UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER: 000-55753
Can B̅B Corp.
(Exact name of registrant as specified in its charter)
| (Exact name of registrant as specified in its charter) | ||
| Florida | 20-3624118 | |
(State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) |
Identification No.) | |
960 South Broadway, Suite 120
Hicksville, NY 11801
(Address of principal executive offices)
516-595-9544
(Registrant’s telephone number, including area code)
Canbiola, Inc.
(Former name, former address and former fiscal, if changed since last report)
Securities Registered Pursuant to Section 12(b) of the Act:
| Securities Registered Pursuant to Section 12(b) of the Act: | ||||
| Tile of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | CANB | N/A | ||
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 every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [X] | Smaller reporting company | [X] |
| Emerging Growth Company | [ ] | ||
| (Do not check if smaller reporting company) |
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 Exchange Act). [ ] Yes [X] No
The number of shares of the registrant’s only class of common stock issued and outstanding as of AugustMay 14, 20202021 was 3,840,05316,667,665 shares.
Can B CorpCorp.
FORM 10-Q
June 30, 2020March 31, 2021
TABLE OF CONTENTS
| 2 |
PART 1 -– FINANCIAL INFORMATION
Item 1.Financial Statements.Statements
Can B̅ Corp. and SubsidiarySubsidiaries
Consolidated Balance Sheets
(Unaudited) June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 390,201 | $ | 46,540 | ||||
| Accounts receivable, less allowance for doubtful accounts of $385,468 and $0, respectively | 1,496,836 | 1,251,609 | ||||||
| Inventory | 373,833 | 784,497 | ||||||
| Note Receivable | 23,787 | 24,268 | ||||||
| Deposit - current | 312,655 | - | ||||||
| Prepaid expenses - current | 1,259,604 | 1,279,901 | ||||||
| Total current assets | 3,856,916 | 3,386,815 | ||||||
| Property and equipment, at cost less accumulated depreciation of $178,065 and $116,555, respectively | 1,030,519 | 1,075,242 | ||||||
| Other assets: | ||||||||
| Deposit - noncurrent | 21,287 | 21,287 | ||||||
| Prepaid expenses - noncurrent | 591,819 | 1,179,929 | ||||||
| Other receivable – noncurrent | 23,581 | 58,206 | ||||||
| Intangible assets, net of accumulated amortization of $479,679 and $202,521, respectively | 980,591 | 1,056,562 | ||||||
| Investment in Marketable Securities | 550,000 | - | ||||||
| Goodwill | 55,849 | 55,849 | ||||||
| Right-of-Use Asset, net of amortization of $25,208 and $6,280, respectively | 78,052 | 96,980 | ||||||
| Total other assets | 2,301,179 | 2,468,813 | ||||||
| Total assets | $ | 7,188,614 | $ | 6,930,870 | ||||
| Liabilities and Stockholders’ Deficiency | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 377,307 | 226,467 | ||||||
| Accrued officers’ compensation | 240,410 | 144,363 | ||||||
| Other accrued expenses payable | 28,886 | 61,557 | ||||||
| Notes and loans payable | 1,164,138 | 35,000 | ||||||
| Current portion of lease liability | 40,941 | 38,281 | ||||||
| Total current liabilities | 1,851,682 | 505,668 | ||||||
| Long-term liabilities: | ||||||||
| Non-current portion of lease liability | 37,786 | 58,998 | ||||||
| Notes and loans payable | 354,840 | - | ||||||
| Total long-term liabilities | 392,626 | 58,998 | ||||||
| Total liabilities | 2,244,308 | 564,666 | ||||||
| Commitments and contingencies (Notes 15) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, authorized 5,000,000 shares: | ||||||||
| Series A Preferred stock, no par value: | ||||||||
| authorized 20 shares, issued and outstanding 20 shares, respectively | 5,539,174 | 5,539,174 | ||||||
| Common stock, no par value; authorized 1,500,000,000 shares, issued and outstanding 3,421,338 and 2,680,937 shares, respectively | 24,056,211 | 23,113,077 | ||||||
| Additional Paid-in capital | 872,976 | 872,976 | ||||||
| Additional Paid-in capital – Stock Options (Note 12) | 202,200 | 202,200 | ||||||
| Accumulated deficit | (25,726,255 | ) | (23,361,223 | ) | ||||
| Total stockholders’ equity | 4,944,306 | 6,366,204 | ||||||
| Total liabilities and stockholders’ equity | $ | 7,188,614 | $ | 6,930,870 | ||||
