CEN BIOTECH, INC. AND SUBSIDIARY

Consolidated Statements of Operations and Other Comprehensive (Loss) Income

Period ended March 31, 2022, and 2021

See accompanying notes to condensed consolidated financial statements.

CEN BIOTECH, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Deficit

Period ended March 31, 2022 and December 31, 2021

See accompanying notes to condensed consolidated financial statements.

CEN BIOTECH, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Period ended March 31, 2022, and 2021

See accompanying notes to condensed consolidated financial statements.

 

CEN BIOTECH, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

March 31, 2022, and December 31, 2021

(All amounts are in US dollars unless otherwise stated.)

 

NOTE 1 –BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the condensed consolidated financial statements of the Company for the year ended December 31, 20202021 and notes thereto.

 

The Company's criticalThere have been no material changes in the Company’s significant accounting policies are disclosedas compared to the significant accounting policies described in its Annual Reportthe Company’s annual report on Form 10-K for the year ended December 31, 2020. 2021.Subsequent to the filing of the Form 10-K, the Company completed its acquisition of Clear Com Media, Inc on July 9, 2021. In connection with this acquisition, the Company reports certain financial statement captions that it had not previously and, as such, has included the critical accounting policies associated with such items herein.

 

Consolidation

CEN Biotech, Inc.’s (“CEN”) consolidated financial statements include the accounts of CEN, Clear Com Media, Inc. (“CCM”), and Eastern Starr (collectively, the “Company”). CCM is a Windsor, Ontario based digital marketing, and e-commerce company. CCM’s purpose is to develop, market and sell various digital products. Additionally, CCM will provide in-house IT support functions for CEN’s activities. Eastern Starr’s purpose is to facilitate future growth opportunities in the LED lighting sector. All material intercompany transactions are eliminated in consolidation.

Use of Estimates and Assumptions

The accompanying condensed consolidated financial statements include certain estimates and assumptions which affect the reported amounts of assets and disclosure of contingent assets and liabilities at the date of the financial statements (including intangible assets and goodwill), and the reported amounts of revenues and expenses during the reporting period, including stock-based compensation. Accordingly, actual results may differ from those estimates.

Loss per Share

 

Net loss per common share is computed pursuant to Accounting Standards Codification (ASC)ASC 260-10-45. Basic loss per share is computed based on the weighted average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the diluted weighted average common shares outstanding, which includes the effect of potentially dilutive securities. During periods when there is a net loss, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of net loss per share. Diluted earnings per share is similarly computed except that the denominator includes the effect, using the treasury stock method, of unvested restricted stock and convertible notes, if including such potential shares of common stock is dilutive. For the three and nine-months ended September 30, 2021March 31, 2022, and 2020,2021, the common stock equivalents of the convertible note agreements were not included in diluted earnings per share computations because their effect was antidilutive.

 

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Revenue from Contracts with Customers

The Company has agreements with third parties to provide multi-platform, internet-based products and services to their customers in the form of online marketing, business metrics, and other solutions. These services are recognized over time, as the services are performed, as the asset created has no alternative use and the Company is contractually entitled to payment for its performance to date in the event the contract is cancelled for convenience. For these contracts, revenue is recognized over time using input measures that correspond to the level of staff effort expended to satisfy the performance obligation on a rate per hour or equivalent basis. Variable consideration has not historically been significant. The Company does not include sales and other taxes in the transaction price and thus does not recognize these amounts as revenue.

The Company derived approximately 99% of its revenue from 1 customer during the three and nine-month periods ended September 30, 2021. The Company had 0 revenue prior to July 9, 2021.

Cash and Cash Equivalents

For purposes of the balance sheet and statement of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

Accounts Receivable

Accounts receivable are customer obligations due under normal trade terms generally requiring payment within 30 to 60 days from the invoice date. Ongoing credit evaluations of customers’ financial condition are conducted and, generally, no collateral is required to support accounts receivable, which are stated at the amount management expects to collect from balances outstanding at year-end. Based on management’s assessment of the credit history with customers having outstanding balances and current relationships with them, it has estimated that realization of losses on balances outstanding at period-end will not be significant.

Property and Equipment

Property and equipment are recorded at cost. Major improvements and renewals are capitalized while ordinary maintenance and repairs are expensed. Management reviews these assets for impairment whenever events or changes in circumstances indicate the related carrying amount may not be recoverable. Depreciation is recognized on a straight-line basis over the estimated useful lives, which generally range from 2 to 7 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives or the period of the respective leases.

Intangible Assets

Product Technology, Trade Names, and Customer Relationships: Identifiable intangible assets with finite useful lives are being amortized over periods ranging 3 to 7 years. See Note 3 regarding the initial measurement period for these intangibles acquired as part of the acquisition of CCM. Management reviews these assets for impairment whenever events or changes in circumstances indicate the related carrying amount may not be recoverable.

Capitalized Software Development Costs:The Company incurs costs from third-parties to develop software for internal-use during the application development stage. Costs incurred during preliminary and post-implementation stages of software for internal use are expensed as incurred. Capitalized software development costs will be amortized on a straight-line basis over the estimated useful life of the project once implemented. The capitalized software has not been implemented as of September 30, 2021.

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Goodwill

Goodwill arising from business combinations represents the excess of purchase consideration exchanged by the Company over the estimated fair value of the net assets of acquired businesses. The Company evaluates goodwill for impairment on an annual basis. In completing this evaluation, the Company considers the profitability of Clear Com Media, Inc. and compares its best estimate of future cash flows with the net carrying value of goodwill.

Income Taxes

Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the year plus or minus the change during the year in deferred tax assets and liabilities.

Tax Credits

The Company’s research and development activities in Canada may entitle the Company to claim benefits under the Scientific Research and Experimental Development Program (“SR&ED”), a Canadian federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development in Canada. Benefits under the program include credits to taxable income. The tax credits received are classified as tax credit income in the condensed consolidated statements of income.

Foreign Currency

Foreign denominated monetary assets and liabilities of CEN are translated at the rate of exchange prevailing at the consolidated balance sheet date. Other assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing when the assets were acquired or the liabilities incurred. Sales and expenses are translated at the average exchange rate over the reporting period. Transaction gains or losses are included in the determination of net income.

The functional currency of CCM is the Canadian dollar. The accounts of CCM were translated to United States dollars equivalents at exchange rates as follows: balance sheet assets and liabilities were converted at period-end rates, equity at historical rates, and income statement accounts at average rates for the period. The resulting translation gain or loss is reflected in other comprehensive loss and accumulated other comprehensive loss in the condensed consolidated statements of operations and comprehensive loss and consolidated statements of shareholders’ deficit, respectively.

Recent Developments

 

OnIn April 20, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with Clear Com Media Inc., an Ontario, Canada corporation (“CCM”), each of the shareholders of CCM as set forth on the signature pages of the Agreement (the “CCM Shareholders”) and Lawrence Lehoux as the Representative of the CCM Shareholders (the “Shareholders’ Representative”, each of CCM and the CCM Shareholders may 2021,be referred to collectively herein as the “CCM Parties”). Pursuant to the Agreement, the Company agreed to acquire from the CCM Shareholders, all of the common shares of CCM, which is 10,000 shares of CCM common shares (the “CCM Stock”) held by the CCM Shareholders in exchange (the “Exchange”) for the issuance by the Company to the CCM Shareholders of 4,000,000 restricted shares of the Company’s common stock began to be quoted on the OTC Link alternative trading system (operated by OTC Markets Group Inc.) under the trading symbol “CENBF” on the OTC Pink tier. There is no par value per share (the “Company Common Stock”). The Agreement closed on July 9, 2021 (the “Closing”). At Closing, the CCM Shareholders delivered the CCM Stock to the Company and the Company delivered the Company Common Stock to the CCM Shareholders, and CCM became a wholly owned subsidiary of the Company.assurance that an active trading market for our shares will develop or will be sustained if developed.

 

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At Closing, the Company increased the number of members on its Board of Directors (the “Board”) by one and to appoint and name the Shareholder Representative as a member of the Board of the Company. Additionally, at Closing, the Company appointed and named the Shareholder Representative as the Company’s Chief Technology Officer.

At Closing, the Company entered into an employment agreement (the “Employment Agreement”) with Mr. Lehoux. Pursuant to the Employment Agreement, during the term of the Employment Agreement, the Company agreed to employ, and Mr. Lehoux agreed to accept employment with the Company as the Company’s Chief Technology Officer. Pursuant to the Employment Agreement, the Company agreed to pay Mr. Lehoux an annual base salary of $31,200.

On October 7, 2021 (“Closing Date”), the Company completed and closed the definitive agreement with Tesla Digital Inc., an Ontario, Canada corporation, Tesla Digital Global Group, Inc., an Ontario, Canada corporation, as well as Steven Pokrajac individually (together, the “Sellers”), pursuant to which the parties completed the sale and assignment of certain assets of the Sellers (the “Purchased Assets”) related to a Light Emitting Diode Driver Circuit, as more specifically set forth in the Asset Purchase Agreement, Patent Assignment and Bill of Sale (together, the “Transaction Documents”).

Pursuant to the Transaction Documents, the Company agreed to complete the purchase, acquisition and acceptance from the Sellers of the Purchased Assets, which include all of the Sellers’ right, title, and interest in and to United States patent number U.S. 8,723,425 (the “Patent”), in and to the inventions therein set forth and any reissue, reexamination, renewal, divisional, or continuation thereof, in addition to, any related manufacturing machinery plus inventory on hand, and all know-how pertaining to manufacture, use, operation maintenance, development, enjoyment and exploitation of the Patent and the related manufacturing machinery (the “Property”).

U.S. Patent Application No.	Application Filing Date	Status	U.S. Patent No.	Issue Date	Subject Matter
13/525,703	06/18/2012	Issued U.S. Patent	8,723,425	05/13/2014	Light Emitting Diode Driver Circuit

The Sellers cooperated with the Company to perfect the sale and assignment of the Patent and Property, including through execution of the Patent Assignment and recordation of the same with the U.S. Patent Office, on October 7, 2021. The Company had full rights to utilize the patented technology prior to the Patent Assignment. These rights were granted by the Seller as a part of the transaction with the Company started in August of 2016.

As consideration for the sale, assignment and transfer of the Purchased Assets (the “Tesla Digital Transaction”), on the Closing Date the Company agreed to pay to the Sellers (i) 5,000,000 shares of the Company’s Common Stock, at no par value per share (the “Shares”), (ii) that parcel of real property known as 1517-1525 Ride Road, Essex, Ontario (Canada), which the Parties acknowledged has already been satisfactorily tendered by Company to Sellers with assumption of mortgage, and (iii) that parcel of real property known as 135 North Rear Road, Town of Lakeshore, Ontario (Canada), which the Parties acknowledged has already been satisfactorily tendered by Company to Sellers with assumption of mortgage.

Pursuant to notice given to its current transfer agent on Closing Date, the Company has authorized and instructed transfer agent to reserve the Shares of the Company for issuance upon the written request of any of the Sellers in accordance with the terms therein and following written confirmation by the Company.

The Transaction Documents are the definitive agreements between the Company and Sellers, following a Sale Purchase Agreement for the sale of certain assets, properties and rights dated August 31, 2016, as well as its Amending Agreements dated March 29, 2018, September 30, 2018, April 3, 2019 and March 16, 2020.

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Recently Adopted Accounting Pronouncements

 

No pronouncements were adopted by the Company during the ninethree-month period ended September 30, 2021.March 31, 2022.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement (ASU 2020-06) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity's own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity's own equity. As a smaller reporting company, as defined by the SEC, this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The Company intends to adoptis currently evaluating the impact of this standard effective January 1, 2022.ASU on the consolidated financial statements.

 

NOTE 2 –GOING CONCERN UNCERTAINTY / MANAGEMENT PLANS

 

The accompanying condensed consolidated financial statements have been prepared in contemplating the continuation of the Company as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, a substantial doubt has been raised with regard to the ability of the Company to continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. The Company had an accumulated deficit of $43,895,667$46,221,218 at September 30, 2021March 31, 2022 and had no committed source of additional debt or equity financing. The Company didhas not havehad any operating revenue until the acquisition of Clear Com Media, Inc. on July 9, 2021 and such amounts aredoes not expected to be sufficient to sustain ongoing operations.foresee any operating revenue in the near term. The Company has relied on the issuance of loans payable and convertible debt instruments to finance its expenses, including notes that are in default, as described in Notes 7,5, 8,6, 9,7, and 10.8. The Company will continue to raise additional capital through placement of our common stock, notes or other securities in order to implement its business plan or additional borrowings, including from related parties. The COVID-19 pandemic has hindered the Company’s ability to raise capital. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

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The Company’s cash position may not be sufficient to support the Company’s daily operations or its ability to undertake any business activity that will generate sufficient net revenue.

 

NOTE 3 – ACQUISTION OF CLEAR COM MEDIA, INC.

As described in Note 1, CEN acquired CCM on July 9, 2021. The results of operations for CCM have been included in the accompanying consolidated financial statements from that date forward. The acquisition was made for the purpose of providing revenue to support CEN operations through the development, marketing and sales of certain digital products.  Additionally, CCM will provide in-house IT support functions for CEN activities.

The merger will be accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (ASC) 805, “Business Combinations” (ASC 805), with CEN representing the accounting acquirer under this guidance. ASC 805 requires, among other things, an assignment of the acquisition consideration transferred to the sellers for the tangible and intangible assets acquired and liabilities assumed, using the bottom-up approach, to estimate their value at acquisition date. Any excess of the fair value of the purchase consideration over these identified net assets is to be recorded as goodwill. Conversely, any excess of the fair value of the net assets acquired over the purchase consideration is recorded as a bargain purchase gain. Our estimates of fair value are based upon assumptions believed to be reasonable, yet are inherently uncertain and, as a result, may differ from actual performance. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the estimated fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill or bargain purchase gain, as appropriate, in the period in which such revised estimates are identified.

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See Note 21 for segment reporting, which includes the specific revenue and earnings results of CCM since the date of acquisition as CCM has been determined to be a distinct operating segment.

The aggregate consideration for the acquisition of CCM was 4,000,000 restricted shares of CEN common stock, which were valued at $2,120,000 based upon the closing stock price on July 9, 2021. The purchase price accounting is still in process. The following is a preliminary estimate of the fair values of the assets acquired and the liabilities assumed by CEN in the transaction:

Cash		$	259,470
Accounts receivable			202,527
Property and equipment			97,911
Other assets			244,540
Identifiable intangibles			625,170
Current financial liabilities			(321,251	)
Other long-term liabilities			(140,078	)
Total identifiable net assets			968,289
Goodwill			1,151,711
Net assets acquired		$	2,120,000

Identified intangible assets acquired includes trade names, customer relationships, and product technology whose fair value of $625,170 is based on a provisional amount, pending receipt of additional appraisals. These assets are expected be amortized over useful-lives ranging from 3 to 7 years and will reviewed for impairment at least annually or more frequently if indicators of impairment exist.

Amounts recognized as goodwill are expected to be fully deductible for Canadian income tax purposes.

Costs related to the acquisition, which include legal, accounting, and valuation fees, in the amount of approximately $80,000 have been charged directly to operations and are included in general and administrative expenses in the 2021 consolidated statement of operations.

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Supplemental proforma financial information

The unaudited financial information in the table below summarizes the combined results of operations of CEN and CCM on a pro forma basis, as though the companies had been combined as of the January 1, 2020. These pro forma results were based on estimates and assumptions, which we believe are reasonable. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2020. The pro forma financial information assumes the 4,000,000 shares of CEN common stock were issued on January 1, 2020 and includes adjustments to amortization for acquired intangible assets.

The pro forma financial information for the three and nine-months ended September 30, 2021 combines the results of CEN and CCM for the respective periods, which include the results of CCM subsequent to July 9, 2021, and the historical results for CCM for the period of July 1, 2021 to July 8, 2021 and the six-months ended June 30, 2021. The pro forma financial information for the three and nine months ended September 30, 2020 combines CEN’s historical results for those periods with the historical results of CCM for the three and nine months ended September 30, 2020.

