expenses required by such request. Manufacturer will use commercially reasonable efforts to meet Canbiola's requested delivery schedules for Products. For Manufacturer's first purchase order, the latest shipment date shall be 90 days after receipt of purchase order, unless delayed by governmental registration restrictions. Canbiola shall make any claims for shortage or damage of Products with the common carrier promptly upon receipt of the order and provide Manufacturer with written notice of such a claim. As between Manufacturer and Canbiola, Products shall be deemed accepted by Canbiola unless, within three (3) business days of delivery of the Products, Canbiola affirmatively rejects the Products, by written notice detailing the reasons for rejections. If no such notice of rejection is received, Canbiola shall be deemed to have accepted delivery provided; however, the acceptance of delivery shall in no way diminish or affect the product warranty given by Manufacturer in Section 6 (Warranty and Repairs).

2.4

Payment. Canbiola shall pay 10% of the estimated cost of any Product order subject to a written purchase order prior to production and the balance upon completion of production.

2.5

Forecasts . Canbiola shall submit a rolling one (1) month sales forecast to Manufacturer every one (1) months. Such sales forecast shall include expected sales quantities per month, order dates, shipping dates and Product requirements. If the most recent forecast becomes materially inaccurate at any time, Canbiola shall promptly provide Manufacturer with updated information.

Modifications; Discontinued Products; Quality Assurance.

3.1

Customization . Manufacturer agrees to white label / rebrand or relabel the Products pursuant to “white label agreements” entered into between Canbiola and third party customers. Manufacturer and Canbiola shall collaborate to make sure the labeling is satisfactory to the parties and in accordance with Canbiola's requirements for such Products set forth in its agreements with its . Canbiola shall indicate its its approval of any specific label by causing an authorized representative to sign and print his or her name on a copy of the final label, which executed label shall be delivered to Canbiola’s third party customer on behalf of

Canbiola in accordance with its white label agreement with each customer. Canbiola shall provide Manufacturer with camera-ready artwork necessary for the labeling of the customized/ white label Products, which shall include, without limitation: trademarks, Product serial numbers, UPC codes, and such additional information as may be specified by Canbiola. Canbiola shall be responsible for the costs of such labeling. Canbiola shall be responsible for the costs of registration.

3.2

Quality Assurance. The Products shall be manufactured in accordance with industry standards and in compliance with all local, state and federal laws.

Confidentiality.

Manufacturer and Canbiola agree that certain information supplied by Canbiola to Manufacturer during the term of this Agreement, including, without limitation, the Products, the documentation and the intellectual property and technology underlying the Products, the information for customization pursuant to Section 3.1 (Customization) and information contained on purchase orders or regarding Canbiola's ordering or delivery patterns is proprietary, secret, confidential or non-public. All such information shall be held in confidence by Manufacturer, shall be used only for the purposes of this Agreement and shall not be disclosed to any person other than an employee with a need to know the information in order to fulfill the obligations of the receiving party hereunder.

4.1

Return or Destroy Confidential Information. Upon termination of this Agreement, Manufacturer shall return or, upon request, destroy all confidential, proprietary or secret information of Canbiola in its possession. Manufacturer’s obligations pursuant to this Section 4 (Confidentiality) shall survive the expiration or earlier termination of this Agreement.

Canbiola Trademarks. Canbiola hereby grants to Manufacturer a non-exclusive, non-transferable, revocable right to use the “Canbiola” trademark (“Canbiola Mark”) solely on the Products ordered by Canbiola hereunder and associated packaging. Manufacturer agrees to the following:

(a)

to comply with Canbiola's guidelines and instructions regarding use of the Canbiola Marks as communicated to Manufacturer from time to time;

(b)

in the event Canbiola notifies Manufacturer that such use is not in conformance with Canbiola's guidelines and instructions, to promptly bring such use into conformance;

(c)

to ensure that all use of the Canbiola Marks will not reflect adversely upon the good name or good will of Canbiola and that all Products in connection with which the Canbiola Marks are used are of high standard and workmanship and of such nature, style, appearance and quality as shall be adequate and suited to the protection of the Canbiola Marks and the goodwill associated therewith;

(d)

not to use the Canbiola Marks (or any part thereof) as part of, or in combination with, any other names or trademarks without Canbiola's prior written approval;

(e)

not to register (or aid any third party in registering) the Canbiola Marks (or confusingly similar mark) or take any action inconsistent with Canbiola's ownership of the Canbiola Marks in any jurisdiction; and

(f)

that all usage of the Canbiola Marks will be on behalf of, and inure to the benefit of, Canbiola.

Warranty.

6.1

Warranty. Manufacturer warrants that the Products manufactured and sold by it will be free from defects in material and workmanship, and will substantially conform to the technical specifications provided by Canbiola in writing. Canbiola shall have three (3) business days to notify Manufacturer of any defects relating to the Products and shall return the subject Products to Manufacturer. Upon receipt, Manufacturer will replace the defective product free of charge. Manufacturer reserves the right to inspect the defective Products on its return in order to determine the origin of the fault, and if the defect is found not to be covered by the warranty,

6.2

Disclaimer . Canbiola shall be responsible for any warranty it extends, either directly or indirectly, expressly or by operation of law, beyond the warranty expressly granted in this Section 6 (Warranty). Manufacturer is not responsible for (i) damages caused by Canbiola's failure to perform Canbiola's responsibilities or (ii) damages due to deterioration during periods of storage by Canbiola longer than those periods set forth in the Product documentation.

Insurance. Manufacture shall purchase and maintain throughout the term of this Agreement insurance or indemnity protection sufficient to cover all potential liabilities of Manufacturer. This shall include, but not necessarily be limited to (1) broad form commercial general liability insurance, (2) personal/commercial automobile liability insurance (including, as appropriate, owned, hired, and borrowed auto coverages), and (3) workman’s compensation insurance. The limit of liability for such coverage shall be no less than $1 million per claim/occurrence, and Canbiola shall be named as “additional insureds” under such policies.

Product Recalls. Manufacturer shall be responsible for all Product recalls. Manufacturer agrees to take any and all actions, at its sole cost and expense, which are reasonably necessary and appropriate to effectuate a Product corrective action, including, without limitation, a Product recall, provided, however that Canbiola agrees to cooperate with Manufacturer in such action, including, without limitation contacting customers and assisting in the transfer of Products, as directed by Manufacturer, if necessary.

Representations and Warranties of Manufacturer. Manufacturer hereby represents and warrants to Canbiola as of the Effective Date as follows:

9.1

Authorization. Manufacturer (i) has the corporate power and authority and the legal right to enter into the Agreement and perform its obligations hereunder, and (ii) has taken all necessary corporate action on its part required to authorize the execution and delivery of the Agreement and the performance of its obligations hereunder. The Agreement has been duly executed and delivered on behalf of Manufacturer, and constitutes a legal, valid, binding obligation of Manufacturer and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity whether enforceability is considered a proceeding at law or equity.

10.

Representations and Warranties of Canbiola. Canbiola hereby represents and warrants to Manufacturer as of the Effective Date as follows:

10.1

Authorization. Canbiola (i) has the corporate power and authority and the legal right to enter into the Agreement and perform its obligations hereunder, and (ii) has taken all necessary corporate action on its part required to authorize the execution and delivery of the Agreement and the performance of its obligations hereunder. The Agreement has been duly executed and delivered on behalf of Canbiola, and

constitutes a legal, valid, binding obligation of Canbiola and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity whether enforceability is considered a proceeding at law or equity.

11.