| (Unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,677,076 | $ | 457,798 | ||||
| Accounts receivable, less allowance for doubtful accounts of $533,300 and $485,848, respectively | 2,029,013 | 2,003,064 | ||||||
| Inventory | 331,951 | 344,954 | ||||||
| Note receivable | 2,898 | 2,898 | ||||||
| Prepaid expenses | 933,706 | 1,209,126 | ||||||
| Total current assets | 4,974,644 | 4,017,840 | ||||||
| Property and equipment, net | 963,428 | 994,979 | ||||||
| Other assets: | ||||||||
| Deposits | 23,287 | 21,287 | ||||||
| Intangible assets, net | 794,352 | 523,009 | ||||||
| Goodwill | 55,849 | 55,849 | ||||||
| Operating lease right-of-use-asset | 47,854 | 58,174 | ||||||
| Other noncurrent assets | 12,968 | 20,315 | ||||||
| Total other assets | 934,310 | 678,634 | ||||||
| Total assets | $ | 6,872,382 | $ | 5,691,453 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 195,311 | $ | 153,640 | ||||
| Accrued expenses | 157,765 | 200,495 | ||||||
| Notes and loans payable | 1,592,318 | 1,827,531 | ||||||
| Operating lease liability - current | 44,602 | 43,506 | ||||||
| Total current liabilities | 1,989,996 | 2,225,172 | ||||||
| Long-term liabilities: | ||||||||
| Notes and loans payable | 194,940 | 194,940 | ||||||
| Operating lease liability - noncurrent | 3,921 | 15,492 | ||||||
| Total long-term liabilities | 198,861 | 210,432 | ||||||
| Total liabilities | $ | 2,188,857 | $ | 2,435,604 | ||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, authorized 5,000,000 shares: | ||||||||
| Series A Preferred stock, no par value: 20 shares authorized, issued and outstanding | 5,539,174 | 5,539,174 | ||||||
| Series B Preferred stock, $0.001 par value: 500,000 shares authorized, 0 issued and outstanding | - | - | ||||||
| Series C Preferred stock, $0.001 par value: 2,000 shares authorized, 50 issued and outstanding | - | - | ||||||
| Series D Preferred stock, $0.001 par value: 4,000 shares authorized, 1,950 issued and outstanding | 2 | - | ||||||
| Common stock, no par value; 1,500,000,000 shares authorized, 16,667,654 and 5,544,590 issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 29,719,534 | 26,111,978 | ||||||
| Treasury stock | (572,678 | ) | (572,678 | ) | ||||
| Additional paid-in capital | 2,563,399 | 2,563,399 | ||||||
| Accumulated deficit | (32,565,906 | ) | (30,386,024 | ) | ||||
| Total stockholders’ equity | 4,683,525 | 3,255,849 | ||||||
| Total liabilities and stockholders’ equity | $ | 6,872,382 | $ | 5,691,453 | ||||
See notes to consolidated financial statements.statements
| 3 |
Can B̅ CorpCorp. and SubsidiarySubsidiaries
Consolidated StatementsStatement of Operations
(Unaudited)
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues | ||||||||||||||||
| Product Sales | $ | 774,091 | $ | 1,147,139 | $ | 204,684 | $ | 631,779 | ||||||||
| Service Revenue | 700 | 3,600 | 400 | 1,800 | ||||||||||||
| Total Revenues | 774,791 | 1,150,739 | 205,084 | 633,579 | ||||||||||||
| Cost of product sales | 169,594 | 561,757 | 48,045 | 299,204 | ||||||||||||
| Gross Profit | 605,197 | 588,982 | 157,039 | 334,375 | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Officers and director’s compensation (including stock-based compensation of $622,671, $834,230, $30,000 and $336,882, respectively) | 1,020,755 | 1,274,688 | 382,082 | 829,138 | ||||||||||||
| Consulting fees (including stock-based compensation of $353,116, $953,914, $181,764 and $388,138, respectively) | 423,022 | 1,091,086 | 206,614 | 427,335 | ||||||||||||
| Advertising expense | 260,035 | 153,762 | 141,205 | 127,374 | ||||||||||||
| Hosting expense | 12,136 | 7,917 | 5,793 | 7,467 | ||||||||||||
| Rent expense | 121,652 | 12,344 | 29,046 | 484 | ||||||||||||
| Professional fees | 325,136 | 112,016 | 134,958 | 74,180 | ||||||||||||
| Depreciation of property and equipment | 8,103 | 14,297 | 4,008 | 11,532 | ||||||||||||
| Amortization of intangible assets | 277,158 | 7,160 | 147,192 | 4,966 | ||||||||||||
| Reimbursed Expenses | 40,963 | 62,776 | 20,674 | 35,474 | ||||||||||||
| Other | 347,703 | 460,293 | 204,940 | 251,714 | ||||||||||||
| Total operating expenses | 2,836,663 | 3,196,339 | 1,276,512 | 1,769,664 | ||||||||||||
