CENBF CEN Biotech Inc (CE)

NOTE 2 – GOING CONCERN UNCERTAINTY / MANAGEMENT PLANS

The accompanying condensed consolidated financial statements have been prepared in contemplating continuation of the Company as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, a substantial doubt has been raised with regard to the ability of the Company to continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. The Company had an accumulated deficit of $43,895,667 at September 30, 2021 and had no committed source of additional debt or equity financing. The Company did not have any operating revenue until the acquisition of Clear Com Media, Inc. on July 9, 2021 and such amounts are not expected to be sufficient to sustain ongoing operations. The Company has relied on the issuance of loans payable and convertible debt instruments to finance its expenses, including notes that are in default, as described in Notes 7, 8, 9, and 10. The Company will continue to raise additional capital through placement of common stock, notes or other securities in order to implement its business plan or additional borrowings, including from related parties. The COVID-19 pandemic has hindered the Company’s ability to raise capital. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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

NOTE 3 – ACQUISTION OF CLEAR COM MEDIA, INC.

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

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

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

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

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

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

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

Supplemental proforma financial information

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

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

The following table summarizes the pro forma financial information:

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

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

NOTE 5 – ADVANCES TO CEN BIOTECH UKRAINE AND LOAN RECEIVABLE FROM EMERGENCE GLOBAL

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

At September 30, 2021 and December 31, 2020, the Company had advances of $1,299,328 and $1,179,328, respectively, to CEN Biotech Ukraine, LLC, a related party (see Note 16). The advances were for the purpose of funding the operations of CEN Biotech Ukraine, LLC.

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

NOTE 6 – INTANGIBLE ASSETS

Lighting Patent

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

The patent remained in the name of Tesla Digital, Inc. until full settlement of the terms of the agreement. In the interim, pursuant to an updated agreement executed on April 15, 2019 between the Company and the Sellers, CEN has reaffirmed the rights to use the patented technology. In addition, the Company agreed to employ Stevan Pokrajac, by an LED subsidiary that the Company plans to form, but which has not yet been formed, in connection with the development of the acquired technology with compensation equal to $200,000 per year, commencing with the start of operations.

In March 2018, the agreement was amended to reflect a fixed one million registered shares of CEN common stock. As of September 30, 2021 and December 31, 2020, the value of this liability was $354,900 and $1,380,000, respectively. This liability will be remeasured at each reporting date using the current fair value of CEN’s common shares.

Subsequently, on October 7, 2021, the agreement was amended and finalized to increase the number of CEN common shares to be transferred to five million. Upon closing of the agreement, the CEN common stock was transferred to the Sellers and the transfer of the patent and real property was completed. In addition, the Sellers assumed the mortgage and associated accrued interest on certain real property that was included in the original agreement, see Note 7.

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

Intangible assets consist of the following at:

As of September 30, 2021 and December 31, 2020, there is no impairment expense recognized based on the Company’s expectations that it will be able to monetize the intangible assets. The lighting patent is being amortized straight-line over 16 years. Remaining intangibles, with the exception of the capitalized software development costs, which have not yet been implemented, are being amortized straight-line over 3 to 15 years. Expected amortization expense for the lighting patent is $424,812 per year through 2031, with the remaining $283,215 to be amortized in 2032. Expected amortization expense for the product technology, customer relationships, and trade names acquired as part of the CCM acquisition on July 9, 2021 are expected to be approximately $96,400 per year through 2023, $88,600 in 2024, $80,700 in 2025 and 2026, with the remaining $121,100 to be amortized through 2028. See Note 3 regarding the initial measurement period for the intangibles acquired as part of the acquisition. of CCM.

During each of the three-month periods ended September 30, 2021 and 2020, 18,000 common shares were issued to individuals in connection with interest terms of the above loans. Accordingly, during the three-month periods ended September 30, 2021 and 2020, $10,926 and $12,960 in interest expense and additional paid-in capital was recorded, respectively.

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

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

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

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

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

The Company issues convertible notes as a method to raise operating capital. These notes convert to a fixed number of shares specified in the convertible note, at the option of the note holder. Certain of these notes are considered to contain a beneficial conversion feature if in-the-money at the time of issuance. The Company has determined the value associated with the beneficial conversion feature in connection with the notes issued during nine-month period ended September 30, 2021 to be $93,164. This value has been recorded as a component of equity during 2021 and the aggregate original issue discount is accreted and charged to interest expense as a financing expense from the date of issuance until maturity. Upon conversion, any remaining unaccreted discount is charged to interest expense. No convertible notes with beneficial conversion features were issued during the three-month period ended September 30, 2021 or the three or nine-month periods ended September 30, 2020.

These notes may be converted at the option of the note holder upon written notice by the note holder. These notes are convertible into a total of 551,815 common shares.

During the three-month period ended September 30, 2021, certain private investors elected to exercise their convertible notes payable totaling $167,924 in exchange for 104,953 common shares. During the nine-month period ended September 30, 2021, certain private investors elected to exercise their convertible notes payable totaling $5,023,785 in exchange for 3,395,133 common shares. As a result, the associated convertible notes have been extinguished and reclassified as additional paid in capital. There were no such elections to convert any of the convertible notes payable during the three or nine-month periods ended September 30, 2020.

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

As of November 19, 2021, we are currently in default of $726,472 of convertible notes payable, which are convertible into 457,517 shares of common stock.