Indemnity

11.1

Canbiola shall indemnify, defend and hold Manufacturer harmless from and against any damages, claims, suits, actions, causes of action, demands, liabilities, losses, costs and expenses (including without limitation reasonable attorneys' fees and disbursements and court costs) as a result of or arising from any representations or warranties made by Canbiola to customers or end users which (a) exceed the scope of the representations or warranties made by Manufacturer to Canbiola pursuant to Sections 6 (Warranty and Repairs) and 9 (Representations and Warranties) of this Agreement; or (b) contradict the documentation and/or information made available to Canbiola by Manufacturer regarding specifications, performance and intended use of the Products, provided that (i) Manufacturer shall have promptly provided Canbiola written notice thereof and reasonable cooperation, information and assistance in connection therewith, and (ii) Canbiola shall have sole control and authority with respect to the defense, settlement or compromise thereof. Canbiola acknowledges and agrees that Manufacturer may perform its services hereunder through subsidiaries and the above indemnification shall apply to all Manufactuer subsidiaries, affiliates and agents providing services to Canbiola pursuant to this Agreement.

12.

Term and Termination .

12.1

Term. Unless earlier terminated pursuant to this Section 12 (Term and Termination) or renewed for an additional term to be determined by the parties hereto, by written agreement, this Agreement shall terminate ten (10) years from the Effective Date.

12.2

Termination . This Agreement may be terminated by the mutual agreement of the parties evidenced in writing. Either party may terminate this Agreement upon the material breach of the Agreement by the other party and failure to cure after thirty (30) days following written notice from the non-breaching party.

12.3

Duties Upon Termination . Upon the termination of this Agreement for any reason whatsoever, Manufacturer shall promptly return to Canbiola any and all Canbiola-owned equipment, materials, documentation or data in the possession of Manufacturer for whatever reason or purpose, such equipment, materials, documentation and data to be in the same condition as when delivered to Manufacturer, reasonable use, wear and tear excepted.

13.

Miscellaneous .

13.1

Force Majeure . Manufacturer shall not be liable in any respect for failure to ship or for delay in shipment of Products pursuant to accepted orders where such failure or delay shall have been due wholly or in part to the elements, acts of God, acts of Canbiola, acts or civil or military authority, fires, floods, epidemics, quarantine restrictions, war, armed hostilities, riots, strikes, lockouts, breakdown, differences with workers, accidents to machinery, delays in transportation, delays in delivery by Manufacturer, Manufacturer or any other cause beyond the reasonable control of Manufacturer.

13.2

Equitable Relief . Nothing in this Agreement will prevent a party from bringing an action for equitable or injunctive relief in any court of competent jurisdiction to compel the other party to comply with its obligations under the Agreement.

13.3

Applicable Law, Jurisdiction . This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without reference to the conflict of laws provisions thereof.

13.4

Relationship of the Parties . Nothing contained in this Agreement shall be deemed to constitute either party as the agent or representative of the other party, or both parties as joint ventures or partners for any purpose. Neither party shall be responsible for the acts or omissions of the other party, and neither party will have authority to speak for, represent or obligate the other party in any way without prior written authority from the other party.

13.5

Entire Agreement . This Agreement (including its Schedules) constitutes the entire agreement between Manufacturer and Canbiola and shall not be amended, altered or changed except by a written agreement signed by the parties hereto. Any terms and conditions in any purchase order or other instrument issued by Canbiola or Manufacturer or any of Canbiola's customers in connection with this Agreement which are in addition to or inconsistent with the terms and conditions of this Agreement shall not be binding on either party and shall not be deemed to amend or modify this Agreement. Each party acknowledges that it is not entering into this Agreement on the basis of any representations not expressly contained herein.

13.6

Rights and Remedies . All rights and remedies of either party hereunder shall be cumulative and may be exercised singularly or concurrently. The failure of either party, in any one or more instances, to enforce any of the terms of this Agreement shall not be construed as a waiver of future enforcement of that or any other term.

13.7

Modifications, Amendments . Modifications and amendments to this Agreement must be in writing, executed by the party against which enforcement thereof is sought.

13.8

No Rights by Implication . No rights or licenses with respect to the Products are granted or deemed granted hereunder or in connection herewith, other than those rights expressly granted in this Agreement.

13.9

Non-Disparagemen t. Each Party agrees to take all commercially reasonable steps to prevent any of its personnel from making disparaging or otherwise adverse remarks about the products of the other party. Manufacturer shall not, in regard to, Canbiola or its affiliates, or any of their employees, officers, shareholders, or members (the “Protected Parties”), make any statement in writing, orally or on the internet via, among other things, blogs, message boards and social networks) about the Protected Parties that could reasonably be construed as disparaging or defamatory, or to cast such Protected Parties in a negative light, or harm the Protected Parties current or prospective business plans or advantage.

13.10

Delivery of Notices. Whenever, by the terms of this Agreement, notice, demand or other communication shall or may be given to either party, the communication will be deemed to have been properly given (i) upon delivery, if delivered in person or by facsimile transmission with receipt of an electronic confirmation thereof, (ii) one business day after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three business days after having been deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested and shall be addressed to the other party at its address first set forth above, or to such other address or addresses as shall from time to time be designated by written notice by either party to the other.

13.11

Section Headings . Section headings are for descriptive purposes only and shall not control or alter

the meaning of this Agreement.

13.12

Publicity . Manufacturer shall not make any public announcement or release regarding this Agreement or Canbiola without Canbiola’s prior written permission.

13.13

Severability . If any provision of this Agreement shall for any reason be held illegal or unenforceable, such provision shall be deemed separable from the remaining provisions of this Agreement and shall in no way affect or impair the validity or enforceability of the remaining provisions of this Agreement, unless removal of the invalidated provision renders another provision impossible to perform or inconsistent with the intent of the parties.

13.14

Counterparts . This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more 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 counterpart. This Agreement may be signed and delivered by electronic means, including e-mail.

IN WITNESS WHEREOF, Manufacturer and Canbiola hereby have duly executed this Agreement under seal as of the day and year first above written.

MANUFACTURER

Printed:

Title:

CANBIOLA

Printed: Marco Alfonsi

Title: CEO

SCHEDULE A

Products

SCHEDULE B

Technical Specification of Products

EXECUTIVE SERVICES AGREEMENT

This Executive Services Agreement (“Agreement”) is entered into as of February 7, 2017, by and between Canbiola, Inc., a Florida corporation (the “Company”), and David Posel, a resident of Washington (“Executive”). The parties agree as follows:

I. Services Provided

Company hereby appoints Executive to serve as its Executive “COO,” Chief Operating Officer, and Executive hereby accepts such appointment. Executive shall provide those services required of an officer of like title of a company of similar size and industry. Without limiting the generality of the foregoing, Executive’s duties will include creation of formulas for the Company’s CBD infused products. Any and all services relating to creation of such formulas or development the Company’s products or methodologies provided by Executive under this Agreement will hereafter be referred to as “Work.”

II. Nature of Relationship

The Executive is an independent contractor and will not be deemed an employee of Company or any of its project companies for purposes of employee benefits, income tax withholding, F.I.C.A. taxes, unemployment benefits or otherwise.

III. Work for Hire; Intellectual Property Ownership

This Agreement is made with the intent that the Work is work made for hire. The Work (including, without limitation, any works of authorship, documents, records, notes, inventions (whether or not reduced to practice), methods, materials, ideas, designs, models, concepts, techniques, discoveries, and improvements created, conceived or reduced to practice by Executive in connection with Work or by use of or exposure to the Company’s confidential information) has been specially ordered and commissioned by the Company, may be incorporated in existing the Company works as a compilation or collective work, and constitutes work made for hire for the Company under applicable copyright law to the extent it qualifies as such. Executive agrees that the Company will own all copyrights, trademarks, trade secrets, formulas and patents in the Work and that the Work is a “work made for hire” for all intellectual property purposes.

All rights, titles and interests in and to any formulas, programs, systems data, and materials furnished to Executive by the Company are and shall remain the property of the Company. All rights, titles and interests in and to the formulas, programs, systems, data, reports, audio and video materials, databases, or other materials used or produced by Executive in the performance of the Work, including any modifications, enhancements, or derivative works thereof, shall remain or become the property of the Company.

