Item 1.
Financial Statements.
|
|
|
|
|
|
Canbiola, Inc. and Subsidiary
Consolidated Balance Sheets
|
|
|
June 30,
|
|
December 31,
|
|
|
2017
|
|
|
2016
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
257
|
|
|
$
30,193
|
Accounts receivable, less allowance for doubtful
accounts of $0 and $0, respectively
|
|
24,690
|
|
|
13,742
|
Inventory
|
|
10,946
|
|
|
-
|
Prepaid expenses
|
|
88,246
|
|
|
2,500
|
Total current assets
|
|
124,139
|
|
|
46,435
|
|
|
|
|
|
|
Property and equipment, at cost less accumulated
|
|
|
|
|
|
depreciation of $18,636 and $17,021, respectively
|
|
12,761
|
|
|
14,375
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
Security deposit
|
|
11,687
|
|
|
11,687
|
Note receivable
|
|
39,000
|
|
|
39,000
|
Intangible assets, net of accumulated
|
|
|
|
|
|
amortization of $36,933 and $34,947, respectively
|
|
23,495
|
|
|
25,481
|
Total other assets
|
|
74,182
|
|
|
76,168
|
|
|
|
|
|
|
Total assets
|
|
$
211,082
|
|
|
$
136,978
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Notes and loans payable
|
|
$
146,420
|
|
|
$
58,315
|
Derivative Liability
|
|
530,343
|
|
|
352,688
|
Accounts payable
|
|
103,610
|
|
|
54,714
|
Accrued officers compensation
|
|
170,750
|
|
|
134,750
|
Other accrued expenses payable
|
|
60,583
|
|
|
51,099
|
Total current liabilities and total liabilities
|
|
1,011,706
|
|
|
651,566
|
Commitments and contingencies (Notes 7 and 12)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
Series A Preferred stock, no par value:
|
|
|
|
|
|
authorized 20 shares, issued and outstanding
|
|
|
|
|
|
10 and 10 shares, respectively
|
|
103,664
|
|
|
103,664
|
Common stock, no par value; authorized
|
|
|
|
|
|
400,000,000 shares, issued and outstanding
|
|
|
|
|
|
160,179,466 and 146,008,250 shares, respectively
|
|
12,087,817
|
|
|
11,889,505
|
Accumulated deficit
|
|
(12,992,105)
|
|
|
(12,507,757)
|
Total stockholders' equity (deficit)
|
|
(800,624)
|
|
|
(514,588)
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
211,082
|
|
|
$
136,978
|
See notes to consolidated financial statements.
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
Canbiola, Inc. and Subsidiary
|
Consolidated Statements of Operations and Comprehensive Loss
|
(Unaudited)
|
|
Six Months Ended June 30,
|
|
Three Months Ended June 30,
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Service Revenue
|
|
$
41,707
|
|
|
$
47,663
|
|
|
$
23,735
|
|
|
$
25,437
|
Product Sales
|
|
2,135
|
|
|
-
|
|
|
2,135
|
|
|
-
|
Total Revenues
|
|
$
43,842
|
|
|
$
47,663
|
|
|
$
25,870
|
|
|
$
25,437
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cost and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales
|
|
1,139
|
|
|
-
|
|
|
1,139
|
|
|
-
|
Officers and directors compensation and payroll taxes (including
|
|
|
|
|
|
|
|
|
|
|
|
stock - based compensation of $0, $0, $0 and $0 respectively)
|
|
38,832
|
|
|
120,567
|
|
|
19,377
|
|
|
59,746
|
Consulting fees (including stock-based compensation of $37,229
|
|
|
|
|
|
|
|
|
|
|
|
$30,000, $26,229 and $0 respectively)
|
|
71,782
|
|
|
67,095
|
|
|
55,082
|
|
|
11,234
|
Advertising expense
|
|
21,510
|
|
|
4,750
|
|
|
20,893
|
|
|
-
|
Hosting expense
|
|
14,687
|
|
|
12,140
|
|
|
12,246
|
|
|
1,842
|
Rent expense
|
|
32,530
|
|
|
32,530
|
|
|
16,265
|
|
|
16,265
|
Professional fees
|
|
62,736
|
|
|
16,737
|
|
|
46,758
|
|
|
12,288
|
Depreciation of property and equipment
|
|
1,614
|
|
|
1,653
|
|
|
807
|
|
|
806
|
Amortization of intangible assets
|
|
1,986
|
|
|
1,987
|
|
|
993
|
|
|
993
|
Other
|
|
60,519
|
|
|
21,446
|
|
|
38,775
|
|
|
8,727
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
307,335
|
|
|
278,905
|
|
|
212,335
|
|
|
111,901
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(263,493)
|
|
|
(231,242)
|
|
|
(186,465)
|
|
|
(86,464)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
586
|
|
|
585
|
|
|
293
|
|
|
292
|
Income (expense) from derivative liability
|
|
(53,655)
|
|
|
-
|
|
|
(250,334)
|
|
|
-
|
Interest expense (including amortization of debt discounts of $153,105, $0,
$65,375 and $0 respectively)
|
|
(167,786)
|
|
|
(250)
|
|
|
(71,942)
|
|
|
(125)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) net
|
|
(220,855)
|
|
|
335
|
|
|
(321,983)
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
(484,348)
|
|
|
(230,907)
|
|
|
(508,448)
|
|
|
(86,297)
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss
|
|
$
(484,348)
|
|
|
$
(230,907)
|
|
|
$
(508,448)
|
|
|
$
(86,297)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
(0.00)
|
