UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark
One)
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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the
fiscal year ended: December 31, 2016
OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the
transition period
from ________________________ to _________________________
Commission
file number: 333-177500
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SYMBID CORP.
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(Exact
name of registrant as specified in its charter)
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Nevada
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45-2859440
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(State
or other jurisdiction of incorporation or
organization)
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(IRS
Employer Identification No.)
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Marconistraat 16, 3029 AK Rotterdam, The Netherlands
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(Address
of principal executive offices)
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(Postal
Code)
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+31(0)108900400
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(Registrant’s
telephone number, including area code)
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Securities
registered pursuant to Section 12(b) of the
Act:
None
Securities
registered pursuant to Section 12(g) of the
Act:
Common Stock, par
value $0.001 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act.
Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90
days. Yes ☒
No ☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such
files). Yes ☒
No ☐
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form
10-K. ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of the
“large accelerated filer,” “accelerated
filer,” “non-accelerated filer,” and
“smaller reporting company” in Rule 12b-2 of the
Exchange Act.
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Large
Accelerated Filer ☐
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Accelerated
Filer ☐
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Non-Accelerated
Filer ☐
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Smaller
reporting company ☒
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(Do not
check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange
Act). Yes ☐
No ☒
As of
June 30, 2016, there were 37,277,039 shares of the
registrant's common stock, par value $0.001 per share, issued and
outstanding. Of these, 29,125,391 shares were held
by non-affiliates of the registrant. The market value of
securities held by non-affiliates on June 30, 2016 was $5,096,943
based upon a closing price of $0.175 per share on June 30,
2016.
As of
March 31, 2017, there were 187,329,355 shares of the
registrant’s common stock, $0.001 par value per share, issued
and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Not
Applicable.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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1
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PART I
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2
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ITEM
1.
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BUSINESS
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2
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ITEM
1B.
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UNRESOLVED STAFF COMMENTS
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26
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ITEM
2.
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PROPERTIES
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26
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ITEM
3.
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LEGAL PROCEEDINGS
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26
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ITEM
4.
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MINE SAFETY DISCLOSURES
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26
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PART
II
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26
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ITEM
5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER
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MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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27
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ITEM
6.
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SELECTED FINANCIAL DATA
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30
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ITEM
7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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30
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ITEM
7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
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41
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ITEM
8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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41
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ITEM
9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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41
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ITEM
9A.
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CONTROLS AND PROCEDURES
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41
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ITEM
9B.
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OTHER INFORMATION
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43
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PART III
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43
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ITEM
10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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43
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ITEM
11.
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EXECUTIVE COMPENSATION
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46
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ITEM
12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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AND RELATED STOCKHOLDER MATTERS
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47
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ITEM
13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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48
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ITEM
14.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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50
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PART
IV
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49
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ITEM 15.
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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50
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SIGNATURES
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56
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This
Current Report contains forward-looking statements, including,
without limitation, in the sections captioned “Description of
Business,” “Risk Factors,” and
“Management’s Discussion and Analysis of Financial
Condition and Plan of Operations,” and
elsewhere. Any and all statements contained in this
Report that are not statements of historical fact may be deemed
forward-looking statements. Terms such as “may,”
“might,” “would,” “should,”
“could,” “project,” “estimate,”
“pro-forma,” “predict,”
“potential,” “strategy,”
“anticipate,” “attempt,”
“develop,” “plan,” “help,”
“believe,” “continue,”
“intend,” “expect,” “future,”
and terms of similar import (including the negative of any of the
foregoing) may be intended to identify forward-looking
statements. However, not all forward-looking statements
may contain one or more of these identifying
terms. Forward-looking statements in this Report may
include, without limitation, statements regarding (i) the plans and
objectives of management for future operations, (ii) a projection
of income (including income/loss), earnings (including
earnings/loss) per share, capital expenditures, dividends, capital
structure or other financial items, (iii) our future financial
performance, including any such statement contained in a discussion
and analysis of financial condition by management or in the results
of operations included pursuant to the rules and regulations of the
Securities and Exchange Commission (the “SEC”), and
(iv) the assumptions underlying or relating to any statement
described in points (i), (ii) or (iii) above.
The
forward-looking statements are not meant to predict or guarantee
actual results, performance, events or circumstances and may not be
realized because they are based upon our current projections,
plans, objectives, beliefs, expectations, estimates and assumptions
and are subject to a number of risks and uncertainties and other
influences, many of which we have no control over. Actual results
and the timing of certain events and circumstances may differ
materially from those described by the forward-looking statements
as a result of these risks and uncertainties. Factors that may
influence or contribute to the inaccuracy of the forward-looking
statements or cause actual results to differ materially from
expected or desired results may include, without limitation, our
inability to obtain adequate financing, existing or increased
competition, results of arbitration and litigation, stock
volatility and illiquidity, and our failure to implement our
business plans or strategies. A description of some of
the risks and uncertainties that could cause our actual results to
differ materially from those described by the forward-looking
statements in this Report appears in the section captioned
“Risk Factors” and elsewhere in this
Report.
Readers
are cautioned not to place undue reliance on forward-looking
statements because of the risks and uncertainties related to them
and to the risk factors. We disclaim any obligation to
update the forward-looking statements contained in this Report to
reflect any new information or future events or circumstances or
otherwise.
Readers
should read this Report in conjunction with the discussion under
the caption “Risk Factors,” our financial statements
and the related notes thereto in this Report, and other documents
which we may file from time to time with the SEC.
1
ITEM
1.
BUSINESS
Unless
the context indicates otherwise, all references in this Annual
Report to “Symbid,” the “Company,”
“we,” “us” and “our” refer to
Symbid Corp. and its wholly-owned consolidated subsidiary, Symbid
Holding B.V., FAC B.V. a wholly owned subsidiary of Symbid Holding
B.V., Symbid Germany GmbH, a 51% owned subsidiary of Symbid Holding
B.V., Symbid B.V., a wholly owned subsidiary of Symbid Holding B.V.
and direct and indirect subsidiaries of Symbid B.V. All references
in this Annual Report to “Symbid Holding B.V.” refer
solely to Symbid Holding B.V. and all references to Symbid B.V.
refer solely to Symbid B.V.
Business Developments
Corporate Restructuring
Because
we were not able to raise additional capital from investors in the
fourth quarter of 2016 we were forced to enter into settlements
with our creditors and note holders and restructure the Company.
This restructuring caused us to curtail certain business operations
and change our focus from the operation of online funding platforms
and the provision of software solutions for the alternative
financing in the small and medium enterprise (“SME”)
market to the licensing of available software packages for which we
own or license the intellectual property.
The
revised business model requires fewer employees, advisors and
consultants and is more economical to operate than our past
operations. Over the past few years we have developed several
software products suitable for the alternative market which we
continue to offer to and operate with third parties. Such products
and related services include white label versions of crowdfunding
software for investor groups and monitoring software to provide
investors with ongoing insight into the performance of SMEs to
which they have loaned money. Related licensing fees and
subscription agreements may include set fees and yearly
contribution fees.
Our
goal is to limit our debt, continue to operate our business and
negotiate a possible acquisition or other business combination with
another operating entity. There can be no assurance that we will be
successful in this endeavor or that if a business combination is
consummated that it will be on favorable terms. In the interim, we
are continuing forward with our business operations under the
revised business model.
As the
result of the restructuring, our previous crowdfunding platform in
the Netherlands will be operated through Symbid Coöperatie UA
(“Symbid Coöp”) and we will no longer receive
revenues from Symbid Coöp. We previously controlled and
operated Symbid Coöp through corporate governance but as the
result of the restructuring, Symbid Coöp has become an
independent entity. As we did not have the resources available to
continue the software development of the online funding platform,
Symbid Coöp developed the software for operating the
crowdfunding platform under the laws and regulations of The
Netherlands. Symbid Coöp has, in return for reimbursing the
further development of the software, been granted a non-exclusive
license to the intellectual property from Stichting Symbid IP
Foundation in order to continue crowdfunding operations in The
Netherlands. We will continue to hold an identical non-exclusive
license to the intellectual property of the crowdfunding platform
whereby we will be allowed to use the most up to date versions of
the software and other intellectual property.
Amendments to Employment Agreements
On July
1, 2016, each of Korstiaan Zandvliet, our Chief Executive Officer
and President, Maarten van der Sanden, our Chief Financial Officer,
Treasurer and Secretary, Robin Slakhorst, our former Vice
President, and Jeroen Bontje, a former key employee, executed
amendments to their respective employment agreements reducing their
respective base annual net salaries by approximately 50% to
€19,200. No other changes were made to such employment
agreements at that time.
2
Effective
October 12, 2016, each of our then executive officers, Korstiaan
Zandvliet, Maarten van der Sanden and Robin Slakhorst, executed
amendments to their respective employment agreements pursuant to
which each executive agreed to have their base salaries reduced to
zero retroactive to August 1, 2016. No other changes were made to
the employment agreements at that time.
Debt Restructuring
On
November 1, 2016 Symbid B.V. entered into agreements with Symbid
Coöp and persons having employment agreements with Symbid
B.V., providing for the termination of all Symbid B.V. employment
agreements and the entry into new agreements between such employees
and Symbid Coöp.
On
November 15, 2016, we entered into a Note Termination and
Conversion Agreement with each of the holders of our 2016 3-year,
8% unsecured convertible notes (the “2016 Notes”),
pursuant to which the holders agreed to the termination of their
2016 Notes in exchange for their receipt of equity participation
rights in Symbid Coöp. An aggregate of $550,000 in principal
amount of 2016 Notes together with all accrued interest due thereon
was cancelled and participation rights representing an aggregate of
18.75% of the equity in Symbid Coöp was issued.
On
November 15, 2016, we entered into a Note Termination and
Conversion Agreement with each of the holders of our 2015 3-year 8%
unsecured convertible notes (the “2015 Notes”) pursuant
to which the holders agreed to the termination of their respective
2015 Notes in exchange for equity participation rights in Symbid
Coöp and/or a right of first refusal with respect to any
direct or indirect activities of Symbid Corp. and related entities.
Right of First Refusal Agreement (“ROFRA”) requires
Symbid Corp. and related parties to inform the note holder in the
form of a written detailed business plan of any asset management
activities or operations in the SME market to be undertaken by
Symbid group companies. Symbid Corp. or any of the related entities
is required to provide marketing plans 60 days before asset
activities or operations begin. The investor will have a 15 day
grace period to veto or refuse such activities to be undertaken by
Symbid group or related parties. The ROFRA has a term which runs
through December 31, 2020. As to Symbid Corp., the right of first
refusal terminates if and when there is a change in control of
Symbid Corp. involving another entity with business activities
different from those currently undertaken by Symbid Corp. In
connection with the foregoing, one note holder of $1,175,000 in
principal amount of 2015 Notes agreed to receive the right of first
refusal executed on November 15, 2016, in combination with an
equity participation in Symbid Coöp while all of the other
holders agreed to receive equity participation rights in Symbid
Coöp. An aggregate of $1,310,000 in principal amount of 2015
Notes together with all accrued interest due thereon was cancelled
and participation rights representing an aggregate of 6.5% of the
equity in Symbid Coöp was issued. The Note Termination and
Conversion Agreements also provided for the termination of
pre-emptive rights which holders of the 2015 Notes had been granted
in connection with their purchases of 2015 Notes.
On
November 15, 2016 Symbid B.V. entered into an agreement with
Voyager Beheer BV (“Voyager”) and Symbid Coöp
which provided for the termination of a September 15, 2011
€66,950 promissory note from Symbid B.V. to Voyager,
including all accrued interest due thereon, in consideration of the
grant to Voyager of a 1.33% equity participation in Symbid
Coöp.
On
November 15, 2016 Symbid B.V. entered into an agreement with
Rabobank Leiden-Katwijk (“Rabobank”), IP Foundation and
Symbid Coöp pursuant to which Symbid B.V.’s outstanding
€52,959 debt to Rabobank and all accrued interest due thereon
are to be transferred to and assumed by Symbid Coöp. The
agreement further provided that a related line of credit with an
amount due of €60,500 be assumed by Symbid
Coöp.
On
November 15, 2016 Symbid Coöp assumed certain debts and
obligations from Symbid B.V. in consideration of cancellation of
the current account between Symbid B.V. and Symbid Coöp and
office furniture from Symbid B.V. to be obtained in return by
Symbid Coöp, under the suspending condition that all other
debts and obligations of Symbid B.V. are settled, with the
exception of any liabilities owed to Symbid Corp. or Symbid Holding
B.V. by Symbid B.V.
3
On
November 18, 2016 we settled approximately €101,000 in debts
with two creditors through agreements with Symbid Coöp under
which the creditors agreed to the termination of the debts in
consideration of receiving equity participation in Symbid Coöp
aggregating to 5% of Symbid Coöp.
License Agreements
On
November 15, 2016 Symbid B.V. and Symbid Coöp entered into an
Intellectual Property License Termination Agreement which
terminated the April 13, 2011 License Agreement between them
retroactive to November 1, 2016.
On
November 15, 2016 IP Foundation and Symbid Holding executed
Addendum 2 to their Intellectual Property License and Transfer
Agreement dated October 16, 2013 to enable IP Foundation to grant a
non-exclusive license to Symbid Coöp in return for Symbid
Coöp’s bearing the costs for the further development of
the related software, intellectual property rights and know-how.
This was done in recognition of the fact that Symbid Holding is no
longer able to continue development of the software in compliance
with applicable Netherlands laws and regulations due the financial
distressed situation of the Company.
On
November 15, 2016 Symbid Coöp and IP Foundation entered into
an Intellectual Property License and Transfer Agreement (the
“Agreement”) with retroactive effect to November 1,
2016 pursuant to which IP Foundation granted Symbid Coöp a
perpetual, royalty free license which included the right to grant
sublicenses to affiliates of Symbid Coöp to use the Symbid
online crowdfunding platform to conduct crowdfunding business
worldwide and to further develop and maintain the platform. Any
sublicenses granted to Symbid Coöp affiliates are required to
provide for the subsequent transfer of any intellectual property
rights and know how relating to the Symbid platform created by such
affiliates to Symbid Coöp. In the Agreement, Symbid Coöp
acknowledged and agreed that all intellectual property rights and
other ownership rights in the intellectual property would remain
with IP Foundation.
On
November 15, 2016 we settled approximately €15,000 in debts
with one creditor through a settlement agreement. The creditor is
the owner of the FAC monitoring technology intellectual property
rights for which we hold through our wholly owned subsidiary FAC
B.V. the exclusive perpetual worldwide free of charge license. In
consideration of the settlement of €15,000, the terms of the
license were changed to a non-exclusive perpetual worldwide free of
charge license.
Officer/Director Resignation
Robin
Slakhorst resigned as our Chief Commercial Officer and as a
Director effective the close of business on November 15, 2016. The
resignation of Mr. Slakhorst was not the result of any disagreement
with us on any matter related to our operations, policies or
practices.
Going Concern Qualification
Our
expenses have outpaced our revenues since our inception causing
liquidity issues and raising substantial doubt about our ability to
continue as a going concern. In recognition thereof, we have
implemented strategies to reduce expenses and restructure our
operations. Such restructuring, as described elsewhere in this
Report, has caused us to curtail certain of our operations and
change our business focus from the operation of online funding
platforms and the provision of software solutions for the
alternative financing market for the SME market to the licensing of
available software packages for which we own or license the
intellectual property.
4
Company Background
Founded
in The Netherlands in April 2011 as the provider of one of the
first crowdfunding platforms, our business evolved in 2015 into a
fully integrated, data driven, user friendly online funding network
consisting of several products and services known as The Funding
Network™.
The
Funding Network™ is intended to give SMEs direct access to
all forms of finance, while offering investors full transparency on
the potential risks and return of their portfolios and was
developed in response to the following funding hurdles affecting
entrepreneurs and investors in general and SMEs in
particular:
●
Limited or no
structured distribution channels for SME finance other than banks,
increasing the mismatch between entrepreneurs and
financiers;
●
No centralized
platform for (alternative) financiers, making it difficult and
inefficient to find the right financier at the right
time;
●
No standardized
data protocols for SME data, leading to costly and time-intensive
(offline) screening and monitoring;
●
Limited financial
skills of entrepreneurs leading to unnecessary inefficiencies and
obstacles within the financing process; and
●
Decline in bank
financing due to new regulations and recent financial crises,
leaving a vacuum in the life cycle of SME financing.
Since
2011, we have been a Dutch leader in equity-based crowdfunding
having funded 120 SME’s with over EUR 14.4 million
(approximately $15 million) in total crowdfunding volume since
inception.
As the
result of our corporate restructuring, we no longer offer
crowdfunding services in the Netherlands or elsewhere.
Our
online funding operations through The Funding Network™ are
intended to address the decreasing availability of traditional bank
financing options to SMEs in Europe and elsewhere. We are an early
mover in online funding having developed in-house investing and
monitoring technologies designed to create efficiently structured
capital market funding solutions. We believe that we are presently
the only European based online funding platform to offer
proprietary equity, loan and high quality monitoring services to
private SMEs. Certain competitors offer comparable funding services
but do not include monitoring services. Others provide equity and
loan funding services plus high quality monitoring services but do
not currently possess a proprietary user base or internal payment
method.
On
December 8, 2014 we entered into an agreement (the
“Agreement”) with Fortion Holding B.V., a Netherlands
limited liability corporation conducting its business under the
trade name Credion (“Credion”). Credion provides
financial advisory services in the Dutch SME markets and
specializes in debt and equity financings for SMEs. The Agreement
provides for a strategic alliance between us and Credion in which
Credion’s extensive network of investors and entrepreneurs
will be connected with each other through our online funding
platform. Credion will process the funding for its SME clients
through our platform resulting in monthly recurring revenue and
transaction fees for us. The alliance is intended to provide more
efficient access to capital for SMEs while greatly improving SME
data monitoring standards for investors. SMEs utilizing the
platform will have direct access to Credion’s investor
clients as well as our investors.
5
Prior
to November 2016, Symbid Coöp was the contractor for all of
our crowdfunding business in the Netherlands. We did not own or
have any interest in Symbid Coöp. Symbid Coöp was a
variable interest entity (“VIE”) which we, through
Symbid B.V., effectively controlled through corporate governance
rather than through any ownership. Because we owned no interest in
Symbid Coöp, we had no right to receive any distributions from
Symbid Coöp. The revenues to us from Symbid Coöp came
from administrative, success and management fees paid to us by
Symbid Coöp. Because of the corporate governance control
structure, we consolidated the financial statements of Symbid
Coöp with our own. For the fiscal years ended December 31,
2016 and 2015, approximately 90% and 80% of our revenues,
respectively, were derived from Symbid Coöp. For the years
ended December 31, 2016 and December 31, 2015 we had net losses of
$1,507,652 and $2,299,275, respectively.
In
August 2014 we incorporated in Germany our indirect, majority
owned, subsidiary Symbid Germany GmbH. We contributed capital of
$7,749 to this subsidiary, which is currently an entity without
operations.
Further
to the planned European expansion of our equity crowdfunding
operations, on February 20, 2015, Symbid Italia SPA (“Symbid
Italia”), an Italian corporation created to develop the
business of equity crowdfunding in Italy, was formed by our wholly
owned subsidiary, Symbid Holding B.V., together with Banca Sella
Holding SPA (“Banca Sella”) and Marco Bicocchi Pichi.
Through Symbid Italia, we intended to create a new online funding
platform, based on our existing crowdfunding technology, in which
Italian investors and entrepreneurs could connect, fund and grow
together and to digitalize financial services for Italian
SME’s. At the direction of the Symbid Italia board of
directors, a special Symbid Italia shareholder meeting was held on
April 29, 2016, at which it was determined to liquidate Symbid
Italia and return the residual capital to the Symbid Italia
shareholders.
On May 26, 2016, Symbid
Italia was liquidated and the Company received $44,922 for its
50.1% interest and recognized a loss of $2,986. The results of
Symbid Italia’s operations have been included in the
consolidated financial statements
In June
2015, our loan crowdfunding program was launched, and in the
beginning of July 2015 our first successful loan crowdfunding
campaign was realized. The launch of this peer-to-business lending
service complemented our existing equity crowdfunding service and
supported the development of our online funding platform for
start-ups and SME’s, The Funding Network.
To
operate the loan crowdfunding Symbid Coöp obtained an
exemption to mediate in redeemable funds from the Dutch Authority
Financial Markets.
Overview
We were
incorporated as HapyKidz.com, Inc. in Nevada on July 28, 2011 with
the intention to become an e-commerce marketplace that connects
merchants to consumers by offering daily discounts on goods and
services through a proprietary website. We were not successful in
this endeavor.
On
September 4, 2013, we filed a Certificate of Amendment to our
Articles of Incorporation with the Nevada Secretary of State to
change our name from HapyKidz.com, Inc. to Symbid
Corp.
On
December 6, 2013, we closed a share exchange (the “Share
Exchange”) pursuant to which the 19 shareholders of Symbid
Holding B.V. sold all of their capital stock in Symbid Holding B.V.
to us in exchange for 21,170,000 shares of our common stock, $0.001
par value per share (the “Common Stock”). As a result
of the Share Exchange, Symbid Holding B.V. became a wholly owned
subsidiary of ours.
As the
result of the Share Exchange, we became engaged in the business of
creating and operating online, equity based crowdfunding platforms,
through our wholly owned subsidiary, Symbid Holding B.V. In 2015,
we expanded our operations to include an online platform for SME
funding, connecting new and traditional sources of finance in one
integrated network built around our technology or elsewhere. As the
result of the corporate restructuring in November 2016, we no
longer offer crowdfunding services in the Netherlands or
elsewhere.
6
In
connection with the Share Exchange and pursuant to a December 6,
2013 Split-Off Agreement (the “Split-Off Agreement”),
we transferred our pre-Share Exchange business to Holli Morris, our
pre-Share Exchange majority stockholder, in exchange for the
surrender by her and cancellation of 187,500,000 shares of our
Common Stock.
As a
result of the Share Exchange and Split-Off, we discontinued our
pre-Share Exchange business and acquired the business of Symbid
Holding B.V. and we have continued the existing business operations
of Symbid Holding B.V. as a publicly-traded company under the name
Symbid Corp.
Also on
December 6, 2013, we completed an initial closing of a private
placement offering of 3,098,736 units at $0.50 per unit, for
aggregate gross proceeds of $1,549,368 (before deducting placement
agent fees and expenses of the offering estimated at approximately
$64,895). Each of these units consisted of one share of our common
stock and one warrant to purchase one share of our common stock.
The warrants were exercisable for a period of three (3) years at a
purchase price of $0.75 per share. The private placement was exempt
from registration under Section 4(a)(2) of the Securities Act of
1933, as amended (the “Securities Act”), in reliance
upon the exemptions provided by Regulation D and Regulation S
promulgated by the SEC thereunder. The private placement was sold
to “accredited investors,” as defined in Regulation D
and/or to “non-U.S. Persons” in accordance with Rule
903 of Regulation S under the Securities Act. On February 5, 2014,
we completed a second closing of the private placement for
aggregate additional gross proceeds of $186,992. On May 20, 2014,
we completed a third and final closing of the private placement for
aggregate additional gross proceeds of $1,190,405.
The
Share Exchange was treated as a recapitalization of the Company for
financial accounting purposes and Symbid Holding B.V. was
considered the acquiror for accounting purposes.
In
accordance with “reverse acquisition” accounting
treatment, our historical financial statements as of period ends,
and for periods ended, prior to the Share Exchange have been
replaced with the historical financial statements of Symbid Holding
B.V. prior to the Share Exchange in our post Share Exchange filings
with the SEC.
Prior
to the Share Exchange, we were a “shell company” (as
such term is defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). As a
result of the Share Exchange, we ceased to be a shell
company.
On
January 28, 2015, we completed the initial closing under a private
placement offering in which we offered shares of our common stock
at a purchase price of $0.50 per share. In connection therewith, we
sold 1,248,232 shares for aggregate proceeds of $624,116. Effective
June 30, 2015, we sold an additional 200,000 shares for aggregate
proceeds of $100,000 and completed the offering.
On July
14, 2015 and September 8, 2015, we closed on the sale of $250,000
and $1,250,000, respectively, in principal amount of three-year, 8%
unsecured convertible promissory notes (the “Notes”).
Interest was payable on the first, second and third anniversaries
of the issuance date. At any time after issuance, the holders
could, at their option, convert all or a portion of the principal
and interest then due into shares of common stock at a price of
$0.25 per share. On July 14, 2015, we received conversion notices
from four persons holding an aggregate of $190,000 in principal
amount of Notes of their determination to convert all of such
principal into an aggregate of 760,000 shares and subsequently
issued such shares. As set forth under
Debt Restructuring
above, the balance
of the Notes were terminated on November 15, 2016 pursuant to Note
Termination and Conversion Agreements.
On June
1, 2016, we closed on the sale of $550,000 in principal amount of
three-year 8% unsecured convertible promissory notes (the
“2016 Notes”). Interest was payable on the first,
second and third anniversaries of the issuance date. If, during the
term of the 2016 Notes, we completed an equity offering (a
“Qualified Offering”) for gross proceeds of not less
than $1,500,000, the holders could, at their option, convert all or
a portion of the principal and interest then due into shares of
common stock at a price per share equal to 50% of the price at
which our common stock was sold in the Qualified Offering. As set
forth under
Debt
Restructuring
above, the 2016 Notes were terminated on
November 15, 2016 pursuant to Note Termination and Conversion
Agreements.
7
On
December 9, 2016, we entered into a Securities Purchase Agreement
with CKR Law LLP (“CKR”) pursuant to which we issued
149,863,484 shares of our restricted common stock to CKR and its
designees for (i) the cancellation of an aggregate of $86,456.41
due from the Company to CKR for legal services and expense
reimbursements; (ii) a cash payment of $43,614 and (iii) the
commitment of CKR to fund certain future operating expenses of the
Company.
Although
Symbid Holding B.V., Symbid B.V. and their subsidiaries maintain
their books and records in their functional currency, the Euro
(“EUR” or “€”), the currency of The
Netherlands, for financial reporting purposes Symbid Corp. uses the
United States dollar (“U.S. dollars,” “USD”
or “$”). For purposes of describing metrics or certain
business related numbers in the Business description or MD&A
Section an exchange rate of $1.05 for €1 as of December 31,
2016 has been applied.
Share Exchange and Related Transactions
Share Exchange Agreement
On
December 6, 2013 we, Symbid Holding B.V. and the shareholders of
Symbid Holding B.V., entered into a Share Exchange Agreement (the
“Share Exchange Agreement”), which closed on the same
date. Pursuant to the terms of the Share Exchange Agreement, the 19
shareholders of Symbid Holding B.V. sold all of their capital stock
in Symbid Holding B.V. to us in exchange for 21,170,000 shares of
our Common Stock. As a result of the Share Exchange, Symbid Holding
B.V. became a wholly-owned subsidiary of ours.
Prior
to the Share Exchange, we ceased being an e-commerce marketplace
that offered daily discounts on goods and services through a
proprietary website and became a “shell company”.
Pursuant to the Share Exchange, we acquired the business of Symbid
Holding B.V., to engage in the creation and operation of online
investment “crowd funding” platforms.
At the
closing of the Share Exchange, an aggregate of 11,400,000 shares of
our Common Stock were issued to the holders of Symbid Holding
B.V.’s common stock and 9,770,000 shares of our Common Stock
were delivered in escrow, 600,000 of which were initially being
held in escrow in accordance with the indemnification provisions of
the Share Exchange Agreement. The remaining 9,170,000 shares in
escrow were being held in connection with Symbid’s
prospective acquisitions of additional interests in Gambitious B.V.
and Equidam Holding B.V. On June 6, 2014 we determined not to
proceed with the purchase of additional shares in Gambitious B.V.
As a consequence, thereof, 5,000,000 of the 9,170,000 shares,
representing the shares which had been allocated to the prospective
purchase of additional shares of Gambitious B.V. were returned from
escrow and subsequently cancelled. An additional 300,000 shares
allocated to our existing ownership interest in Gambitious B.V. at
the time of the Share Exchange were similarly returned from escrow
and subsequently cancelled due to the reduction in our indirect
ownership interest in Gambitious B.V. from 18% to 12%. 600,000 of
the shares of our common stock delivered into escrow and allocated
to our existing ownership in Gambitious B.V. were distributed to
the former shareholders of Symbid Holding B.V., subject to a 5%
hold back to further secure the indemnification obligations of the
former Symbid Holding B.V. shareholders under the Share Exchange
Agreement. The 5% hold back shares were subsequently released from
escrow.
On
September 2, 2014 we determined not to proceed with the purchase of
additional shares of Equidam Holding B.V. Until March 2017, we held
a 7% ownership interest in Equidam Holding B.V. which we sold for
EUR 15,000. Until August 2014, we held a 9% ownership interest in
Equidam Holding B.V., which was diluted in connection with an
equity financing by Equidam Holding B.V. in which we determined not
to participate. As a consequence of the foregoing, the 3,000,000
shares of our common stock allocated to the prospective purchase of
additional shares of Equidam Holding B.V. delivered into escrow
were returned to us and cancelled. 270,000 of the shares of our
common stock delivered into escrow and allocated to our existing
ownership interest in Equidam Holding B.V. were distributed to the
former shareholders of Symbid Holding B.V., subject to a 5%
holdback to further secure the indemnification obligations of the
former Symbid Holding B.V. shareholders under the Share Exchange
Agreement. The 5% hold back shares we subsequently released from
escrow.
8
On
February 9, 2015, we sold our remaining 12% interest in Gambitious
B.V. for €18,000 due to Gambitious B.V. having incurred
continuing losses in 2014, Gambitious B.V. having switched its
business focus to that of the publishing of games, Gambitious B.V.
requiring capital contributions from its existing owners and
Gambitious B.V. no longer constituting a strategic fit with our
evolving operations.
The
Share Exchange Agreement contained customary representations and
warranties and pre- and post-closing covenants of each party and
customary closing conditions. Breaches of the representations and
warranties were subject to customary indemnification provisions,
subject to specified aggregate limits of liability.
