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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
��
For the Fiscal Year Ended December 31, 20182019
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
For the Transition Period From ____________ to ____________
Commission File Number:333-208293000-55753
CANBIOLA, INC.Can B̅ Corp.
(f/k/a Canbiola, Inc.)
(Exact name of registrant as specified in its charter)
| Florida | 20-3624118 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
960 South Broadway, Suite 120, Hicksville NY 11801,
(Address of principal executive offices)
516-595-9544
Registrant’s telephone number, including area code:
None
Securities Registered Pursuant to Section 12(b) of the Act:
| Tile of each class | Trading Symbol(s) | Name of each exchange onwhich registered | ||
| Common Stock | CANB | N/A |
Common Stock, par value $0.001 per share
Securities Registered Pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter time that the registrant was required to submit and post such files). Yes [X] 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [ ] (Do not check if a smaller reporting company) | Smaller reporting company | |
| Emerging Growth Company [X] | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of voting stock held by non-affiliates of the registrant on June 30, 2018, was $4,466,469, based on the last reported sale price of the registrant’s Common Stock on the OTC Markets on that date.
As of April 12, 2019,March 13, 2020, the registrant had outstanding 548,487,7142,861,740 shares of common stock, $0.00 par value per share.
EXPLANATORY NOTE
Canbiola, Inc. (the “Company”) inadvertently provided an incorrect contact phone number in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Original Filing”) and did not include interactive data (aka XBRL’s) for the Original Filing. This Amendment No. 1 on Form 10-K (“Amendment No. 1”) is being filed solely to include the Company’s interactive data and to amend the Company’s phone number.
CANBIOLA, INC.Can B̅ Corp.
20172019 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this Annual Report on Form 10-K are considered forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) concerning our business, results of operations, economic performance and/or financial condition, based on management’s current expectations, plans, estimates, assumptions and projections. Forward-looking statements are included, for example, in the discussions about:
| ● | strategy; | |
| ● | new product discovery and development; | |
| ● | current or pending clinical trials; | |
| ● | our products’ ability to demonstrate efficacy or an acceptable safety profile; | |
| ● | actions by regulatory authorities; | |
| ● | product manufacturing, including our arrangements with third-party suppliers; | |
| ● | product introduction and sales; | |
| ● | royalties and contract revenues; | |
| ● | expenses and net income; | |
| ● | credit and foreign exchange risk management; | |
| ● | liquidity; | |
| ● | asset and liability risk management; | |
| ● | the outcome of litigation and other proceedings; | |
| ● | intellectual property rights and protection; | |
| ● | economic factors; | |
| ● | competition; and | |
| ● | legal risks. |
Any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Forward-looking statements generally are identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “aims,” “plans,” “may,” “could,” “will,” “will continue,” “seeks,” “should,” “predict,” “potential,” “outlook,” “guidance,” “target,” “forecast,” “probable,” “possible” or the negative of such terms and similar expressions. Forward-looking statements are subject to change and may be affected by risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events, except as required by law, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws and other applicable laws.
We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements, and therefore you should not place too much reliance on them. These factors include, among others, those described herein, under “Risk Factors” and elsewhere in this Annual Report and in our other public reports filed with the Securities and Exchange Commission. It is not possible to predict or identify all such factors, and therefore the factors that are noted are not intended to be a complete discussion of all potential risks or uncertainties that may affect forward-looking statements. If these or other risks and uncertainties materialize, or if the assumptions underlying any of the forward-looking statements prove incorrect, our actual performance and future actions may be materially different from those expressed in, or implied by, such forward-looking statements. We can offer no assurance that our estimates or expectations will prove accurate or that we will be able to achieve our strategic and operational goals.
Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.
Moreover, new risks regularly emerge and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this prospectus are based on information available to us on the date of this Annual Report. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Annual Report.
JUMPSTART OUR BUSINESS STARTUPS ACT
We qualify as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have more than $1,000,000,000$1,700,000,000 in annual gross revenue and did not have such amount as of December 31, 2018,2019, the last day of our last fiscal year. We are electing to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.
As an emerging growth company, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
| ● | being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report; | |
| ● | not being requested to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”); | |
| ● | reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration 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 will remain an emerging growth company until the earliest to occur of: (i) our reporting $1 billion or more in annual gross revenues; (ii) the end of fiscal year 2019; (iii) our issuance, in a three year period, of more than $1 billion in non-convertible debt; and (iv) the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million on the last business day of our second fiscal quarter.
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| Item 1. | Business |
Company Overview
Canbiola, Inc.Can B̅ Corp. (the “Company,” “CAN B,” “CANB,” “we,” “us,” and “our”) was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005 in order to tap into a largely un-serviced segment of the web-based advertising industry. Effective December 27, 2010, WRAP effected a 10 for 1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1 for 10 reverse stock split of its common stock. The accompanying consolidated financial statements retroactively reflect these stock splits. On March 6, 2020, Can B̅ effected a 1 for 300 reverse stock split of its common stock.
Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008, in order to acquire Prosperity’s office productivity software suite as a complement to WRAP’s existing intellectual property. After its acquisition, the Company transferred Prosperity’s operations to WRAP and is presently in the process of dissolving Prosperity.WRAP. For the periods presented, the assets, liabilities, revenues, and expenses are those of the Company. Prosperity had no activity for the periods presented.
Around the first quarter of 2017, the Company began to transition into the Hemp CBD industry and now primarily offersoperates four distinct health and beauty productswellness divisions, Pure Health Products (R&D and supplements containing CBD.manufacturing), Duramed (medical devices), Green Grow Farms, Inc. (cultivation and processing), and licensing under its new agreement with Lifeguard brand. On May 15, 2017, WRAP changed its name to Canbiola, Inc. (the “Company” or “CANB” or “Canbiola”) to reflect its transition. On March 6, 2020 CANB changed its name to “Can B̅ Corp.” in order to segregate its corporate identity from its lead products branded under the “Canbiola” brand.
Business Segments
The Company’s primaryCompany is in the business is theof promoting health and wellness through its development production and sale of products containing CBD (with no psychoactive THC) the production of hemp biomass, the licensing of durable medical devises and delivery devices containing CBD.the sale of non-CBD products such as sunscreen and lip balm.
| I- | Pure Health Products – R&D, Manufacturing and “CBD” Business |
The Company’s Research, Development, and core manufacturing arm also is a direct producer, seller and purveyor of products to private label products for multiple distributors of CBD products. The Company’s products contain CBD derived from Hemp and include products such as oils, creams, moisturizers, isolate, and gel caps. In addition to offering white labeled products, Canbiolathe Company has developed its own line of proprietary products, as well asproducts. The Company is always seeking synergistic value through acquisitions of products and brands in the Hemp industry. CanbiolaThe Company aims to be the premier provider of the highest quality natural Hemp CBD products on the market through sourcing the very best raw material and developing a variety of products we believe will improve people’s lives in a variety of areas.
“CBD” Business
Cannabidiol (“CBD”) is one of nearly 85 naturally occurring compounds (cannabinoids) found in industrial hemp (it is also contained in marijuana, but the Company’s products are derived only from hemp). CBD is non-psychoactive and is thought to have numerous uses, including, but not limited to, for pain, insomnia, epilepsy, anxiety, inflammation, and nausea. Unlike CBD derived from marijuana, CBD derived from the seeds and stalks of industrial hemp is generally considered “legal” in the U.S. so long as it contains less than 0.3% of “THC,” another, but psychoactive, cannabinoid found in cannabis. This purported “legal status” is because the 2018 Farm Bill removed hemp as a Schedule I drug under the Controlled Substances Act and hemp may now be grown as a commodity crop, with restrictions; however, the 2018 Farm Bill did not specifically legalize CBD. Until Congress promulgates rules and regulations relating to hemp derived CBD under the 2018 Farm Bill, the “legal” status of CBD from hemp, or the processes the Company may have to implement (and at what expense), are still unknowns. A similar paradigm exists under various state laws with which the Company will have to comply. In any case, CBD derived from marijuana, marijuana and other marijuana derivatives are federally illegal in the U.S. under the Controlled Substances Act, despite being medically or recreationally legal in numerous states, which is why the Company has established procedures to ensure that its CBD is derived from hemp in compliance with the Farm Bill.TheBill. The Company has all of its hemp based raw materials (isolate) tested by a 3tf3rd party independent laboratory and those results are posted on the Company web site.
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In order to facilitate its operations, the Company has (and will) form or acquire a number of subsidiaries. Its goal is to eventually operate a vertically integrated hemp conglomerate that has operations spanning from seed to sale. Currently, the
The Company’s primary focus is the development, sale and manufacture of CBD products. The Company’smedical office products are marketed under the tradename “Canbiola.,“Canbiola,” and sold via its website and through doctors and other medical professionals with which the Company enters intounder distribution agreements. The Company also manufactures and/or sells separately branded CBD products through its subsidiaries and websites for “Pure Leaf Oil”, essentially its retail consumer brand and “Sevenis sold via the Company’s website as well as direct internet sales for retail use consumers. Additionally, the Pure Leaf Oil products are targeted to be featured in the Company’s new line of vending machines, currently in test markets such as medical facilities and retail centers., Nu Wellness its independent pharmacy brand and targets toward the over three-thousand independent retail drug stores nationally with its first product schedule for roll-out in the 1st quarter 2020. , The” Seven Chakras” brand.brand is targeted toward health clubs, spas, and beauty lines and is expecting a major launch in 2nd quarter 2020 to include a full line of related topical products both with and without CBD. The Severn Chakras has a customer base and following and compliments the Canbiola and Pure Leaf Oil brands with additional new products such as bath bombs, stress relief products, and lotions. Seven Chakras has its own internet website and continues in its direct marketing to its customer base.
In December, 2018, the Company acquired 100% of the membership interests in Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”), with which it had had and has an exclusive production agreement, pursuant to an Acquisition Agreement (“PHP Acquisition Agreement”). PHP manufactures and packages the Company’s CBD infused products. PHP may also white label / rebrand or relabel the Company’s products pursuant to “white label agreements” entered into between the Company and/or PHP and third-party customers. Through PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. In January, 2019, PHP acquired certain assets from Seven Chakras, LLC (“Seven Chakras”), a former competitor, which assets included the rights and title to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ CBD products, (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials.
The Company believes the acquisitionproducts are distributed through an array of Seven Chakra’s assets will bring accretive valuemethods including: 1- For Canbiola brand directly though doctors and expand the Company’s market base. The Severn Chakras has a customer following in the northwest and compliments the Canbiola andmedical offices, 2- For Pure Leaf Oil brands with additional new products such as bath bombs, stress relief products,direct to consumer via walk-in business, internet and lotions.other distributors, 3- for Seven Chakras hasvia direct sales and through internet sales. The Company’s newest brand Nu Wellness is distributed to independent pharmacies through distributor relationships. The White or Private Label business is sold direct to the companies for distribution through their own network of retailers.
| II- | Duramed Division- Durable Medical Equipment |
Through its own internet websitemedical device division, Duramed, Inc. and continuesDuramedNJ LLC, the Company serves the post-surgery medical patient arena aiming to reduce the reliance of opiates in its direct marketingfavor of a wearable ultrasound device to its customer base.aid in recovery and pain reduction.
In November 2018, the Company formed Duramed, Inc., a Nevada corporation (“Duramed”) to facilitate the manufacture and sale of durable medical equipment incorporating CBD. On January 14, 2019, Duramed entered into a Memorandum of Understanding (the “Sam MOU”) with Sam International (“Sam”) and ZetrOZ Systems LLC (“ZetrOZ” and, collectively with Sam, the “Manufacturers”). Pursuant to the Sam MOU, the Manufacturers granted Duramed the exclusive right to distribute sam® Pro 2.0 (SA271) and sam® Gel Coupling Patches (UB-14-72) within the United States for the Personal Injury Protection/No Fault Market during the term of the Sam MOU. Duramed has agreed to purchase monthly minimums from the Manufacturers at a price per Unit of $2,447. The exclusivity of the Distribution License granted to Duramed under the Sam MOU is dependent upon meeting the monthly minimum. In addition, Duramed was granted the right to distribute sam® Gel Capture Patches (UB-14-24). Duramed will get rebates of 2%-3% based on the volume of Products sold by it. The initial term of the Sam MOU expires December 31, 2019 (the “Initial Term”). The agreement contemplated by the Sam MOU will automatically renew for additional one-year terms at the end of each calendar year,providedthe monthly minimums have been met. The primary thrust of the Duramed Divisiondivision is to market to patients via doctors via a device rental program reimbursable by insurance carriers to help patient with pain reductions and faster healing.
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On May 29, 2019, the Company created DuramedNJ LLC to execute the same business strategy into the no-fault insurance market in New Jersey that it had developed in New York. That company continues to develop opportunities into 2020.
| III- | Hemp Production, Aggregation, Processing, and Sale |
On July 11, 2019, Canbiola, Inc. (the “Company” or “CANB”) entered into a Joint Venture Agreement (the “JV Agreement”) with NY – SHI, LLC, a New York limited liability company (“NY – SHI”), EWSD I LLC dba SHI Farms, a Delaware limited liability company (“SHI Farms”), NY Hemp Depot LLC, a Nevada limited liability company and wholly-owned subsidiary of CANB (“CANB Sub”). Pursuant to the JV Agreement, NY – SHI and CANB Sub entered into a joint venture for the purpose of jointly implementing a business model referred to as the “Depot Model” (the “Joint Venture”) to aggregate and purchase fully-grown, harvested industrial hemp from third-party farmers (“Farmers”) in the State of New York. The Joint Venture may also sell feminized seeds, clones, and additional materials required to grow and cultivate industrial hemp to the Farmers and provide the Farmers with initial training reasonably required for them to be able to grow industrial hemp and maximize CBD potency.
Pursuant to the JV Agreement, NY – SHI agreed to provide (i) technical expertise regarding the growth and cultivation of industrial hemp, (ii) certain products that may include feminized hemp seeds and/or clone plants to sell to the Farmers, (iii) growing technology and expertise to grow, cultivate, and harvest industrial hemp, including the initial training of Farmers to grow industrial hemp and maximize CBD potency, (iv) use of its cultivating license, which shall be amended to add a New York hemp depot facility (the “NY Hemp Depot Facility”) once such facility is obtained by CANB Sub, and (v) services for the recruitment of Farmers to grow and cultivate industrial hemp for sale to the Joint Venture.
CANB Sub agreed to provide (i) a building for the operation of the NY Hemp Depot Facility, (ii) location services in connection with its securing the building for the NY Hemp Depot Facility, (iii) management and other services for the day-to-day operation of the Joint Venture, and (iv) services for the recruitment of Farmers to grow and cultivate industrial hemp for sale to the Joint Venture. CANB Sub shall have full and complete discretion to manage and control the business and affairs of the Joint Venture, to make all decisions affecting the business and affairs of the Joint Venture, and to take all such actions as it deems necessary or appropriate to accomplish the purposes of the Joint Venture. Notwithstanding the foregoing, unanimous consent between NY – SHI and CANB Sub is required for certain transactions, including but not limited to amending the JV Agreement, obligating the Joint Venture to pay an excess of $20,000 for any transaction or series of transactions, and terminating the Joint Venture.
As consideration for the foregoing, CANB Sub delivered to NY – SHI a cash payment of $500,000.00 upon execution of the JV Agreement. Additionally, per the terms of the JV Agreement, CANB issued $500,000.00 in value of its Common Stock to NY – SHI;provided, however, that the NY – SHI’s cultivating license shall have been amended to add the NY Hemp Depot Facility as a condition to such issuance. SHI Farms has also agreed to sell certain isolate to the Company or its designated affiliate at a discounted rate equal to the cost of processing the isolate from biomass and granted CANB Sub an interest in the 1.5% payments due to SHI Farms in connection with its separate agreements with Mile High Labs.
The “gross profits” from the Joint Venture, which are defined as gross revenues less certain direct operational costs, will be distributed quarterly in arrears with the first distribution scheduled to be made on March 31, 2020, of which 70% is to be distributed to CANB Sub and 30% is to be distributed to NY – SHI.
NY Hemp Depot production is coordinated via the new acquisition of Green Grow Farms, Inc.
On December 4, 2019, the Company entered into a Stock Purchase Agreement (the “GGFI Agreement” with Iconic Brands, Inc., a Nevada corporation (“ICNB”) and Green Grow Farms, Inc., a New York corporation (“GGFI” or “Green Grow” and, collectively with ICNB and the Company, the “Parties”). Pursuant to the terms of the GGFI Agreement, at closing, the Company received 51% equity interest in Green Grow (the “GG Shares”) in exchange for an aggregate of 37,500,000 pre-split shares of the Company’s common stock (the “Purchase Shares”). On June 30, 2020 (the “Valuation Date”), a valuation of the Purchase Shares shall be performed for the purpose of determining whether the Market Price Per Purchase Share (as defined in the GGFI Agreement) on the Valuation Date is less than $1,000,000. In the event that the aggregate Market Price Per Purchase Share on the Valuation Date is less than $1,000,000, the Company shall issue to the ICNB such a number of additional shares (“Additional Purchase Shares”) so that the aggregate value of aggregate shares issued to ICNB for the purchase of the GG Shares (taking into account the Purchase Shares and the Additional Purchase Shares) equals $1,000,000. For purposes of the valuation, Market Price Per Purchase Share shall be determined based upon the 10-day average VWAP for the 10-day period ending on June 30, 2020.
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In the event that ICNB determines to make a distribution of the Purchase Shares to its shareholders, whether by way of dividend or otherwise, the Company agreed to cooperate in the filing of a registration statement (the “Registration Statement”) with the SEC covering the Purchase Shares, if requested by ICNB. ICNB shall be responsible for directly paying all expenses relating to such Registration Statement, including, but not limited to, filing fees, the Company’s counsel legal fees, blue sky filing fees and audit fees. Pursuant to the GGFI Agreement, the Company has agreed to indemnify and hold ICNB harmless from and against any and all liabilities, obligations or claims arising out of or resulting from Green Grow’s operation of its business or its assets after the closing of the GGFI Agreement and the Company’s breach of any covenants, warranties or agreements set forth therein, provided the amount of any indemnification shall not exceed an amount equal to the value of the GG Shares as of the closing. The GGFI Agreement otherwise contains customary representations and warranties, termination rights, and certain covenants of the Parties.
On January 27, 2020, the Company entered into an Amendment to Stock Purchase Agreement (the “Amendment”) with ICNB and Green Grow. The Amendment was to correct a scrivener’s error in the GGFI Agreement. The Amendment clarifies that Additional Purchase Shares will be issued to ICNB only if the Market Price Per Purchase Share on the Valuation Datemultiplied by the 37,500,000 pre-split Purchase Shares is less than $1,000,000.
On March 3, 2020, the Company entered into an Agreement (the “Modification Agreement”) with Green Grow, New York Farm Group, Inc., a New York corporation (“NYFG”), Steven Apolant, an individual, and Peter Scalise, an individual, relating to the GGFI Agreement, as amended. Following the closing of the GGFI Agreement, the Company discovered that certain assets of GGFI were valued at less than the amount GGFI had previously represented. In light of the foregoing, pursuant to the Modification Agreement, NYFG agreed to assign to CANB (i) all of the equity interests in GGFI held by NYFG and (ii) 1,000,000 shares of ICNB’s common stock. The ICNB shares are subject to a lock up leak out agreement with ICNB whereby the Company has agreed not to transfer the ICNB shares until July 1, 2020 and for the six (6) months thereafter not sell or transfer more than the greater of 3.5% of ICNB’s trading volume or $5,000. Pursuant to the Modification Agreement, CANB agreed to forgive a loan to Apolise LLC in the amount of $144,310 and to assume the lease liability for 1545 Ocean Ave., Suite 1, Bohemia, NY 11716. Each party to the Modification Agreement also agreed to release the other parties thereto from all claims relating to the GGFI Agreement and the transactions contemplated thereby. As a result of the transaction contemplated by the Modification Agreements, the Company now owns 100% of GGFI.
| IV- | Licensing |
On January 28, 2020, Canbiola, Inc. (the “Company” or “CANB”) entered into a License Agreement (the “Lifeguard Agreement”) with LIFEGUARD LICENSING CORP., a Delaware corporation (“Lifeguard”). Pursuant to the Lifeguard Agreement, Lifeguard granted the Company the right to use its “LIFEGUARDTM” trademark (the “Mark”) in connection with the Company’s manufacture, marketing, distribution, and sale of products (the “License”). In consideration for the License, the Company agreed to pay Lifeguard a royalty equal to six percent (6%) of net sales of its LIFEGUARD branded products on a quarterly basis. The Company further agreed that, regardless of the net sales generated, each royalty payment will be in an amount not less than $60,000, which minimum amount will increase annually following December 31, 2021. The Lifeguard Agreement will continue until December 31, 2025, unless earlier terminated by the parties, and may be renewed for additional five (5)-year terms if certain performance conditions are met.
Under the License, the Company has various performance and sales obligations including initial product introduction timing and Lifeguard has various oversight rights such as audit rights, quality control and inspection rights. Licensor has the right to terminate the License in the event of certain breaches by the Company, at which point, the Company will be required all licensed material; however it will be permitted to sell its existing inventory so long as termination is not due to quality issues. Lifeguard and the Company have agreed to indemnify each other, which indemnification obligations will survive the termination of the Agreement. The Company also agreed to procure and maintain certain insurance policies for the benefit of the Company and Lifeguard.