All rights, titles and interests in and to any and all materials provided pursuant to this Agreement, including all rights in copyrights, trade secrets, trademarks, patents, including but not limited to any research, databases created specifically for the Company, formulas and manufacturing methods for the Company’s products, or other intellectual property rights pertaining thereto (the “Work Products”) shall be held by the Company, and all Work Products shall, to the extent possible, be considered works made by Executive for the benefit of the Company. Executive shall mark all Work Products with the Company's copyright or other proprietary notices as directed by the Company and shall take all actions deemed necessary by the Company to protect the Company's rights therein.

The Company may use any ideas, concepts, know-how, methods or techniques not fixed in a tangible medium during the term of this Agreement (“Residual Subject Matter”) relating to the Work that it, individually or jointly, develops or discloses under this Agreement. Notwithstanding the above, neither party shall be prevented from making use of know-how and principles learned nor experience gained of a non-proprietary and non-confidential nature.

IV.

Executive’s Warranties

Throughout the term of this Agreement and for a period of one (1) year thereafter, the Executive 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 in the territories in which the Company operates. All intellectual properties and formulas created by Executive shall be property of the Company, and stored in a secure data room provided by the Company.

Executive shall perform his obligations under this Agreement in a manner that does not infringe, or constitute an infringement or misappropriation of, any patent, copyright, trademark, trade secret or other proprietary rights of the Company or any third party.

V. Compensation

Compensation. As compensation for Executive’s services, Executive shall receive a salary of $5,000.00 per month. The salary shall be paid on the 1 ^st and 15 ^th of each month unless modified by the Company.

Salary milestones:

Corporate Annual Sales in a calendar year exceeds $1.5M the employee's income shall increase by 20%

Corporate Annual Sales in a calendar year exceeds $3M the employee's income shall increase by 10%

Corporate Annual Sales in a calendar year exceeds $5M the employee's income shall increase by 20%

Note: Any increase is from the last salary example: If employees salary is $5K/month and Company surpasses $1.5M annual Revenue then the salary will increase by 20% or $1,000 to $6,000/month, if the company then follows with a year where annual sales surpass $3M the salary shall increase to $6,600/month (10% above prior salary) and so forth. If the company surpasses a step in this model such as going directly to $3M+ in sales for the calendar year then the employee shall see a salary increase immediately of $1,600/month in the sample above

Executive shall also receive 5% of net revenues from the sale of the Company’s products by U.S.A. Wholesale Exchange, LLC, payable in conjunction with Executive’s salary. For purposes of this Agreement, “net revenues” means all revenues derived from the sale of the Company’s products by U.S.A. Wholesale Exchange, LLC, less the cost of goods sold, pro rata overhead expenses, shipping costs and returns.

Preferred Share Issuance. As additional compensation, Executive shall be issued one (1) share of the Company’s Series A Preferred Stock upon execution of this Agreement, which shall vest and be considered fully earned only upon expiration of the initial four-year term of this Agreement.

Vacation and Sick Pay. Executive shall be entitled to two weeks paid vacation time and 5 paid days for illness each year. Unused vacation and sick days will roll-over and may be used in the following year. Further, Executive may take the following paid holidays: New Year's Day, Martin Luther King, Jr., Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving (plus one additional), and Christmas (plus one additional).

VI. Indemnification and Insurance

The Company hereby agrees to hold harmless and indemnify Executive to the fullest extent 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 Executive, pursuant to the terms of the attached Indemnity Agreement.

VII. Term of Agreement

This Agreement shall be in effect from the date hereof and continue for an initial term of four years. This Agreement shall be renewed for consecutive four-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.

VIII. Termination

This Agreement shall automatically terminate upon the death of the Executive or upon his resignation. Executive may resign with 30 days’ prior written notice to the Company. This Agreement may be terminated by the Company prior to the expiration of its term without or “with cause.” For purposes of this Agreement, “with cause” means: (i) the failure or neglect by the Executive to perform his duties, or (2) misconduct in connection with the performance of any of Executive’s duties, including, without limitation, misappropriation of funds or property of the company, securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company, or any material violation of law or regulations to which the Company is subject. If the Company terminates the Agreement prior to the expiration of its term, but not with cause, it shall pay to Executive within five (5) days of such termination, $5,000.00 (“Severance Pay”). In the event of a merger or acquisition involving the Company where this Agreement is terminated, the Company shall arrange to pay Executive the Severance Pay as a term of the merger or acquisition agreement.

In the event of any termination of this Agreement, the Executive agrees to return any materials and confidential information of the Company.

IX. 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.

X. 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.

XI. 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.

XII. 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.

XIII. 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.

XIV. 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.

____________________________________

By:

Title:
EXECUTIVE

____________

David Posel

EXHIBIT A

INDEMNITY AGREEMENT

This Indemnity Agreement (“ Agreement ”) is made and entered into this 6 day of February, 2018 by and between Canbiola, Inc., a Florida corporation (the “ Company ”), and David Posel (“ Executive ”).

RECITALS

WHEREAS, Executive performs a valuable service to the Company in his capacity as Chief Operations Officer;

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 Executive to continue to serve as COO of the Company, the Company has determined and agreed to enter into this Agreement with Executive.

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

AGREEMENT

1. Indemnity of Executive. The Company hereby agrees to hold harmless and indemnify Executive 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 Executive 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 Executive is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Executive 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 Executive solely for an accounting of profits made from the purchase or sale by Executive 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 Executive’s conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

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

(d) for which payment is actually made to Executive 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 Executive 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 Executive, or any proceeding by Executive 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 Executive 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 Executive 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 Executive was serving in the capacity referred to herein.

4. Partial Indemnification. Executive 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 Executive 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 Executive for the portion thereof to which Executive is entitled.

5. Notification and Defense of Claim. Not later than thirty (30) days after receipt by Executive of notice of the commencement of any action, suit or proceeding, Executive 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 Executive otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Executive notifies the Company of the commencement thereof:

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

(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 Executive. After notice from the Company to Executive of its election to assume the defense thereof, the Company will not be liable to Executive under this Agreement for any legal or other expenses subsequently incurred by Executive in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Executive 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 Executive unless (i) the employment of counsel by Executive has been authorized by the Company, (ii) Executive shall have reasonably concluded, and so notified the Company, that there is an actual conflict of interest between the Company and Executive 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 Executive’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 Executive shall have made the conclusion provided for in clause (ii) above; and

(c) the Company shall not be liable to indemnify Executive 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 Executive without Executive’s written consent, which may be given or withheld in Executive’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 Executive in connection with such proceeding upon receipt of an undertaking by or on behalf of Executive to repay said amounts if it shall be determined ultimately that Executive 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 Executive shall be enforceable by or on behalf of Executive 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. Executive, 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 Executive 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 Executive 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 Executive 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 Executive, 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 Executive by this Agreement shall not be exclusive of any other right which Executive 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 Executive by this Agreement shall continue after Executive 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 Executive’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 Executive 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 Executive by the Company.

[signature page follows]

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

CANBIOLA, INC.

___________________________________

By:
Title:

EXECUTIVE

___________________________________

David Posel

EXECUTIVE SERVICES AGREEMENT

This Executive Services Agreement ("Agreement") is entered into as of February 16, 2017 by and between Canbiola, Inc., a Florida corporation (the "Company"), and Andrew W Holtmeyer, a resident of New York ("Executive"). The parties agree as follows:

Services Provided

Company hereby appoints Executive to serve as its Executive Vice President Business Development and Executive hereby accepts such appointment. Executive 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 New York, the federal securities laws and other state and federal laws and regulations, as applicable. All previous service agreements between the parties are hereby terminated.

II.

Nature of Relationship

III.

Executive's Warranties

Throughout the term of this agreement and for a period of one (1) year thereafter, the Executive 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

Compensation. As compensation for Executive's services, Executive shall receive a salary of $10,000.00 per month. The salary shall be paid on the 11 and 15 ^th of each month unless modified by the Company.