| Loss from operations | (2,231,466 | ) | (2,607,357 | ) | (1,119,473 | ) | (1,435,289 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 441 | 317 | 221 | 317 | ||||||||||||
| Interest expense (including amortized finance cost of $69,645 $0, $58,967 and $0, respectively) | (82,782 | ) | (2,965 | ) | (68,898 | ) | (2,519 | ) | ||||||||
| Other income (expense) - net | (82,341 | ) | (2,648 | ) | (68,677 | ) | (2,202 | ) | ||||||||
| Loss before provision for income taxes | (2,313,807 | ) | (2,610,005 | ) | (1,188,150 | ) | (1,437,491 | ) | ||||||||
| Provision for income taxes | 1,225 | - | 275 | - | ||||||||||||
| Net Loss | $ | (2,315,032 | ) | $ | (2,610,005 | ) | $ | (1,188,425 | ) | $ | (1,437,491 | ) | ||||
| Net loss per common share - basic | $ | (.79 | ) | $ | (1.47 | ) | $ | (0.39 | ) | $ | (0.76 | ) | ||||
| Net loss per common share - diluted | $ | (0.64 | ) | $ | (1.00 | ) | $ | (0.32 | ) | $ | (0.60 | ) | ||||
| Weighted average common shares outstanding – | ||||||||||||||||
| Basic | 2,947,930 | 1,776,620 | 3,079,235 | 1,880,137 | ||||||||||||
| Diluted | 3,614,610 | 2,603,610 | 3,745,915 | 2,384,289 | ||||||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenues | ||||||||
| Product sales | $ | 243,695 | $ | 569,407 | ||||
| Service revenue | 63,245 | 300 | ||||||
| Total revenues | 306,940 | 569,707 | ||||||
| Cost of revenues | 76,795 | 121,549 | ||||||
| Gross profit | 230,145 | 448,158 | ||||||
| Operating expenses | 2,022,679 | 1,560,151 | ||||||
| Loss from operations | (1,792,534 | ) | (1,111,993 | ) | ||||
| Other income (expense): | ||||||||
| Other income | 5,564 | 220 | ||||||
| Interest expense | (392,787 | ) | (13,884 | ) | ||||
| Other expense | - | (7,500 | ) | |||||
| Other expense | (387,223 | ) | (21,164 | ) | ||||
| Loss before provision for income taxes | (2,179,757 | ) | (1,133,157 | ) | ||||
| Provision for income taxes | 125 | 950 | ||||||
| Net loss | $ | (2,179,882 | ) | $ | (1,134,107 | ) | ||
| Loss per share - basic and diluted | $ | (0.24 | ) | $ | (0.33 | ) | ||
| Weighted average shares outstanding - basic and diluted | 9,131,956 | 3,483,304 | ||||||
See notes to consolidated financial statements.statements
| 4 |
Can B̅ CorpCorp. and SubsidiarySubsidiaries
Consolidated StatementsStatement of Comprehensive Loss
(Unaudited)Stockholders’ Equity
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net Loss | $ | (2,315,032 | ) | $ | (2,610,005 | ) | $ | (1,188,425 | ) | $ | (1,437,491 | ) | ||||
| Other comprehensive loss: | ||||||||||||||||
| Unrealized loss on marketable securities | (50,000 | ) | - | (42,500 | ) | - | ||||||||||
| Comprehensive Loss | $ | (2,365,032 | $ | (2,610,005 | ) | $ | (1,230,925 | ) | $ | (1,437,491 | ) | |||||
Series A | Series B | Series C | Series D | Additional | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Treasury Stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2021 | 20 | $ | 5,539,174 | - | $ | - | - | $ | - | - | $ | - | 5,544,590 | $ | 26,111,978 | 543,715 | $ | (572,678 | ) | $ | 2,563,399 | $ | (30,386,024 | ) | $ | 3,255,849 | ||||||||||||||||||||||||||||||||||
| Issuance of preferred stock | - | - | - | - | 50 | - | 1,950 | 2 | - | - | - | - | - | - | 2 | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series C Preferred stock to Common stock | - | - | - | - | - | - | - | - | 3,750,000 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Sale of common stock | - | - | - | - | - | - | - | - | 5,732,000 | 2,866,000 | - | - | - | - | 2,866,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in lieu of note repayments | - | - | - | - | - | - | - | - | 1,155,250 | 537,748 | - | - | - | - | 537,748 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services rendered | - | - | - | �� | - | - | - | - | - | 130,758 | 66,135 | - | - | - | - | 66,135 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for asset acquisition | - | - | - | - | - | - | - | - | 355,057 | 137,673 | - | - | - | - | 137,673 | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (2,179,882 | ) | (2,179,882 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | 20 | $ | 5,539,174 | 0 | $ | - | 50 | $ | - | 1,950 | $ | 2 | 16,667,655 | $ | 29,719,534 | 543,715 | $ | (572,678 | ) | $ | 2,563,399 | $ | (32,565,906 | ) | $ | 4,683,525 | ||||||||||||||||||||||||||||||||||