|
|
$
(0.00)
|
|
|
$
(0.00)
|
|
|
$
(0.00)
|
Diluted
|
|
$
(0.00)
|
|
|
$
(0.00)
|
|
|
$
(0.00)
|
|
|
$
(0.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
153,334,334
|
|
|
145,555,368
|
|
|
158,836,059
|
|
|
145,608,250
|
Diluted
|
|
267,980,990
|
|
|
145,555,368
|
|
|
278,278,009
|
|
|
145,608,250
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
|
5
|
|
|
|
|
|
|
Canbiola, Inc. and Subsidiary
|
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
Operating Activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
(484,348)
|
|
|
$
(230,907)
|
Adjustments to reconcile net income (loss) to net
|
|
|
|
|
|
|
cash used in operating activities:
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
37,229
|
|
|
30,000
|
Expense (income) from derivative liability
|
|
|
53,655
|
|
|
-
|
Depreciation of property and equipment
|
|
|
1,614
|
|
|
1,653
|
Amortization of intangible assets
|
|
|
1,986
|
|
|
1,987
|
Amortization of debt discounts
|
|
|
153,105
|
|
|
-
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(10,948)
|
|
|
(1,745)
|
Inventory
|
|
|
(10,946)
|
|
|
-
|
Prepaid expenses
|
|
|
2,500
|
|
|
9,671
|
Accounts payable
|
|
|
48,896
|
|
|
20,219
|
Accrued officers compensation
|
|
|
36,000
|
|
|
80,000
|
Other accrued expenses payable
|
|
|
17,321
|
|
|
9,676
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(153,936)
|
|
|
(79,446)
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
Proceeds received from notes and loans payable
|
|
|
124,000
|
|
|
61,513
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
124,000
|
|
|
61,513
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(29,936)
|
|
|
(17,933)
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
30,193
|
|
|
18,373
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
$
257
|
|
|
$
440
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
Income taxes paid
|
|
|
$
-
|
|
|
$
-
|
Interest paid
|
|
|
$
-
|
|
|
$
-
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Issuance of common stock in satisfaction of debt
|
|
|
$
65,000
|
|
|
$
-
|
|
|
|
|
|
|
|
Issuance of common stock in satisfaction
|
|
|
|
|
|
|
of accrued interest
|
|
|
$
7,837
|
|
|
$
-
|
|
|
|
|
|
|
|
Issuance of common stock in satisfaction
|
|
|
|
|
|
|
of accounts payable
|
|
|
$
-
|
|
|
$
21,557
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
6
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
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 (Prosperity); however, after the acquisition of Prosperity, the Company transferred Prosperitys 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.
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 June 30, 2017, the Company had cash and cash equivalents of $257 and negative working capital of $887,567. For the six months ended June 30, 2017 and 2016, the Company had net losses of $484,348and $230,907, respectively. These factors raise substantial doubt as to the Companys 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 start a health supplements business to attain profitable operations. 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 Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they may not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The interim financial statements should be read in conjunction with the Companys latest annual financial statement. In the opinion of management, the unaudited financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation. Operating results for the three-month period ended June 30, 2017 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2017.
NOTE 4 Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of WRAP 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.
(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.
7
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
(c) Fair Value of Financial Instruments
The Companys financial instruments consist of cash and cash equivalents, accounts receivable, note receivable, notes and loans payable, accounts payable, and accrued expenses payable. Except for the note receivable, the fair value of these financial instruments approximate their carrying amounts reported in the consolidated balance sheets due to the short term maturity of these instruments. Based on comparable instruments with similar terms, the fair value of the 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 instruments 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 market. Cost is principally determined using the first-in, first-out (FIFO) method.