Preferred Share Issuance. As additional compensation, Executive shall be issued six shares of the Company's Series A Preferred Stock ("Shares"), which shall be issued according to the following vesting schedule:

•

Three Shares will be issued and considered fully vested upon the one year anniversary of this Agreement.

•

Two Shares will be issued and considered fully vested upon the two year anniversary of this Agreement.

•

One Share will be issued and considered fully vested upon the three year anniversary of this Agreement.

All Shares will be considered fully earned upon issuance. Executive shall forfeit all unvested Shares should this Executive's engagement with the Company terminate, for any reason, prior to the expiration of its term.

Vacation and Sick Pay. Executive 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 may be used in the following year. Further, Executive may take the following paid holidays: New Year's Day, Martin Luther King, Jr., Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving (plus one additional), and Christmas (plus one additional).

Indemnification

The Company hereby agrees to hold harmless and indemnify Executive to the fullest extent 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 Executive.

VI.

Term of Agreement

This Agreement shall be in effect from the date hereof and continue for an initial term of three years. 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.

^Termination

This Agreement shall automatically terminate upon the death of the Executive or upon his resignation. Executive may resign with 30 days prior written notice to the Company. This Agreement may be terminated by the Company prior to the expiration of its term only "with cause." For purposes of this Agreement, "with cause" means: (i) the failure or neglect by the Executive to perform his duties, or (2) misconduct in connection with the performance of any of Executive's duties, including, without limitation, misappropriation of funds or property of the company, securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company, or any material violation oflaw or regulations to which the Company is subject. If the Company terminates the Agreement prior to expiration of its term, but not with cause, it shall pay to Executive within five (5) days of such termination, an amount equal to the two month, multiplied by $5,000.00, with partial months to be prorated ("Severance Pay"). In the event of a merger or acquisition involving the Company where this Agreement is terminated, the Company shall arrange to pay Executive the Severance Pay as a term of the merger or acquisition agreement.

In the event of any termination of this Agreement, the Executive agrees to return any materials and confidential information of the Company.

VIII.

Sole Agreement

IX.

Assignment

Notices

^XI.

^{Survival of Obligations}

XII.

Severability

^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.

[Execution Page Follows]

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

[F1072.GIF]

EXHIBIT A

INDEMNITY AGREEMENT

This Indemnity Agreement ("Agreement") is made and entered into this 16 ^th day of February, 2017, by and between Canbiola, Inc., a Florida corporation (the "Company"), and Marco Alfonsi ("Executive").

RECITALS

WHEREAS, Executive performs a valuable service to the Company in his capacity as Chief Executive Officer (CEO) and interim Chief Financial Officer (CFO) 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 Executive to continue to serve as CEO of the Company, the Company has determined and agreed to enter into this Agreement with Executive;

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

AGREEMENT

Indemnity of Executive. The Company hereby agrees to hold harmless and indemnify Executive 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 Executive 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 Executive is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Executive 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.

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

(a)

on account of any claim against Executive solely for an accounting of profits made from the purchase or sale by Executive 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 Executive's conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

(c)

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

(d)

for which payment is actually made to Executive 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 Executive 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

(t) in connection with any proceeding (or part thereof) initiated by Executive, or any proceeding by Executive 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.

Continuation of Indemnity. All agreements and obligations of the Company contained herein shall continue during the period Executive 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 Executive 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 Executive was serving in the capacity referred to herein.

Partial Indemnification. Executive 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 Executive 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 Executive for the portion thereof to which Executive is entitled.

Notification and Defense of Claim. Not later than thirty (30) days after receipt by Executive of notice of the commencement of any action, suit or proceeding, Executive 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 Executive otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Executive notifies the Company of the commencement thereof:

(a)

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

(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 Executive. After notice from the Company to Executive of its election to assume the defense thereof, the Company will not be

liable to Executive under this Agreement for any legal or other expenses subsequently incurred by Executive in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Executive 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 Executive unless (i) the employment of counsel by Executive has been authorized by the Company, (ii) Executive shall have reasonably concluded, and so notified the Company, that there is an actual conflict of interest between the Company and Executive 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 Executive'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 Executive shall have made the conclusion provided for in clause (ii) above; and

(c)

the Company shall not be liable to indemnify Executive 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 Executive without Executive's written consent, which may be given or withheld in Executive's sole discretion.

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

Enforcement. Any right to indemnification or advances granted by this Agreement to Executive shall be enforceable by or on behalf of Executive 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. Executive, 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 I 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 Executive 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 Executive 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 Executive is not entitled to indemnification under this Agreement or otherwise.

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 Executive, 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.

Non-Exclusivity of Rights. The rights conferred on Executive by this Agreement shall not be exclusive of any other right which Executive 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 Executive by this Agreement shall continue after Executive 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 Executive'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 Executive 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 Executive by the Company.

[signature page follows)

[F1074.GIF] IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above writte .

[F1076.GIF]

EXECUTIVE SERVICES AGREEMENT

This Executive Services Agreement (“Agreement”) is entered into as of Oct 3, 2017 by and between Canbiola, Inc., a Florida corporation (the “Company”), and Marco Alfonsi, a resident of New York (“Executive”). The parties agree as follows:

I. Services Provided

Company hereby appoints Executive to serve as its Chief Executive Officer (CEO) and interim Chief Financial Officer and Secretary until replacements are appointed, and Executive hereby accepts such appointment. Executive 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

III. Executive’s Warranties

Throughout the term of this agreement and for a period of one (1) year thereafter, the Executive 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. Compensation. As compensation for Executive’s services, Executive shall receive a salary of $10,000.00 per month. The salary shall be paid on the 1 ^st and 15 ^th of each month unless modified by the Company.

B. Preferred Share Issuance. As additional compensation, Executive 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.

C. Vacation and Sick Pay. Executive 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 may be used in the following year. Further, Executive may take the following paid holidays: New Year's Day, Martin Luther King, Jr., Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving (plus one additional), and Christmas (plus one additional).

V. Indemnification and Insurance

VI. Term of Agreement

VII. Termination

This Agreement shall automatically terminate upon the death of the Executive or upon his resignation. Executive may resign with 30 days prior written notice to the Company. This Agreement may be terminated by the Company prior to the expiration of its term only “with cause.” For purposes of this Agreement, “with cause” means: (i) the failure or neglect by the Executive to perform his duties, or (2) misconduct in connection with the performance of any of Executive’s duties, including, without limitation, misappropriation of funds or property of the company, securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company, or any material violation of law or regulations to which the Company is subject. If the Company terminates the Agreement prior to expiration of its term, but not with cause, it shall pay to Executive within five (5) days of such termination, an amount equal to the number of month remaining on the term of this Agreement, multiplied by $10,000.00, with partial months to be prorated (“Severance Pay”). In the event of a merger or acquisition involving the Company where this Agreement is terminated, the Company shall arrange to pay Executive the Severance Pay as a term of the merger or acquisition agreement.

In the event of any termination of this Agreement, the Executive agrees to return any materials and confidential information of the Company.

VIII. Sole Agreement

IX. Assignment

X. Notices

XI. Survival of Obligations

XII. Severability

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.

____________________________________

By:

Title:

EXECUTIVE

____________

Marco Alfonsi

EXHIBIT A

INDEMNITY AGREEMENT

This Indemnity Agreement (“ Agreement ”) is made and entered into this ____ day of July, 2017 by and between Canbiola, Inc., a Florida corporation (the “ Company ”), and Marco Alfonsi (“ Executive ”).

RECITALS

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

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

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

AGREEMENT

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

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

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

10. Survival of Rights.

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.

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.

[signature page follows]

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

CANBIOLA, INC.

___________________________________

By:
Title:

EXECUTIVE

___________________________________

Marco Alfonsi

SALES AGREEMENT

THIS SALES AGREEMENT is made as of October 31, 2017, by and between Canbiola, Inc., a Florida corporation (the “Company”) and Christy Davies, an individual resident of Utah (the “Salesperson”).