| Three months ended March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2020 | 20 | $ | 5,539,174 | - | $ | - | - | $ | - | - | $ | - | 2,680,937 | $ | 23,113,077 | - | $ | - | $ | 1,075,176 | $ | (23,361,223 | ) | $ | 6,366,204 | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for services rendered | - | - | - | - | - | - | - | - | 58,835 | 132,392 | - | - | - | - | 132,392 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock - reverse stock split rounding | - | - | - | - | - | - | - | - | 2,460 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to FirstFire note agreement | - | - | - | - | - | - | - | - | 119,508 | 295,780 | - | - | - | - | 295,780 | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (1,134,107 | ) | (1,134,107 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2020 | 20 | $ | 5,539,174 | - | $ | - | - | $ | - | - | $ | - | 2,861,740 | $ | 23,541,249 | - | $ | - | $ | 1,075,176 | $ | (24,495,330 | ) | $ | 5,660,269 | |||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.statements
| 5 |
Can B̅ Corp. and SubsidiarySubsidiaries
Consolidated StatementsStatement of Stockholders’ Deficiency (Unaudited)Cash Flows
| Preferred Stock A | Preferred Stock B | Preferred Stock C | Common Stock, no | Additional | ||||||||||||||||||||||||||||||||||||||||
| , no par value | , $0.001 par value | , $0.001 par value | par value | Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2020 | 20 | $ | 5,539,174 | - | $ | - | - | $ | - | 2,680,937 | $ | 23,113,077 | $ | 1,075,176 | ($ | 23,361,223 | ) | $ | 6,366,204 | |||||||||||||||||||||||||
| Issuance of common stock in | ||||||||||||||||||||||||||||||||||||||||||||
| 2020 for services rendered | 190,888 | 315,615 | 315,615 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in | ||||||||||||||||||||||||||||||||||||||||||||
| 2020 for 300:1 reverse stock split rounding | 2,460 | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in 2020 pursuant to First Fire | ||||||||||||||||||||||||||||||||||||||||||||
| note agreement | 119,508 | 295,780 | , | 295,780 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in 2020 pursuant to Labrys Fund Equities note agreement | 142,545 | 80,182 | 80,182 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in 2020 pursuant to Eagle Equities | ||||||||||||||||||||||||||||||||||||||||||||
| note agreement | 20,000 | 8,745 | 8,745 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in 2020 for acquisition of intangible assets | 235,000 | 201,187 | 201,187 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in | ||||||||||||||||||||||||||||||||||||||||||||
| 2020 for compensation | 30,000 | 41,625 | 41,625 | |||||||||||||||||||||||||||||||||||||||||
| Net Loss | (2,315,032 | ) | ((2,315,032) | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | (50,000 | ) | (50,000 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | 20 | $ | 5,539,174 | - | $ | - | - | $ | - | 3,421,338 | $ | 24,056,211 | $ | 1,075,176 | ($ | 25,726,255 | ) | $ | 4,944,306 | |||||||||||||||||||||||||
| Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2019 | 18 | $ | 4,557,424 | 499,958 | $ | 479 | - | $ | - | 1,468,554 | $ | 16,624,557 | $ | 1,075,176 | ($ | 18,786,753 | ) | $ | 3,488,883 | |||||||||||||||||||||||||
| Issuance of common stock for retirement of Series A | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | (1 | ) | (10,500 | ) | 33,333 | 10,500 | - | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock for retirement of Series B Preferred Stock | (157,105 | ) | (157 | ) | 67,405 | 157 | ||||||||||||||||||||||||||||||||||||||
| Sale of common stock in Q1 & Q2 2019 | 224,314 | 1,946,100 | 1,946,100 | |||||||||||||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in 2019 for acquisition of | ||||||||||||||||||||||||||||||||||||||||||||
| technology | 28,333 | 148,655 | 148,655 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in 2019 for satisfaction of accrued | ||||||||||||||||||||||||||||||||||||||||||||
| salaries | 2,227 | 54,340 | 54,340 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in | ||||||||||||||||||||||||||||||||||||||||||||
