UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended March 31, 2017

 

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

 

For the transition period from __________ to __________

 

COMMISSION FILE NUMBER: 333-208293

 

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 No.)

 

445 NE 12^th Avenue

Fort Lauderdale, Florida 33301

 (Address of principal executive offices)

 

(516) 590-1846

(Registrant’s telephone number, including area code)

WRAPmail, Inc.

 (Former name, former address and former fiscal, if changed since last report)

 

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 ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

 

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

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

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

The number of shares of the registrant’s only class of common stock issued and outstanding as of May 12, 2017 was 159,679,466 shares.

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WRAPMAIL, INC.

FORM 10-Q

March 31, 2017

 

TABLE OF CONTENTS

 

		Page No.
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – March 31, 2017 and December 31, 2016	4
	Consolidated Statements of Operations and Comprehensive Income (Loss) – Three Months Ended March 31, 2017 and 2016	5
	Consolidated Statements of Cash Flows – Three Months Ended March 31, 2017 and 2016	6
	Condensed Notes to Unaudited Consolidated Financial Statements.	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	18
Item 4.	Controls and Procedures.	18
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	19

 

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PART 1 - FINANCIAL INFORMATION

 Item 1.

Financial Statements.

WRAPmail, Inc. and Subsidiary Consolidated Balance Sheets
		March 31,		December 31,
		2017			2016
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	29,822		$	30,193
Accounts receivable, less allowance for doubtful       accounts of $0 and $0, respectively		16,678			13,742
Prepaid expenses		-			2,500
Total current assets		46,500			46,435
Property and equipment, at cost less accumulated
depreciation of $17,829 and $17,021, respectively		13,568			14,375
Other assets:
Security deposit		11,687			11,687
Note receivable		39,000			39,000
Intangible assets, net of accumulated
amortization of $35,940 and $34,947, respectively		24,488			25,481
Total other assets		75,175			76,168
Total assets	$	135,243		$	136,978
Liabilities and Stockholders' Equity
Current liabilities:
Notes and loans payable	$	131,045		$	58,315
Derivative Liability		165,509			352,688
Accounts payable		42,488			54,714
Accrued officers compensation		152,750			134,750
Other accrued expenses payable		50,102			51,099
Total current liabilities and total liabilities		541,894			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
154,679,466 and 146,008,250 shares, respectively		11,973,342			11,889,505
Accumulated deficit		(12,483,657)			(12,507,757)
Total stockholders' equity (deficit)		(406,651)			(514,588)
Total liabilities and stockholders' equity (deficit)	$	135,243		$	136,978
See notes to consolidated financial statements.

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WRAPmail, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
			Three Months Ended  March 31,
			2017			2016
Operating Activities:
Net income (loss)		$	24,100		$	(144,610)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Stock-based compensation			11,000			30,000
Expense (income) from derivative liability			(196,679)			-
Depreciation of property and equipment			807			847
Amortization of intangible assets			993			994
Amortization of debt discounts			87,730			-
Changes in operating assets and liabilities:
Accounts receivable			(2,936)			(1,851)
Prepaid expenses			2,500			9,671
Accounts payable			(12,226)			5,830
Accrued officers compensation			18,000			24,500
Other accrued expenses payable			6,840			7,586
Net cash used in operating activities			(59,871)			(67,033)
Investing Activities:
Net cash used in investing activities			-			-
Financing Activities:
Proceeds received from notes and loans payable			59,500			51,500
Net cash provided by financing activities			59,500			51,500
Increase (decrease) in cash and cash equivalents			(371)			(15,533)
Cash and cash equivalents, beginning of period			30,193			18,373
Cash and cash equivalents, end of period		$	29,822		$	2,840
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.

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WRAPmail, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2017 and 2016

(Unaudited)

NOTE 1 – Organization and Description of Business

WrapMail, Inc. (“WRAP”) was incorporated 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.  WRAP and its wholly owned subsidiary Prosperity (collectively, the “Company”) provide document, project, marketing and sales management systems to business clients through its website and proprietary software. After the acquisition of Prosperity, the Company transferred Prosperity’s operations to WRAP and is presently in the process of dissolving Prosperity. 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.

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 March 31, 2017, the Company had cash and cash equivalents of $29,822 and negative working capital of $495,394. For the three months ended March 31, 2017 and 2016, the Company had net gain of $24,100 and net loss of $144,610, respectively. Absent to the gain from derivative liability, the net loss for the three months ended March 31, 2017 and 2016 would be $172,579 and $144,610, 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 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 Company’s 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 March 31, 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.

(c)  Fair Value of Financial Instruments

The Company’s 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.

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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)  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.

(f)  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.

(g)  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.

 (h)  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.

 

(i)  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.

      

(j) 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.

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

 Options and warrants

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

Risk-Free Interest Rate.

We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of

our awards.  

Expected Volatility.

We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient

historical market information to estimate the volatility of our own stock.

 

Dividend Yield.

We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend   in the foreseeable future and therefore used a dividend yield of zero.

 

Expected Term.