The following table summarizes the pro forma financial information:

		Three-Months Ended								Nine-Months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Revenue		$	320,637			$	310,210			$	951,284			$	906,875
Operating expenses			943,803				1,249,508				18,412,579				3,032,209
Loss from operations			(623,166	)			(939,298	)			(17,461,295	)			(2,125,334	)
Other (expense) income			(73,670	)			(866,513	)			944,926				(2,492,515	)
Net income (loss)		$	(696,836	)		$	(1,825,511	)		$	(16,516,369	)		$	(4,617,849	)
Net Loss Per Share
Basic and Diluted		$	(0.01	)		$	(0.06	)		$	(0.40	)		$	(0.15	)
Weighted Average Number of Shares Outstanding
Basic and Diluted			49,412,822				31,334,031				41,394,326				31,172,985

NOTE 4 - PROPERTY, PLANT AND IMPROVEMENTS, NET

Property and equipment, net consists of the following as of:

		September 30,
		2021
Computers and equipment		$	62,574
Furniture and fixtures			32,900
Leasehold improvements			19,208
			114,682
Less: accumulated depreciation and amortization			10,857
Net property and equipment		$	103,825

Effective August 1, 2020, the Company terminated both their operating lease at 20 North Rear Road with Jamsyl Group, a third-party, and abandoned their office space under operating lease with RN Holdings Ltd, a third-party, in Windsor, Ontario (Note 13). All property, plant, and improvements, including the previously held equipment that had secured the Global Holdings International, LLC loan, were located at these locations and, with the exception of proceeds of $1,801 from sales of associated assets, all remaining property, plant, and improvements were abandoned resulting in a loss on disposal of $135,600 for the three and nine-months ended September 30, 2020. Accordingly, there was no property and equipment held prior to the CCM acquisition on July 9, 2021.

Depreciation expense was $10,968 and $1,532 for the three-months ended September 30, 2021 and 2020, respectively, and $10,968 and $10,724 for the nine months ended September 30, 2021 and 2020, respectively.

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NOTE 5–ADVANCES TO CEN BIOTECH UKRAINE AND LOAN RECEIVABLE FROM EMERGENCE GLOBALACQUISITION OF CLEAR COM MEDIA

 

At DecemberMarch 31, 2020, the Company had an outstanding loan receivable of $17,901 from Emergence Global Enterprises Inc. (“Emergence Global”), a related party (see Note 16). The loan was made for the purpose of funding the operations of Emergence Global. The loan was unsecured, non-interest bearing, and was due on December 31, 2021. At the time the loan was made, Joseph Byrne, the CEO of Emergence Global was not an officer or director of the Company. He was at that time a 5% shareholder and former CEO of the Company. He was then appointed as the President and a director of the Company on April 19, 2021. Additionally, our CEO, Bill Chaaban was appointed as the President of Emergence Global on April 12, 2021. In light of Section 402 of the Sarbanes-Oxley Act of 2002, the Company and Emergence Global entered into that certain Loan Repayment Agreement dated as of May 6, 2021, pursuant to which Emergence Global agreed to repay to the Company $17,901, representing the total amount outstanding under the loan agreement, by issuing 21,830 shares of Emergence Global common stock, $0.82 par value per share. Such shares were issued to the Company on May 6, 2021. As the value of the common shares is not material, it has been presented within prepaid expenses and other assets.

At September 30, 20212022 and December 31, 2020,2021, the Company had advances of $1,299,328 and $1,179,328,$1,299,328, respectively, to CEN Biotech Ukraine, LLC, a related party (see Note 1611). The advances were for the purpose of funding the operations of CEN Biotech Ukraine, LLC.

 

Bahige (Bill) Chaaban, our former Chief Executive Officer and member of our Board of Directors, and Usamakh Saadikh, a former member of our Board of Directors, each directly own 25.5% of CEN Ukraine respectively. The remaining 49% of CEN Ukraine is owned by XN Pharma, which is an entity jointly owned by Bahige (Bill) Chaaban and Usamakh Saadikh. Bahige (Bill) Chaaban and Usamakh Saadikh do not currently hold any positions with CEN Ukraine. CEN Ukraine is operated and controlled by its sole director. Pursuant to Ukrainian law, shareholders of a company do not have the ability to control the company or the actions of its director. CEN Ukraine is operated under the direction of its management pursuant to the guidelines of Ukrainian law. These loans are unsecured, non-interest bearing, and are due on demand.

 

CEN acquired CCM on July 9, 2021. The results of operations for CCM have been included in the accompanying consolidated financial statements from that date forward. The acquisition was made for the purpose of providing revenue to support CEN operations through the development, marketing and sales of certain digital products.  Additionally, CCM will provide in-house IT support functions for CEN activities.

The merger was accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (ASC) 805, “Business Combinations” (ASC 805), with CEN representing the accounting acquirer under this guidance. ASC 805 requires, among other things, an assignment of the acquisition consideration transferred to the sellers for the tangible and intangible assets acquired and liabilities assumed, using the bottom-up approach, to estimate their value at acquisition date. Any excess of the fair value of the purchase consideration over these identified net assets is to be recorded as goodwill.

The aggregate consideration for the acquisition of CCM was 4,000,000 shares of CEN common stock, which were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Act”), in reliance upon exemptions from the registration requirements of the Act in transactions not involving a public offering, and which were valued at $2,120,000 based upon the closing stock price on July 9, 2021. The purchase price accounting was still in process as of September 30, 2021, our most recently reported quarterly interim reporting. However, as of December 31, 2021, subsequent adjustments to the initial purchase price accounting due to receipt of final appraisal reports and other adjustments resulted in an increase in accounts receivable of approximately $8,000, a decrease of identifiable intangibles by approximately $168,000, and an increase in current financial liabilities by approximately $23,000, with a corresponding increase to goodwill of approximately $184,000. The decreased value of identifiable intangibles, had it been reflected in the September 30, 2021 reporting, would have resulted in a decrease to accumulated amortization and associated amortization expense of approximately $15,000. The following represents the adjusted fair values of the assets acquired and the liabilities assumed by CEN in the transaction:

Cash		$	259,470
Accounts receivable			210,536
Property and equipment			97,911
Other assets			244,540
Identifiable intangibles			456,855
Current financial liabilities			(344,591	)
Other long-term liabilities			(140,078	)
Total identifiable net assets			784,643
Goodwill			1,335,357
Net assets acquired		$	2,120,000

Identified intangible assets acquired include trade names, customer relationships, and product technology whose fair value of $456,855 is based on an appraisal report utilizing a combination of market, income, and multi-period excess earnings methods. These trade names and customer relationships are being amortized over useful lives ranging of 3 and 7 years, respectively, and the product technology is not yet being amortized as not yet in service. These identifiable intangible assets will be reviewed for impairment at least annually or more frequently if indicators of impairment exist.

Amounts recognized as goodwill are expected to be fully deductible for Canadian income tax purposes. All goodwill has been included within the Digital segment.

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Costs related to the acquisition, which include legal, accounting, and valuation fees, in the amount of approximately $80,000 have been charged directly to operations and are included in general and administrative expenses in the 2021 consolidated statement of operations.

Supplemental proforma financial information

The unaudited financial information in the table below summarizes the combined results of operations of CEN and CCM on a pro forma basis, as though the companies had been combined as of the January 1, 2020. These pro forma results were based on estimates and assumptions, which we believe are reasonable. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2020. The pro forma financial information assumes the 4,000,000 shares of CEN common stock were issued on January 1, 2020 and includes adjustments to amortization for acquired intangible assets and income tax expense.

The pro forma financial information for the year ended December 31, 2021 combines the results of CEN and CCM for 2021, which include the results of CCM subsequent to July 9, 2021, and the historical results for CCM for the period of January 1, 2021 to July 8, 2021. The pro forma financial information for the year ended December 31, 2020 combines CEN’s historical results for 2020 with the historical results of CCM for 2020.

The following table summarizes the pro forma financial information (unaudited):

		Years Ended
		December 31, 2021				December 31, 2020
Revenue		$	1,305,985			$	1,242,676
Operating expenses			20,437,863				3,720,279
Loss from operations			(19,131,878	)			(2,477,603	)
Other income, net			57,949				16,950,653
(Loss) income before income taxes			(19,073,929				14,473,050
Income tax expense			(61,032	)			32,892
Net (loss) income		$	(19,012,897			$	14,440,158
Net (Loss) Income Per Share
Basic		$	(0.43	)		$	0.46
Diluted		$	(0.43	)		$	0.39
Weighted Average Number of Shares Outstanding
Basic			44,488,649				31,264,072
Diluted			44,488,649				36,732,510

NOTE 64 –INTANGIBLE ASSETS

 

Lighting Patent

On September 12, 2016, the Company executed an agreement dated August 31, 2016, to acquire assets, including a patent related to LED Lighting, from Tesla Digital, Inc., a Canadian Corporation, and Stevan (Steve) Pokrajac (the “Sellers”).

 

Material consideration given by Company was: (a) Shares of CEN common stock equal to $5 million upon commencement of public trading (b) The transfer of real properties located at 135 North Rear Road, Lakeshore, Ontario, Canada having a fair value of $2,161,467 and 1517-1525 Ridge Road having a purchase cost (including other related disbursements) to the Company of $202,666.

The patent remainedremains in the name of Tesla Digital, Inc. until full settlement of the terms of the agreement. In the interim, pursuant to an updated agreement executed on April 15, 2019 between the Company and the Sellers, CEN has reaffirmed the rights to use the patented technology.

In addition, the Company agreed to employ Stevan Pokrajac, by an LED subsidiary that the Company plans to form, but which has not yet been formed, in connection with the development of the acquired technology with compensation equal to $200,000 per year, commencing with the start of operations.

 

In March 2018, the Tesla agreement was amended to reflectreplace the $5 million stock consideration commitment with a fixed 1000000commitment to issue one million registered shares of CEN common stock. Asstock with a closing date of September 30, 2018. On October 4, 2018, this agreement was amended to extend the closing date to December 15, 2018. On April 3, 2019, the Company entered into an amendment which extended the closing date of the agreement to December 31, 2019. On March 16, 2020 the Company entered into an amendment extending the closing date until December 31, 2021. The March 2018 modification of the agreement converted a fixed value of shares to a fixed number of shares. Accordingly, the liability was reduced and additional paid in capital was increased by $4,380,000 to reflect the fair value of the shares committed at the date of the amendment. As of both March 31, 2021 and December 31, 2020, the fair value of this liability was $354,900 and $1,380,000, respectively.$1,380,000. This liability will be remeasured at each reporting

date using the current fair value of CEN’s common shares.

 

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Subsequently, on On October 7, 2021, the agreement was amended and finalized to increase the number of CEN common shares to be transferred to five million. Upon closing of the agreement, the CEN common stock, valued at $2,042,500 based upon the October 7, 2021 closing market price, was transferred to the Sellers and the transfer of the patent and real property was completed. Of this amount, $1,634,000 represented additional stock compensation expense for the additional four million shares issued. In addition, the Sellers assumed the mortgage and associated accrued interest on certain real property that was included in the original agreement, see Note 7.of $302,186, resulting in a net loss on final settlement of the lighting patent purchase of $1,331,814.

 

The Company intends to explore using the patented LED Lighting Technology across manufacturing operations and licensing opportunities across multiple industries such as horticultural, automotive, industrial and commercial lighting. The assets acquired, other than the patent, included certain machinery and raw materials, which were old and non-functioning and accordingly, had no fair value.

 

Intangible assets consistThe intangible asset consists of the following at:

 

 

As of September 30,December 31, 2021 and December 31, 2020,there is 0 impairment expense recognized based on the Company’s expectations that it will be able to monetize the intangible assets. The lighting patent is being amortized straight-line over 16 years. Remaining intangibles, with the exception of the capitalized software development costs, which have not yet been implemented, are being amortized straight-line over 3 to 15 years. Expected amortization expense for the lighting patent is $424,812 per year through 2031, with the remaining $283,215 to be amortized in 2032. Expected amortization expense for the product technology, customer relationships and trade names acquired as part of the CCM acquisition on July 9, 2021 are expected to be approximately $96,400$29,300 per year through 2023, $88,60025,400 in 2024, $80,700$21,400 in 2025 and 2026, with the remaining $121,100$32,100 to be amortized through 2028. See NoteThe product technology and capitalized software development costs are 3not regarding the initial measurement periodyet available for the intangibles acquired as part of the acquisition. of CCM.general release to customers and thus are not yet amortized.

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NOTE 75 –LOANS PAYABLE

 

Loans payable consist of the following at:at March 31, 2022 and December 31 2021:

 

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During 2020, $9,600,000 plus $11,579,043 in associated accrued interest payable to Global Holdings International, LLC (“GHI”) was derecognized. The note matured on June 30, 2016 and the Company was in default. As at no time since the default on the loan did GHI, its principal, agent or its attorneys reach out via mail, e-mail, text or phone to demand payment on the loan. The Company reached out numerous times and never received a response or demand for payment or notice of default on the loan. CEN’s last attempt occurred in November 2020. The note, related interest and venue for the agreement are governed by Ontario Law and according to the Ontario Limitations Act (Limitations Act, 2002, S.O. 2002, c. 24, Sched. B) the statute of limitations is 2 years from the date of default under the note. The date of default was June 30, 2016, which is over the 2-year Statute of Limitation (SOL) period, and therefore the lender is outside of the SOL and cannot bring an action in Court against the Company for the debt. As a result of the legal finding, and having exhausted all reasonable efforts to contact GHI, the Company exercised its legal rights to derecognize the principal and interest obligations related to the related note with GHI which in accordance with ASC 405-20-40-1(b), is when CEN is judicially released from its obligations under the note.

 

During each of the both three2021-month periods ended September 30, 2021 and 2020, 18,000 62,000 and 72,000 common shares, respectively, were issued to individuals in connection with interest terms of the above loans. As of December 31, 2021, 10,000 common shares earned by an individual in connection with one of the above loans were not yet issued totaling $4,012 and is included within accrued expenses. Accordingly, during the three2021-month periods ended September 30, 2021 and 2020, $10,926 $57,876 and $12,960$63,720 in interest expense and $53,864 and $63,720 in additional paid-in capital was recorded, respectively.

 

During each of the nine2021,-month periods ended September 30, 2021 and 2020, 54,000 common shares were issued to individuals in connection with interest terms of the above loans. Accordingly, during the nine-month periods ended September 30, 2021 and 2020, $52,266 and $38,880 in interest expense and additional paid-in capital was recorded, respectively.

During the three and nine-month periods ended September 30, 2021, certain private investors amended their convertible notes payable totaling $1,209,484 and $1,459,484, respectively,$1,463,793, which were convertible into 549,830 and 677,955 common shares, respectively.shares. As a result of the amendments, these notes no longer contain a conversion feature and have been reclassified to loans payable from convertible notes payable.

 

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to Royal Bank of Canada is unsecured, non-interest bearing until December 2022 and interest bearing at 5% thereafter. If the loan is not repaid by December 31, 2023, the principal balance increases by $15,776 (CAD 20,000). The loan principal is due in full at the maturity date of December 2025.

The Canadian government enacted the Canada Emergency Wage Subsidy (“CEWS”) and Canada Emergency Rent Subsidy (“CERS”) in 2020 to provide a wage and rent subsidy to employers that suffered reductions in revenue resulting from the COVID-19 pandemic. CCM received $171,078 during 2021 related to CEWS and CERS and has included as a governmental assistance payable on the consolidated balance sheet as of December 31, 2021 as this represents an overpayment which is due back to the government.