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The Lifeguard Agreement otherwise contains terms, conditions, and representation common with this type of transaction.
Competitive Conditions
The CBD and cannabis markets are flooded with competition ranging from mom and pop operations to multi-million-dollar conglomerates, many with longer operating histories, more capital and/or more industry knowledge than the Company. The Company hopes to partner with or engage industry specialists to help set it apart from its numerous competitors. One of those points of differentiation is its 3rd party independent testing “Certificate of Analysis” conducted on all of the CBD isolate products it purchases and posting of those lab results on its website.
CBD biomass, that is farmers growing product, has created a glut on the US market with the supply chain breakdown being processing, extraction, and use of product. The Company believes there will be a leveling out of supply and demand but strongly believes that the companies with the greatest potential are those with a final consumer end-use for the product. One of the Company’s strengths is that it built a demand side consumer base prior to any vertical integration. Ergo, our GGFI Division will be growing under our own license in New York for our own manufacturing facility production, for our own customer demand.
The statements found herein have not been evaluated by the Food and Drug Administration (FDA) and the Company’s products are not intended to diagnose, treat, cure or prevent any disease or medical condition.
WRAPmail
The Company owns a patented technology that combines custom marketing content with organization e-mail to provide a next generation marketing platform for organizations and personal use. WRAPMail had provided software solutions for marketing and is no longer being sold or serviced.Intellectual Property
We are not aware of any competitors developing a similar solution to WRAPmail, possibly giving us first mover advantage. Nonetheless, we may face competition from stationary letterhead, bulk e-mail and similar product providers.
Currently the Company is not pursuing additional customers for WRAPmail but does continue to service current customers using the software.
Bullseye
The Bullseye Productivity Suite is a cloud-based system that consolidates all necessary office productivity tools into one online experience, accessible everywhere when you need it with full disaster recovery mechanisms built in. All functions and features are audited to help users with corporate governance and compliance issues.
The Company is not presently seeking additional customers for Bullseye but continues to service the existing customer base.
Intellectual Property
We ownwon the following patents for our WRAPmail technology: US patentPatent no. 8572275 issued on October 29, 2013. This patent expires in October 2033.2022. On July 20, 2015, WRAPmail filed for a new patent under the title:title Method, System and Software for Dynamically Extracting Content for Integrationintegration with Instant Messages, which application is still pending and not being actively pursued by the Company.
The above patents relate to the document management and email marketing divisions.divisions which are not presently being developed. Due to diminishing revenue from these divisions,this division, the Company’sCompany accountant determined to reduce the fair value of these patents to $0.
The Company employesemploys through its Pure Health Product LLC Division, two full time product researchers and developers and technology experts who, on a daily basis, set the quality standards and new product development status and time-line agendas under the direct supervision of the Company’s management team.
Employees
The Company currently has nineteen employees, 17 of which are full-time employees and 2 who are under service agreements.
The Company employs through its Pure Health Products LLC Division, two full time product researchers and CBD technology experts who, on a daily basis, set the quality standards and new product development status and time-line agendas under the direct supervision of the company’s management team. Additionally, there is a division president, three production personnel, and five sales/ marketing and fulfillment personnel.
EmployeesDuramed, the medical device company employees four people including the division president and 3 field operation personnel.
The Company currently hasremaining four full-time employeepeople are corporate staff and seven under services agreements.general sales and are directly employed by the Company.
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Reports to Security Holders
Our common stock is registered under the Securities Exchange Act of 1934 and we are required to file current, quarterly and annual reports and other information with the SEC. You may read and copy any document that we file at the SEC’s public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings are available to you free of charge at the SEC’s web site at www.sec.gov. We are an electronic filer with the SEC and, as such, our information is available through the Internet site maintained by the SEC that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. This information may be found at www.sec.gov and posted on our website at www.canbiola.com.
Research and Development
In fiscal year 20172019 and 2018 we spent respectively $37,000$150,000 and $75,000, respectively, in research and development which was expensesexpensed as spent.
Government Regulation
The cultivation and sale of hemp and hemp products is federally regulated under the United States Farm Bill. The 2018 Farm Bill removed hemp as a Schedule 1 Substance under the Controlled Substances Act; however, rules and regulations relating to manufacture and sale of CBD products under the Farm Bill must still be promulgated and are expected to impact the Company’s operations. As the legal CBD industry and our product lines expand, it is uncertain what other statutory schemes and agencies will start to regulate our CBD products. The FDA currently still considers the addition of CBD to food products or supplements to be illegal and prohibits the advertisement of CBD products with health claims. The Company must also comply with each state’s laws relating to the sale of hemp basedhemp-based CBD products. These regulations may affect, among others, the way the Company manufactures and distributes its products, the way the Company is taxed, the way the Company banks, the location of the Company’s facilities, the content and testing of the Company’s products, and the quality of the Company’s services.
Through our document managementThe Company is presently growing and email marketing platforms, wecultivating in New York State under a State License provided by its GGFI Division. Once processing the biomass into isolate, it is shipped to the Company’s manufacturing facility in Lacey WA under the provisions of the Farm Bill of 2018.
We are also subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing the Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other online services, and increase the cost of providing online services. These regulations and laws may cover sweepstakes, taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet and e-commerce. Unfavorable resolution of these issues may harm our business and results of operations. CBD sales are additional state regulated for shipping and the Company maintains a current list.
Transfer Agent
We had engaged Island Stock Transfer, located at 15500 Roosevelt Blvd, Suite 301, Clearwater, FL 33760, as our stock transfer agent. Phone: 727.289.0010. Our former director, Carl Dilley, is a principal of Island Stock Transfer.
On April 1st, 2019 we changed Transfer Agents to Transhare Corporation located at 15500 Roosevelt Blvd,2849 Executive Drive, Suite 302,200, Clearwater, FL 33760.33762.
| Item1A. | Risk Factors |
We are a smaller reporting company and not required to provide the information in this Item.
| Item 1B. | Unresolved Staff Comments |
Not applicable.
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| Item 2. | Properties |
The Company does not currently own any real property. We do however lease office space in Hicksville, New York, and Bohemia New York. The Company’s wholly-owned subsidiary, Pure Health Products, operates its manufacturing facility in the state of Washington.
The lease payments are: Pure Health Products in Lacey WA $2,300, Can B̅ Corp. home office in Hicksville NY $3,350, and Green Grow Farms, Inc. in Bohemia NY $1,575.
| Item 3. | Legal Proceedings |
We are not aware of any pending or threatened legal proceedings in which we are involved, except as disclosed herein. On or around May 11, 2018, the Company initiated arbitration proceedings against T8 Partners, Inc., a New York Corporation (“T8”), pursuant to the American Arbitration Association (“AAA”) rules, for breach of contract and return of 2.5M shares of the Company’s common stock for non-performance by T8 under a services contract. The case, Case No. 01-18-0001-8823, is being heard in AAA’s Los Angeles Regional Office.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Market Information
Our common stock is not registered or traded on any national stock market or NASDAQ but is listed for quotation on OTCQB Market’sOTC market’s OTCQB® Venture Market under the symbol “CANB.” Our common stock began trading in April 2011. Trading in our common stock has historically lacked consistent volume, and the market price has been volatile.
The following table presents, for the periods indicated, the high and low bid prices of the Company’s common stock and is based upon information provided by OTC Market. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.
| 2018 | ||||||||
| High | Low | |||||||
| First Quarter | $ | 0.05 | $ | 0.02 | ||||
| Second Quarter | $ | 0.03 | $ | 0.01 | ||||
| Third Quarter | $ | 0.10 | $ | 0.01 | ||||
| Fourth Quarter | $ | 0.10 | $ | 0.03 | ||||
| 2019 – Prior to 300:1 reverse stock split | ||||||||
| High | Low | |||||||
| First Quarter | $ | .10 | $ | .03 | ||||
| Second Quarter | $ | .06 | $ | .03 | ||||
| Third Quarter | $ | .04 | $ | .01 | ||||
| Fourth Quarter | $ | .02 | $ | .01 | ||||
| 2017 | ||||||||
| High | Low | |||||||
| First Quarter | $ | 0.09 | $ | 0.07 | ||||
| Second Quarter | $ | 0.04 | $ | 0.03 | ||||
| Third Quarter | $ | 0.03 | $ | 0.03 | ||||
| Fourth Quarter | $ | 0.04 | $ | 0.03 | ||||
| 2018 – Prior to 300:1 reverse stock split | ||||||||
| High | Low | |||||||
| First Quarter | $ | 0.05 | $ | 0.02 | ||||
| Second Quarter | $ | 0.03 | $ | 0.01 | ||||
| Third Quarter | $ | 0.10 | $ | 0.01 | ||||
| Fourth Quarter | $ | 0.10 | $ | 0.03 | ||||
The last reported sale price of the Company’s common stock as of April 12, 2019March 13, 2020 was $0.039$1.04 per share.
Record Holders
As April 12, 2019,of March 13, 2020, there were 548,487,7142,861,740 shares of common stock issued and outstanding to approximately 163197 shareholders of record.
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Dividends
The Company paid $0 and $13,779 in in-kind dividends on its ClassSeries B Preferred Stock by the issuance of common stock to the ClassSeries B holders in 2019 and 2018, and $0 in 2017.respectively. Each share of Series B Preferred Stock has the first preference to dividends, distributions and payments upon liquidation, dissolution and winding-up of the Company, and is entitled to an accrued cumulative but not compounding dividend at the rate of 5% per annum whether or not declared. After six months of the issuance date, such share and any accrued but unpaid dividends can be converted into common stock at the conversion price which is the lower of (i) $0.0101; or (ii) the lower of the dollar volume weighted average price of CANB common stock on the trading day prior to the conversion day or the dollar volume weighted average price of CANB common stock on the conversion day. The Series B Preferred Stock have no voting rights. There are no currently outstanding shares of Series B Preferred Stock.
We do not anticipate paying any cash dividends in the foreseeable future. Except for its ClassSeries B Preferred Stock, the payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit our ability to pay dividends on our common stock other than those generally imposed by applicable state law.
Securities Authorized for Issuance under Equity Compensation Plans
We do not now have, or plan to have in the near future, an equity incentive plan.
Recent Sales of Unregistered Securities
Note- The share amounts referenced below do not reflect the 300:1 reverse split in March 2020.
The following is a summary of transactions since our previous disclosure on our Form 10-Q filed with the Securities and Exchange Commission on November 14, 201819, 2019 involving sales of our securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”). Each offer and sale were exempt from registration under either Section 4(a)(2) of the Securities Act or Rule 506(b) under Regulation D of the Securities Act.
From October 2, 2018 to November 7, 2018,On December 16, 2019, the Company issued aggregately 13,094,73310,700,000 shares of CANB common stock to RedDiamond in exchangeas agreed for the early retirement of 101,736 shares of CANB Series B Preferred Stock.
From November 5, 2018 to December 28, 2018, the Company issued aggregately 2,125,000 shares of CANB common stock to multiple consultants for services rendered. The $80,665 fair value of the 2,125,000 shares of CANB common stock was partially charged to consulting feesStock converted in the three months ended December 30, 2018.
From December 3, 2018 to December 28, 2018, the Company issued aggregately 1,500,000 shares of CANB common stock to three board members for services rendered. The $62,342 fair value of the 1,500,000 shares of CANB common stock was charged to director fees in the three months ended December 30, 2018.
From December 3, 2018 to December 28, 2018, the Company issued aggregately 22,413,794 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $650,000.
On December 11, 2018, the Company issued 891,089 shares of CANB common stock to RedDiamond in satisfaction of dividend payable of $9.000.
On December 19, 2018, the Company issued 891,089 shares of CANB common stock to Auctus, LLC pursuant to a cashless exercise of stock options.
On December 21, 2018, Company received a conversion notice from a lender. As a result, 9,372,100 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $83,500 and accrued interest payable of $10,221.
On December 21, 2018, Company issued aggregately 4,370,629 shares of CANB common stock to four officers and key executives of the Company in satisfaction of accrued compensation of $192,300.
On December 28, 2018, the Company issued 3,096,827 shares of CANB common stock for the acquisition of Pure Health Products, LLC.
On December 28, 2018, the Company issued 245,789 shares of CANB common stock to a key executive of the Company pursuant to the Employment Agreement dated December 29, 2018 with Andrew Holtmeyer. The $14,207 fair value of the issuance was charged to stock-based compensation in the three months ended December 31, 2018.
On December 29, the Company issued 30,000,000 shares of CANB common stock to Marco Alfonsi in exchange for the return of 3 shares of CANB Series A Preferred Stock owned by Marco Alfonsi.
On January 28, 2019, the Company issued 10,000,000 shares of CANB common stock to a consultant of the Company in exchange for the return of 1 share of CANB Series A Preferred Stock.
From February 21, 2019 to March 12, 2019, the Company issued aggregately 20,221,436 shares of CANB common stock to RedDiamond in exchange for the retirement of 157,105 shares of CANB Series B Preferred Stock.
From January 4, 2019 to March 27, 2019, the Company issued aggregately 41,431,994 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $1,196,100.
On January 14, 2019, the Company issued 7,500,000 shares of CANB common stock the owner of Hudilab, Inc., pursuant to a License and Acquisition Agreement dated January 14,August 2019.
From January 18,October 1, 2019 to March 17,through December 31, 2019, the Companycompany issued aggregately 24,600,000an aggregate of 36,677,274 shares of CANB common stockCommon Stock to multiple consultants for services rendered.
From January 19,October 1, 2019 to March 27,through December 31, 2019, the Company issued aggregately 1,167,959an aggregate of 4,250,000 shares of CANB common stockCommon Stock to key employees and officersmembers of the Company pursuant to employee agreementAdvisory Board, Medical Advisory Board, and in satisfaction of accrued compensationSports Advisory Board for the quarter ended March 31, 2019.services rendered.
On February 5,From October 1, 2019 through December 31, 2019, the Company issued 2,000,000an aggregate of 1,500,000 shares toof Common Stock under the ownerterms of TZ Wholesale LLC, pursuant to a Memorandum of Understanding (the “MOU”) dated November 9, 2018.executive employment agreements.
On February 20,From October 1, 2019 through December 31, 2019, the Company issued 1,000,000an aggregate of 37,500,000 shares of CANB common stock to ownersCommon Stock under the terms of Seven Chakras pursuant to an Asset Purchase Agreement dated January 31, 2019.inventory purchase agreement for total inventory of $487,500.
On March 3, 2020, the Company issued an aggregate of 11,650,000 shares of CANB Common Stock to multiple consultants for services rendered.
On March 3, 2020, the Company issued an aggregate of 6,000,000 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
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| Item 6. | Selected Financial Data |
Not required for smaller reporting companies.
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operation |
General
Canbiola, Inc.Can B̅ Corp. was originally formed as a Florida corporation on October 11, 2005, under the name of WrapMail, Inc. Effective January 5, 2015, we acquired 100% ownership of Prosperity Systems, Inc., which the Company is in the process of dissolving. Effective December 28, 2018, we acquired 100% ownership of Pure Health Products. In November 2018, we formed Duramed as a wholly-owned subsidiary. The Company is presently in the process of dissolving Prosperity.
We manufacture and sell products containing CBD. We also provide document, project, marketing and sales management systems to our residual business clients through our website and proprietary software, which divisions are being wound-down. The consolidated financial statements include the accounts of CANB and its wholly ownedwholly-owned subsidiary Pure Health Products from the date of its acquisition on December 28, 2018.
Results of Operations
Year Ended December 31, 20182019 compared with Year Ended December 31, 2017:2018:
Revenues increased $545,857$1,636,900 from $122,746 in 2017 to $668,603 in 2018.2018 to $2,305,503 in 2019. The increase was due to the growth of CBD product and durable equipment sales.
Cost of product sales increased $361,068$193,050 from $44,466$405,534 in 20172018 to $405,434$598,584 in 20182019 due to the growth of product sales and outreach into additional market segments such as wholesale and private label opportunities.
Officers and director’s compensation and payroll taxes increased $1,324,581$784,579 from to $154,406 in 2017 to $1,478,987 in 2018.2018 to $2,263,566 in 2019. The 20172019 expense amount ($154,406) consists of salaries accrued to our Chief Executive Officer ($84,000) and stock based2,263,566) includes additional stock-based compensation of ($63,902)1,210,915) pursuant to their respective employment agreements and related payroll taxes ($6,504)39,962). The 2018 expense amount ($1,478,987) includes additional stock-based compensation of ($1,255,193) pursuant to their respective employment agreements and related payroll taxes ($2,559).
Consulting fees increased $1,384,902$412,741 from $284,741 in 2017 to $1,669,443 in 2018.2018 to $2,082,184 in 2019. The 20172018 expense amount ($284,741)1,669,443) includes stock-based compensation of ($167,688)1,524,107), resulting from stock issued for the service of consultants. The 20182019 expense amount ($1,669,443)2,041,934) includes stock-based compensation of ($1,527,107)1,858,837), resulting from stock issued for the service of consultants.
Advertising expense increased $55,994$249,125 from $28,322 in 2017 to $84,316 in 2018.2018 to $333,441 in 2019.
Hosting expense decreased $7,266$1,663 from $21,963 in 2017 to $14,697 in 2018.2018 to $13,034 in 2019.
Rent expense increased $2,105$179,803 from $65,060 in 2017 to $67,165 in 2018.2018 to $246,968 in 2019.
Professional fees increased $22,172$169,723 from $95,546 in 2017 to $117,718 in 2018.2018 to $287,441 in 2019.
Depreciation of property and equipment increased $2,246$7,154 from $3,227 in 2017 to $5,473 in 2018.2018 to $12,627 in 2019.
Amortization of intangible assets decreased $3,972increased $142,093 from $3,972 in 2017 to $0 in 2018.2018 to $142,093 in 2019.
Reimbursed expenses increased $242,585 from $0 in 2018 to $242,585 in 2019.
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Other operating expenses increased $107,215$426,053 from $133,829 in 2017 to $241,044 in 2018.2018 to $667,097 in 2019. The increase was due largely to higher commission fees, supplies expense and shipping expensesoffice expense in 20182019 compared to 2017.2018.
Net loss increased $1,972,558$480,193 from $2,139,719 in 2017 to $4,112,277 in 2018.2018 to $4,592,470 in 2019. The increase was due to the $2,877,777$2,612,193 increase in total operating expenses offset by the $730,430$690,234 decrease in other expense -– net, the $2,084 increase in provision for income taxes and by the $184,989$1,443,850 increase in gross profit.
Liquidity and Capital Resources
At December 31, 2018,2019, the Company had cash and cash equivalents of $807,747$46,540 and a working capital of $939,582.$2,881,147. Cash and cash equivalents increased $806,095decreased $761,207 from $1,652 at December 31, 2017 to $807,747 at December 31, 2018.2018 to $46,540 at December 31, 2019. For the year ended December 31, 2018, $1,605,6442019, $3,312,495 was provided by financing activities, $753,569$2,413,420 was used in operating activities, and $45,980$1,660,282 was used in investing activities.
The Company currently has no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
We currently have no commitments with any person for any capital expenditures.
We have no off-balance sheet arrangements.
| Item 7A. | Quantitative and Qualitative Disclosure About Market Risk |
Not applicable.
| Item 8. | Financial Statements and Supplementary Data |
Our Consolidated Financial Statements and Notes thereto, for the fiscal years ended December 31, 20182019 and 20172018 and the report of BMKR, LLP, our independent registered public accounting firm, are set forth on pages F-1 through F-27F-30 of this Annual Report.
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Not applicable.
| Item 9A. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer (CEO), as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the CEO has concluded that our disclosure controls and procedures are ineffective to ensure that information disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. This determination was based on the small size of our accounting staff, the lack of segregation of duties and the lack of an audit committee.
To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
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Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Any internal control system, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management, with the participation of our Chief Executive Officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 20182019 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, because of the Company’s limited resources and limited number of employees, and the absence of an audit committee, management concluded that, as of December 31, 2018,2019, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principle, which creates a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness means there is a risk that our financial reports or other filings may contain an error or inaccuracy or not submitted timely.
There was a material weakness in the Company’s internal control over financial reporting due to the fact that the Company did not have an adequate process established to ensure appropriate levels of review of accounting and financial reporting matters, which resulted in our closing process not identifying all required adjustments and disclosures in a timely fashion. We expect that the Company will need to hire accounting personnel with the requisite knowledge to improve the levels of review of accounting and financial reporting matters. The Company may experience delays in doing so and any such additional employees would require time and training to learn the Company’s business and operating processes and procedures. For the near-term future, until such personnel are in place, this will continue to constitute a material weakness in the Company’s internal control over financial reporting that could result in material misstatements in the Company’s financial statements not being prevented or detected.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934) during the year ended December 31, 20182019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Other Information |
None.
| Item 10. | Directors, Executive Officers and Corporate Governance |
Our board of directors is elected annually by our shareholders. The board of directors elects our executive officers annually. Our directors and executive officers as of April __, 2019March 13, 2020 are as follows:
| Name | Age | Position | ||
| Marco Alfonsi | CEO, Director and Chairman since June 15, 2017 | |||
| Stanley L. Teeple | CFO, Secretary and Director since October 1, 2018 | |||
| Phil Scala | 68 | Interim COO since August 15, 2019 | ||
| Pasquale Ferro | 57 | President, Pure Health Products since December 31, 2018 | ||
| Andrew Holtmeyer | VP of Business Development since December 31, 2018 | |||
| David Posel | 41 | COO. Pure Health Products- since February 12, 2018 | ||
| Frederick Alger Boyer, Jr. | 50 | Independent Director appointed October 9, 2019 | ||
| Ronald A. Silver | 84 | Independent Director appointed October 9, 2019 | ||
| James F. Murphy | 72 | Independent Director appointed October 9, 2019 |
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Marco Alfonsi, CEO and Chairman Director has been a financial service professional for the past 20 years. Mr. Alfonsi was appointed director and CEO of the Company in or around January 2015. Immediately prior to that, he spent eight years serving as the CEO of Prosperity Systems, Inc.