In
connection with the Share Exchange, the parties took all actions
necessary to ensure that the Share Exchange was treated as a
tax-free exchange under Section 351 of the Internal Revenue Code of
1986, as amended.
The
issuance of shares of our common stock to holders of Symbid Holding
B.V.’s capital stock in connection with the Share Exchange
was not registered under the Securities Act, in reliance upon the
exemption from registration provided by Section 4(a)(2) of the
Securities Act, which exempts transactions by an issuer not
involving any public offering and/or Regulation S promulgated by
the SEC under that section. These securities may not be offered or
sold in the United States absent registration or an applicable
exemption from the registration requirements.
2013 Equity Incentive Plan
Before
the Share Exchange, our Board of Directors adopted, and our
stockholders approved, our 2013 Equity Incentive Plan (the
“2013 Plan”), which provides for the issuance of
incentive awards of up to 5,000,000 shares of our Common Stock to
officers, key employees, consultants and directors. For a
description of the awards made under the 2013 Plan, see
“Securities Authorized for Issuance under Equity Compensation
Plans”.
Forward Stock Split
We
effected a 25-for-1 forward stock split on our common stock in the
form of a dividend with a record date of September 16, 2013 and a
payment date of September 17, 2013. All share amounts referenced in
this Annual Report, including those applicable to periods prior to
the forward stock split, give effect to the forward stock split
unless otherwise indicated.
FAC B.V. Acquisition
On July
29, 2014, we entered into a Share Purchase Agreement with our
wholly owned subsidiary, Symbid Holding B.V., and FAC 2 B.V., a
limited liability corporation incorporated in The
Netherlands. Pursuant to the Share Purchase Agreement,
we acquired FAC B.V. (“Acquiree”), a limited liability
corporation incorporated in The Netherlands from FAC 2 B.V. in
exchange for 2,750,000 shares of our restricted common
stock. Acquiree owns a perpetual, worldwide, exclusive
license to infrastructure technology upon which we have developed a
platform to enable cloud based financing solutions for SME’s,
expanding on our current equity based crowdfunding solutions in the
Netherlands. Acquiree was formed by FAC 2 B.V. for the
specific purpose of holding the license and has no customers,
employees, operations or revenues. Acquiree’s only
assets are its proprietary software and technology.
Fortion Agreement
On
December 8, 2014 we entered into an agreement (the
“Agreement”) with Fortion Holding B.V., a Netherlands
limited liability corporation conducting its business under the
trade name Credion (“Credion”). Credion provides
financial advisory services in the Dutch SME markets and
specializes in debt and equity financings for SMEs. The Agreement
provides for a strategic alliance between us and Credion in which
Credion’s extensive network of investors and entrepreneurs
will be connected with each other through an online funding
platform of ours. Credion will process the funding for its SME
clients through our platform resulting in monthly recurring revenue
and transaction fees for us. The alliance is intended to provide
more efficient access to capital for SMEs while greatly improving
SME data monitoring standards for investors. SMEs utilizing the
platform will have direct access to Credion’s investor
clients as well as our investors.
9
We will
charge SMEs utilizing the platform a service fee for the start
package related thereto (€350) with part of such fee being
utilized to purchase advisory services from Credion in its capacity
as a preferred supplier.
Financing
proposals generated by Credion within the platform can be offered
to investors (i) by means of a private placement with the
professional financing parties affiliated by service level
agreements or (ii) by means of an offer on the online direct
funding platform enabling investors to invest online utilizing
standardized financial products. For (i) above, the settlement of
potential transactions will be finalized outside of the platform.
For successful transactions under (ii) above, a percentage of the
applicable success fee will be paid to Credion. Financiers will be
encouraged, but not required, to purchase monitoring services from
us. The financier will pay us a monthly fee for such monitoring
services. Entrepreneurs that are introduced to the platform by us
will be charged a fee of €300 for a monitoring start
package.
The
Agreement provides that commencing January 1, 2015 all financings
facilitated and brokered by Credion and its advisors will be
registered on our platform. In connection therewith, Credion will
add us on a best efforts basis as a contractual party to all
service level agreements it has signed and will sign.
Notwithstanding the foregoing, Credion has the right to utilize
other direct online funding platforms. Similarly, we have the right
to facilitate financings brokered by other corporate finance
companies, but we must continue to offer the Credion services
within the financing process via our platform on a preferred
supplier basis.
As
consideration for Credion’s obligations under the Agreement,
we issued 1,500,000 shares of our restricted common stock to
Credion following execution of the Agreement. For the period
January 1, 2015 through December 31, 2017, we are required to issue
up to an additional 1,000,000 shares of our restricted common stock
to Credion, up to 250,000 of which shares are payable as at
December 31, 2015 for the period January 1, 2015 through December
31, 2015, up to 500,000 of which shares are payable as at December
31, 2016 for the period January 1, 2016 through December 31, 2016
and up to 250,000 of which shares are payable as at December 31,
2017 for the period January 1, 2017 through December 31, 2017. The
number of shares to be issued for each of 2015, 2016 and 2017 will
be based upon the number of monitoring start packages of €300
times the number of companies purchasing those packages from us
that have been introduced to us by Credion. During both 2015 and
2016 no monitoring start packages were sold to customers of Credion
and no shares were payable as at December 31, 2016.
SME
entrepreneurs will be charged a success fee equal to 5% of the
amount raised from the direct online funding platform, 20% of which
will be payable to Credion. For private placements with SME
entrepreneurs introduced by us, SME entrepreneurs will be charged a
success fee of €250. If the entrepreneur has been introduced
through the Credion network, no success fee will be charged on the
private placement.
As the
result of our November 2016 corporate restructuring, we do not
expect to realize any future revenues from this
Agreement.
Symbid Overview Corporate Structure
Symbid
B.V. derived until and including October 2016 income from its
crowdfunding business in The Netherlands through revenue streams
from Symbid Coöperatie U.A. (“Symbid Coöp”),
a Dutch limited liability cooperative that licenses Symbid’s
crowdfunding platform. Symbid B.V. does not own or have
any equity interest in Symbid Coöp. Symbid Coöp was
a variable interest entity (“VIE”) which Symbid B.V.
effectively controlled through corporate governance rather than
through equity ownership.
It was
Symbid Coöp’s status as a VIE that allowed Symbid B.V.
to consolidate the financial statements of Symbid Coöp as if
Symbid Coöperatie U.A. were a subsidiary of Symbid B.V. As the
result of our November 2016 corporate restructuring, we are no
longer able to consolidate Symbid Coöp’s financial
results with our own. As of December 31, 2016, Symbid B.V.’s
fiscal year end, approximately 90% of Symbid B.V.’s revenues
were derived from Symbid Coöp. As of December 31, 2015, Symbid
B.V.’s fiscal year end, approximately 80% of Symbid
B.V.’s revenues were derived from Symbid Coöp. Prior to
November 1, 2016 we received administrative, success and management
fees from Symbid Coöp. For the year ended December 31, 2016,
these fees totaled: Administrative - $44,634, Success - $150,999
and Management - $0. For the year ended December 31, 2015, these
fees totaled: Administrative - $62,632, Success - $219,523 and
Management - $0.
10
The
intellectual property (“IP”) underlying Symbid
B.V.’s crowdfunding platform is not owned by Symbid
B.V. It is owned by Stichting Symbid IP Foundation, a
Dutch foundation that was formed in October 2013 to hold that
property as part of Symbid’s restructuring. In
addition to the software IP relating to the crowdfunding platform
technology, Stichting Symbid IP Foundation’s IP consists
primarily of two internet domain names (www.symbid.com and
www.symbid.nl) and does not include any patents. Stichting Symbid
IP Foundation licensed the crowdfunding platform technology to
Symbid Holding B.V. on a perpetual basis. Symbid Holding B.V., in
turn, licenses the technology, on a perpetual basis, to Symbid B.V.
Without the primary license of the crowdfunding platform technology
from Stichting Symbid IP Foundation, Symbid would not be able to
continue its business. By transferring the Symbid crowdfunding
technology to Stichting Symbid IP Foundation, Symbid believes that
it has insulated and protected that property from various types of
claims that otherwise might possibly arise if the property had
remained in a corporate entity.
Our
subsidiary, FAC B.V. is the owner of the perpetual, worldwide,
exclusive license to infrastructure technology upon which we have
developed a platform to enable cloud based financing solutions for
SME’s. Per addendum dated November 15, 2016 the license
agreement had been amended to a non-exclusive license.
History and Organizational Structure
Symbid
B.V. was incorporated on March 29, 2011, as a privately held
besloten vennootschap (private limited liability company) organized
under the laws of The Netherlands. Through October 3, 2013, Symbid
B.V. was our primary operating company managing all of our
activities including our crowdfunding platform in The
Netherlands. Until October 16, 2013, Symbid B.V. was the
owner of our intellectual property (the
“IP”). This entity was also the contractor
for all material agreements related to the IP. Additionally, Symbid
B.V nominates for appointment, by the Symbid Foundation board, the
board of directors of Symbid Foundation. Until March 2017, Symbid
B.V. also held ownership interests in Equidam Holding B.V. (7%).
Such interests were sold for €15,000.
A
schematic overview of our corporate structure as of March 1, 2017
is set forth below. In March 2017, we sold our 7% interest in
Equidam Holding B.V.
Neither
Symbid Corp., Symbid Holding B.V., Symbid B.V. nor any of their
affiliates have any ownership interests in Stichting Symbid IP
Foundation, Symbid Foundation or Symbid Coöp.
11
Reorganization of Corporate Structure in 2013
Because
of the December 6, 2013 Share Exchange and Symbid’s plans to
enter various new markets, Symbid determined to restructure the
legal organization of its business as described below.
Symbid
Holding B.V. was incorporated on October 3, 2013, as a privately
held besloten vennootschap (private limited liability company)
organized under the laws of The Netherlands. Symbid
Holding B.V. was organized to serve as the holding company for all
of Symbid’s business activities in The Netherlands and in
other countries. As such, on October 3, 2013, the holders of the
capital shares of Symbid B.V. exchanged their shares for capital
shares of Symbid Holding B.V. and, as a result, Symbid B.V. became
a wholly owned subsidiary of Symbid Holding B.V. Symbid B.V. is now
the Symbid operating entity for the Company’s business in The
Netherlands. As such, Symbid B.V. will continue to hold the
ownership interests in Equidam Holding B.V. FAC B.V. operates as of
July 2014 as a 100% subsidiary of Symbid Holding B.V. In
conjunction with this reorganization, Symbid’s IP, which
includes all of the software relating to the Symbid crowdfunding
internet platform, was transferred to a new entity organized in The
Netherlands on October 3, 2013, Stichting Symbid IP Foundation. We
do not have an ownership interest in Stichting Symbid IP Foundation
but maintain management control over Stichting Symbid IP Foundation
through our control of Stichting Symbid IP Foundation’s board
of directors. See “Risk Factors. Our intellectual property is
owned by Stichting Symbid IP Foundation, a Dutch entity that we do
not own”. Pursuant to the organizational documents of
Stichting Symbid IP Foundation, the board of directors of Stichting
Symbid IP Foundation must be composed of at least two members, one
of whom must always be Symbid B.V. or one of its directors and the
other must always be Symbid Corp. or one of its directors. The size
of the board of directors of Stichting Symbid IP Foundation is
established by the board itself, giving Symbid B.V. and Symbid
Corp. full control over the Stichting Symbid IP Foundation board.]
Stichting Symbid IP Foundation has granted a perpetual license in
the IP to Symbid Holding B.V. which, in turn, has granted a
perpetual, license in the IP to Symbid B.V. Symbid B.V. previously
sublicensed the IP to Symbid Coöp but in connection with the
corporate restructure and the November 15, 2016 Intellectual
Property License and Transfer Agreement, Symbid Stichting IP
Foundation directly granted a perpetual, royalty free license to
Symbid Corp. With respect to future Symbid crowdfunding platform
business projects in other countries, Symbid Holding B.V. will
grant IP licenses to the new legal entities established for these
business purposes.
Reorganization of Corporate Structure in 2016
Because
we were not able to raise additional capital in the fourth quarter
of 2016 we were forced to enter into settlements with our creditors
and note holders and restructure the Company. This restructuring
caused us to curtail certain business operations and change our
focus from the operation of online funding platforms and the
provision of software solutions for the alternative financing in
the SME market to the licensing of available software packages for
which we own or license the intellectual property.
The
revised business model will require fewer employees, advisors and
consultants and will be more economical to operate than our past
operations. Over the past few years we have developed several
software products suitable for the alternative market which we will
continue to offer to and operate with third parties. Such products
and related services include white label versions of crowdfunding
software for investor groups and monitoring software to provide
investors with ongoing insight into the performance of SMEs to
which they have loaned money. Related licensing fees and
subscription agreements may include set fees and yearly
contribution fees.
Our
goal is to substantially reduce or eliminate our debt, continue to
operate our business and negotiate a possible acquisition or other
business combination with another operating entity. There can be no
assurance that we will be successful in this endeavor or that if a
business combination is consummated that it will be on favorable
terms. In the interim, we will continue forward with our business
operations under the revised business model.
12
As the
result of the restructuring, our previous crowdfunding platform in
the Netherlands will be operated through Symbid Coöp. We
previously controlled and operated Symbid Coöp through
corporate governance but as the result of the restructuring, Symbid
Coöp has become an independent entity. As we did not have the
resources available to continue the software development of the
online funding platform, Symbid Coöp was required to further
develop the software for operating the crowdfunding platform under
the laws and regulations of The Netherlands before January 1, 2017
in order to remain compliant, which it did. Symbid Coöp has,
in return for reimbursing the further development of the software,
been granted a non-exclusive license to the intellectual property
from IP Foundation in order to continue crowdfunding operations in
The Netherlands. We continue to hold an identical non-exclusive
license to the intellectual property of the crowdfunding platform
whereby we are allowed to use the most up to date versions of the
software and other intellectual property.
Market Need - The Problem Definition
SMEs
are crucial engines of economic growth, job creation and social
cohesion. In many countries SMEs represent approximately 99% of all
business entities. However, entrepreneurs and investors in the SME
backbone of our economies experience obstacles and barriers when
seeking to connect, fund and grow. Recent financial crises and
stricter banking regulations are contributing to this vacuum in the
life cycle of SME financing. Access to capital remains one of the
biggest challenges in the creation, survival and growth of
SMEs.
In
their report “Financing SMEs and Entrepreneurs 2016”,
which monitors SMEs’ and entrepreneurs’ access to
finance in 37 countries over the period 2007-2014, with the
pre-crisis year 2007 serving as a benchmark, The Organization for
Economic Co-operation and Development indicates that the ongoing
economic recovery between 2012 and 2015 has had a moderately
positive effect on SME financing. These improvements in the
macroeconomic environment, which are expected to continue in the
forthcoming years, as well as improved financial conditions led to
a rise in lending volumes in the majority of participating
countries. Despite these general positive developments, many small
innovative businesses continue to face difficulties in accessing
external financing. Credit conditions are expected to remain tight,
regulatory requirements are likely to continue to discourage
lending to SMEs, venture capital investments are generally still
below pre-crisis levels and bank financing is often not suited to
the needs of start-ups. The report consequently suggests that SMEs
could further benefit from the ongoing recovery through tapping
into a diverse range of financing instruments.
Results
from the 15
th
round of the Survey
on the Access to Finance of Enterprises (SAFE) also confirm the
above-described improvement in overall income situations of SMEs.
In the period April – September 2016, Euro area enterprises
reported overall improvements in their debt situations and declines
in interest expenses. The SAFE survey additionally showed that SMEs
in the euro area see access to finance as less of a burden compared
to other business activities. In the Netherlands, where Symbid was
incorporated in 2011, access to finance however remains the
predominant problem according to the surveyed SMEs. Contrary to 3
years ago, the “external financing gap”, measuring the
perceived difference at firm level between needed and available
funds, records as a negative value for the third consecutive time.
This indicates that SMEs in most Euro countries communicated that
the potential supply of external funds topped the internal need for
financing. The SAFE survey finally revealed that, although there is
a slight increase, the use of equity as an external source of
financing remains non relevant for many SMEs.
However,
according to a previous SAFE report, ‘innovative’
businesses active in the online industries have the poorest access
to finance across the different types of business entities
surveyed. This is due primarily to the difficulties associated with
the valuation of companies that lack well-defined material assets
but whose core business is based mostly upon intellectual property.
Therefore, in our digital age, it is the more forward-thinking,
online-oriented businesses that are suffering most from the lack of
bank finance for SMEs.
13
The
lack of access to capital for SMEs, which was to a higher degree
existent in the years after the financial crisis in 2007, was also
recognized in the United States where the Jumpstart Our Business
Startups Act (JOBS Act) was enacted into law in April 2012. The
JOBS Act is intended to encourage the funding of small businesses
located in the United States by easing various federal and state
securities regulations. It is expected that once the SEC
promulgates regulations required under the JOBS Act, entrepreneurs
will be able to engage an online crowd of investors through equity
crowdfunding. Title II went into effect on September 23, 2013.
Title III rulings enabling the general solicitation of unaccredited
investors, thereby effectively legalizing equity crowdfunding in
the U.S. as is already the case in most European countries, went
into effect on January 29, 2016.
Although
the above-mentioned research shows that financial markets and
access to finance for SMEs have significantly improved over the
past years, pre-financial crisis conditions are yet to be reached.
In particular, innovative start-ups suffer from the tight credit
conditions and increased regulatory requirements. It is also these
companies for which traditional loans are not viable due to for
example lacking revenue streams, leading to a demand for different
forms of alternative financing.
Online Funding Operations
The
launch of The Funding Network™ took place in early March
2015. Built around our investing and monitoring technology, The
Funding Network™ gives entrepreneurs access to various types
of finance, while offering (private and institutional) investors
risk/reward transparency. Entrepreneurs connecting to our online
funding platform are guided towards the type of funding best suited
to their needs by our professional advisors. Investors can
personalize their deal flow according to key business criteria,
pinpointing the investment opportunities that matter to them. This
is intended to produce a more efficient capital allocation service,
underpinned by standardized XBRL data streamed from the financial
reporting system. Our platform is designed to connect
entrepreneurs, start-ups and small businesses to all types of
funding.
Our
platform breaks down the funding process from beginning to end. We
connect entrepreneurs to investors via sound financial advice.
Investors seek new opportunities, then monitor the performance of
their investments. Financial advisors give support to entrepreneurs
along the way, while accountants provide the real-time financial
data. The funding process consists of the following
steps:
|
|
CREATE
: The entrepreneur and advisor together create a
funding request in a standardized deal format.
SHARE
: The standardized funding request can be shared with a
variety of institutional investors, and a network of over 36,000
private (crowdfunding) investors, who can invest from as little as
€ 20 ($22). Deals can be shared publically (open) or
privately (closed).
MATCH
: We match deals with the right investors based on
personalized preferences and can facilitate the settlement if
required.
MONITOR
: Ongoing financial analysis of private companies,
resulting in reporting for optimal risk and return management.
Financial data can be imported into our monitoring from the
accountant reporting system. Standardized data allows for comparing
the performance of companies. Investors and entrepreneurs both use
a personalized dashboard based on pre-set Key Performance
Indication (“KPI”) relating to a particular
company.
|
14
Symbid’s Product/Service Portfolio
Crowdfunding
As the
result of our November 2016 corporate restructuring, we no longer
offer crowdfunding services.
Monitoring Services
We
offer our monitoring technology as part of The Funding
Network™ and as a standalone product for business partners.
The technology provides insights for investors and entrepreneurs
with the periodical financial results of a portfolio of companies.
The product is an online application fully integrated into The
Funding Network™ by Symbid, handling XBRL (eXtensible
Business Reporting Language) data in order to calculate KPIs and
inform users of the key performance trends of a particular
business. Entrepreneurs connecting to The Funding Network™
register to have their company’s data monitored and encourage
their investors to subscribe to their company’s monitoring
portal access. The product was conceived with its target user being
an investor, but will also be marketed to entrepreneurs focused on
assessing and improving the performance of their own
business.
A brief
overview of service companies currently related to our crowdfunding
eco-system is provided below.
|
FAC
B.V.
|
On July
29, 2014, we entered into a Share Purchase Agreement with our
wholly owned subsidiary, Symbid Holding B.V., and FAC 2 B.V., a
limited liability corporation incorporated in The Netherlands.
Pursuant to the Share Purchase Agreement, we acquired FAC B.V.
(“Acquiree”), a limited liability corporation
incorporated in The Netherlands from FAC 2 B.V. in exchange for
2,750,000 shares of our restricted common stock. Acquiree owns a
perpetual, worldwide, exclusive license to infrastructure
technology upon which we intend to develop a platform to enable
cloud based financing solutions for SME’s, expanding on our
current equity based crowdfunding solutions in the Netherlands. The
license provides the required technology for ongoing monitoring of
private companies. Financial data can be imported into Symbid
monitoring from the accountant reporting system resulting in
powerful reporting for optimal risk and return management.
Standardized data allows for comparing the performance of
companies. Investors and entrepreneurs get a personal dashboard
with KPI’s for key variables and covenants.
|
|
Equidam
Holding B.V.
|
Equidam
Holding B.V., founded in August 2013, is one of the first companies
to be organized in any country as a crowdfunding service provider.
Started as an online valuation tool for private companies with a
particular focus on SMEs, Equidam Holding B.V. now also offers
monitoring services to investors on the Symbid platform. In
addition to Equidam Holding B.V.’s relationship with Symbid,
this company has entered partnerships with European crowdfunding
platforms to provide its services to these platforms as well.
Symbid owned a 7% direct interest in Equidam Holding B.V. following
an additional round of financing by Equidam Holding B.V. in which
we determined not to participate. In March 2017, this 7% interest
was sold for €15,000.
|
|
Kredietpaspoort
Coöperatie UA
|
The
Kredietpaspoort (Credit Passport) is an online
“passport” which provides up-to date information about
entrepreneurs and their business. The product is designed to be
used by private investors to quickly assess the prospects and
reliability of start-ups, SMEs and their owners before making an
investment. In essence, the Credit Passport is a simple-to-use yet
comprehensive online tool which provides the necessary information
for all lenders.
|
15
Meanwhile,
entrepreneurs gain insight into their funding potential with
specific information about the types of investor attracted to their
business and why they choose to invest or not. Furthermore,
entrepreneurs are immersed in investment terminology and can
learn how to target investors more effectively. The service enables
investors and entrepreneurs to do business in a more
efficient, streamlined fashion and reduces uncertainty for both
sides.
The
Credit Passport complements The Funding Network by enabling
entrepreneurs to create an online summary of critical investor
information, thereby eliminating the costly paper trails which
currently inhibit entrepreneurs in raising funds. We are currently
a minority shareholder in the Kredietpaspoort
initiative.
The Market
Driven
by various factors, including the financial crisis, the ubiquity of
mobile devices, increased transparency, significant decreases in
the costs of computing powers as well as new regulatory law (JOBS
Act), the alternative finance industry has grown exponentially over
the past years. According to the report “The 2
nd
European
Alternative Finance Industry Report” by The University of
Cambridge and KPMG, in Europe, where the market for alternative
finance has been growing at an impressive pace for several years,
the total market volume for online alternative finance reached
€5,431million in 2015. This represents an annual growth rate
of 92%. The majority of the European market is comprised by the
United Kingdom, which accounts for €4,348 million of the
total alternative finance volume. The Netherlands represented the
fourth largest market in alternative finance with a total market
volume of €111 million. Furthermore, the per capita market
volume in 2015 for the Netherlands was the highest in Europe (excl.
the UK), amounting to €6.53.
The
report published by the University of Cambridge furthermore shows
that in 2015, €536 million of business finance was raised
through online alternative funding models, providing capital to a
total of 9,442 SMEs (excluding the UK). This represents a
year-on-year growth of 167% and 63% respectively.
Currently
Peer-to-Peer lending and reward-based crowdfunding account for 71%
of the total European market volume (excl. UK). In 2015,
equity-based crowdfunding comprised with €159 million, 16% of
the market volume, and had an average three-year growth rate of
83%. In the Netherlands, the alternative finance volume through
equity-based crowdfunding totaled €16,6 million.
According
to the University of Cambridge/KPMG report, a major trend within
the alternative finance industry is the increased rates of
participation rates of institutional investments. The percentage of
institutional investors participating in online alternative finance
platforms has grown from 33% in 2014 to 44% in 2015, and is
expected to grow further in the coming years.
In
terms of risk perception, the survey conducted by the University of
Cambridge pointed out that the Dutch rate “the collapse of
one or more well-known platforms due to malpractice” as the
highest crowdfunding risk. Fraud, increased business failure rates
and changed to regulation were other risks considered by
respondents.
The Symbid Business Model
Our
business is intended to facilitate the full funding process for
SMEs from prospective creation through and including, the
monitoring process. We expect that our business will lead to
revenue generation from the following sources:
Create process related revenues
●
Application fees
– $385 for every entrepreneur applying for funding through
our online funding network, with part of such fee being utilized to
purchase advisory services from Credion in its capacity as a
preferred supplier
16
Matchmaking related revenues
Public Funding
(Offered until November
2016)
●
Transaction fees
– For every payment transaction to a Symbid wallet or
investment in an investment proposition, a fee of 1% is charged to
the investor (1.21% including VAT).
●
Success fee –
When reaching a funding target, 4-7% (exclusive of VAT) of the
target capital is charged to the target company.
Private funding
●
Placement fee
– Success fee – When reaching a funding target, 4-7%
(exclusive of VAT) of the target capital is charged to the target
company.
Monitoring related revenues
●
Monitoring fees -
Each financier will pay us a monthly fee of $10 (exclusive of VAT)
for one monitoring portal access. Entrepreneurs will be charged a
fee of $330 (exclusive VAT) for a monitoring start package which
includes three portal accesses for the period of one
year.
Licensing related revenues
Symbid
may sublicense the platform technology in the forms discussed below
in The Netherlands and to country partners.
●
White label licenses
- Symbid offers
stand-alone and white label versions of its crowdfunding platform
to partners, companies and other (educational) organizations.
Stand-alone versions of the crowdfunding platform operate
independently in a closed environment while white label versions
are interconnected with the Symbid crowdfunding platform allowing
for interaction with Symbid platform users. Target net revenue per
partner is $10,000 for the set-up and a yearly license fee to cover
maintenance costs.
●
Software licenses
– Symbid offers
exclusive licenses within a country to use the Symbid legal and
technology infrastructure. Set-up fees are at a minimum of $27,000
and yearly license fees will be offered for a minimum of $10,000
per year;
●
Affiliate and Group licenses
–
Symbid offers owners of existing communities or groups a
crowdfunding service so they do not require their own crowdfunding
infrastructure. Prices range from $530 to $2,500 on a yearly
basis.
The Competitive Environment
The
crowdfunding industry has developed rapidly since 2000 when several
non-governmental organizations and companies started raisings funds
online. The concept of online fundraising was quickly adapted to
various forms of collective funding over the internet, now all
being labelled as crowdfunding.
17
There
are several different forms of crowdfunding. The main categories
are:
●
Donation-based
crowdfunding: donations made online to a specific project or cause
without the prospect of any return;
●
Pre-sales
(reward-based) crowdfunding: donations made online to a specific
project or cause with the prospect of a return in the form of a
product or service, when the project is successful;
●
Debt/loan
crowdfunding (peer-to-peer and peer-to-business lending):
investments made online in a specific loan proposal (business as
well as private) with the prospect of a return in the form of
interest and repayment of the initial debt;
●
Equity
crowdfunding: investments made online in specific investment
proposals with the prospect of a return in the form of dividends
and value growth.
Globally,
thousands of crowdfunding platforms are currently active in the
marketplace. However, the majority of these platforms are involved
in donation- or reward-based (pre-sales) crowdfunding. The low
barriers to entry in this sector allow many vendors to establish
crowdfunding platforms, but, typically, their scope is limited to a
specific geography or nice industry, such as books or movies.
According to the Massolution “Crowdfunding Industry
2015” report, the total global crowdfunding industry was
estimated to be $34 billion, a 112% growth compared to 2014. This
furthermore represents an enormous growth compared to 2012, where
the global fundraising volume totaled only $2.7
billion.
Many of
the existing crowdfunding platforms struggle in this growth
environment with respect to their ability to professionalize their
systems and legal frameworks and otherwise manage their growth.
Reward- and loan-based crowdfunding (e.g. peer-to-peer lending)
currently account for approximately 90% of this industry, but
equity crowdfunding is expected to further enlarge its market share
in the short- to mid-term future. In 2015 $2.5 billion was
fundraised through equity, whereas in 2012, the global equity
crowdfunding market was worth just $116 million.
Currently
the UK has the largest equity crowdfunding market. The two leading
UK platforms, Seedrs and Crowdcube, currently account for more than
all other European platforms combined according to their own
funding volume totals. To our knowledge, there are currently
approximately 40 crowdfunding platforms active in The Netherlands.
Due to regulatory changes there are at the moment no domestic
platforms that offer all-equity deals on their platforms. There are
however some foreign equity-crowdfunding platforms active in The
Netherlands, including Seedrs and Ourcrowd.
The 28
countries of the European Union are a very long way from offering a
homogeneous regulatory environment for crowdfunding. This is
particularly true of equity crowdfunding which touches on multiple
heavily regulated areas of finance such as investment advice,
securities trading, retail banking and corporate finance. Few
European countries have, like France, issued new regulations that
are specific to investment crowdfunding. In the Netherlands, as of
April 1, 2016, the regulatory framework applicable to equity based
crowdfunding was amended. Investment limits are doubled to
€40,000 and platforms need to conduct an investors test in
order to assess whether the investment is sound for this particular
retail investor. Additionally, as of 2017 equity-based crowdfunding
platforms are required to have an investment license. Due to these
tightened regulations, we do not expect a significant increase in
crowdfunding enterprises in the near future.