 

NOTE 86 –LOANS PAYABLE- RELATED PARTY

 

Loans payable - related party consists of the following at:at March 31, 2022 and December 31 2021:

 

		September 30, 2021				December 31, 2020
Loan payable in default due to the spouse of Bill Chaaban, CEO of CEN, which bears an interest at 12% per annum. This loan matured on August 17, 2020.		$	1,388,122			$	0
Loans payable in default to the spouse of Bill Chaaban, CEO of CEN, for the original amounts of CAD 48,630 and USD $198,660, bear interest at 10% per annum. These are unsecured loans that matured on December 31, 2018.			236,830				236,854
Loans payable in default to a former director of Creative, former parent company, bear interest at 10% per annum. This are unsecured loans that matured on December 31, 2018.			601,500				601,500
Loan payable in default to R&D Labs Canada, Inc., whose president is Bill Chaaban, also the CEO of CEN, bearing interest at 8% per annum. This is an unsecured loan that matured on October 2, 2019. R&D Labs Canada is a company owned by Bill Chaaban’s spouse.			300,000				300,000
Loan payable to the spouse of Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 12, 2018 with a 30-day maturity, bearing share interest of 4,000 common shares per 30-day period. This is an unsecured loan that matures on December 16, 2021.			100,000				100,000
Loan payable to Alex Tarrabain, CFO and a Director of CEN, issued January 17, 2018 with a 30-day maturity, bearing share interest of 3,000 common shares per 30-day period. This is an unsecured loan that matures on December 16, 2021.			75,000				75,000
Loan payable to Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 24, 2018 with a 30-day maturity, bearing share interest of 2,000 common shares per 30-day period. This loan was repaid in June 2021.			0				50,000
Total loans payable - related party (all current)		$	2,701,452			$	1,363,354

		2022				2021
Loan payable in default due to the spouse of Bill Chaaban, former CEO of CEN, which bears an interest at 12% per annum. This loan matured on August 17, 2020.		$	1,388,122			$	1,388,122
Loans payable in default to a former director of Creative, former parent company, bear interest at 10% per annum. This are unsecured loans that matured on December 31, 2018.			601,500				601,500
Loan payable in default to R&D Labs Canada, Inc., whose president is Bill Chaaban, also the former CEO of CEN, bearing interest at 8% per annum. This is an unsecured loan that matured on October 2, 2019. R&D Labs Canada is a company owned by Bill Chaaban’s spouse.			300,000				300,000
Loans payable in default to the spouse of Bill Chaaban, former CEO of CEN, for the original amounts of CAD 48,630 and USD $198,660, bear interest at 10% per annum. These are unsecured loans that matured on December 31, 2018.			237,019				237,019
Loan payable to the spouse of Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 12, 2018 with a 30-day maturity, bearing share interest of 4,000 common shares per 30-day period. This is an unsecured loan that matures on April 16, 2022.			100,000				100,000
Loan payable to Alex Tarrabain, former CFO and a Director of CEN, issued January 17, 2018 with a 30-day maturity, bearing share interest of 3,000 common shares per 30-day period. This is an unsecured loan that matures on April 16, 2022.			75,000				75,000
Loan payable to Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 24, 2018 with a 30-day maturity, bearing share interest of 2,000 common shares per 30-day period. This loan was repaid in June 2021.			-				-
Total loans payable – related party (all current)		$	2,701,641			$	2,701,641

 

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Attributable related party accrued interest was $644,360$671,665 and $568,969 as of September 30, 2021 and December 31, 2021 and 2020,respectively. Interest expense attributable to related party loans was $39,927$189,182 and $46,504 for the $202,640 in three2021-months ended September 30, 2021 and 2020, respectively, and was $155,452 and $138,275 for the nine-months ended September 30, 2021 and 2020, respectively.

 

During the both three2021-month periods ended September 30, 2021 and 2020, 21,000 96,000 and 27,000108,000 common shares, respectively, were issued to related parties in connection with interest terms of the above loans made to CEN. Accordingly, during the three2021-month periods ended September 30, 2021 and 2020, $12,747 $81,302 and $19,440 in related party interest expense and additional paid-in capital was recorded, respectively.

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During the nine-month periods ended September 30, 2021 and 2020, 75,000 and 81,000 common shares, respectively, were issued to related parties in connection with interest terms of the above loans made to CEN. Accordingly, during the nine-month periods ended September 30, 2021 and 2020, $74,757 and $58,320$95,580 in related party interest expense and additional paid-in capital was recorded, respectively.

 

NOTE 97 –CONVERTIBLE NOTES

 

Convertible notes payable consists of the following at:at March 31, 2022 and December 31 2021:

 

 

The Company issues convertible notes as a method to raise operating capital. These notes convert to a fixed number of shares specified in the convertible note, at the option of the note holder. Certain of these notes are considered to contain a beneficial conversion feature if in-the-money at the time of issuance. The Company has determined the value associated with the beneficial conversion feature in connection with the notes issued during nine2021-month period ended September 30, 2021 to be $93,164.$180,098. This value has been recorded as a component of equity during 2021 and the aggregate original issue discount is accreted and charged to interest expense as a financing expense from the date of issuance until maturity. Upon conversion, any remaining unaccreted discount is charged to interest expense. NaN convertible notes with beneficial conversion features were issued during the three-month period ended September 30, 2021 or the three or nine-month periods ended September 30, 2020.

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These notes may be converted at the option of the note holder upon written notice by the note holder. These notes are convertible into a total of 551,815914,732 common shares.

 

During the three2021,-month period ended September 30, 2021, certain private investors elected to exercise their convertible notes payable totaling $167,924$5,173,785 in exchange for 104,953 common shares. During the nine-month period ended September 30, 2021, certain private investors elected to exercise their convertible notes payable totaling $5,023,785 in exchange for 3,395,1333,488,883 common shares. As a result, the associated convertible notes have been extinguished and reclassified as additional paid in capital. There were no such elections to convert any of the convertible notes payable during the three or nine-month periods ended September 30, 2020.

 

During the nine2021,-month period ended September 30, 2021, certain private investors elected to convert $78,893 of accrued interest owed on convertible notes into 94,357 shares of common stock. There were no such elections to convert any of the accrued interest on convertible notes payable during the three-month periods ended September 30, 2021 or 2020 or the nine-month period ended September 30, 2020.

 

As of November 19, 2021,April 14, 2022, we are currently in default of $726,472$576,472 of convertible notes payable, which are convertible into 457,517363,767 shares of common stock. There were no new notes issued during Q12022.

 

NOTE 108 –CONVERTIBLE NOTES PAYABLE -– RELATED PARTIESPARTY

 

Convertible notes payable -– related partiesparty consists of the following at:at March 31, 2022 and December 31 2021:

 

 

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Attributable related party accrued interest was $1,160,088$1,201,790 and $1,046,911 as of September 30, 2021 and December 31, 2021 and 2020,respectively. Interest expense attributable to related party convertible notes was $61,918,$229,318 and $60,529 for the $240,797 in three2021 months ended September 30, 2021 and 2020, respectively, and was $183,043 and $180,268 for the nine-months ended September 30, 2021 and 2020, respectively.

 

The Company issues convertible notes to related parties as a method to raise operating capital. These notes convert to a fixed number of shares specified in the convertible note, at the option of the note holder. Certain of these notes are considered to contain a beneficial conversion feature if in-the-money at the time of issuance.

 

The Company has determined the value associated with the beneficial conversion feature in connection with the notes issued to related parties during the nine2021-month period ended September 30, 2021 to be $18,142.$18,141. This value has been recorded as a component of equity during 2021 and the aggregate original issue discount is accreted and charged to interest expense as a financing expense from the date of issuance until maturity. Upon conversion, any remaining unaccreted discount is charged to interest expense. NaN convertible notes to related parties with beneficial conversion features were issued during the three-month period ended September 30, 2021 or the three or nine-month periods ended September 30, 2020.

These notes may be converted at the option of the note holder upon written notice by the note holder. These notes are convertible into a total of 719,591170,611 common shares.

 

During the nine2021,-month period ended September 30, 2021, a convertible note due to Joseph Byrne in the amount of $102,395, convertible into 63,997 shares, was transferred to a private investor and reclassified.

 

As of November 19, 2021,April 14, 2022, we are currently in default of $1,000,164$121,796 of convertible notes payable, which are convertible into 625,10376,123 shares of common stock.

 

NOTE 119 – CEBA LOAN PAYABLE

The Canada Emergency Business Account (“CEBA”) loan payable of $31,396 (CAD 40,000) as of September 30, 2021 to Royal Bank of Canada is unsecured, non-interest bearing until December 2022 and interest bearing at 5% thereafter. The loan principal is due in full at the maturity date of December 2025.

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NOTE 12– GOVERNMENTAL ASSISTANCE

The Canadian government enacted the Canada Emergency Wage Subsidy (“CEWS”) and Canada Emergency Rent Subsidy (“CERS”) in 2020 to provide a wage and rent subsidy to employers that suffered reductions in revenue resulting from the COVID-19 pandemic. CCM received $116,610 during the three and nine months ended September 30, 2021 related to CEWS and CERS which is recognized as governmental assistance income in the condensed consolidated statements of operations and other comprehensive loss.

NOTE 13– LEASESINCOME TAXES

 

The Company currently leases certain facilitieshas elected to file separate Canadian income tax returns for CEN (growth) and equipment under noncancelable operating lease agreements that expire at various dates through 2024. Monthly rentals range from CAD 844 to CAD 5,595. In addition, the facilities lease calls for variable charges for common area usage which are expensed as incurred.CCM (digital).

 

The Company also leased office space in Windsor, Ontario from RN Holdings Ltd. Under the lease agreement effective October 1, 2017, monthly rents of CAD 2,608 are due through September 2022, at which point monthly rents of CAD 3,390 are due. Effective August 1, 2020, the Company ceased making payments and abandoned the leased space. Accordingly, the Company determined that there was no future economic value to the associated right-of-use asset and recognized a full impairment loss of $146,795 on August 1, 2020. Effective with the August 1, 2020 lease termination and abandonments, all property, plant, and improvements which were located at these properties were abandoned. As of November 19, 2021, the Company has not reached an agreement with RN Holdings Ltd to modify or to settle the remaining contractual liability, which therefore remains recorded as of September 30, 2021 under its original contractual terms.Growth:

The operating lease liability as of September 30, 2021 and December 31, 2020 was $318,775 and $164,997, respectively, utilizing a weighted average discount rate of approximately 6.70% over a weighted average remaining lease term of approximately 4.6 years. During the three-months ended September 30, 2021 and 2020, lease expenses of $17,594 and $5,248, respectively, and during the nine-months ended September 30, 2021 and 2020, lease expenses of $28,343 and $18,501, respectively, related to this agreement were recognized within general and administrative expenses.

The following is a schedule of future annual minimum rental payments required under operating leases with initial or remaining noncancelable lease terms in excess of one year for the 12 months subsequent to September 30, 2021:

		Amount
2022		$	110,969
2023			89,879
2024			75,522
2025			31,930
2026			31,930
Thereafter			31,930
Total lease payments		$	372,159
Less imputed interest			53,384
Present value of lease liability		$	318,775

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NOTE 14– INCOME TAXES

A reconciliation of the effective tax rate of the income tax benefit and the statutory income tax rates applied to the loss before income taxes is as follows for the three and nine-months ended September 30:

		2021				2020
Income tax benefit at Canadian statutory rate			26.5	%			26.5	%
Valuation allowance			(26.5	%)			(26.5	%)
Effective income tax rate			0	%			0	%

 

As of September 30, 2021,March 31, 2022, the CompanyCEN has net operating loss carry forwards of approximately $29,200,000$46,221,218 that may be available to reduce future years’ taxable income. Such carry forwards typically expire after 20 years. The CompanyCEN currently has carry forwards that begin to expire in 2034. Future tax benefits which may arise as a result of these losses have not been recognized in these consolidated financial statements, because the CompanyCEN believes that it is more likely than not that the carryforwards will expire unused and accordingly, the CompanyCEN has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. The deferred tax asset and associated valuation allowance are as follows for the periodyears ended September 30, 2021 December 31:

		2021				2020
Deferred tax asset - net operating losses		$	8,300,000			$	3,400,000
Deferred tax asset valuation allowance			(8,300,000	)			(3,400,000	)
Net deferred tax asset		$	0			$	0

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The change in the valuation allowance amounted to $4,900,000 and $3,400,000 for the yearyears ended December 31, 2020:

		September 30, 2021				December 31, 2020
Deferred tax asset - net operating losses		$	7,700,000			$	3,400,000
Deferred tax asset valuation allowance			(7,700,000	)			(3,400,000	)
Net deferred tax asset		$	0			$	0

The valuation allowance increased $100,000 and $700,000 for the three-months ended September 30, 2021 and 2020, respectively, and $4,300,000 and $1,400,000 for the nine-months ended September 30, 2021 and 2020, respectively. All other temporary differences are immaterial both individually and in the aggregate to the condensed consolidated financial statements.

Digital:

The tax benefit for CCM income taxes consists of the following components:

		December 31, 2021
Current		$	(33,621	)
Deferred			(2,735	)
Net income tax benefit		$	(36,356	)

The net deferred income tax asset presented in the consolidated balance sheets is comprised of the following at:

		December 31,
		2021
Deferred tax assets
SR&ED credits		$	39,464
Deferred tax liabilities
Property and equipment			(11,357	)
Intangible assets, including goodwill			(25,387	)
Total deferred tax liabilities			(36,744	)
Net deferred tax asset		$	2,720

A reconciliation of the income tax benefit and the amount computed by applying the statutory Canadian federal income tax rate to CEN’s and CCM’s income before income tax benefit for the year ended December31 is as follows:
 

		2021												2020
		Growth				Digital				Total				Growth				Digital				Total
Income tax (benefit) expense at statutory rate of 26.5%		$	(5,020,280	)		$	1,177			$	(5,019,103	)		$	3,776,156			$	0			$	3,776,156
Valuation allowance			5,020,280				0				5,020,280				(3,776,156	)			0				(3,776,156	)
SR&ED credits			0				(19,198	)			(19,198	)			0				0				0
Other			0				(18,335	)			(18,335	)			0				0				0
Income tax benefit		$	0			$	(36,356	)		$	(36,356	)		$	0			$	0				0

 

Company management analyzes its income tax filing positions in Canadian federal and provincial jurisdictions where it is required to file income tax returns, for all open tax years in these jurisdictions, to identify potential uncertain tax positions. As of September 30,December 31, 2021, there are no uncertain income tax positions taken or expected to be taken that would require recognition of a liability or disclosure in the condensed consolidated financial statements. The Company is subject to routing audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Generally, the Company is no longer subject to income tax examinations for years prior to 2017.2018.

 

NOTE 1510 –SHAREHOLDERS’DEFICIT / STOCK ACTIVITY

 

The Company is authorized to issue an unlimited number of common shares and an unlimited number of special voting shares. Common shares have 0 stated par value.

 

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As of September 30,December 31, 2021, 1,271,40610,000 common shares earned by an individual in connection with one of the loans, as described in Note 9, were not yet issued.

As of December 31, 2021, 1,085,343 shares of common stock are committed to the holders of the convertible notes.

 

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NOTE 1611 –RELATED PARTY TRANSACTIONS

 

The Company has received loans from several related parties, as described above in Notes 86 and 10.8.

 

A loan totaling $17,901 was made to Emergence Global as of December 31, 2020. The loan was made for the business purpose of assisting Emergence with operating expenses. Emergence Global’s Chief Executive Officer is Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN. Joseph Byrne, previously served as the Chief Executive Officer and member of the Board of Directors of the Company from July 2017 until November 13, 2019. This note was repaid on May 6, 2021, see Note 5.202.

 

There are advances of $1,299,328 and $1,179,328 to CEN Biotech Ukraine as of September 30, 2021 and December 31, 2021 and 2020,respectively. Such advances were made for the purpose of funding the operations of CEN Ukraine as summarized in Note 5.7. CEN Ukraine was founded by Bill Chaaban. Prior to December 3, 2017, Bill Chaaban directly owned 51% of CEN Ukraine. CEN Ukraine was founded to seek agricultural and pharmaceutical opportunities in Ukraine. Bill Chaaban personally funded the establishment and initial phases of CEN Ukraine. On December 14, 2017, the Company entered into a controlling interest purchase agreement with Bill Chaaban, our interim Chief Executive Officer and member of our board of directors, and another shareholder of CEN Ukraine, Usamakh Saadikh, a member of our board of directors, for 51% of the outstanding equity interests of CEN Ukraine. The consideration will be paid by issuing common shares of the Company. The agreement, which is subject to certain conditions, has not closed as of November 19, 2021,April 14, 2022, as the Company needs to raise additional funds in order to proceed with the closing. Bahige (Bill) Chaaban, our Interim Chief Executive Officer and member of our Board of Directors, and Usamakh Saadikh, a member of our Board of Directors, each directly own 25.5% of CEN Ukraine respectively. The remaining 49% of CEN Ukraine is owned by XN Pharma, which is an entity jointly owned by Bahige (Bill) Chaaban and Usamakh Saadikh. Bahige (Bill) Chaaban and Usamakh Saadikh do not currently hold any positions with CEN Ukraine. CEN Ukraine is operated and controlled by its sole director. Pursuant to Ukrainian law, shareholders of a company do not have the ability to control the company or the actions of its director. CEN Ukraine is operated under the direction of its management per the guidelines of Ukrainian law.