Throughout his career, Mr. Alfonsi was directly and indirectly involved in raising over $100 million dollars for small and medium sized business. Prior to his involvement in the financial services industry, Mr. Alfonsi has owned, operated, financed and sold several businesses. Mr. Alfonsi successfully started and managed two companies (ExecuteDirect.com, and Bakers Express of New York, Inc.), and held senior management positions with a number of financial institutions, including: Global American Investments, Clark Street Capital and Basic Investors.
Stanley L. Teeple –Mr. Teeple, CFO, Secretary, Director, was engaged from 2017-2018 with Solis Tek, Inc. (OTCQB:SLTK) a California based publicly traded corporation as Senior Vice President, Corporate Secretary , and Chief Compliance Officer. Solis Tek, Inc. a NV Corporation, is a developer of lighting and nutrient products, and most recently in cultivation and processing for the cannabis industry. Previously, from 2015-2016 Mr. Teeple was Chief Financial Officer and Secretary for Zonzia Media, Inc. (OTC:ZONX), a provider of streaming video and content to cable subscribers and hotel networks throughout the eastern US. From 2008 to 2014 Mr. Teeple was Chief Financial Officer and Secretary of Indigo-Energy, Inc. (OTC:IDGG) a publicly traded company in the oil and gas exploration business. Over the prior three plus decades Mr. Teeple through his turnaround consulting business, Stan Teeple, Inc., has held numerous senior management positions in several public and private companies across a broad spectrum of industries. Additionally, he has operated and worked for various court appointed trustees and principals as CEO, COO, and CFO in the entertainment, pharmaceuticals, food, travel, and tech industries. He operated his consulting business on a project-to-project basis and holds various other directorships. His businesses operational strengths include knowing how to manage and maximize the resources and preserve the integrity of a company from start-up through to maturity and corporate compliance in a regulatory environment.
Phil Scala, Interim Chief Operating Officer, 40 year career offers unique expertise in delivering the information needed to make informed decisions, whether in times of crisis or in the course of simply running our business; is highlighted by his 29 years of service with the FBI. Throughout his 29-year career with the FBI, he worked, supervised and lead investigations on nearly every type of federal crime, including securities fraud, white collar crime, money laundering, tax violations, narcotics, racketeering, homicide, violent crime, kidnappings, and public corruptions. Mr. Scala has been the recipient of numerous commendations and awards for outstanding service, notably the FBI Shield of Bravery, as a group commendation, as the SWAT team leader of the Al-Qaeda Bomb Factory Raid, on June 3, 1993.
Mr. Scala was assigned to the Criminal Division of the New York Office. He served in numerous assignments within the Organized crime branch and was sent to the Defense language Institute in Monterey, California to gain proficiency in the Italian/ Sicilian languages. From 2003-2008, Mr. Scala, developed and implemented the NY Office’s Leadership Development Program, which assisted relief supervisors develop excellence in leadership through mentoring, journalizing, “Best Practice” experiences, and accountability tools. The program was designed to be continuous, progressive, and measurable in assisting the FBI leaders maximize their leadership potential throughout their careers.
Mr. Scala received his Bachelor’s degree and Master of Business Administration in accounting from St. John’s University, he also earned a Master of Arts degree in Psychology from New York University.
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Pasquale Ferro (“Pat” to his friends and co-workers), President of Pure health Products LLC, built Pure Health Products from the ground up inside a vacant warehouse including all mechanical, electrical, environmental, regulatory, and lab-quality specifications. Right out of school Pat began a career in real estate development both on the retail and commercial side of the business. Pat formed a company that would take new or distressed buildings (or anything in-between) and rehab and repair the facilities so they were commercially viable and move-in ready. During the course of this career Pat was often in charge of multiple work crews, union and non-union, for work in demolition, construction, plumbing, electrical, grounds crew and other professionally skilled tradesmen required to complete a building project.
Pat had his first foray into the manufacturing process in 2015 when he started Pure Health Products, LLC, which he developed into a regional research laboratory, new product development resource, and full-on production facility capable of producing capsules, tinctures, drops, salves, tablets and other products for the supplement and custom label community. Later in 2015, Pat connected with Marco Alfonsi, CEO of the Company, and became the production facility for all of the Company’s CBD based products. In late 2018, Pat sold Pure Health Products to the Company and became the President of that wholly-owned facility which he operates and manages today under a long term employment services agreement.
Andrew Holtmeyer –, Director of Business Development Mr. Holtmeyer started his business career in the financial services sector. During his 20 year career on wall street,Wall Street, Mr. Holtmeyer worked at and built several investment firms that employed hundreds of salesmen. During the last 5 years of his career, he concentrated mostly on investment banking. After leaving the financial sector, Mr. Holtmeyer started a highly successful consulting firm, which concentrated on raising capital for small to mid-sized companies that were both private and public. After selling his consulting business, Mr. Holtmeyer started a very successful real estatesestate business which is now run by his family.
Carl Dilley, 63, served on our BoardDavid Posel, COO of Directors until he resigned for personal reasons on February 21, 2019.
David Posel, 39,Pure Health Products, LLC, 40, served as the Company’s COO during 2018, when the Company’s operations were limited to its contractual arrangement with Pure Health Products. After acquiring PHP directly, Mr. Posel was transitioned to COO of PHP.
Frederick Alger Boyer, Jr. Independent Director, is President & CEO of Advance Care Medical, Inc. - Mr. Boyer has over 25 years of Wall Street experience having worked on both the investment side as well as the banking side of the business Most recently he served as Head of Equities for the New York based investment bank H.C. Wainwright & Co. where he had overseen efforts in capital markets, sales, and trading. Prior to that he worked and or supervised teams at Rodman & Renshaw, Oppenheimer, Piper Jaffray, and Credit Suisse in New York, San Francisco, and Minneapolis. In his various roles he has advised hundreds of companies in their financing efforts both publicly and privately. Mr. Boyer has numerous securities licenses and is a graduate of the University of California at Berkeley.
Ronald A. Silver, Independent Director, was first elected to the Florida House of Representatives In 1978 and continued his tenure in that body until 1992. While in the Florida House, Silver served in major positions including Majority Whip (1984-1986) and Majority Leader (1986-1988). He also chaired various committees including the Select Committee on Juvenile Justice, Criminal Justice, Ethics and Elections and the subcommittee of Appropriations on General Government. He was then elected to the Florida Senate in 1992 and subsequently re-elected, serving as the Majority (Democratic) leader for the 1994 session. During his last term in the Senate he was designated by both the House and Senate as the Dean of the Legislature recognizing his standing as the longest serving member. His career as a lawmaker has yielded a vast and extensive knowledge of public policy issues and the legislative process, allowing him to be an advocate and servant for his diverse community. Throughout his tenure in the House and Senate, Mr. Silver has been known to tackle tough issues, transcend partisanship and build strong coalitions and in addition served on the Judiciary committee, which heard all condominium issues. As Senator, he served on a variety of committees, and was chairman of both the Appropriations Subcommittee on Health and Human Services and Criminal Justice. His career in the Senate has earned praise from his colleagues, in both the legislature and other branches of government throughout the nation. In 1993 Mr. Silver was elected Chairman of the Southern Legislative Conference (17 Southern States) of the Council of State Governments. Most recently, a new prescription drug plan of Medicare-eligible senior citizens in the State of Florida has been named “Silver Saver” in his honor. Since his retirement from the Senate in 2002, Mr. Silver also functions as President of his own consulting firm (Ron Silver & Associates) and maintains his law practice in Miami Beach, Florida. Mr. Silver is married with two children and three grandchildren.
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James F. Murphy, Independent Director, brings more than 40 years of investigative and consulting experience as the Founder and President of Sutton Associates. From 1980 to 1984, Mr. Murphy was an Assistant Special Agent in Charge with the Federal Bureau of Investigation, responsible for a territory encompassing more than seven million people. His investigative specialties included organized crime, white-collar crime, labor racketeering and political corruption. From 1976 to 1980, Mr. Murphy was assigned to the Office of Planning and Evaluation at FBI headquarters, Washington, D.C. In this capacity, he evaluated and recommended changes in the FBI’s administrative and investigative programs. Since entering the private sector in 1984, Mr. Murphy has advanced the industry by developing systematic and professional protocols for performing due diligence, as well as other investigative services.
Board Committees
We have not yet established an audit committee, compensation committee, or nominating committee. During 2018,2019, the functions ordinarily handled by these committees were handled by our entire Board.
Family Relationships
There are no familial relationships between any of our officers and directors.
Director or Officer Involvement in Certain Legal Proceedings
Our current directors and executive officers have not been involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.
Director Independence
The Company is not currently listed on any national securities exchange that has a requirement that the board of directors be independent. NoneHowever, in anticipation of a possible exchange up listing, and in an effort toward better Board oversight, the Company’s directors are independent.company has engaged three independent Directors making the independent outside Director a majority on the Board of Directors.
Code of Ethics
We have not adopted a Code of Ethics that applies to all of our employees and officers, and the members of our Board of Directors dueDirectors. This Code of Ethics is posted on the Company’s website and applies to the financial constraints of doing so.all executive officers including CEO, CFO and COO.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive 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 SEC. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on our review of the reports filed by Reporting Persons, we believe that, during the year ended December 31, 2018,2019, the following Reporting Persons did not meet all applicable Section 16(a) filing requirements: (i) Stanley Teeple, (ii) David Posel, and (iii) Carl Dilley.(iii Phil Scala. (iv.) Frederick Alger Boyer, (v.) Ronald Silver, (vi) James Murphy, (vi.) Pasquale Ferro, (vii.) Andrew Holtmeyer. Otherwise, we believe that the Reporting Persons met such filing requirements.
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| Item 11. | Executive Compensation |
The table below summarizes all compensation awarded to, earned by, or paid to our executive officers and directors for all services rendered in all capacities to us during the previous two fiscal years, as of December 31, 2018.2019.
| Executive Summary Compensation Table | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name and principal position | Year | Salary | Bonus | Stock awards | Option awards | Non-equity incentive plan compensation | Non-qualified deferred compensation earnings | All other compensation | Total | Year | Salary | Bonus | Stock awards | Option awards | Non-equity incentive plan comp. | Non-qualified deferred comp. earnings | All other comp. | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marco Alfonsi(1) | 2017 | $ | 84,000 | $ | 0 | $ | 63,902 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 147,902 | 2018 | $ | 104,500 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 104,500 | ||||||||||||||||||||||||||||||||||||
| CEO and Director | 2018 | $ | 104,500 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 104,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | $ | 180,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 180,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stanley L. Teeple(2) | 2018 | $ | 45,000 | $ | 0 | $ | 144,500 | $ | 118,200 | $ | 0 | $ | 0 | $ | 0 | $ | 307,700 | 2018 | $ | 45,000 | $ | 0 | $ | 144,500 | $ | 118,200 | $ | 0 | $ | 0 | $ | 0 | $ | 307,700 | ||||||||||||||||||||||||||||||||||||
| 2019 | $ | 180,000 | $ | 0 | $ | 372,667 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 552,667 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Andrew Holtmeyer(3) | 2018 | $ | 118,400 | $ | 0 | $ | 1,169,658 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1,288,058 | 2018 | $ | 118,400 | $ | 0 | $ | 1,169,658 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1,288,058 | ||||||||||||||||||||||||||||||||||||
| 2019 | $ | 180,000 | $ | 0 | $ | 105,485 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 285,485 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| David Posel (4) | 2018 | $ | 60,000 | $ | 0 | $ | 58,720 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 118,720 | 2018 | $ | 60,000 | $ | 0 | $ | 58,720 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 118,720 | ||||||||||||||||||||||||||||||||||||
| 2019 | $ | 60,000 | $ | 0 | $ | 64,355 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 124,355 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pasquale Ferro (5) | 2019 | $ | 180,000 | $ | 0 | $ | 527,425 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 707,425 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Johnny Mack PhD (6) | 2019 | $ | 31,154 | $ | 0 | $ | 89,513 | $ | 192,000 | $ | 0 | $ | 0 | $ | 0 | $ | 312,667 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Phil Scala (7) | 2019 | $ | 7,500 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 7,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Pursuant to an employment agreement entered on or around May 14, 2015, Marco Alfonsi was entitled to receive compensation of $6,000 per month through September 31, 2017 when the contract expired. On or around October 3, 2017, the Company entered into a new employment agreement with Mr. Alfonsi whereby he was entitled to receive $10,000 per month for a period of three years. Mr. Alfonsi also received one share of ClassSeries A Preferred Stock upon his execution of the new agreement. In addition, on or around October 4, 2017, the Company authorized the issuance of an additional two shares of ClassSeries A Preferred Stock to Mr. Alfonsi in consideration for cancellation of approximately $120,000 of deferred income owed to Mr. Alfonsi. The Company entered into a new employment agreement dated October 21, 2018 Mr. Alfonsi, pursuant to which Mr. Alfonsi agreed to continue to serve as the Company’s Chief Executive Officer (“CEO”) and accept appointment as Chairman of the Board of Directors (“Chairman”) for an initial term of four (4) years. He is entitled to receive $15,000 per month and other compensation under the new agreement.
(2) Pursuant to an employment agreement entered on or around October 15, 2018, Mr. Teeple servicesserves as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The Agreement also provides for compensation to Mr. Teeple of $15,000 cash per month and the issuance of 1 share of Series A Preferred Stock upon execution of the Agreement. The fair value of the Series A preferred Stockshare is $578,000 and has a vesting period of four years. An additional share of Series A Preferred Stock was issued in April 2019 per the Agreement. The fair value of the Series A Preferred share issued in April 2019 is $992,250 and has a vesting period of three years. In 2019 and 2018, the amortized portion of Series A preferred Stockshares is $144,500.$372,667 and $144,500, respectively.
(3) On February 16, 2018, the Company executed an Executive Service Agreement (“Holtmeyer Agreement”) with Andrew W Holtmeyer. The Holtmeyer Agreement provides that Mr. Holtmeyer servicesserves as the Company’s Executive Vice President Business for a term of 3 years. The Holtmeyer Agreement also provides for compensation to Mr. Holtmeyer of $10,000 cash per month and the issuance of 3, 2 and 1 share of Series A Preferred Stock at the beginning of each year. On December 29, 2018, this Holtmeyer Agreement was terminated due to the execution of a new Holtmeyer Employment Agreement with Andrew W Holtmeyer. The Holtmeyer Employment Agreement provides that Mr. Holtmeyer servicesserves as the Company’s Executive Vice President Business for a term of 4 years. The Holtmeyer Employment Agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 245,789 shares of common stock upon signing of the agreement. In 2018, the Company issued 5 shares of Series A preferred shares valued at $3,910,000$3,910,000. In 2019 and 2018, the amortization in 2018amortized portion of Series A preferred shares is $1,169,658.$105,485 and $1,169,658, respectively.
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(4) On February 12, 2018, the Company executed an Executive Service Agreement (“Posel Agreement”) with David Posel. The Posel Agreement provides that Mr. Posel servicesserves as the Company’s Chief Operating Officer for a term of 4 years. The Posel Agreement also provides for compensation to Mr. Posel of $5,000 cash per month and the issuance of 1 share of Series A Preferred Stock at the inception of the Posel Agreement. In the fourth quarter, this Posel Agreement was terminated due to the execution of a new Posel Employment Agreement between Pure Health Products, LLC and David Posel. The fair value of the Series A preferred Stock is $373,000 and has a vesting period of four years. In 2019 and 2018, the amortized portion of Series A preferred Stock related to Mr. Posel’s service as an executive is $58,720.$64,355 and $58,720, respectively.
(5) On December 28, 2018, the Company executed an Executive Service Agreement (“Ferro Agreement”) with Pasquale Ferro. The Ferro Agreement provides that Mr. Ferro serves as the President of Pure Health Products, LLC for a term of 4 years. The Ferro Agreement also provides for compensation to Mr. Ferro of $15,000 cash per month and the issuance of 5 shares of Series A Preferred Stock upon execution of the Ferro Agreement. The fair value of the Series A preferred shares is $2,109,700 and has a vesting period of four years. In 2019, the amortized portion of Series A preferred stock is $527,425.
(6) On July 10, 2019, the Company executed an Executive Service Agreement (“Mack Agreement”) with Johnny J. Mack. The Mack Agreement provides that Mr. Mack serves as the Chief Operating Officer for a term of 90 days. The Mack Agreement also provided for compensation to Mr. Mack of $7,500 cash per month and the issuance of 3,500,000 shares of common stock within 30 days of execution of the Mack Agreement. The fair value of the common shares is $89,513. On September 10, 2019, the Company executed a Mack Executive Service Agreement (“Second Agreement”) with Mr. Mack. The Second Agreement provides that Mr. Mack serves as the Chief Operating Officer for a term of 1 year. The Second Agreement also provides for compensation to Mr. Mack of $15,000 per month and the option to receive a total of 32,000,000 options (“Options”) to purchase shares of the Company’s common stock, with 8,000,000 Options vesting on the effective date and additional tranches of 8,000,000 Options vesting on each of the first, second, and third anniversaries of the Effective Date. On October 4, 2019, Mr. Mack resigned and is no longer with the Company.
(7) On October 11, 2019, the Company executed an Executive Service Agreement (“Scala Agreement”) with Phil Scala. The Scala Agreement provides that Mr. Scala serves as the Interim Chief Operating Officer for a term of 90 days. The Scala Agreement also provides for compensation to Mr. Scala of $2,500 cash per month. On January 1, 2020, Scala and the Company extended the engagement until March 31, 2020.
We do not have an equity incentive plan and no named executive officer has unexercised outstanding equity awards.
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The table below summarizes all compensation awarded to, earned by, or paid to our non-interested directors for all services rendered in all capacities to us during the previous two fiscal years, as of December 31, 2018.2019.
| Non-Interested Director Summary Compensation Table | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name and principal position | Year | Fees Earned or Paid in Cash | Stock awards | Option awards | Non-equity incentive plan compensation | Non-qualified deferred compensation earnings | All other compensation | Total | Year | Fees Earned or Paid in Cash | Stock awards | Option awards (2) | Non-equity incentive plan comp. | Non-qualified deferred comp. earnings | All other com. | Total | ||||||||||||||||||||||||||||||||||||||||||||
| Carl Dilley(1) | 2017 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | 2018 | $ | 0 | $ | 0 | $ | 84,000 | $ | 0 | $ | 0 | $ | 0 | $ | 84,000 | ||||||||||||||||||||||||||||||
| Director | 2018 | $ | 0 | $ | 0 | $ | 84,000 | $ | 0 | $ | 0 | $ | 0 | $ | 84,000 | 2019 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||||||
| Frederick A. Boyer | 2018 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||||||||||||||||||||
| Director | 2019 | $ | 0 | $ | 0 | $ | 63,000 | $ | 0 | $ | 0 | $ | 0 | $ | 63,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Ronald Silver | 2018 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||||||||||||||||||||
| Director | 2019 | $ | 0 | $ | 0 | $ | 63,000 | $ | 0 | $ | 0 | $ | 0 | $ | 63,000 | |||||||||||||||||||||||||||||||||||||||||||||
| James F. Murphy | 2018 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||||||||||||||||||||
| Director | 2019 | $ | 0 | $ | 0 | $ | 63,000 | $ | 0 | $ | 0 | $ | 0 | $ | 63,000 | |||||||||||||||||||||||||||||||||||||||||||||
| (1) | Mr. Dilley resigned from the Company on February 21, 2019. |
| (2) | As of December 31, 2019, Directors Teeple, Boyer, Silver and Murphy each owned 3 million (pre-split) / 10 thousand post-split options to exercise and purchase stock at $.001 at any time until 2023. |
No director has received cash compensation for their directorship. We do not have a compensation committee and compensation for our directors and officers is determined by our board of directors.
We reimburse Non-Employee Directors for actual out-of-pocket costs incurred to attend board meetings. No additional compensation is paid for attendance in person or by telephone at board meetings.
The table below summarizes all outstanding equity awards, as of December 31, 2019 – Prior to 300:1 reverse stock split.
| Outstanding Equity Awards at Fiscal Year-End | ||||||||||||||||||||
| Name and principal position | Grant Date | Grant Type | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | ||||||||||||||
| Stanley Teeple - CFO | 10/21/18 | Stock Options | 3,000,000 | 0 | $ | .001 | 10/20/23 | |||||||||||||
| Johnny Mack PhD – Ex COO | 9/9/19 | Stock Options | 8,000,000 | 0 | $ | .001 | 9/8/24 | |||||||||||||
| Frederick A. Boyer - Director | 10/15/19 | Stock Options | 3,000,000 | 0 | $ | .001 | 10/14/24 | |||||||||||||
| Ronald Silver - Director | 10/15/19 | Stock Options | 3,000,000 | 0 | $ | .001 | 10/14/24 | |||||||||||||
| James F. Murphy - Director | 10/15/19 | Stock Options | 3,000,000 | 0 | $ | .001 | 10/14/24 | |||||||||||||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The following tables set forth the ownership, as of April 12, 2019,March 13, 2020, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding voting stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control. The Company’s principal office is the business address for each of the named shareholders.
