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

 

OR

 

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

 

For the Transition Period From ____________ to ____________

 

Commission File Number: 333-208293

 

CANBIOLA. INC.

(Exact name of registrant as specified in its charter)

 

Florida

 

20-3624118

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

960 South Broadway, Suite 120, Hicksville NY 11801 ,

(Address of principal executive offices)

 

516-590-1846

Registrant’s telephone number, including area code:

 

None

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

 

Common Stock, par value $0.00 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 [  ]



1




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. 

 

 



2




  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

 

 



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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.

 



4




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.

 



5




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.



6




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.



7




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.



8




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.

  



9




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.



10




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.

 



11




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.



12




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.

  



13




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.

   



14




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.



15




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.



16




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.

 



17




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.



18





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.



19




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.



20




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

 

 

$

-

 

 

 

$

-

   



21




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.

   



22





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

 

 

 

 



23





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



24





[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





SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

    Income taxes paid

 

 

$

-

 

 

$

-

Interest paid

 

 

$

-

 

 

$

-

 

 

 

 

 

 

 

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.


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.



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.


(c)  Fair Value of Financial Instruments


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


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


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


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


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


(d)  Cash and Cash Equivalents


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


(e)  Inventory


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


(f)  Property and Equipment, Net


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


(g)  Intangible Assets, Net


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



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