 

On July 12, 2017, the Company’s Shareholders elected individuals to serve as Directors on the Board. These individuals hold long-term convertible notes payable issued prior to the election. All notes payable bear interest at 5% per annum and are convertible to common shares with various maturity dates. They became related parties when they were elected.

During the three-monthsyears ended September 30,December 31, 2021 and 2020, the Company incurred payroll and consulting expenses of $53,914 and $31,200, respectively, and $131,914 and $93,600 during the nine-months ended September 30, 2021 and 2020, respectively, with certain Board Members and Officers.Officers totaling $188,718 and $124,800, respectively. As of September 30, 2021 and December 31, 2021 and 2020,$462,114 $518,918 and $330,200 respectively, was payable to these related parties for payroll and consulting charges, which are included within accrued expenses.

 

During the year ended December 31, 2021, the Company incurred payroll expenses with Lawrence Lehoux, the Chief Technology Officer, of $94,553, which is included within general and administrative expenses.

During 2017, the Company purchased equipment from R&D Labs Canada, Inc., whose president is Bill Chaaban, in exchange for a $300,000 note payable. This equipment was then sold to CEN Ukraine for a loss of $255,141 in exchange for a $44,859 note receivable, payable in 10 equal installments beginning in 2017 through 2026.No payments have been received as of December 31, 2021. See Note 25 for a discussion of subsequent events in Ukraine.

As of December 31, 2021 and 2020, the Company owed $8,347 to Joe Byrne, a Director, for advances made to the Company, which is included within accounts payable – related parties.

During 2021, the Company utilized an entity owned by Alex Tarrabain, the Chief Financial Officer, for accounting advisory services totaling $13,320. As of December 31, 2021, the Company owed $13,320 to this entity and also owed Mr. Tarrabain $30,795 for reimbursable expenses, which are included within accounts payable – related parties.

As of December 31, 2021, the Company owed Lawrence Lehoux, the Chief Technology Officer, $48,960 for reimbursable expenses, which is included within accounts payable – related parties.

The Company currently leases certain facilities and equipment under noncancelable operating lease agreements that expire at various dates through 2024. Monthly rentals range from CAD 844 to CAD 5,595. In addition, the facilities lease calls for variable charges for common area usage which are expensed as incurred.

The Company also leased office space in Windsor, Ontario from RN Holdings Ltd. Under the lease agreement effective October 1, 2017, monthly rents of CAD 2,608 are due through September 30,2022, at which point monthly rents of CAD 3,390 are due. Effective August 1, 2020, the Company ceased making payments and abandoned the leased space. Accordingly, the Company determined that there was no future economic value to the associated right-of-use asset and recognized a full impairment loss of $146,795 on August 1, 2020. Effective with the August 1, 2020 lease termination and abandonments, all property, plant, and improvements which were located at these properties were abandoned. As of April 14, 2022, the Company has not reached an agreement with RN Holdings Ltd to modify or to settle the remaining contractual liability, which therefore remains recorded as of December 31, 2021 however, management expectsunder its original contractual terms. As of December 31, 2021 and 2020 the associated liability was $177,686 and $164,997, respectively. During 2021 and 2020, lease expenses of approximately $13,000 and $35,000, respectively related to this balanceagreement were recognized within general and administrative expenses.

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The operating lease liability as of December 31, 2021 and 2020 was $310,671 and $164,997, respectively, utilizing a weighted average discount rate of approximately 6.76% over a weighted average remaining lease term of approximately 4.4 years. During 2021 and 2020, lease expenses of approximately $46,000 and $35,000, respectively, related to be collectible.these agreements were recognized within general and administrative expenses.

 

Jamaal Shaban (“Lessor”), cousin of Bill Chaaban, leased a property at 20 North Rear Road a 10.4 acre site of land in Canada which included two buildings and a security vault, to the Company under an agreement effective January 2017 for monthly rental payments of CAD 4,000 plus taxes for a period of five years. This lease was assigned by the Lessor to Jamsyl Group, a third-party, when Jamsyl Group purchased the property from Jamaal Shaban in October 2019. Effective August 1, 2020, the Company entered into a mutual termination and release agreement with Jamsyl Group in exchange for 36,500 shares of CEN common stock, valued at $50,700, which vested immediately, based upon remaining lease payments owed. The lease had been accounted for as an operating lease utilizing an 8% discount rate.lease. All remaining associated right-of-use assets as of August 1, 2020 of $48,110 and associated liabilities of $45,118, which had utilized an 8% discount rate, were written off in conjunction, resulting in a loss on lease termination of $53,692. During the three2020, and nine-months ended September 30, 2020, lease expenses of $2,982 and $20,391, respectively,approximately $20,000 related to this agreement were recognized within general and administrative expenses.

 

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year for the 12 months subsequent to December 31:

		Amount
2022		$	119,543
2023			90,325
2024			61,897
2025			32,088
2026			32,088
Thereafter			24,066
Total lease payments		$	360,007
Less imputed interest			49,336
Present value of lease liability		$	310,671

 

NOTE 1712 –STOCK BASED COMPENSATION

 

Adoption of Equity Compensation Plan

 

On November 29, 2017, the Board adopted the 2017 Equity Compensation Plan (the “Plan”) providing for the granting of options to purchase shares of common stock, restricted stock awards and other stock-based awards to directors, officers, employees, advisors and consultants. The Company reserved 20,000,000 shares of common stock for issuance under the Plan. The Plan is intended to provide equity incentives to persons retained by our Company.

 

On April 2, 2021, the Board of Directors of the Company adopted the 2021 Equity Compensation Plan (the ““2021 Plan”) providing for the granting of options to purchase shares of common stock, restricted stock awards and other stock-based awards to directors, officers, employees, advisors and consultants of the Company and reserved an additional 20,000,000 shares of the Company’s common stock for issuance under the 2021 Plan.

 

Equity Compensation Grants

 

On November 30, 2017, the Company granted a one-time equity award (“Equity Award”) of restricted shares of the Company’s common stock pursuant to a Restricted Stock Agreement to certain executives and directors of the company. Donald Strilchuck, Director, received 1,000,000 restricted shares of the Company's common stock for security consulting services, of which 550,000 vested immediately and the remaining vesting ratably each month over the next 36 months until November 2020. Other individuals received a total of 1,870,000 restricted shares of the Company's common stock for consulting services performed, of which 1,330,000 vested immediately and the remaining vesting ratably each month over the next 36 months until November 2020. The expense related to the restricted stock awarded to non-employees for services rendered was recognized on the grant date.

 

On October 1, 2019, the Company entered into an agreement with a communications and branding firm for the payment of its services under which the Company issued 50,000 shares of its common stock. This award vested immediately. The expense related to the restricted stock awarded to non-employees for services rendered was recognized on the grant date.

On April 17, 2020, the Company entered into agreements with three individuals for the payment of business consulting services under which the Company issued 225,000 shares of its common stock. These awards vested immediately. The expense related to the restricted stock awarded to non-employees for services rendered of $162,000 was recognized on the grant date.

 

On August 27, 2020 and September 25, 2020, the Company entered into agreements with two individuals for the payment of business consulting services under which the Company issued an aggregate of 162,500 shares of its common stock. These awards vested immediately. The expense related to the restricted stock awarded to non-employees for services rendered of $117,000 was recognized on the grant date.

 

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On April 2, 2021, a consulting agreement with CONFIEN SAS for business coaching was entered into for a period of 12 months. As payment for these services, 650,000 restricted shares, subject to applicable securities laws and regulations as set forth in the Restricted Stack Agreement, of the Company’s common stock were granted. Such shares vested immediately. The expense related to the restricted stock awarded to non-employees for services previously rendered of $897,000 was recognized on the grant date.

 

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On July 13, 2021, the Company entered into agreements with two individuals for the payment of security and legal consulting services under which the Company issued an aggregate of 500,000 shares of its common stock. These awards vested immediately. The expense related to the restricted stock awarded to non-employees for services rendered of $275,000 was recognized on the grant date.

 

Employment Agreements

 

On November 30, 2017, employment agreements were entered into with four key members of management:

 

●

Under the Employment Agreement with Bahige (Bill) Chaaban, then President of the Company, Mr. Chaaban agreed towill receive compensation in the form of a base annual salary of $31,200 and a grant of 8,750,000 shares of restricted stock of the Company, of which 7,400,000 vested immediately and the remaining vested ratably each month over the next 36 months until November 2020.

 

●

Under the Employment Agreement with Joseph Byrne, former Chief Executive Officer of the Company, Mr. Byrne agreed towill receive compensation in the form of a base annual salary of $31,200 and a grant of 1,250,000 shares of restricted stock of the Company, of which 325,000 vested immediately and the remaining vesting ratably each month over the next 36 months until November 2020. Effective November 13, 2019, Mr. Byrne resigned and left the Company, at which point additional vesting and salary accruals ceased. As of April 2, 2020, the accrued salaries owed to Joe Byrne, which amounted to $58,500, were settled by allowing Joe Byrne to vest in the remaining 337,500 restricted shares that had not vested. On April 19, 2021, Joe Byrne was appointed as President and a member of the board of directors of the Company.

 

●

Under the Employment Agreement with Richard Boswell, Senior Executive Vice President and then Chief Financial Officer of the Company, Mr. Boswell agreed towill receive compensation in the form of a base annual salary of $31,200 and a grant of 4,500,000 shares of restricted stock of the Company, of which 4,140,000 vested immediately and the remaining vested ratably each month over the next 36 months until November 2020.

 

●

Under the Employment Agreement with Brian Payne, Vice President of the Company, Mr. Payne agreed towill receive compensation in the form of a base annual salary of $31,200 and a grant of 750,000 shares of restricted stock of the Company, of which 300,000 vested immediately and the remaining vested ratably each month over the next 36 months until November 2020.

 

On May 16, 2019, an employment agreement, under similar terms, was entered into with Mr. Tarrabain. Under the Employment Agreement with Alex Tarrabain,one of the members of the Company’s Board, to serve as the Company’s Chief Financial Officer and as one of the Vice Presidents of the Company, effective Mr. Tarrabain will receive compensation in the form of a base annual salary of $31,200 and a grant of 1,250,000 shares of restricted stock of the Company, of which 350,000 vested immediately and the remaining vesting ratably each month over the next 36 months until May 21, 2019:2022.

●

Under the Employment Agreement with Alex Tarrabain, Chief Financial Officer and as one of the Vice Presidents of the Company, Mr. Tarrabain agreed to receive compensation in the form of a base annual salary of $31,200 and a grant of 1,250,000 shares of restricted stock of the Company, of which 350,000 vested immediately and the remaining vesting ratably each month over the next 36 months until May 2022.

 

On December 6, 2021, the Board of Directors appointed Rick Purdy as its Senior Vice President of Deals and Acquisitions. On this date, an employment agreement, under similar terms, was entered into with Mr. Purdy. Under the Employment Agreement, Mr. Purdy will receive compensation in the form of a base annual salary of $31,200 and a grant of 2,500,000 shares of restricted stock of the Company, of which 700,000 vested immediately and the remaining vesting ratably each month over the next 36 months until December 2024. The expense related to the restricted stock awarded to employees for services previously rendered of $238,000 was recognized on the grant date. Remaining expenses will be recognized ratably monthly as the restricted stock award vests.

On April 2, 2021, the Board of Directors appointed Ameen Ferris and Harold Aubrey De Lavenu to serve as Vice Presidents of the Company. Under the associated Executive Employment Agreements, they will each receive compensation in the form of a base annual salary of $31,200. In addition, Ameen Ferris was granted 1,000,000 and Harold Aubrey De Lavenu was granted 1,041,250 restricted shares, subject to applicable securities laws and regulations, as set forth in the Restricted Stock Agreement, of the Company’s common stock. Such shares vested immediately. The expense related to the restricted stock awarded to employees for services previously rendered of $2,816,925 was recognized on the grant date.

 

---

 

On April 2, 2021, the Company entered into an RSA (the “Boswell RSA”) with Richard Boswell. Pursuant to the Boswell RSA, the Company granted Mr. Boswell 2,185,679 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $3,016,237 was recognized on the grant date.

 

On April 2, 2021, the Company entered into an RSA (the “Chaaban RSA”) with Bahige Chaaban. Pursuant to the Chaaban RSA, the Company granted Mr. Chaaban 3,106,122 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $4,286,435 was recognized on the grant date.

 

On April 2, 2021, the Company entered into an RSA (the “Payne RSA”) with Brian Payne. Pursuant to the Payne RSA, the Company granted Mr. Payne 1,435,000 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $1,980,300 was recognized on the grant date.

 

On April 2, 2021, the Company entered into an RSA (the “Saadikh RSA”) with Usamakh Saadikh. Pursuant to the Saadikh RSA, the Company granted Mr. Saadikh 1,000,000 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $1,380,000 was recognized on the grant date.

 

On April 2, 2021, the Company entered into an RSA (the “Strilchuck RSA”) with Donald Strilchuck. Pursuant to the Strilchuck RSA, the Company granted Mr. Strilchuck 341,250 restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $470,925 was recognized on the grant date.

 

On April 2, 2021 and June 25, 2021, the Company entered into an RSA (the “Tarrabain RSA”) with Alex Tarrabain. Pursuant to the Tarrabain RSA, the Company granted Mr. Tarrabain 300,000 and 1,000,000, respectively, restricted shares of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense related to the restricted stock awarded to employees for services previously rendered of $899,000 was recognized on the grant date.

 

Restricted Stock Awards

 

Restricted stock awards relate to common shares that are subject to applicable securities laws and regulations as set forth in the RSAs and other equity compensation grants.

 

The total grant-date fair value of the restricted shares noted in thegranted through employment agreements and equity compensation grants sections above was $29,035,063$29,885,063 and $13,013,241 as of September 30, 2021 and December 31, 2021 and 2020,respectively. During the three2021 and nine2020,-month periods ended September 30, 2021, 500,000 and 12,559,291 15,059,291 restricted shares respectively, with a grant date fair value of $275,000 and $16,021,822, respectively, were awarded. During the three and nine-month periods ended September 30, 2020, 162,500$16,871,822 and 387,500 restricted shares respectively, with a grant date fair value of $117,000 and $279,000, respectively, were awarded. Prior to the start of trading on April 5, 2021 via the OTC Link alternative trading system (operated by OTC Markets Group Inc.), the grant-date fair value was calculated utilizing an enterprise valuation model as of the date the awards are granted. Beginning April 5, 2021, the grant-date fair value is calculated utilizing the daily closing price as published via the OTC Link.

 

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With the exception of immediately vesting portions of awards, shares typically vest pro-rata over the requisite service period, which is generally three years from the grant-date. Non-vested restricted stock awards participate in dividends and recipients are entitled to vote these restricted shares during the vesting period.

 

During the three2021-month periods ended September 30, 2021 and 2020, 575,000 13,559,291 and 500,000, respectively, and during the nine-month periods ended September 30, 2021 and 2020, 12,784,291 and 1,737,500, respectively,1,987,500 of these shares vested.vested, respectively. The fair value of the restricted stock which vested amounted to $350,750$16,562,822 and $355,500$1,237,250 for the three2021-months ended September 30, 2021 and 2020, respectively, and $16,249,072 and $1,053,000 for the nine-months ended September 30, 2021 and 2020, respectively.

 

Compensation expense, broken out by allocation, recognized in connection with the restricted stock awards was $75,750 and $196,650as follows for the three-monthsyears ended September 30, 2021 December 31:and 2020, respectively, and $15,077,072 and $589,950 for the nine-months ended September 30, 2021 and 2020, respectively. Consulting expense recognized in connection with the restricted stock awards was $275,000 and $117,000 for the three-months ended September 30, 2021 and 2020, respectively, and $1,172,000 and $279,000 for the nine-months ended September 30, 2021 and 2020, respectively.

		2022				2021
Stock Based Compensation		$	0			$	15,390,822
Professional fees			0				1,172,000
Total		$	0			$	16,562,822

 

Non-vested restricted stock award activity for the nine-monthsyears ended September 30,December 31, 2021 and 2020 are as follows:

 

 

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The fair value of the restricted stock grants was based on the valuation of a third-party specialist prior to April 5, 2021. Beginning April 5, 2021, the fair value of the restricted stock grants is based upon the daily closing price per the OTC Link. As of September 30,December 31, 2021, unrecognized compensation expense totaled $202,000,$738,250, which will be recognized on a straight-line basis over the vesting period or requisite service period through May 2022.December 2024.