| 2019 for compensation and services rendered | 159,737 | 1,156,944 | 1,156,944 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A Preferred stock pursuant to employment agreement | 3 | 992,250 | 992,250 | |||||||||||||||||||||||||||||||||||||||||
| Net loss | (2,610,005 | ) | (2,610,005 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2019 | 20 | $ | 5,539,174 | 342,853 | $ | 322 | - | $ | - | 1,983,903 | $ | 19,941,253 | $ | 1,075,176 | ($ | 21,378,758 | ) | $ | 6,366,204 | |||||||||||||||||||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (2,179,882 | ) | $ | (1,134,107 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | - | 132,392 | ||||||
| Depreciation | 31,551 | 30,625 | ||||||
| Amortization of intangible assets | 43,860 | 129,966 | ||||||
| Amortization of original-issue-discount | 351,535 | 10,678 | ||||||
| Unrealized loss on investment | - | 7,500 | ||||||
| Bad debt expense | 47,452 | 110,936 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (73,401 | ) | (403,627 | ) | ||||
| Inventory | 13,003 | 415,325 | ||||||
| Prepaid expenses | 275,420 | 316,548 | ||||||
| Deposits | (2,000 | ) | - | |||||
| Other noncurrent assets | 7,347 | 39,856 | ||||||
| Operating lease right-of-use asset | (155 | ) | 189 | |||||
| Accounts payable | 41,671 | 280,601 | ||||||
| Accrued expenses | (42,730 | ) | 58,497 | |||||
| Net cash used in operating activities | (1,486,329 | ) | (4,621 | ) | ||||
| Investing activities: | ||||||||
| Note receivable | - | 481 | ||||||
| Purchase of property and equipment | - | (13,126 | ) | |||||
| Purchase of intangible assets | (177,530 | ) | - | |||||
| Investment in marketable security | - | (600,000 | ) | |||||
| Net cash used in investing activities | (177,530 | ) | (612,645 | ) | ||||
| Financing activities: | ||||||||
| Proceeds received from notes and loans payable | 175,000 | 743,000 | ||||||
| Proceeds from issuance of Series D Preferred Stock | 2 | - | ||||||
| Proceeds from sale of common stock | 2,932,135 | - | ||||||
| Repayments of notes and loans payable | (224,000 | ) | (70,000 | ) | ||||
| Deferred financing costs | - | (50,000 | ) | |||||
| Net cash provided by financing activities | 2,883,137 | 623,000 | ||||||
| Increase in cash and cash equivalents | 1,219,278 | 5,734 | ||||||
| Cash and cash equivalents, beginning of period | 457,798 | 46,540 | ||||||
| Cash and cash equivalents, end of period | $ | 1,677,076 | $ | 52,274 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Income taxes paid | $ | 125 | $ | 950 | ||||
| Interest paid | $ | - | $ | 3,206 | ||||
| Non-cash Investing and Financing Activities: | ||||||||
| Issuance of common stock in lieu of repayments of notes payable | $ | 537,748 | $ | 295,780 | ||||
| Amortization of prepaid issuance of common stock for services rendered | $ | - | $ | 132,392 | ||||
| Issuance of common stock in asset acquisitions | $ | 137,673 | $ | - | ||||
See notes to consolidated financial statements.statements
| 6 |
Consolidated Statements of Cash Flows (Unaudited)
| Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | (2,315,032 | ) | $ | (2,610,005 | ) | ||
| Adjustments to reconcile net loss to net | ||||||||
| cash used in operating activities: | ||||||||
| Stock-based compensation, net of prepaid stock- based consulting fees | 975,787 | 1,788,144 | ||||||
| Depreciation of property and equipment-General | 8,103 | 14,296 | ||||||
| Depreciation of property and equipment-COGS | 53,407 | 24,973 | ||||||
| Amortization of intangible assets | 277,158 | 7,160 | ||||||
| Amortization of original-issue-discount | 69,645 | - | ||||||
| Bad debt expense | 131,985 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (377,212 | ) | (549,388 | ) | ||||
| Inventory | 410,664 | (750 | ) | |||||
| Prepaid expenses | (10,140 | ) | (7,850 | ) | ||||
| Security deposit | - | 28,940 | ||||||
| Other receivable | 34,625 | (20,225 | ) | |||||
| Right-of-use asset | 376 | (7,457 | ) | |||||
| Accounts payable | 150,840 | 18,076 | ||||||
| Accrued officer’s compensation | 96,047 | - | ||||||
| Other accrued expenses payable | (32,671 | ) | (10,601 | ) | ||||
| Net cash used in operating activities | (526,418 | ) | (1,324,687 | ) | ||||