(f) Property and Equipment, Net
Property and equipment, net, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to operations as incurred.
(g) Intangible Assets, Net
Intangible assets, net, are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the estimated economic lives of the respective assets.
(h) Goodwill and Intangible Assets with Indefinite Lives
The Company does not amortize goodwill and intangible assets with indefinite useful lives, but instead tests for impairment at least annually. When conducting the annual impairment test for goodwill, the Company compares the estimated fair value of a reporting unit containing goodwill to its carrying value. If the estimated fair value of the reporting unit is determined to be less than its carrying value, goodwill is reduced and an impairment loss is recorded.
8
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
(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 assets carrying amount to determine if a write-down is required. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value.
(j) Revenue Recognition
The Company recognizes revenue over agreed periods of services delivered to customers, provided there are no uncertainties regarding customer acceptance, persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable.
(k) 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 companys 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 counterpartys performance is complete.
Options and warrants
The fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:
Risk-Free Interest Rate.
We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of
our awards.
Expected Volatility.
We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient
historical market information to estimate the volatility of our own stock.
Dividend Yield.
We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
Expected Term.
The expected term of options granted represents the period of time that options are expected to be outstanding. We
estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
9
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
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 $21,510 and $4,750 for the six months ended June 30, 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.
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 managements 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 three and six months ended June 30, 2016, the diluted net loss per share calculation excluded the effect of convertible notes payable, Series A preferred stock and stock options outstanding (see Note7,8 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 August 2014, the FASB issued ASU 2014-15 Disclosure about an Entitys Ability to Continue as a Going Concern. The update establishes managements responsibility to evaluate whether there is substantial doubt about an entitys 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.
10
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
The impact on the Companys financial statements has not yet been determined.
(q) Reclassifications
Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current year presentation. These reclassification adjustments had no effect on the Company's previously reported net income.
NOTE 5 Note Receivable
At June 30, 2017 and December 31, 2016, the $39,000 note receivable bears interest at a rate of 3% per annum and is due November 30, 2020. The receivable arose from the Companys sale of its 50% interest in Stock Market Manager, Inc. to Endeavour Cooperative Partners, LLC (Endeavour) on November 30, 2015. Endeavour is affiliated with Carl Dilley, a Company director.
NOTE 6 Intangible Assets, Net
Intangible assets, net, consist of:
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31, 2016
|
|
|
|
|
|
Video conferencing software acquired
|
|
|
|
|
by Prosperity in December 2009
|
|
$
30,000
|
|
$
30,000
|
|
|
|
|
|
Enterprise and audit software acquired
|
|
|
|
|
by Prosperity in April 2008
|
|
20,000
|
|
20,000
|
|
|
|
|
|
Patent costs incurred by WRAP
|
|
6,880
|
|
6,880
|
|
|
|
|
|
Other
|
|
3,548
|
|
3,548
|
|
|
|
|
|
Total
|
|
60,428
|
|
60,428
|
|
|
|
|
|
Accumulated amortization
|
|
(36,933)
|
|
(34,947)
|
|
|
|
|
|
Net
|
|
$
23,495
|
|
$
25,481
|
Expected future amortization expense for intangible assets as of June 30, 2017 follows:
|
|
|
|
|
Amount
|
|
|
|
Year Ending December 31, 2017
|
|
$
1,988
|
Year Ending December 31, 2018
|
|
3,975
|
Year Ending December 31, 2019
|
|
3,975
|
Year Ending December 31, 2020
|
|
3,975
|
Year Ending December 31, 2021
|
|
3,975
|
Thereafter
|
|
5,607
|
|
|
|
Total
|
|
$
23,495
|
|
|
|
11
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
NOTE 7 Notes and Loans Payable
|
|
|
|
|
|
Notes and loans payable consist of:
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
Convertible note payable to lender dated February 1, 2016 (as amended
December 21, 2016), interest at 12% per annum, due February 1,