---

 

NOTE 1813 –NET LOSS PER SHARE

 

During periods when there is a net loss, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of diluted net loss per share. Based on the Company’s application of the as-convertedas converted and treasury stock methods, all common stock equivalents were excluded from the computation of diluted earnings per share due to net losses as of September 30, 2021December 31, 2021. and During 2020.2020, the potential common shares from the Tesla Agreement, which were contingent on certain events as described in Note 8, were excluded as the effect of conversion was anti-dilutive. Common stock equivalents that were excluded for the three and nine-month periodsyears ended September 30,December 31, 2021 and 2020 because they were anti-dilutive are as follows:
 

		2021				2020
Convertible debt			1,085,343				0
Tesla agreement			0				1,000,000

The following table shows the computation of basic and diluted earnings per share for 2021:

 

		Three-months Ended								Nine-months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Convertible debt			1,271,406				5,733,735				1,163,866				5,425,999

		Income				Shares				Per-Share
		(Numerator)				(Denominator)				Amount
Basic EPS
Income available to common stockholders		$	18,937,577				42,417,416			$	0.45
Effect of Dilutive Securities
Convertible debt			0				0				-
Diluted EPS
Income available to common stockholders with assumed conversions		$	18,937,577				42,417,416			$	0.45

 

NOTE 1914 –CONTINGENCY

 

In connection with the distribution by Creative of CEN’s common stock on February 29, 2016 and the Form 10 registration statement filed by CEN to register its shares of common stock under the Exchange Act, CEN received comments by the Staff of the Securities and Exchange Commission, including a letter dated May 4, 2016 in which the Staff noted that they “…continue to question the absence of Securities Act registration of the spin-off distribution”. In the event that the distribution of shares of CEN’s common stock was a distribution that required registration under the Securities Act, then the Company could be subject to enforcement action by the SEC that claims a violation of Section 5 of the Securities Act and could be subject to a private right of action for rescission or damages. Based on management’s estimate, any potential liability related to this matter would not be material.

 

NOTE 2015 –FAIR VALUE DISCLOSURES

 

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.

 

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The fair value of the Company’s financial instruments are as follows at:follows:

 

 

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		Carrying Amount				Level 1				Level 2				Level 3				Fair Value
At December 31, 2020:
Cash and cash equivalents		$	1,908			$	0			$	1,908			$	0			$	1,908
Other receivables		$	113,999			$	0			$	0			$	113,999			$	113,999
Note receivable – CEN Biotech Ukraine, LLC – related party		$	44,859			$	0			$	0			$	44,859			$	44,859
Advances to Emergence Global - related party		$	17,901			$	0			$	0			$	17,901			$	17,901
Advances to CEN Biotech Ukraine, LLC - related party		$	1,179,328			$	0			$	0			$	1,179,328			$	1,179,328
Loans payable		$	527,379			$	0			$	0			$	527,379			$	527,379
Loans payable – related parties		$	1,363,354			$	0			$	0			$	0			$	0
Patent acquisition liability		$	1,380,000			$	0			$	0			$	1,380,000			$	1,380,000
Convertible notes payable		$	6,730,448			$	0			$	0			$	7,766,663			$	7,766,663
Convertible notes payable – related parties		$	2,558,681			$	0			$	0			$	0			$	0

		Carrying Amount				Level 1				Level 2				Level 3				Fair Value
At December 31, 2020:
Cash and cash equivalents		$	193,198			$	0			$	193,198			$	0			$	193,198
Note receivable – CEN Biotech Ukraine, LLC – related party		$	44,859			$	0			$	0			$	44,859			$	44,859
Advances to CEN Biotech Ukraine, LLC - related party		$	1,299,328			$	0			$	0			$	1,299,328			$	1,299,328
Loans payable		$	1,688,793			$	0			$	0			$	1,688,793			$	1,688,793
Loans payable – related parties		$	2,701,641			$	0			$	0			$	0			$	0
Convertible notes payable		$	643,330			$	0			$	0			$	1,890,736			$	1,890,736
Convertible notes payable – related parties		$	162,639			$	0			$	0			$	0			$	0
CEBA loan payable		$	31,552			$	0			$	0			$	31,552			$	31,552

 

The fair values of other receivables (including related accrued interest), note receivable - CEN Biotech Ukraine, LLC, and advances to Emergence Global and CEN Biotech Ukraine, LLC approximate carrying value due to the terms of the instruments.

 

The fair value of the loans payable approximates carrying value due to the terms of such instruments and applicable interest rates.

 

The fair value of convertible notes payable is based on the par value plus accrued interest through the date of reporting due to the terms of such instruments and interest rates.

 

It is not practicable to estimate the fair value of loans payable – related parties and convertible notes payable – related parties due to their related party nature.

 

The fair value of the patent acquisition liability is based upon the fair value of the common stock, which was obtained from a 3^rd party valuation specialist prior to April 5, 2021. This valuation report utilized a cash-free asset value model to estimate enterprise value based upon similar companies. Beginning April 5, 2021, the fair value of the patent acquisition liability iswas based upon the OTC closing price and accordingly was transferred from Level 3 to Level 1 due to the availability of published prices for CEN’s common stock.stock during 2021. Effective October 7, 2021, the liability was settled with delivery of the associated common shares, see Note 8.

NOTE 16– SUBSEQUENT EVENTS

On April 14, 2022, the following persons resigned from the following positions from Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022.

The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above name persons no longer hold any positions with the Company.

The Resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by any of the above persons.

Appointments of Officers and Directors

On April 14, 2022, the Company’s Board of Directors (the “Board”) appointed Brian S. Payne as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors and appointed Lawrence Lehoux as the Company’s President, effective at the close of business on April 14, 2022.

 

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NOTEOn 21April 19, 2022, Dr. Usamakh Saadikh resigned from his position as a director on the Board of Directors (the “Board”) of the “Company as well as all other positions with the Company effective immediately. Dr. Usamakh Saadikh, was a member of our Board and the Vice President of International Business Development since June 2018. The foregoing resignation was not – SEGMENT INFORMATIONthe result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by Dr. Saadikh.

Appointment of Directors

On April 18, 2022, the Board appointed the following persons as members of its Board effective April 18, 2022:

●

Josef Tukacs; and

●

George Dragicevic

Settlement Agreements with Departing Officers and Directors

 

As described in Note 2,reported by the Company closed on its Current Report on Form 8-K filed with the acquisition of CCMSecurities and Exchange Commission on July 9, 2021.April 19, 2022, With on April 14, 2022, the acquisitionfollowing persons resigned from the following positions from the Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of CCM,the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022. The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above named persons no longer hold any positions with the Company. In connection with the Resignations, the Company has 2 reportable business segments, Growth and Digital. The Growth segment encompassesentered into the activitiessettlement agreements described below with the following persons.

On April 19, 2022, the Company, entered into a settlement agreement with Bahige (Bill) Chaaban (the “Chaaban Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Chaaban 1,785,096 restricted shares of CEN Biotech, Inc. and focuses onits common stock in exchange for the planned manufacturing, production and developmentaccrued salary of LED lighting technology and hemp-based products. The Digital segment encompasses the activities of Clear Com Media, Inc. and focuses on providing digital marketing and web design related services. Substantially all$133,882.19 owed to Mr. Chaaban as of the Company’s operations are conducted withindate of his resignation from the United StatesCompany pursuant to his employment agreement with the Company. Pursuant to the Chaaban Settlement Agreement, Mr. Chaaban’s Employment Agreement with the Company dated November 30, 2017, was terminated as of America and Canada.April 14, 2022. Pursuant to the Chaaban Settlement Agreement, Mr. Chaaban agreed to release the Company from any claims, as such term is defined thereunder, that Mr. Chaaban may have against the Company.

 

Segment information:

		Three-months Ended September 30,
		2021								2020
		Growth				Digital				Growth				Digital
Revenue		$	0			$	272,166			$	0			$	0
Operating loss			(570,311	)			(74,665	)			(968,424	)			0
Depreciation expense			0				10,968				1,532				0
Amortization expense			106,203				24,350				106,203				0
Interest income			0				87				1,553				0
Interest expense			173,412				0				921,017				0
Capital expenditures			0				18,988				0				0

		Nine-months Ended September 30,
		2021								2020
		Growth				Digital				Growth				Digital
Revenue		$	0			$	272,166			$	0			$	0
Operating loss			(17,178,728	)			(74,665	)			(2,189,621	)			0
Depreciation expense			0				10,968				10,724				0
Amortization expense			318,609				24,350				318,609				0
Interest income			394				87				5,465				0
Interest expense			703,665				0				2,727,672				0
Capital expenditures			0				18,988				0				0

Segment assetsOn April 19, 2022, the Company, entered into a settlement agreement with Alex Tarrabain (the “Tarrabain Settlement Agreement”) pursuant to total assets:

		September 30, 2021				December 31, 2020
Growth		$	5,989,211			$	6,314,142
Digital			2,412,754				0
Total assets		$	8,401,965			$	6,314,142

NOTEwhich the Company agreed to issue Mr. Tarrabain 1,196,673 restricted shares of its common stock in exchange for the accrued salary of $89,682.19 owed to Mr. Tarrabain as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Tarrabain Settlement Agreement, Mr. Tarrabain’s Employment Agreement with the Company dated 22May 21, 2019, – SUBSEQUENT EVENTSwas terminated as of April 14, 2022. Pursuant to the Tarrabain Settlement Agreement, Mr. Tarrabain agreed to release the Company from any claims, as such term is defined thereunder, that Mr. Tarrabain may have against the Company.

 

FromOn October 1, 2021 to NovemberApril 19, 2021,2022, the Company, issuedentered into a settlement agreement with Rick Purdy (the “Purdy Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Purdy 150,483 restricted shares of its common stock in exchange for the accrued salary of $11,286.19 owed to Mr. Purdy as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Purdy Settlement Agreement, Mr. Purdy’s Employment Agreement with the Company dated oneDecember 6, 2021, new convertible note totaling $100,000was terminated as of April 14, 2022.

On April 19, 2022, the Company, entered into a settlement agreement with conversion rightsAmeen Ferris (the “Ferris Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Ferris 433,096 restricted shares of 416,667its common stock in exchange for the accrued salary of $32,482.19 owed to Mr. Ferris as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Ferris Settlement Agreement, Mr. Ferris’s Employment Agreement with the Company dated April 2, 2021, was terminated as of April 14, 2022.

On April 19, 2022, the Company, entered into a settlement agreement with Richard Boswell (the “Boswell Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Boswell 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Boswell as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Boswell Settlement Agreement, Mr. Boswell’s Employment Agreement with the Company dated November 30, 2017, was terminated as of April 15, 2022.

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Dismissal of Independent Registered Accounting Firm

On May 2, 2022, the Board of Directors of the Company common stock.approved the dismissal of Mazars USA LLP (“Mazars”), as its independent registered accounting firm, effective immediately. Mazars was engaged by the Company on January 16, 2018. No audit report of Mazars for the years ended December 31, 2021 or December 31, 2020, contained an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, with the exception of providing an explanatory paragraph stating there was substantial doubt about the Company’s ability to continue as a going concern. During the Company’s two most recent fiscal years and through May 2, 2022, (i) there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Mazars on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Mazars, would have caused Mazars to make reference to the subject matter of such disagreement in connection with its reports on the financial statements for such periods and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).

Engagement of New Independent Registered Accounting Firm

On May 2, 2022, the Company’s Board approved the appointment of Olayinka Oyebola & Co (“OOC”) as the Company’s new independent registered public accounting firm effective immediately. During the Company’s two most recent fiscal years ended December 31, 2021 and 2020, and the subsequent interim period through May 2, 2022, neither the Company nor anyone acting on its behalf consulted with OOC regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, in connection with which either a written report or oral advice was provided to the Company that OOC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

 

 

ITEM 2

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

 

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the Notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Special Note Regarding Forward-Looking Statements. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Background and Overview

 

CEN Biotech, Inc. (“we,” “us,” “our” or “CEN” or the “Company”) is a Canadian holding company, incorporated in Canada on August 4, 2013, as a subsidiary of Creative Edge Nutrition, Inc. (“Creative”), a Nevada corporation. Creative separated its planned specialty pharmaceutical business located in Canada by transferring substantially all of the assets and liabilities of the planned specialty pharmaceutical business to CEN and effecting a distribution (the “Spin-Off Distribution”) of CEN common stock to Creative shareholders on February 29, 2016. The Spin-Off Distribution was intended to be tax free for U.S. federal income tax purposes.

 

Prior to the Spin Off Distribution, the Company initially pursued the cannabis business in Canada and obtained funding to build the initial phase of its comprehensive seed-to-sale facility and applied to obtain a license in Canada to begin operating its state-of-the-art medical marijuana cultivation, processing, and distribution facility in Lakeshore, Ontario.  On March 11, 2015, the Company’s application for a license to produce marijuana for medical purposes was formally rejected by Canadian regulatory authority. On February 1, 2016 the Company commenced legal action against the Attorney General of Canada in the Ontario Superior Court of Justice for damages for detrimental reliance, economic loss, and prejudgment and post judgment interest, costs of the proceeding and other relief that the court may seem just.  As of November 19, 2021May 12, 2022 the action in the Ontario Superior Court of Justice is still ongoing.  In the meantime, the Company decided to develop and pursue other businesses that are related to Light Emitting Diode (“LED”) lighting and hemp-based industrial, medical and food products that have a tetrahydrocannabinol (“THC”) that is below 0.3%.

 

We are currently focused on the manufacturing, production and development of LED lighting technology and hemp-based products. The Company intends to continue to explore the usage of hemp, which it now intends to cultivate for usage in industrial, medical and food products. We also plan to expand our business to include Cannabis, Psychedelic Mushrooms, and Digital Communities. Our mission is to strive to be an agriculture based mindful provider of Phyto medical solutions developed to help improve "your" state of health and well-being.

On April 20, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with Clear Com Media Inc., an Ontario, Canada corporation (“CCM”), each of the shareholders of CCM as set forth on the signature pages of the Agreement (the “CCM Shareholders”) and Lawrence Lehoux as the Representative of the CCM Shareholders (the “Shareholders’ Representative”, each of CCM and the CCM Shareholders may be referred to collectively herein as the “CCM Parties”). Pursuant to the Agreement, the Company agreed to acquire from the CCM Shareholders, all of the common shares of CCM, which is 10,000 shares of CCM common shares (the “CCM Stock”) held by the CCM Shareholders in exchange (the “Exchange”) for the issuance by the Company to the CCM Shareholders of 4,000,000 restricted shares of the Company’s common stock, no par value per share (the “Company Common Stock”). The Agreement closed on July 9, 2021 (the “Closing”). At Closing, the CCM Shareholders delivered the CCM Stock to the Company and the Company delivered the Company Common Stock to the CCM Shareholders, and CCM became a wholly owned subsidiary of the Company.

Effective with the acquisition of Clear Com Media, Inc. on July 9, 2021, the Company reports in two business segments, Growth and Digital. The Growth segment encompasses the activities of CEN Biotech, Inc. and focuses on the planned manufacturing, production and development of LED lighting technology and hemp-based products. The Digital segment encompasses the activities of Clear Com Media, Inc. and focuses on providing digital marketing and web design related services. Substantially all of the Company’s operations are conducted within the United States of America and Canada.

Our principal office is located at 300-3295 Quality Way, Windsor, Ontario, Canada, N8T 3R9 and our phone number is (519) 419-4958. Our corporate website is located at http://www.cenbiotechinc.com. The information contained on or connected to our website is not part of this report and is not incorporated herein.

The Company derived approximately 99% of its revenue from one customer during the three and nine-month periods ended September 30, 2021. The Company had no revenue prior to July 9, 2021.

Our consolidated financial statements have been prepared assuming that we will continue as a going concern; however, given our recurring losses from operations, management, as well as our auditors, have determined there is substantial doubt about our ability to continue as a going concern.

At September 30, 2021 and December 31, 2020, the Company had advances of $1,299,328 and $1,179,328, respectively, to CEN Ukraine which is a related party. The advances were for the purpose of funding the operations of CEN Ukraine. These advances were substantially used as follows:

●

Approximately $420,000 to operate its office in Kiev;

●

Approximately $445,328 to employ several workers;

●

Approximately $350,000 for performing multiple test crops;

●

Approximately $75,000 for oil processing activities; and

●

Approximately $9,000 for payment of rent.

Plan of Operations

Plan of Operations of CEN Biotech Inc.