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There are 548,487,7142,861,740 shares of common stock outstanding as of April 12, 2019,March 13, 2020, and 1720 shares of Series A preferred stock issued and outstanding, which in aggregate are convertible into 170,000,000666,680 shares of common stock at any time and represent 340,000,0001,333,340 votes. There is a total of approximately 888,487,7144,192,618 votes eligible to be cast in any Company vote as of April 15, 2019.
On April 12, 2019, Red Diamond Partners LLC (“Red Diamond”) owned 342,853 shares of Series B Preferred Stock, which is convertible into approximately 44,129,594 shares of common stock, subject to ownership percentage limitations; however, Series B Preferred Stock is non-voting.March 13, 2020.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities.
Except as otherwise indicated and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. Unless stated otherwise, the business address for these shareholders is 960 South Broadway, Suite 120, Hicksville NY 11801.
| Name | Title | Number of Common Shares | % of Common Shares | Number of Series A Preferred Shares | % of Series A Preferred Shares | % of Eligible Votes | Number of Warrants currently exercisable or exercisable in the next 60 days | |||||||||||||||||||
| Marco Alfonsi[1] | CEO, Director | 59,398,915 | 10.83 | % | 5 | 29.41 | % | 17.94 | % | 0 | ||||||||||||||||
| Stanley L. Teeple[2] | CFO, Director | 980,752 | 0.18 | % | 1 | 5.88 | % | 2.36 | % | 0 | ||||||||||||||||
| Andrew Holtmeyer[3] | Vice President | 1,107,769 | 0.20 | % | 5 | 29.41 | % | 11.38 | % | 0 | ||||||||||||||||
| All officers and directors as a group [3 persons] | 61,487,436 | 11.21 | % | 11 | 64.70 | % | 31.68 | % | 0 | |||||||||||||||||
| Name | Title | Number of Common Shares | % of Common Shares | Number of Series A Preferred Shares | % of Series A Preferred Shares | % of Eligible Votes | Number of Warrants currently exercisable or exercisable in the next 60 days | |||||||||||||||||||
| Marco Alfonsi [1] | CEO, Director | 197,996 | 6.92 | % | 5 | 25 | % | 12.67 | % | 0 | ||||||||||||||||
| Stanley L. Teeple [2] | CFO, Director | 3,269 | 0.11 | % | 4 | 20 | % | 6.43 | % | 0 | ||||||||||||||||
| Andrew Holtmeyer [3] | Vice President | 3,693 | 0.13 | % | 5 | 25 | % | 8.03 | % | 0 | ||||||||||||||||
| David Posel [4] | COO, Pure Health Products | 0 | 0 | % | 1 | 5 | % | 1.59 | % | 0 | ||||||||||||||||
| Pasquale Ferro [5] | President, Pure Health Products | 74,599 | 2.61 | % | 5 | 25 | % | 9.72 | % | 0 | ||||||||||||||||
| Phil Scala [6] | Interim COO | 2,816 | .10 | % | 0 | 0 | % | .07 | % | 0 | ||||||||||||||||
| All officers and directors as a group [9 persons] | 289,040 | 10.10 | % | 20 | 100 | % | 38.67 | % | 0 | |||||||||||||||||
| (1) | As of March 13, 2020 Marco, Alfonsi owns approximately 197,996 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 166,667 shares and equal 333,334 votes. Prior to October 29, 2015, Mr. Alfonsi owned 270,000 shares of the Company’s common stock, at which time it was agreed that he would retire 166,666 shares of common stock for 5 shares of Series A Preferred Stock. In addition to the listed shares, five adult members of Mr. Alfonsi’s family hold an aggregate of 42,343 shares of common stock, which shares have not been included in the above calculations. | |
| (2) | As of March 13, 2020, Stanley L. Teeple owns approximately 3,269 shares of common stock and 4 shares of Series A preferred stock, which are convertible into 133,334 shares and equal 266,667 votes. | |
| (3) | As of March 13, 2020, Andrew Holtmeyer owns approximately 3,693 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 166,667 shares and equal 333,334 votes. | |
| (4) | As of March 13, 2020, David Posel owns 0 shares of common stock and 1 shares of Series A preferred stock, which is convertible into 33,334 shares and equal 66,666 votes. | |
| (5) | As of March 13, 2020, Pasquale Ferro owns approximately 74,599 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 166,667 shares and equal 333,334 votes. | |
| (6) | As of March 13, 2020, Phil Scala owns approximately 2,816 shares of common stock and 0 shares of Series A preferred stock. | |
| (7) | As of December 31, 2019, Directors Teeple, Boyer, Silver and Murphy each owned 3 million (pre-split) / 10 thousand post-split options to exercise and purchase stock at $.001 at any time until 2023. |
| 21 |
(1) As of April 12, 2019, Marco Alfonsi owns approximately 59,398,915 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 50,000,000 shares and equal 100,000,000 votes. Prior to October 29, 2015, Mr. Alfonsi owned 81,000,000 shares of the Company’s common stock, at which time it was agreed that he would retire 50,000,000 shares of common stock for 5 shares of Series A Preferred Stock. In addition to the listed shares, four members of Mr. Alfonsi’s family hold an aggregate of 10,000,000 shares of common stock, which shares have not been included in the above calculations.
(2) As of April 12, 2019, Stanley L. Teeple owns approximately 980,752 shares of common stock and 1 shares of Series A preferred stock, which are convertible into 10,000,000 shares and equal 20,000,000 votes.
(3) As of April 12, 2019, Andrew Holtmeyer owns approximately 1,107,769 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 50,000,000 shares and equal 100,000,000 votes.
The following tables set forth the ownership of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding voting stock, excluding our directors and our executive officers
| Name | Number of Common Shares | % of Common Shares | Number of Preferred A Shares | % of Shares | % of Eligible Votes | Number of Warrants currently exercisable or exercisable in the next 60 days | ||||||||||||||||||
| McKenzie Webster Limited[1] | 64,879,916 | 11.83 | % | 0 | 0 | % | 7.30 | % | 0 | |||||||||||||||
| Pasquale Ferro [2] | 22,172,159 | 4.04 | % | 5 | 29.41 | % | 13.75 | % | 0 | |||||||||||||||
| Name | Number of Common Shares | % of Common Shares | Number of Preferred A Shares | % of Shares | % of Eligible Votes | Number of Warrants currently exercisable or exercisable in the next 60 days | ||||||||||||||||||
| McKenzie Webster Limited [1] | 181,000 | 6.32 | % | 0 | 0 | % | 4.31 | % | 0 | |||||||||||||||
| (1) | McKenzie Webster Limited is controlled by the Company’s former director and CFO, Rolv Heggenhougen. The business address for this shareholder is 445 NE 12th Ave., Fort Lauderdale, Florida 33301. | |
The above tables are based upon information derived from our stock records. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown.
| Item 13. | Certain Relationships and Related Party Transactions, and Director Independence |
Can B̅ Corp.’s Corporate Governance Guidelines establish standards for evaluating Director independence and requires that a majority of Directors be independent. The Board determines the independence of each Director under Nasdaq governance standards. Those standards identify the types of relationships that, if material, could impair independence. The Board determined that, under the Nasdaq listing standards, the following non-employee Directors are independent: Frederick A. Boyer, Ronald Silver and James F. Murphy. Our non-independent directors are Marco Alfonsi and Stanley L. Teeple.
Except as described herein (or within the section entitled Executive Compensation of this prospectus), none of the following parties (each a “Related Party”) has, in our fiscal years ended 20172018 and 2018,2019, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
| ● | any of our directors or officers; |
| ● | any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; or |
| ● | any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the above persons. |
ProAdvanced Group, Inc.LI Accounting Associates, LLC (“PAG”LIA”), an entity controlled by a relative of the Company’s chief executive officer,Managing Member PHP, is a customervendor of CANB.Can B̅ Corp. At December 31, 2018, CANB had2019, the Company did not have an account receivable from PAG of $7,240.payable due to LIA. For the yeartwelve months ended December 31, 2018, CANB2019, the Company had revenues from PAGexpenses to LIA of $5,000.$10,750.
Island Stock Transfer (“IST”), an entity controlled by Carl Dilley, a Company director, is both a customer and vendorPasquale Ferro, President of CANB. At December 31, 2018, CANB had an account receivable from IST of $7,035 and an account payable to IST of $1,454. For the year ended December 31, 2018, CANB had revenues from IST of $4,000.
Stock Market Manager, Inc. is also an entity controlled by Mr. Dilley. For the year ended December 31, 2018, CANB had an account payable to Stock Market Manager Inc. of $1,676.
In order to facilitate its operations, the Company has entered into a Production Agreement with Pure Health Products LLC, (“PHP”),manages the R&D and manufacturing of the Company products sold via other subsidiary companies. Mr. Ferro is also a New York limited liability company. Pursuant tosubstantial shareholder of the Production Agreement, PHP will manufacture, package, and sell the Company’s CBD infused products on an exclusive basis. PHP will not produce or manufacture any product containing any cannabis or hemp derivative for any person or entityCompany but receives no direct compensation from Can B, Corp. other than the Company, and the Company controls the ingredients, recipe, manufacturing processes and procedures and quality and taste parameters for all Products produced at the PHP facility. PHP may also white label / rebrand or relabel the products on the Company’s behalf pursuant to “white label agreements” entered into between the Company and third-party customers. Credit card sales are processed through PHP as well. Through its contractual relationship with PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. In addition, the Company has the option to acquire certain assets of PHP should it elect to take over direct manufacture of its Products. For the year ended December 31, 2018, purchase of CBD infused products from PHP totaled $274,556.50. Effective December 28, 2018, the Company acquired Pure Health Products, LLC.outlined in his Employment Agreement.
During the yeartwelve months ended December 31, 2018,2019, we had products and service sales to related parties totaling $5,000.$0.
| Item 14. | Principal Accounting Fees and Services |
The following table sets forth fees billed to us by BMKR, LLP, our independent registered public accounting firm, during the fiscal years ended December 31, 20182019 and December 31, 20172018 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as audit fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.
| December 31, 2018 | December 31, 2017 | |||||||
| Audit Fees | $ | 23,965 | $ | 31,700 | ||||
| Audited Related Fees | $ | $ | ||||||
| Tax Fees | $ | $ | ||||||
| All Other Fees | $ | $ | ||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Audit Fees | $ | 34,600 | $ | 23,965 | ||||
| Audited Related Fees | $ | $ | ||||||
| Tax Fees | $ | $ | ||||||
| All Other Fees | $ | $ | ||||||
| 22 |
| Item 15. | Exhibits, Financial Statement Schedules. |
Exhibits Schedule
The following exhibits are filed with this Annual Report:
| (3) | Filed with the Annual Report on Form 10-K filed with the SEC on April 16, 2019 and incorporated herein by reference. |
| (4) | Filed with the Annual Report on Form 10-K filed with the SEC on April 6, 2018 and incorporated herein by reference. |
| (5) | Filed with the Current Report on Form 8-K filed with the SEC on January 30, 2019 and incorporated herein by reference. |
| (6) | Filed with the Current Report on Form 8-K filed with the SEC on February 26, 2019 and incorporated herein by reference. |
| (7) | Filed with the Current Report on Form 8-K filed with the SEC on July 18, 2019 and incorporated herein by reference. |
| (8) | Filed with the Current Report on Form 8-K filed with the SEC on January 14, 2020 and incorporated herein by reference. |
| (9) | Filed with the Current Report on Form 8-K filed with the SEC on December 6, 2019 and incorporated herein by reference. |
| (10) | Filed with the Current Report on Form 8-K filed with the SEC on February 18, 2020 and incorporated herein by reference. |
| 23 |
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: April | By: | /s/ Marco Alfonsi |
| Name: | Marco Alfonsi | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer and Principal Accounting Officer) | ||
| Date: April 2, 2020 | By: | /s/ Stanley L. Teeple |
| Name: | Stanley L. Teeple | |
| Title: | Chief Financial Officer | |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Person | Capacity | Date | ||
| /s/ Marco Alfonsi | Director | April | ||
| Marco Alfonsi | ||||
| /s/ Stanley L. Teeple | Director | April | ||
| Stanley L. Teeple | ||||
| /s/ James F. Murphy | Director | April 2, 2020 | ||
| James F. Murphy |
| 24 |
CANBIOLA, INC.CAN B̅ CORP. AND SUBSIDIARY
Index to Financial Statements
| Years Ended December 31, | Pages | |
| Financial Statements | ||
| Report of Independent Registered Public Accounting Firm | F-2 | |
| Consolidated Balance Sheets | F-3 | |
| Consolidated Statements of Operations and Comprehensive Loss | F-4 | |
| Consolidated Statements of Stockholders’ Equity | F-5 | |
| Consolidated Statements of Cash Flows | F-6 | |
| Notes to Consolidated Financial Statements | F-7 |
| ||
|
| ||
| ||
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Canbiola, Inc
| F-2 |
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Canbiola Inc. (the Company) as of December 31. 2018 and 2017, and the related consolidated statements of operations, consolidated stockholders’ equity. and cash flows for each of the years in the two year period ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opm1on on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are tree of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its intemal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred a net loss of $4,112,277 during the year ended December 31, 2018, and as of that date, had an accumulated deficit of $18,768,753 The company is in arears with certain vendor creditors which, among other things, cause the balances to become due on demand. The Company is not aware of any alternate sources of capital to meet such demands, if made.
As discussed in note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.
We have served as the Company’s auditor since 2014. Hauppauge,
NY
April 15, 2019
Member American Institute of Certified Public Accounts
Member Public Company Accounting Oversight Board
Canbiola, Inc. and Subsidiary
Consolidated Balance Sheets
| December 31, 2018 | December 31, 2017 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 807,747 | $ | 1,652 | ||||
| Accounts receivable, less allowance for doubtful accounts of $0 and $0, respectively | 39,172 | 6,075 | ||||||
| Inventory | 87,104 | 9,834 | ||||||
| Note receivable - current | - | 75,000 | ||||||
| Prepaid expenses - current | 210,351 | 64,911 | ||||||
| Total current assets | 1,144,374 | 157,472 | ||||||
| Property and equipment, at cost less accumulated depreciation of $26,775 and $20,248, respectively | 59,619 | 11,148 | ||||||
| Other assets: | ||||||||
| Deposits | 48,726 | 11,687 | ||||||
| Prepaid expenses - noncurrent | 2,365,719 | - | ||||||
| Note receivable - noncurrent | 19,389 | 39,000 | ||||||
| Goodwill (Note 4) | 55,849 | - | ||||||
| Total other assets | 2,489,683 | 50,687 | ||||||
| Total assets | $ | 3,693,675 | $ | 219,307 | ||||
| Liabilities and Stockholders’ Deficiency | ||||||||
| Current liabilities: | ||||||||
| Notes and loans payable | $ | 19,205 | $ | 193,504 | ||||
| Derivative Liability | - | 1,451,137 | ||||||
| Accounts payable | 73,059 | 143,274 | ||||||
| Accrued officers compensation | 68,750 | 98,750 | ||||||
| Other accrued expenses payable | 43,778 | 62,539 | ||||||
| Total current liabilities and total liabilities | 204,792 | 1,949,204 | ||||||
| Commitments and contingencies (Notes 14) | ||||||||
| Stockholders’ deficiency: | ||||||||
| Preferred stock, authorized 5,000,000 shares: | ||||||||
| Series A Preferred stock, no par value: authorized 20 shares, issued and outstanding 18 and 8 shares, respectively | 4,557,424 | 243,537 | ||||||
| Series B Preferred stock, $0.001 par value: authorized 500,000 shares, issued and outstanding 499,958 and 157,985 shares, respectively | 479 | 150 | ||||||
| Common stock, no par value; authorized 750,000,000 shares, issued and outstanding 440,566,325 and 225,572,323 shares, respectively | 16,624,557 | 12,524,042 | ||||||
| Additional Paid-in capital | 872,976 | 149,850 | ||||||
| Additional Paid-in capital – Stock Options (Note 12) | 202,200 | - | ||||||
| Accumulated deficit | (18,768,753 | ) | (14,647,476 | ) | ||||
| Total stockholders’ deficiency | 3,488,883 | (1,729,897 | ) | |||||
| Total liabilities and stockholders’ deficiency | $ | 3,693,675 | $ | 219,307 | ||||
See notes to consolidated financial statements.