18
Employees
As of
March 31, 2017 we had 2 employees involved through contractual
relationships with the Company. Our contractual relationships with
employees consist of employment agreements. We have never
experienced a work stoppage and believe our relationship with our
employees is good.
Description of Properties
Our
principal executive offices are located at Marconistraat 16, 3029
AK Rotterdam, The Netherlands. We are
c
urrently co-using this office
space.
Regulatory Framework
During
the development of the Symbid crowdfunding platform in 2010, we
were in close contact with the Authority Financial Markets in The
Netherlands (the “AFM”) to discuss the Symbid
crowdfunding model, the structure of our crowdfunding platform and
its relationship to the Dutch regulatory framework. In our
correspondence with the AFM, we primarily focused on the equity
based crowdfunding model rather than the pledge or donation based
models which do not implicate securities law considerations. In an
email correspondence to Symbid, the AFM acknowledged that, although
it is Symbid’s responsibility to identify activities
requiring government authorization, as described to the AFM by
Symbid, the AFM saw, on the basis of the information provided, no
indication that the crowdfunding activities of Symbid would require
permission under the Dutch Act on Financial Supervision. Although
we did not specifically address our partnering/affiliate programs
in our correspondence with the AFM, it is our understanding and
belief that the same AFM considerations would apply to these
activities to the extent that they make use of Symbid’s legal
structure and model. The activities of Symbid have not materially
changed in comparison with the information provided to the AFM in
2010. During the expansion of our product offerings to include debt
based crowdfunding, we have been in discussions with AFM regarding
the classification of our activities. In agreement with the AFM,
Symbid applied for an exemption for its activities under the Dutch
financial regulatory framework at the AFM, which was provided in
the second quarter of 2015. Additional changes in the regulatory
framework are expected in the future whereby crowdfunding will
become a regulated business, however as of November 2016 the
Company is not offering any crowdfunding services in the
Netherlands, or elsewhere.
Symbid’s
restructuring in 2013 in which it established Symbid Holding B.V.
as a holding company for its crowdfunding activities and
transferred its intellectual property to Stichting Symbid IP
Foundation did not have an impact on Symbid’s legal structure
at the operating level. Symbid established its operational model in
The Netherlands such that all crowdfunding activities would be
conducted at the Symbid Coöperatie U.A. level with management
control exercised by Symbid Foundation. This operational structure
was designed to function independently from the legal structure and
changes in the ownership structure of Symbid B.V. or Symbid Holding
B.V. Because of this operation versus ownership structure, Symbid
believes that its corporate reorganization will have no impact on
the application of the AFM’s considerations or other aspects
of the Dutch regulatory framework.
Our
crowdfunding platform encompasses other activities which, in The
Netherlands, could require a license or specific regulatory
compliance under certain circumstances. These activities relate to
(i) the holding of redeemable funds and (ii) securities offerings
to the public without a prospectus.
Redeemable funds
– Our financial partner InterSolve
(FEET EGI B.V.) holds a license from the Dutch Central Bank as an
Electronic Money Institution, is supervised by the Authority
Financial Markets (“AFM”), being the Dutch equivalent
of the SEC, and the Dutch Central Bank and is, therefore, allowed
to redeem funds to the public. On the Symbid crowdfunding platform,
investors can re-claim, i.e., redeem, their electronic money at any
time prior to the funding target having been reached of a business
idea to which they have allocated their electronic money.
InterSolve will exchange upon request by such an investor the
amount of electronic money being redeemed into scriptural money on
the bank account of the investor. Symbid partners with InterSolve
to ensure that Symbid cannot be deemed to hold redeemable funds of
investors itself. Because an investor’s funds are held in an
electronic wallet with Intersolve and released to a particular
project only when that project actually funds, and any funds that
an investor allocates to a project that the investor redeems prior
to a project funding remain in that investor’s account
(electronic wallet) with Intersolve, which, in effect, acts as an
escrow agent for the investor’s funds and particular project
fundings, Symbid does not record any success fee revenues on its
books until a project funding actually closes and Symbid’s
earned fees are transferred to it. As a result of this structure,
any funds that may be redeemed by an investor prior to a project
funding and returned to that investor’s electronic wallet do
not appear, and are not reported, on the financial statements of
Symbid. If, however, an investor decides to remove funds
from his electronic wallet and return them to his personal bank
account, effectively taking these funds out of the Symbid
crowdfunding system, Symbid pays Intersolve a fee of approximately
$16.50 (€15).
19
Offerings to the public without a prospectus
– Under
Dutch law, as long as the target capital raised for a particular
business over a period of 12 consecutive months remains below
€2.5 million (approximately $2.75 million), there is an
exemption from the prospectus delivery requirements. Under the
current regulations, a prospectus must be prepared and approved by
the AFM for capital raises planned or expected to exceed the
€2.5 million (approximately $2.75 million) within a 12-month
period.
Separately,
membership interests in a Dutch cooperative, if not freely
tradable, are not considered securities under Dutch law. Symbid has
taken the business decision to ensure that all membership interests
in Symbid Coöperatie U.A. are not freely tradable; thus Symbid
Coöperatie U.A. is not required to be licensed to sell
securities under the Dutch Act on Financial
Supervision.
Legal Proceedings
From
time to time, we may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm business.
We are
currently not aware of any pending legal proceedings to which we
are a party or of which any of our property is the subject, nor are
we aware of any such proceedings that are contemplated by any
governmental authority.
THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN STATEMENTS
RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF
OUR COMPANY. YOU ARE CAUTIONED THAT SUCH STATEMENTS ARE
ONLY PREDICTIONS AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT
ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN
EVALUATING SUCH STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER THE
VARIOUS FACTORS IDENTIFIED IN THIS ANNUAL REPORT ON FORM 10-K,
INCLUDING THE MATTERS SET FORTH BELOW, WHICH COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH
FORWARD-LOOKING STATEMENTS.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS BEFORE DECIDING TO INVEST IN OUR COMPANY. IF ANY
OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND PROSPECTS FOR GROWTH WOULD
LIKELY SUFFER. AS A RESULT, YOU MAY LOSE ALL OR PART OF
YOUR INVESTMENT IN OUR COMPANY.
GENERAL RISKS RELATING TO OUR BUSINESS, OPERATIONS AND FINANCIAL
CONDITION
We have a limited operating history and are subject to the risks
encountered by early-stage companies.
We were
organized in The Netherlands in April 2011. Because our operating
company has a limited operating history, you should consider and
evaluate our operating prospects in light of the risks and
uncertainties frequently encountered by early-stage companies in
rapidly evolving markets. For us, these risks include:
●
risks that we may
not have sufficient capital to achieve our business
strategies;
●
risks that we may
not develop our product and service offerings in a manner that
enables us to be profitable and meet our customers’
requirements;
●
risks that our
business strategy may not be successful; and
●
risks that
fluctuations in our operating results will be significant relative
to our revenues.
20
These
risks are described in more detail below. Our future growth will
depend substantially on our ability to address these and the other
risks described in this Annual Report. If we do not successfully
address these risks, our business would be significantly
harmed.
We have a history of net losses, may incur substantial net losses
in the future and may not achieve profitability.
Although
we have generated revenues, we have incurred significant losses
since inception. If our revenues do not increase, or if we
experience increases in operating expenses, we will continue to
incur significant losses and will not become profitable. If we are
not able to significantly increase our revenues, we will likely not
be able to achieve profitability in the future.
Our operating losses and working capital deficiency raise
substantial doubt about our ability to continue as a going concern.
If we do not continue as a going concern, investors could lose
their entire investment.
Our
operating losses and working capital deficiency raise substantial
doubt about our ability to continue as a going
concern. If we do not generate revenues, do not achieve
profitability and do not have other sources of financing for our
business, we may have to curtail or cease our development plans and
operations, which could cause investors to lose the entire amount
of their investment.
Our Management Team Does Not Have Prior Experience In U.S. Public
Company Matters, Which Could Impair Our Ability To Comply With
Legal And Regulatory Requirements.
Our
management team has had no prior U.S. public company management
experience, which could impair our ability to comply with legal and
regulatory requirements such as the Sarbanes-Oxley Act of 2002 and
applicable U.S. federal securities laws, including filing required
reports and other information on a timely basis. There
can be no assurance that our management will be able to implement
and affect programs and policies in an effective and timely manner
that adequately respond to increased legal, regulatory compliance
and reporting requirements imposed by such laws and
regulations. Our failure to comply with such laws and
regulations could lead to the imposition of fines and penalties and
result in the deterioration of our business.
Civil liabilities may not be able to be enforced against
us.
Substantially
all of our assets and our officers and directors are located
outside of the United States. As a result of this, it may be
difficult or impossible to effect service of process and enforce
judgments awarded by a court in the United States against our
assets or those of our officers and directors who are located in
The Netherlands.
Our intellectual property is owned by Stichting Symbid IP
Foundation, a Dutch entity that we do not own.
In
October 2013, Symbid B.V. transferred the Symbid crowdfunding
platform intellectual property to Stichting Symbid IP Foundation, a
Dutch foundation with, according to its organizational documents,
at least two directors one of whom must always be Symbid B.V. or
one of its directors and the other must always be Symbid Corp. or
one of its directors. Stichting Symbid IP Foundation licenses the
Symbid crowdfunding technology on a perpetual, exclusive basis to
Symbid Holding B.V. which, in turn, licenses the technology to
Symbid B.V. for sublicense to Symbid Coöperatie
U.A. Because Symbid does not own Stichting Symbid IP
Foundation, it cannot assure that the board of directors of the
foundation will not be expanded or changed in such a way as to
challenge the interests of Symbid Holding B.V. to the crowdfunding
platform license. Any such change could negatively impact
Symbid’s ability to sublicense its crowdfunding platform and
negatively impact Symbid’s results of operations and
financial condition. As of November 2016 the IP license agreement
has been revised to a non-exclusive basis, providing also Symbid
Coöperatie UA with an equal IP license.
21
Our business is subject to risks generally associated with
fluctuating economic tendencies in the capital
markets.
The
demand for our products can change over time due to fluctuations in
the global and local economies and in the related capital
requirements of SMEs. These fluctuations could
negatively impact our future revenue streams.
If we lose the services of the members of our senior management
team, we may not be able to execute our business
strategy.
Our
success depends in a large part upon the continued service of our
management team. The continued service of Korstiaan Zandvliet our
Chief Executive Officer and Maarten van der Sanden our Chief
Financial Officer is critical to our vision, strategic direction,
culture, products and technology. We do not maintain key-man
insurance for any of the members of our management team. The loss
of any member of management could harm our business.
We may not be able to adequately protect our proprietary
technology, and our competitors may be able to offer similar
products and services, which would harm our competitive
position.
Our
success depends in part upon our proprietary technology. We rely
primarily on trademark, copyright, service mark and trade secret
laws, confidentiality procedures, license agreements and
contractual provisions to establish and protect our proprietary
rights. Despite these precautions, third parties could copy or
otherwise obtain and use our technology without authorization, or
develop similar technology independently. We also pursue the
registration of our domain names, trademarks, and service marks in
the United States. We cannot assure you that the protection of our
proprietary rights will be adequate or that our competitors will
not independently develop similar technology, duplicate our
products and services or design around any intellectual property
rights we hold.
If third parties claim that we infringe their intellectual
property, it may result in costly litigation.
We
cannot assure you that third parties will not claim our current or
future products infringe their intellectual property rights. Any
such claims, with or without merit, could cause costly litigation
that could consume significant management time. As the number of
product and services offerings in the crowdfunding market increases
and functionalities increasingly overlap, companies such as ours
may become increasingly subject to infringement claims. Such claims
also might require us to enter into royalty or license agreements.
If required, we may not be able to obtain such royalty or license
agreements, or obtain them on terms acceptable to us.
We will need additional financing. Any limitation on our ability to
obtain such additional financing could have a material adverse
effect on our future business, financial condition and results of
operations.
We will
require additional capital to fund our future growth. The
raising of additional capital could result in dilution to our
stockholders. In addition, there is no assurance that we
will be able to obtain additional capital, or that if available, it
will be available to us on favorable or reasonable
terms. Any limitation on our ability to obtain
additional capital as and when needed could have a material adverse
effect on our business, financial condition and results of
operations.
If we fail to maintain proper and effective internal controls, our
ability to produce accurate and timely financial statements could
be impaired, which could harm our operating results, our ability to
operate our business and investors’ views of us.
Ensuring
that we have adequate internal financial and accounting controls
and procedures in place so that we can produce accurate financial
statements on a timely basis is a costly and time-consuming effort
that will need to be evaluated frequently. Section 404 of the
Sarbanes-Oxley Act requires public companies to conduct an annual
review and evaluation of their internal controls. Our failure to
maintain the effectiveness of our internal controls in accordance
with the requirements of the Sarbanes-Oxley Act could have a
material adverse effect on our business. We could lose
investor confidence in the accuracy and completeness of our
financial reports, which could have an adverse effect on the price
of our common stock. In addition, if our efforts to comply with new
or changed laws, regulations, and standards differ from the
activities intended by regulatory or governing bodies due to
ambiguities related to practice, regulatory authorities may
initiate legal proceedings against us and our business may be
harmed.
22
Currency fluctuations may adversely affect our
business.
All of
our present operations take place in Europe. Accordingly, we
receive revenues in Euros and maintain our books and records in
Euros. However, for financial reporting purposes, we use the U.S.
dollar. To the extent the U.S. dollar strengthens against the Euro,
the translation of foreign currency denominated transactions will
result in reduced revenue, operating expenses and net income for
us. We have not entered into agreements or purchased instruments to
hedge our exchange rate risks, although we may do so in the future.
The availability and effectiveness of any hedging transaction may
be limited, and we may not be able to successfully hedge our
exchange rate risks.
RISKS RELATING TO OUR SECURITIES
Because we are a former shell company, Rule 144 of the General
Rules and Regulations under the Securities Act of 1933, as amended,
is available to our shareholders only during such times that we
remain current with our SEC reporting requirements and satisfy
other Rule 144 requirements applicable to former shell
companies.
We were
a shell company at the time of the December 6, 2013 Share Exchange.
As the result of the Share Exchange, we were no longer a shell
company and on December 12, 2013 we filed a Current Report on Form
8-K containing Form 10 type information which, among other things,
announced that we were no longer a shell company. Rule 144 of the
General Rules and Regulations under the Securities Act of 1933, as
amended (the “Securities Act”) provides conditions
under which restricted and control securities of issuers can be
sold without registration under the Securities Act. Rule 144(i)
limits the availability of Rule 144 to shareholders of former shell
companies to circumstances where former shell companies have ceased
to be shell companies, have filed Form 10 type information, one
year has elapsed since the filing of such Form 10 type information
and the former shell company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act and has
filed all reports and other materials required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12
month period or such shorter period that the former shell company
was subject to such reporting requirements. Should we fail to
continue to satisfy the requirements of Rule 144(i), absent
registration or other exemption therefrom, holders of our
restricted and control shares will not be able to sell their shares
in the public market.
Because the Share Exchange was deemed a reverse acquisition, we may
not be able to attract the attention of major brokerage firms,
which may limit the liquidity of our common stock and may make it
more difficult for us to raise additional capital in the
future.
Additional
risks may exist because the Share Exchange is considered a
“reverse acquisition” under accounting and securities
regulations. Certain SEC rules are more restrictive when applied to
reverse acquisition companies, such as the ability of stockholders
to resell their shares of our common stock pursuant to Rule 144. In
addition, securities analysts of major brokerage firms may not
provide coverage of our common stock because there may be little
incentive for brokerage firms to recommend the purchase of our
common stock. As a result, our common stock may have limited
liquidity and investors may have difficulty selling it. In
addition, we cannot assure you that brokerage firms will want to
conduct any secondary offerings on our behalf if we seek to raise
additional capital in the future. Our inability to raise additional
capital may have a material adverse effect on our
business.
There is not now, and there may not ever be, an active market for
our common stock.
There
currently is no active public market for our common stock. The
limited trading in our common stock is extremely sporadic. For
example, several days may pass before any shares may be traded. As
a result, an investor may find it difficult to dispose of, or to
obtain accurate quotations of the price of, our common stock.
Accordingly, investors must assume they may have to bear the
economic risk of an investment in our common stock for an
indefinite period of time. There can be no assurance that a more
active market for our common stock will develop, or if one should
develop, there is no assurance that it will be sustained. This
severely limits the liquidity of our common stock, and would likely
have a material adverse effect on the market price of our common
stock and on our ability to raise additional capital.
23
We cannot assure you that our common stock will become liquid or
that it will be listed on a securities exchange.
Until
our common stock is listed on a national securities exchange such
as the New York Stock Exchange or the Nasdaq Stock Market, we
expect our common stock to remain eligible for quotation on the OTC
Markets QB Tier. In those venues, however, an investor may find it
difficult to obtain accurate quotations as to the market value of
our common stock. In addition, if we fail to meet the criteria set
forth in SEC regulations, various requirements would be imposed by
law on broker-dealers who sell our securities to persons other than
established customers and accredited investors. Consequently, such
regulations may deter broker-dealers from recommending or selling
our common stock, which may further affect the liquidity of the
common stock. This would also make it more difficult for us to
raise capital.
Our common stock is subject to the “penny stock” rules
of the SEC and the trading market in the securities is limited,
which makes transactions in the stock cumbersome and may reduce the
value of an investment in the stock.
The SEC
has adopted Rule 15g-9 which establishes the definition of a
“penny stock,” for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require:
●
that a broker or
dealer approve a person’s account for transactions in penny
stocks; and
●
the broker or
dealer receives from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny
stock to be purchased.
In
order to approve a person’s account for transactions in penny
stocks, the broker or dealer must:
●
obtain financial
information and investment experience objectives of the person;
and
●
make a reasonable
determination that the transactions in penny stocks are suitable
for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prescribed by the SEC relating
to the penny stock market, which, in highlight form sets
forth:
●
the basis on which
the broker or dealer made the suitability determination;
and
●
that the broker or
dealer received a signed, written agreement from the investor prior
to the transaction.
●
generally, brokers
may be less willing to execute transactions in securities subject
to the “penny stock” rules. This may make it more
difficult for investors to dispose of common stock and cause a
decline in the market value of stock.
Disclosure
also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in
penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny
stocks.
24
The price of our common stock may become volatile, which could lead
to losses by investors and costly securities
litigation.
The
trading price of our common stock is likely to be highly volatile
and could fluctuate in response to factors such as:
●
actual or
anticipated variations in our operating results;
●
announcements of
developments by us or our competitors;
●
announcements by us
or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
●
adoption of new
accounting standards affecting our industry;
●
additions or
departures of key personnel;
●
sales of our common
stock or other securities in the open market; and
●
other events or
factors, many of which are beyond our control.
The
stock market is subject to significant price and volume
fluctuations. In the past, following periods of volatility in the
market price of a company’s securities, securities class
action litigation has often been initiated against the company.
Litigation initiated against us, whether or not successful, could
result in substantial costs and diversion of our management’s
attention and resources, which could harm our business and
financial condition.
We do not anticipate dividends to be paid on our common stock, and
investors may lose the entire amount of their
investment.
Cash
dividends have never been declared or paid on our common stock, and
we do not anticipate such a declaration or payment for the
foreseeable future. We expect to use future earnings, if any, to
fund business growth. Therefore, stockholders will not receive any
funds absent a sale of their shares. We cannot assure stockholders
of a positive return on their investment when they sell their
shares, nor can we assure that stockholders will not lose the
entire amount of their investment.
You may experience dilution of your ownership interests because of
the future issuance of additional shares of our common
stock.
In the
future, we may issue our authorized but previously unissued equity
securities, resulting in the dilution of the ownership interests of
our present stockholders and the purchasers of common stock offered
hereby. We are currently authorized to issue an aggregate of
300,000,000 shares of capital stock consisting of 290,000,000
shares of common stock and 10,000,000 shares of preferred stock
with preferences and rights to be determined by our Board of
Directors. As of December 31, 2016, there were 187,329,355 shares
of our common stock and no shares of our preferred stock
outstanding. As of December 31, 2016, there were no outstanding
warrants, no outstanding restricted stock units and no outstanding
securities convertible into or exercisable for shares of our common
stock. We may issue additional shares of our common stock or other
securities that are convertible into or exercisable for our common
stock in connection with hiring or retaining employees, future
acquisitions, future sales of its securities for capital raising
purposes, or for other business purposes. The future issuance of
any such additional shares of our common stock may create downward
pressure on the trading price of our common stock. There can be no
assurance that we will not be required to issue additional shares,
warrants or other convertible securities in the future in
conjunction with any capital raising efforts.
25
We are an “emerging growth company,” and the reduced
reporting requirements applicable to emerging growth companies may
make our common stock less attractive to investors.
We are
an “emerging growth company,” as defined in the JOBS
Act. For as long as we continue to be an emerging growth company,
we may take advantage of exemptions from various reporting
requirements that are applicable to other public companies that are
not “emerging growth companies,” including not being
required to comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in this Annual Report and our periodic
reports and proxy statements and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not
previously approved. We could be an emerging growth company until
December 31, 2017, although circumstances could cause us to lose
that status earlier, including if the market value of our common
stock held by non-affiliates exceeds $700 million as of any fiscal
year end before that time or if we have total annual gross revenue
of $1.0 billion or more during any fiscal year before that time, in
which cases we would no longer be an emerging growth company as of
fiscal year end or, if we issue more than $1.0 billion in
non-convertible debt during any three year period before that time,
we would cease to be an emerging growth company
immediately.
Even
after we no longer qualify as an emerging growth company, we may
still qualify as a “smaller reporting company,” which
would allow us to take advantage of many of the same exemptions
from disclosure requirements, including not being required to
comply with the auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act and reduced disclosure obligations regarding
executive compensation in this Annual Report and our periodic
reports and proxy statements. Some investors may find our common
stock less attractive because we rely on these exemptions, there
may be a less active trading market for our common stock and our
stock price may be more volatile.
We have
elected not to use the extended transition period for complying
with new or revised accounting standards under Section 102(b)(2) of
the JOBS Act that allows us to delay the adoption of new or revised
accounting standards that have different effective dates for public
and private companies until those standards apply to private
companies. Section 107 provides that our decision to opt out of the
extended transition period for complying with new or revised
accounting standards is irrevocable.
ITEM
1B.
UNRESOLVED
STAFF COMMENTS
None.
ITEM
2.
PROPERTIES
Our
principal executive offices are located at Marconistraat 16, 3029
AK Rotterdam, The Netherlands. We are currently co-using this
office.
ITEM
3.
LEGAL
PROCEEDINGS
We know
of no materials, active or pending legal proceedings against us,
nor are we involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any beneficial shareholder
are an adverse party or has a material interest adverse to
us.
ITEM
4.
MINE
SAFETY DISCLOSURES
Not
applicable.
26
ITEM
5.
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our
common stock has been quoted on the OTC Bulletin Board (OTCBB) and
the OTC Markets QB Tier (OTCQB), since September 25, 2013, under
the symbol “SBID.” Prior to that date, our symbol was
“HKDZ.”
Shares
of our common stock began trading on a very limited basis in late
January 2014.
As of
March 31, 2017, we had 187,329,355 shares of common stock
outstanding held by 113 stockholders of record.
The
following table sets forth the high and low bid prices for our
common stock for the fiscal quarter indicated as reported on OTC
Markets. The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual
transactions. Our common stock is very thinly traded and, thus,
pricing of our common stock on OTC Markets does not necessarily
represent its fair market value.
|
Period
|
High
|
Low
|
|
|
|
|
|
Quarter ended March
31, 2015
|
0.34
|
0.18
|
|
Quarter ended June
30, 2015
|
0.33
|
0.16
|
|
Quarter ended
September 30, 2015
|
0.30
|
0.15
|
|
Quarter ended
December 31, 2015
|
0.37
|
0.191
|
|
Quarter ended March
31, 2016
|
0.50
|
0.25
|
|
Quarter ended June
30, 2016
|
0.251
|
0.07
|
|
Quarter ended
September 30, 2016
|
0.15
|
0.04
|
|
Quarter ended
December 31, 2016
|
0.04
|
0.0082
|
|
Quarter ending
March 31, 2017*
|
0.015
|
0.011
|
|
* Through March 21,
2017
|
|
|
Dividends
We have
never paid any cash dividends on our capital stock and do not
anticipate paying any cash dividends on our Common Stock in the
foreseeable future. We intend to retain future earnings to fund
ongoing operations and future capital requirements. Any future
determination to pay cash dividends will be at the discretion of
our Board of Directors and will be dependent upon financial
condition, results of operations, capital requirements and such
other factors as the Board of Directors deems relevant. Other than
provisions of the Nevada Revised Statutes requiring post-dividend
solvency according to certain measures, there are no material
restrictions limiting, or that are likely to limit, our ability to
pay dividends on our common stock.
Recent Sale of Unregistered Securities
On June
1, 2016 we closed on the sale of $550,000 in principal amount of 8%
unsecured convertible promissory notes to three
persons.
Effective
July 1, 2016 we issued an aggregate of 34,455 restricted stock
units under our 2013 Equity Incentive Plan to two
employees.
27
On
December 8, 2016 we issued an aggregate of 188,832 shares of our
restricted common stock to three advisors and four former board
members in connection with the vesting of restricted stock
units.
On
December 9, 2016 we entered into a Securities Purchase Agreement
with CKR, pursuant to which we issued 149,863,484 shares of our
restricted common stock to CKR and its designees for
(i) the cancellation of an aggregate
of $86,456.41 due from the Company to CKR for services and expense
reimbursements; (ii) a cash payment of $43,614 to be used to pay an
aggregate of $37,614 to creditors of the Company, and (iii) the
commitment of CKR to fund, to the extent future net revenues of the
Company prove insufficient, additional operating expenses of the
Company necessary to ensure its continuing operation and existence
until such time that the Company can fund operations independently
or until the Company completes an acquisition, business
continuation, or similar transaction with an operating entity in a
transaction that results in a change of control.
All of
the issuances of restricted stock units were made in reliance on
the exemption from registration provided by Section 4(a)(2) of the
Securities Act, for transactions by an issuer not involving a
public offering.
Securities Authorized for Issuance under Equity Compensation
Plans
The
following table provides information as of December 31, 2016, with
respect to the shares of common stock that may be issued under our
existing equity compensation plans:
Equity Compensation Plan Information
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants, units and rights
|
Weighted-average
exercise price of outstanding options, warrants, units and
rights
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column)
|
|
|
|
|
|
|
Equity compensation
plans approved by security holders
(1)
|
0
|
N/A
|
3,724,432
|
|
Equity compensation
plans not approved by security holders
|
N/A
|
N/A
|
N/A
|
|
Total
|
0
|
N/A
|
0
|
(1)
2013 Equity Incentive Plan
On
December 6, 2013, our Board of Directors adopted, and on December
6, 2013, our stockholders approved, the 2013 Equity Incentive Plan,
which reserves a total of 5,000,000 shares of our common stock for
issuance under the 2013 Plan. If an incentive award granted under
the 2013 Plan expires, terminates, is unexercised or is forfeited,
or if any shares are surrendered to us in connection with an
incentive award, the shares subject to such award and the
surrendered shares will become available for further awards under
the 2013 Plan.
In
addition, the number of shares of our common stock subject to the
2013 Plan, any number of shares subject to any numerical limit in
the 2013 Plan, and the number of shares and terms of any incentive
award are expected to be adjusted in the event of any change in our
outstanding our common stock by reason of any stock dividend,
spin-off, split-up, stock split, reverse stock split,
recapitalization, reclassification, merger, consolidation,
liquidation, business combination or exchange of shares or similar
transaction.
28
Administration
The
compensation committee of the Board, or the Board in the absence of
such a committee, will administer the 2013 Plan. Subject to the
terms of the 2013 Plan, the compensation committee or the Board has
complete authority and discretion to determine the terms of awards
under the 2013 Plan.
Grants
The
2013 Plan authorizes the grant to participants of nonqualified
stock options, incentive stock options, restricted stock awards,
restricted stock units, performance grants intended to comply with
Section 162(m) of the Internal Revenue Code (as amended, the
“Code”) and stock appreciation rights, as described
below:
●
Options granted
under the 2013 Plan entitle the grantee, upon exercise, to purchase
a specified number of shares from us at a specified exercise price
per share. The exercise price for shares of our Common Stock
covered by an option generally cannot be less than the fair market
value of our Common Stock on the date of grant unless agreed to
otherwise at the time of the grant. In addition, in the case of an
incentive stock option granted to an employee who, at the time the
incentive stock option is granted, owns stock representing more
than 10% of the voting power of all classes of stock of the Company
or any parent or subsidiary, the per share exercise price will be
no less than 110% of the fair market value of our Common Stock on
the date of grant.
●
Restricted stock
awards and restricted stock units may be awarded on terms and
conditions established by the compensation committee, which may
include performance conditions for restricted stock awards and the
lapse of restrictions on the achievement of one or more performance
goals for restricted stock units.
●
The Board of
Directors may make performance grants, each of which will contain
performance goals for the award, including the performance
criteria, the target and maximum amounts payable, and other terms
and conditions.
●
The 2013 Plan
authorizes the granting of stock awards. The compensation committee
will establish the number of shares of our Common Stock to be
awarded and the terms applicable to each award, including
performance restrictions.
●
Stock appreciation
rights (“SARs”) entitle the participant to receive a
distribution in an amount not to exceed the number of shares of our
Common Stock subject to the portion of the SAR exercised multiplied
by the difference between the market price of a share of our Common
Stock on the date of exercise of the SAR and the market price of a
share of our Common Stock on the date of grant of the
SAR.
Duration, Amendment, and Termination
The
Board has the power to amend, suspend or terminate the 2013 Plan
without stockholder approval or ratification at any time or from
time to time. No change may be made that increases the total number
of shares of our Common Stock reserved for issuance pursuant to
incentive awards or reduces the minimum exercise price for options
or exchange of options for other incentive awards, unless such
change is authorized by our stockholders within one year. Unless
sooner terminated, the 2013 Plan will terminate on December 6,
2023.