Our monthly “burn rate,” the amount of expenses we expect to incur on a monthly basis, is approximately $100,000 for a total of $1,200,000 for the maximum of 12 months. We have relied and will continue to rely on capital raised from third parties to fund our operating expenses during the following 12 months.

In order to complete our plan of operations, we estimate that $8,400,000 in funds will be required. The source of such funds is anticipated to be from capital raised from third parties. If we fail to generate $8,400,000 of funds from capital raised, we may not be able to fully carry out our plan of operations.

Generally, the funds are planned to be invested as follows: $2.3 million in hemp activities, $2.2 million in LED lighting manufacturing, $200,000 to obtain quotation on OTCQB, $2.5 million to complete acquisitions in the phyto medical space including cannabis and psychedelic mushrooms and $1.2 million in general operating costs. There can be no assurance that the Company will be able to raise the foregoing funds or proceed as planned.

We hope to reach the following milestones in the next 12 months:

●

August 2022 – The Company intends to close a minimum of two acquisitions in the phyto medical space and we estimate the cost of this to be $1,250,000.

●

November 2022 - The Company intends to close an additional two acquisitions in the phyto medical space and we estimate the cost of this to be $1,250,000.

●

February 2022 – The Company intends to obtain quotation on OTCQB and we estimate the costs of this to be $200,000.

●

May 2022 – The Company intends to close on its contract with CEN Ukraine and we estimate the costs of this to be $300,000.

●

March 2022 to December 2024 – The Company intends to explore the usage of hemp, which it intends to cultivate for usage in industrial, medical and food products through CEN Ukraine as follows:

●

Secure lease of processing facility expected to take place in April, 2022 and we estimate the costs of this to be $400,000 annually.

●

Purchase of seeds for production crop expected to take place in March, 2022 and we estimate the costs of this to be $100,000 annually.

●

Hire farming and production staff expected to take place in March, 2022 and we estimate the costs of this to be $600,000 annually.

●

Rent farming equipment, purchase fuel, irrigation, and nutrients expected to take place in April, 2022 and we estimate the costs of this to be $600,000 annually.

●

Market, package and ship product expected to take place in September, 2022 and we estimate the costs of this to be $300,000 annually.

●

October 2021 – The Company closed on its contract with Tesla Digital, Inc. regarding the LED lighting patent.

●

December 2021 to December 2024 – The Company intends to explore using the LED lighting patent across manufacturing operations and licensing opportunities across multiple industries such as the horticultural industry, as well as the automotive, industrial and commercial lighting industries as follows:

●

Lease production facility expected to take place in April, 2022 and we estimate the costs of this to be $400,000 annually.

●

Lease equipment expected to take place in June, 2022 and we estimate the costs of this to be $400,000 annually.

●

Hire staff expected to take place in May, 2022 and we estimate the costs of this to be $600,000 annually.

●

Initial raw materials expected to take place in May, 2022 and we estimate the costs of this to be $500,000 one time.

●

Marketing and delivery expected to take place in September, 2022 and we estimate the costs of this to be $300,000 annually.

Achievement of the milestones will depend highly on our funds and the availability of those funds. There can be no assurance that we will be able to successfully complete such milestones.

Plan of Operations of Clear Com Media, Inc.

The current burn rate for CCM inclusive of all wages and operating costs are approximately $120,000 CDN per month or $1,440,000 CDN per year (Approx. $1,152,000 USD) per year. We anticipate a decrease of 30% in this burn rate with the elimination of some staff members that provide the SEO and custom development services that are no longer being performed by CCM. We will potentially rehire some of these people in order to retool the focus of the business and pivot to the development of some products as soon as it is financially viable to do so.

The following highlights the major goals and activities planned for the next twelve months:

●

Expansion of CCM’s enterprise hosting infrastructure for CCM’s client services and CCM products to address the ongoing growth needs of the business.

●

The pace of development of the Chatter product has been modified to meet the changing needs of the business and to address new market realities. Progress continues but a refocus on core deliverables that delivers a new phased approach to product roll out is being implemented. Recent changes in sales, the competitive landscape and modified revenue forecasts have triggered a pivot in terms of priorities and timing.

●

The development of the Block Chain Permission Platform has been modified to solely focus on the R&D elements of the offering. Commercialization of the product has been reorganized to be addressed later once we have achieved new internal goals and milestones; however, work continues on the core offering with clear goals and objectives in mind.

●

Continued development of internal efficiency processes and automated systems for tasks such as workflow, billing, subscriptions, security and internal cloud computing.

●

The marketing of both the Chatter and Block Chain product and service are being refined based on new and ongoing information that is being gathers from our target markets and the rapidly changing landscape of the verticals we operate in. As our research continues, we hope to commence marketing efforts in second to third quarter of next year when the products are in a completed and in a commercially viable state.

●

The development of digital community project remains at the discovery stage and research continues about the participants and nuances of this space and how we feel we can best serve this vertical. Once a plan is formalized new hires will be recruited to address the specific development needs of this product and service.

●

Continued support and a modest expansion of the core services offered by to our key business partners and direct customers. These services include but are not limited to responsive website design, online chat, social media marketing and landing page development.

●

As part of our renegotiation with Postmedia as are no longer providing the SEO and custom development services going forward.

●

No acquisitions are being considered at this time until the proper financing in place to do so.

---

Recent Developments

The outbreak of a novel coronavirus (COVID-19), which the World Health Organization declared in March 2020 to be a pandemic, continues to spread throughout the United States of America and the globe. Many State Governors issued temporary Executive Orders that, among other stipulations, effectively prohibit in-person work activities for most industries and businesses, having the effect of suspending or severely curtailing operations. The extent of the ultimate impact of the pandemic on the Company's operational and financial performance will depend on various developments, including the duration and spread of the outbreak, and its impact on potential customers, employees, and vendors, all of which cannot be reasonably predicted at this time. While management reasonably expects the COVID-19 outbreak to negatively impact the Company's financial condition, operating results, and timing and amounts of cash flows, the related financial consequences and duration are highly uncertain.

 

On April 20, 2021, the Company entered into a Share Exchange Agreement (the “Agreement”) with Clear Com Media Inc., an Ontario, Canada corporation (“CCM”), each of the shareholders of CCM as set forth on the signature pages of the Agreement (the “CCM Shareholders”) and Lawrence Lehoux as the Representative of the CCM Shareholders (the “Shareholders’ Representative”, each of CCM and the CCM Shareholders may be referred to collectively herein as the “CCM Parties”). Pursuant to the Agreement, the Company agreed to acquire from the CCM Shareholders, all of the common shares of CCM, which is 10,000 shares of CCM common shares (the “CCM Stock”) held by the CCM Shareholders in exchange (the “Exchange”) for the issuance by the Company to the CCM Shareholders of 4,000,000 restricted shares of the Company’s common stock, no par value per share (the “Company Common Stock”). The Agreement closed on July 9, 2021 (the “Closing”). At Closing, the CCM Shareholders delivered the CCM Stock to the Company and the Company delivered the Company Common Stock to the CCM Shareholders, and CCM became a wholly owned subsidiary of the Company. At Closing, the Company increased the number of members on its Board of Directors (the “Board”) by one and to appoint and named the Shareholder Representative as a member of the Board of the Company. Additionally, at Closing, the Company appointed and named the Shareholder Representative as the Company’s Chief Technology Officer. At Closing, the Company entered into an employment agreement (the “Employment Agreement”) with Mr. Lehoux. Pursuant to the Employment Agreement, during the term of the Employment Agreement, the Company agreed to employ, and Mr. Lehoux agreed to accept employment with the Company as the Company’s Chief Technology Officer. Pursuant to the Employment Agreement, the Company agreed to pay Mr. Lehoux a base salary of $31,200.

Clear Com Media Inc. is a Windsor, Ontario based data management, digital marketing and Ecommerce company founded on the premise that we are not satisfied until our customers are. Clear Com is entirely committed to delivering a positive customer experience while continuing to grow and gaining the trust of the online community. Clear Com seeks to let nothing stop it from delivering a positive personal experience by focusing on data driven decision making. By exemplifying professionalism and expertise in technology Clear Com seeks to ensure customer satisfaction every step of the way.

The aggregate consideration for the acquisition of CCM was 4,000,000 restricted shares of CEN common stock, which were valued at $2,120,000 based upon the closing stock price on July 9, 2021. The following is a preliminary estimate ofrepresents the fair values of the assets acquired and the liabilities assumed by CEN in the transaction:transaction, including from the originally reported estimates, an increase in accounts receivable of approximately $8,000, a decrease of identifiable intangibles by approximately $168,000, and an increase in current financial liabilities by approximately $23,000, with a corresponding increase to goodwill of approximately $184,000 reflected as of July 9, 2021:

 

Effective with the acquisition of Clear Com Media, Inc. on July 9, 2021, the Company reports in two business segments, Growth and Digital. The Growth segment encompasses the activities of CEN Biotech, Inc. and focuses on the planned manufacturing, production and development of LED lighting technology and hemp-based products. The Digital segment encompasses the activities of Clear Com Media, Inc. and focuses on providing digital marketing and web design related services. Substantially all of the Company’s operations are conducted within the United States of America and Canada.

Our principal office is located at 300-3295 Quality Way, Windsor, Ontario, Canada, N8T 3R9 and our phone number is (519) 419-4958. Our corporate website is located at http://www.cenbiotechinc.com. The information contained on or connected to our website is not part of this report and is not incorporated herein.

The Company did not have any operating revenue until the acquisition of Clear Com Media, Inc. on July 9, 2021 and such amounts are not expected to be sufficient to sustain ongoing operations. Our consolidated financial statements have been prepared assuming that we will continue as a going concern; however, given our recurring losses from operations, management, as well as our auditors, have determined there is substantial doubt about our ability to continue as a going concern.

At March 31, 2022 and December 31, 2021, the Company had advances of $1,299,328 and $1,299,328, respectively, to CEN Ukraine which is a related party. The advances were for the purpose of funding the operations of CEN Ukraine. These advances were substantially used as follows:

●

Approximately $350,000 to operate its office in Kiev;

●

Approximately $445,328 to employ several workers;

●

Approximately $350,000 for performing multiple test crops;

●

Approximately $75,000 for oil processing activities; and

●

Approximately $9,000 for payment of rent.

Plan of Operations

Our monthly “burn rate,” the amount of expenses we expect to incur on a monthly basis, is approximately $150,000 for a total of $1,800,000 for the maximum of 12 months. We have relied and will continue to rely on capital raised from third parties to fund our operating expenses during the following 12 months.

In order to complete our plan of operations, we estimate that $5,000,000 in funds will be required. The source of such funds is anticipated to be from capital raised from third parties. If we fail to generate $5,000,000 of funds from capital raised, we may not be able to fully carry out our plan of operations.

Generally, the funds are planned to be invested as follows: $2.0 million in digital development, $1.2 million in LED lighting manufacturing, and $1.8 million in general operating costs. There can be no assurance that the Company will be able to raise the foregoing funds or proceed as planned.

We hope to reach the following milestones in the next 12 months:

●

May 2022 to December 2024 – The Company intends to explore using the LED Lighting across manufacturing operations and licensing opportunities across multiple industries such as the horticultural industry, as well as the automotive, industrial and commercial lighting industries as follows:

o

Lease production facility expected to take place in June 2022 and we estimate the costs of this to be $400,000 annually.

o

Lease equipment expected to take place in July, 2022 and we estimate the costs of this to be $400,000

o

Hire staff expected to take place in August, 2022 and we estimate the costs of this to be $600,000 annually.

o

Initial raw materials expected to take place in August, 2022 and we estimate the costs of this to be $500,000 one time.

o

Marketing and delivery expected to take place in October, 2022 and we estimate the costs of this to be $300,000 annually.

o

May 2022 to June 2023 – The Company will continue to develop digital media programs and services to accentuate its current service offerings and we estimate the costs of this to be $2,000,000.

Plan of Operations of Clear Com Media, Inc.

The current burn rate for CCM inclusive of all wages and operating costs are approximately $120,000 CDN per month or $1,440,000 CDN per year (Approx. $1,152,000 USD) per year. We anticipate a decrease of 30% in this burn rate with the elimination of some staff members that provide the SEO and custom development services that are no longer being performed by CCM. We will potentially rehire some of these people in order to retool the focus of the business and pivot to the development of some products as soon as it is financially viable to do so.

The following highlights the major goals and activities planned for the next twelve months:

o

Expansion of CCM’s enterprise hosting infrastructure for CCM’s client services and CCM products to address the ongoing growth needs of the business.

o

The pace of development of the Chatter product has been modified to meet the changing needs of the business and to address new market realities. Progress continues but a refocus on core deliverables that delivers a new phased approach to product roll out is being implemented. Recent changes in sales, the competitive landscape and modified revenue forecasts have triggered a pivot in terms of priorities and timing.

o

The development of the Block Chain Permission Platform has been modified to solely focus on the R&D elements of the offering. Commercialization of the product has been reorganized to be addressed later once we have achieved new internal goals and milestones; however, work continues on the core offering with clear goals and objectives in mind.

o

Continued development of internal efficiency processes and automated systems for tasks such as workflow, billing, subscriptions, security and internal cloud computing.

o

The marketing of both the Chatter and Block Chain product and service are being refined based on new and ongoing information that is being gathers from our target markets and the rapidly changing landscape of the verticals we operate in. As our research continues, we hope to commence marketing efforts in the third quarter of this year when the products are in a completed and in a commercially viable state.

o

The development of digital community project remains at the discovery stage and research continues about the participants and nuances of this space and how we feel we can best serve this vertical. Once a plan is formalized new hires will be recruited to address the specific development needs of this product and service.

o

Continued support and a modest expansion of the core services offered by to our key business partners and direct customers. These services include but are not limited to responsive website design, online chat, social media marketing and landing page development.

o

As part of our renegotiation with Postmedia as are no longer providing the SEO and custom development services going forward.

o

No acquisitions are being considered at this time until the proper financing in place to do so.

Achievement of the milestones will depend highly on our funds and the availability of those funds. There can be no assurance that we will be able to successfully complete such milestones.

Recent Developments

The continued outbreak of a novel coronavirus (COVID-19), which the World Health Organization declared in March 2020 to be a pandemic, continues to spread throughout the United States of America and the globe. Many State Governors issued temporary Executive Orders that, among other stipulations, effectively prohibiting in-person work activities for most industries and businesses, having the effect of suspending or severely curtailing operations. The extent of the ultimate impact of the pandemic on the Company's operational and financial performance will depend on various developments, including the continued duration and spread of the outbreak, and its impact on potential customers, employees, and vendors, all of which cannot be reasonably predicted at this time. While management reasonably expects the COVID-19 outbreak to negatively impact the Company's financial condition, operating results, and timing and amounts of cash flows, the related financial consequences and duration are highly uncertain.

Resignations of Officers and Directors

 

On July 13, 2021,April 14, 2022, the following persons resigned from the following positions from the Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022.

The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above name persons no longer hold any positions with the Company.

The Resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by any of the above persons.

Appointments of Officers and Directors

On April 14, 2022, the Company’s Board of Directors (the “Board”) appointed Brian S. Payne as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors and appointed Lawrence Lehoux as the Company’s President, effective at the close of business on April 14, 2022.

Resignation of Director

On April 19, 2022, Dr. Usamakh Saadikh resigned from his position as a director on the Board of Directors of the Company as well as all other positions with the Company effective immediately. Dr. Usamakh Saadikh, was a member of our Board and the Vice President of International Business Development since June 2018. The foregoing resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices by Dr. Saadikh.

Appointment of Directors

On April 18, 2022, the Board appointed the following persons as members of its Board effective April 18, 2022:

●

Josef Tukacs; and

●

George Dragicevic

Settlement Agreements with Departing Officers and Directors

As reported by the Company on its Current Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2022, on April 14, 2022, the following persons resigned from the following positions from the Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Alex Tarrabain resigned from his positions as the Company’s Chief Financial Officer and Director effective at the close of business on April 14, 2022. Rick Purdy resigned from his positions as Company’s Senior Vice President of Deals and Acquisitions and Director effective at the close of business on April 14, 2022. Amen Ferris resigned from his positions as Company’s Vice President and Director effective at the close of business on April 14, 2022. Joseph Byrne resigned from his positions as a Director of the Company effective at the close of business on April 14, 2022. Additionally, Richard Boswell resigned from his positions as the Company’s Senior Executive Vice President and Director effective as of April 15, 2022. The foregoing resignations shall be referred to together herein as the “Resignations”. Subsequent to the effectiveness of the above Resignations, the above named persons no longer hold any positions with the Company. In connection with the Resignations, the Company has entered into the settlement agreements described below with the following persons.