The expected term of options granted represents the period of time that options are expected to be outstanding.  We

estimated the expected term of stock options by using the simplified method.  For warrants, the expected term   represents the actual term of the warrant.

Forfeitures.

Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite   service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates.   Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change   and will also impact the amount of compensation expense to be recognized in future periods.

(k)  Advertising

Advertising costs are expensed as incurred and amounted to $617 and $4,750 for the three months ended March 31, 2017 and 2016, respectively.      

(l) Research and Development

Research and development costs are expensed as incurred.

(m)  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.

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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.

(n)  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 months ended March 31, 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).

(o)  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 Entity’s Ability to Continue as a Going Concern”. 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.

 

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

(p) 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 March 31, 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 Company’s 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.

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NOTE 6 – Intangible Assets, Net

Intangible assets, net, consist of:

		March 31,  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		(35,940)		(34,947)
Net		$           24,488		$           25,481

Expected future amortization expense for intangible assets as of March 31, 2017 follows:

		Amount
Year Ending December 31, 2017		$        2,981
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		$    24,488

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NOTE 7 – Notes and Loans Payable

Notes and loans payable consist of:
		March 31,  2017		December 31,  2016
Convertible note payable to lender dated February 1, 2016 (as amended                  December 21, 2016), interest at 12% per annum, due February 1,         2017, convertible into Common Stock at a Conversion Price equal to the         Lesser of (i) $0.01 per share or (ii) 50% of the lowest Bid Price of the         Common Stock for the 30 Trading Days preceding the Conversion Date                –fully converted at February 13, 2017		$                    -			$          3,571
Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to February 27, 2017, interest at rates ranging from 12% to 14.99% per annum, due from April 6, 2017 to July 28, 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 $9,038 and $34,411, respectively		24,712			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 $16,667 and $58,095		48,333			6,905
Note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due)		5,000			5,000
Note payable to Pasquale and Rosemary Ferro, interest at 14.99% per annum, due September 16, 2017		50,000			-
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		$         131,045			$         58,315

The derivative liability of the convertible notes payable at March 31, 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			$33,750			$56,675
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			108,834
Totals		$	98,750		$	165,509

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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 ($23,919 total for the three months ended March 31, 2017) and charged the applicable amounts to debt discounts ($9,500 total for the three months ended March 31, 2017) and the remainder to other expense ($14,419 total for the three months ended March 31, 2017). The increase (decrease) in the fair value of the derivative liability from the respective issuance dates (or amendment dates) of the notes to the measurement date ($62,949 total decrease the three months ended March 31, 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 March 31, 2017 include (1) stock price of $0.021 per share, (2) exercise price of $0.01 per share, (3) terms ranging from 6 days to 119 days, (4) expected volatility of 265% and (5) risk free interest rates ranging from 0.00% to 0.81%.

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.

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.

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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 2017	-		-		-
Cancelled in 1Q 2017	-		-		-
Balance, March 31, 2017	50,000		247,500		297,500

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

Year		Number Outstanding			Exercise		Year of
Granted		And Exercisable			Price		Expiration
2009		50,000		$	1.00		2019
Total		50,000

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

Year		Number Outstanding			Exercise		Year of
Granted		And Exercisable			Price		Expiration
2010		247,500		$	1.00		2020
Total		247,500

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:

		Three Months Ended March 31,
		2017		2016
Expected income tax (benefit) at 35%		$          8,435		$      (50,614)
Non-deductible stock-based compensation		3,850		10,500
Non-deductible amortization of debt discounts		30,706		-
Non-taxable (income) from derivative liability		(68,838)		-
Increase in deferred income tax assets
valuation allowance		25,847		40,114
Provision for (benefit from) income taxes		$                 -		$                  -

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Deferred income tax assets consist of:

		March 31,  2017		December 31, 2016
Net operating loss carryforward		1,246,326		1,220,479
Valuation allowance		(1,246,326)		(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 $1,246,326 attributable to the future utilization of the $3,550,353 net operating loss carryforward as of March 31, 2017 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the consolidated financial statements at March 31, 2017. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, and 2037 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511, $338,345, $386,297, and $73,849, 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.

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 $16,265 for each of the three months ended March 31, 2017 and 2016.

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

Year ending December 31, 2017	27,445
Year ending December 31, 2018	27,900
Total	$ 55,345

Major Customers

For the three months ended March 31, 2017, two customers accounted for approximately 44% and 36%, respectively, of total revenues.

For the three months ended March 31, 2016, four customers accounted for approximately 34%, 29%, 17%, and 14%, respectively, of total revenues.

Public Offering of Units

On August 2, 2016, the Company’s Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. On a self-underwritten basis, the Company was offering up to 40,000,000 Units at a price of $0.05 per Unit or $2,000,000 maximum. Each Unit consisted 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 withdrew the Registration Statement; no units were sold in the offering.

Litigation

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

NOTE 13 – Related Party Transactions

ProAdvanced Group, Inc. (“PAG”), an entity controlled by the Company’s chief executive officer, is a customer of WRAP. At March 31, 2017, WRAP had an account receivable from PAG of $3,190.