WHEREAS, the Company sells products such as oils, creams, moisturizers, chews, vapes, isolate, gel caps, concentrates and water infused with Cannabidiol (“CBD”) derived from industrial hemp imported from overseas (the “Products”).

WHEREAS, Salesperson is recognized and widely known throughout the United States.

WHEREAS, the Company wishes to engage Salesperson to sell Products on the Company’s behalf, subject to the terms and conditions of this Agreement.

NOW, THEREFORE , in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Salesperson hereby agree as follows:

1. Appointment of Salesperson.

(a) Appointment: Upon the terms and conditions of this Agreement, the Company hereby appoints the Salesperson as an authorized non-exclusive salesperson of the Company's Products within the territories set forth in Schedule A attached hereto and incorporated herein, as the same may be amended by the parties from time-to-time (“Territory”), and Salesperson hereby accepts such appointment. In such capacity, the Salesperson will solicit customer orders for the Company’s Products and will devote his continuing best efforts to the promotion and sale of such Products in the Territory.

(b) Reservation of Rights by the Company. The Company reserves the right to take the following actions within the Salesperson's Territory: (i) to appoint or be represented by other or additional salespersons; (ii) to make sales directly to any or all customers of the same and/or other Company products, and (iii) to sell exclusively, on a direct basis, to certain types of customers or specific accounts which Company may, in its sole discretion, designate from time to time in accordance with then current Company policies.

(c) Addition, Discontinuance and Modification of Products. The Company shall have the right at any time to introduce new Products, discontinue the manufacture or sale of any of its Products and make changes in the design or construction of any of such Products without incurring any obligation or liability whatsoever. The Company will give the Salesperson thirty (30) days prior notice of any discontinuance of a Product.

(d) License. Salesperson grants to the Company the exclusive right and license during the term of this Agreement to use Salesperson’s name, nickname, initials, autograph, facsimile signature, photograph, likeness, and/or endorsement (the “Likeness”) in connection with the advertisement, promotion, and sale of the Products as well as the right to use such Likeness on the Product and related packaging

2. Product Orders. All customer orders for Products received by Salesperson shall be transmitted to the Company in writing or by fax or e-mail. (A telephone request to purchase, or to modify an existing order, shall not be considered an order unless and until followed up in writing.) Orders must be completed on pre-approved forms supplied by the Company. All orders shall be subject to acceptance by the Company. If accepted, Customers’ orders will be fulfilled and shipped directly by the Company according to its standard policies and procedures.

3. Compensation. Salesperson shall receive compensation equal to 10% of the “Adjusted Gross Revenues” received by the Company from customer orders submitted by Salesperson (“Sales Fee”). The Sales Fee for any month will be due on the tenth (10 ^th ) day of the month following the month in which the Sales Fee was earned. As used in this Agreement, “Adjusted Gross Revenues” shall mean all gross revenues received by the Company from customer orders placed through Salesperson, less the Company’s cost of goods sold for such Products and all sales, excise and similar taxes and expenses related to the sale of such Products.

4. Trademarks. The Salesperson shall have the right hereunder to represent that it is “an Authorized Salesperson of Company Products.” Any other use by the Salesperson of the Company’s trademarks must be in a form and format approved by the Company in advance of such usage.

5. Promotional Materials. During the term of this Agreement, the Company shall take reasonable action to assist the Salesperson in the Salesperson's efforts to promote and sell Products, including the provision of reasonable quantities of support materials such as product information and sales promotional literature.

6. Duties of the Salesperson.

(a) Sales Activities. The Salesperson agrees to use its best efforts vigorously and actively to promote the sale of Products in the Territory.

(b) Advertising. Each printed advertisement, flyer, handbill, television spot, radio script, yellow pages listing, webpage or any other advertising or promotional material bearing or using the trademark or trade name “Canbiola” or pertaining to Products must be approved by the Company in writing prior to its use by the Salesperson. Such approval will not be unreasonably withheld or delayed.

(c) Reputation. The Salesperson shall continually maintain to the satisfaction of the Company a general reputation for honesty, integrity and good credit standing and shall maintain the highest quality standards.

(d) Competing Products. The Salesperson shall not, directly or indirectly, promote, advertise, manufacture, market, distribute or sell cannabis products not provided by the Company.

(e) Compliance with Law. The Salesperson shall comply with all laws, ordinances and regulations applicable to the Salesperson's business, including those relating to the sale of CBD or cannabis Products in the Territory. Notwithstanding the parties acknowledge that cannabis and its derivatives are illegal under federal law.

(f) Expenses. The Salesperson shall pay and discharge, and the Company shall have no obligation to pay for, any expenses or costs of any kind or nature incurred by the Salesperson in connection with performing its function hereunder.

(g) If requested to do so by the Company, Salesperson agrees to make himself available at least four (4) times in each year of the term of this Agreement for photographs for use in advertising or for appearances.

7. Force Majeure. The Company shall be excused from delay or non-performance in the delivery of an order and the Salesperson shall have no claim for damage if and to the extent such delay or failure is caused by occurrences beyond the control of the Company including, but not limited to, market conditions; acts of God; war, acts of terrorism, riots and civil disturbances; expropriation or confiscation of facilities or compliance with any order or request of governmental authority; strikes, labor or employment difficulties whether direct or indirect; or any cause whatsoever which is not within the reasonable control of the Company..

8. Relationship of Parties: Indemnification of Company.

(a) Independent Contractor Status. The relationship of the parties established by this Agreement is that of vendor and vendee, and all work and duties to be performed by the Salesperson as contemplated by this Agreement shall be performed by it as an independent contractor.

(b) No Authority to Bind Company. Nothing in this Agreement or otherwise shall be construed as constituting an appointment of the Salesperson as an agent, legal representative, joint venturer, partner, employee or servant of the Company for any purpose whatsoever. The Salesperson is not authorized to transact business, assign or create any obligation of any kind, express or implied, on behalf of the Company, or to bind it in any way whatsoever, or to make any contract, promise, warranty or representation on the Company's behalf with respect to Products sold by the Company or any other matter, or to accept any service of process upon the Company or receive any notice of any nature whatsoever on the Company's behalf.

(c) Indemnification. Under no circumstances shall the Company be liable for any act, omission, contract, debt or other obligation of any kind of the Salesperson or any salesman, employee, agent or other person acting for or on behalf of the Salesperson. The Salesperson shall indemnify and hold the Company harmless from any and all claims, liabilities, losses, damages or expenses (including reasonable attorneys, fees and costs) arising directly or indirectly from, as a result of, or in connection with, the Salesperson's operation of the Salesperson's business. The terms of this indemnity shall survive the termination of this Agreement.

9. Confidential Information.

(a) Definition. As used in this Section, “Proprietary Information” means information developed by or for the Company which is not otherwise generally known in any industry in which the Company is or may become engaged and includes, but is not limited to, information developed by or for the Company, whether now owned or hereafter obtained, concerning plans, marketing and sales methods, materials, processes, procedures, devices utilized by the Company, prices, quotes, suppliers, manufacturers, customers with whom the Company deals (or organizations or other entities or persons associated with such customers), trade secrets and other confidential information of any type, together with all written, graphic and other materials relating to all or any part of the same.

(b) Non-Disclosure. Except as authorized in writing by the Company, the Salesperson shall not at any time, either during or after the term of this Agreement, disclose or use, directly or indirectly, any Proprietary Information of which the Salesperson gains knowledge during or by reason of this Agreement and the Salesperson shall retain all such information in trust in a fiduciary capacity for the sole use and benefit of the Company. In the event that the Salesperson operates one or more locations other than those set forth on Schedule A, the Salesperson shall not disclose any Proprietary Information to local management or employees of such other location(s).

10. Term and Termination.

(a) Term. The term of this Agreement shall be for a period beginning on the date hereof and ending on the date one (1) year therefrom. Thereafter, this Agreement shall automatically renew for successive one (1) year periods unless either party gives to the other party written notice of termination at least thirty (30) days prior to the end of the initial or any renewal term.