As of
December 31, 2014, 982,250 restricted stock units were issued and
outstanding under the 2013 Plan, which number reflects the
forfeiture and cancellation of 140,000 restricted stock units
during the year ended December 31, 2014.
29
As of
December 31, 2015, 1,643,458 restricted stock units were issued and
outstanding under the 2013 Plan, which number reflects the
forfeiture and cancellation of 9,750 restricted stock units during
the year ended December 31, 2015.
As of
December 31, 2016, no restricted stock units were outstanding under
the 2013 plan, which number reflects the forfeiture and
cancellation of 367,890 restricted stock units during the year
ended December 31, 2016.
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
None.
ITEM
6.
SELECTED
FINANCIAL DATA
We are
a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item.
ITEM
7.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following management’s discussion and analysis should be
read in conjunction with the historical financial statements and
the related notes thereto contained in this report. The
management’s discussion and analysis contains forward-looking
statements, such as statements of our plans, objectives,
expectations and intentions. Any statements that are not statements
of historical fact are forward-looking statements. When used, the
words “believe,” “plan,”
“intend,” “anticipate,”
“target,” “estimate,” “expect”
and the like, and/or future tense or conditional constructions
(“will,” “may,” “could,”
“should,” etc.), or similar expressions, identify
certain of these forward-looking statements. These forward-looking
statements are subject to risks and uncertainties, including those
under “Risk Factors” in this Form 10-K, that could
cause actual results or events to differ materially from those
expressed or implied by the forward-looking statements. The
Company’s actual results and the timing of events could
differ materially from those anticipated in these forward-looking
statements as a result of several factors. The Company does not
undertake any obligation to update forward-looking statements to
reflect events or circumstances occurring after the date of this
report.
The
following discussion highlights the Company’s results of
operations and the principal factors that have affected our
financial condition, as well as our liquidity and capital resources
for the periods described, and provides information that management
believes is relevant for an assessment and understanding of the
statements of financial condition and results of operations
presented herein. The following discussion and analysis are based
on the Company’s audited financial statements contained in
this Annual Report, which we have prepared in accordance with
United States generally accepted accounting principles. You should
read this discussion and analysis together with such financial
statements and the related notes thereto.
Basis of Presentation
The
audited financial statements for our fiscal years ended December
31, 2016 and 2015 include a summary of our significant accounting
policies and should be read in conjunction with the discussion
below.
Overview 2016
To mitigate the conditions that raised substantial doubt about the
Company’s ability to continue as a going concern management
sought out new and current strategic institutional investors.
However, the Company was unable to raise additional funds during
the first quarter of 2016. To avoid bankruptcy due to the cash flow
position of the Company, management decided to implement a cost
reduction program during the second quarter of 2016. The following
cost reduction actions have been successfully implemented and have
provided a positive impact on the cost structure of the
Company:
30
●
Closed
offices in Milano (Symbid Italia) and Amsterdam (Product
development);
●
Reduction
in costs of office space Rotterdam HQ;
●
Terminated
employment agreements with 10 full time employee
(“FTE”) product development team, our CFO, 2 FTE Symbid
Italia, 4 Commercial FTE operating in the Netherlands;
●
Put
on hold internationalization of the Symbid services and
products;
●
Put
on hold the further investments related to monitoring
services;
●
Management
salaries were reduced to nil as of August 1, 2016.
During the second half of 2016, the Company was still unable to
raise additional capital from investors and was forced to enter
settlement agreements with its creditors and note holders to
restructure the Company. Because of the restructuring, the Company
curtailed certain operations and changed its business focus from
the operation of online funding platforms and the provision of
software solutions for SMEs in the alternative financing market to
the licensing of available software packages that the Company owns
and licenses.
In addition to the measures implemented in the first nine months of
2016, the Company also implemented the following cost reductions in
connection with the restructuring during the fourth quarter of
2016:
●
Termination
of employment agreements remaining employees of Symbid B.V., under
condition employment agreements were assumed by Symbid
Coop;
●
Further
software and infrastructure development for the core crowdfunding
product has been stopped and under certain conditions assumed by
Symbid Coop;
●
Termination
of the obligations to operate a crowdfunding platform in the
Netherlands through Symbid B.V. The Company decided to a shift its
focus to commercializing available software products instead of the
more cash intensive operation of a crowdfunding platform. Symbid
Coop will continue as an independent business entity in the
crowdfunding business within the Netherlands whereby it has been
assuming significant obligations from the Company.
As the result of the restructuring, the Company’s
crowdfunding platform in the Netherlands is now operated through
Symbid Coop. The Company previously controlled and operated Symbid
Coop through corporate governance but as the result of the
restructuring, Symbid Coop has become an independent entity.
Because the Company no longer has the resources to continue the
software development of the online funding platform, Symbid Coop
took over the development of software for the crowdfunding platform
during the fourth quarter of 2016 in order to remain compliant
under the laws and regulations of The Netherlands. Symbid Coop has,
in return for reimbursing the further development of the software,
been granted a non-exclusive license to the intellectual property
from IP Foundation in order to continue crowdfunding operations in
The Netherlands. The Company will continue to hold an identical
non-exclusive license to the intellectual property of the
crowdfunding platform whereby we will be allowed to use the most up
to date versions of the software and other intellectual
property.
On December 9, 2016, the Company entered into a Securities Purchase
Agreement to issue shares constituting upon issuance 80% of its
outstanding shares in consideration for the cancellation of $86,456
due from the Company to the subscriber, a cash payment of $43,614
to be used to pay off Company debts to third parties and the
subscribers commitment to fund certain future operating expenses of
the Company.
Going Concern
The Company suffered recurring losses during the years ended
December 31, 2016 and 2015, of $1,507,652 and $2,299,275,
respectively. At December 31, 2016 and December 31, 2015, the
Company had a working capital deficit of $11,371 and working
capital of $164,209, respectively. As of December 31, 2016, the
Company had cash on hand of $9,677.
The recurring losses
raise substantial doubt about the Company’s ability to
continue as a going concern. The recoverability of a major portion
of the recorded asset amounts shown in the accompanying
consolidated balance sheet is dependent upon continued operations
of the Company, which in turn, is dependent upon the
Company’s ability to raise capital and/or generate positive
cash flows from operations. The financial statements do not include
any adjustments related to the recoverability and classification of
recorded assets and classifications that might be necessary in the
event the Company cannot continue in existence.
31
Additionally,
our independent registered public accounting firm included an
explanatory paragraph in their report for the years ended December
31, 2016 and 2015 regarding concerns about our ability to continue
as a going concern.
Our
ability to continue as a going concern is dependent upon our
generating operating cash flow and raising capital sufficient to
fund operations. We have discussed our strategy and
plans relating to these matters elsewhere in this Annual Report
although the consolidated financial statements included herein do
not include any adjustments that might result from the outcome of
these uncertainties. On December 9, 2016, we signed a Securities
Purchase Agreement under which the subscriber has agreed to fund
ongoing operation expenses of the Company until such time that the
Company can independently fund its operations or until the Company
completes an acquisition, business combination or similar
transaction with an operating entity which results in a change of
control of the Company. Our business strategy may not be successful
in addressing these issues, however, and if we cannot continue as a
going concern, our stockholders may lose their entire investment in
us.
Strategy
Our revised business model requires fewer employees, advisors and
consultants and is more economical to operate. The Company has
developed several software products suitable for the alternative
market which it will continue to offer to third parties. Such
products and related services include white label versions of
crowdfunding software for investor groups and monitoring software
to provide investors with ongoing insight into the performance of
SMEs to which they have loaned money. Related licensing fees and
subscription agreements may include set fees and yearly
contribution fees.
The Company’s goal is to substantially reduce and eliminate
its debt while continuing to operate its business and negotiate a
possible acquisition or other business combination with another
operating entity. There can be no assurance that the Company will
be successful in this endeavor or that if a business combination is
consummated that it will be on favorable terms. In the interim, the
Company will continue forward with its ongoing operations under the
revised business model.
Highlights
The
following is a summary of our financial performance for the
financial year 2016:
●
Consolidated
revenue for the twelve month periods ended December 31, 2016 and
2015 totaled approximately $218,662 and $353,076, respectively, a
decrease of approximately 38%.
●
For the twelve
months ended December 31, 2016, almost 90% of our total revenues
during this period was attributable to crowdfunding.
●
For the twelve
month periods ended December 31, 2016 and 2015, total selling,
general and administrative expenses totaled $1,104,614 and
$1,543,827, respectively.
●
As of December 31,
2016 we had 2 full-time employees.
Share Exchange and PPO closings
On
December 6, 2013, we closed a Share Exchange pursuant to which the
19 shareholders of Symbid Holding B.V. sold all of their capital
stock in Symbid Holding B.V. to us in exchange for 21,170,000
shares of our common stock, $0.001 par value per share. Concurrent
with the closing of the Share Exchange, we completed a closing of a
PPO in which we sold 3,089,736 units of our common stock and
warrants, at a price of $0.50 per unit for a total consideration of
$1,549,368.
On February 5,
2014, a second closing of the private placement offering was
completed in which an additional 373,984 units were sold which
generated gross proceeds of $186,987. In connection with the second
closing, we incurred advisory and professional fees of $80,251, of
which issuance costs of $7,750 were allocated to equity
issuance costs and deducted from additional paid in capital. On May
20, 2014, a third closing of the private placement offering was
completed in which an additional 2,380,810 units were sold
generating gross proceeds of $1,190,405. In connection with the
third closing, we incurred advisory and professional fees of
$81,724, none of which were allocated to equity issuance costs and
deducted from additional paid- in capital.
32
On
January 28, 2015, we completed the initial closing under a private
placement offering in which we offered shares of our common stock
at a purchase price of $0.50 per share. In connection therewith, we
sold 1,248,232 shares for aggregate proceeds of $624,116. Effective
June 30, 2015, we sold an additional 200,000 shares for aggregate
proceeds of $100,000 and completed the offering.
On July
14, 2015 and September 8, 2015, we closed on the sale of $250,000
and $1,250,000, respectively, in principal amount of 8% unsecured
convertible promissory notes (the “Notes”). Subject to
earlier prepayment or conversion, the Notes were scheduled to
mature three years from issuance. Interest was payable on the
first, second and third anniversaries of the issuance date. At any
time after issuance, the holders could, at their option, convert
all or a portion of the principal and interest then due into shares
of common stock at a price of $0.25 per share. On July 14, 2015, we
received conversion notices from four persons holding an aggregate
of $190,000 in principal amount of Notes of their determination to
convert all of such principal into an aggregate of 760,000 shares
and subsequently issued such shares. The balance of the Notes were
terminated on November 15, 2016 pursuant to Note Termination and
Conversion Agreements.
On June 1, 2016, we closed on the sale of $550,000 in principal
amount of 8% unsecured convertible promissory notes (the
“Notes”) to three persons. Subject to earlier
prepayment or conversion, the Notes were scheduled to mature three
years from issuance. Interest was payable on the first, second and
third anniversaries of the issuance date. If, during the term of
the Notes, we completed an equity offering (a “Qualified
Offering”) for gross proceed of not less than $1,500,000, the
holders could, at their option, convert all or a portion of the
principal and interest then due on the Notes into shares of our
common stock at a price per share equal to 50% of the price at
which our common stock was sold in the Qualified Offering. The
Notes were terminated on November 15, 2016 pursuant to Note
Termination and Conversion Agreements.
2013 Equity Incentive Plan
Before
the Share Exchange on December 6, 2013, our Board of Directors
adopted and our stockholders approved, the 2013 Equity Incentive
Plan (the “2013 Plan”), which provides for the issuance
of incentive awards of up to 5,000,000 shares of common stock to
officers, key employees, consultants and directors.
Shares Issued for Services
On
December 8, 2014, the Company entered into an agreement with
Fortion Holding B.V. and issued 1,500,000 shares of common stock
valued at $645,000 for Credion's obligations under the
agreement.
Shares Issued for Asset Acquisition
On July
29, 2014, our wholly owned subsidiary Symbid Holding, a limited
liability Corporation in the Netherlands, acquired all the issued
and outstanding shares of FAC B.V. (“acquiree”) in
exchange for 2,750,000 shares of our restricted common stock.
Acquiree owns a perpetual, worldwide, exclusive license to
infrastructure technology upon which we intend to develop a
platform to enable cloud based financing solutions for SMEs,
expanding on our current equity based crowdfunding solutions in the
Netherlands. FAC B.V. was formed by FAC 2 B.V. for the specific
purpose of holding the license and has no customers, employees,
operations or revenues. Acquiree’s only assets are its
proprietary software and technology. Prior to our
acquisition of Acquiree, (i) an indirect employee of ours who is a
member of Symbid B.V. (a wholly owned subsidiary of Symbid Holding
B.V.) management and is also the managing director of a 5%
shareholder of ours indirectly owned 20% of Acquiree; (ii) an
indirect employee of ours who is a member of Symbid B.V. management
indirectly owned 20% of Acquiree; and (iii) a minority shareholder
of ours indirectly owned 10% of Acquiree. (See for more detail Note
7 to the Financial Statements).
33
Incorporation of Symbid Germany GmbH
In
August 2014 we incorporated in Germany our subsidiary Symbid
Germany GmbH. We contributed capital of $7,749 to this subsidiary
which is currently an entity without operations.
Incorporation Symbid Italia SPA
On
February 20, 2015, Symbid Italia SPA (“Symbid Italia”),
an Italian corporation created to develop the business of equity
crowdfunding in Italy, was formed by our wholly owned subsidiary,
Symbid Holding B.V., together with Banca Sella Holding SPA
(“Banca Sella”) and Marco Bicocchi Pichi. Through
Symbid Italia, we intended to create a new online funding platform,
based on our existing crowdfunding technology, in which Italian
investors and entrepreneurs could connect, fund and grow together
and to digitalize financial services for Italian SMEs. In
connection with the formation of Symbid Italia, we paid
€250,000 for a 50.1% ownership interest. Banca Sella held a
29.94% ownership interest and Mr. Pichi held a 19.96%
interest.
From the date of formation through December 31, 2015, Symbid Italia
incurred operating losses, of approximately $118,000. Based thereon
and following an extensive review of the prospects of Symbid Italia
developing profitable operations in the near future and beyond, the
board of directors and shareholders of Symbid Italia determined
that further investment in Symbid Italia was not warranted. This
conclusion was based upon an assessment of the then current and
expected medium term Italian equity crowdfunding market, the view
that the current European regulatory framework for equity
crowdfunding reflects a country by country market rather than a pan
European market which greatly limits expected synergies and
economies of scale and because the Italian equity crowdfunding
regulations restrict the ability to attract non-domestic investors.
At the direction of the Symbid Italia board of directors, a special
Symbid Italia shareholder meeting was held on April 29, 2016, at
which it was determined to liquidate Symbid Italia and return the
residual capital to the Symbid Italia shareholders. On May 26,
2016, Symbid Italia was liquidated and we received proceeds of
$44,744 and recognized a loss on derecognition of $2,986. The loss
represents the difference between the fair value of the proceeds
received, the carrying amount of the noncontrolling interest and
the carrying amount of Symbid Italia’s net assets at May 26,
2016.
Gambitious interest sale
On February 9, 2015, we sold our remaining 12% indirect interest in
Gambitious B.V. for €18,000 due to Gambitious B.V. having
incurred continuing losses in 2014, Gambitious B.V. having switched
its business focus to that of the publishing of games, Gambitious
B.V. requiring capital contributions from its existing owners and
Gambitious B.V. no longer constituting a strategic fit with our
evolving operations.
December 9, 2016 Securities Purchase Agreement
On December 9, 2016 we entered into a Securities Purchase Agreement
with CKR Law LLP ("CKR"), pursuant to which we issued 149,863,484
shares of our restricted common stock to CKR and its designees
for
(i) the cancellation of an aggregate of $86,456
due from the Company to CKR for legal services and expense
reimbursements; (ii) a cash payment of $43,614 to be used to pay an
aggregate of $37,614 to creditors of the Company, including
payments required to enable the filing of our September 30, 2016
Quarterly Report; and (iii) the commitment of CKR to fund, to the
extent future net revenues of the Company prove insufficient,
additional operating expenses of the Company necessary to ensure
its continuing operation and existence until such time that the
Company can fund operations independently or until the Company
completes an acquisition, business continuation, or similar
transaction with an operating entity in a transaction that results
in a change of control.
34
Critical Accounting Estimates
We
regularly evaluate the accounting estimates that we use to prepare
our financial statements. A complete summary of these policies is
included in the Notes to our audited financial statements. In
general, management’s estimates are based on historical
experience, on information from third party professionals, and on
various other assumptions that are believed to be reasonable under
the facts and circumstances. Actual results could differ from those
estimates made by management.
We
believe that of our significant accounting policies, which are
described in Note 2 to our consolidated financial statements, the
following accounting policies involve a greater degree of judgment
and complexity. Accordingly, these are the policies we believe are
the most critical to aid in fully understanding and evaluating our
financial condition and results of operations.
Revenue Recognition
In 2014
we generated substantially all our revenue from administration and
success fees from transactions on the Crowdfunding platform.
Revenue from these transactions is accounted for at the moment an
investment is made or a proposition is successfully funded. Until
the end of year 2015 there has been no credit risk since the
success fees were collected directly at the moment that the
transaction takes place on the platform. As of January 2016 we had
to change the policy for collecting the success fees and there will
be a credit risk going forward. Administration fees have no credit
risk since the fees are collected directly at the moment the
transaction takes place on the platform.
At the
start of a funding campaign, the entrepreneur signs a contract with
Symbid pursuant to which he or she agrees to pay Symbid a success
fee once a successful fund raising campaign for that entrepreneur
closes. Once the funding campaign has closed, Symbid’s
success fee is transferred by Intersolve, the third party banking
entity that holds all funds in escrow until closing, and the net
proceeds of the funding are transferred by Intersolve to the notary
or directly to the entrepreneur. Upon completion of the funding
campaign on Symbid’s platform, services delivered under the
contract with the entrepreneur have been completed and Symbid
recognizes its success fee revenues at the time the campaign has
been closed successfully. Also, because the success fee percentage
is stated in the contract with the entrepreneur prior to the start
of the funding campaign, Symbid believes that this amount is fixed
and, assuming the successful conclusion of the funding campaign,
collectible from the entrepreneur. This revenue recognition
policy complies with ASC 605-10-S99-1 in that it is based on
written agreements with the entrepreneurs, contractual services
have been completed, pricing is fixed and determinable based on
agreements with the customer and collectability is reasonably
assured as the customers of Symbid have just received their new
funding.
Effectively
Symbid has the following refund policy. The cash which is collected
from investors is held in a third party bank account with
Intersolve, which cannot be used or accessed by Symbid. With funds
in this bank account, an investor buys crowdfunding credits which
are accounted for in an electronic wallet and allocated by the
investor to the investor’s funding projects of choice.
Allocated funds can only be refunded to an investor from his
electronic wallet if a particular project is not fully funded and
the funding campaign is terminated. In that situation the investor
project allocated funds are credited by Intersolve back to his
electronic wallet, from where he can invest again in another
project or request a refund of his money from Intersolve. Investors
can refund to their bank accounts free of any charge, however
InterSolve is currently charging us $15.5 (€15) for each
refund by an investor.
Other
revenue is generated by licensing the platform to third parties.
Revenue is accounted for on a monthly basis for the agreed monthly
licensed fee. There is limited credit risk. If the monthly licensed
fee is not paid, we are entitled to set the platform
offline.
We
provide a description of the different types of revenue
below.
35
Create process related revenues
●
Application fees
– $370 (exclusive of VAT) for every entrepreneur applying for
funding on The Funding Network, with part of such fee being
utilized to purchase advisory services from Credion in its capacity
as a preferred supplier
Matchmaking related revenues
Public funding (Not applicable after October 2016)
●
Transaction
fees – For every payment transaction to a Symbid wallet or
investment in an investment proposition, a fee of 1% (exclusive of
VAT) is charged to the investor.
●
Refund Fee
–If an investor requests a refund from the “Online
Wallet” a fee is charged to the investor in the amount of
approximately $22 (€ 20), of which the Company will receive
approximately $5. As of December 1, 2014 the Company will be
charged $16.5 for each refund by an investor, while for the
investor a refund has become free of any charge.
●
Success fee –
When reaching in an equity campaign the funding target, 4 to 7%
(exclusive of VAT) of the target capital is charged to the target
company. The loan based model operates through a transaction-based
model similar to our current equity crowdfunding service. There is
a fixed 1% success fee upon the successful funding of a loan
crowdfunding campaign, paid by the business, plus 1% per year for
the term of the loan immediately payable upon successful closing of
the campaign.
Private funding
●
Placement fee
–
When reaching a
funding target, 4 to 7% (exclusive of VAT) as success fee is being
charged to that target company.
Monitoring related revenues
●
Monitoring fees -
The financer will pay us a monthly fee of $10 (exclusive of VAT)
for one monitoring portal access. Entrepreneurs will be charged a
fee of $320 (exclusive of VAT) for a monitoring start package which
includes three portal accesses for one year.
Licensing related revenues
Symbid
may sublicense the platform technology in the forms discussed below
in The Netherlands and to country partners.
●
White label licenses
- Symbid offers
stand-alone and white label versions of its crowdfunding platform
to partners, companies and other (educational) organizations.
Stand-alone versions of the crowdfunding platform operate
independently in a closed environment while white label versions
are interconnected with the Symbid crowdfunding platform allowing
for interaction with Symbid platform users. Target net revenue per
partner is $10,000 for the set-up and a yearly license fee to cover
maintenance costs.
●
Software licenses
– Symbid offers
exclusive licenses within a country to use the Symbid legal and
technology infrastructure. Set-up fees are at a minimum of $25,000
and yearly license fees will be offered for a minimum of $10,000
per year;
36
●
Affiliate and Group licenses
–
Symbid offers owners of existing communities or groups a
crowdfunding service so they do not require their own crowdfunding
infrastructure. Prices range from $530 to $2,500 on a yearly
basis.
Concentrations of Credit Risk
The
Company has cash balances at financial institutions located in the
Netherlands. Balances at financial institutions in the Netherlands
may, from time to time, exceed insured limits. Currently the
insured limit amounts to EUR 100,000 (
$105,252
). We have not experienced any
losses in such accounts.
Accounts
Receivable: Customer accounts typically are collected within a
short period of time, and based on its assessment of current
conditions and its experience collecting such receivables,
management believes it has a minimal risk related to its
concentration within its accounts receivable.
Components of Results of Operations
Revenues
We
generated our revenues partly from crowdfunding related fees like
administration fees and success fees and for the other part from
revenues from The Funding Network.
Research and development
Research
and development expenses consist primarily of fees we are being
charged for developing the source code of the software platform
enabling us to build new products as well as improve existing
products. We expense substantially all of our research and
development costs as they are incurred.
Selling, General and Administrative
Our
selling, general and administrative expenses consist primarily of
legal and accounting services and other supporting overhead
costs.
Distinct Characteristics of The Dutch Model
Symbid
B.V. had until November 2016 a variable interest in Symbid
Coöperatie U.A. Symbid Coöperatie U.A. licensed from
Symbid B.V. its online crowdfunding platform in exchange for 100%
of the administration fees and success fees earned by Symbid
Coöperatie U.A. In addition, Symbid Coöperatie U.A. has
entered into a perpetual platform management service agreement with
Symbid B.V. for customer support, software updates and content
management system control for approximately $6,000 per year. The
management team of Symbid Coöperatie U.A. is the same as the
management team of Symbid B.V.
The
Company consolidates any variable interest entity
(“VIE”) for which the Company is considered the primary
beneficiary.
1
1
AVIE is an entity in which either a) the equity
investment at risk is not sufficient to permit the entity to
finance its own activities without additional financial support or
b) the voting rights of the equity investors are not proportional
to their obligations to absorb the expected losses of the entity or
their rights to receive the expected residual returns of the
entity. The Company evaluates whether entities in which it has an
interest are VIEs and whether the Company qualifies as the primary
beneficiary of any VIEs identified in its
analysis.
37
Symbid
B.V. was deemed to be the primary beneficiary of Symbid
Coöperatie U.A. Symbid B.V. had a controlling financial
interest in Symbid Coöperatie U.A. because it had the power to
direct the activities of Symbid Coöperatie U.A. that most
significantly impact Symbid Coöperatie U.A.’s economic
performance. Symbid B.V., through its control of Symbid Foundation,
was able to appoint the majority of the members’ council of
Symbid Coöperatie U.A. which, in turn, appoints the management
board of Symbid Coöperatie U.A. The Management Board of Symbid
Coöperatie U.A. controls the activities that are most
significant to Symbid Coöperatie U.A. In addition,
by virtue of the license agreement and management service agreement
between Symbid Coöperatie U.A. and Symbid B.V., substantially
all revenue earned by Symbid Coöperatie U.A. was remitted to
Symbid B.V.
As a
result of this VIE structure, Symbid B.V. consolidated until
November 2016 the financial statements of Symbid Coöperatie
U.A. Every reporting period Symbid B.V. reassesses its relationship
with Symbid Coöperatie U.A. to determine whether consolidation
is required. As such, our conclusion regarding our status as the
primary beneficiary of Symbid Coöperatie U.A. is subject to
change.
On November 15, 2016, Symbid B.V. and Symbid Coop entered into an
Intellectual Property License Termination Agreement which
terminated the April 13, 2011 License Agreement between both
companies retroactive to November 1, 2016. Symbid B.V. had
controlled and operated Symbid Coop through corporate governance
under the license agreement pursuant to which the online
crowdfunding platform was leased. As of November 1, 2016, the
effective date of the Intellectual Property License Termination
Agreement, the Company gave up its board control in Symbid Coop and
Symbid Coop became an independent entity.
Upon
deconsolidation at
November 1,
2016
,
the carrying amount of
the noncontrolling interest and the carrying amount of Symbid
Coop’s net assets were equal to each other and no gain or
loss was recorded.
38
Results of Operations
Fiscal Years Ended December 31, 2016 and 2015
The
following table summarizes our historical consolidated financial
statements:
|
|
Year
ended
December
31,
|
|
|
|
2016
|
2015
|
|
Revenues
|
|
|
|
Crowdfunding
|
$
195,632
|
$
282,155
|
|
The Funding
Network
|
22,399
|
47,975
|
|
Other
|
631
|
22,946
|
|
Total
revenues
|
218,662
|
353,076
|
|
Operating
expenses
|
|
|
|
Selling, general
and administrative
|
1,104,614
|
1,543,827
|
|
Professional
fees
|
376,720
|
721,963
|
|
Research and
development costs
|
32,869
|
59,930
|
|
Depreciation and
amortization
|
76,600
|
145,543
|
|
Bad debt expense
(recoveries)
|
(32,911
)
|
36,292
|
|
Impairment
expense
|
747,871
|
-
|
|
Total operating
expenses
|
2,305,763
|
2,507,555
|
|
|
|
|
|
Operating
loss
|
(2,087,101
)
|
(2,154,479
)
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
Interest expense
and amortization of debt discount
|
(294,599
)
|
(148,509
)
|
|
Gain on troubled
debt restructuring
|
1,169,253
|
-
|
|
Loss on cumulative
translation adjustment
|
(292,219
)
|
-
|
|
Other
income
|
-
|
11,504
|
|
Other
expense
|
(2,986
)
|
(7,791
)
|
|
Total other income
(expense)
|
579,449
|
(144,796
)
|
|
|
|
|
|
Net
loss
|
(1,507,652
)
|
(2,299,275
)
|
|
|
|
|
|
Net loss
attributable to noncontrolling interests
|
(17,029
)
|
(99,761
)
|
|
|
|
|
|
Net
loss attributable to Symbid Corp. stockholders
|
$
(1,490,623
)
|
$
(2,199,514
)
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$
(0.03
)
|
$
(0.06
)
|
|
|
|
|
|
Weighted average
number of shares outstanding
|
|
|
|
Basic and
diluted
|
46,166,536
|
35,263,977
|
|
|
|
|
|
Share-based
compensation expense included in operating expenses:
|
|
|
|
Selling, general
and administrative
|
$
33,187
|
286,298
|
|
Professional
fees
|
-
|
152,711
|
|
Research and
development costs
|
(942
)
|
33,791
|
|
|
$
32,245
|
$
472,800
|
Revenues
Total
revenue for 2016 was $218,662 and for 2015 was $353,076
representing a year on year decrease of approximately 38% or
approximately $134,000. In line with those results, Crowdfunding
revenue decreased by approximately $87,000 during the same
period.
Selling, General and Administrative Expenses
Selling,
general and administrative expenses for 2016 totaled $1,104,614
compared to $1,543,847 for 2015, a decrease of $439,233. The
decrease was primarily due to the cost reduction program and
restructuring programs implemented during the year.
39
We
anticipate that Selling, General and Administrative expenses for
2017 will decrease significantly until we have entered into a
potential transaction with a new business combination.
Professional fees
Professional
fees decreased for the year ended 2016 to a total of $376,720
compared to $721,963 for 2015, a decrease of $345,243. The decrease
in professional fees was primarily due to the stoppage in further
roll-out of the services, as well as cash flow did not allow for
further expenses.
We
anticipate professional fees will remain a substantial percentage
of the operating costs in 2017. We anticipate incurring these costs
in relation to the Company’s continued listing on the OTC
markets and the cost reduction program and restructuring programs
implemented during the year.
Research and development
Research
and development expenses for the year ended 2016 were $32,869
compared to $59,930 for the year ended 2015, a decrease of $27,061.
The decrease is primarily attributable to the cost reduction
program and restructuring programs implemented during the
year.
We
anticipate the research and developments costs for 2017 will
decrease until we have entered into a potential transaction with a
new business combination.
Foreign Currency Translation Adjustment
In
connection with the cessation of platform operations in 2016, and
in accordance with ASC 830-30, “Foreign Currency Matters
– Translation of Financial Statements”, the cumulative
foreign currency translation adjustment was released into loss
during 2016.