On April 19, 2022, the Company, entered into an RSAa settlement agreement with Bahige (Bill) Chaaban (the “Keane RSA”“Chaaban Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Chaaban 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Chaaban as of the date of his resignation from the Company pursuant to his employment agreement with Patrick Keane.the Company. Pursuant to the Keane RSA,Chaaban Settlement Agreement, Mr. Chaaban’s Employment Agreement with the Company granted Mr. Keane 200,000 restricted sharesdated November 30, 2017, was terminated as of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense relatedApril 14, 2022. Pursuant to the restricted stock awardedChaaban Settlement Agreement, Mr. Chaaban agreed to employees for services previously rendered was recognized onrelease the grant date.Company from any claims, as such term is defined thereunder, that Mr. Chaaban may have against the Company.

 

 

On July 13, 2021,April 19, 2022, the Company, entered into an RSAa settlement agreement with Alex Tarrabain (the “Scott RSA”“Tarrabain Settlement Agreement”) pursuant to which the Company agreed to issue Mr. Tarrabain 1,196,673 restricted shares of its common stock in exchange for the accrued salary of $89,682.19 owed to Mr. Tarrabain as of the date of his resignation from the Company pursuant to his employment agreement with Daniel Scott.the Company. Pursuant to the Scott RSA,Tarrabain Settlement Agreement, Mr. Tarrabain’s Employment Agreement with the Company granted Mr. Scott 300,000 restricted sharesdated May 21, 2019, was terminated as of the Company’s common stock under the 2021 Plan to vest immediately on the grant date. The shares issued are restricted shares that are subject to applicable securities laws and regulations. The expense relatedApril 14, 2022. Pursuant to the restricted stock awardedTarrabain Settlement Agreement, Mr. Tarrabain agreed to employees for services previously rendered was recognized onrelease the grant date.Company from any claims, as such term is defined thereunder, that Mr. Tarrabain may have against the Company.

 

On October 7, 2021 (“Closing Date”),April 19, 2022, the Company, entered into and closed on a definitivesettlement agreement with Tesla Digital Inc., an Ontario, Canada corporation, Tesla Digital Global Group, Inc., an Ontario, Canada corporation, as well as Steven Pokrajac individually (together, the “Sellers”Rick Purdy (the “Purdy Settlement Agreement”), pursuant to which the partiesCompany agreed to issue Mr. Purdy 150,483 restricted shares of its common stock in exchange for the sale and assignmentaccrued salary of certain assets$11,286.19 owed to Mr. Purdy as of the Sellers (the “Purchased Assets”) relateddate of his resignation from the Company pursuant to a Light Emitting Diode Driver Circuit, as more specifically set forth inhis employment agreement with the Asset Purchase Agreement, Patent Assignment and Bill of Sale (together, the “Transaction Documents”).

Company. Pursuant to the Transaction Documents,Purdy Settlement Agreement, Mr. Purdy’s Employment Agreement with the Company dated December 6, 2021, was terminated as of April 14, 2022.

On April 19, 2022, the Company, entered into a settlement agreement with Ameen Ferris (the “Ferris Settlement Agreement”) pursuant to which the Company agreed to completeissue Mr. Ferris 433,096 restricted shares of its common stock in exchange for the purchase, acquisition and acceptanceaccrued salary of $32,482.19 owed to Mr. Ferris as of the date of his resignation from the Sellers ofCompany pursuant to his employment agreement with the Purchased Assets, which include all of the Sellers’ right, title, and interest in and to United States patent number U.S. 8,723,425 (the “Patent”), in andCompany. Pursuant to the inventions therein set forth and any reissue, reexamination, renewal, divisional, or continuation thereof, in addition to, any related manufacturing machinery plus inventory on hand, and all know-how pertaining to manufacture, use, operation maintenance, development, enjoyment and exploitation of the Patent and the related manufacturing machinery (the “Property”).

U.S. Patent Application No.	Application Filing Date	Status	U.S. Patent No.	Issue Date	Subject Matter
13/525,703	06/18/2012	Issued U.S. Patent	8,723,425	05/13/2014	Light Emitting Diode Driver Circuit

The Sellers cooperatedFerris Settlement Agreement, Mr. Ferris’s Employment Agreement with the Company to perfect the sale and assignmentdated April 2, 2021, was terminated as of the Patent and Property, including through execution of the Patent Assignment and recordation of the same with the U.S. Patent Office, on October 7, 2021. The Company had full rights to utilize the patented technology prior to the Patent Assignment. These rights were granted by the Seller as a part of the transaction withApril 14, 2022.

On April 19, 2022, the Company, started in August of 2016.

As consideration for the sale, assignment and transfer of the Purchased Assetsentered into a settlement agreement with Richard Boswell (the “Tesla Digital Transaction”“Boswell Settlement Agreement”), on the Closing Date pursuant to which the Company agreed to payissue Mr. Boswell 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Boswell as of the date of his resignation from the Company pursuant to his employment agreement with the Company. Pursuant to the Sellers (i) 5,000,000 sharesBoswell Settlement Agreement, Mr. Boswell’s Employment Agreement with the Company dated November 30, 2017, was terminated as of the Company’s Common Stock, at no par value per share (the “Shares”), (ii) that parcel of real property known as 1517-1525 Ride Road, Essex, Ontario (Canada), which the Parties acknowledged has already been satisfactorily tendered by Company to Sellers with assumption of mortgage, and (iii) that parcel of real property known as 135 North Rear Road, Town of Lakeshore, Ontario (Canada), which the Parties acknowledged has already been satisfactorily tendered by Company to Sellers with assumption of mortgage.April 15, 2022.

 

Pursuant to notice given to its current transfer agent on Closing Date,Dismissal of Independent Registered Accounting Firm

On May 2, 2022, the Company has authorized and instructed transfer agent to reserve the SharesBoard of the Company approved the dismissal of Mazars USA LLP (“Mazars”), as its independent registered accounting firm, effective immediately. Mazars was engaged by the Company on January 16, 2018. No audit report of Mazars for issuance upon the written requestyears ended December 31, 2021 or December 31, 2020, contained an adverse opinion or a disclaimer of any of the Sellers in accordanceopinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, with the terms thereinexception of providing an explanatory paragraph stating there was substantial doubt about the Company’s ability to continue as a going concern. During the Company’s two most recent fiscal years and following written confirmation bythrough May 2, 2022, (i) there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the Company.

The Transaction Documents are the definitive agreementsrelated instructions) between the Company and Sellers, following a Sale Purchase AgreementMazars on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Mazars, would have caused Mazars to make reference to the subject matter of such disagreement in connection with its reports on the financial statements for the salesuch periods and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of certain assets, properties and rights dated August 31, 2016, as well as its Amending Agreements dated March 29, 2018, September 30, 2018, April 3, 2019 and March 16, 2020.Regulation S-K).

 

From October 1,Engagement of New Independent Registered Accounting Firm

On May 2, 2022, the Company’s Board approved the appointment of Olayinka Oyebola & Co (“OOC”) as the Company’s new independent registered public accounting firm effective immediately. During the Company’s two most recent fiscal years ended December 31, 2021 to November 19, 2021,and 2020, and the subsequent interim period through May 2, 2022, neither the Company issued one new convertible note totaling $100,000nor anyone acting on its behalf consulted with conversion rightsOOC regarding either: (i) the application of 416,667 sharesaccounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, in connection with which either a written report or oral advice was provided to the Company common stock.that OOC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

 

Results of Operations

 

We have incurred recurring losses and have only recentlynot commenced revenue generating operations with our acquisition of Clear Com Media, Inc. on July 9, 2021.to date. Our expenses to date are primarily our general and administrative expenses and fees, costs and expenses related to acquisitions and operations. Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

 

The accompanying condensed consolidated financial statements have been prepared in contemplating continuation of the Company as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, a substantial doubt has been raised with regard to the ability of the Company to continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. The Company had an accumulated deficit of $43,895,667$46,221,218 at September 30, 2021March 31, 2022 and had no committed source of debt or equity financing. The Company did not have any operating revenue until the acquisition of Clear Com Media, Inc. on July 9, 2021 and such amounts are not expected to be sufficient to sustain ongoing operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company has relied on the issuance of loans payable and convertible debt instruments to finance its expenses, including a notenotes that isare in default, as described in Notes 5,6,7,and is secured by the Company’s equipment and certain unsecured convertible notes payable.8. The Company will be dependent upon raisingcontinue to raise additional capital through placement of our common stock, notes or other securities in order to implement its business plan or additional borrowings, including from related parties. The COVID-19 pandemic has hindered the Company’s ability to raise capital. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

The Company’s cash position may not be sufficient to support the Company’s daily operations or its ability to undertake any business activity that will generate sufficient net revenue.

 

Results of Operations for the ThreeThree-Months Ended March 31, 2022 and Nine-Months Ended September 30, 2021 and 2020:2021::

 

The following tables reflect our operating results for the threethree-months ended March 31, 2022 and nine-months ended September 30, 2021, and 2020, respectively:

 

		Three-months ended
Operating Summary		September 30, 2021				September 30, 2020				Change
Revenue		$	272,166			$	-				n/a	%
Operating Expenses			(917,142	)			(968,424	)			(5.3	)%
Loss from Operations			(644,976	)			(968,424	)			(33.4	)%
Other Expense, net			(73,964	)			(957,752	)			(92.3	)%
Net Loss		$	(718,940	)		$	(1,926,176	)			(62.7	)%

		Nine-months ended
Operating Summary		September 30, 2021				September 30, 2020				Change
Revenue		$	272,166			$	-				n/a	%
Operating Expenses			(17,525,559	)			(2,189,621	)			700.4	%
Loss from Operations			(17,253,393	)			(2,189,621	)			688.0	%
Other Income (Expense), net			418,253				(2,696,548	)			(115.5	)%
Net Loss		$	(16,835,140	)		$	(4,886,169	)			244.5	%

		Three-months ended
Operating Summary		March 31, 2022				March 31, 2021				Change
Revenues, net		$	340,260			$	-				100	%
Cost of Goods Sold			-				-				-
Gross Profit			340,260				-				-
Operating Expenses			480,136				344,840				(39.2	%)
Loss from Operations			139,876				344,840				59.4	%
Other Expense			118,993				278,195				57.2	%
Net Loss		$	258,869			$	623,035				58.4	%

 

Revenue

 

Effective July 9,We have not recognized revenue during the three-months ended March 31, 2021 with the acquisition of Clear Com Media, Inc.,and 2020, as we have not commenced revenue generating operations. All revenue generating activity was from the Digital segment. Revenue of $272,166 was recognized during both the three and nine-months ended September 30, 2021. We did not recognize revenue during the three or nine-months ended September 30, 2020, as we had not yet commenced revenue generating operations.operations to date.

 

Operating Expenses

 

Growth Segment

During the three months ended September 30, 2021,March 31, 2022, our operating expenses were $570,311$480,260 compared to $968,424$344,480 during the three months ended September 30, 2020.March 31, 2021. During the three months ended September 30,March 31, 2022, our operating expenses were comprised of salary and consulting fees of $47,011, and general and administrative expenses of $433,125. By comparison, during the three months ended March 31, 2021, our operating expenses were comprised of salary and consulting fees of $328,914,$31,200, stock-based compensation expense of $75,750, and general and administrative expenses of $165,647. By comparison, during the three months ended September 30, 2020, our operating expenses were comprised of salary and consulting fees of $167,200, stock-based compensation expense of $196,650, general and administrative expenses of $268,487, and losses from lease abandonment, lease termination, and associated disposal of property and equipment of $336,087.$237,890. Expenses incurred during the three months ended September 30, 2021March 31, 2022 compared to three months ended September 30, 2020 decreasedMarch 31, 2021 increased primarily due to the non-recurring losses from lease abandonment, lease termination,acquisition of Clear Com Media and its associated disposal of property and equipment that occurred in 2020 and decreases in general and administrative spending.expenses.

 

During the nine months ended September

 

Other Income and Expense Items

 

During the three months ended September 30, 2021,March 31, 2022, our other expense, net was $73,964$117,159 compared to other expense, net of $957,752$278,195 during the three months ended September 30, 2020.March 31, 2021. During the three months ended September 30,March 31, 2022, our other income and expense items were comprised of interest expense of $124,236, foreign exchange loss of $7,077. By comparison, during the three months ended March 31, 2021, our other income and expense items were comprised of interest expense of $173,412,$253,264, interest income of $87, governmental assistance income of $116,610, loss on change in fair value of patent acquisition liability of $52,900, and foreign exchange gain of $35,651. By comparison, during the three months ended September 30, 2020, our other income and expense items were comprised of interest expense of $921,017, interest income of $1,553,$594, and foreign exchange loss of $38,288. Expenses incurred$24,725. The decrease during the three months ended September 30, 2021 compared to three months ended September 30, 2020 decreased primarilyperiod is due to a decrease in interest expense as a resultdriven by the conversion of certain debt conversions.

During the nine months ended September 30,instruments to shares in 2021 our other income, net was $418,253 compared to other expense, net of $2,696,548 during the nine months ended September 30, 2020. During the nine months ended September 30, 2021, our other income and expense items were comprised of interest expense of $703,665, interest income of $481, governmental assistance income of $116,610, gain on change in fair value of patent acquisition liability of $1,025,100, and foreign exchange loss of $20,273. By comparison, during the nine months ended September 30, 2020, our other income and expense items were comprised of interest expense of $2,727,672, interest income of $5,465, and foreign exchange gain of $25,659. Expenses incurred during the nine months ended September 30, 2021 compared to nine months ended September 30, 2020 decreased primarily due to a decrease in interest expense as a result of debt conversions and a favorable change in the fair value of the patent acquisition liability.

 

Income Taxes

 

As of September 30, 2021,March 31, 2022, the Company has net operating loss carryforwards of approximately $29,200,000$46,221,218 that may be available to reduce future years’ taxable income. As of September 30, 2021,March 31, 2022, the Company has a deferred tax asset of approximately $7,700,000$3,500,000 which has been completely offset by a valuation allowance. The Company believes that it is more likely than not that the carryforwards will expire unused as the Company has not been able to commence revenue generatingrevenue-generating activities to date.

 

Net Loss

 

Our net loss during the three months ended September 30, 2021March 31, 2022 was $718,940$258,869 compared to a net loss of $1,926,176$623,035 during the three months ended September 30, 2020March 31, 2021 due to the factors discussed above.

Our net loss during the nine months ended September 30, 2021 was $16,835,140 compared to a net loss of $4,886,169 during the nine months ended September 30, 2020 due to the factors discussed above.

Other Comprehensive Loss

Our comprehensive loss arises from foreign currency translation adjustments related to CCM based upon published exchange rates. During both the three and nine-months ended September 30, 2021 our other comprehensive loss was $44,379. We had no items of comprehensive income or loss during either the three or nine-months ended September 30, 2020.

 

Liquidity and Capital Resources

 

As of September 30, 2021March 31, 2022 and December 31, 2020,2021, our liquid assets consisted of cash of $213,805$135,178 and $1,908,$193,198, respectively.

 

As of September 30, 2021,March 31, 2022, our indebtedness includes a patent acquisition liability of $354,900, accrued interest of $1,323,520,$1,396,563, accrued interest to related parties of $1,804,448,$1,962,816, as well as loans payable, loans payable to related parties, convertible notes, and convertible notes to related parties at original issuance totaling $6,497,758 ($6,474,082 net of debt discount), and a CEBA loan payable of $31,396, with maturity dates as outlined below. The convertible notes are generally due 2 years from issuance with notes maturing in 2018 through 2022. As of November [ ], 2021 we are currently in default of $5,272,669 of unsecured debt.$5,196,349. We expect our operating and administrative expenses to be at least $1,200,000$1,800,000 annually.