| Investing Activities: | ||||||||
| Note receivable | 481 | - | ||||||
| Fixed assets additions | (16,787 | ) | (962,698 | ) | ||||
| Intangible assets additions | - | (50,000 | ) | |||||
| Investment in marketable security | (600,000 | ) | - | |||||
| Net cash used in investing activities | (616,306 | ) | (1,012,698 | ) | ||||
| Financing Activities: | ||||||||
| Proceeds received from notes and loans payable | 1,657,840 | - | ||||||
| Repayments of notes and loans payable | (70,000 | ) | (3,364 | ) | ||||
| Note payable finance cost | (101,455 | ) | - | |||||
| Proceeds from sale of common stock | - | 1,946,100 | ||||||
| Net cash provided by financing activities | 1,486,385 | 1,942,736 | ||||||
| Increase (Decrease) in cash and cash equivalents | 343,661 | (394,649 | ) | |||||
| Cash and cash equivalents, beginning of period | 46,540 | 807,747 | ||||||
| Cash and cash equivalents, end of period | $ | 390,201 | $ | 413,098 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Income taxes paid | $ | 1,225 | $ | - | ||||
| Interest paid | $ | 13,137 | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of common stock in acquisition of note payable (returnable shares) | $ | 312,655 | $ | - | ||||
| Issuance of common stock in acquisition of note payable (commitment shares) | $ | 72,052 | $ | - | ||||
| Amortization of prepaid issuance of common Stock for services rendered | $ | 618,547 | $ | 497,220 | ||||
| Issuance of common stock in acquisition of intangible assets | $ | 201,187 | $ | 148,635 | ||||
| Issuance of common stock in satisfaction of officer’s compensation | $ | - | $ | 54,340 | ||||
See notes to consolidated financial statements
Can B̅ Corp. and SubsidiarySubsidiaries
Notes to Consolidated Financial Statements
Six Months Ended June 30, 2020 and 2019March 31, 2021
NOTENote 1 – Organization and Description of Business
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 Company’s durable equipment products, such as sam® units with CBD infused pads, are marketed and sold through its wholly-owned subsidiaries, Duramed Inc. (incorporated on November 29, 2018) and DuramedNJ LLC (incorporated on May 29, 2019) (collectively, “Duramed”). Duramed began operating on or about February1, 2019. The Company’s wholly owned subsidiary, Radical Tactical LLC (“Radical Tactical”), formed May 11, 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 on or around July 11, 2019. The Company’s hemp farming business is run through Green Grow Farms, Inc. (“Green Grow Farms”), which was acquired in August, 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. Effective March 6, 2020 Can B̅ Corp effected a 300:1 reverse stock split of its common stock.
On May 15, 2017, WRAP changed its name to Canbiola, Inc. On January 16, 2020 Canbiola, Inc. changed its name to Can B̅ Corp. (the “Company”, “we”, “us”, “our”, “CANB”, “Can B̅” or “Registrant”).
Can B̅ specializesThe 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 Company runs it manufacturing operations through PHP and holds and sells several of its brands through PHP as well. The Company’s durable equipment products, such as sam® units with and without CBD infused pads, are marketed and sold through its wholly-owned subsidiaries, Duramed Inc. (incorporated on November 29, 2018) and Duramed MI LLC (fka DuramedNJ, LLC) (incorporated on May 29, 2019) (collectively, “Duramed”). Duramed began operating on or about February 1, 2019. Most of the Company’s consumer products include hemp derived cannabidiol (“CBD”); however, the Company has just recently begun extracting cannabinol (“CBN”) and cannabigerol (“CBG”) for wholesale to third-parties looking to incorporate such compounds into their products through its wholly owned subsidiary, Botantical Biotech, LLC (incorporated March 10, 2021). Botanical Biotech has also begun synthesizing delta-8 from hemp. Delta-8 can produce similar, though less potent, effects as delta-9 (commonly referred to as THC); however, the legality of hemp derived delta-8 is in a gray area and considered a potential loophole at this point due to the 2018 hemp bill. The Company’s other subsidiaries did not have operations during Q1 2021.