Income and other expenses
For
2016, total income was $579,449 an increase of $724,245 compared to
the same period in 2015. This increase was caused by the
restructuring of the company as a result of which a gain on
troubled debt restructuring was recognized.
Financial Condition, Liquidity and Capital Resources
As of
December 31, 2016, we had cash on hand of $9,677 and a working
capital deficit of $11,371.
Our
principal sources of liquidity have been fund raising through
Private Placement Offerings. Before we were a public company our
principal source of liquidity was funds raised from private
investors.
Our
cash position in 2016 decreased as compared to 2015 by $544,019
from $553,696 to $9,677. This decrease in cash can be attributed to
cash used as working capital in the operations.
On
December 6, 2013, we completed an initial closing of a private
placement offering of 3,098,736 units at $0.50 per unit, for
aggregate gross proceeds of $1,549,368 (before deducting placement
agent fees and expenses of the offering estimated at approximately
$64,895). Each of these units consisted of one share of our common
stock and one warrant to purchase one share of our common stock. On
February 5, 2014, we completed a second closing of the private
placement for aggregate additional gross proceeds of $186,992. On
May 20, 2014, we completed a third and final closing of the private
placement for aggregate additional gross proceeds of
$1,190,405.
40
On
January 28, 2015, we completed the initial closing under a private
placement offering in which we offered shares of our common stock
at a purchase price of $0.50 per share. In connection therewith, we
sold 1,248,232 shares for aggregate proceeds of $624,116. Effective
June 30, 2015, we sold an additional 200,000 shares for aggregate
proceeds of $100,000 and completed the offering.
On July
14, 2015 and September 8, 2015, we closed on the sale of $250,000
and $1,250,000, respectively, in principal amount of 8% unsecured
convertible promissory notes (the “Notes”). On July 14,
2015, we received conversion notices from four persons holding an
aggregate of $190,000 in principal amount of Notes of their
determination to convert all of such principal into an aggregate of
760,000 shares and subsequently issued such shares. The balance of
the Notes were terminated on November 15, 2016 pursuant to Note
Termination and Conversion Agreements.
On June
1, 2016 we closed on the sale of $550,000 in principal amount of 8%
unsecured convertible promissory notes (the “Notes”).
The Notes were terminated on November 15, 2016 pursuant to Note
Termination and Conversion Agreements.
On December 9, 2016, the Company entered into a Securities Purchase
Agreement to issue shares constituting upon issuance 80% of its
outstanding shares in consideration for the cancellation of
$86,456.41 due from the Company to the subscriber, a cash payment
of $43,614 to be used to pay off Company debts to third parties and
the subscriber’s commitment to fund certain future operation
expenses of the Company.
Off-Balance Sheet Arrangements
We have
no off-balance sheet arrangements (as that term is defined in Item
303(a)(4)(ii) of Regulation S-K) as of December 31, 2016 that have
or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources.
ITEM
7A.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are
a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item.
ITEM
8.
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Our
consolidated financial statements are included beginning
immediately following the signature page to this
report. See Item 15 for a list of the consolidated
financial statements included herein.
ITEM
9.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM
9A.
CONTROLS
AND PROCEDURES
Disclosure Controls and Procedures
We
maintain disclosure controls and procedures, as defined in Rule
13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act
that are designed to ensure that information required to be
disclosed by us in the reports that we file or submit 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 principal
executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required
disclosure.
41
We
carried out an evaluation, under the supervision and with the
participation of our principal executive officer and principal
financial officer of the effectiveness of the design and operation
of our disclosure controls and procedures as of December 31,
2016. Based on the evaluation of these disclosure
controls and procedures, and in light of the material weaknesses
found in our internal controls over financial reporting, our senior
management concluded that our disclosure controls and procedures
were not effective.
Management’s Report on Internal Control Over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal
control over financial reporting is defined in Rule 13a-15(f) or
15d-15(f) promulgated under the Exchange Act as a process designed
by, or under the supervision of, our principal executive and
principal financial officers and effected by our Board, management
and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting
principles generally accepted in the United States of America and
includes those policies and procedures that:
●
Pertain to the
maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our
assets;
●
Provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America and
that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of
the company; and
●
Provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect
misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may
deteriorate. All internal control systems, no matter how
well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement
preparation and presentation. Because of the inherent
limitations of internal control, there is a risk that material
misstatements may not be prevented or detected on a timely basis by
internal control over financial reporting. However, these inherent
limitations are known features of the financial reporting
process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this
risk.
As of
December 31, 2016, our senior management assessed the effectiveness
of our internal control over financial reporting based on the
criteria for effective internal control over financial reporting
established in Internal Control-Integrated 2013 Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) and SEC guidance on conducting such
assessments. Based on that evaluation, we believe that, during the
period covered by this report, such internal controls and
procedures were not effective to detect the inappropriate
application of US GAAP rules as more fully described below. This
was due to deficiencies that existed in the design or operation of
our internal controls over financial reporting that adversely
affected our internal controls and that may be considered to be
material weaknesses.
The
matters involving internal controls and procedures that our
management considered to be material weaknesses under the standards
of the Public Company Accounting Oversight Board were: (1) lack of
a functioning audit committee, resulting in ineffective oversight
in the establishment and monitoring of required internal controls
and procedures; (2) inadequate segregation of duties consistent
with control objectives; and (3) ineffective controls over period
end financial disclosure and reporting processes. The
aforementioned material weaknesses were identified by our senior
management in connection with the review of our financial
statements as of December 31, 2016.
42
Management’s Remediation Initiatives
In an
effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we plan to initiate
the following series of measures:
●
Assuming we are
able to secure additional working capital and grow our business,
(i) we will create a position to segregate duties consistent with
control objectives and will increase our personnel resources and
technical accounting expertise within the accounting function when
funds are available to us; (ii) we will create an audit committee
which will undertake the oversight in the establishment and
monitoring of required internal controls and procedures such as
reviewing and approving estimates and assumptions made by
management.
Changes in Internal Control over Financial Reporting
There
has been no change in our internal control over financial reporting
identified in connection with our evaluation we conducted of the
effectiveness of our internal control over financial reporting as
of December 31, 2016, that occurred during our fourth quarter that
has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
ITEM
9B.
OTHER
INFORMATION
None.
ITEM
10.
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Below
are the names of and certain information regarding our current
executive officers and directors:
|
Name
|
|
Age
|
|
Position
|
|
Date Named to
Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
Korstiaan
Zandvliet
|
|
32
|
|
Director,
Chief Executive Officer and President
|
|
December
6, 2013
|
|
|
|
|
|
|
|
|
|
|
|
Maarten
van der Sanden
|
|
31
|
|
Chief
Executive Officer, Chief Operating Officer, Treasurer and
Secretary
|
|
N/A
|
|
Directors
are elected to serve until the next annual meeting of stockholders
and until their successors are elected and qualified. Directors are
elected by a plurality of the votes cast at the annual meeting of
stockholders and hold office until the expiration of the term for
which he or she was elected and until a successor has been elected
and qualified.
A
majority of the authorized number of directors constitutes a quorum
of the Board of Directors for the transaction of business. The
directors must be present at the meeting to constitute a quorum.
However, any action required or permitted to be taken by the Board
of Directors may be taken without a meeting if all members of the
Board of Directors individually or collectively consent in writing
to the action.
The
presently authorized number of directors to constitute our Board of
Directors is one. Executive officers are appointed by the Board of
Directors and serve at its pleasure.
43
The
principal occupation and business experience during at least the
past five years for our executive officers and directors is as
follows:
Korstiaan Zandvliet – Director and Chief Executive
Officer.
Korstiaan Zandvliet has served as our
Chief Executive Officer and a director since December 6, 2013. Mr.
Zandvliet is a founder of Symbid B.V. and has been a Managing
Director of Symbid B.V. since December 2010. From July
2008 to December 2010, Mr. Zandvliet was the Global Marketing
Director for Mendix B.V. – Rotterdam, a software start-up
offering a fully integrated model-driven platform to build
enterprise-class business applications. At Mendix, Mr. Zandvliet
was responsible for, among other things, (i) budgeting
and implementing all company communications strategies, both
external and internal, (ii) editorial direction, design and
production of all company publications, (iii) implementing
marketing campaigns for trade shows and company marketing events,
(iv) streamlining and optimizing the inside sales process,
including organizing and staffing of webinars and CRM-system
optimization, (v) market research and roll-out for the
company’s international locations (Sweden, Thailand, USA, Abu
Dhabi and UK) and (vi) capture and cataloging competitive
intelligence from other model-driven organizations and
competitors. Since July 2010, Mr. Zandvliet has been an
expert consultant and writer for Crowdsourcing Inc., a company
whose website provides authoritative information and other content
relating to crowdfunding and related formats. Because of Mr.
Zandvliet’s years of international experience and management
skills working with start-up organizations, including his role as a
founder and Managing Director of Symbid B.V., we have concluded
that Mr. Zandvliet should serve as a director of Symbid Corp. Mr.
Zandvliet received a Bachelor’s Degree in business
administration from RSM Erasmus University in 2007 and a
Master’s Degree in Entrepreneurship and New Business
Venturing from Erasmus University Rotterdam in 2010.
Maarten van der Sanden – Secretary, Treasurer, Chief
Financial Officer and Chief Operating
Officer.
Maarten van der Sanden has served as our
Chief Operating Officer since December 6, 2013. Mr. van
der Sanden served as our Chief Financial Officer and Treasurer from
December 6, 2013 until April 15, 2014 and also served as our Chief
Financial Officer and Treasurer from March 16, 2015 until November
16, 2015. Since May 6, 2016 he has again been serving as our Chief
Executive Officer and Treasurer. He has served as our Secretary
since November 16, 2015. Mr. van der Sanden has been a member of
the board of directors of Symbid B.V. since January 2012. From July
2008 through December 2012, Mr. van der Sanden was a founder and
Managing Director of RotaSocio Holding B.V. - Amsterdam, a
developer of innovative mobility solutions whose first project,
StudentCar, a car-sharing provider for students in the Netherlands,
was launched in Rotterdam in January 2009, with an electric shared
car introduced in June 2009. At RotaSocio, Mr. van der
Sanden was responsible for the operations and finance functions and
the roll-out of StudentCar. RotoSocio was sold in 2012
to the second largest car-sharing provider in the Netherlands.
Since September 2012, Mr. van der Sanden has also been the Managing
Director and owner of Sanden Beheer B.V. - Amsterdam, an investment
company that invests in and provides management services to
SMEs. Mr. van der Sanden received a Bachelor’s
Degree in business administration from RSM Erasmus University in
2006 and a Master’s Degree in Finance and Investments in 2007
and a Master’s Degree in Entrepreneurship and New Business
Venturing in 2009, both from Erasmus University
Rotterdam.
Director Independence
We are
not currently subject to listing requirements of any national
securities exchange or inter-dealer quotation system which has
requirements that a majority of the board of directors be
“independent” and, as a result, we are not at this time
required to have our Board of Directors comprised of a majority of
“independent directors.” We do not presently have any
independent directors.
Family Relationships
There
are no family relationships among our Directors or executive
officers.
44
Involvement in Certain Legal Proceedings
None of
our directors or executive officers has been involved in any of the
following events during the past ten years:
●
Any bankruptcy
petition filed by or against any business of which such person was
a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
●
Any conviction in a
criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offences);
●
Being subject to
any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or
otherwise limiting his or her involvement in any type of business,
securities or banking activities; or
●
Being found by a
court of competent jurisdiction (in a civil action), the Commission
or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment
has not been reversed, suspended, or vacated.
Board Committees
The
Company currently has not established any committees of the Board
of Directors. Subject to our appointment of additional
directors, our Board of Directors may designate from among its
members an executive committee and one or more other committees in
the future. We do not have a nominating committee or a
nominating committee charter. Further, we do not have a
policy with regard to the consideration of any director candidates
recommended by security holders. To date, other than as
described above, no security holders have made any such
recommendations. Our sole director performs all
functions that would otherwise be performed by
committees. Given the present size of our board it is
not practical for us to have committees. If we are able
to grow our business and increase our operations, we intend to
expand the size of our board and allocate responsibilities
accordingly.
Audit Committee Financial Expert
We have
no separate audit committee at this time. Our sole
director oversees our audits and auditing procedures. At this time
none of our directors are an “audit committee financial
expert” within the meaning of Item 407(d)(5) for SEC
regulation S-K.
Code of Ethics
We have
adopted a written code of ethics (the “Code of Ethics”)
that applies to our principal executive officer, principal
financial officer, principal accounting officer or controller, and
persons performing similar functions. We believe that the Code of
Ethics is reasonably designed to deter wrongdoing and promote
honest and ethical conduct; provide full, fair, accurate, timely
and understandable disclosure in public reports; comply with
applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the
code. To request a copy of the Code of Ethics, please
make written request to our Secretary, at Symbid Corp.,
Marconistraat 16, 3029 AK Rotterdam, The Netherlands.
Compliance with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires our directors, officers and
persons who own more than 10% of a registered class of our equity
securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Directors, officers
and greater than 10% stockholders are required by SEC regulations
to furnish us with copies of all Section 16(a) forms they file.
Based solely upon our review of the copies of such forms that we
received with respect to the year ended December 31, 2016, we
believe that each person who at any time during the year was a
director, officer or beneficial owner of more than 10% of our
Common Stock satisfied their Section 16(a) filing requirements,
although certain reports were filed on a late basis.
45
Shareholder Communications
Currently,
we do not have a policy with regard to the consideration of any
director candidates recommended by security holders. To date, no
security holders have made any such recommendations.
ITEM
11.
EXECUTIVE
COMPENSATION
The
following table sets forth information concerning the total
compensation paid or accrued by us during the fiscal year ended
December 31, 2016 to (i) all individuals that served as our
principal executive officer or acted in a similar capacity for us
at any time during the fiscal year ended December 31, 2016 and (ii)
all individuals that served as executive officers of ours at any
time during the fiscal year ended December 31, 2016 that received
annual compensation during the fiscal year ended December 31, 2016
in excess of $100,000. None of our executive officers received
annual compensation during the fiscal year ended December 31, 2016
in excess of $100,000.
Summary Compensation Table
|
Name &
Principal Position
|
|
Fiscal Year
ended
December
31,
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity
Incentive Plan Compensation
|
Non-Qualified
Deferred Compensation Earnings ($)
|
All Other
Compensation ($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Korstiaan
Zandvliet, CEO
(1)(2)
|
|
2016
|
$
23,843
|
0
|
0
|
0
|
0
|
0
|
0
|
$
23,843
|
|
|
|
2015
|
$
60,396
|
0
|
31,303
(3)
|
0
|
0
|
0
|
0
|
$
91,699
|
(1)
On December 6,
2013, Mr. Zandvliet, was appointed as our Chief Executive Officer
and President.
(2)
The numbers
presented in this table represent compensation paid to Mr.
Zandvliet through his management entity, Arena Amnis
B.V.
(3)
Represents Stock
Award compensation consisting of Restricted Stock Units awarded to
the executive. As of July 24, 2014 the executive was awarded with
130,000 shares that all vested at the end of June 2015. As of
December 31, 2015 we expensed $30,361 on these awards, which has
been included in the calculation of the 2015 compensation for the
executive. As of November 5, 2015 the executive was awarded with
16,233 shares that vested on November 5, 2016. As of December 31,
2015 we expensed $942 on these awards, which has been included in
the calculation of the 2015 compensation for the executive. As of
December 31, 2016 the employee chose to not have the 16,233 shares
vest and forfeited the RSU’s.
Outstanding Equity Awards at Fiscal Year-End
We have
one compensation plan approved by our stockholders, the 2013 Plan.
As of December 31, 2016, we had no restricted stock units issued
and outstanding. 130,000 restricted stock units granted to the
named executive officer under the 2013 Plan vested on June 30,
2015.
We have no plans
in place and have never maintained any plans that provide for the
payment of retirement benefits or benefits that will be paid
primarily following retirement including, but not limited to, tax
qualified deferred benefit plans, supplemental executive retirement
plans, tax-qualified deferred contribution plans and nonqualified
deferred contribution plans.
46
Employment Agreements
On
December 6, 2013, we entered into employment service agreements
with each of Korstiaan Zandvliet and Maarten van der Sanden,
respectively, pursuant to which they presently serve as our Chief
Executive Officer and President and Chief Executive Officer,
Treasurer, Secretary and Chief Commercial Officer, respectively.
Mr. van der Sanden served as our Chief Financial Officer and
Treasurer from December 6, 2013 until April 15, 2014 and from March
16, 2015 until November 16, 2015. He resumed these roles again on
May 6, 2016. The employment agreements provided for a net annual
base salary of €50,000 ($55,000 per year) and €50,000
($55,000 per year) for each of Messrs. Zandvliet and van der
Sanden, respectively. Effective July 24, 2014, each of Messrs.
Zandvliet and van der Sanden executed amendments to their
respective employment agreements pursuant to which each agreed to
have their base net salaries reduced by one third resulting in a
net annual salary of €33.333 ($44,300 per year). Effective
November 1, 2015, we determined to raise the base annual salary
that we were paying to each of Korstiaan Zandvliet and Maarten van
der Sanden to €57,000 (approximately $63,600 based on the
Euro to US Dollar conversion rate as of November 1, 2015). On July
1, 2016, Korstiaan Zandvliet and Maarten van der Sanden executed
amendments to their employment agreements to reduce their
respective base salaries from €57,000 to €22,392
(approximately $24,631 based on the Euro to US Dollar conversion
rate as of July 1, 2016). Effective October 12, 2016. Korstiaan
Zandvliet and Maarten van der Sanden executed further amendments to
their employment agreements to reduce their respective base
salaries to zero retroactive to August 1, 2016. All salary payments
were paid in Euros and were exclusive of an 8% holiday allowance.
In addition, each of Messrs. Zandvliet and van der Sanden are
eligible to earn an annual bonus at such time and in such amount as
may be determined by the Company’s Board of Directors. The
Board of Directors may determine that some or all of an annual
bonus shall be based upon the achievement of operational, financial
or other milestones. Effective November 5, 2015, each of Messrs.
Zandvliet and van der Sanden received restricted stock units valued
at 10% of their respective annual base salaries each of which
vested on November 5, 2016.
Director Compensation
We
currently do not pay any cash compensation to members of our board
of directors for their services as directors of the Company.
However, we reimburse our directors for all reasonable
out-of-pocket expenses incurred in connection with their attendance
at meetings of the board of directors. We may also determine to
grant to each non-employee director, awards under our equity
incentive plans.
ITEM
12.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The
following table sets forth information with respect to the
beneficial ownership of our Common Stock as of March 31, 2017, by
(i) each stockholder known by us to be the beneficial owner of more
than 5% of our Common Stock (our only class of voting securities),
(ii) each of our directors and executive officers, and (iii) all of
our directors and executive officers as a group. To the best of our
knowledge, except as otherwise indicated, each of the persons named
in the table has sole voting and investment power with respect to
the shares of our Common Stock beneficially owned by such person,
except to the extent such power may be shared with a spouse. To our
knowledge, none of the shares listed below are held under a voting
trust or similar agreement, except as noted. Other than the Share
Exchange, to our knowledge, there is no arrangement, including any
pledge by any person of securities of the Company or any of its
parents, the operation of which may at a subsequent date result in
a change in control of the Company.
47
Unless
otherwise indicated in the following table, the address for each
person named in the table is c/o Symbid Corp., Marconistraat 16,
3029 AK Rotterdam, The Netherlands.
|
Name and Address
of Beneficial Owner
|
Common
Stock
Beneficially
Owned
|
Percent of
Common Stock Beneficially Owned(1)
|
|
|
|
|
|
Korstiaan
Zandvliet
|
1,376,096
(2)
|
0.73
%
|
|
|
|
|
|
Maarten van der
Sanden
|
1,420,039
(3)
|
0.76
%
|
|
|
|
|
|
All directors and
executive officers as a group (2 persons)
|
2,796,135
|
1.49
%
|
|
|
|
|
|
CKR Law
LLP
1330 Avenue of the
Americas, 14th Floor
New York, NY
10019
|
140,515,750
(4)
|
75.01
%
|
(1)
Applicable
percentage ownership is based on 187,329,355 shares of Common Stock
outstanding as of March 31, 2017, together with securities
exercisable or convertible into shares of common stock within 60
days of March 31, 2017, for each shareholder. Beneficial ownership
is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities.
Shares of Common Stock issuable pursuant to the exercise or
conversion of other securities are deemed outstanding for the
purpose of computing the percentage of ownership of the security
holder, but are not treated as outstanding for the purpose of
computing the percentage of ownership of any other
person.
(2)
Consists of shares
of common stock held by Arena Amnis B.V. Korstiaan Zandvliet has
sole voting and investment power with respect to these
shares.
(3)
Consists of shares
of common stock held by Sanden Beheer B.V. Maarten van der Sanden
has sole voting and investment power with respect to these
shares.
(4)
Jeffrey Rinde, the
managing partner of CKR Law LLP has sole voting and investment
power with respect to these shares.
ITEM
13.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
SEC
rules require us to disclose any transaction or currently proposed
transaction in which we are a participant and in which any related
person has or will have a direct or indirect material interest
involving the lesser of $120,000 or one percent of the average of
our total assets as of the end of last two completed fiscal years.
A related person is any executive officer, director, nominee for
director, or holder of 5% or more of our common stock, or an
immediate family member of any of those persons.
Following
the Share Exchange on December 6, 2013, the three executive
officers of the Company at that time entered into employment
agreements and became salaried employees of Symbid Corp. During the
years ended December 31, 2016 and 2015, total expenses recorded
under these agreements were approximately $150,000 and $181,000,
respectively. As of December 31, 2016 and 2015, $0 has been
accrued and recorded in accounts payable and accrued
expenses.
48
Loans to Symbid B.V.
Voyager
B.V., beneficially owned by Maarten Timmerman, loaned approximately
$81,000 to the Company in September 2011. This loan, as extended,
is due on December 31, 2016 with interest only payments of 4% per
annum. The loan is subordinate to the interests of a bank working
capital facility and is unsecured. On November 15, 2016 Symbid B.V.
entered into an agreement with Voyager Beheer BV
(“Voyager”) and Symbid Coöp which provided for the
termination of a September 15, 2011 €66,950 promissory note
from Symbid B.V. to Voyager, including all accrued interest due
thereon, in consideration of the grant to Voyager of a 1.33% equity
participation in Symbid Coöp.
Acquisition of FAC B.V.
On July
29, 2014, we entered into a Share Purchase Agreement with our
wholly owned subsidiary, Symbid Holding B.V., and FAC 2 B.V., a
limited liability corporation incorporated in The
Netherlands. Pursuant to the Share Purchase Agreement,
we acquired FAC B.V. (“Acquiree”), a limited liability
corporation incorporated in The Netherlands from FAC 2 B.V. in
exchange for 2,750,000 shares of our restricted common
stock. Acquiree owns a perpetual, worldwide, exclusive
license to infrastructure technology upon which we intend to
develop a platform to enable cloud based financing solutions for
SMEs, expanding on our current equity based crowdfunding solutions
in the Netherlands. Acquiree was formed by FAC 2 B.V.
for the specific purpose of holding the license and has no
customers, employees, operations or
revenues. Acquiree’s only assets are its
proprietary software and technology. Prior to our
acquisition of Acquiree, (i) an indirect employee of ours who is a
member of Symbid B.V. (a wholly owned subsidiary of Symbid Holding
B.V.) management and is also the managing director of a 5%
shareholder of ours indirectly owned 20% of Acquiree; (ii) an
indirect employee of ours who is a member of Symbid B.V. management
indirectly owned 20% of Acquiree; and (iii) a minority shareholder
of ours indirectly owned 10% of Acquiree.
RSU Issuances
During
the year ended December 31, 2016 we awarded no shares of restricted
stock units to our employees.
Director Independence
We are
not currently subject to listing requirements of any national
securities exchange or inter-dealer quotation system which has
requirements that a majority of the board of directors be
“independent” and, as a result, we are not at this time
required to have our Board of Directors comprised of a majority of
“independent directors.”
ITEM
14.
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Audit Fees
The
aggregate fees billed to us by our principal accountants for
professional services rendered during the years ended December 31,
2016 and December 31, 2015 are set forth in the table
below:
|
Fee
Category
|
Year
ended
December 31,
2016
|
Year
ended
December 31,
2015
|
|
|
|
|
|
Audit
fees
(1)
|
$
69,600
|
$
75,000
|
|
Audit-related
fees
(2)
|
0
|
5,675
|
|
Tax
fees
(3)
|
0
|
0
|
|
All other
fees
(4)
|
0
|
0
|
|
Total
fees
|
$
69,600
|
$
80,675
|
49
(1)
Audit fees consist
of fees incurred for professional services rendered for the audit
of consolidated financial statements, for reviews of our interim
consolidated financial statements included in our quarterly reports
on Form 10-Q and for services that are normally provided in
connection with statutory or regulatory filings or engagements. Of
the audit fees incurred during 2016, CKR paid $52,500 on behalf of
the Company in accordance with the SPA Agreement.
(2)
Audit-related
fees consist of fees billed for professional services that are
reasonably related to the performance of the audit or review of our
consolidated financial statements, but are not reported under
“Audit fees.”
(3)
Tax fees
consist of fees billed for professional services relating to tax
compliance, tax planning, and tax advice.
(4)
All other
fees consist of fees billed for all other services.
Audit Committee’s Pre-Approval Practice
Prior
to our engagement of our independent auditor, such engagement was
approved by our board of directors. The services
provided under this engagement may include audit services,
audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category
of services and is generally subject to a specific budget. Pursuant
our requirements, the independent auditors and management are
required to report to our board of directors at least quarterly
regarding the extent of services provided by the independent
auditors in accordance with this pre-approval, and the fees for the
services performed to date. Our board of directors may also
pre-approve particular services on a case-by-case basis. All
audit-related fees, tax fees and other fees incurred by us for the
year ended December 31, 2016, were approved by our board of
directors.
ITEM
15.
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
Financial Statements
See
Index to Financial Statements immediately following the signature
page of this report.
Financial Statement Schedules
All
financial statement schedules are omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
Exhibits
In
reviewing the agreements included as exhibits to this Form 10-K,
please remember that they are included to provide you with
information regarding their terms and are not intended to provide
any other factual or disclosure information about the Company or
the other parties to the agreements. The agreements may contain
representations and warranties by each of the parties to the
applicable agreement. These representations and warranties have
been made solely for the benefit of the parties to the applicable
agreement and:
●
should not in all
instances be treated as categorical statements of fact, but rather
as a way of allocating the risk to one of the parties if those
statements prove to be inaccurate;
●
have been qualified
by disclosures that were made to the other party in connection with
the negotiation of the applicable agreement, which disclosures are
not necessarily reflected in the agreement;
●
may apply standards
of materiality in a way that is different from what may be viewed
as material to you or other investors; and
50
●
were made only as
of the date of the applicable agreement or such other date or dates
as may be specified in the agreement and are subject to more recent
developments.
Accordingly,
these representations and warranties may not describe the actual
state of affairs as of the date they were made or at any other
time. Additional information about the Company may be found
elsewhere in this Form 10-K and the Company’s other public
filings, which are available without charge through the SEC’s
website at http://www.sec.gov.