(b) Voluntary Termination. Either party may terminate this Agreement with thirty (30) days prior written notice to the other party.

(c) Default by the Salesperson. This Agreement may be terminated by the Company immediately upon Salesperson’s breach of any provision of this Agreement by providing Salesperson with written notice.

(d) Effect on Outstanding Orders. Upon the effective date of termination of this Agreement, all outstanding orders from the Salesperson to the Company shall be completed and all compensation previously earned by Salesperson will be paid by the Company within thirty (30) days from the date of termination of this Agreement. .

(e) Return of Company Property. Upon termination of this Agreement for any reason, the Salesperson shall promptly return to the Company any property of the Company, including, without limitation, all sales and marketing documents, manuals and other records and proprietary information of the Company, as well as any samples in the Salesperson's possession or control. The Salesperson agrees that it will not make or retain any copy of, or extract from, such property or materials.

11. General.

(a) Waiver. Failure of either party at any time to require performance by the other party of any provision hereof shall not be deemed to be a continuing waiver of that provision, or a waiver of its rights under any other provision of this Agreement, regardless of whether such provision is of the same or a similar nature.

(b) Complete Agreement. This Agreement (including the exhibits hereto and all documents and papers delivered pursuant hereto and any written amendments hereof executed by the parties to this Agreement) constitutes the entire agreement, and supersedes all prior agreements and understandings, oral and written, among the parties to this Agreement with respect to the subject matter hereof. This Agreement may be amended only by written agreement executed by all of the parties hereto. No purchase order or sales form will be applicable to any sales pursuant to this Agreement and only the terms of this Salesperson Agreement shall govern such sales.

(c) Applicable Law; Jurisdiction and Venue. This Agreement shall be construed under, and governed by, the laws of the state of New York without resort to conflict of law principals.

(d) Severability. If any provision of this Agreement is unenforceable or invalid, the Agreement shall be ineffective only to the extent of such provisions, and the enforceability or validity of the remaining provisions of this Agreement shall not be affected thereby.

(e) Assignment. This Agreement may not be transferred or assigned in whole or in part by operation of law or otherwise by the Salesperson without the prior written consent of the Company.

(f) Notices. Any notice or other communication related to this Agreement shall be effective if sent by first class mail, postage prepaid, to the address as may be designated in writing to the other party.

(g) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Agreement (or such party’s signature page thereof) will be deemed to be an executed original thereof.

(h) Attorneys’ Fees and Cost of Collection. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement, the parties agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees, deposition costs, and expenses paid by such prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first set forth above.

SALESPERSON:

By:

______________________________

Christy Davies

COMPANY:

Canbiola, Inc.

By: _______________________

Printed Name: Marco Alfonsi

Title: CEO

Initials: _____, ______

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE AND CHIEF FINANCIAL 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 6, 2018	By:	/s/ Marco Alfonsi
		Marco Alfonsi
		Chief Executive Officer (Principal Executive Officer) (Principal Accounting Officer)

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE AND 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, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marco Alfonsi, Chief Executive Officer and 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 6, 2018	By:	/s/ Marco Alfonsi
		Marco Alfonsi
		Chief Executive Officer 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.

[F10102.GIF]

CONSULTING AGREEMENT

This Consulting Agreement (the "Consulting Agreement") made as of January 25rd 2018 by and between ______________________________-, ("Consultant") and Canbiola, Inc., 960 South Broadway Suite 120 Hicksville, NY 11801 (the "Company").

WITNESSETH

WHEREAS, the Company requires and will continue to require consulting services relating to product development, interfacing with the medical & alternative medicine communities and marketing to prospective clients and partners about its business;

WHEREAS, Consultant can provide the Company with strategic planning and marketing consulting services from a medical standpoint and is desirous of performing such services for the Company; and

WHEREAS, the Company wishes to induce Consultant to provide these consulting services to the Company subject to the terms of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter stated, it is agreed as follows:

1. APPOINTMENT .

The Company hereby engages Consultant and Consultant agrees to render services to the Company as a consultant upon the terms and conditions hereinafter set forth.

2. TERM .

The term of this Consulting Agreement began as of the date of this Agreement, and shall terminate on January 25rd 2019, unless earlier terminated in accordance with paragraph 7 herein or extended as agreed to between the parties.

3. SERVICES .

During the term of this Agreement, Consultant shall provide advice to, undertake for and consult with the Company concerning product development, interfacing with the medical & alternative medicine communities and marketing to prospective clients and partners about its business exclusively to the Company. During the term of this Agreement and for the period one year thereafter, Consultant will not, directly or indirectly, provide services similar to those contemplated by this Agreement and shall not participate in any business, in any form, competitive with the business of the Company in the territories in which the Company operates. Consultant agrees to provide the following enumerated services plus any additional services reasonably requested by the Company:

(a) Take the role of member on the “medical advisor board” to the Company

(b) Give input on new Hemp (CBD)-products based on consultant’s core expertise such as but not limited to hormone treatment, general health & fitness, detox, anti-aging lotions/salves, dieting supplements;

(c) Advise the Company relative to patient testing and results, conduct and gather real life testimonials from users of Company’s products

(d) The identification of potential clients/client groups and partners within the medical community. So long as such information obtained regarding any client and/or patience is obtained and treated in accordance to HIPAA privacy rules.

(e) The Consultant has the discretion to attend or not attend medical related conferences.

4. DUTIES OF THE COMPANY .

The Company shall provide Consultant, on a regular and timely basis, with all approved data and information about it, its subsidiaries, its management, its products and services and its operations as shall be reasonably requested by Consultant, and shall advise Consultant of any facts which would affect the accuracy of any data and information previously supplied pursuant to this paragraph. The Company shall promptly supply Consultant with all brochures or other sales materials relating to its products or services.

5. COMPENSATION .

The Company shall compensate the Consultant with 300,000 restricted shares of stock which shall vest and be issued as follows:

Jan 25, 2018: 75,000

April 25, 2018: 75,000

July 25, 2018: 75,000

Oct 25, 2018: 75,000

6. REPRESENTATION .

The Company represents and warrants that all information, marketing materials and data supplied to Consultant by the Company shall be true and correct to the best of the Company’s knowledge and the Company acknowledges its awareness that Consultant will rely on such continuing representation in disseminating such information and otherwise performing its advisory functions. Consultant in the absence of notice in writing from the Company will rely on the continuing accuracy of material, information and data supplied by the Company, unless Consultant has independent knowledge of inaccuracy. Consultant represents that he has knowledge of and is experienced in providing the aforementioned services.

7. MISCELLANEOUS .

Termination : This Agreement may be terminated by either Party upon written notice to the other Party for any reason which shall be effective five (5) business days from the date of such notice. This Agreement shall be terminated immediately upon written notice for material breach of this Agreement. Any future compensation following termination will be automatically cancelled.

Modification : This Consulting Agreement sets forth the entire understanding of the Parties with respect to the subject matter hereof. This Consulting Agreement may be amended only in writing signed by both Parties.

Notices : Any notice required or permitted to be given hereunder shall be in writing and shall be mailed or otherwise delivered in person or by facsimile transmission at the address of such Party set forth above or to such other address or facsimile telephone number, as the Party shall have furnished in writing to the other Party.

Waiver : Any waiver by either Party of a breach of any provision of this Consulting Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Consulting Agreement. The failure of a Party to insist upon strict adherence to any term of this Consulting Agreement on one or more occasions will not be considered a waiver or deprive that Party of the right thereafter to insist upon adherence to that term of any other term of this Consulting Agreement.

Assignment : The shares due under this Agreement are assignable at the discretion of the Consultant. The obligations of Consultant may not be assigned and any such assignment may be null and void.