Island Stock Transfer (“IST”), an entity controlled by Carl Dilley, a Company director, is both a customer and vendor of WRAP. As of March 31, 2017, WRAP had an account receivable from IST of $900 and an account payable to IST of $1,735. For the three months ended March 31, 2017, WRAP had revenues from IST of $900.

Stock Market Manager, Inc. (see Note 5) is also an entity controlled by Mr. Dilley. At March 31, 2017, WRAP had an account payable to Stock Market Manager Inc. of $2,000.

NOTE 14 – Subsequent Events

On April 6, 2017, stockholders holding a majority of the voting stock of the Company approved a name change from WRAPmail, Inc. to Canbiola Inc. by written consent. On May 8, 2017, the Company mailed the name change amendment to its certificate of incorporation to Florida. Effective May 15, 2017, FINRA approved the name change.

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 April 20, 2017, the Company amended a $50,000 Promissory Note dated March 16, 2017. The note became 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 May 3, 2017, the Company issued a $50,000 Convertible Promissory Note to a lender for loan proceeds of $50,000. The note bears interest at a rate of 12% per annum, is due on November 3, 2017, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date.

In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through May 15, 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.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

We were incorporated in Florida on October 11, 2005. Effective January 5, 2015, we acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008. We and our wholly owned subsidiary Prosperity (collectively, the “Company”) provide document, project, marketing and sales management systems to business clients through its website and proprietary software. The Company is presently in the process of dissolving Prosperity.

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.

Results of Operations

Three Months Ended March 31, 2017 compared with Three Months Ended March 31, 2016:

Revenues decreased $4,254 from $22,226 in 2016 to $17,972 in 2017.  The decrease was due to the loss of business from customers.

Officers and directors compensation and payroll taxes decreased $41,366 from $60,821 in 2016 to $19,455 in 2017.  The 2016 expense amount ($60,821) consists of salary paid to our Chief Technology Officer ($37,500) and Chief Executive Officer ($18,000) pursuant to their respective employment agreements and related payroll taxes ($5,321). The 2017 expense amount ($19,455) consists of salaries accrued to our Chief Executive Officer ($18,000) pursuant to their respective employment agreements and related payroll taxes ($1,455).

Consulting fees decreased $39,161 from $55,861 in 2016 to $16,700 in 2017. The 2016 expense amount ($55,861) includes stock-based compensation of $30,000. The 2017 expense amount ($16,700) includes stock-based compensation of $11,000, resulting from stock issued for the service of a consultants.

Advertising expense decreased $4,133 from $4,750 in 2016 to $617 in 2017.  

Hosting expense increased $7,857 from $10,298 in 2016 to $2,441 in 2017.

Rent expense remained same at $16,265 in 2016 and 2017.

Professional fees increased $11,529 from $4,449 in 2016 to $15,978 in 2017.

Depreciation of property and equipment decreased $40 from $847 in 2016 to $807 in 2017.  

Amortization of intangible assets decreased $1 from $994 in 2016 to $993 in 2017.

Other operating expenses increased $9,025 from $12,719 in 2016 to $21,744 in 2017.  The increase was due largely to higher miscellaneous expenses in 2017 compared to 2016.

Net loss decreased $168,710 from a loss of $144,610 in 2016 to a gain of $24,100 in 2017. The decrease was due to the $72,004 decrease in total operating expenses and the increase of $100,960 in other income – net from $168 other income – net in 2016 to $101,128 other income– net in 2017, and the $4,254 decrease in revenues.

Liquidity and Capital Resources

At March 31, 2017, we had cash and cash equivalents of $29,822 and negative working capital of $495,394.

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Cash and cash equivalents decreased $371 from $30,193 at December 31, 2016 to $29,822 at March 31, 2017.  For the three months ended March 31, 2017, $59,500 was provided by financing activities and $59,871 was used in operating activities.

We currently have 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

None.

 

ITEM 4. CONTROLS AND PROCEDURES

 

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

As of March 31, 2017, our principal executive officer and principal financial officer conducted an evaluation regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon the evaluation of these controls and procedures, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

 

(B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

There were no changes in our internal control over financial reporting in our first fiscal quarter for the period ended March 31, 2017 covered by this Quarterly Report on Form 10-Q, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

 

PART II-OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently a party to any legal proceedings.

 

ITEM 1A. RISK FACTORS

 

As a smaller reporting company, we are not required to provide risk factors in this Form 10-Q; however, you may review risk factors contained in our S-1 Registration Statement, which are available for review at sec.gov.

  

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Sales of unregistered securities during the quarterly period ended March 31, 2017 follows:

On February 2, 2017, the Company issued 200,000 shares of WRAP common stock to a financial consultant as payment in full for $11,000 of services rendered for the period January 1, 2016 through March 31, 2017.

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.

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With respect to the transactions noted above, each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a “sophisticated person”, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

31.1		Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
32.1		Section 1350 certification of Chief Executive Officer
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	WRAPMAIL, INC.
Date: May 16, 2017	By:	/s/ Marco Alfonsi
		Marco Alfonsi, Chief Executive Officer

 

 

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