Canbiola, Inc. and Subsidiary
Consolidated Statements of Operations and Comprehensive Loss
Years Ended December 31, 2018 and 2017
| 2018 | 2017 | |||||||
| Revenues | ||||||||
| Product Sales | $ | 651,978 | $ | 79,030 | ||||
| Service Revenue | 16,625 | 43,716 | ||||||
| Total Revenues | 668,603 | 122,746 | ||||||
| Cost of product sales | 405,534 | 44,466 | ||||||
| Gross Profit | 263,069 | 78,280 | ||||||
| Operating costs and expenses: | ||||||||
| Officers and directors compensation (including stock-based compensation of $1,255,193 and $63,902 respectively) | 1,478,987 | 154,406 | ||||||
| Consulting fees (including stock-based compensation of $1,524,107 and $167,688, respectively) | 1,669,443 | 284,741 | ||||||
| Advertising expense | 84,316 | 28,322 | ||||||
| Hosting expense | 14,697 | 21,963 | ||||||
| Rent expense | 67,165 | 65,060 | ||||||
| Professional fees | 117,718 | 95,546 | ||||||
| Depreciation of property and equipment | 5,473 | 3,227 | ||||||
| Amortization of intangible assets | - | 3,972 | ||||||
| Other | 241,044 | 133,829 | ||||||
| Total operating expenses | 3,678,843 | 791,066 | ||||||
| Loss from operations | (3,415,774 | ) | (712,786 | ) | ||||
| Other income (expense): | ||||||||
| Cancellation of Debt | - | 10,589 | ||||||
| Loss on Forgiveness of receivable from Pure Health Products | (85,827 | ) | - | |||||
| Loss on debt conversion | (1,299,369 | ) | (32,383 | ) | ||||
| Loss on stock issuance | (649,259 | ) | (191,553 | ) | ||||
| Impairment of intangible assets | - | (21,507 | ) | |||||
| Interest income | 10,325 | 2,842 | ||||||
| Income (expense) from derivative liability | 1,591,137 | (915,700 | ) | |||||
| Interest expense (including amortization of debt discounts of $176,497 and $50,315, respectively) | (263,510 | ) | (279,221 | ) | ||||
| Other income (expense) - net | (696,503 | ) | (1,426,933 | ) | ||||
| Loss before provision for income taxes | (4,112,277 | ) | (2,139,719 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss and comprehensive loss | $ | (4,112,277 | ) | $ | (2,139,719 | ) | ||
| Net loss per common share - basic and diluted | $ | (.01 | ) | $ | (.00 | ) | ||
| Weighted average common shares outstanding – | ||||||||
| Basic | 276,026,704 | 165,230,550 | ||||||
| Diluted | 423,881,781 | 256,295,851 | ||||||
Canbiola, Inc. and Subsidiary
Consolidated Statements of Stockholders’ Deficiency
Years Ended December 31, 2017 and 2018
| Preferred Stock A, | Preferred Stock B, | Common Stock, | Additional | |||||||||||||||||||||||||||||||||
| no par value | $0.001 par value | no par value | Paid-in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2016 | 10 | $ | 103,664 | - | - | 146,008,250 | $ | 11,889,505 | $ | - | $ | (12,507,757 | ) | $ | (514,588 | ) | ||||||||||||||||||||
| �� | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock on February 2, 2017 for services rendered | 200,000 | 11,000 | 11,000 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on February 13, 2017 in satisfaction of debt and accrued interest | 1,685,900 | 67,436 | 67,436 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on March 22, 2017 in satisfaction of debt and accrued interest | 6,785,316 | 154,027 | 154,027 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on April 17, 2017 for services rendered | 5,000,000 | 125,000 | 125,000 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on June 21, 2017 for services rendered | 250,000 | 5,975 | 5,975 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on June 28, 2017 for services rendered | 250,000 | 5,000 | 5,000 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on August 25, 2017 in satisfaction of debt and accrued interest | 7,142,857 | 107,142 | 107,142 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on August 25, 2017 for services rendered | 250,000 | 3,750 | 3,750 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on September 5, 2017 for services rendered | 250,000 | 4,375 | 4,375 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on September 7, 2017 for services rendered | 2,500,000 | 32,750 | 32,750 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on September 11, 2017 for services rendered | 500,000 | 6,700 | 6,700 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on September 25, 2017 for services rendered | 250,000 | 2,525 | 2,525 | |||||||||||||||||||||||||||||||||
| Issuance of Series A Preferred Stock on October 4, 2017 in satisfaction of accrued officer compensation | 3 | 191,705 | 191,705 | |||||||||||||||||||||||||||||||||
| Sale of Series B Preferred Stock on October 13, 2017 at $0.95 per share | 157,985 | 150 | 149,850 | 150,000 | ||||||||||||||||||||||||||||||||
| Issuance of common stock on November 2, 2017 for services rendered | 250,000 | 1,725 | 1,725 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on November 9, 2017 for services rendered | 2,500,000 | 21,250 | 21,250 | |||||||||||||||||||||||||||||||||
| Issuance of common stock and retirement of Series A preferred stock on November 30, 2017 | (5 | ) | (51,832 | ) | 50,000,000 | 51,832 | - | |||||||||||||||||||||||||||||
| Issuance of common stock on December 5, 2017 for services rendered | 500,000 | 6,000 | 6,000 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on December 7, 2017 for services rendered | 250,000 | 4,500 | 4,500 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on December 18, 2017 for services rendered | 500,000 | 9,050 | 9,050 | |||||||||||||||||||||||||||||||||
| Issuance of common stock on December 25, 2017 for services rendered | 500,000 | 14,500 | 14,500 | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (2,139,719 | ) | (2,139,719 | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2017 | 8 | $ | 243,537 | 157,985 | $ | 150 | 225,572,323 | $ | 12,524,042 | $ | 149,850 | $ | (14,647,476 | ) | $ | (1,729,897 | ) | |||||||||||||||||||
| Issuance of Series A Preferred Stock in 2018 pursuant to employment and consulting agreement | 13 | 4,441,690 | 4,441,690 | |||||||||||||||||||||||||||||||||
| Sale of Series B Preferred Stock in 2018 | 761,972 | 749 | 723,126 | 723,875 | ||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 for services rendered | 19,345,789 | 656,306 | 656,306 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 for Preferred B dividends | 891,089 | 38,379 | (9,000 | ) | 29,379 | |||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 in Satisfaction of debt and accrued interest | 45,263,513 | 1,604,412 | , | 1,604,412 | ||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 for Warrant exercise | 8,500,000 | 619,880 | 619,880 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 in Satisfaction of accrued compensation | 4,370,629 | 192,300 | 192,300 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 for Acquisition of PureHealth, LLC | 3,096,827 | 112,415 | 112,415 | |||||||||||||||||||||||||||||||||
| Issuance of stock options for retirement Of common shares | (3,000,000 | ) | (101,400 | ) | 84,000 | (17,400 | ) | |||||||||||||||||||||||||||||
| Issuance of stock options | 118,200 | 118,200 | ||||||||||||||||||||||||||||||||||
| Sale of common stocks in 2018 | 29,821,201 | 850,000 | 850,000 | |||||||||||||||||||||||||||||||||
| Issuance of common stock and retirement of Series A preferred stock In 2018 | (3 | ) | (127,803 | ) | 30,000,000 | 127,803 | - | |||||||||||||||||||||||||||||
| Issuance of common stock and retirement of Series B preferred stock In 2018 | (419,999 | ) | (420 | ) | 76,704,954 | 420 | - | - | ||||||||||||||||||||||||||||
| Net loss | (4,112,277 | ) | (4,112,277 | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2018 | 18 | $ | 4,557,424 | 499,958 | $ | 479 | 440,566,325 | $ | 16,624,557 | $ | 1,075,176 | $ | (18,768,753 | ) | 3,488,883 | |||||||||||||||||||||
Canbiola, Inc. and Subsidiary
Consolidated Statements of Cash Flows
| Year Ended December 31, | ||||||||
| 2018 | 2017 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | (4,112,277 | ) | $ | (2,139,719 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation, net of prepaid stock- based consulting fees | 2,779,300 | 231,590 | ||||||
| Loss on Forgiveness of receivable from Pure Health Products | 85,827 | - | ||||||
| Loss on stock issuance | 649,259 | 191,553 | ||||||
| Loss on debt conversion | 1,299,369 | 32,383 | ||||||
| Debt issuance expense | 14,000 | - | ||||||
| Impairment of intangible assets | - | 21,507 | ||||||
| Expense from derivative liability | (1,591,137 | ) | 915,700 | |||||
| Depreciation of property and equipment | 5,473 | 3,227 | ||||||
| Amortization of intangible assets | - | 3,972 | ||||||
| Amortization of debt discounts | 176,497 | 250,188 | ||||||
| Bad debt expense | - | 16,840 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (33,097 | ) | (9,173 | ) | ||||
| Inventory | 2,382 | (9,834 | ) | |||||
| Security deposit | (34,939 | ) | - | |||||
| Prepaid expenses | - | 2,500 | ||||||
| Accounts payable | (115,235 | ) | 88,566 | |||||
| Accrued officers compensation | 85,900 | 91,803 | ||||||
| Other accrued expenses payable | 35,109 | 22,606 | ||||||
| Net cash used in operating activities | (753,569 | ) | (286,291 | ) | ||||
| Investing Activities: | ||||||||
| Cash received from acquisition of Pure Health Products, LLC | 404 | - | ||||||
| Note receivable - current | - | (75,000 | ) | |||||
| Fixed assets additions | (46,384 | ) | - | |||||
| Net cash used in investing activities | (45,980 | ) | (75,000 | ) | ||||
| Financing Activities: | ||||||||
| Repayments of notes and loans payable | (123,231 | ) | - | |||||
| Proceeds received from notes and loans payable | 155,000 | 182,750 | ||||||
| Proceeds from sale of common stock | 850,000 | - | ||||||
| Proceeds from sale of Series B preferred stock | 723,875 | 150,000 | ||||||
| Net cash provided by financing activities | 1,605,644 | 332,750 | ||||||
| Increase (decrease) in cash and cash equivalents | 806,095 | (28,541 | ) | |||||
| Cash and cash equivalents, beginning of period | 1,652 | 30,193 | ||||||
| Cash and cash equivalents, end of period | $ | 807,747 | $ | 1,652 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Income taxes paid | $ | - | $ | - | ||||
| Interest paid | $ | - | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of common stock in satisfaction of debt | $ | 262,000 | $ | 115,000 | ||||
| Issuance of common stock in satisfaction Of officers compensation | $ | 282,200 | $ | 127,803 | ||||
| Issuance of common stock in acquisition of PureHealth, LLC | $ | 178,997 | $ | - | ||||
| Cancellation of note receivable and accrued interest in exchange for service | $ | 19,611 | $ | - | ||||
| Cancellation of note receivable and accrued interest in acquisition of PureHealth, LLC | $ | 85,827,25 | $ | - | ||||
| Issuance of common stock in satisfaction of accrued interest | $ | 43,043 | $ | 11,168 | ||||
| Year Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 46,540 | $ | 807,747 | ||||
| Accounts receivable, less allowance for doubtful accounts of $0 and $0, respectively | 1,251,609 | 39,172 | ||||||
| Inventory | 784,497 | 87,104 | ||||||
| Note Receivable | 24,268 | - | ||||||
| Prepaid expenses - current | 1,279,901 | 210,351 | ||||||
| Total current assets | 3,386,815 | 1,144,374 | ||||||
| Property and equipment, at cost less accumulated depreciation of $116,555 and $20,248, respectively | 1,075,242 | 59,619 | ||||||
| Other assets: | ||||||||
| Deposit - noncurrent | 21,287 | 48,726 | ||||||
| Prepaid expenses - noncurrent | 1,179,929 | 2,365,719 | ||||||
| Note receivable - noncurrent | - | 19,389 | ||||||
| Other receivable – noncurrent | 58,206 | - | ||||||
| Intangible assets, net of accumulated amortization of $202,521 and $0, respectively | 1,056,562 | - | ||||||
| Goodwill | 55,849 | 55,849 | ||||||
| Right-of-Use Asset, net of amortization of $6,280 and $0, respectively | 96,980 | - | ||||||
| Total other assets | 2,468,813 | 2,489,683 | ||||||
| Total assets | $ | 6,930,870 | $ | 3,693,675 | ||||
| Liabilities and Stockholders’ Deficiency | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 226,467 | $ | 73,059 | ||||
| Accrued officers’ compensation | 144,363 | 68,750 | ||||||
| Other accrued expenses payable | 61,557 | 43,778 | ||||||
| Notes and loans payable | 35,000 | 19,205 | ||||||
| Current portion of lease liability | 38,281 | - | ||||||
| Total current liabilities | 505,668 | 204,792 | ||||||
| Non-current portion of lease liability | 58,998 | - | ||||||
| Total liabilities | 564,666 | 204,792 | ||||||
| Commitments and contingencies (Notes 14) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, authorized 5,000,000 shares: | ||||||||
| Series A Preferred stock, no par value: authorized 20 shares, issued and outstanding 20 and 18 shares, respectively | 5,539,174 | 4,557,424 | ||||||
| Series B Preferred stock, $0.001 par value: authorized 500,000 shares, issued and outstanding 0 and 499,958 shares, respectively | - | 479 | ||||||
| Common stock, no par value; authorized 1,500,000,000 shares, issued and outstanding 804,281,149 and 440,566,325 shares, respectively | 23,113,077 | 16,624,557 | ||||||
| Additional Paid-in capital | 872,976 | 872,976 | ||||||
| Additional Paid-in capital – Stock Options (Note 11) | 202,200 | 202,200 | ||||||
| Accumulated deficit | (23,361,223 | ) | (18,768,753 | ) | ||||
| Total stockholders’ equity | 6,366,204 | 3,488,883 | ||||||
| Total liabilities and stockholders’ equity | $ | 6,930,870 | $ | 3,693,675 | ||||
See notes to consolidated financial statements.
| F-3 |
Consolidated Statements of Operations and Comprehensive Loss
Years Ended December 31, 2019 and 2018
| 2019 | 2018 | |||||||
| Revenues | ||||||||
| Product Sales | $ | 2,304,303 | $ | 651,978 | ||||
| Service Revenue | 1,200 | 16,625 | ||||||
| Total Revenues | 2,305,503 | 668,603 | ||||||
| Cost of product sales | 598,584 | 405,534 | ||||||
| Gross Profit | 1,706,919 | 263,069 | ||||||
| Operating costs and expenses: | ||||||||
| Officers and director’s compensation (including stock-based Compensation of $1,210,915 and $1,255,193, respectively | 2,263,566 | 1,478,987 | ||||||
| Consulting fees (including stock-based compensation of 1,858,837 and 1,524,107, respectively) | 2,082,184 | 1,669,443 | ||||||
| Advertising expense | 333,441 | 84,316 | ||||||
| Hosting expense | 13,034 | 14,697 | ||||||
| Rent expense | 246,968 | 67,165 | ||||||
| Professional fees | 287,441 | 117,718 | ||||||
| Depreciation of property and equipment | 12,627 | 5,473 | ||||||
| Amortization of intangible assets | 142,093 | - | ||||||
| Reimbursed Expenses | 242,585 | - | ||||||
| Other | 667,097 | 241,044 | ||||||
| Total operating expenses | 6,291,036 | 3,678,843 | ||||||
| Loss from operations | (4,584,117 | ) | (3,415,774 | ) | ||||
| Other income (expense): | ||||||||
| Loss on forgiveness of receivable from Pure Health Products | - | (85,827 | ) | |||||
| Loss of debt conversions | - | (1,299,369 | ||||||
| Loss on stock issuance | - | (649,259 | ) | |||||
| Interest income | 2,524 | 10,325 | ||||||
| Income from derivative liability | - | 1,591,137 | ||||||
| Interest expense (including amortization of debt discounts of $0 and 176,497, respectively | (8,793 | ) | (263,510 | ) | ||||
| Other income (expense) - net | (6,269 | ) | (696,503 | ) | ||||
| Loss before provision for income taxes | (4,590,386 | ) | (4,112,277 | ) | ||||
| Provision for income taxes | 2,084 | - | ||||||
| Loss and comprehensive loss | (4,592,470 | ) | (4,112,277 | ) | ||||
| Net loss per common share - basic and diluted | (.01 | ) | (.01 | ) | ||||
| Weighted average common shares outstanding – | ||||||||
| Basic | 617,557,484 | 276,026,704 | ||||||
| Diluted | 806,215,018 | 423,881,781 | ||||||
See notes to consolidated financial statements.
| F-4 |
Canbiola, Inc.Can B̅ Corp. and Subsidiary
Notes to Consolidated Financial Statements of Stockholders’ Deficiency
Years Ended December 31, 2018 and 20172019
| Preferred Stock A | Preferred Stock B | Common Stock | Additional | |||||||||||||||||||||||||||||||||
| , no par value | , $0.001 par value | , no par value | Paid-in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2017 | 8 | $ | 243,537 | 157,985 | $ | 150 | 225,572,323 | $ | 12,524,042 | $ | 149,850 | ($ | 14,647,476 | ) | ($ | 1,729,897 | ) | |||||||||||||||||||
| Issuance of Series A Preferred Stock in 2018 pursuant to employment and consulting agreement | 13 | 4,441,690 | 4,441,690 | |||||||||||||||||||||||||||||||||
| Sale of Series B Preferred Stock in 2018 | 761,972 | 749 | 723,126 | 723,875 | ||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 for services rendered | 19,345,789 | 656,306 | 656,306 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 for Preferred B dividends | 891,089 | 38,379 | (9,000 | ) | 29,379 | |||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 in Satisfaction of debt and accrued interest | 45,263,513 | 1,604,412 | , | 1,604,412 | ||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 for Warrant exercise | 8,500,000 | 619,880 | 619,880 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 in Satisfaction of accrued compensation | 4,370,629 | 192,300 | 192,300 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2018 for Acquisition of PureHealth, LLC | 3,096,827 | 112,415 | 112,415 | |||||||||||||||||||||||||||||||||
| Issuance of stock options for retirement Of common shares | (3,000,000 | ) | (101,400 | ) | 84,000 | (17,400 | ) | |||||||||||||||||||||||||||||
| Issuance of stock options | 118,200 | 118,200 | ||||||||||||||||||||||||||||||||||
| Sale of common stocks in 2018 | 29,821,201 | 850,000 | 850,000 | |||||||||||||||||||||||||||||||||
| Issuance of common stock and retirement of Series A preferred stock In 2018 | (3 | ) | (127,803 | ) | 30,000,000 | 127,803 | - | |||||||||||||||||||||||||||||
| Issuance of common stock and retirement of Series B preferred stock In 2018 | (419,999 | ) | (420 | ) | 76,704,954 | 420 | - | |||||||||||||||||||||||||||||
| Net loss | (4,112,277 | ) | (4,112,277 | ) | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2018 | 18 | $ | 4,557,424 | 499,958 | $ | 479 | 440,566,325 | $ | 16,624,557 | $ | 1,075,176 | ($ | 18,768,753 | ) | $ | 3,488,883 | ||||||||||||||||||||
| Issuance of Series A Preferred Stock in 2019 pursuant to employment agreement | 3 | 992,250 | 992,250 | |||||||||||||||||||||||||||||||||
| Issuance of common stock for retirement | ||||||||||||||||||||||||||||||||||||
| of Series A Preferred Stock | (1 | ) | (10,500 | ) | 10,000,000 | 10,500 | - | |||||||||||||||||||||||||||||
| Issuance of common stock for retirement of Series B Preferred Stock | (499,958 | ) | (479 | ) | 75,039,446 | 479 | - | |||||||||||||||||||||||||||||
| Sale of common stock in 2019 | 113,866,481 | 3,296,700 | 3,296,700 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2019 for acquisition of technology and licenses | 20,574,089 | 648,655 | 648,655 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2019 for acquisition of inventory | 37,500,000 | 487,500 | 487,500 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2019 for satisfaction of accrued salaries | 667,959 | 54,340 | 54,340 | |||||||||||||||||||||||||||||||||
| Issuance of common stock in 2019 for services rendered | 106,066,849 | 1,990,346 | 1,990,346 | |||||||||||||||||||||||||||||||||
| Net loss | (4,592,470 | ) | (4,592,470 | ) | ||||||||||||||||||||||||||||||||
| 20 | $ | 5,539,174 | - | $ | - | 804,281,149 | $ | 23,113,077 | $ | 1,075,176 | ($ | 23,361,223 | ) | $ | 6,366,204 | |||||||||||||||||||||
See notes to consolidated financial statements.
| F-5 |
Consolidated Statements of Cash Flows
| Year Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | (4,592,470 | ) | $ | (4,112,277 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation, net of prepaid stock- based consulting fees | 3,089,188 | 2,779,300 | ||||||
| Loss on forgiveness of receivable from PHP | - | 85,827 | ||||||
| Loss on stock issuance | - | 649,259 | ||||||
| Loss on debt conversion | - | 1,299,369 | ||||||
| Debt issuance expense | - | 14,000 | ||||||
| Expense from derivative liability | - | (1,591,137 | ||||||
| Depreciation of property and equipment | 89,779 | 5,473 | ||||||
| Amortization of intangible assets | 142,093 | - | ||||||
| Amortization of debt discounts | - | 176,497 | ||||||
| Bad debt expense | 253,483 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,465,920 | ) | (33,097 | ) | ||||
| Inventory | (209,893 | ) | 2,382 | |||||
| Prepaid expenses | (4,760 | ) | - | |||||
| Security deposit | 27,439 | (34,939 | ) | |||||
| Other receivable | (58,206 | ) | - | |||||
| Right-of-use asset | 299 | |||||||
| Accounts payable | 153,408 | (115,235 | ) | |||||
| Accrued officer’s compensation | 144,363 | 85,900 | ||||||
| Other accrued expenses payable | 17,777 | 35,109 | ||||||
| Net cash used in operating activities | (2,413,420 | ) | (753,569 | ) | ||||
| Investing Activities: | ||||||||
| Cash received from acquisition of PHP | - | 404 | ||||||
| Note receivable - current | (4,879 | ) | - | |||||
| Fixed assets additions | (1,105,403 | ) | ||||||
| Intangible assets additions | (550,000 | ) | (46,384 | ) | ||||
| Net cash used in investing activities | (1,660,282 | ) | (45,980 | ) | ||||
| Financing Activities: | ||||||||
| Proceeds received from notes and loans payable | 35,000 | 155,000 | ||||||
| Repayments of notes and loans payable | (19,205 | ) | (123,231 | ) | ||||
| Proceeds from sale of common stock | 3,296,700 | 850,000 | ||||||
| Proceeds from sale of Series B preferred stock | - | 723,875 | ||||||
| Net cash provided by financing activities | 3,312,495 | 1,605,644 | ||||||
| (Decrease)Increase in cash and cash equivalents | (761,207 | ) | 806,095 | |||||
| Cash and cash equivalents, beginning of period | 807,747 | 1,652 | ||||||
| Cash and cash equivalents, end of period | $ | 46,540 | $ | 807,747 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Income taxes paid | $ | 2,084 | $ | - | ||||
| Interest paid | $ | 8,793 | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of common stock in acquisition of inventory | $ | 487,500 | $ | - | ||||
| Issuance of common stock in acquisition of intangible assets | $ | 648,655 | $ | - | ||||
| Amortization of prepaid issuance of common Stock for services rendered | $ | 121,000 | $ | - | ||||
| Issuance of common stock in satisfaction of officer’s compensation | $ | 68,750 | $ | 282,200 | ||||
| Issuance of common stock in conversion of Series A Preferred Stock | $ | 10,500 | $ | - | ||||
| Issuance of common stock in retirement of Series B Preferred Stock | $ | 479 | $ | - | ||||
| Issuance of common stock in satisfaction of debt | $ | - | $ | 262,000 | ||||
| Issuance of common stock in acquisition of PHP | $ | - | $ | 178,997 | ||||
| Cancellation of note receivable and accrued interest in exchange for service | $ | - | $ | 19,611 | ||||
| Cancellation of note receivable and accrued interest in acquisition of PHP | $ | - | $ | 85,827,25 | ||||
| Issuance of common stock in satisfaction of accrued interest | $ | - | $ | 43,043 | ||||
See notes to consolidated financial statements.
| F-6 |
Notes to Consolidated Financial Statements
Year Ended December 31, 2019 and 2018
NOTE 1 – Organization and Description of Business
Canbiola, Inc.Can B̅ Corp. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005. Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008. The Company is in the process of dissolving Prosperity. The Company acquired 100% of the membership interests in Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”) effective December 28, 2018. The CompanyCompany’s durable equipment products, such as sam® units with CBD infused pads, are marketed and sold through its wholly-owned newly formed subsidiaries, Duramed Inc. (incorporated in or around November 2018) and DuramedNJ LLC (incorporated in or around May 2019) (collectively, “Duramed”). Duramed began operating on or about February1, 2019. The Company’s wholly-owned subsidiary, Radical Tactical LLC (“Radical Tactical”), a Nevada corporationformed May, 2019 provides the marketplace with millennium targeted product lines such as vapes, gums, and kratom. The Company’s hemp aggregation business is run through NY Hemp Depot LLC (the “Hemp Depot”), which was formed in or around July, 2019. The Company’s hemp farming business is run through Green Grow Farms, Inc. (“Duramed”Green Grow Farms”), which was formed in November 2018, to facilitate the manufacture and sale of durable medical equipment incorporating CBDAugust, 2019.
Effective December 27, 2010, WRAP effected a 10 for 1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1 for 10 reverse stock split of its common stock. The accompanying consolidated financial statements retroactively reflect these stock splits.splits of March 6, 2020 for a 300:1 reverse split.
On May 15, 2017, WRAP changed its name to Canbiola, Inc. On March 6, 2020 Canbiola, Inc. changed its name to Can B̅ Corp. (the “Company” or “CANB” or “Canbiola”“Can B” or “Registrant”).