 

Description		Maturity Date		Amount at Original Issuance
Loan Payable		Q2 2016		$	75,000
Loan Payable		Q2 2018			10,000
Loan Payable		Q1 2019			53,000
Loan Payable		Q2 2019			210,000
Loan Payable		Q3 2019			30,000
Loan Payable		Q4 2019			45,000
Loan Payable		Q1 2020			32,000
Loan Payable		Q3 2020			162,395
Loan Payable		Q2 2021			50,000
Loan Payable		Q3 2021			302,187
Loan Payable		On Demand			867,088
Loan Payable – Related Party		Q4 2018			838,330
Loan Payable – Related Party		Q4 2019			300,000
Loan Payable – Related Party		Q3 2020			1,388,122
Loan Payable – Share Interest		Q3 2021			50,000
Loan Payable – Share Interest		Q4 2021			100,000
Loan Payable – Share Interest – Related Party		Q4 2021			175,000
Convertible Notes		Q2 2018			4,000
Convertible Notes		Q4 2018			50,000
Convertible Notes		Q1 2019			137,072
Convertible Notes		Q2 2019			10,000
Convertible Notes		Q3 2019			40,000
Convertible Notes		Q4 2019			105,600
Convertible Notes		Q1 2020			122,800
Convertible Notes		Q4 2020			7,000
Convertible Notes		Q2 2021			75,000
Convertible Notes		Q4 2021			175,000
Convertible Notes		Q2 2022			35,000
Convertible Notes - Related Party		Q1 2019			878,368
Convertible Notes - Related Party		Q3 2020			121,796
Convertible Notes - Related Party		Q2 2022			48,000
CEBA Loan Payable		Q4 2025			31,396
Total				$	6,529,154

Loans payable - related party consists of the following at March 31, 2022 and December 31 2021:

		2022				2021
Loan payable in default due to the spouse of Bill Chaaban, former CEO of CEN, which bears an interest at 12% per annum. This loan matured on August 17, 2020.		$	1,388,122			$	1,388,122
Loans payable in default to a former director of Creative, former parent company, bear interest at 10% per annum. This are unsecured loans that matured on December 31, 2018.			601,500				601,500
Loan payable in default to R&D Labs Canada, Inc., whose president is Bill Chaaban, also the former CEO of CEN, bearing interest at 8% per annum. This is an unsecured loan that matured on October 2, 2019. R&D Labs Canada is a company owned by Bill Chaaban’s spouse.			300,000				300,000
Loans payable in default to the spouse of Bill Chaaban, former CEO of CEN, for the original amounts of CAD 48,630 and USD $198,660, bear interest at 10% per annum. These are unsecured loans that matured on December 31, 2018.			237,019				237,019
Loan payable to the spouse of Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 12, 2018 with a 30-day maturity, bearing share interest of 4,000 common shares per 30-day period. This is an unsecured loan that matures on April 16, 2022.			100,000				100,000
Loan payable to Alex Tarrabain, former CFO and a Director of CEN, issued January 17, 2018 with a 30-day maturity, bearing share interest of 3,000 common shares per 30-day period. This is an unsecured loan that matures on April 16, 2022.			75,000				75,000
Loan payable to Joseph Byrne, a 5% shareholder and former CEO, and current President and member of the board of CEN, issued January 24, 2018 with a 30-day maturity, bearing share interest of 2,000 common shares per 30-day period. This loan was repaid in June 2021.			-				-
Total loans payable - related party (all current)		$	2,701,641			$	2,701,641

Convertible notes payable consists of the following at March 31, 2022 and December 31 2021:

		2022				2021
Convertible notes payable in default to multiple private investors, including certain notes in default, bearing interest at 5% per annum with conversion rights for 363,767 common shares, which matured at various dates between May 2018 and October 2021.		$	576,472			$	576,472
Convertible notes payable with beneficial conversion features at original issuance to multiple private investors, bearing interest at 5% per annum with conversion rights for 550,965 common shares, maturing at various dates between June 2022 and December 2022.			145,000				145,000
Convertible note payable, due on demand, for the original amount of CAD 1,104,713, bearing interest at 7% per annum which had conversion rights for 335,833 common shares. Effective August 17, 2021, the note was amended and reclassified to loans payable as the conversion feature was removed, see Note 9.			-				-
Total convertible notes payable			721,472				721,472
Less unamortized debt discount			78,142				78,142
Total convertible notes payable, net of unamortized debt discount			643,330				643,330
Less current portion			643,330				643,330
Convertible notes payable, less current portion		$	-			$	-

Convertible notes - related party consists of the following at March 31, 2022 and December 31 2021:

		2022				2021
Convertible notes, in default, due to Joseph Byrne, former CEO, and current President and member of the board of CEN, bearing interest at 12% per annum. This note is convertible to 76,123 common shares and matured on August 17, 2020.		$	121,796			$	121,796
Convertible notes with beneficial conversion features due to the parents of Jeffery Thomas, a Director of CEN, bearing interest at 5% per annum. These notes are convertible to 94,488 common shares with a maturity date of May 24, 2022.			48,000				48,000
Convertible note, in default, due to the spouse of Bill Chaaban, former CEO of CEN, which bears an interest at 12% per annum. This note was convertible to 867,576 common shares and matured on August 17, 2020. Effective August 17, 2021, the note was amended and reclassified as the conversion feature was removed, see Note 10.			-				-
Convertible notes due to Harold Aubrey de Lavenu, a Vice President and Director of CEN, bearing interest at 5% per annum. On October 12, 2021, this note was converted to 548,980 common shares.			-				-
Convertible note due to Alex Tarrabain, former CFO and a Director of CEN, bearing interest at 5% per annum. On April 10, 2021, this note was converted to 30,000 common shares.			-				-
Convertible note due to Darren Ferris, brother of Ameen Ferris, a Vice President and a Director of CEN, bearing interest at 5% per annum. On April 26, 2021, this note was converted to 12,500 common shares.			-				-
Total convertible notes payable – related parties			169,796				169,796
Less unamortized debt discount			7,157				7,157
Total convertible notes payable - related parties (all current)		$	162,639			$	162,639

 

We intend to fund our expenses through revenues generated through Clear Com Media, Inc. and from the issuance and sale of additional securities. We do not have any commitments from any persons to purchase any securities and there can be no assurance that we will be able to raise sufficient funds to pay our liabilities as they become due and payable.

 

 

Nine-monthsThree-months ended September 30,March 31, 2022 and 2021 and 2020

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities. During the ninethree months ended September 30, 2021,March 31, 2022, we used $256,032$58,020 in operating activities compared to $399,306$61,128 used in operating activities during the ninethree months ended September 30, 2020.March 31, 2021. The decrease in the use of operating cash between the two periods wasrelated primarily related to increasesa decrease in generalour overall net loss driven by decreased levels of interest expense and administrative expenses that werecollections on other receivables, as offset by the commencement of revenue generating activities with the acquisition of CCM on July 9, 2021.an unfavorable change in exchange rates.

 

Cash Flows from Investing Activities

 

Our use of cash flow provided byfor investing activities during the ninethree months ended September 30, 2021March 31, 2022 was $66,731$0 compared to cash used in investing activities of $103,199$50,000 during the ninethree months ended September 30, 2020.March 31, 2021. During the ninethree months ended September 30,March 31, 2021, our cash flows from investing activities was comprised of an addition of cash as part of the CCM acquisition in exchange for shares of CEN common stock, advances to CEN Biotech Ukraine of $120,000, research and development of $53,751, and purchases of equipment of $18,988. By comparison, during the nine months ended September 30, 2020, our use of cash flows for investing activities waswere comprised of advances to CEN Ukraine of $105,000 and proceeds$50,000. By comparison, during the three months ended March 31, 2022, we did not have any cash flows from the sale of equipment of $1,801.investing activities. 

 

Cash Flows from Financing Activities

 

During the ninethree months ended September 30, 2021,March 31, 2022, we received $460,830$0 through issuance of convertible notes to investors to fund our working capital requirements and repaid $50,000 of our loans payable.requirements. During the ninethree months ended September 30, 2020,March 31, 2021, we received $499,000$110,000 through issuance of convertible notes to investors to fund our working capital requirements.

During the nine months ended September 30, 2021, holders of convertible notes totaling $5,091,785 elected to convert their notes into 3,437,633 common shares.

During the nine-month period ended September 30, 2021, certain private investors elected to convert $78,893 of accrued interest owed on convertible notes into 94,357 shares of common stock.

 

CEN has no committed source of debt or equity financing. Our Executive team and Board are seeking additional financing from their business contacts, but no assurances can be given that such financing will be obtained or, if obtained, on what terms.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a reporting company that will increase our operating costs or cash requirements in the future.

 

Jumpstart Our Business Startups Act of 2012

 

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) provides that an emerging growth company can take advantage of certain exemptions from various reporting and other requirements that are applicable to public companies that are not emerging growth companies. We currently take advantage of some, but not all, of the reduced regulatory and reporting requirements that are available to us for as long as we qualify as an emerging growth company. Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting for as long as we qualify as an emerging growth company.

 

Recent Accounting Pronouncements

 

Recently Adopted Accounting Pronouncements

 

No pronouncements were adopted by the Company during the nine-month periodquarter ended September 30, 2021.March 31, 2022.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement (ASU 2020-06) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity's own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity's own equity. As a smaller reporting company, as defined by the SEC, this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The Company intends to adoptis currently evaluating the impact of this standard effective January 1, 2022.ASU on the consolidated financial statements.

 

Critical Accounting Policies

 

The preparation of condensed consolidated financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.

 

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the condensed consolidated financial statements.

 

Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made, except as it relates to the provisional estimates surrounding the valuation of net assets recognized in conjunction with the acquisition of CCM on July 9, 2021. ASC 805 allows for a measurement period, not to exceed 12 months from the date of acquisition, for filers to compile sufficient information to complete their estimate of the fair value of the net assets acquired. As of September 30, 2021, the Company is still in this measurement period. Any significant adjustments to our estimates of fair value of acquired net assets in future periods could have significant impacts on reported results from such periods.made. Note 1to the consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a smaller reporting company, we are not required to provide the information called for by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

(a) Evaluation of disclosure and controls and procedures.

 

We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Exchange Act. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’sCompany’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of September 30, 2021,March 31, 2022, our disclosure controls and procedures were not effective.

Management recognized the need for additional resources in the area of accounting and financial reporting controls and procedures. As a result, we have outsourced the accounting and financial reporting oversight roles to a qualified accounting firm with public company reporting expertise.

 

(b) Changes in internal control over financial reporting.

 

During the quarter ended September 30, 2021,In April of 2022, the Company acquiredhad management changes to its officers and directors, including the Clear Com Media, Inc. business. Asresignations of quarter ended September 30, 2021, management isthe Company’s Chief Executive Officer and Chief Financial Officer, and Brian S. Payne was appointed as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, as further described in the processCompany’s 8-K filings and elsewhere in this quarterly report. Additionally, in May of integrating2022, the Company changed its independent registered accounting firm as further described in the Company’s 8-K filings and elsewhere in this quarterly report. Further, in May of 2022, the Company changed its outside accounting service provider to a new business line into the Company's overall internal control environment. Further, management will perform a thorough review of processes and procedures to ensure appropriate controls are in place. Management anticipates completing these integration efforts by the end of the current year ending December 31, 2021.third party firm.

 

Other than the foregoing, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2021March 31, 2022 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.

 

From time to time, we may become party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operation if determined adversely to us.

 

ITEM 1A. RISK FACTORS.

 

Not applicable.

 

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

 

During both the three and nine-monthsthree-months ended September 30, 2021,March 31, 2022, the Company made the following issuances of shares of its common stock pursuant to certain Settlement Agreements:

●

Pursuant to the Bahige (Bill) Chaaban (the “Chaaban Settlement Agreement”) the Company issued Mr. Chaaban 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Chaaban as of the date of his resignation from the Company pursuant to his employment agreement with the Company.

●

Pursuant to the Alex Tarrabain (the “Tarrabain Settlement Agreement”) the Company issued Mr. Tarrabain 1,196,673 restricted shares of its common stock in exchange for the accrued salary of $89,682.19 owed to Mr. Tarrabain as of the date of his resignation from the Company pursuant to his employment agreement with the Company.

●

Pursuant to the Rick Purdy (the “Purdy Settlement Agreement”) the Company the Company issued Mr. Purdy 150,483 restricted shares of its common stock in exchange for the accrued salary of $11,286.19 owed to Mr. Purdy as of the date of his resignation from the Company pursuant to his employment agreement with the Company.

●

Pursuant to the Ameen Ferris (the “Ferris Settlement Agreement”) the Company issued Mr. Ferris 433,096 restricted shares of its common stock in exchange for the accrued salary of $32,482.19 owed to Mr. Ferris as of the date of his resignation from the Company pursuant to his employment agreement with the Company.

●

Pursuant to the Richard Boswell (the “Boswell SettlementAgreement”) the Company issued Mr. Boswell 1,785,096 restricted shares of its common stock in exchange for the accrued salary of $133,882.19 owed to Mr. Boswell as of the date of his resignation from the Company pursuant to his employment agreement with the Company.

During the three-months ended March 31, 2022, CEN entered into loans and associated extension agreements with various parties and also settled an accrued liabilities.liability. In consideration for such loans and associated extensions, along with the settlement of an accrued liabilities,liability, CEN granted various individuals a total aggregate amount of 192,726418,667 unregistered shares of common stock of CEN during both the three and nine-months-months ended September 30, 2021.March 31, 2022.

 

The above issuances of shares of common stock were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended and the provisions of Regulation D promulgated thereunder or in reliance on the provisions of Regulation S promulgated thereunder.

During both the three and nine-months ended September 30, 2021, we issued $456,395 of convertible notes to investors to fund our working capital requirements. These notes bear interest at 5% per year and are convertible at the option of the holder into 677,775 common shares.

The above issuances of convertible notes were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended and the provisions of Regulation D promulgated thereunder or in reliance on the provisions of Regulation S promulgated thereunder.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

CEN has a payment default with respect to certain unsecured loans payable to private investors and related parties, in the principal amount of $3,243,846 and which bear interest at rates from 5% to 22% per annum which were due prior to November 19, 2021. The aggregate amounts due under these loans as of November 19, 2021, including accrued interest, is approximately $4,969,425. Interest and default interest and related fees currently accrue at approximately $97,000 per quarter.

 

CEN has a payment default with respect to certain unsecured convertible loans payable to private investors and related parties, in the principal amount of $1,726,636$805,969 and which bear interest at rates from 5% to 12% per annum which were due prior to November 19, 2021.March 31, 2022. The aggregate amounts due under these loans as of November 19, 2021,March 31, 2022, including accrued interest, is approximately $2,149,000.$1,500,000. Interest and default interest and related fees currently accrue at approximately $24,000$96,000 per quarter.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

The exhibits listed on the Exhibit Index below are provided as part of this report.

 

Exhibit No.		Description
3.1		Articles of Incorporation of Cen Biotech, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement (Commission file number 000-55557) on Form 10 filed with the SEC January 4, 2016.)
3.2		By-Laws of Cen Biotech, Inc. (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement (Commission file number 000-55557) on Form 10 filed with the SEC January 4, 2016.)
31.110.1		Certification of Chief Executive Officer pursuantSettlement Agreement dated April 19, 2022 between the registrant and Bahige (Bill) Chaaban. (Incorporated by reference to Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302Exhibit 10.1 of the Sarbanes-Oxley Act of 2002.*Company’s Current Report on Form 8-K filed with the SEC on April 21, 2022).
31.210.2		Settlement Agreement dated April 19, 2022 between the registrant and Alex Tarrabain. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2022).
10.3		Settlement Agreement dated April 19, 2022 between the registrant and Rick Purdy. (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2022).
10.4		Settlement Agreement dated April 19, 2022 between the registrant and Ameen Ferris. (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2022).
10.5		Settlement Agreement dated April 19, 2022 between the registrant and Richard Boswell. (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2022).
31.1		Certification of the Chief Executive and Financial Officer pursuant to Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Certification of the Chiefand Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

 

 

101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).*
101.SCH	Inline XBRL Taxonomy Extension Schema Document.*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document.*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).*

_____________

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* Filed herewith.

 

b.     Financial Statement Schedules

 

None

 

 

SIGNATURES

 

Pursuant to the requirements of Section 15(d) 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.

 

Dated: November 19, 2021May 20, 2022

	CEN BIOTECH, INC.
	By:	/s/ Bahige Chaaban
By:	/s/ Brian S. Payne
Name:	Bahige ChaabanBrian S. Payne
	Title:	Chief Executive Officer (Principal Executive Officer)

 

Dated: November 19, 2021 May 20, 2022	/s/ Alex TarrabainBrian S. Payne
	Name: Alex Tarrabain Brian S. Payne
	Title: Chief Financial Officer (Principal Financial and Accounting Officer)