The
following exhibits are included as part of this
report:
|
Exhibit
Number
|
|
SEC Report
Reference Number
|
|
Description
|
|
|
|
|
|
|
|
2.1
|
|
2.1
|
|
Share
Exchange Agreement dated December 6, 2013, by and among Registrant,
Symbid Holding B.V. and the Shareholders of Symbid Holding
B.V (1)
|
|
3.1
|
|
3.1
|
|
Articles
of Incorporation of the Registrant (2)
|
|
3.2
|
|
3.1
|
|
Certificate
of Amendment to the Articles of Incorporation of the
Registrant (3)
|
|
3.3
|
|
3.2
|
|
By-Laws
of the Registrant (2)
|
|
3.4
|
|
3.4
|
|
Articles
of Association of Symbid Cooperatie U.A. (Unofficial English
Translation) (4)
|
|
3.5
|
|
3.5
|
|
Articles
of Association of Symbid Foundation. (Unofficial English
Translation) (4)
|
|
3.6
|
|
3.6
|
|
Articles
of Association of Symbid IP Foundation. (Unofficial English
Translation) (4)
|
|
4.1
|
|
4.1
|
|
Form of
Investor Warrant of the Registrant (1)
|
|
4.2
|
|
4.2
|
|
Form of
Broker Warrant of the Registrant (1)
|
|
4.3
|
|
4.1
|
|
Form of
2015 8% Convertible Promissory Note (9)
|
|
10.1
|
|
10.1
|
|
Split-Off
Agreement, dated as of December 6, 2013, by and among the
Registrant, Symbid Split Corp. and Holli
Morris (1)
|
|
10.2
|
|
10.2
|
|
General
Release Agreement, dated as of December 6, 2013, by and among the
Registrant, Symbid Split Corp. and Holli
Morris (1)
|
|
10.3
|
|
10.3
|
|
Form of
Lock-Up and No Short Selling Agreement between the Registrant and
the officers, directors and shareholders party
thereto (1)
|
|
10.4
|
|
10.4
|
|
Form of
Securities Purchase Agreement between the Registrant and the
investors party thereto (1)
|
|
10.5
|
|
10.5
|
|
Form of
Notice to Investors dated November 25, 2013 (1)
|
|
10.6
|
|
10.6
|
|
Placement
Agency Agreement, dated September 9, 2013, between the Registrant
and Gottbetter Capital Markets, LLC (1)
|
|
10.7
|
|
10.7
|
|
Placement
Agency Agreement, First Amendment, dated October 14, 2013, between
the Registrant and Gottbetter Capital Markets,
LLC (1)
|
|
10.8
|
|
10.8
|
|
Placement
Agency Agreement, Second Amendment, dated November 15, 2013,
between the Registrant and Gottbetter Capital Markets,
LLC (1)
|
51
|
10.9
|
|
10.9
|
|
Placement
Agency Agreement, Third Amendment, dated February 6, 2014, between
the Registrant and Gottbetter Capital Markets,
LLC (6)
|
|
10.10
|
|
10.10
|
|
Placement
Agency Agreement, Fourth Amendment, dated March 25, 2014, between
the Registrant and Gottbetter Capital Markets,
LLC (6)
|
|
10.11
|
|
10.11
|
|
Placement
Agency Agreement, Fifth Amendment, dated April 30, 2014, between
the Registrant and Gottbetter Capital Markets,
LLC (6)
|
|
10.12
|
|
10.12
|
|
Placement
Agency Agreement, Sixth Amendment, dated May 9, 2014, between the
Registrant and Gottbetter Capital Markets,
LLC (6)
|
|
10.13
|
|
10.9
|
|
Subscription
Escrow Agreement, dated as of September 9, 2013, among the
Registrant, CSC Trust Company of Delaware and Gottbetter Capital
Markets, LLC (1)
|
|
10.14
|
|
10.10
|
|
Subscription
Escrow Agreement, First Amendment dated as of November 15, 2013,
among the Registrant, CSC Trust Company of Delaware and Gottbetter
Capital Markets, LLC (1)
|
|
10.15
|
|
10.15
|
|
Subscription
Escrow Agreement, Second Amendment dated as of February 6, 2014,
among the Registrant, CSC Trust Company of Delaware and Gottbetter
Capital Markets, LLC (6)
|
|
10.16
|
|
10.16
|
|
Subscription
Escrow Agreement, Third Amendment dated as of March 25, 2014, among
the Registrant, CSC Trust Company of Delaware and Gottbetter
Capital Markets, LLC (6)
|
|
10.17
|
|
10.17
|
|
Subscription
Escrow Agreement, Fourth Amendment dated as of April 30, 2014,
among the Registrant, CSC Trust Company of Delaware and Gottbetter
Capital Markets, LLC (6)
|
|
10.18
|
|
10.18
|
|
Subscription
Escrow Agreement, Fifth Amendment dated as of May 9, 2014, among
the Registrant, CSC Trust Company of Delaware and Gottbetter
Capital Markets, LLC (6)
|
|
10.19
|
|
10.11
|
|
Escrow
Agreement dated as of December 6, 2013 by and among the Registrant,
the Indemnification and Shareholder Representative named therein
and Gottbetter & Partners, LLP (1)
|
|
10.20
|
|
10.12
|
|
Employment
Services Agreement, dated December 6, 2013, between the Registrant
and Korstiaan Zandvliet (1)
|
|
10.21
|
|
10.13
|
|
Employment
Services Agreement, dated December 6, 2013, between the Registrant
and Robin Slakhorst (1)
|
|
10.22
|
|
10.14
|
|
Employment
Services Agreement, dated December 6, 2013, between the Registrant
and Maarten van der Sanden (1)
|
|
10.23
|
|
10.1
|
|
Employment
Services Agreement, dated April 15, 2014 between the Registrant and
Philip Cooke (5)
|
|
10.24
|
|
10.15
|
|
Registrant’s
2013 Equity Incentive Plan (1)
|
|
10.25
|
|
10.16
|
|
Form of
Registration Rights Agreement (1)
|
|
10.26
|
|
10.17
|
|
License
Agreement dated April 13, 2011 by and between Symbid B.V. and
Symbid Cooperatie U.A. (1)
|
52
|
10.27
|
|
10.18
|
|
Platform
Management Services Agreement April 6, 2011 by and between Symbid
B.V. and Symbid Cooperatie U.A. (1)
|
|
10.28
|
|
10.19
|
|
Intellectual
Property Transfer Agreement dated October 16, 2013 by and between
Symbid B.V. and Stichting Symbid IP
Foundation (1)
|
|
10.29
|
|
10.20
|
|
Intellectual
Property License and Transfer Agreement dated October 16, 2013 by
and between Stichting Symbid IP Foundation and Symbid Holding
B.V. (1)
|
|
10.30
|
|
10.21
|
|
Addendum
1 dated December 5, 2013 to Intellectual Property License and
Transfer Agreement dated October 16, 2013 by and between Stichting
Symbid IP Foundation and Symbid Holding B.V. (1)
|
|
10.31
|
|
10.22
|
|
Intellectual
Property Sublicense and Transfer Agreement dated December 5, 2013
by and between Symbid Holding B.V. and Symbid
B.V. (1)
|
|
10.32
|
|
10.1
|
|
Share
Purchase Agreement dated July 29, 2014, between the Registrant,
Symbid Holding B.V., and FAC 2 B.V (7)
|
|
10.33
|
|
10.25
|
|
Agreement
dated December 8, 2014 by and between the Registrant and Fortion
Holding B.V. (8)
|
|
10.34
|
|
10.26
|
|
Subscription
and shareholder agreement dated December, 2014, between the
Registrant, Banca Sella Holding SPA and Marco Bicocchi
Pichi (8)
|
|
10.35
|
|
10.1
|
|
Employment
Services Agreement dated as of November 1, 2015 between Registrant
and Dick Kooij (10)
|
|
10.36
|
|
10.2
|
|
Amendment
No. 1 dated as of November 16, 2015 to Employment Services
Agreement between Registrant and Dick Kooij (10)
|
|
10.37
|
|
10.1
|
|
Financial
Public Relations Agreement dated as of July 1, 2015 between
Registrant and Dynasty Wealth LLC (11)
|
|
10.38
|
|
10.1
|
|
First
Amendment dated as of November 11, 2015 to Financial Public
Relations Agreement dated as of July 1, 2015 between Registrant and
Dynasty Wealth LLC (9)
|
|
10.39
|
|
10.2
|
|
Form of
Restricted Stock Unit Agreement of
Registrant (12)
|
|
10.40
|
|
10.1
|
|
Resignation
Letter of Hendrik Kasteel dated April 5, 2016 (13)
|
|
10.41
|
|
10.2
|
|
Resignation
Letter of Vincent Lui dated April 5, 2016 (13)
|
|
10.42
|
|
10.3
|
|
Resignation
Letter of Jerome Koelewijn dated April 5, 2016 (13)
|
|
10.43
|
|
10.1
|
|
Form of
November 15, 2016 Note Termination and Conversion Agreement (2016
Notes) (14)
|
|
10.44
|
|
10.2
|
|
Form of
November 15, 2016 Note Termination and Conversion Agreement (2015
Notes) (14)
|
|
10.45
|
|
10.3
|
|
Right
of First Refusal Agreement dated November 15,
2016 (14)
|
|
10.46
|
|
10.4
|
|
Intellectual
Property License Termination Agreement dated November 15, 2016
between Symbid B.V. and Symbid Coöperatie U.A.
(14)
|
|
10.47
|
|
10.5
|
|
Addendum
2 dated November 15, 2016 to October 16, 2013 Intellectual Property
License and Transfer Agreement between Stichting Symbid IP
Foundation and Symbid Holding B.V. (14)
|
|
10.48
|
|
10.6
|
|
Intellectual
Property License and Transfer Agreement dated November 15, 2016
between Symbid Coöperatie U.A. and Stichting Symbid IP
Foundation (14)
|
53
|
10.49
|
|
10.7
|
|
Securities
Purchase Agreement dated as of December 9,2016 between Registrant
and CKR Law LLP (14)
|
|
14.1
|
|
14.1
|
|
Code of
Ethics (2)
|
|
21.1*
|
|
|
|
Subsidiaries
of Registrant
|
|
23.1*
|
|
|
|
Consent
of Independent Registered Public Accounting Firm
|
|
31.1*
|
|
|
|
Certification
of Principal Executive Officer pursuant to Exchange Act Rules
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002**
|
|
31.2*
|
|
|
|
Certification
of Principal Financial Officer pursuant to Exchange Act Rules
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002**
|
|
32.1*
|
|
|
|
Certifications
of 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*
|
|
|
|
Certifications
of Chief 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*
|
|
|
|
XBRL
Instance Document***
|
|
101.SCH*
|
|
|
|
XBRL
Taxonomy Extension Schema Document***
|
|
101.CAL*
|
|
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document***
|
|
101.DEF*
|
|
|
|
XBRL
Taxonomy Extension Definition Linkbase Document***
|
|
101.LAB*
|
|
|
|
XBRL
Taxonomy Extension Label Linkbase Document***
|
(1)
Filed with the
Securities and Exchange Commission on December 12, 2013, as an
exhibit, numbered as indicated above, to the Registrant’s
Current Report on Form 8-K dated December 6, 2013, which exhibit is
incorporated herein by reference.
(2)
Filed with the
Securities and Exchange Commission on October 25, 2011, as an
exhibit, numbered as indicated above, to the Registrant’s
Registration Statement on Form S-1 (File No. 333-177500), which
exhibit is incorporated herein by reference.
(3)
Filed with the
Securities and Exchange Commission on September 9, 2013, as an
exhibit, numbered as indicated above, to the Registrant’s
Current Report on Form 8-K dated September 3, 2013, which exhibit
is incorporated herein by reference.
(4)
Filed with the
Securities and Exchange Commission on March 13, 2014, an exhibit,
numbered as indicated above, to the Registrant’s Current
Report on Form 8-K/A (Amendment No. 1) dated December 6, 2013,
which exhibit is incorporated herein by reference.
(5)
Filed with the
Securities and Exchange Commission on April 18, 2014, as an
exhibit, numbered as indicated above, to the Registrant’s
Current Report on Form 8-K, which exhibit is incorporated herein by
reference.
(6)
Filed with the
Securities and Exchange Commission on May 21, 2014, as an exhibit,
numbered as indicated above, to the Registrant’s Registration
Statement on Form S-1 (File No. 333-196153), which exhibit is
incorporated herein by reference.
(7)
Filed with the
Securities and Exchange Commission on August 4, 2014, as an
exhibit, numbered as indicated above, to the Registrant’s
Current Report on Form 8-K dated July 29, 2014, which exhibit is
incorporated herein by reference.
54
(8)
Filed with the
Securities and Exchange Commission on March 25, 2015, as an
exhibit, numbered as indicated above, to the Registrant’s
Annual Report on Form 10-K for the year ended December 31, 2014,
which exhibit is incorporated herein by reference.
(9)
Filed with the
Securities and Exchange Commission on November 12, 2015, as an
exhibit, numbered as indicated above, to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2015, which
exhibit is incorporated herein by reference.
(10)
Filed with the
Securities and Exchange Commission on November 19, 2015, as an
exhibit, numbered as indicated above, to the Registrant's Current
Report on Form 8-K dated November 16, 2015, which exhibit is
incorporated herein by reference.
(11)
Filed with the
Securities and Exchange Commission on July 8, 2015, as an exhibit,
numbered as indicated above, to the Registrant's Current Report on
Form 8-K dated July 1, 2015, which exhibit is incorporated herein
by reference.
(12)
Filed with the
Securities and Exchange Commission on July 31, 2015, as an exhibit,
numbered as indicated above, to the Registrant’s Registration
Statement on Form S-8, which exhibit is incorporated herein by
reference.
(13)
Filed with the
Securities and Exchange Commission on April 11, 2016, as an
exhibit, numbered as indicated above, to the Registrant’s
Current Report on Form 8-K dated April 5, 2016, which exhibit is
incorporated herein by reference.
(14)
Filed with the
Securities and Exchange Commission on December 14, 2016, as an
exhibit, numbered as indicated above, to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended September 30,
2016, which exhibit is incorporated herein by
reference.
* Filed
herewith
** This
certification is being furnished and shall not be deemed
“filed” with the SEC for purposes of Section 18 of the
Exchange Act, or otherwise subject to the liability of that
section, and shall not be deemed to be incorporated by reference
into any filing under the Securities Act or the Exchange Act,
except to the extent that the Registrant specifically incorporates
it by reference.
*** Furnished
herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive
Data Files on Exhibit 101 hereto are deemed not filed or part of
any registration statement or prospectus for purposes of Sections
11 or 12 of the Securities Act of 1933, are deemed not filed for
purposes of Section 18 of the Securities and Exchange Act of 1934,
and otherwise are not subject to liability under those
sections.
55
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
Symbid Corp.
|
|
|
|
|
|
|
|
|
Dated: March 31,
2017
|
By:
|
/s/
Korstiaan Zandvliet
|
|
|
|
|
Korstiaan
Zandvliet
|
|
|
|
|
Chief Executive
Officer and President
|
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
|
| Dated: March 31, 2017 |
By:
|
/s/
Maarten van der Sanden
|
|
|
|
|
Maarten van der
Sanden
|
|
|
|
|
Chief Financial Officer, Treasurer and Secretary |
|
|
|
|
(Principal Financial Officer) |
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Korstiaan Zandvliet
|
|
Chief
Executive Officer and President (Principal
|
|
March
31, 2017
|
|
Korstiaan
Zandvliet
|
|
Executive
Officer) and Director
|
|
|
|
|
|
|
|
|
56
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
|
|
Page
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2016 and 2015
|
F-2
|
|
|
|
|
Consolidated
Statements of Operations for the Years Ended December 31, 2016 and
2015
|
F-3
|
|
|
|
|
Consolidated
Statements of Comprehensive Loss for the Years Ended December 31,
2016 and 2015
|
F-4
|
|
|
|
|
Consolidated
Statements of Stockholders’ Equity (Deficit) for the years
ended December 31, 2016 and 2015
|
F-5
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2016 and
2015
|
F-6
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
57
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders of Symbid Corp.
We have audited the accompanying consolidated balance sheets of Symbid Corp. (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for each of the years in the two year period ended December 31, 2016. Symbid Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Symbid Corp. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred operating losses during the year ended December 31, 2016, and has negative cash flows from operations of $1,094,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. If the Company is unable to successfully refinance or raise capital to fund ongoing operations there would be a material adverse effect to the consolidated financial statements.
Stockholders of Symbid Corp.
We have audited the accompanying consolidated balance sheets of Symbid Corp. (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for each of the years in the two year period ended December 31, 2016. Symbid Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Symbid Corp. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred operating losses during the year ended December 31, 2016, and has negative cash flows from operations of $1,094,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. If the Company is unable to successfully refinance or raise capital to fund ongoing operations there would be a material adverse effect to the consolidated financial statements.
/s/
Friedman LLP
East Hanover, New Jersey
March 31, 2017
East Hanover, New Jersey
March 31, 2017
F-1
SYMBID
CORP. AND SUBSIDIARIES
(EXPRESSED IN US DOLLARS)
|
|
December
31,
|
December
31,
|
|
|
2016
|
2015
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash
|
$
9,677
|
$
553,696
|
|
Accounts
receivable, less allowance for doubtful accounts of $-0- and
$39,847 respectively
|
-
|
64,639
|
|
Prepaid expenses
and other current assets
|
32,544
|
42,553
|
|
Total current
assets
|
42,221
|
660,888
|
|
|
|
|
|
Property and
equipment, at cost, less accumulated depreciation
|
-
|
15,108
|
|
Investments in
associated companies
|
1,095
|
1,134
|
|
Intangible assets,
net
|
-
|
785,070
|
|
Total
assets
|
$
43,316
|
$
1,462,200
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' (DEFICIENCY) EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
16,515
|
$
88,774
|
|
Accrued expenses
and other current liabilities
|
37,077
|
301,896
|
|
Current maturities
of notes payable
|
-
|
32,993
|
|
Subordinated loan
– related party
|
-
|
73,016
|
|
Total current
liabilities
|
53,592
|
496,679
|
|
|
|
|
|
Notes payable, less
current maturities
|
-
|
49,476
|
|
8% Convertible
promissory notes payable, net of $-0- and $722,622 discount,
respectively
|
-
|
587,378
|
|
Total
liabilities
|
53,592
|
1,133,533
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
Stockholders'
(Deficiency) Equity
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
|
Authorized:
$0.001 par value, 10,000,000 shares authorized
|
-
|
-
|
|
Issued
and outstanding: nil preferred shares
|
|
|
|
Common
stock
|
|
|
|
Authorized:
$0.001 par value, 290,000,000 shares authorized
|
|
|
|
Issued
and outstanding: 187,329,355 and 36,909,472,
respectively
|
187,329
|
36,909
|
|
|
|
|
|
Additional paid-in
capital
|
8,287,292
|
7,635,104
|
|
Accumulated other
comprehensive loss
|
-
|
(322,183
)
|
|
Accumulated
deficit
|
(8,484,897
)
|
(6,994,274
)
|
|
Total Symbid Corp.
stockholders' (deficiency) equity
|
(10,276
)
|
355,556
|
|
Noncontrolling
interests
|
-
|
(26,889
)
|
|
Total stockholders'
(deficiency) equity
|
(10,276
)
|
328,667
|
|
Total liabilities
and stockholders' equity
|
$
43,316
|
$
1,462,200
|
(The
accompanying notes are an integral part of these consolidated
financial statements)
F-2
SYMBID CORP. AND SUBSIDIARIES
(EXPRESSED IN US DOLLARS)
|
|
Year
ended
December
31,
|
|
|
|
2016
|
2015
|
|
Revenues
|
|
|
|
Crowdfunding
|
$
195,632
|
$
282,155
|
|
The Funding
Network
|
22,399
|
47,975
|
|
Other
|
631
|
22,946
|
|
Total
revenues
|
218,662
|
353,076
|
|
Operating
expenses
|
|
|
|
Selling, general
and administrative
|
1,104,614
|
1,543,827
|
|
Professional
fees
|
376,720
|
721,963
|
|
Research and
development costs
|
32,869
|
59,930
|
|
Depreciation and
amortization
|
76,600
|
145,543
|
|
Bad debt expense
(recoveries)
|
(32,911
)
|
36,292
|
|
Impairment
expense
|
747,870
|
-
|
|
Total operating
expenses
|
2,305,763
|
2,507,555
|
|
|
|
|
|
Operating
loss
|
(2,087,101
)
|
(2,154,479
)
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
Interest expense
and amortization of debt discount
|
(294,599
)
|
(148,509
)
|
|
Gain on troubled
debt restructuring
|
1,169,253
|
-
|
|
Loss on cumulative
translation adjustment
|
(292,219
)
|
-
|
|
Other
income
|
-
|
11,504
|
|
Other
expense
|
(2,986
)
|
(7,791
)
|
|
Total other income
(expense)
|
579,449
|
(144,796
)
|
|
|
|
|
|
Net
loss
|
(1,507,652
)
|
(2,299,275
)
|
|
|
|
|
|
Net loss
attributable to noncontrolling interests
|
(17,029
)
|
(99,761
)
|
|
|
|
|
|
Net
loss attributable to Symbid Corp. stockholders
|
$
(1,490,623
)
|
$
(2,199,514
)
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$
(0.03
)
|
$
(0.06
)
|
|
|
|
|
|
Weighted average
number of shares outstanding
|
|
|
|
Basic and
diluted
|
46,166,536
|
35,263,977
|
|
|
|
|
|
Share-based
compensation expense included in operating expenses:
|
|
|
|
Selling, general
and administrative
|
$
33,187
|
286,298
|
|
Professional
fees
|
-
|
152,711
|
|
Research and
development costs
|
(942
)
|
33,791
|
|
|
$
32,245
|
$
472,800
|
(The
accompanying notes are an integral part of these consolidated
financial statements)
F-3
SYMBID CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(EXPRESSED IN US DOLLARS)
|
|
Year
ended
December
31,
|
|
|
|
2016
|
2015
|
|
|
|
|
|
Net
loss
|
$
(1,507,652
)
|
$
(2,299,275
)
|
|
Other comprehensive
loss:
|
|
|
|
Foreign currency
translation income (loss)
|
322,183
|
(143,661
)
|
|
Comprehensive
loss
|
(1,185,469
)
|
(2,442,936
)
|
|
|
|
|
|
Net loss
attributable to noncontrolling interests
|
(17,029
)
|
(99,761
)
|
|
Foreign currency
translation income (loss) attributable to noncontrolling
interests
|
(827
)
|
10,129
|
|
Comprehensive loss
attributable to noncontrolling interests
|
(17,856
)
|
(89,632
)
|
|
|
|
|
|
Comprehensive loss
attributable to Symbid Corp. stockholders
|
$
(1,167,613
)
|
$
(2,353,304
)
|
(The
accompanying notes are an integral part of these consolidated
financial statements)
F-4
SYMBID CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY
(EXPRESSED IN US DOLLARS)
|
|
Symbid
Corp. Stockholders’
|
|
|
|||||
|
|
Number
of
Shares
|
Common
Stock
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Loss
|
Accumulated
Deficit
|
Total Symbid
Corp.
Stockholders'
Equity
|
Noncontrolling
Interests
|
Total
Stockholders'
Equity
|
|
Balance,
January 1, 2015
|
33,182,100
|
$
33,182
|
$
5,367,771
|
$
(178,522
)
|
$
(4,794,760
)
|
$
427,671
|
$
(78,025
)
|
$
349,646
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the
issuance of common stock, net of issuance costs
|
1,448,232
|
1,448
|
722,668
|
-
|
-
|
724,116
|
-
|
724,116
|
|
Issuance of common
stock for services
|
530,904
|
531
|
181,856
|
-
|
-
|
182,387
|
-
|
182,387
|
|
Reclassification of
warrants
|
-
|
-
|
160,945
|
-
|
-
|
160,945
|
-
|
160,945
|
|
Share Based
compensation related to employee share based awards
|
988,236
|
988
|
320,166
|
-
|
-
|
321,154
|
-
|
321,154
|
|
Symbid Italia
formation
|
-
|
-
|
(129,918
)
|
-
|
-
|
(129,918
)
|
140,768
|
10,850
|
|
Conversion of 8%
Notes
|
760,000
|
760
|
189,240
|
-
|
-
|
190,000
|
-
|
190,000
|
|
Beneficial
conversion feature
|
-
|
-
|
822,376
|
-
|
-
|
822,376
|
-
|
822,376
|
|
Translation
adjustment
|
-
|
-
|
-
|
(143,661
)
|
-
|
(143,661
)
|
10,129
|
(133,532
)
|
|
Net
loss
|
-
|
-
|
-
|
-
|
(2,199,514
)
|
(2,199,514
)
|
(99,761
)
|
(2,299,275
)
|
|
Balance,
December 31, 2015
|
36,909,472
|
$
36,909
|
$
7,635,104
|
$
(322,183
)
|
$
(6,994,274
)
|
$
355,556
|
$
(26,889
)
|
$
328,667
|
|
Derecognition of
Symbid Italia
|
-
|
-
|
-
|
-
|
-
|
-
|
(46,171
)
|
(46,171
)
|
|
Derecognition of
Symbid Coop
|
-
|
-
|
-
|
|
-
|
-
|
90,916
|
90,916
|
|
Issuance of common
stock under SPA Agreement
|
149,863,484
|
149,863
|
(25,793
)
|
|
-
|
124,070
|
-
|
124,070
|
|
Issuance of common
stock for services
|
249,567
|
250
|
77,451
|
|
-
|
77,701
|
|
77,701
|
|
Share based
compensation
|
306,832
|
307
|
50,530
|
|
-
|
50,837
|
|
50,837
|
|
Beneficial
conversion feature
|
-
|
-
|
550,000
|
|
-
|
550,000
|
|
550,000
|
|
Translation
adjustment
|
-
|
-
|
|
322,183
|
-
|
322,183
|
(827
)
|
321,356
|
|
Net
loss
|
-
|
-
|
|
|
(1,490,623
)
|
(1,490,623
)
|
(17,029
)
|
(1,507,652
)
|
|
Balance,
December 31, 2016
|
187,329,355
|
$
187,329
|
$
8,287,292
|
$
0
|
$
(8,484,897
)
|
$
(10,276
)
|
$
0
|
$
(10,276
)
|
(The
accompanying notes are an integral part of these consolidated
financial statements)
F-5
SYMBID CORP. AND SUBSIDIARIES
(EXPRESSED IN US DOLLARS)
|
|
Year ended
December 31,
|
|
|
|
2016
|
2015
|
|
Cash
flows from operating activities
|
|
|
|
Net
loss
|
$
(1,507,652
)
|
$
(2,299,275
)
|
|
Adjustments to
reconcile net loss to net cash
|
|
|
|
used in operating
activities
|
|
|
|
Employee and
non-employee share based compensation
|
32,245
|
320,089
|
|
Shares issued under
service agreements
|
-
|
182,387
|
|
Depreciation and
amortization
|
76,600
|
145,543
|
|
Amortization of
debt discount
|
174,091
|
99,753
|
|
Impairment of
intangible asset
|
747,870
|
-
|
|
Gain on troubled
debt restructuring
|
(1,169,253
)
|
-
|
|
Loss on foreign
currency translation
|
292,219
|
-
|
|
Warrant liability -
fair value adjustment
|
-
|
7,791
|
|
Bad debt
recoveries
|
(10,371
)
|
36,292
|
|
Loss on liquidation
of Symbid Italia
|
2,986
|
-
|
|
Gain on sale of
investment in Gambitious B.V.
|
-
|
(11,504
)
|
|
Changes
in assets and liabilities
|
|
|
|
Accounts
receivable
|
64,639
|
(60,926
)
|
|
Prepaid expenses
and other current assets
|
10,009
|
5,431
|
|
Accounts
payable
|
(72,259
)
|
(262,073
)
|
|
Accrued expenses
and other current liabilities
|
264,819
|
33,449
|
|
Net cash used in
operating activities
|
(1,094,057
)
|
(1,803,043
)
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
Proceeds from sale
of associated companies
|
$
-
|
$
20,309
|
|
Net payment from
liquidation of Symbid Italia
|
(44,744
)
|
-
|
|
Acquisition of
property and equipment
|
(5,784
)
|
(9,885
)
|
|
Net cash (used in)
provided by investing activities
|
(50,528
)
|
10,424
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
Line of credit,
net
|
$
67,420
|
$
-
|
|
Repayments of notes
payable
|
(16,740
)
|
(33,583
)
|
|
Proceeds from
convertible notes
|
550,000
|
1,500,000
|
|
Proceeds from the
issuance of common stock, net of issuance costs
|
-
|
724,116
|
|
Net cash provided
by financing activities
|
600,680
|
2,190,533
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(114
)
|
(77,286
)
|
|
Net
(decrease) / increase in cash
|
(544,019
)
|
320,628
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
553,696
|
233,068
|
|
Cash
and cash equivalents, end of period
|
$
9,677
|
$
553,696
|
|
|
|
|
|
Supplemental
cash flow disclosures
|
|
|
|
Interest
paid
|
$
4,511
|
$
13,609
|
|
|
|
|
|
Non-cash
investing and financing activities
|
|
|
|
Change in accrued
expenses related to non-employee share based payments
|
$
98,242
|
$
1,065
|
|
Change in accrued
expenses related to shares issued under SPA agreement
|
124,070
|
|
|
Deconsolidation of
Symbid Italia assets
|
5,901
|
-
|
|
Deconsolidation of
Coop assets
|
90,945
|
-
|
|
Transfer of
Rabobank debt facility and fixed assets to Symbid Coop
|
122,292
|
-
|
|
Beneficial
conversion feature
|
550,000
|
-
|
|
Conversion of 8%
convertible promissory notes
|
-
|
190,000
|
|
Reallocation of
noncontrolling interests
|
-
|
129,918
|
(The
accompanying notes are an integral part of these consolidated
financial statements)
F-6
SYMBID CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 - BUSINESS, ORGANIZATION AND LIQUIDITY
Business and Organization
Symbid Corp. was incorporated as HapyKidz.com, Inc. in the state of
Nevada on July 29, 2011. On September 4, 2013, the Company filed a
Certificate of Amendment to our Articles of Incorporation with the
Nevada Secretary of State to change the Company’s name from
HapyKidz.com, Inc. to Symbid Corp. The Company continues to be a
“smaller reporting company,” as defined under the
Exchange Act.
Symbid
Holding B.V. (“Symbid Holding”) was incorporated on
October 3, 2013 organized under the laws of the
Netherlands. Symbid Holding was organized to serve as
the holding company for all of Symbid’s business activities
in the Netherlands and in other countries. As such, on
October 3, 2013, the holders of the capital shares of Symbid B.V.
exchanged their shares for capital shares of Symbid Holding and, as
a result, Symbid B.V. became a wholly owned subsidiary of Symbid
Holding. Symbid B.V. was the operating entity for the
Company’s business in the Netherlands through November 1,
2016.
On
December 6, 2013, the Company closed a Share Exchange pursuant to
which the 19 shareholders of Symbid Holding B.V. sold all of their
capital stock in Symbid Holding B.V. to the Company in exchange for
21,170,000 shares of our common stock, $0.001 par value per share.
Because the Company had no operations at the time of the
acquisition of Symbid Holding, Symbid Holding is considered to
be the predecessor Company for financial reporting
purposes.
The
Share Exchange was accounted for as a “reverse
acquisition,” and Symbid Holding was deemed to be the
acquirer. Consequently, the assets and liabilities and the
historical operations reflected in the financial statements prior
to the Share Exchange are those of Symbid Holding and are recorded
at the historical cost basis of Symbid Holding. The consolidated
financial statements after completion of the Share Exchange include
the assets and liabilities of Symbid Holding, historical operations
of Symbid Holding and operations of the Company and its
subsidiaries from the Closing Date of the Share Exchange. As a
result of the issuance of the shares of our common stock pursuant
to the Share Exchange, a change in control occurred as of the date
of consummation of the Share Exchange.
The main operating entity of Symbid Corp. is Symbid B.V.
(“Symbid B.V.”), incorporated in Utrecht, The
Netherlands on March 29, 2011 under the laws of the Netherlands.
The Company was launched in April 2011 and its headquarters was
based in Rotterdam, The Netherlands as one of the first equity
based crowdfunding forerunners worldwide. Entrepreneurs used Symbid
to obtain business growth funding from the crowd in exchange for a
part of the equity of their company. Investors could participate
for as little as $21, and become shareholders of start-up companies
or growing businesses in need of capital.