Severability : If any provision of this Consulting Agreement is invalid, illegal, or unenforceable, the balance of this Consulting Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

Disagreements : Any dispute or other disagreement arising from or out of this Consulting Agreement shall be submitted to arbitration under the rules of the American Arbitration Association and the decision of the arbiter(s) shall be enforceable in any court having jurisdiction thereof. Arbitration shall occur only in Los Angeles County, CA. The interpretation and the enforcement of this Agreement shall be governed by California Law as applied to residents of the State of California relating to contracts executed in and to be performed solely within the State of California. In the event any dispute is arbitrated, the prevailing Party (as determined by the arbiter(s)) shall be entitled to recover that Party's reasonable attorney's fees incurred (as determined by the arbiter(s)).

IN WITNESS WHEREOF, this Consulting Agreement has been executed by the Parties as of the date first above written.

January 25th 2018

Marco Alfonsi CEO CONSULTANT

___________________ _____________________________

Canbiola, Inc. Dr. Channing Coe

[F10112.GIF]

CONSULTING AGREEMENT

This Consulting Agreement (the "Consulting Agreement") made as of October 17, 2017 by and between Dr. John P. Salerno, 12East 52 ^nd St. 4 ^th Fl. New York NY 10022, ("Consultant") and Canbiola, Inc., 445 NE 12th Avenue Ft; Lauderdale, FL. 33301 (the "Company").

WITNESSETH

WHEREAS, Consultant can provide the Company with strategic planning and marketing consulting services from a medical standpoint and is desirous of performing such services for the Company; and

WHEREAS, the Company wishes to induce Consultant to provide these consulting services to the Company subject to the terms of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter stated, it is agreed as follows:

1. APPOINTMENT .

The Company hereby engages Consultant and Consultant agrees to render services to the Company as a consultant upon the terms and conditions hereinafter set forth.

2. TERM .

The term of this Consulting Agreement began as of the date of this Agreement, and shall terminate on October 17, 2018, unless earlier terminated in accordance with paragraph 7 herein or extended as agreed to between the parties.

3. SERVICES .

(a) Take the role of member on the “medical advisor board” to the Company

(c) Advise the Company relative to patient testing and results, conduct and gather real life testimonials from users of Company’s products

(e) The Consultant has the discretion to attend or not attend medical related conferences.

4. DUTIES OF THE COMPANY .

5. COMPENSATION .

The Company shall compensate the Consultant with 1,000,000 restricted shares of stock which shall vest and be issued as follows:

Oct 17, 2017: 250,000

Jan 17, 2018: 250,000

April 17, 2018: 250,000

July 17, 2018: 250,000

6. REPRESENTATION .

7. MISCELLANEOUS .

Termination : This Agreement may be terminated by either Party upon written notice to the other Party for any reason which shall be effective five (5) business days from the date of such notice. This Agreement shall be terminated immediately upon written notice for material breach of this Agreement. Any future compensation following termination will be automatically cancelled.

Modification : This Consulting Agreement sets forth the entire understanding of the Parties with respect to the subject matter hereof. This Consulting Agreement may be amended only in writing signed by both Parties.

Notices : Any notice required or permitted to be given hereunder shall be in writing and shall be mailed or otherwise delivered in person or by facsimile transmission at the address of such Party set forth above or to such other address or facsimile telephone number, as the Party shall have furnished in writing to the other Party.

Waiver : Any waiver by either Party of a breach of any provision of this Consulting Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Consulting Agreement. The failure of a Party to insist upon strict adherence to any term of this Consulting Agreement on one or more occasions will not be considered a waiver or deprive that Party of the right thereafter to insist upon adherence to that term of any other term of this Consulting Agreement.

Assignment : The shares due under this Agreement are assignable at the discretion of the Consultant. The obligations of Consultant may not be assigned and any such assignment may be null and void.

Disagreements : Any dispute or other disagreement arising from or out of this Consulting Agreement shall be submitted to arbitration under the rules of the American Arbitration Association and the decision of the arbiter(s) shall be enforceable in any court having jurisdiction thereof. Arbitration shall occur only in Los Angeles County, CA. The interpretation and the enforcement of this Agreement shall be governed by California Law as applied to residents of the State of California relating to contracts executed in and to be performed solely within the State of California. In the event any dispute is arbitrated, the prevailing Party (as determined by the arbiter(s)) shall be entitled to recover that Party's reasonable attorney's fees incurred (as determined by the arbiter(s)).

IN WITNESS WHEREOF, this Consulting Agreement has been executed by the Parties as of the date first above written.

October 17, 2017

Marco Alfonsi CEO CONSULTANT

___________________ _____________________________

Canbiola, Inc. Dr. John P. Salerno

[F10122.GIF]

CONSULTING AGREEMENT

This Consulting Agreement (the "Consulting Agreement") made as of September 20, 2017 by and between Fratellone Medical Associates LLP, 515 Madison Avenue - New York, New York 10019, ("Consultant") and Canbiola, Inc., 445 NE 12th Avenue Ft; Lauderdale, FL. 33301 (the "Company").

WITNESSETH

WHEREAS, Consultant can provide the Company with strategic planning and marketing consulting services from a medical standpoint and is desirous of performing such services for the Company; and

WHEREAS, the Company wishes to induce Consultant to provide these consulting services to the Company subject to the terms of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter stated, it is agreed as follows:

1. APPOINTMENT .

The Company hereby engages Consultant and Consultant agrees to render services to the Company as a consultant upon the terms and conditions hereinafter set forth.

2. TERM .

The term of this Consulting Agreement began as of the date of this Agreement, and shall terminate on September 20, 2018, unless earlier terminated in accordance with paragraph 7 herein or extended as agreed to between the parties.

3. SERVICES .

(a) Take the role of member on the “medical advisor board” to the Company

(c) Advise the Company relative to patient testing and results, conduct and gather real life testimonials from users of Company’s products

(e) Have the availability to speak at two conferences, New York base conferences on an annual basis.

(f)

Be available to record videos to present the Company’s products to the medical community.

4. DUTIES OF THE COMPANY .

5. COMPENSATION .

The Company shall compensate the Consultant with 1,000,000 restricted shares of stock which shall vest and be issued as follows:

Sept 20, 2017: 250,000

Dec, 20, 2017: 250,000

Mar 20, 2018: 250,000

April 20, 2018: 250,000

6. REPRESENTATION .

7. MISCELLANEOUS .

Termination : This Agreement may be terminated by either Party upon written notice to the other Party for any reason which shall be effective five (5) business days from the date of such notice. This Agreement shall be terminated immediately upon written notice for material breach of this Agreement. Any future compensation following termination will be automatically cancelled.

Modification : This Consulting Agreement sets forth the entire understanding of the Parties with respect to the subject matter hereof. This Consulting Agreement may be amended only in writing signed by both Parties.

Notices : Any notice required or permitted to be given hereunder shall be in writing and shall be mailed or otherwise delivered in person or by facsimile transmission at the address of such Party set forth above or to such other address or facsimile telephone number, as the Party shall have furnished in writing to the other Party.

Waiver : Any waiver by either Party of a breach of any provision of this Consulting Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Consulting Agreement. The failure of a Party to insist upon strict adherence to any term of this Consulting Agreement on one or more occasions will not be considered a waiver or deprive that Party of the right thereafter to insist upon adherence to that term of any other term of this Consulting Agreement.

Assignment : The shares due under this Agreement are assignable at the discretion of the Consultant. The obligations of Consultant may not be assigned and any such assignment may be null and void.

Disagreements : Any dispute or other disagreement arising from or out of this Consulting Agreement shall be submitted to arbitration under the rules of the American Arbitration Association and the decision of the arbiter(s) shall be enforceable in any court having jurisdiction thereof. Arbitration shall occur only in Los Angeles County, CA. The interpretation and the enforcement of this Agreement shall be governed by California Law as applied to residents of the State of California relating to contracts executed in and to be performed solely within the State of California. In the event any dispute is arbitrated, the prevailing Party (as determined by the arbiter(s)) shall be entitled to recover that Party's reasonable attorney's fees incurred (as determined by the arbiter(s)).