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

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

The Company has determined the value associated with the beneficial conversion feature in connection with the notes issued to related parties during the nine-month period ended September 30, 2021 to be $18,142. This value has been recorded as a component of equity during 2021 and the aggregate original issue discount is accreted and charged to interest expense as a financing expense from the date of issuance until maturity. Upon conversion, any remaining unaccreted discount is charged to interest expense. No convertible notes to related parties with beneficial conversion features were issued during the three-month period ended September 30, 2021 or the three or nine-month periods ended September 30, 2020.

These notes may be converted at the option of the note holder upon written notice by the note holder. These notes are convertible into a total of 719,591 common shares.

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

As of November 19, 2021, we are currently in default of $1,000,164 of convertible notes payable, which are convertible into 625,103 shares of common stock.

NOTE 11 – CEBA LOAN PAYABLE

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

NOTE 12 – GOVERNMENTAL ASSISTANCE

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

NOTE 13 – LEASES

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

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

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

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

As of September 30, 2021, the Company has net operating loss carry forwards of approximately $29,200,000 that may be available to reduce future years’ taxable income. Such carry forwards typically expire after 20 years. The Company currently has carry forwards that begin to expire in 2034. Future tax benefits which may arise as a result of these losses have not been recognized in these consolidated financial statements, because the Company believes that it is more likely than not that the carryforwards will expire unused and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. The deferred tax asset and associated valuation allowance are as follows for the period ended September 30, 2021 and the year ended December 31, 2020:

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

Company management analyzes its income tax filing positions in Canadian federal and provincial jurisdictions where it is required to file income tax returns, for all open tax years in these jurisdictions, to identify potential uncertain tax positions. As of September 30, 2021, there are no uncertain income tax positions taken or expected to be taken that would require recognition of a liability or disclosure in the condensed consolidated financial statements. The Company is subject to routing audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Generally, the Company is no longer subject to income tax examinations for years prior to 2017.

NOTE 15 – SHAREHOLDERS’ DEFICIT / STOCK ACTIVITY

The Company is authorized to issue an unlimited number of common shares and an unlimited number of special voting shares. Common shares have no stated par value.

As of September 30, 2021, 1,271,406 shares of common stock are committed to the holders of the convertible notes.

NOTE 16 – RELATED PARTY TRANSACTIONS

The Company has received loans from several related parties, as described above in Notes 8 and 10.

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

There are advances of $1,299,328 and $1,179,328 to CEN Biotech Ukraine as of September 30, 2021 and December 31, 2020, respectively. Such advances were made for the purpose of funding the operations of CEN Ukraine as summarized in Note 5. CEN Ukraine was founded by Bill Chaaban. Prior to December 3, 2017, Bill Chaaban directly owned 51% of CEN Ukraine. CEN Ukraine was founded to seek agricultural and pharmaceutical opportunities in Ukraine. Bill Chaaban personally funded the establishment and initial phases of CEN Ukraine. On December 14, 2017, the Company entered into a controlling interest purchase agreement with Bill Chaaban, our Chief Executive Officer and member of our board of directors, and another shareholder of CEN Ukraine, Usamakh Saadikh, a member of our board of directors, for 51% of the outstanding equity interests of CEN Ukraine. The consideration will be paid by issuing common shares of the Company. The agreement, which is subject to certain conditions, has not closed as of November 19, 2021, as the Company needs to raise additional funds in order to proceed with the closing. Bahige (Bill) Chaaban, Chief Executive Officer and member of our Board of Directors, and Usamakh Saadikh, a member of our Board of Directors, each directly own 25.5% of CEN Ukraine respectively. The remaining 49% of CEN Ukraine is owned by XN Pharma, which is an entity jointly owned by Bahige (Bill) Chaaban and Usamakh Saadikh. Bahige (Bill) Chaaban and Usamakh Saadikh do not currently hold any positions with CEN Ukraine. CEN Ukraine is operated and controlled by its sole director. Pursuant to Ukrainian law, shareholders of a company do not have the ability to control the company or the actions of its director. CEN Ukraine is operated under the direction of its management per the guidelines of Ukrainian law.

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

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

During 2017, the Company purchased equipment from R&D Labs Canada, Inc., whose president is Bill Chaaban, in exchange for a $300,000 note payable. This equipment was then sold to CEN Ukraine for a loss of $255,141 in exchange for a $44,859 note receivable, payable in 10 equal installments beginning in 2017 through 2026. No payments have been received as of September 30, 2021, however, management expects this balance to be collectible.

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

NOTE 17 – STOCK BASED COMPENSATION

Adoption of Equity Compensation Plan

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

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

Equity Compensation Grants

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

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

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

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

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

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

Employment Agreements

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

On May 16, 2019, an employment agreement was entered into with Alex Tarrabain, one of the members of the Company’s Board, to serve as the Company’s Chief Financial Officer and as one of the Vice Presidents of the Company effective May 21, 2019:

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

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

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

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

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

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

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

Restricted Stock Awards

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

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

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

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

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

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

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

NOTE 18 – NET LOSS PER SHARE

During periods when there is a net loss, all potentially dilutive shares are anti-dilutive and are excluded from the calculation of diluted net loss per share. Based on the Company’s application of the as-converted and treasury stock methods, all common stock equivalents were excluded from the computation of diluted earnings per share due to net losses as of September 30, 2021 and 2020. Common stock equivalents that were excluded for the three and nine-month periods ended September 30, 2021 and 2020 are as follows:

NOTE 19 – CONTINGENCY

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

NOTE 20 – FAIR VALUE DISCLOSURES

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

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