The Company is in the productionbusiness of promoting health and wellness through its development, manufacture and sale of a varietyproducts containing cannabinoids derived from hemp biomass and the licensing of hemp-derived cannabidiol (“CBD”)durable medical devises. Can B̅’s products such asinclude oils, creams, moisturizers, isolate, gel caps, spa products, and concentrates.concentrates and lifestyle products. Can B̅ is developingdevelops its own line of proprietary products as well as seekingseeks synergistic value through acquisitions in the hemp industry. Can B̅ aims to be the premier provider of the highest quality hemp CBDderived products on the market through sourcing the very best raw material and developingoffering a variety of products we believe will improve people’s lives in a variety of areas.
For the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity, Radical Tactical and NY Hemp Depot had no activity for the periods presented. Financial information for PHP, Duramed and Green Grow Farms in the periods have been consolidated with the Company’s financials.
NOTENote 2 – Going Concern UncertaintyLiquidity
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 June 30, 2020,March 31, 2021, the Company had cash and cash equivalents of $390,201$1,677,076 and a working capital of $2,005,234.$2,984,648. For the periods ended June 30,March 31, 2021 and 2020, and 2019, the Company had net loss of $2,365,032$2,179,882 and $2,610,005,$1,134,107, 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.
NOTENote 3 – Basis of Presentation and Summary of Significant Accounting Policies
(a) PrinciplesBasis of ConsolidationFinancial Statement Presentation
The accompanying unaudited consolidated financial statements include the accounts of CANB and its wholly-owned subsidiaries, Pure Health Products, Duramed, Prosperity Radical Tactical and Green Grow Farms. All intercompany balances and transactions have been eliminatedprepared in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformityaccordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these interim consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of the management of the Company, as defined below, these unaudited consolidated financial statements include all adjustments necessary to present fairly the information set forth therein. Results for interim periods are not necessarily indicative of results to be expected for a full year.
The consolidated balance sheet information as of December 31, 2020 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”). The interim consolidated financial statements contained herein should be read in conjunction with the 2020 Form 10-K.
Principles of Consolidation
The unaudited consolidated financial statements contained herein include the accounts of Can B Corp. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
| 7 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2021
Covid-19
Commencing in December 2019, the novel strain of coronavirus (“COVID-19”) began spreading throughout the world, including the first outbreak in the US in February 2020. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. COVID-19 has disrupted and continues to significantly disrupt local, regional, and global economies and businesses. The COVID-19 outbreak is disrupting supply chains and affecting production and sales across a range of industries. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on the Company’s customers, employees and vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact the Company’s financial condition and/or results of operations is uncertain.
In response to COVID-19, the Company put into place certain restrictions, requirements and guidelines to protect the health of its employees and clients, including requiring that certain conditions be met before employees return to the Company’s offices. Also, to protect the health and safety of its employees, the Company’s daily execution has evolved into a largely virtual model. The Company plans to continue to monitor the current environment and may take further actions that may be required by federal, state or local authorities or that it determines to be in the interests of its employees, customers, and partners.
Management Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atas of the datesdate of the financial statements and the reported amounts of revenues and expenses duringin those financial statements. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, inventory, goodwill, intangible assets and other long-lived assets, income taxes and deferred taxes. Descriptions of these policies are discussed in the reporting periods. ActualCompany’s 2020 Form 10-K. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and adjusts when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates.estimates and assumptions. Significant changes, if any, in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.
(c) Fair Value of Financial InstrumentsSignificant Accounting Policies
The Company’s financial instruments consistsignificant accounting policies are described in “Note 3: Summary of cash and cash equivalents, accounts receivable, notes receivable, notes and loans payable, accounts payable, and accrued expenses payable. ExceptSignificant Accounting Policies” of our 2020 Form 10-K.
Recently Adopted Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) issued the following accounting pronouncement which became effective for the noncurrent note receivable, the fair value of theseCompany in 2021, and which did not have a material impact on its condensed consolidated 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.statements:
PursuantIn December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which modifies ASC 740 to ASC 820, Fair Value Measurementssimplify the accounting for income taxes. ASU 2019-12 addresses the accounting for hybrid tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of legal entities not subject to tax, intraperiod tax allocation exception to incremental approach, ownership changes in investments - changes from a subsidiary to an equity method investment, ownership changes in investments - changes from an equity method investment to a subsidiary, interim period accounting for enacted changes in tax law and Disclosures, an entityyear-to-date loss limitation in interim period tax accounting.