IN WITNESS WHEREOF, this Consulting Agreement has been executed by the Parties as of the date first above written.

September 15, 2017

Marco Alfonsi CEO CONSULTANT

___________________ _____________________________

Canbiola, Inc. Patrick Fratellone, M.D.

[F10132.GIF]

CONSULTING AGREEMENT

This Consulting Agreement (the "Consulting Agreement") made as of Oct 31, 2017 by and between True Green Essence Corp,12 Irma Ave, Port Washington NY 11050, ("Consultant") and Canbiola, Inc., 445 NE 12th Avenue Ft; Lauderdale, FL. 33301 (the "Company").

WITNESSETH

WHEREAS, Consultant can provide the Company with strategic planning and marketing consulting services from a medical standpoint and is desirous of performing such services for the Company; and

WHEREAS, the Company wishes to induce Consultant to provide these consulting services to the Company subject to the terms of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter stated, it is agreed as follows:

1. APPOINTMENT .

The Company hereby engages Consultant and Consultant agrees to render services to the Company as a consultant upon the terms and conditions hereinafter set forth.

2. TERM .

The term of this Consulting Agreement began as of the date of this Agreement, and shall terminate on Oct 31, 2018, unless earlier terminated in accordance with paragraph 7 herein or extended as agreed to between the parties.

3. SERVICES .

(a) Take the role of member on the “medical advisor board” to the Company

(c) Advise the Company relative to patient testing and results, conduct and gather real life testimonials from users of Company’s products

(e) Have the availability to speak at two conferences, New York base conferences on an annual basis.

(f)

Be available to record videos to present the Company’s products to the medical community.

4. DUTIES OF THE COMPANY .

5. COMPENSATION .

For the Work, the Company will pay Consultant, The Company shall compensate the Consultant with 1,000,000 restricted shares of stock which shall vest and be issued as follows:

Oct 31, 2017: 250,000

Jan 31, 2018: 250,000

April 31, 2018: 250,000

July 31, 2018: 250,000

6. REPRESENTATION .

7. MISCELLANEOUS .

Termination : This Agreement may be terminated by either Party upon written notice to the other Party for any reason which shall be effective five (5) business days from the date of such notice. This Agreement shall be terminated immediately upon written notice for material breach of this Agreement. Any future compensation following termination will be automatically cancelled.

Modification : This Consulting Agreement sets forth the entire understanding of the Parties with respect to the subject matter hereof. This Consulting Agreement may be amended only in writing signed by both Parties.

Notices : Any notice required or permitted to be given hereunder shall be in writing and shall be mailed or otherwise delivered in person or by facsimile transmission at the address of such Party set forth above or to such other address or facsimile telephone number, as the Party shall have furnished in writing to the other Party.

Waiver : Any waiver by either Party of a breach of any provision of this Consulting Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Consulting Agreement. The failure of a Party to insist upon strict adherence to any term of this Consulting Agreement on one or more occasions will not be considered a waiver or deprive that Party of the right thereafter to insist upon adherence to that term of any other term of this Consulting Agreement.

Assignment : The shares due under this Agreement are assignable at the discretion of the Consultant. The obligations of Consultant may not be assigned and any such assignment may be null and void.

Disagreements : Any dispute or other disagreement arising from or out of this Consulting Agreement shall be submitted to arbitration under the rules of the American Arbitration Association and the decision of the arbiter(s) shall be enforceable in any court having jurisdiction thereof. Arbitration shall occur only in Los Angeles County, CA. The interpretation and the enforcement of this Agreement shall be governed by California Law as applied to residents of the State of California relating to contracts executed in and to be performed solely within the State of California. In the event any dispute is arbitrated, the prevailing Party (as determined by the arbiter(s)) shall be entitled to recover that Party's reasonable attorney's fees incurred (as determined by the arbiter(s)).

IN WITNESS WHEREOF, this Consulting Agreement has been executed by the Parties as of the date first above written.

Oct 31, 2017

Marco Alfonsi CEO CONSULTANT

___________________ _____________________________

Canbiola, Inc. Robert A. Kornfeld, DPM

[F10142.GIF]

CONSULTING AGREEMENT

This Consulting Agreement (the "Consulting Agreement") made as of June 1, 2017 by and between Smita Ohri M.D., 75 Lincoln Highway, Suite 204, Iselin, NJ 08830 , ("Consultant") and Canbiola, Inc., 445 NE 12th Avenue Ft; Lauderdale, FL. 33301 (the "Company").

WITNESSETH

WHEREAS, the Company requires and will continue to require consulting services relating to product development, interfacing with the medical & alternative medicine community and marketing to prospective clients and partners about its business; and

WHEREAS, Consultant can provide the Company with strategic planning and marketing, from a medical standpoint, consulting services and is desirous of performing such services for the Company; and

WHEREAS, the Company wishes to induce Consultant to provide these consulting services to the Company,

NOW, THEREFORE, in consideration of the mutual covenants hereinafter stated, it is agreed as follows:

1. APPOINTMENT .

The Company hereby engages Consultant and Consultant agrees to render services to the Company as a consultant upon the terms and conditions hereinafter set forth.

2. TERM .

The term of this Consulting Agreement began as of the date of this Agreement, and shall terminate on June 1, 2018, unless earlier terminated in accordance with paragraph 7 herein or extended as agreed to between the parties.

3. SERVICES .

(a) Take the role of “medical advisor” to the Company

(b) Give input on new CBD-products based on consultant’s core expertise such as but not limited to hormone treatment, general health & fitness, detox, anti-aging lotions/salves, dieting supplements;

(c) Advise the Company relative to patient testing and results, conduct medical trials and gather real life testimonials from users of Company’s products

(d) The identification of potential clients/client groups and partners within the medical community.

(e) Advice on the Company’s blog.

(f)

Be available to record videos to present the Company’s products from a medical angle

4. DUTIES OF THE COMPANY .

5. COMPENSATION .

The Company shall compensate the Consultant with 1,000,000 restricted shares of stock which shall issue as follows:

September 1, 2017: 250,000

December 1, 2017: 250,000

March 1, 2018: 250,000

June 1, 2018: 250,000

6. REPRESENTATION AND INDEMNIFICATION .

7. MISCELLANEOUS .

Termination : This Agreement may be terminated by either Party upon written notice to the other Party for any reason which shall be effective five (5) business days from the date of such notice. This Agreement shall be terminated immediately upon written notice for material breach of this Agreement. Any future compensation following termination will be automatically cancelled.

Modification : This Consulting Agreement sets forth the entire understanding of the Parties with respect to the subject matter hereof. This Consulting Agreement may be amended only in writing signed by both Parties.

Notices : Any notice required or permitted to be given hereunder shall be in writing and shall be mailed or otherwise delivered in person or by facsimile transmission at the address of such Party set forth above or to such other address or facsimile telephone number, as the Party shall have furnished in writing to the other Party.

occasions will not be considered a waiver or deprive that Party of the right thereafter to insist upon adherence to that term of any other term of this Consulting Agreement.

Assignment : The Options under this Agreement are assignable at the discretion of the Consultant.

Disagreements : Any dispute or other disagreement arising from or out of this Consulting Agreement shall be submitted to arbitration under the rules of the American Arbitration Association and the decision of the arbiter(s) shall be enforceable in any court having jurisdiction thereof. Arbitration shall occur only in Los Angeles County, CA. The interpretation and the enforcement of this Agreement shall be governed by California Law as applied to residents of the State of California relating to contracts executed in and to be performed solely within the State of California. In the event any dispute is arbitrated, the prevailing Party (as determined by the arbiter(s)) shall be entitled to recover that Party's reasonable attorney's fees incurred (as determined by the arbiter(s)).

IN WITNESS WHEREOF, this Consulting Agreement has been executed by the Parties as of the date first above written.

May 22, 2017

CONSULTANT

___________________ _____________________________

Canbiola, Inc. Smita Ohri M.D