CanbiolaCan B̅ specializes in the production and sale of a variety of hemp derived Cannabidiol (“CBD”) products such as oils, creams, moisturizers, isolate, gel caps, concentratespa products, and water. Canbiolaconcentrates. Can B̅ is developing its own line of proprietary products as well as seeking synergistic value through acquisitions in the Hemp Industry. CanbiolaCan B̅ aims to be the premier provider of the highest quality hemp CBD products on the market through sourcing the very best raw material and developing a variety of products we believe will improve people’s lives in a variety of areas.
The Company also operatesowns document management and email marketing platforms. The Company usedplatforms which it is seeking to operate its document and information platform from its wholly owned subsidiary, Prosperity Systems, Inc; however, after the acquisition of Prosperity, the Company transferred Prosperity’s operations to the Company directly.sell or repurpose.
For the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity, Radical Tactical, NY Hemp Depot and DuramedGreen Grow Farms had no activity for the periods presented. Financial information for PHP from December 28, 2018 to December 31, 2018 hasand Duramed in the periods have been consolidated with the Company’s financials.
NOTE 2 – Going Concern Uncertainty
The consolidated financial statements have been prepared on a “going concern” basis, which contemplates the realization of assets and liquidation of liabilities in a normal course of business. As of December 31, 2018,2019, the Company had cash and cash equivalents of $807,747$46,540 and a working capital of $939,582.$2,881,147. For the years ended December 31, 20182019 and 2017,2018, the Company had net lossesloss of $4,112,277$4,592,470 and $2,139,719,$4,112,277, respectively. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company plans to improve its financial condition by raising capital through sales of shares of its common stock. Also, the Company plans to expand its operation of CBD products to increase its profitability. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
| F-7 |
NOTE 3 – Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of CANB and its wholly ownedwholly-owned subsidiaries, Pure Health products (from its acquisition date of December 28, 2018),Products, Duramed, Prosperity and Prosperity from the date of its acquisition on January 5, 2015.Radical Tactical. All intercompany balances and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
(c) Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, notes and loans payable, accounts payable, and accrued expenses payable. Except for the noncurrent note receivable, the fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to the short term maturity of these instruments. Based on comparable instruments with similar terms, the fair value of the noncurrent note receivable approximates its carrying value.
Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
(d) Cash and Cash Equivalents
The Company considers all liquid investments purchased with a maturity of three months or less to be cash equivalents.
(e) Accounts receivable
Accounts receivable are presented in the balance sheet net of the allowance for doubtful accounts. Accounts receivable are written off when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the Company’s historical losses, the existing economic conditions in the industry, and the financial stability of its customers. Bad debt expense was $253,483 and $0 for the years ended December 31, 2019 and 2018.
| F-8 |
(f) Inventory
All inventories areInventories consist of raw materials and finished goods and are stated at the lower of cost or net realizable value. Cost is principally determined using the first-in, first-out (FIFO) method.
(f)(g) Prepaid expenses
Prepaid expenses include stock-based officer, employee and consulting compensation of $2,459,830 and $2,576,070 at December 31, 2019 and 2018, respectively. The Company’s policy is to record stock-based compensation as prepaids and expense over the term of employment and consulting agreements.
(h) Property and Equipment, Net
Property and equipment, net, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to operations as incurred.
(g)(i) Intangible Assets, Net
Intangible assets, net, are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the estimated economic lives of the respective assets.
(h)(j) Goodwill and Intangible Assets with Indefinite Lives
The Company does not amortize goodwill, and intangible assets with indefinite useful lives, but instead tests for impairment at least annually. When conducting the annual impairment test for goodwill, the Company compares the estimated fair value of a reporting unit containing goodwill to its carrying value. If the estimated fair value of the reporting unit is determined to be less than its carrying value, goodwill is reduced, and an impairment loss is recorded.
(i)(k) Long-lived Assets
The Company reviews long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation of recoverability is required, the estimated undiscounted future cash flows associated with the asset is compared to the asset’s carrying amount to determine if a write-down is required. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value.
(j)(l) Revenue Recognition
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criterial standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts.
Private Label Customers, Global CBD, LLC and TZ Wholesale, are wholesale distributors of the Company’s product, under their own wholesale private label brand. The products are made to Company specifications and shipped directly to the wholesaler. The pricing is predicated upon a volume discount negotiated at the time of the placement of the orders. Product is produced and labeled in the Washington manufacturing facility and shipped directly to the Private Label customer who re-distributes to their retail and other customers. The products are fully paid when shipped. For 2018, Global CBD, LLC revenue of $44,602 represents approximately 9% and TZ Wholesale revenue of $17,172 represents approximately 3.5% of total Company revenues for the year ended December 31, 2018.
| F-9 |
Revenue from product sales is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred, and collectability is reasonably assured.
Additionally,The Company’s Duramed Division provides a sam® Pro 2.0 medical device to patients through a doctor program whereby the Company also generates revenue from email marketingphysician evaluates the patients’ needs for medical necessity, and cloud service providedif determined that the device use would be beneficial, writes a prescription for the patient who signs a rental form, for a 35 day cycle for the unit, that is submitted to several existing customers.Duramed who bills the appropriate insurance company. The serviceinsurance company pays the invoice, or a negotiated amount via arbitration, and that revenue is recognized over agreed periods of services deliveredreported as revenue when invoiced to customers, provided there are no uncertainties regarding customer acceptance, persuasive evidence of an arrangement exists; the sales priceinsurance carrier. The collected amount is fixed or determinable; and collectability is deemed probable.reconciled with the invoice amount on a daily basis.
(k)(m) Cost of Product Sales
The cost of product sale is the total cost incurred to obtain a sale and the cost of the goods sold, and the Company’s policy is to recognize it in the same manner as, and in conjunction with, revenue recognition. Cost of product sale primarily consisted of the costs directly attributable to revenue recognized and includes expenses related to the production, packaging and labeling of our CBD products.
(l)
(m) Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 718, “Compensation – Stock Compensation” (“ASC718”) and ASC 505-50, “Equity – Based Payments to Non-Employees.”
In addition to requiring supplemental disclosures, ASC 718 addresses the accounting for share-based payment transactions in which a company receives goods or services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.
In accordance with ASC 505-50, the Company determines the fair value of the stock basedstock-based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date at which the counterparty’s performance is complete.
Options and warrants
The fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:
Risk-Free Interest Rate.
We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
Expected Volatility.
We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.
Dividend Yield.
We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
| F-10 | |
(m)Expected Term.
The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
Forfeitures.
Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.
(o) Advertising
Advertising costs are expensed as incurred and amounted to $84,316$333,441 and $28,322$84,316 for the yearyears ended December 31, 20182019 and 2017,2018, respectively.
(n)(p) Research and Development
Research and development costs are expensed as incurred. In fiscal year 2017the period ended December 31, 2019 and 2018, the Company spent $37,000$150,000 and $75,000 in research and development which was expenses as spent, respectively.
(o)(q) Income Taxes
Income taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.
The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority. The Company believes that it has not taken any uncertain tax positions and thus has not recorded any liability.
(p)(r) Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation. For the periods presented, the diluted net loss per share calculation excluded the effect of Series B preferred stocks and stock options outstanding (see Notes 7, 89, 10 and 10)11).
(q)(s) Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) which establishes revenue recognition standards. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017. The impact of ASU 2014-09 on the Company’s financial statements has not been significant.
In 2016, the FASB issued ASU 2016-2 (Topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees will be required to recognize right of use assets and liabilities for most leases having terms of 12 months or more. ASU 2016-2 isEffective January 1, 2019, we adopted this new accounting guidance using the effective for fiscal years beginning after December 15, 2018.date transition method, which permits entities to apply the new lease standards using a modified retrospective transition approach at the date of adoption. As such, historical periods will continue to be measured and presented under the previous guidance while current and future periods subject to this new accounting guidance. Upon adoption we recorded a $100,681 right-of-use asset related to our one operating lease (see Note 14) and a $90,591 lease liability.
| F-11 |
The impact on the Company’s financial statements has not yet been determined.
(r)(t) Reclassifications
Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation. These reclassification adjustments had no effect on the Company’s previously reported net income.
NOTE 4 – Acquisition of Pure Health Products, LLC
Effective December 28, 2018, CANB acquired 100% ownership of Pure Health Products, LLC (“Pure Health”) in exchange for the cancellation of CANB’s $75,000 note receivable from Pure Health and $10,827 accrued interest thereon and issuance of 3,096,827 newly issued shares of CANB common stock (valued at the $0.0578 closing trading price on December 28, 2018 or $178,997, see Note 11). The acquisition has been accounted for in the accompanying consolidated financial statements as a purchase transaction. Accordingly, the financial position and results of operations of Pure Health prior to the date of the acquisition have been excluded from the accompanying consolidated financial statements.
The estimated fair values of the identifiable net assets of Pure Health at December 28, 2018 (effective date of acquisition), after cancellation of the $75,000 note payable to CANB and $10,827 accrued interest thereon, consisted of:
| Cash and cash equivalents | $ | 404 | ||
| Accounts receivable from CANB | 16,676 | |||
| Inventory | 79,652 | |||
| Property and equipment, net | 7,559 | |||
| Security deposit | 2,100 | |||
Total assets | 106,391 | |||
| Accounts payable, including $34,419 due to CANB | 49,825 | |||
| Total liabilities | 49,825 | |||
| Identifiable net assets | $ | 56,566 |
Goodwill of $55,849 (excess of the $112,415 fair value of the 3,096,827 shares of CANB common stock issued to Pure Health’s stockholders over the $56,566 identifiable net assets of Pure Health at December 28, 2018 after reflecting the $85,827 cancellation of the $75,000 note payable and $10,827 accrued interest) was recorded from the acquisition.
The following pro forma information summarizes the results of operations for the periods indicated as if the acquisition occurred at December 31, 2016. The pro forma information is not necessarily indicative of the results that would have been reported had the transaction actually occurred on December 31, 2016, nor is it intended to project results of operations for any future period.
| Year Ended | ||||||||
| December 31, | ||||||||
| 2018 | 2017 | |||||||
| Product sales | $ | 651,978 | $ | 90,634 | ||||
| Cost of product sales | 224,894 | 62,958 | ||||||
| Gross profit on product sales | 427,084 | 27,676 | ||||||
| Service revenue | 16,625 | 43,716 | ||||||
| Total gross profit | 443,709 | 71,392 | ||||||
| Operating expenses | 4,674,321 | 812,365 | ||||||
| Loss from operations | (4,203,613 | ) | (740,973 | ) | ||||
| Other income (loss) - net | (2,671,581 | ) | (1,428,783 | ) | ||||
| Net loss | $ | (6,875,194 | ) | $ | (2,169,756 | ) | ||
| Net loss per common share- basic and diluted | $ | (0.02 | ) | $ | (0.01 | ) | ||
| Weighted average common shares outstanding – | ||||||||
| Basic | 276,026,704 | 165,230,550 | ||||||
| Diluted | 423,881,781 | 256,295,851 | ||||||
NOTE 5 – Inventories
Inventories consist of:
| December 31, 2018 | December 31, 2017 | December 31, 2019 | December 31, 2018 | |||||||||||||
| Raw materials | $ | 79,652 | $ | - | $ | 708,239 | $ | 79,652 | ||||||||
| Finished goods | 7,452 | 9,834 | 76,258 | 7,452 | ||||||||||||
| Total | $ | 87,104 | $ | 9,834 | $ | 784,497 | $ | 87,104 | ||||||||
NOTE 65 – Notes Receivable
Notes receivable consist of:
| December 31, 2018 | December 31, 2017 | |||||||||||||||
| Secured Promissory note dated October 17, 2017 due from Pure Health Products, LLC (“PHP”), interest at 12% per annum, due October 17, 2018, secured by assets of PHP. Cancelled in acquisition of Pure Health Products, LLC | $ | - | $ | 75,000 | ||||||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||||||
| Note receivable dated November 30, 2015 from Stock Market Manager, Inc, interest at 3% per annum due November 30, 2020 | 19,389 | 39,000 | $ | 19,389 | $ | 19,389 | ||||||||||
| Note receivable dated February 8,2019 from an employee, weekly installments of $1,200 with interest at 8% per annum. | 4,879 | - | ||||||||||||||
| Total | 19,389 | 114,000 | 24,268 | 19,389 | ||||||||||||
| Current portion of notes receivable | - | (75,000 | ) | (24,268 | ) | - | ||||||||||
| Noncurrent portion of notes receivable | $ | 19,389 | $ | 39,000 | $ | - | $ | 19,389 | ||||||||
Pursuant to an option Agreement dated November 10, 2017, the Company has an option expiring November 10, 2027 to purchase certain specified assets of Pure Health for $75,000, payable via cancellation of Pure Health’s obligations under the Secured Promissory Note or in cash or cash equivalent.
| F-12 |
Stock Market Manager, Inc is affiliated with Carl Dilley, a Company director. In 2018, the Company received services from Stock Market Manager valued at $19,611 in exchange for the cancellation of $19,611 in note receivables.
NOTE 76 – Property and Equipment, Net
Property and Equipment, net, consist of:
| December 31, | December 31, | |||||||
| 2018 | 2017 | |||||||
| Furniture & Fixtures | $ | 19,018 | $ | 19,018 | ||||
| Office Equipment | 20,992 | 12,378 | ||||||
| Manufacturing Equipment | 46,384 | - | ||||||
| Total | 86,394 | 31,396 | ||||||
| Accumulated amortization | (26,775 | ) | (20,248 | ) | ||||
| Net | $ | 59,619 | $ | 11,148 | ||||
December 31, 2019 | December 31, 2018 | |||||||
| Furniture & Fixtures | $ | 19,018 | $ | 19,018 | ||||
| Office Equipment | 12,378 | 20,992 | ||||||
| Manufacturing Equipment | 355,016 | 46,384 | ||||||
| Medical Equipment | 783,782 | - | ||||||
| Leasehold Improvements | 21,603 | - | ||||||
| Total | 1,191,797 | 86,394 | ||||||
| Accumulated depreciation | (116,555 | ) | (26,775 | ) | ||||
| Net | $ | 1,075,242 | $ | 59,619 | ||||
NOTE 87 – Intangible Assets, Net
Intangible assets, net, consist of:
| December 31, | December 31, | |||||||||||||||
| 2018 | 2017 | December 31, 2019 | December 31, 2018 | |||||||||||||
| Video conferencing software acquired by Prosperity in December 2009 | $ | 30,000 | $ | 30,000 | $ | 30,000 | $ | 30,000 | ||||||||
| Enterprise and audit software acquired by Prosperity in April 2008 | 20,000 | 20,000 | 20,000 | 20,000 | ||||||||||||
| Patent costs incurred by WRAP | 6,880 | 6,880 | 6,880 | 6,880 | ||||||||||||
| Hemp license and technology | 1,000,000 | - | ||||||||||||||
| CBD technology | 198,655 | - | ||||||||||||||
| Other | 3,548 | 3,548 | 3,548 | 3,548 | ||||||||||||
| Total | 60,428 | 60,428 | 1,259,083 | 60,428 | ||||||||||||
| Accumulated amortization and Impairment | (60,428 | ) | (60,428 | ) | (202,521 | ) | (60,428 | ) | ||||||||
| Net | $ | 0 | $ | 0 | $ | 1,056,562 | $ | - | ||||||||
The CBD related technology were purchased from Hudilab, Inc. (“HUDI”) and Seven Chakras, LLC (“Seven Chakras”) during the three months ended March 31, 2019. On January 14, 2019, the Company and PHP (collectively, the “buyer”) entered into a License and Acquisition Agreement (the “LAA”) with HUDI. Pursuant to the LAA, HUDI will sell the technology owned by it to the buyer in exchange for 7,500,000 (prior to 300:1 reverse split) shares of CANB common stock. On January 14, 2019, the shares were issued to the owner of HUDI and valued at $131,625. On January 31, 2019, PHP entered into an Asset Purchase Agreement (the “Chakras Agreement”) with Seven Chakras, LLC (“Seven Chakras”). Pursuant to the Chakras Agreement, PHP purchased the rights and title to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ products containing cannabidiol (“CBD”), (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials (collectively, the “Assets”). On February 20, 2019, the Company issued 1,000,000 (prior to 300:1 reverse split) shares of CANB common stock valued at $17,030 to owners of Seven Chakras as additional consideration, along with the $50,000 cash payments, pursuant to the Chakras Agreement.
| F-13 |
The abovehemp related license and technology purchased from Shi Farms during the three months ended September 30, 2019. Hemp Depot will contract with farmers in New York to grow hemp under a controlled program of specific strains, cultured feminized seeds, proven technology, and access to processing for their crop. NY Hemp Depot will amalgamate the cultivated off-take from the farmers, combine and fill “super-sacks” for shipping to the processing facility in Colorado to produce high-grade isolate or distillate for use in Can B’s manufacturing facility in Lacey WA.
The other intangible assets relate to the document management and email marketing divisions. AtSince December 31, 2017, wethe Company do not expect any future positive cash flow from these divisions. Accordingly, we have recorded an impairment expense of $21,509 at December 31, 2017 and reduced the net carrying value of these intangible assets was reduced to $0.
NOTE 98 – Notes and Loans Payable
| Notes and loans payable consist of: | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to November 15, 2017, interest at rates ranging from 12% to 14.99% per annum, due from April 6, 2017 to May 15, 2018, partially converted at March 22, 2017 and the remaining notes convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date – net of unamortized debt discount of $0 and $1,815, respectively-fully converted on August 31, 2018 | - | 36,685 | ||||||
| Convertible notes payable to lender dated February 1, 2016 (as amended December 21, 2016) and December 21, 2016, interest at 12% per annum, due February 1, 2017 and May 20, 2017, convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date – net of unamortized debt discount of $0 and $0, respectively. The note date dated February 1, 2016 was fully converted at June 11, 2018 while note dated December 21, 2016 was fully converted at September 7, 2018 | - | 65,000 | ||||||
| Convertible notes payable to Pasquale and Rosemary Ferro dated from May 2, 2017 to August 10, 2018, interest at 12% per annum, due at June 30, 2020 (as amended August 13, 2018), convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date – net of unamortized debt discount of $25,009 and $19,613, respectively. The notes were fully converted at August 9, 2018 and December 21, 2018. | - | 73,887 | ||||||
| Convertible note payable to lender dated August 8, 2017 interest at 12% per annum, due August 8, 2018, convertible into Common Stock at a Conversion Price equal to the lesser of (i) $0.01 per share or (ii) 50% of the lowest Closing Bid Price of the Common Stock for the 30 Trading Days preceding the Conversion Date – net of unamortized debt discount of $0 and $15,068, respectively. The notes were fully converted at August 31, 2018. | - | 9,932 | ||||||
| Convertible note payable to lender dated June 6, 2018, interest at 12% per annum, due March 6, 2019, convertible into Common Stock at a Conversion Price equal to the lesser of 55% of the lowest Closing Bid . Price of the Common Stock for the 25 Trading Days preceding the (i) Inception date or (ii) the Conversion Date – net of unamortized debt discount of $57,509 and $0, respectively. The note was fully paid off at October 19, 2018. | - | - | ||||||
| Note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due) | 5,000 | 5,000 | ||||||
| Note payable to Carl Dilley, a director of the Company, interest at 12.99% per annum, due February 1, 2021 | 10,899 | - | ||||||
| Loan payable to Mckenzie Webster Limited (“MWL”), an entity controlled by the former Chairman of the Board of Directors of the Company, non-interest bearing, due on demand | 3,000 | 3,000 | ||||||
| Total | $ | 18,899 | $ | 193,504 | ||||
The derivative liability of the convertible notesNotes and loans payable consistsconsist of:
| December 31, 2018 | December 31, 2017 | |||||||||||||||
| Face Value | Derivative Liability | Face Value | Derivative Liability | |||||||||||||
| Convertible notes payable to lender dated from March 15, 2016 (as amended June 2, 2016) to November 15, 2017, due from April 6, 2017 to May 15, 2018. Fully converted on August 31, 2018 | $ | - | $ | - | 38,500 | 248,597 | ||||||||||
| Convertible notes payable to lender dated February 1, 2016 (as amended December 21, 2016) and December 21, 2016, due February 1, 2017 and May 20, 2017. The notes were fully converted at June 11, 2018 and September 7, 2018 | - | - | 65,000 | 418,889 | ||||||||||||
| Convertible notes payable to Pasquale and Rosemary Ferro dated from May 25, 2017 to January 8, 2018, due at June 30, 2020 (as amended August 13, 2018), | - | - | 93,500 | 611,886 | ||||||||||||
| Convertible notes payable to lender dated June 6, 2018, due March 6, 2019. Fully paid off at October 19, 2018. | - | - | - | - | ||||||||||||
| Convertible notes payable to lender dated August 8, 2017, due August 8, 2018. Fully converted at August 31, 2018 | - | - | 25,000 | 171,765 | ||||||||||||
| Totals | $ | - | $ | - | $ | 222,000 | $ | 1,451,137 | ||||||||
The above convertible notes outstanding at December 31, 2017 contained a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes was indeterminate. Accordingly, we recorded the fair value of the embedded conversion features as a derivative liability at the respective issuance dates (or amendment dates) of the notes ($445,112 total for the year ended December 31, 2017) and charged the applicable amounts to debt discounts of ($182,750 total for the year ended December 31, 2017) and the remainder to other expense ($262,362 total for the year ended December 31, 2017). The increase (decrease) in the fair value of the derivative liability from the respective issuance dates (or amendment dates) of the notes to the measurement date ($926,819 total increase for the year ended December 31, 2017) are charged (credited) to other expense (income). The fair value of the derivative liability of the notes is measured at the respective issuance dates and quarterly thereafter using the Black Scholes option pricing model. Assumptions used for the calculations of the derivative liability of the notes at December 31, 2017 include (1) stock price of $0.0335 per share, (2) exercise price of $0.0045 per share, (3) terms ranging from 0 days to 220 days, (4) expected volatility of 287% and (5) risk free interest rates ranging from 0.00% to 1.58%.