2017, convertible into Common Stock at a Conversion Price equal to the
Lesser of (i) $0.01 per share or (ii) 50% of the lowest Bid Price of the
Common Stock for the 30 Trading Days preceding the Conversion Date
fully converted at February 13, 2017
|
|
$
-
|
|
$
3,571
|
|
|
|
|
|
Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to February 27, 2017, interest at rates ranging from 12% to 14.99% per annum, due from April 6, 2017 to October 7, 2017, partially converted at March 22, 2017 and the remaining notes convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date net of
unamortized debt discount of $2,573 and $34,411, respectively
|
|
32,677
|
|
39,839
|
|
|
|
|
|
Convertible notes payable to lender dated February 1, 2016 (as amended
December 21, 2016) and December 21, 2016, interest at 12% per
annum, due February 1, 2017 and May 20, 2017, convertible into
Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per
share or (ii) 50% of the lowest Closing Bid Price of the Common Stock
for the 30 Trading Days preceding the Conversion Date net of
unamortized debt discount of $0 and $58,095
|
|
65,000
|
|
6,905
|
|
|
|
|
|
Convertible notes payable to Pasquale and Rosemary Ferro dated from
March 16, 2017 to June 8, 2017, interest at rates ranging from 12% to
14.99% per annum, due from September 16, 2017 to May 7, 2018,
convertible into Common Stock at a Conversion Price equal to the lesser
of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the
Common Stock for the 30 Trading Days preceding the Conversion Date
net of unamortized debt discount of $72,257 and $0
|
|
40,743
|
|
-
|
|
|
|
|
|
Note payable to the brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due)
|
|
5,000
|
|
5,000
|
|
|
|
|
|
Loan payable to Mckenzie Webster Limited (MWL), an entity controlled by the Chairman of the Board of Directors of the Company, non-interest bearing, due on demand
|
|
3,000
|
|
3,000
|
Total
|
|
$
146,420
|
|
$
58,315
|
12
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
The derivative liability of the convertible notes payable at June 30, 2017 consisted of:
|
|
|
|
|
|
|
|
|
Face Value
|
|
Derivative Liability
|
|
|
|
|
|
|
|
Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to February 27, 2017, due from April 6, 2017 to July 28, 2017
|
|
|
$
35,250
|
|
|
$
82,863
|
|
|
|
|
|
|
|
Convertible notes payable to lender dated February 1, 2016 (as amended
December 21, 2016) and December 21, 2016, due February 1, 2017 and
May 20, 2017
|
|
|
65,000
|
|
|
151,667
|
|
|
|
|
|
|
|
Convertible notes payable to Pasquale and Rosemary Ferro dated from
March 16, 2017 to June 8, 2017, due from September 16, 2017 to
May 7, 2018
|
|
|
113,000
|
|
|
295,813
|
|
|
|
|
|
|
|
Totals
|
|
$
|
213,250
|
|
|
530,343
|
The above convertible notes contain a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes is indeterminate. Accordingly, we have recorded the fair value of the embedded conversion features as a derivative liability at the respective issuance dates (or amendment dates) of the notes ($267,660 total for the six months ended June 30, 2017) and charged the applicable amounts to debt discounts ($124,000 total for the six months ended June 30, 2017) and the remainder to other expense ($143,660 total for the six months ended June 30, 2017). The increase (decrease) in the fair value of the derivative liability from the respective issuance dates (or amendment dates) of the notes to the measurement date ($58,143 total increase for the six months ended June 30, 2017) is charged (credited) to other expense (income). The fair value of the derivative liability of the notes is measured at the respective issuance dates and quarterly thereafter using the Black Scholes option pricing model. Assumptions used for the calculations of the derivative liability of the notes at June 30, 2017 include (1) stock price of $0.025 per share, (2) exercise price of $0.0075 per share, (3) terms ranging from 0 days to 311 days, (4) expected volatility of 267% and (5) risk free interest rates ranging from 0.00% to 1.21%.
NOTE 8 Preferred Stock
The Company issued a total of 10 shares of WRAP Series A Preferred Stock (5 shares to MWL and 5 shares to Marco Alfonsi) in exchange for the retirement of a total of 100,000,000 shares of WRAP common stock (50,000,000 shares from MWL and 50,000,000 shares from Marco Alfonsi).
Each share of Series A Preferred Stock is convertible into 10,000,000 shares of WRAP common stock and is entitled to 20,000,000 votes.
NOTE 9 Common Stock
On January 2, 2016, the Company issued 104,500 shares of WRAP common stock to a technical consultant in satisfaction of a $12,864 account payable to that vendor.
On March 9, 2016, the Company issued 140,000 shares of WRAP common stock to a technical consultant in satisfaction of a $8,693 account payable to that vendor.
On October 6, 2016, the Company issued 400,000 shares of WRAP common stock to a technical consultant in satisfaction of a $25,617 account payable to that vendor.