Founded as the provider of one of the first equity based
crowdfunding platforms, the business evolved in 2015 into a fully
integrated, data driven, user friendly online funding network
consisting of several products and services known as The Funding
Network™. The Funding Network™ is intended to give SMEs
direct access to all forms of finance, while offering investors
full transparency on the potential risks and return of their
portfolios and was developed in response to the following funding
hurdles affecting entrepreneurs and investors in general and SMEs
in particular:
●
Limited or no
structured distribution channels for SME finance other than banks,
increasing the mismatch between entrepreneurs and
financiers;
F-7
1 - BUSINESS, ORGANIZATION AND LIQUIDITY
(Continued)
●
No
centralized platform for (alternative) financiers, making it
difficult and inefficient to find the right financier at the right
time;
●
No
standardized data protocols for SME data, leading to costly and
time-intensive (offline) screening and monitoring;
●
Limited financial
skills of entrepreneurs leading to unnecessary inefficiencies and
obstacles within the financing process; and
●
Decline in bank
financing due to new regulations and recent financial crises,
leaving a vacuum in the life cycle of SME financing.
On February 20, 2015, Symbid Italia SPA (“Symbid
Italia”), an Italian corporation was created to develop the
business of equity crowdfunding in Italy, was formed by our wholly
owned subsidiary, Symbid Holding B.V., together with Banca Sella
Holding SPA (“Banca Sella”) and Marco Bicocchi Pichi.
Through Symbid Italia, we intended to create a new online funding
platform, based on our existing crowdfunding technology, in which
Italian investors and entrepreneurs could connect, fund, grow
together and digitalize financial services for Italian SMEs. Symbid
Italia represented the first stage of the European roll-out of our
crowdfunding platform outside of The Netherlands. In connection
with the formation of Symbid Italia, we paid $284,525 for a 50.1%
ownership interest. Banca Sella held a 29.94% ownership interest
and Mr. Pichi held a 19.96% interest.
At the direction of
the Symbid Italia board of directors, a special Symbid Italia
shareholder meeting was held on April 29, 2016, at which it was
determined to liquidate Symbid Italia and return the residual
capital to the Symbid Italia shareholders.
On May 26, 2016, Symbid Italia was liquidated and
the Company received $44,744 for its 50.1% interest and recognized
a loss of $2,986. The results of Symbid Italia’s operations
have been included in the consolidated financial statements (see
Note 11).
As of December 31, 2016, the Company had a 7.57% ownership interest
in Kredietpaspoort Coöperatie U.A.
(“Kredietpaspoort”), a Cooperative located in the
Netherlands, through its wholly owned subsidiary Symbid B.V. As of
December 31, 2015, the Company had a 14.53% ownership interest in
Kredietpaspoort, through its wholly owned subsidiary Symbid B.V.
and Symbid Coöperatie UA (“Symbid Coop”), a
variable interest entity which we effectively controlled through
corporate governance rather than through any ownership. In
addition, the Company’s former Chief Commercial Officer owned
a 5.72% interest in Kredietpaspoort. The Kredietpaspoort is a
cloud- based platform that was developed to provide credit
evaluation and financing options to SME companies in the
Netherlands. On November 1, 2016, Symbid Coop was deconsolidated
from the Company and on November 15, 2016, the Company’s
Chief Commercial Officer resigned and the Company’s combined
ownership interest decreased below 20% (See Note 7). As of December
31, 2016 and 2015, the combined holdings in Kredietpaspoort by
Symbid B.V., Symbid Coop and our former Chief Commercial Officer
totaled approximately 7.57% and 20.25%, respectively.
During the first quarter of 2015, the Company sold its remaining
interest in Gambitious Coöperatie UA (“Gambitious
Coop”) to better align the goals of the Company (See Note
7).
As of December 31, 2016 and December 31, 2015, the Company held a
7% ownership interest in Equidam Holding B.V.
(“Equidam”). Equidam started as an online valuation
tool for private companies with a particular focus on SME’s,
Equidam now also offers simple monitoring services to investors on
the Company’s platform.
Restructuring
During the second half of 2016, the Company was unable to raise
additional capital from investors and was forced to enter
settlement agreements with its creditors and note holders to
restructure the Company (See Note 9). Because of the restructuring,
the Company curtailed certain operations and changed its business
focus from the operation of online funding platforms and the
provision of software solutions for SMEs in the alternative
financing market to the licensing of available software packages
that the Company owns and licenses intellectual
property.
F-8
1 - BUSINESS, ORGANIZATION AND LIQUIDITY
(Continued)
As the result of the restructuring, the Company’s
crowdfunding platform in the Netherlands is now operated through
Symbid Coop. The Company previously controlled and operated Symbid
Coop through corporate governance but as the result of the
restructuring, Symbid Coop has become an independent entity.
Because the Company no longer has the resources to continue the
software development of the online funding platform, Symbid Coop
took over the development of software for the crowdfunding platform
during the fourth quarter of 2016 in order to remain compliant
under the laws and regulations of The Netherlands. Symbid Coop has,
in return for reimbursing the further development of the software,
been granted a non-exclusive license to the intellectual property
from IP Foundation in order to continue crowdfunding operations in
The Netherlands. The Company will continue to hold an identical
non-exclusive license to the intellectual property of the
crowdfunding platform whereby we will be allowed to use the most up
to date versions of the software and other intellectual
property.
The revised business model requires fewer employees, advisors and
consultants and is more economical to operate. The Company has
developed several software products suitable for the alternative
market which it will continue to offer to third parties. Such
products and related services include white label versions of
crowdfunding software for investor groups and monitoring software
to provide investors with ongoing insight into the performance of
SMEs to which they have loaned money. Related licensing fees and
subscription agreements may include set fees and yearly
contribution fees.
The Company’s goal is to substantially reduce and eliminate
its debt while continuing to operate its business and negotiate a
possible acquisition or other business combination with another
operating entity. There can be no assurance that the Company will
be successful in this endeavor or that if a business combination is
consummated that it will be on favorable terms. In the interim, the
Company will continue forward with its ongoing operations under the
revised business model.
Liquidity and Going Concern Matters
The accompanying consolidated financial statements have been
prepared in conformity with U.S. generally accepted accounting
principles, which contemplates continuation of the Company as a
going concern.
The Company has suffered recurring losses during the years ended
December 31, 2016 and 2015, of $1,507,652 and $2,299,275,
respectively. At December 31, 2016 and December 31, 2015, the
Company had a working capital deficit of $11,371 and working
capital of $164,209, respectively. As of December 31, 2016, the
Company had cash on hand of $9,677. The recurring losses raise
substantial doubt about the Company’s ability to continue as
a going concern.
Management has evaluated the significance of these conditions and
has determined that the recoverability of a major portion of the
recorded asset amounts shown in the accompanying consolidated
balance sheet is dependent upon continued operations of the
Company, which in turn, is dependent upon the Company’s
ability to raise capital and/or generate positive cash flows from
operations. The financial statements do not include any adjustments
related to the recoverability and classification of recorded assets
and classifications that might be necessary in the event the
Company cannot continue in existence.
To mitigate the conditions that raise substantial doubt about the
Company’s ability to continue as a going concern management
sought out new and current strategic institutional investors.
However, the Company was unable to raise additional funds and
during the fourth quarter of 2016 and ultimately decided to
restructure and convert the majority of its liabilities into
participation rights in Symbid Coöp. Additionally, to avoid
bankruptcy due to the cash flow position of the Company management
decided to implement a cost reduction program during the second
quarter of 2016. During the reporting period, the following cost
reduction actions have been successfully implemented and have
provided a positive impact on the cost structure of the
Company:
●
Closed
offices in Milano (Symbid Italia) and Amsterdam (Product
development);
●
Reduction
in costs of office space Rotterdam HQ;
F-9
1 - BUSINESS, ORGANIZATION AND LIQUIDITY
(Continued)
●
Terminated
employment agreements with 10 full time employee
(“FTE”) product development team, our CFO, 2 FTE Symbid
Italia, 4 Commercial FTE operating in the Netherlands;
●
Put
on hold internationalization of the Symbid services and
products;
●
Put
on hold the further investments related to monitoring
services;
●
Management
salaries were reduced to nil as of August 1, 2016.
In addition to the measures implemented in the first nine months of
2016, the Company also implemented the following cost reductions in
connection with the restructuring during the fourth quarter of
2016:
●
Resignation
of Robin Slakhorst as CCO and Board member of the
Company;
●
Termination
of employment agreements remaining employees of Symbid B.V., under
condition employment agreements were assumed by Symbid
Coop;
●
Further
software and infrastructure development for the core crowdfunding
product has been stopped and under certain conditions assumed by
Symbid Coop;
●
Termination
of the obligations to operate a crowdfunding platform in the
Netherlands through Symbid B.V., the Company decided for a shift in
focus to commercialize the available software products instead of
the more cash intensive operation of a crowdfunding platform.
Symbid Coop will continue as an independent business entity in the
crowdfunding business within the Netherlands whereby it has been
assuming significant obligations from the Company.
On December 9, 2016, the Company entered into a Securities Purchase
Agreement to issue 80% of its outstanding shares in consideration
for the cancellation of $124,070 in debts due the Company’s
creditors and the future payment of fees to keep the
Company’s filing status current. The new majority shareholder
has committed to fund the future operations of the Company until
either the Company can fund its own operations or until the Company
completes a business combination or other similar transaction
resulting in a change in control. (See Note 10)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its significant subsidiaries on a
consolidated basis. The Company also includes subsidiaries over
which a direct or indirect legal or effective control exists and
for which the Company is deemed to direct the significant
activities and has the obligation to absorb the losses or benefits
of the entities.
All intercompany accounts, balances and
transactions with other consolidated entities have been eliminated.
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States, and include the Company’s accounts as well as
those of a certain variable interest entity (“VIE”) for
which the Company was the primary beneficiary.
Reclassifications
Certain reclassifications have been made to the 2015 financial
statements to conform to the consolidated 2016 financial statement
presentation. These reclassifications had no effect on net earnings
or cash flows as previously reported.
Use of Estimates
The
preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires that management
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-10
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Noncontrolling Interests
The Company presents noncontrolling interests as a component of
equity. Changes in a parent’s ownership interest while the
parent retains its controlling interest will be accounted for as
equity transactions, and upon loss of control, retained ownership
interest will be re-measured at fair value, with any gain or loss
recognized in earnings. Income and losses attributable to the
noncontrolling interests associated with Symbid Coop and Symbid
Italia are presented separately in the Company’s consolidated
statement of operations.
Revenue Recognition
Crowdfunding
The
Company generates its revenue from registration, administration and
success fees within The Funding Network. Registration fee revenue
is recognized as new portfolio companies register to The Funding
Network. Revenue from administration fees are collected from
investors and recognized on a monthly basis calculated as a
percentage of the volume of payments during the reporting period.
There is no credit risk since the fees are collected directly at
the moment that the transaction takes place on the platform. There
is no right of return to investors once a crowdfunding proposition
has been successfully funded. Revenue from success fees is
recognized at the time the loan or equity crowdfunding proposition
is successfully funded and there are no further obligations to the
portfolio company. Prior to January 2016 there was no credit risk
as the success fees were collected directly at the moment the
transaction took place on the platform. As of January 2016, the
Company changed the policy for collecting the success fees and
there will be a credit risk going forward. At the start of a
funding campaign, the entrepreneur signs a contract with Symbid
pursuant to which he or she agrees to pay Symbid a success fee once
a successful fund raising campaign for that entrepreneur closes.
Once the funding campaign closed, Symbid’s success fee was
transferred by Intersolve, the third-party banking entity that
holds all funds in escrow until closing, and the net proceeds of
the funding were transferred by Intersolve to the notary or in case
of loan crowdfunding directly to the entrepreneur. Upon completion
of the funding campaign on Symbid’s platform, services
delivered under the contract with the entrepreneur have been
rendered and Symbid recognized its success fee revenue at the time
the campaign was successfully closed.
The Funding Network
On June
16, 2015, Loan Crowdfunding was launched by our wholly owned
subsidiary, Symbid Holding B.V. The launch of this new
peer-to-business lending service is intended to complement our
existing Equity Crowdfunding service and support the development of
our online funding platform for start-ups and small businesses, The
Funding Network. This service will make use of our monitoring
technology to provide investors ongoing insights into the
performance of the business to which they have lent money. All
businesses funded via Loan Crowdfunding will be required to
register for Monitoring by Symbid for one full year via a
monthly-based subscription model. Revenue related to monitoring
start packages is recognized ratably over the term of the
subscription.
Other
Revenue related to licensing is recognized on a monthly basis
determined by the contracted monthly license fee. If the monthly
license fee is not paid, the Company is entitled to set the
platform offline. Revenues from URL services are based on a fixed
annual fee and recognized ratably over the contract period,
typically one year.
Share Based Compensation
ASC
Topic 718,
Compensation –
Stock Compensation
, requires that compensation expense for
employee stock- based compensation be recognized over the requisite
service period based on the fair value of the award on the date of
grant.
The
Company accounts for the granting of equity based awards to
employees using the fair value method, whereby all awards to
employees will be recorded at fair value on the date of grant. The
fair value of all equity based awards is expensed over their
vesting period with a corresponding increase to additional paid in
capital. The fair value of equity based awards is estimated using
the most recent securities offering of the same or similar share
classes. Compensation costs for stock- based payments to employees
with graded vesting are recognized on a straight line
basis.
F-11
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Based
on guidance in ASC 505,
Equity
share based payments to
non-employees are measured at the fair value of the consideration
received or the fair value of the equity instruments issued or
liabilities incurred, whichever is more reliably measurable. The
fair value of share based payments to non- employees is
periodically re-measured until the counterparty performance is
complete, and any change therein is recognized over the vesting
period of the award. Compensation costs for share based payments
with graded vesting are recognized on a straight-line basis. The
cost of the share based payments to non-employees that are fully
vested and non-forfeitable as at the grant date are measured and
recognized at that date, unless there is a contractual term for
services in which case such compensation would be amortized over
the contractual term.
Fair Value of Financial Instruments
The accounting standard for fair value establishes a framework for
measuring fair value and enhances fair value measurement
disclosure. Under the provisions of the pronouncement, fair value
is defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the
measurement date.
GAAP establishes a hierarchy for inputs used in measuring fair
value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable
inputs be used when available. Observable inputs are inputs that
market participants would use in pricing the asset or liability
developed based on market data obtained from sources independent of
the Company. Unobservable inputs are inputs that reflect the
Company’s assumptions about the assumptions market
participants would use in pricing the asset or liability developed
based on the best information available in the circumstances. The
hierarchy is described below:
Level 1: Quoted prices (unadjusted) in active markets that are
accessible at the measurement date for assets or liabilities. The
fair value hierarchy gives the highest priority to Level 1
inputs.
Level 2: Observable prices that are based on inputs not quoted on
active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data
is available. The fair value hierarchy gives the lowest priority to
Level 3 inputs.
The Company’s current financial assets and liabilities
approximate fair value due to their short term nature and include
cash accounts. The Company’s borrowings approximate fair
value as the rates of interest are similar to what they would
receive from other financial institutions.
Concentrations of Credit Risk
Cash Held in Banks
The Company has cash balances at financial institutions located in
the Netherlands. Balances at financial institutions in the
Netherlands may, from time to time, exceed insured limits.
Currently the insured limit amounts to $105,252.
Accounts Receivable
Customer accounts typically are collected within a short period of
time, and based on its assessment of current conditions and its
experience collecting such receivables, management believes it has
no significant risk related to its concentration within its
accounts receivable.
Foreign Currency Translation
The Company uses the United States dollar (“U.S.
dollars” or “USD”) for financial reporting
purposes and to maintain its books and records. The Company’s
subsidiaries maintain their books and records in their functional
currency, the Euro (“EUR”), the currency of the
Netherlands.
In connection with the cessation of platform
operations in 2016, and in accordance with ASC 830-30,
“Foreign Currency Matters – Translation of Financial
Statements”, the cumulative foreign currency translation
adjustment was released into loss during 2016.
F-12
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
In general, for consolidation purposes, the Company translates its
assets and liabilities into U.S. dollars using the applicable
exchange rates prevailing at the balance sheet date, the statements
of operations and cash flows are translated at average exchange
rates during the reporting period. As a result, amounts
related to assets and liabilities reported on the statement of cash
flows will not necessarily agree with changes in the corresponding
balances on the balance sheet. Equity accounts are
translated at historical rates. Adjustments resulting from the
translation of the financial statements are recorded as accumulated
other comprehensive income or loss.
As of December 31, 2016 and December 31, 2015, the balance sheet
accounts, with the exception of equity, were translated at 1 EUR to
$1.0525 and $1.0906, respectively. The average translation rates
applied to the statements of operations and cash flows for the
years ended December 31, 2016 and 2015 were at 1 EUR to $1.1067 and
1 EUR to $ 1.1103, respectively.
Property and Equipment
Property and equipment are stated at cost, net of accumulated
depreciation. Depreciation is charged to operations using the
straight-line method over the estimated useful lives of 5 years.
Property and equipment consists mainly of computers.
Expenditures for maintenance and repairs are charged to operations
as incurred. Expenditures for betterments and major renewals are
capitalized. The cost of assets sold or retired and the related
amounts of accumulated depreciation are eliminated from the
accounts in the period of disposal, and any resulting gains or
losses are included in operations.
Impairment of Intangible Assets with Definite Lives
An
intangible asset arose as the result of the acquisition of the FAC
B.V., a limited liability entity incorporated in the Netherlands,
resulting in the acquisition of a perpetual, worldwide, exclusive
license to a software library of infrastructure technology. The
Company amortizes the costs of the acquired intangible asset using
the straight- line method over the estimated useful life of 7
years.
The
carrying value of the intangible asset is reviewed on a regular
basis for the existence of facts or circumstances that the
intangible asset may be impaired.
An
intangible asset is subject to amortization and is assessed for
impairment whenever events or circumstances indicate that their
carrying value may not be recoverable. In testing the
recoverability of the asset, the carrying value of the asset is
compared to the future projected undiscounted cash flows. The cash
flows are based on management’s expectations of future
revenues and expenses including costs to maintain the assets over
their respective service lives. An impairment loss is recognized as
the excess of the carrying value over the fair value when an asset
is not recoverable. Fair value is based on valuation techniques or
third party appraisals. Significant estimates and judgments are
applied in determining these cash flows and fair values. In
accordance with US GAAP, we perform interim impairment testing
should circumstances requiring it arise. Due certain impairment
indicators which were triggered during the three months
ended
June 30, 2016, the Company performed an impairment
analysis of its intangible asset which indicated that the future
undiscounted cash flows of the asset did not exceed its net
carrying value. As such, the Company fully impaired its intangible
asset as of June 30, 2016 (See Note 6).
Income Taxes
Income taxes have been determined using the asset and liability
approach of accounting for income taxes. Under this approach,
deferred taxes represent the future tax consequences expected to
occur when the reported amounts of assets and liabilities are
recovered or paid. Deferred taxes result from differences between
the financial statement and tax bases of the Company’s assets
and liabilities and are adjusted for changes in tax rates and tax
laws when changes are enacted. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a
tax benefit will not be realized. The assessment of whether or not
a valuation allowance is required often requires significant
judgment.
Net Loss Per Common Share
Basic and diluted net loss per share is presented in conformity
with ASC Topic 260, Earnings per Share, for all periods presented.
In accordance with this guidance, basic and diluted net loss per
share was determined by dividing net loss applicable to common
stockholders by the weighted- average common shares outstanding
during the period.
F-13
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
In a period where there is a net loss position, diluted weighted
average shares are the same as basic weighted average shares.
Shares used in the diluted net loss per common share calculation
exclude potentially dilutive share equivalents as the effect would
be antidilutive.
Risks and Uncertainties
The Company’s operations are subject to a number of risks,
including but not limited to, changes in the general economy,
demand for the Company’s platform, the success of its
customers, research and development results, uncertainties
surrounding crowdfunding rules and regulations, and the ability to
attract new funding.
Accounts Receivable
and Allowance for Doubtful
Accounts
Accounts receivable are carried at the amount billed to a customer,
net of the allowance for doubtful accounts, which is an estimate
for credit losses based on a review of all outstanding amounts on a
monthly basis. Management determines the allowance for doubtful
accounts by regularly evaluating individual customer receivables
and considering a customer’s financial condition, credit
history and current economic conditions. Accounts receivable are
written off when deemed uncollectible. Recoveries of accounts
receivable previously written off are recorded when
received.
The
Company reviews the collectability of accounts receivable based on
an assessment of historic experience, current economic conditions,
and other collection indicators. At December 31, 2016 and December
31, 2015, the Company has recorded an allowance for doubtful
accounts of $-0- and $39,847, respectively.
Comprehensive Loss
Comprehensive
loss refers to revenues, expenses, gains and losses that under U.S.
GAAP are included in comprehensive loss but are excluded from net
loss as these amounts are recorded directly as an adjustment to
stockholders’ equity. The Company’s other comprehensive
loss is comprised of foreign currency translation
adjustments.
Cost Method Investments
Direct
and or indirect investments in business entities in which the
Company does not have a controlling financial interest and has no
ability to exercise significant influence over operating and
financial policies (generally 0-20 percent ownership), are
accounted for by the cost method.
Equity Method Investments
Direct
and or indirect investments in business entities in which Symbid
Corp. does not have a controlling financial interest, but has the
ability to exercise significant influence over operating and
financial policies (generally 20-50 percent ownership), are
accounted for by the equity method.
Recent Accounting Pronouncements
In May
2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with
Customers (“ASU 2014-09”). The standard provides
companies with a single model for use in accounting for revenue
arising from contracts with customers and supersedes current
revenue recognition guidance, including industry-specific revenue
guidance. The core principle of the model is to recognize revenue
when control of the goods or services transfers to the customer, as
opposed to recognizing revenue when the risks and rewards transfer
to the customer under the existing revenue guidance. In August
2015, the FASB issued ASU 2015-14, Revenue from Contracts with
Customers (Topic 606) (“ASU 2015-14”), Deferral of the
Effective Date. With the issuance of ASU 2015-14, the new revenue
guidance ASU 2015-09 as amended by ASU 2015-14 is effective for
annual reporting periods beginning after December 15, 2017. Early
adoption is permitted as of the original effective date for ASU
2015-09 for annual reporting periods beginning after December 15,
2016, but otherwise earlier adoption is not permitted. The guidance
permits companies to either apply the requirements retrospectively
to all prior periods presented, or apply the requirements in the
year of adoption, through a cumulative adjustment. The
adoption of this guidance is not expected to have an impact on the
Company’s consolidated financial statements.
F-14
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
In
February 2016, the FASB issued ASU No. 2016-02, Leases, requiring
lessee’s to recognize assets and liabilities for leases with
lease terms of more than 12 months in the balance sheet. Leases
will be classified as either finance or operating, with
classification affecting the pattern of expense recognition in the
income statement. The new guidance is effective for fiscal years
and for interim periods within those fiscal years, beginning after
December 15, 2018. A modified retrospective transition approach is
required for lessees for capital and operating leases existing at,
or entered into after, the beginning of the earliest comparative
period presented in the financial statements, with certain
practical expedients available. The adoption of this guidance is
not expected to have an impact on the Company’s consolidated
financial statements.
In
March 2016, the FASB issued ASU No. 2016-09,
Compensation—Stock Compensation (Topic 718): Improvements to
Employee Share based Payment Accounting (“ASU
2016-09”), which addresses how companies account for certain
aspects of share based payments to employees. Entities will be
required to recognize the income tax effects of awards in the
statement of income when the awards vest or are settled, and to
present excess tax benefits as an operating activity on the
statement of cash flows rather than as a financing activity. The
ASU also addresses such areas as an accounting policy election for
forfeitures and the amount an employer can withhold to cover income
taxes and still qualify for equity classification. The amendments
in this ASU will be effective for annual periods and for interim
periods within those fiscal years, beginning after December 15,
2016. Early adoption is permitted. The adoption of this guidance is
not expected to have an impact on the Company’s consolidated
financial statements.
In
October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic
810): Interests Held through Related Parties That Are under Common
Control (“ASU 2016-17”), which addresses how companies
evaluate whether a reporting entity is the primary beneficiary of a
VIE by changing how the reporting entity that is a single decision
maker of a VIE treats indirect interests in the entity held through
related parties that are under common control with the reporting
entity. If a reporting entity satisfies the first characteristic of
a primary beneficiary (such that it is the single decision maker of
a VIE), the amendments in ASU 2016-17 require that reporting
entity, in determining whether it satisfies the second
characteristic of a primary beneficiary, to include all of its
direct variable interests in a VIE and, on a proportionate basis,
its indirect variable interests in a VIE held through related
parties, including related parties that are under common control
with the reporting entity. The amendments in this ASU will be
effective for annual periods and for interim periods within those
fiscal years, beginning after December 15, 2016. Early adoption is
permitted. The adoption of this guidance is not expected to have an
impact on the Company’s consolidated financial
statements.
3 - VARIABLE INTEREST ENTITY- SYMBID COOP
At December 31, 2015, the Company held a variable interest in
Symbid Coop. Symbid Coop was the lessee of the Company’s
online crowdfunding platform. Symbid B.V. licensed the online
platform exclusively to Symbid Coop. The management of Symbid Coop
was the same as the management of Symbid B.V. and Symbid
Holding.
The Company had an implicit variable interest in Symbid Coop
through common control and management had the ability to compel
payment whether stated or silent in the lease agreement. The
Company was deemed to be the primary beneficiary of Symbid
Coop and had a controlling financial interest as it had the
power to direct the activities of the VIE that most significantly
impact Symbid Coop’s economic performance. The Company
reassessed the presentation of Symbid Coop every reporting period
to conclude if consolidation was required.
On November 15, 2016, Symbid B.V. and Symbid Coop entered into an
Intellectual Property License Termination Agreement which
terminated the April 13, 2011 License Agreement between both
companies retroactive to November 1, 2016. Symbid B.V. had
controlled and operated Symbid Coop through corporate governance
under the license agreement pursuant to which the online
crowdfunding platform was leased.
Also on November 15, 2016,
Symbid Coop assumed certain debts and obligations from Symbid B.V.
equal to $148,347 in consideration for the cancellation of the
receivable balance due to Symbid BV of $115,110 and office
furniture from Symbid B.V. of $8,263. The Company recognized a gain
on this transfer of $24,974 which has been included in the gain on
the troubled debt restructuring (See Note 9).
As of November 1, 2016, the effective date of the
Intellectual Property
F-15
3 - VARIABLE INTEREST ENTITY- SYMBID COOP
(Continued)
License Termination Agreement, the Company gave up its board
control in Symbid Coop and Symbid Coop became an independent
entity.
Upon deconsolidation at
November 1, 2016
,
the carrying amount of the noncontrolling interest
and the carrying amount of Symbid Coop’s net assets were
equal to each other and no gain or loss was
recorded.
The classification and carrying amounts of assets and liabilities
of Symbid Coop in the consolidated balance sheets are as
follows:
|
|
December
31,
|
|
|
|
2016
|
2015
|
|
Current
assets
|
$
-
|
$
73,600
|
|
Current
liabilities
|
$
-
|
$
186,214
|
The assets related to Symbid Coop are not restricted.
4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid
expenses and other current assets consist of the
following:
|
|
December
31,
|
|
|
|
2016
|
2015
|
|
VAT return Q4 2016/
2015
|
$
-
|
$
17,827
|
|
Revenues to be
invoiced
|
1,370
|
2,472
|
|
Wage tax
refund
|
3,602
|
-
|
|
Other prepaid
expenses
|
6,996
|
10,883
|
|
Insurance
premiums
|
13,484
|
11,371
|
|
Intercompany
balance Symbid Coöperatie UA and
Symbid Crowdfunding
B.V.
|
7,092
|
-
|
|
|
$
32,544
|
$
42,553
|
VAT in the Netherlands
In the
Netherlands and Europe it is compulsory for a business to charge
VAT to its clients on the invoice. The VAT charged to a customer
can be offset by VAT payable to the Company’s suppliers and
the remainder is payable or receivable from the Dutch tax
authorities. An important basic rule is that a company cannot
reclaim any VAT, if it does not charge VAT on its invoices. At the
moment Netherlands VAT rate is 21% (standard rate which also
applies to the Company) or a reduced rate of 6% and 0% (for supply
in the EU intra-Community supplies and export). For e-commerce
special rules apply.
Most of
the time companies file the Netherlands VAT tax return on quarterly
basis. However, in case of high turnover it can be changed to
monthly or from a cash flow perspective. On the other hand if the
turnover is very low, on request the Netherlands VAT tax return can
be filed annually. The Company is filing tax returns on a quarterly
basis. When the Company has to reclaim VAT, the amount will be
refunded by the Dutch tax authorities within 30 days after the VAT
return was filed.
As of
December 31, 2016, the Q4 (2016) VAT return accounted for 0% of
total prepaid and other current assets (See Note 8 for the payable
balance as of December 31, 2016). As of December 31, 2015, the Q4
(2015) VAT return accounted for 42% of total prepaid and other
current assets.
F-16
5 - PROPERTY AND EQUIPMENT
Property
and equipment consist of the following:
|
|
December
31,
|
|
|
|
2016
|
2015
|
|
Computers and
equipment
|
$
10,057
|
$
20,868
|
|
Less - Accumulated
depreciation
|
(1,765
)
|
(5,760
)
|
|
Impairment
|
(7,807
)
|
-
|
|
Translation
adjustment
|
(485
)
|
-
|
|
|
$
-
|
$
15,108
|
For the
years ended December 31, 2016 and 2015, depreciation expense was
$4,654 and $2,384, respectively. On November 15, 2016, fixed assets
with a net carrying value of $8,263 were transferred to Symbid Coop
(See Note 3). In connection with the restructuring of the Company,
the remaining fixed assets were impaired as of December 31, 2016.
Impairment expense related to fixed assets was $7,807 for the year
ended December 31, 2016 and is included in the statement of
operations in Impairment expense.