In 2018, all convertible notes containing embedded conversion features were satisfied and the Company recognized income from derivative liability of $1,591,137
| December 31, 2019 | December 31, 2018 | |||||||
| Note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due) | 5,000 | 5,000 | ||||||
| Note payable to Carl Dilley, a director of the Company, interest at 12.99% per annum, due February 1, 2021 | - | 10,899 | ||||||
| Loan payable to McKenzie Webster Limited (“MWL”), non-interest bearing, due on demand. | - | 3,000 | ||||||
| Loan payable to Pasquale Ferro, interest at 12% per annum, due December 2020. | 30,000 | - | ||||||
| Total | $ | 35,000 | $ | 18,899 | ||||
NOTE 109 – Preferred Stock
Note- The share and vote amounts referenced below are reflected prior to the 300:1 reverse split in March 2020.
Each share of Series A Preferred Stock is convertible into 10,000,000 shares of CANB common stock and is entitled to 20,000,000 votes.
Each share of Series B Preferred Stock has the first preference to dividends, distributions and payments upon liquidation, dissolution and winding-up of the Company, and is entitled to an accrued cumulative but not compounding dividend at the rate of 5% per annum whether or not declared. After six months of the issuance date, such share and any accrued but unpaid dividends can be converted into common stock at the conversion price which is the lower of (i) $0.0101; or (ii) the lower of the dollar volume weighted average price of CANB common stock on the trading day prior to the conversion day or the dollar volume weighted average price of CANB common stock on the conversion day. The shares of Series B Preferred Stock have no voting rights.
The Company issued a total of 10 shares of CANB Series A Preferred Stock (5 shares to Mckenzie Webster Limited and 5 shares to Marco Alfonsi) in exchange for the retirement of a total of 100,000,000 shares of CANB common stock (50,000,000 shares from Mckenzie Webster Limited and 50,000,000 shares from Marco Alfonsi).
On October 4, 2017, the Company issued 3 shares of CANB Series A Preferred Stock to Alfonsi: 2 shares were the consideration for Alfonsi’s cancellation of accrued salaries payable of $127,803 owed to Alfonsi and 1 share (valued at $63,902) was issued pursuant to the new employment agreement with Alfonsi.
On November 30, 2017, MWL converted its 5 shares of CANB Series A Preferred Stock to 50,000,000 shares of CANB common stock.
On December 5, 2017, the Company issued 157,985 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to a Securities Purchase Agreement (the “SPA”) dated October 13, 2017, in exchange for proceeds of $150,000, or $0.95 per CANB Series B Preferred share.
On January 22, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.
| F-14 |
On February 12, 2018, the Company issued 1 share of CANB Series A Preferred Stock to David Posel pursuant to a service agreement. The fair value of the issuance is $257,370$373,000 and will be amortized over the vesting period of four years.
On February 16, 2018, the Company issued 3 shares of CANB Series A Preferred Stock to Andrew Holtmeyer pursuant to a service agreement. The fair value of the issuance is $703,800$1,020,000 and will be amortized over the vesting period of one year.
On February 16, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.
On March 20, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.
On April 13, 2018, April 25, 2018, May 3, 2018, June 19, 2018 and June 25, 2018, RedDiamond Partners converted its 10,000 shares, 10,000 shares, 10,000 shares, 15,000 shares and 10,000 shares of CANB Series B Preferred Stock to 1,287,129 shares, 1,287,129 shares, 1,287,129 shares, 3,545,455 shares, and 2,363,636 shares of CANB common stock, respectively.
On May 14, 2018, the Company issued 1 share of CANB Series A Preferred Stock to a consultant pursuant to a Consulting Agreement dated May 11, 2018. The $105,000$150,000 fair value of the issuance was partially charged to consulting fees in the three months ended September 30, 2018.
From July 24, 2018 to September 26, 2018, RedDiamond Partners converted aggregately 263,263 shares of CANB Series B Preferred Stock to 53,839,743 shares of CANB common stock.
On August 28, 2018, September 14, 2018 and September 19, 2018, the Company issued 36,842 shares, 105,263 shares, and 105,263 shares of CANB Series B Preferred Stock, respectively, to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $35,000, $100,000 and $100,000, respectively, or $0.95 per CANB Series B Preferred share.
From October 2, 2018 to November 7, 2018, RedDiamond Partners converted aggregately 101,736 shares of CANB Series B Preferred Stock to 13,094,733 shares of CANB common stock.
On October 23, 2018 and November 14, 2018, the Company issued 200,000 shares and 52,500 shares of CANB Series B Preferred Stock, respectively, to RedDiamond Partners LLC (“RedDiamond”) in exchange for proceeds of $190,000 and $49,875, respectively, or $0.95 per CANB Series B Preferred share.
On December 28,2018, Marco Alfonsi converted 3 shares of CANB Series A Preferred Stock to 30,000,000 shares of CANB common stock.
On December 29, 2018 the Company issued 8 shares of CANB Series A Preferred Stock to three officers of the company (1 share to Stanley L. Teeple, 5 shares to Pasquale Ferro and 2 shares to Andrew Holtmeyer), pursuant to the employment agreements with them. The fair value of the issuance totaled at $3,375,520$4,624,000 and will be amortized over the vesting period of four years.
NOTE 11 – Common Stock
On February 2, 2017,January 28, 2019, the Company issued 200,000 shares of CANB common stock to a financial consultant for services rendered. The $11,000 fair value of the 200,000 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2017.
On February 13, 2017, the Company issued 1,685,900 shares of CANB common stock to the brother of the Chief Executive Officer of the Company in satisfaction of notes payable of $15,000 and accrued interest payable of $1,859.
On March 22, 2017, the Company issued 6,785,316 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $5,979.
On April 17, 2017, the Company issued 5,000,00010,000,000 shares of CANB common stock to a consultant for services rendered. The $125,000 fair value of the 5,000,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2017.
On June 21, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,975 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2017.
On June 28, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,000 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2017.
On August 25, 2017, the Company issued 7,142,857 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $3,331.
On August 25, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $3,750 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2017.
On September 5, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $4,375 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2017.
On September 7, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $32,750 fair value of the 2,500,000 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2017. On July 12, 2018, the consultant agreed to return the 2,500,000 shares
to the Company due to the lack of service after an arbitration was filed on May 11,2018.
On September 11, 2017, the Company issued 250,000 and 250,000 shares of CANB common stock to two consultants for services rendered, respectively. The $3,350 fair value of each 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2017.
On September 25, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $2,525 fair value of the 2,500,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2017.
On November 2, 2017, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $1,725 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended December 31, 2017.
On November 9, 2017, the Company issued 2,500,000 shares of CANB common stock to a consultant for services rendered. The $21,250 fair value of the 2,500,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.
On November 30, 2017, the Company issued 50,000,000 shares of CANB common stock to Mckenzie Webster Limited in exchange for the retirement of 5 shares1 share of CANB Series A Preferred Stock.
On December 5, 2017,From February 21, 2019 to March 12, 2019, the Company issued 250,000 and 250,000aggregately 20,221,436 shares of CANB common stock to two consultantsRedDiamond in exchange for services rendered, respectively.the retirement of 157,105 shares of CANB Series B Preferred Stock.
| F-15 |
On May 28, 2019, the Company issued 3 shares of CANB Series A Preferred Stock to Stanley L. Teeple pursuant to the employment agreement with him. The $3,000 fair value of each 250,000 sharesthe issuance totaled at $1,203,000 and will be amortized over the vesting period of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.four years.
On December 7, 2017,April 26, 2019, the Company issued 250,0001,930,693 shares of CANB common stock to a consultantRedDiamond in exchange for services rendered. The $4,500 fair valuethe retirement of the 250,00015,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.Series B Preferred Stock.
On December 18, 2017,May 1, 2019, the Company issued 500,0002,574,257 shares of CANB common stock to a consultantRedDiamond in exchange for services rendered. The $9,050 fair valuethe retirement of the 500,00020,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 31, 2017.Series B Preferred Stock.
On December 25, 2017,May 9, 2019, the Company issued 250,000 and 250,0007,113,059 shares of CANB common stock to two consultantsRedDiamond in exchange for services rendered, respectively. The $7,250 fair valuethe retirement of each 250,00055,263 shares of CANB Series B Preferred Stock.
On June 7, 2019, the Company issued 3,217,822 shares of CANB common stock was partially charged to consulting feesRedDiamond in exchange for the three months endedretirement of 25,000 shares of CANB Series B Preferred Stock.
On August 13, 2019, the Company issued 29,282,179 shares of CANB common stock to RedDiamond in exchange for the retirement of 227,590 shares of CANB Series B Preferred Stock.
On December 31, 2017.16, 2019, the Company issued 10,700,000 shares of CANB common stock to RedDiamond as agreed for the early retirement of CANB Series B Preferred Stock converted in August 2019.
NOTE 10 – Common Stock
Note- The share amounts referenced below are reflected prior to the 300:1 reverse split in March 2020.
On February 7, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $9,825 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.
On February 9, 2018, the Company issued 3,000,000 and 3,000,000 shares of CANB common stock to its two directors for services rendered, respectively. The $101,400 fair value of each 3,000,000 shares of CANB common stock was charged to directors fees in the three months ended March 31, 2018. The shares issued to one of the directors were converted to options at June 11, 2018 (see Note 10)11).
On February 13, 2018, the Company issued 150,000 shares of CANB common stock to a consultant for services rendered. The $5,085 fair value of the 150,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.
On February 14, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $8,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.
On February 19, 2018, the Company issued 150,000 shares of CANB common stock to a consultant for services rendered. The $5,280 fair value of the 150,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.
On February 26, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $11,375 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.
| F-16 |
On March 1, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $10,900 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2018.
On March 20, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $6,500 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2018.
On April 13, 2018, April 25, 2018, May 3, 2018, June 19, 2018 and June 25, 2018, the Company issued 1,287,129 shares, 1,287,129 shares, 1,287,129 shares, 3,545,455 shares, and 2,363,636 shares of CANB common stock to RedDiamond in exchange for the retirement of 10,000 shares, 10,000 shares, 10,000 shares, 15,000 shares and 10,000 shares of CANB Series B Preferred Stock, respectively.
On May 9, 2018, the Company issued 125,000 shares of CANB common stock to a consultant for services rendered. The $1,812 fair value of the 125,000 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.
On May 29, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,000 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.
On May 31, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $4,600 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2018.
On June 4, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $5,750 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.
On June 11, 2018, the Company agreed to issue 2,749,429 shares of CANB common stock to a lender in satisfaction of notes payable of $15,000 and accrued interest payable of $4,246. The shares was issued at August 24, 2018.
On June 18, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $6,250 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.
On June 22, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $8,250 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2018.
From July 24, 2018 to September 26, 2018, the Company issued aggregately 53,839,743 shares of CANB common stock to RedDiamond in exchange for the retirement of 263,263 shares of CANB Series B Preferred Stock.
On July 31, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $3,225 fair value of the 250,000 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.
On August 9, 2018, Company received a conversion notice from a lender. As a result, 9,544,292 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $50,000 and accrued interest payable of $7,266 at August 21, 2018.
On August 28, 2018, the Company issued 2,000,000 shares of CANB common stock to a consultant for services rendered. The $159,600 fair value of the 2,000,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
| F-17 |
On September 6, 2018, the Company issued 300,000 shares of CANB common stock to a consultant for services rendered. The $16,500 fair value of the 300,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On September 6, 2018, the Company issued 500,000 shares of CANB common stock to a consultant for services rendered. The $27,500 fair value of the 500,000 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.
On September 6, 2018, the Company issued 8,430,331 shares of CANB common stock to a lender in satisfaction ofnotes payable of $38,500 and accrued interest payable of $7,867.
On September 7, 2018, the Company issued 5,121,694 shares of CANB common stock to a lender in satisfaction of notes payable of $25,000 and accrued interest payable of $3,169.
On September 7, 2018, the Company issued 10,045,667 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $10,274.
On September 8, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $11,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On September 10, 2018, the Company issued 500,000 shares of CANB common stock to a consultant for services rendered. The $19,950 fair value of the 500,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On September 17, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $10,750 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On September 18, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $13,725 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On September 20, 2018, the Company issued 7,407,407 shares of CANB common stock to an investor pursuant to a Stock Purchase Agreement dated September 17, 2018, in exchange for proceeds of $200,000, or $0.027 per CANB common share.
On September 21, 2018, the Company issued 250,000 shares of CANB common stock to a consultant for services rendered. The $14,500 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On September 25, 2018, the Company issued 2,000,000 shares of CANB common stock to a consultant for services rendered. The $97,400 fair value of the 2,000,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
From October 2, 2018 to November 7, 2018, the Company issued aggregately 13,094,733 shares of CANB common stock to RedDiamond in exchange for the retirement of 101,736 shares of CANB Series B Preferred Stock.
From November 5, 2018 to December 28, 2018, the Company issued aggregately 2,125,000 shares of CANB common stock to multiple consultants for services rendered. The $80,665 fair value of the 2,125,000 shares of CANB common stock was partially charged to consulting fees in the three months ended December 30, 2018.
From December 3, 2018 to December 28, 2018, the Company issued aggregately 1,500,000 shares of CANB common stock to three board members for services rendered. The $62,342 fair value of the 1,500,000 shares of CANB common stock was charged to director fees in the three months ended December 30, 2018.
| F-18 |
From December 3, 2018 to December 28, 2018, the Company issued aggregately 22,413,794 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $650,000.
On December 11, 2018, the Company issued 891,089 shares of CANB common stock to RedDiamond in satisfaction of dividend payable of $9.000.$9,000.
On December 19, 2018, the Company issued 891,089 shares of CANB common stock to Auctus, LLC pursuant to a cashless exercise of stock options.
On December 21, 2018, Company received a conversion notice from a lender. As a result, 9,372,100 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $83,500 and accrued interest payable of $10,221.
On December 21, 2018, Company issued aggregately 4,370,629 shares of CANB common stock to four officers of the Company in satisfaction of accrued compensation of $192,300.
On December 28, 2018, the Company issued 3,096,827 shares of CANB common stock for the acquisition of Pure Health Products, LLC.
On December 28, 2018, the Company issued 245,789 shares of CANB common stock to an officer of the Company pursuant to the Employment Agreement dated December 29, 2018 with Andrew Holtmeyer. The $10,371 fair value of the issuance was charged to stock-based compensation in the three months ended December 31, 2018.
On December 29, the Company issued 30,000,000 shares of CANB common stock to Marco Alfonsi in exchange for the return of 3 shares of CANB Series A Preferred Stock owned by Marco Alfonsi.
From January 4, 2019 to March 27, 2019, the Company issued aggregately 41,431,994 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $1,196,100.
On January 14, 2019, the Company issued 7,500,000 shares of CANB common stock to Hudilab, Inc. (“HUDI”), pursuant to a License and Acquisition Agreement for purchase of the technology owned by HUDI.
From January 18, 2019 to March 17, 2019, the Company issued aggregately 24,600,000 shares of CANB common stock to multiple consultants for services rendered.
From January 19, 2019 to March 27, 2019, the Company issued aggregately 1,167,959 shares of CANB common stock to employee and officers of the Company pursuant to employee agreement and in satisfaction of accrued compensation for the quarter ended March 31, 2019.
On February 5, 2019, the Company issued 2,000,000 shares to the owner of TZ Wholesale LLC, pursuant to a Memorandum of Understanding (the “MOU”) dated November 9, 2018.
On February 20, 2019, the Company issued 1,000,000 shares of CANB common stock to owners of Seven Chakras pursuant to an Asset Purchase Agreement (the “Agreement”) with Seven Chakras, LLC dated January 31, 2019.
From April 1, 2019 through June 30, 2019 the company issued an aggregate of 15,511,767 shares of CANB Common Stock to multiple consultants for services rendered.
From April 1, 2019 through June 30, 2019, the Company issued an aggregate of 4,174,886 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From April 1, 2019 through June 30, 2019, the Company issued an aggregate of 1,384,621 shares of Common Stock under the terms of executive employment agreements.
| F-19 |
From April 1, 2019 through June 30, 2019, the Company issued an aggregate of 25,862,071 shares of CANB shares under the terms of the Stock Purchase Agreements for total proceeds of $750,000.
From July 1, 2019 through September 30, 2019, the company issued an aggregate of 5,418,301 shares of CANB Common Stock to multiple consultants for services rendered.
From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 5,500,000 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 4,800,000 shares of Common Stock under the terms of executive employment agreements.
From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 46,572,416 shares of CANB shares under the terms of the Stock Purchase Agreements for total proceeds of $1,350,600.
From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 12,074,089 shares of CANB shares under the terms of the Joint Venture Agreement.
From October 1, 2019 through December 31, 2019, the company issued an aggregate of 36,677,274 shares of CANB Common Stock to multiple consultants for services rendered.
From October 1, 2019 through December 31, 2019, the Company issued an aggregate of 4,250,000 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From October 1, 2019 through December 31, 2019, the Company issued an aggregate of 1,500,000 shares of Common Stock under the terms of executive employment agreements.
From October 1, 2019 through December 31, 2019, the Company issued an aggregate of 37,500,000 shares of CANB Common Stock under the terms of an inventory purchase agreement for total proceeds of $487,500.
NOTE 1211 – Stock Options and Warrants – Prior to 300:1 reverse stock split
A summary of stock options and warrants activity follows:
| Shares of Common Stock Exercisable Into | Shares of Common Stock Exercisable Into | |||||||||||||||||||||||
| Stock | Stock | |||||||||||||||||||||||
| Options | Warrants | Total | ||||||||||||||||||||||
| Balance, December 31, 2016 | 50,000 | 247,500 | 297,500 | |||||||||||||||||||||
| Granted in 2017 | - | - | - | |||||||||||||||||||||
| Expired in 2017 | - | - | - | |||||||||||||||||||||
| Options | Warrants | Total | ||||||||||||||||||||||
| Balance, December 31, 2017 | 50,000 | 247,500 | 297,500 | 50,000 | 247,500 | 297,500 | ||||||||||||||||||
| Granted in 2018 | 6,000,000 | 2,850,000 | 8,850,000 | 6,000,000 | 2,850,000 | 8,850,000 | ||||||||||||||||||
| Cancelled in 2018 | - | - | - | - | - | - | ||||||||||||||||||
| Exercised in 2018 | - | (850,000 | ) | (850,000 | ) | - | (850,000 | ) | (850,000 | ) | ||||||||||||||
| Balance, December 31, 2018 | 6,050,000 | 2,247,500 | 8,297,500 | 6,050,000 | 2,247,500 | 8,297,500 | ||||||||||||||||||
| Granted in Q1, Q2 & Q3 2019 | 17,000,000 | - | 17,000,000 | |||||||||||||||||||||
| Cancelled in Q1, Q2 Q3, & Q4 2019 | (50,000 | ) | - | (50,000 | ) | |||||||||||||||||||
| Exercised in Q1, Q2 Q3, & Q4 2019 | - | - | - | |||||||||||||||||||||
| Balance, December 31, 2019 | 23,000,000 | 2,247,500 | 25,247,500 | |||||||||||||||||||||
| F-20 |
Issued and outstanding stock options as of December 31, 20182019 consist of:
| Year | Number Outstanding And | Exercise | Year of | Number Outstanding | Exercise | Year of | ||||||||||||||||||
| Granted | Exercisable | Price | Expiration | And Exercisable | Price | Expiration | ||||||||||||||||||
| 2009 | 50,000 | $ | 1.000 | 2019 | ||||||||||||||||||||
| 2018 | 6,000,000 | $ | 0.001 | 2023 | 6,000,000 | $ | 0.001 | 2023 | ||||||||||||||||
| 2019 | 17,000,000 | $ | 0.001 | 2022 | ||||||||||||||||||||
| 23,000,000 | ||||||||||||||||||||||||
| Total | 6,050,000 | |||||||||||||||||||||||
On June 11, 2018, the Company granted 3,000,000 options of CANB common stock to Carl Dilley, a former director of the Company, in exchange for the retirement of a total of 3,000,000 shares of CANB common stock from Carl Dilley. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.001 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire June 11, 2023. The value of the Stock Options ($84,000) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $0.028 share price, (ii) 5 years term, (iii) 262.00% expected volatility, (iv) 2.80% risk free interest rate and the difference between this value and the fair value of retired shares was expensed in the quarterly period ended June 30, 2018.
On October 21, 2018, the Company granted 3,000,000 options of CANB common stock to Stanley L. Teeple, an officer and Director of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.001 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire October 1, 2023. The values of the Stock Options ($118,200) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $0.0395 share price, (ii) 5 years term, (iii) 221.96% expected volatility, (iv) 3.05% risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2018
On September 9, 2019, the Company granted 8,000,000 options of CANB common stock to Johnny Mack, a former officer of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.001 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire September 9, 2022. The values of the Stock Options ($192,000) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $0.024 share price, (ii) 3 years term, (iii) 242% expected volatility, (iv) 1.46% risk free interest rate and the fair value of options was expensed in the quarterly period ended September 30, 2019.