On February 2, 2017, the Company issued 200,000 shares of WRAP common stock to a financial consultant for services rendered. The $11,000 fair value of the 200,000 shares of WRAP common stock was charged to consulting fees in the three months ended March 31, 2017.
13
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
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.
On March 22, 2017, the Company issued 6,785,316 shares of WRAP common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $5,979.
On April 17, 2017, the Company issued 5,000,000 shares of WRAP common stock to a consultant for services rendered. The $103,500 fair value of the 5,000,000 shares of WRAP common stock will be charged to consulting fees in the three months ended June 30, 2017.
On June 21, 2017, the Company issued 250,000 shares of WRAP common stock to a consultant for services rendered. The $5,975 fair value of the 250,000 shares of WRAP common stock will be charged to consulting fees in the three months ended June 30, 2017.
On June 28, 2017, the Company issued 250,000 shares of WRAP common stock to a consultant for services rendered. The $5,000 fair value of the 250,000 shares of WRAP common stock will be charged to consulting fees in the three months ended June 30, 2017.
NOTE 10 Stock Options and Warrants
A summary of stock options and warrants activity follows:
|
|
|
|
|
|
|
Shares of Common Stock Exercisable Into
|
|
Stock
|
|
|
|
|
|
Options
|
|
Warrants
|
|
Total
|
Balance, December 31, 2015
|
200,000
|
|
307,500
|
|
507,500
|
Granted in 2016
|
-
|
|
-
|
|
-
|
Expired in 2016
|
(150,000)
|
|
(60,000)
|
|
(210,000)
|
|
|
|
|
|
|
Balance, December 31, 2016
|
50,000
|
|
247,500
|
|
297,500
|
Granted in 1Q and 2Q 2017
|
-
|
|
-
|
|
-
|
Cancelled in 1Q and 2Q 2017
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
Balance, June 30, 2017
|
50,000
|
|
247,500
|
|
297,500
|
Issued and outstanding stock options as of June 30, 2017 consist of:
|
|
|
|
|
|
|
|
Year
|
|
Number Outstanding
|
|
|
Exercise
|
|
Year of
|
Granted
|
|
And Exercisable
|
|
|
Price
|
|
Expiration
|
|
|
|
|
|
|
|
|
2009
|
|
50,000
|
|
$
|
1.00
|
|
2019
|
|
|
|
|
|
|
|
|
Total
|
|
50,000
|
|
|
|
|
|
Issued and outstanding warrants as of June 30, 2017 consist of:
|
|
|
|
|
|
|
|
Year
|
|
Number Outstanding
|
|
|
Exercise
|
|
Year of
|
Granted
|
|
And Exercisable
|
|
|
Price
|
|
Expiration
|
|
|
|
|
|
|
|
|
2010
|
|
247,500
|
|
$
|
1.00
|
|
2020
|
|
|
|
|
|
|
|
|
Total
|
|
247,500
|
|
|
|
|
|
14
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
NOTE 11 Income Taxes
No provisions for income taxes were recorded for the periods presented since the Company incurred net losses in those periods.
The provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal income tax rate of 35% to pretax income (loss) as follows:
|
|
|
|
|
|
|
Six Months Ended March 31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Expected income tax (benefit) at 35%
|
$
(169,522)
|
|
$
(50,614)
|
|
|
|
|
|
Non-deductible stock-based compensation
|
13,030
|
|
10,500
|
|
|
|
|
|
Non-deductible amortization of debt discounts
|
53,587
|
|
-
|
|
|
|
|
Non-taxable (income) from derivative liability
|
18,779
|
|
-
|
|
|
|
|
Increase in deferred income tax assets
|
|
|
|
|
valuation allowance
|
|
84,126
|
|
40,114
|
|
|
|
|
|
Provision for (benefit from) income taxes
|
|
$
-
|
|
$
-
|
|
|
|
|
|
Deferred income tax assets consist of:
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31, 2016
|
|
|
|
|
|
Net operating loss carryforward
|
|
1,304,605
|
|
1,220,479
|
|
|
|
|
|
Valuation allowance
|
|
(1,304,605)
|
|
(1,220,479)
|
|
|
|
|
|
Net
|
|
$
-
|
|
$
-
|
Based on management's present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of $1,304,605 attributable to the future utilization of the $3,716,863 net operating loss carryforward as of June 30, 2017 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the consolidated financial statements at June 30, 2017. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, and 2037 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511, $338,345, $386,297, and $240,359, respectively.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
The Company's U.S. Federal and state income tax returns prior to 2013 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations on the 2012 tax year returns expired in March 2016.
The Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest or penalties paid during 2017 and 2016.
15
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
NOTE 12 Commitments and Contingencies
Employment Agreements
On May 14, 2015, the Company executed an Executive Employment Agreement with Marco Alfonsi (Alfonsi) for Alfonsi to serve as the Company's chief executive officer for cash compensation of $5,000 per month (increased to $6,000 per month in August 2015). Pursuant to the agreement, the Company issued 10,000,000 restricted shares of WRAP common stock to Alfonsi on June 14, 2015. Alfonsi may terminate his employment upon 30 days written notice to the Company. The Company may terminate Alfonsi's employment upon written notice to Alfonsi by a vote of the Board of Directors.
On August 17, 2015, the Company executed an Employment Agreement with Romuald Stone ("Stone") for Stone to serve as the Company's Chief Technology Officer for cash compensation of $12,500 per month. Effective August 17, 2016, the agreement terminated.
Lease Agreements
On December 1, 2014, Prosperity entered into a lease agreement with KLAM, Inc. for office space in Hicksville, New York for an initial term of one year commencing December 1, 2014. The lease provides for monthly rentals of $2,500 and provides Prosperity an option to renew the lease after the initial term. The Company has continued to occupy this space after November 30, 2015 under a month to month arrangement at $2,500 per month. KLAM, Inc. is controlled by the wife of the Company's chief executive officer Marco Alfonsi.
On September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100 for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate taxes.
Rent expense was $32,530 for each of the six months ended June 30, 2017 and 2016.
At June 30, 2017, the future minimum lease payments under non-cancellable operating leases were:
Year ending December 31, 2017
18,418
Year ending December 31, 2018
27,900
Total
$ 46,318
Major Customers
For the six months ended June 30, 2017, two customers accounted for approximately 47% and 31%, respectively, of total service revenues.
For the six months ended June 30, 2016, three customers accounted for approximately 37%, 30%, and 20%, respectively, of total service revenues.
Public Offering of Units
On August 2, 2016, the Companys Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. On a self-underwritten basis, the Company was offering up to 40,000,000 Units at a price of $0.05 per Unit or $2,000,000 maximum. Each Unit consisted one share of Company common stock and one warrant to purchase ½ share of Company common stock of a price of $0.10 per share for a period of three years. There was no minimum offering amount or escrow required as a condition to closing. On May 5, 2017, the Company terminated the Registration Statement; no units were sold in the offering.
16
Canbiola, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Three Months Ended June 30, 2017 and 2016
(Unaudited)
Litigation
On November 25, 2016, the landlord under the lease agreement dated September 11, 2015 (QPR) served us a Notice of Default. On December 5, 2016, QPR filed a Petition to Recover Possession of Real Property seeking unpaid rent of $12,540 (as of November 21, 2016) and possession of the premises. The Company subsequently paid QPR and QPR dismissed the action.
NOTE 13 Related Party Transactions
ProAdvanced Group, Inc. (PAG), an entity controlled by the Companys chief executive officer, is a customer of WRAP. At June 30, 2017, WRAP had an account receivable from PAG of $1,190.
Island Stock Transfer (IST), an entity controlled by Carl Dilley, a Company director, is both a customer and vendor of WRAP. As of June 30, 2017, WRAP had an account receivable from IST of $2,000 and an account payable to IST of $2,005. For the six months ended June 30, 2017, WRAP had revenues from IST of $2,000.
Stock Market Manager, Inc. (see Note 5) is also an entity controlled by Mr. Dilley. At June 30, 2017, WRAP had an account payable to Stock Market Manager Inc. of $2,000.
NOTE 14 Subsequent Events
On July 5, 2017, August 2, 2017 and August 16, 2017, the Company issued three Convertible Promissory Notes of $10,000, $5,000 and $3,000 to a lender for loan proceeds of $10,000, $5,000 and $3,000, respectively. The notes bear interest at a rate of 12% per annum, are due on May 7, 2018, and are convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date.
On August 8, 2017, August 9, 2017 and August 16, 2017, the Company issued three Convertible Promissory Notes of $10,000, $10,000 and $5,000 to a lender for loan proceeds of $10,000, $10,000 and $5,000, respectively. The notes bear interest at a rate of 12% per annum, are due on August 8, 2018, and are convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date.
In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through August 21, 2017, the date on which these consolidated financial statements were available to be issued. Except as disclosed above, there were no material subsequent events that required recognition or additional disclosure in these consolidated financial statements.
17