6 – INTANGIBLE ASSET
On July
29, 2014, our wholly owned subsidiary Symbid Holding, a limited
liability corporation in the Netherlands, acquired all the issued
and outstanding shares of FAC B.V. in exchange for 2,750,000 shares
of our restricted common stock. The sole asset of the FAC B.V. was
a perpetual, worldwide, exclusive license to a software library of
infrastructure technology, upon which we have developed a platform
to enable cloud based financing solutions for SMEs, expanding on
our current equity based crowdfunding solutions in the Netherlands.
The asset acquired in the acquisition of the FAC B.V. does not meet
the definition of a business and, therefore, has been accounted for
as an asset acquisition.
The Company measured the fair value of the restricted shares issued
as consideration in the acquisition of the FAC B.V. based on a
weighted average fair value calculation using available observable
inputs of recent arm’s length transactions in the
Company’s recent private placement offering and, to a lesser
extent, the publicly traded share price, resulting in a fair value
of approximately $1,195,000. The total purchase price was allocated
to the software library acquired in the acquisition. Transaction
costs directly related to the acquisition of the software of
approximately $17,000 incurred to acquire the software have been
capitalized. The software was deemed to have a useful life of 7
years.
On June 30, 2016, the Company fully impaired its intangible
asset
as it was deemed that the fair value of the asset was
not recoverable
. A non-cash
impairment charge of $740,063
has been included in the
results of operations for the
year ended December 31,
2016
.
The intangible asset consists of software obtained through the
acquisition of the FAC B.V.
The intangible asset consists of
the following:
|
|
December
31,
|
|
|
|
2016
|
2015
|
|
Software
|
$
1,019,103
|
$
984,267
|
|
Less - Accumulated
amortization
|
(274,394
)
|
(199,197
)
|
|
Impairment
|
(740,063
)
|
-
|
|
Translation
adjustment
|
(4,646
)
|
-
|
|
|
$
-
|
$
785,070
|
During
the years ended December 31, 2016 and 2015, amortization expense
related to software was approximately
$72,000 and $143,000,
respectively.
F-17
7 - INVESTMENTS IN ASSOCIATED COMPANIES
Kredietpaspoort
As of
April 2014, Symbid B.V. and Symbid Coop acquired membership
interests of 6.50% and 6.03% of Kredietpaspoort, respectively. The
initial investments in Kredietpaspoort by Symbid B.V. and Symbid
Coop of approximately $17,000 and $16,000, respectively, were
recorded in Investments in Associated Companies. In addition,
during 2014 our Chief Executive Officer and Chief Commercial
Officer, both of whom were Directors of the Company, each acquired
membership interests of 5.15% and 4.96%, respectively, in
Kredietpaspoort. In December of 2014, our Chief Executive Officer
sold his interest of 5.15% in Kredietpaspoort, also there was a
re-allocation of memberships.
On
November 1, 2016, Symbid Coop was deconsolidated from the Company
and on November 15, 2016, the Company’s Chief Commercial
Officer resigned and the Company’s combined ownership
interest decreased below 20%. As of December 31, 2016 and 2015, the
combined holdings in Kredietpaspoort by Symbid B.V., Symbid Coop
and our former Chief Commercial Officer totaled approximately 7.57%
and 20.25%, respectively.
The
Company has accounted for its investment in Kredietpaspoort on the
equity method basis of accounting through November 15, 2016, as
Symbid had the ability to exercise significant influence over the
operating and financial policies of Kredietpaspoort through
representation on the Kredietpaspoort board of directors and the
combined voting interest of Symbid and its Chief Commercial
Officer. However, upon the departure of the Company’s Chief
Commercial Officer the Company will no longer have significant
influence over Kredietpaspoort and will account for its investment
on the cost method of accounting basis in future periods. During
2014, the Kredietpaspoort investment balance was reduced to nil, as
the Company suffered losses beyond the initial investment balance.
As of December 31, 2016, the initial investment has not been
recovered.
Gambitious
In previous periods, the Company had an indirect ownership interest
in Gambitious B.V. (“Gambitious”), a Company located in
the Netherlands, which used the Company’s platform to raise
capital for video games produced by a wide range of developers. On
February 9, 2015, the Company sold its remaining 12% indirect
interest in Gambitious for $20,360 and recorded a gain on
investment of $11,504 which is included in other income in the
consolidated statement of operations for the year ended December
31, 2015.
Equidam
In August 2013, the Company acquired a 10% interest in Equidam
Holding B.V. (“Equidam”) for $1,095 recorded in
Investments in Associated Companies. As of December 31, 2016, the
Company has a 7% ownership in Equidam, as the initial investment
was diluted through a subsequent round of seed funding. The Company
is accounting for their investment in Equidam on the cost basis of
accounting. There have been no material transactions with Equidam
during the reporting period.
8– ACCRUED EXPENSES AND OTHER CURRENT
LIABILITIES
|
|
December
31,
|
|
|
|
2016
|
2015
|
|
Advisory
costs
|
$
3,786
|
$
89,829
|
|
Interest
|
-
|
45,863
|
|
Wage tax
return
|
-
|
19,035
|
|
Holiday pay
allowance/Net salary
|
8,647
|
24,533
|
|
Penalty
waiver
|
14,630
|
14,630
|
|
Marketing
|
-
|
38,069
|
|
Accrued stock
liability
|
-
|
20,541
|
|
VAT return Q4 2016/
2015
|
7,028
|
-
|
|
Other current
liabilities
|
2,986
|
49,396
|
|
|
$
37,077
|
$
301,896
|
All amounts are payable within one year.
F-18
9 - NOTES PAYABLE AND TROUBLED DEBT RESTRUCTURING
On November 1, 2016, the Company deconsolidated Symbid Coop as
Symbid BV was not able to maintain and develop the IP of the
crowdfunding software (See Notes 1 and 3). On November 15, 2016,
Symbid Corp. and Symbid BV restructured their liabilities by
involving Symbid Coop (the surviving operating entity of the
crowdfunding platform in The Netherlands) and entering a settlement
agreement with Symbid Coop along with the creditors of the Company.
The following is a summary of the gain recorded from the debt
balances settled in the troubled debt restructuring:
|
|
Year
ended
December 31,
2016
|
|
2015 and 2016 Notes
payable
|
$
761,467
*
|
|
Accrued interest on
2015 and 2016 Notes payable
|
145,068
*
|
|
Subordinated loan
– related party
|
71,993
*
|
|
Accrued interest-
Subordinated loan – related party
|
14,942
*
|
|
Settlement of
Symbid Coop payable
|
24,974
**
|
|
Settlement of
accounts payable – creditors
|
150,809
***
|
|
|
$
1,169,253
|
*Settled through the issuance of profit rights in Symbid Coop
aggregating 26.57%, voting rights aggregating 12.22% and the right
of first refusal in Symbid Corp to the holder of $1.2 million on
principal balance of the 2015 Notes (See Note 9
below).
**Gain calculated as the difference between the Rabobank working
capital facility at November 15, 2016, VAT taxes payable on Symbid
BV’s behalf, less fixed assets transferred to Symbid Coop and
the intercompany balance due Symbid BV (See Note 3).
***Settled through the issuance of profit rights aggregating 5% in
Symbid Coop, other accounts payable were credited and/or written
off based on agreements made
|
|
December
31,
|
|
|
|
2016
|
2015
|
|
Line of
credit
|
$
-
|
$
-
|
|
Working capital
facility
|
-
|
82,469
|
|
Subordinated loan
– related party
|
-
|
73,016
|
|
8% Convertible
promissory notes
|
-
|
587,378
|
|
Total notes
payable
|
-
|
742,863
|
|
Less - Current
Maturities
|
-
|
(106,009
)
|
|
Notes
payable, less current maturities
|
$
-
|
$
636,854
|
Working Capital Facility
On November 15, 2016, Symbid B.V. transferred its outstanding debt
under the working capital facility and line of credit including all
accrued interest due thereon to Symbid Coop. The transfer of the
working capital facility totalling $130,554 and the other
obligations assumed by Symbid Coop less the value of office
furniture transferred to Symbid Coop (See Note 5), was in
consideration for the cancellation of the receivable balance due
Symbid B.V. The transfer was consummated under the suspending
condition that all other debts and obligations of Symbid B.V. would
be settled by Symbid Coop, except for any liabilities owed to
Symbid Corp. or Symbid Holding B.V. by Symbid B.V. The fair value
of the assets and liabilities exchanged resulted in a net gain to
the Company of $24,971, this amount is included in the gain on
troubled debt restructuring for the year ended December 31,
2016.
F-19
9 - NOTES PAYABLE AND TROUBLED DEBT RESTRUCTURING
(Continued)
As of December 31, 2015, the Company had two credit facilities with
the Rabobank, a national bank in the Netherlands.
The facility consisted of the following two
agreements:
1.
Long-term
loan for approximately $198,000, bears interest of approximately
6.4%, principal and interest payable quarterly. The loan decreased
on a quarterly basis by approximately $8,000, starting on September
30, 2012. On November 15, 2016, the date of transfer, there was a
balance of approximately $65,000 on the long-term loan
facility.
2.
A
line of credit of approximately $65,000 with a floating interest
rate of approximately 8.40% at December 31, 2015. On November 15,
2016, the date of transfer, there was a balance of approximately
$66,000 on the credit facility.
The working capital facility was secured by the following
assets:
1.
Assets
of the Company including receivables and intellectual property
developed by the Company.
2.
Guarantee
by principal members of management up to approximately
$55,000.
3.
Guarantee
by the Netherlands government for the remaining balance in a
hypothetical liquidation up to approximately $237,000.
2015 - 8% Convertible Promissory Notes
On June
10, 2015, the Company entered into a subscription agreement to
conduct a private offering consisting of a minimum of $250,000 and
up to a maximum of $1,500,000 of 8% unsecured convertible
promissory notes (the “2015 Notes”), convertible into
common shares of the Company’s common stock. The 2015 Notes
had a three-year maturity from the date of issue and interest was
payable annually. The 2015 Notes were redeemable at any time after
issuance by the Company for a pre-payment fee of 10% of the
principal balance plus outstanding interest due. The 2015 Notes had
an optional conversion feature price of $0.25 per share that could
be exercised any time. However, upon maturity the mandatory
conversion price is the lesser of (a) $0.25 or (b) the amount equal
to 20% discount to the 10-day volume weighted average price per
share for the period immediately prior to the mandatory conversion
date with a floor price of $0.10 per share. The subscribers were
granted preemptive rights allowing participation in future
financings at the then current price for a term of three years so
that such subscriber may maintain its pro-rata interest in the
Company.
Because
the conversion rate of the Notes was less than the market value of
the Company’s stock on the closing dates, the Company
recorded a beneficial conversion feature (“BCF”). The
BCF was calculated by using the most favorable conversion price
that would be in effect at the conversion date to measure the
intrinsic value of an embedded conversion option. The BCF was
recorded to additional paid-in capital with an offset to debt
discount as prescribed by ASC 470-20. The discount against the 2015
Notes was accreted to interest expense using the effective interest
rate method.
On July 14, 2015, the initial closing of the Notes took place under
which the Company raised $250,000 from a total of seven investors.
The Company recorded a debt discount related to the BCF of $62,500.
The effective interest rate of the liability component was equal to
17.7% for the period from January 1, 2016 to November 15, 2016 and
the year ended December 31, 2015. On July 14, 2015, four investors
from the July 14, 2015 closing converted an aggregate of $190,000
in Notes into 760,000 shares of unregistered common stock. Upon
conversion, the Company recorded $47,500 in interest expense and a
corresponding reduction to the debt discount associated with these
Notes.
F-20
9 - NOTES PAYABLE AND TROUBLED DEBT RESTRUCTURING
(Continued)
On September 8, 2015, the Company held the final closing of the
2015 Notes under which it raised $1,250,000 from a total of six
investors. The Company recorded a debt discount related to the BCF
of $759,876. The effective interest rate of the liability component
was equal to 40.4% for the period from January 1, 2016 to November
15, 2016 and the year ended December 31, 2015.
During the third quarter of 2016, the Company was in default with
respect to the initial interest payments which were due on July 14,
2016 and September 8, 2016, with respect to an aggregate of $60,000
and $1,250,000 in principal amount of the 2015 Notes dated July 14,
2015 and September 8, 2015, respectively. On November 15, 2016, the
Company entered into a Note Termination and Conversion Agreement
with each of the 2015 Note holders. An aggregate of $1,310,000 in
principal together with $125,024 in accrued interest was cancelled
in exchange for equity participation rights in Symbid Coop
representing an aggregate of 6.5% of the profit rights in Symbid
Coop.
One note holder of $1,175,000 in principal amount of 2015 Notes
agreed to receive the right of first refusal with respect to any
direct or indirect activities of the Company. The right of first
refusal shall terminate at the earlier of December 31, 2020 or when
there is a change in control of Symbid Corp. involving another
entity with business activities different from those currently
undertaken by Symbid Corp. whereby the share issuance to CKR does
not apply as change of control under this agreement. The Note
Termination and Conversion Agreements also provided for the
termination of pre-emptive rights which holders of the 2015 Notes
had been granted in connection with their purchases of 2015
Notes.
As a result of the troubled debt restructuring, the Company
recognized a gain of $886,488 on the 2015 Notes and related accrued
interest.
2016 - 8% Convertible Promissory Notes
On June 1, 2016, the Company entered into a subscription agreement
to conduct a private offering consisting of a minimum of $350,000
and up to a maximum of $700,000 of 8% unsecured convertible
promissory notes (the “2016 Notes”), convertible into
common shares of the Company’s common stock.
The 2016
Notes had a three-year maturity from the date of issuance and
interest was payable annually. The 2016 Notes were redeemable upon
mutual agreement of the Company and the investors. The 2016 Notes
were convertible upon the completion of the next equity offering (a
“Qualified Offering”) for gross proceeds of not less
than $1,500,000, the holders were entitled, at their option,
convert all or a portion of the principal and interest then due on
the 2016 Notes into shares of common stock at a price per share
equal to 50% of the price at which the common stock is sold in the
Qualified Offering.
The conversion rate was subject to proportionate adjustment in the
event of a subdivision, combination or stock split, stock
dividends, reorganization reclassification, consolidation or
merger. The Company was not permitted to incur senior indebtedness
to exceed $250,000, and was required to notice of default and
notice of entry in certain material transactions such as; voluntary
liquidation, merger or consolidation, sale or transfer of assets
and amendments to the articles of incorporation. The 2016 Notes
were subject to customary events of default such as bankruptcy,
reorganization or insolvency and were due immediately upon such
event. While the 2016 Notes remained outstanding, the Company could
not incur any indebtedness that ranks senior in priority to the
2016 Notes. The 2016 Notes ranked pari passu with the 2015
Notes.
Because
the conversion rate of the Notes was less than the market value of
the Company’s stock on the closing date the Company recorded
a BCF. The BCF was calculated by using the most favorable
conversion price that was in effect at the conversion date to
measure the intrinsic value of an embedded conversion option. The
BCF was recorded to additional paid-in capital with an offset to
debt discount as prescribed by ASC 470-20. The discount against the
Notes was accreted to interest expense using the effective interest
rate method.
F-21
9 - NOTES PAYABLE AND TROUBLED DEBT RESTRUCTURING
(Continued)
On June 1, 2016, the closing of the 2016 Notes took place under
which the Company raised $550,000 from a total of three investors.
The Company recorded a debt discount related to the BCF of
$550,000. The effective interest rate of the liability component
was equal to 960% for the period from June 30, 2016 to November 15,
2016 and the year ended December 31, 2016.
On November 15, 2016, the Company entered into a Note Termination
and Conversion Agreement with each of the 2016 Note holders. An
aggregate of $550,000 in principal amount together with $20,044 in
accrued interest was cancelled in exchange for equity participation
rights in Symbid Coop representing an aggregate of 18.8% of the
profit rights in Symbid Coop. In addition, two holders of the 2016
Notes received an aggregate of 12.22% voting rights in Symbid
Coop.
As a result of the troubled debt restructuring, the Company
recognized a gain of $20,044 on the 2016 Notes and related accrued
interest.
Convertible promissory notes payable as of December 31, 2015 were
as follows:
|
|
Principal
|
Accrued
Interest
|
Unamortized
Debt
Discount
|
Balance as of
December
31,
2015
|
|
8% Convertible
promissory notes July 14, 2015
|
$
60,000
|
$
2,213
|
$
(12,964
)
|
$
49,249
|
|
8% Convertible
promissory notes September 8, 2015
|
1,250,000
|
31,111
|
(709,658
)
|
571,453
|
|
|
$
1,310,000
|
$
33,324
|
$
(722,622
)
|
$
620,702
|
Convertible promissory notes payable as of December 31, 2016 were
as follows:
|
|
Principal
|
Accrued
Interest
|
Unamortized
Debt
Discount
|
Balance as of
December
31,
2016
|
|
8% Convertible
promissory notes July 14, 2015
|
$
0
|
$
0
|
$
0
|
$
0
|
|
8% Convertible
promissory notes September 8, 2015
|
0
|
0
|
0
|
0
|
|
8% Convertible
promissory notes June 1, 2016
|
0
|
0
|
0
|
0
|
|
|
$
0
|
$
0
|
$
0
|
$
0
|
Subordinated Loan - Related Party
On September 15, 2011, a stockholder of the Company granted a loan
of approximately $70,000 to the Company with an original maturity
of September 15, 2016 and interest only payments of 4% per annum.
On September 15, 2015, the maturity date of the loan was extended
to December 31, 2016.
The loan was subordinate to the
interests of the working capital facility and was
unsecured.
On November 15, 2016, Symbid B.V. entered into an agreement with
the holder of the subordinated related party loan which provided
for the termination of the September 15, 2011 agreement, including
all accrued interest due thereon of $14,942, in consideration for
1.33% profit rights in Symbid Coop.
As a result of the troubled debt restructuring, the Company
recognized a gain of $86,933 on the subordinated related party
loan.
F-22
9 - NOTES PAYABLE AND TROUBLED DEBT RESTRUCTURING
(Continued)
Interest expense
For the years ended December 31, 2016 and 2015, the Company
recognized interest expense associated with its debt balances as
follows:
|
|
Year ended
December 31,
|
|
|
|
2016
|
2015
|
|
Cash Interest
Expense
|
|
|
|
Coupon
interest expense
|
$
118,918
|
$
48,756
|
|
Noncash Interest
Expense
|
|
|
|
Amortization
of debt discount
|
175,681
|
99,753
|
|
|
$
294,599
|
$
148,509
|
10 – CAPITAL STOCK
Common and Preferred Stock
The Company’s Certificate of Incorporation authorizes the
issuance of 300,000,000 shares of capital stock, consisting of
290,000,000 shares of Common Stock and 10,000,000 shares of
“blank check” preferred stock, $0.001 par value per
share.
Net Loss per Share
Basic and diluted net loss per share is presented in conformity
with ASC Topic 260, Earnings per Share, for all periods presented.
In accordance with this guidance, basic and diluted net loss per
common share was determined by dividing net loss applicable to
common stockholders by the weighted-average common shares
outstanding during the period. In a period where there is a net
loss position, diluted weighted-average shares are the same as
basic weighted-average shares. Shares used in the diluted net loss
per common share calculation exclude potentially dilutive share
equivalents as the effect would be antidilutive. As of December 31,
2016, there are 2,754,794 Investor and 15,500 Broker Warrants which
are excluded on the aforementioned basis. As of December 31,
2016, there are no outstanding convertible securities or shares
that would be potentially dilutive on an as-if-converted
basis.
Private Placement Offerings
On June 16, 2015, the Company completed a private placement
offering in which 200,000 shares of common stock were sold to a
related party at $.50 per share generating gross proceeds of
$100,000. In connection with the private placement offering, the
Company incurred advisory and professional fees of
$1,050.
On January 28, 2015, the Company completed a private placement
offering in which 1,248,232 shares of common stock were sold at
$.50 per share generating gross proceeds of $624,116. In connection
with the private placement offering the Company incurred advisory
and professional fees of $21,410.
2013 Stock Incentive Plan
Before the Share Exchange on December 6, 2013, our Board of
Directors adopted, and our stockholders approved, our 2013 Equity
Incentive Plan (the “2013 Plan”), which provides for
the issuance of incentive awards of up to 5,000,000 shares of our
common stock to officers, key employees, consultants and directors
(See Note 12).
Common Stock Issued for Services
During the year ended December 31, 2016, the Company issued 249,567
shares common stock as consideration for professional services
valued at $77,701. These services had been accrued for as of
December 31, 2015, and resulted in a non-cash financing adjustment
when issued during the year ended December 31, 2016.
During the year ended December 31, 2015, the Company issued 74,991
shares of
common stock
as consideration for professional
services valued at $22,560.
F-23
10 – CAPITAL STOCK (Continued)
During the year ended December 31, 2015, the Company issued 455,913
shares of fully vested restricted common stock to non- employee
advisors and consultants as consideration for services performed.
The fair value of fully vested restricted common stock issued to
advisors and consultants during the year ended December 31, 2015
was $159,827.
Securities Purchase Agreement
On
December 9, 2016, the Company entered into a Securities Purchase
Agreement with CKR Law LLP ("CKR"), pursuant to which 149,863,484
shares of restricted common stock at a purchase price of $0.001 per
share were issued to CKR for services and (i) the cancellation of
an aggregate of $86,456 due from the Company to CKR for services
and expense reimbursements; (ii) funding of $43,614 of which
$37,614 was used during the year ended December 31, 2016 to pay the
Company’s creditors directly from CKR which enabled the
Company to file its September 30, 2016 quarterly report; and (iii)
the commitment of CKR to fund, to the extent future net revenues of
the Company prove insufficient, additional operating expenses of
the Company necessary to ensure its continuing operation and
existence until such time that the Company can fund operations
independently or until the Company completes an acquisition,
business continuation, or similar transaction with an operating
entity in a transaction that results in a change of control. The
shares issued represent 80% of the outstanding shares of the
Company.
As of
December 31, 2016, the Company recorded an aggregate amount of
$124,070 to equity. The remaining $6,000 due under the initial
funding amount along with payments that CKR makes in the future to
maintain the Company’s operations will be recorded to
additional paid in capital in the period that the Company’s
debts are settled by CKR.
11 – NONCONTROLLING INTERESTS
The composition of the net (income) loss attributable to
noncontrolling interests are as follows:
|
|
Year Ended
December 31,
|
|
|
|
2016
|
2015
|
|
Symbid Coop-
100%
|
$
(23,116
)
|
$
43,202
|
|
Symbid Italia
– 49.9%
|
40,145
|
56,559
|
|
Total
net loss attributable to NCI
|
$
17,029
|
$
99,761
|
The composition of noncontrolling interests as reported in the
balance sheets are as follows:
|
|
December
31,
|
|
|
|
2016
|
2015
|
|
Symbid Coop-
100%
|
$
-
|
$
(112,614
)
|
|
Symbid Italia
– 49.9%
|
-
|
85,725
|
|
Total
equity (deficiency) attributable to noncontrolling
interests
|
$
-
|
$
(26,889
)
|
Symbid Italia
In connection with the formation of Symbid Italia on February 20,
2015 (Refer to Note 1), the Company paid $284,525 for a 50.1%
ownership interest. Two other shareholders obtained 29.94% and
19.96% ownership interests and collectively own a 49.9%
noncontrolling interest in Symbid Italia. Upon formation, to
reflect the Company’s 50.1% equity interest in Symbid Italia,
we reduced our investment through a charge to additional paid
capital of $129,918. The reduction to additional paid in capital
reallocated the equity balances between the Company’s
controlling interest and the noncontrolling interest.
F-24
11 – NONCONTROLLING INTERESTS
(Continued)
From the date of formation through December 31, 2015, Symbid Italia
incurred operating losses, of approximately $118,000. Based thereon
and following an extensive review of the prospects of Symbid Italia
developing profitable operations in the near future and beyond, the
board of directors and shareholders of Symbid Italia have
determined that further investment in Symbid Italia is not
warranted. This conclusion was based upon an assessment of the
current and expected medium term Italian equity crowdfunding
market, the view that the current European regulatory framework for
equity crowdfunding reflects a country by country market rather
than a pan European market which greatly limits expected synergies
and economies of scale and because the Italian equity crowdfunding
regulations restrict the ability to attract non-domestic investors.
At the direction of the Symbid Italia board of directors, a special
Symbid Italia shareholder meeting was held on April 29, 2016, at
which it was determined to liquidate Symbid Italia and return the
residual capital to the Symbid Italia shareholders.
On May 26, 2016, the Symbid Italia was liquidated and the Company
received proceeds of $44,744 and recognized a loss on derecognition
of $2,986 which is included in other expense in the consolidated
statements of operations for the year ended December 31, 2016. The
loss represents the difference between the fair value of the
proceeds received, the carrying amount of the noncontrolling
interest and the carrying amount of Symbid Italia’s net
assets at May 26, 2016.
Symbid Coop
Refer to Notes 1 and 3 for the discussion regarding the loss of the
control in Symbid Coop in November 2016.
12 - SHARE BASED COMPENSATION PLANS
2013 Stock Incentive Plan
Under the 2013 Plan, 5 million shares of the Company’s common
stock have been reserved for issuance to officers, employees,
directors, consultants and advisors to the Company. The stock plan
provides for grants of options, stock appreciation rights,
performance share awards, restricted stock and restricted stock
unit awards (“the Awards”). Up to 1,666,666 shares may
be granted during the first 12 months following the Share Exchange
and the remaining 3,333,332 shares may be granted during the first
24 months following the Share Exchange. As of December 31, 2016,
there are 3,724,432 shares available for issuance under the 2013
Plan.
The vesting period for the Awards under the 2013 Plan
is determined by the Board at the date of grant and is generally
one year.
Employee Share Based Compensation
No
awards were granted to employees during year ended December 31,
2016. During the year ended December 31, 2015, the Company awarded
640,958 shares of restricted stock units ("RSUs") to 20 employees,
including our four executive officers and board members, and 30,000
shares to non-employee advisors and consultants under the 2013
Equity Incentive Plan.
Each restricted stock unit represents the right to receive one
share of our restricted common stock upon vesting.
During the years ended
December 31, 2016 and 2015, 215,191 and 911,236 RSUs were released,
respectively. During the years ended December 31, 2016 and 2015,
there were 367,890 and 9,750 forfeitures
of restricted
stock, respectively.
The
fair market value for stock-based compensation expense is equal to
the closing price of our common stock on the date of grant, which
is measured based on the publicly traded share
price.
The
restrictions on the stock awards are released generally over one
year.
During the years ended December 31, 2016 and 2015, the Company
recognized share based compensation expense for employee awards of
approximately $28,000 and $279,000, respectively.
There is no unrecognized compensation
expense for unvested employee RSUs at December 31,
2016.
F-25
12 - SHARE BASED COMPENSATION PLANS
(Continued)
Non-employee Share Based Compensation
Share based compensation expense related to restricted stock and
restricted stock units (collectively ‘Non-Employee
Awards’) granted to non- employees is measured at the fair
value of consideration received or the fair value of the equity
instruments issued or liabilities incurred, whichever is more
reliably measured. The cost of the share based payments to non-
employees that are fully vested and non- forfeitable as at the
grant date are remeasured and recognized at that date, unless there
is a contractual term for services, in which case such compensation
would be amortized over the contractual term.
For the year ended December 31, 2016, no equity awards were granted
to non- employees under the 2013 Plan.
During the year ended
December 31, 2015, the Company awarded 30,000 RSUs
to one advisor under the 2013 Plan.
During
years ended December 31, 2016 and 2015, 17,000 and 168,500 Awards
were released. As of December 31, 2016, no non-employees have
forfeited RSUs awarded under the 2013 Plan.
For the years ended December 31, 2016 and 2015, the Company
recognized share based compensation expense for non-employees of
$4,000 and $41,000.
As of December 31, 2016 and 2015, the Company has recorded nil and
$20,541 in accrued expenses and other liabilities related to these
non-employee share arrangements, which are either subject to
continued contractual service conditions or have not been settled
in common stock of the Company (See note 8). There was no
unrecognized compensation expense for unvested non-employee RSUs at
December 31, 2016.
13 – INCOME TAXES
As of
December 31, 2016, the Company has net operating loss carry
forwards of approximately $6,410,000 that can be utilized to offset
future taxable income for income tax purposes. Net operating loss
carry forwards expire starting in 2021. Because of the current
uncertainty of realizing the benefit of the tax carry forward, a
valuation allowance equal to the tax benefit for deferred taxes has
been established.
The
full realization of the tax benefit associated with the carry
forward depends predominantly upon the Company’s ability to
generate taxable income during the carry forward period. The
contribution of Symbid Coop to the carry forward has been
nil.
F-26
13 – INCOME TAXES
(Continued)
The
following table reconciles the statutory rates to the
Company’s effective tax rate:
|
|
December
31,
|
|
|
|
2016
|
2015
|
|
|
|
|
|
U.S. Statutory
rates
|
34
%
|
34
%
|
|
Foreign income not
recognized in the U.S.
|
(34
%)
|
(34
%)
|
|
Dutch income tax
rate
|
20
%
|
20
%
|
|
Equity Method
Pick-Up – Symbid Holding
|
(5.80
)
|
(9.02
)
|
|
Other, less than
1%
|
(0.05
)
|
(0.10
)
|
|
Effective income
tax rate
|
14.15
|
10.88
|
|
Effect on valuation
allowance
|
(14.15
)
|
(10.88
)
|
|
Effective income
tax rate
|
0
%
|
0
%
|
The
Company has temporary differences related to its net operating
loss, which give rise to a deferred tax asset of approximately
$1,133,000 and $ 869,000 for the period ended December 31, 2016 and
2015, respectively. The Company maintains a 100% valuation
allowance against its deferred tax assets as of December 31, 2016
and 2015, respectively.
The
Company is subject to income tax examinations by tax authorities
for 2016, 2015 and 2014.
14 - SUBSEQUENT EVENTS
In March 2017, the Company sol
d
its 7% interest in Equidam Holding B.V. for
€15,000.
F-27
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement Schedules