On October 15, 2019, the Company granted 3,000,000 options of CANB common stock each to Frederick Alger Boyer, Jr., Ronald A. Silver and James F. Murphy, directors of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.001 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire October 15, 2022. The values of the Stock Options ($63,000 each) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $0.021 share price, (ii) 3 years term, (iii) 242% expected volatility, (iv) 1.60% risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2019.
Issued and outstanding warrants as of December 31, 20182019 consist of:
| Year | Number Outstanding And | Exercise | Year of | Number Outstanding | Exercise | Year of | ||||||||||||||||||
| Granted | Exercisable | Price | Expiration | And Exercisable | Price | Expiration | ||||||||||||||||||
| 2010 | 247,500 | $ | 1.00 | 2020 | 247,500 | $ | 1.00 | 2020 | ||||||||||||||||
| 2018 | 2,000,000 | $ | 0.04345 | (a) | 2023 | 2,000,000 | $ | 0.04345 | (a) | 2023 | ||||||||||||||
| Total | 2,247,500 | 2,247,500 | ||||||||||||||||||||||
(a) 110% of the closing price of the Company’s common stock on the date that the Holder funds the full purchase price of the Note.
| F-21 |
NOTE 1312 – Income Taxes
No provisions for income taxes were recorded for the periods presented since the Company incurred net losses in those periods.
The provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal income tax rate of 21% and 35% to pretax income (loss) as follows:
| December 31, | ||||||||
| 2019 | 2018 | |||||||
| Expected income tax (benefit) at 21% | $ | (964,419 | ) | $ | (863,578 | ) | ||
| Non-deductible stock-based compensation | 648,729 | 583,653 | ||||||
| Non-deductible amortization of debt discounts | - | 37,064 | ||||||
| Loss on stock issuance | - | 136,344 | ||||||
| Loss on debt conversion | - | 272,867 | ||||||
| Non-deductible expense from derivative liability | - | (334,139 | ) | |||||
| Loan forgiveness | - | 18,024 | ||||||
| Increase in deferred income tax assets valuation allowance | 315,690 | 149,765 | ||||||
| Provision for (benefit from) income taxes | $ | - | $ | - | ||||
| Year Ended December 31, | ||||||||
| 2018 | 2017 | |||||||
| Expected income tax (benefit) at 21% and 35% | $ | (663,578 | ) | $ | (748,902 | ) | ||
| Loss on forgiveness of receivable from Pure Health products | 18,024 | |||||||
| Loss on stock issuance | 36,344 | 67,043 | ||||||
| Loss on debt conversion | 272,867 | 11,334 | ||||||
| Non-deductible stock-based compensation | 583,653 | 81,057 | ||||||
| Non-deductible amortization of debt discounts | 37,064 | 87,566 | ||||||
| Non-deductible impairment of intangible assets | - | 7,527 | ||||||
| Non-deductible expense from derivative liability | (334,139 | ) | 320,495 | |||||
| Increase in deferred income tax assets valuation allowance | 250,235 | 173,879 | ||||||
| Provision for (benefit from) income taxes | $ | - | $ | - | ||||
Deferred income tax assets consist of:
| December 31, | December 31, | |||||||
| 2018 | 2017 | |||||||
| Net operating loss carryforward | 1,644,593 | 1,394,358 | ||||||
| Valuation allowance | (1,644,593 | ) | (1,394,358 | ) | ||||
| Net | $ | - | $ | - | ||||
| December 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Net operating loss carryforward | 1,300,168 | 984,478 | ||||||
| Valuation allowance | (1,300,168 | ) | (984,478 | ) | ||||
| Net | $ | - | $ | - | ||||
Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of $1,644,593$1,300,168 attributable to the future utilization of the $4,786,934$6,191,273 net operating loss carryforward as of December 31, 20182019 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the financial statements at December 31, 2018.2019. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, 2037, 2038 and 20382039 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511, $338,345, $386,297, $496,798$381,638, $499,288, $716,858 and $713,162,$1,503,282, respectively.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
| F-22 |
The Company’s U.S. Federal and state income tax returns prior to 20142015 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations on the 20142015 tax year returns expired in September 2018.2019.
The Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest or penalties paid during 20182019 and 2017.2018.
NOTE 13 – Segment Information
The Company has one reportable segment: Durable Equipment Products.
The accounting policies of the segment described above are the same as those described in Summary of Significant Accounting Policies in Note 3. The Company evaluates the performance of the Durable Equipment Products segment based on income (loss) before income taxes, which includes interest income.
Durable Equipment Products | ||||
| Three months ended December 31, 2019 | ||||
| Revenue from external customers | 466,920 | |||
| Revenue from other segments | - | |||
| Segment profit | 309,370 | |||
| Segment assets | 1,994,845 | |||
| Twelve months ended December 31, 2019 | ||||
| Revenue from external customers | 1,436,403 | |||
| Revenue from other segments | - | |||
| Segment profit | 809,631 | |||
| Segment assets | 1,994,845 | |||
Three Months Ended December 31, 2019 | Twelve Months Ended December 31, 2019 | |||||||
| Total profit for reportable segment | $ | 309,208 | $ | 810,060 | ||||
| Other income (expense) - net | 162 | (429 | ) | |||||
| Income before income taxes | $ | 309,370 | $ | 809,631 | ||||
NOTE 14 – Commitments and Contingencies
Employment Agreements
On October 3, 2017, the Company executed an Executive Employment Agreement with Marco Alfonsi (“Alfonsi”) for Alfonsi to serve as the Company’s chief executive officer and interim chief financial officer and secretary for cash compensation of $10,000 per month. Pursuant to the agreement, the Company issued a share of CANB Series A Preferred Stock to Alfonsi on October 4, 2017 (see Note 8)9). Alfonsi may terminate his employment upon 30 days written notice to the Company. The Company may terminate Alfonsi’s employment upon written notice to Alfonsi by a vote of the Board of Directors. At November 12,October 21, 2018, this former Agreement was terminated due to the execution of a new Employment Agreement with Marco Alfonsi for Alfonsi to serve as the Company’s chief executive officer for cash compensation of $15,000 per month. Pursuant to the agreement,new Agreement, three of the eight previously issued shares of CANB Series A Preferred Stock will be returned to the Company and converted into 30,000,000 common shares. On December Alfonsi may terminate his employment upon 30 days written notice to the Company. The new Agreement has an initial term of four years and can be terminated upon the resignation or death of Mr. Alfonsi, and also can be terminated by the Company due to the failure or neglect of Mr. Alfonsi to perform his duties, or due to the misconduct of Mr. Alfonsi in connection with the performance.
| F-23 |
On February 12, 2018, the Company executed an Executive Service Agreement (“Agreement”) with David Posel. The Agreement provides that Mr. Posel services as the Company’s Chief Operating Officer for a term of 4 years. The Agreement also provides for compensation to Mr. Posel of $5,000 cash per month and the issuance of 1 share of Series A Preferred Stock at the inception of the Agreement. The Agreement can be terminated upon the resignation or death of Mr. Posel, and also can be terminated by the Company due to the failure or neglect of Mr. Posel to perform his duties, or due to the misconduct of Mr. Posel in connection with the performance. On February 12, 2018, 1 share of CANB Series A Preferred Stock were issued to Mr. Posel (see Note 8)9). Since execution of the Posel Agreement, Mr. Posel has been re-assigned to COO for Pure Health Products, the Company’s subsidiary.
On February 16, 2018, the Company executed an Executive Service Agreement (“Agreement”) with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 3 years. The Agreement also provides for compensation to Mr. Holtmeyer of $10,000 cash per month and the issuance of 3, 2 and 1 share of Series A Preferred Stock at the beginning of each year. The Agreement can be terminated upon the resignation or death of Mr. Holtmeyer, and also can be terminated by the Company due to the failure or neglect of Mr. Holtmeyer to perform his duties, or due to the misconduct of Mr. Holtmeyer in connection with the performance. At December 29, 2018, this Agreement was terminated due to the execution of a new Employment Agreement with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 4 years. The Agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 245,789 shares of common stock (prior to 300:1 reverse stock split) upon signing of the agreement.
On October 15, 2018, the Company executed an Employment Agreement (“Agreement”) with Stanley L. Teeple. The Agreement provides that Mr. Teeple services as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The Agreement also provides for compensation to Mr. Teeple of $15,000 cash per month and the issuance of 1 share of Series A Preferred Stock proportionately vesting over four years beginning December 31, 2018 upon execution of the Agreement. The Agreement can be terminated upon the resignation or death of Mr. Teeple, and also can be terminated by the Company due to the failure or neglect of Mr. Teeple to perform his duties, or due to the misconduct of Mr. Teeple in connection with the performance. In May 2019 Mr. Teeple was granted an additional 3 shares of Series A Preferred.
On December 28, 2018, the Company executed an Employment Agreement (“Agreement”) with Pasquale Ferro for Mr. Ferro to serve as Pure Health Products’ president for cash compensation of $15,000 per month and the total issuance of 5 share of Series A Preferred Stock proportionately vesting at the beginning of each year for a term of 4 years. Mr. Ferro may terminate his employment upon 30 days written notice to the Company. The Agreement has an initial term of four years and can be terminated upon the resignation or death of Mr. Ferro, and also can be terminated by the Company due to the failure or neglect of Mr. Ferro to perform his duties, or due to the misconduct of Mr. Ferro in connection with the performance.
Consulting Agreements
On July 29, 2017,Effective September 6, 2019 (the “Effective Date”), Can B̅ Corp (the “Company” or “CANB”) approved the Company executed a Consulting Agreement with Andrew W Holtmeyer for Mr. Holtmeyer to serveappointment of Johnny J. Mack (“Mack”) as its President and Chief Operating Officer. Mack had been serving as the Company’s consultantinterim COO. The Company and Mack have entered into a new Employee Services Agreement (the “Agreement”) to memorialize the terms of the foregoing. In consideration for monthlyMack’s services, Mack will (i) receive a base salary of $15,000 per month, subject to increase after each yearly anniversary of the Agreement, (ii) be eligible to receive annual cash or stock bonuses, (iii) be entitled to four weeks’ vacation time and five paid days for illness in accordance with the Company’s policies, and (iv) receive a total of 32,000,000 options (“Options”) to purchase shares of the Company’s common stock, with 8,000,000 Options vesting on the effective date and additional tranches of 8,000,000 Options vesting on each of the first, second, and third anniversaries of the Effective Date, assuming Mack’s continued employment. Each Option is exercisable at a price of $0.001 per share (prior to 300:1 reverse stock split). The Company also agreed to hold harmless and indemnify Mack as authorized or permitted by law and the Company’s governing documents, as the same may be amended from time to time, except for acts constituting negligence or willful misconduct by Mack. The Company has agreed to pay Mack a severance in the event the Agreement is terminated by the Company without cause or by Mack for “good reason” or by reason of Mack’s death or disability. On October 4, 2019 Mack resigned from all of his office and director positions and the company settled his termination for payment of $5,000 through July 29, 2018. Effective February 16, 2018,all accrued expenses, payout of all accrued time and base compensation of $13,315 and retention of his already earned 8 million options. Mr. Mack has left the Company.
| F-24 |
In addition, on October 10th, 2019 the Company terminatedappointed Philip Scala as its interim COO. Mr. Scala has acted as founder and CEO of Pathfinder Consultants International, Inc. (“Pathfinder”) since 2008. Pathfinder offers unique expertise and delivers the information you need to make informed decisions, whether in times of crisis or in the course of simply running your business. Prior to forming Pathfinder, Mr. Scala served the United States both as a Commissioned Officer in the US Army for five years followed by his 29 years of service with the FBI. Mr. Scala received his bachelor’s degree and Master of Business Administration in accounting from St. John’s University, he also earned a Master of Arts degree in Psychology from New York University. The Company has entered into an employment agreement with Mr. Scala. Pursuant to the agreement, dueMr. Scala will receive a base salary of $2,500 per month. He will be entitled to incentive bonuses and pay increases in accordance with the replacementCompany’s normal policies and procedures. Mr. Scala will also receive options to buy 500,000 common shares of an Executive Service Agreement.the Company at a price of $0.001 (prior to 300:1 reverse stock split) for a period of three years. The initial term of the agreement is for 90 days. The agreement otherwise contains standard covenants and conditions.
Consulting Agreements
On September 6, 2017, the Company executed a Consulting Agreement with T8 Partners LLC (“T8”) for T8 to serve as the Company’s consultant for stock compensation of a total of 10,000,000 restricted shares.shares (prior to 300:1 reverse stock split). Pursuant to the agreement, the Company issued 2,500,000 restricted shares of CANB common stock to T8 on September 7, 2017. Effective October 27, 2017, the Company terminated the agreement due to non-performance by T8. On July 12, 2018,The Company won the Company received a response fromarbitration proceedings against T8 Partners LLC (“T8”) confirming that the 2,500,000and T8 has been ordered to return its shares requested to be returned by the Company in an arbitration filed on May 11, 2018 will be returned to the Company. The Company is awaiting the result of that arbitration.
On November 9, 2017, the Company executed a Consulting Agreement with Healthcare Advisory Group Company (“Healthcare”) for Healthcare to serve as the Company’s consultant for stock compensation of a total of 5,000,000 restricted shares.shares (prior to 300:1 reverse stock split). Pursuant to the agreement, the Company issued 2,500,000 restricted shares of CANB common stock to Healthcare on November 9, 2017. Effective March 6, 2018, the Company terminated the agreement due to non-performance by Healthcare.
On April 1, 2019, we engaged an advisor to provide consulting services under an Investor Relations and Advisory Agreement (the “Advisory Agreement”). Pursuant to the Advisory Agreement, we agreed to pay the Consulting Firm a restricted common stock monthly fee of $5,500 per month for consulting and services paid in advance of services each month. Starting May 1, 2019, the restricted common stock monthly fee will decrease to $4,000 per month. The number of shares to be issued will be calculated based on the closing price of our common shares on the 1st or preceding day of each month, if the 1st were to fall on a weekend or holiday. The shares shall not have registration rights, and the shares may be sold subject to Rule 144.
Lease Agreements
On December 1, 2014, Prosperity entered into a lease agreement with KLAM, Inc. for office space in Hicksville, New York for an initial term of one year commencing December 1, 2014. The lease provides for monthly rentals of $2,500 and provides Prosperity an option to renew the lease after the initial term. The Company has continued to occupy this space after November 30, 2015 under a month to month arrangement at $2,500 per month. KLAM, Inc. is controlled by the wife of the Company’s chief executive officer Marco Alfonsi.
On September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100 for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate taxes. On August 6, 2018, the Company renewed the lease agreement for a term of 36 months starting November 1, 2018. The lease provides for monthly rentals of $3,193 for lease year 1, $3,289 for lease year 2, and $3,388 for lease year 3. In October 2019, the Company modified and extended the lease agreement for a term of 30 months starting November 1, 2019. The lease provides for monthly rentals of $3,807.05 for year 1 and $3,921.26 for the remaining eighteen months. The original $100,681 right-of-use asset and $90,591 lease liability was adjusted to $103,260 with the modification.
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The Company leases office space in numerous medical facilities under month-to-month agreements.
Rent expense for the yearyears ended December 31, 2019 and 2018 was $246,968 and 2017 was $67,165, and $65,060, respectively.
At December 31, 2018,2019, the future minimum lease payments under non-cancellable operating leases were:
| Year ended December 31, 2019 | 38,508 | |||||||
| Year ended December 31, 2020 | 39,666 | $ | 45,913 | |||||
| Year ended December 31, 2021 | 33,880 | 47,055 | ||||||
| Year ended December 31, 2022 | 15,685 | |||||||
| Total | $ | 112,054 | $ | 108,653 | ||||
The lease liability of $97,279 at December 31, 2019 as presented in the Consolidated Balance Sheet represents the discounted (at our 10% estimated incremental borrowing rate) value of the future lease payments of 108,653 at December 31, 2019.
Major Customers
For the yeartwelve months ended December 31, 2019, there were no customers that accounted for more than 10% of total revenues.
For the twelve months ended December 31, 2018, one customer accounted for approximately 16% of total revenues.
For the year ended December 31, 2017, three customers accounted for approximately 45%, 29% and 14%, respectively, of total service revenues.
Public Offering of Units
On August 2, 2016, the Company’s Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. On a self-underwritten basis, the Company was offering up to 40,000,000 Units at a price of $0.05 per Unit or $2,000,000 maximum. Each Unit consisted of one share of Company common stock and one warrant to purchase ½ share of Company common stock at a price of $0.10 per share for a period of three years. There was no minimum offering amount or escrow required as a condition to closing. The offering terminated May 17, 2017.
NOTE 15 – Related Party Transactions
ProAdvanced Group, Inc. (“PAG”)LI Accounting Associates, LLC (LIA), an entity controlled by a relative of the Company’s chief executive officer,Managing Member PHP, is a customer of CANB. At December 31, 2018, CANB had an account receivable from PAG of $7,240. For the year ended December 31, 2018, CANB had revenues from PAG of $5,000.
Island Stock Transfer (“IST”), an entity controlled by Carl Dilley, a former Company director, is both a customer and vendor of CANB. At December 31, 2018,2019, CANB had an account receivable from IST of $7,035 anddid not have an account payable due to IST of $1,454.LIA. For the yeartwelve months ended December 31, 2018,2019, CANB had revenues from ISTexpenses to LIA of $4,000.
Stock Market Manager, Inc. is also an entity controlled by Mr. Dilley. For the year ended December 31, 2018, CANB had an account payable to Stock Market Manager Inc. of $1,676.
In order to facilitate its operations, the Company has entered into a Production Agreement with Pure Health Products, LLC (“PHP”), a New York limited liability company. Pursuant to the Production Agreement, PHP will manufacture, package, and sell the Company’s CBD infused products on an exclusive basis. PHP will not produce or manufacture any product containing any cannabis or hemp derivative for any person or entity other than the Company, and the Company controls the ingredients, recipe, manufacturing processes and procedures and quality and taste parameters for all Products produced at the PHP facility. PHP may also white label / rebrand or relabel the products on the Company’s behalf pursuant to “white label agreements” entered into between the Company and third-party customers. Credit card sales are processed through PHP as well. Through its contractual relationship with PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. In addition, the Company has the option to acquire certain assets of PHP should it elect to take over direct manufacture of its Products. For the year ended December 31, 2018, purchase of CBD infused products from PHP totaled $274,556.50. Effective December 28, 2018, the Company acquired Pure Health Products, LLC.$10,750.
During the yeartwelve months ended December 31, 2018,2019, we had products and service sales to related parties totaling $5,000.$0.
NOTE 16 – Subsequent Events
On January 28, 2019, the Company issued 10,000,000 shares of CANB common stock to a consultant of the Company in exchange for the retirement of 1 share of CANB Series A Preferred Stock.
From February 21, 2019 to March 12, 2019, the Company issued aggregately 20,221,436 shares of CANB common stock to RedDiamond in exchange for the retirement of 157,105 shares of CANB Series B Preferred Stock.
From January 4, 2019 to March 27, 2019, the Company issued aggregately 41,431,994 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $1,196,100.
On January 14, 2019, the Company and PHP (collectively, the “buyer”) entered into a License and Acquisition Agreement (the “LAA”) with Hudilab, Inc. (“HUDI”). Pursuant to the LAA, HUDI will sell the technology owned by it to the buyer in exchange for 7,500,000 shares of CANB common stock. On January 14, 2019, the shares were issued to the owner of HUDI.
From January 18, 2019 to March 17, 2019, the Company issued aggregately 24,600,000 shares of CANB common stock to multiple consultants for services rendered.
From January 19, 2019 to March 27, 2019, the Company issued aggregately 1,167,959 shares of CANB common stock to employee and officers of the Company pursuant to employee agreement and in satisfaction of accrued compensation for the quarter ended March 31, 2019.
On January 31, 2019, PHP entered into an Asset Purchase Agreement (the “Agreement”) with Seven Chakras, LLC (“Seven Chakras”). Pursuant to the Agreement, PHP purchased the rights and title to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ products containing cannabidiol (“CBD”), (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials (collectively, the “Assets”). On February 20, 2019, the Company issued 1,000,000 shares of CANB common stock to owners of Seven Chakras pursuant to the agreement.
On February 5, 2019, the Company issued 2,000,000 shares to the owner of TZ Wholesale LLC, pursuant to a Memorandum of Understanding (the “MOU”) dated November 9, 2018.
As a result of Canbiola’s acquisition of Pure Health products, it conducted a corporate re-alignment including naming Pasquale Ferro President and moving David Possel from Chief Operating Officer of Canbiola to Chief Operations Officer Pure Health Products.
In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through October 30, 2018,November 1, 2019, the date on which these consolidated financial statements were available to be issued. Except as disclosed above, thereThere were no material subsequent events that required recognition or additional disclosure in these consolidated financial statements.statements as follows:
The Company acquired 51% of Green Grow Farms, Inc. (GGFI) in December 2019 for 37.5 million shares of CANB common stock. The remaining 49% of GGFI was held by New York Farm Group (NYFG). Post-closing of the original agreement, the Company discovered certain assets needed reassessment and reconsideration. In settlement of certain claims held by the Company as a result of the foregoing, NYFG agreed to assign the Company its 49% interest in GGFI and 1,000,000 shares of Iconic Brands, Inc (ICNB) stock in consideration for a release from the Company. The settlement agreement was executed on March 3, 2020.
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the year ended December 31, 2020.
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