Segment reporting
As of March 31, 2021, the Company reports operating results and financial data in one operating and reportable segment. The Chief Executive Officer, who is requiredthe chief operating decision maker, manages the Company as a single profit center in order to maximizepromote collaboration, provide comprehensive service offerings across the use of observable inputsentire customer base, and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchyprovide incentives to employees 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 measurementsuccess of the fair valueorganization as a whole. Although certain information regarding selected products or services is discussed for purposes of promoting an understanding of the assets or liabilities.
(d) CashCompany’s business, the chief operating decision maker manages the Company 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 inallocates resources at 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 $131,985 and $0 for the periods ended June 30, 2020 and 2019.consolidated level.
(f) InventoryCan B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
Inventories 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.March 31, 2021
(g) Prepaid expensesReclassifications
Prepaid expenses include stock-based officer, employee and consulting compensation of $1,836,523 and $3,226,390 at June 30, 2020 and 2019, 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.
(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.
(j) Marketable Securities
Marketable securities are recorded at fair value with unrealized gains and losses included in income. The Company has classified its investments in 1,000,000 shares of Iconic Brands, Inc. as trading securities.
(k) Goodwill
The Company does not amortize goodwill, 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.
(l) 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.
(m) 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.
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.
The Company’s Duramed Division provides a sam® Pro 2.0 medical device to patients through a doctor program whereby the physician evaluates the patients’ needs for medical necessity, and if 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 Duramed who bills the appropriate insurance company. The insurance company pays the invoice, or a negotiated amount via arbitration, and that revenue is reported as revenue when invoiced to the insurance carrier. The collected amount is reconciled with the invoice amount on a daily basis.
(n) 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.
(o) 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-based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date at which the counterparty’s performance is complete.
Options and warrants
The fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:
Risk-Free Interest Rate.
We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
Expected Volatility.
We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.
Dividend Yield.
We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.
Expected Term.
The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
Forfeitures.
Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.
(p) Advertising
Advertising costs are expensed as incurred and amounted to $260,035 and $153,762 for the periods ended June 30, 2020 and 2019, respectively.
(q) Research and Development
Research and development costs are expensed as incurred. In the period ended June 30, 2020 and 2019, the Company spent $25,000 and $70,000 in research and development which was expenses as spent, respectively.
(r) 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.
(s) 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 10, 11 and 12).
(t) Reverse Stock-Split
On March 2, 2020, the Company filed an amendment to its Articles of Incorporation with the Florida Secretary of State to effect a 300-to-1 reverse stock split of its issued and outstanding, but not authorized, shares of Common Stock, as reported in the Company’s definitive Schedule 14C filed with the Securities and Exchange Commission on December 13, 2019.
All disclosures of common shares and per common share data in the accompanying financial statements and related notes reflect the reverse stock split for all periods presented.
(u) Recent Accounting Pronouncements
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. Effective January 1, 2019, we adopted this new accounting guidance using the effective date transition method, which permits entities to apply the new lease standards using a modified retrospective transition approach at the date of adoption.
(v) Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.
(w) 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.loss.
NOTENote 4 – Asset Acquisitions
Botanical Biotech Asset Acquisition
On March 11, 2021, Company entered into an Asset Acquisition Agreement, which was fully executed on March 17, 2021, with multiple sellers (each, a “Seller” and, collectively, the “Sellers”), pursuant to which the Sellers agreed to sell certain assets to Company, and to transfer such assets to Botanical Biotech, LLC, a newly-formed, wholly-owned subsidiary of the Company (“Transferee” or “BB”). The assets purchased (“BB Assets”) include certain materials and manufacturing equipment, marketing or promotional designs, brochures, advertisements, concepts, literature, books, media rights, rights against any other person or entity in respect of any of the foregoing and all other promotional properties, in each case primarily used, developed or acquired by the Sellers for use in connection with the ownership and operation of the BB Assets. In exchange for the BB Assets the Company will pay the Seller a maximum of $355,057, payable half in the form of cash or cash equivalent and half in the form of restricted shares of common stock of the Company (the “Shares”) at a price per Share equal to the average closing price of the common stock of the Company during the ten (10) consecutive trading days immediately preceding the closing. The Company has agreed to indemnify the Sellers for certain breaches of covenants, representations and warranties and for claims relating to the BB Assets following closing.
In conjunction with the BB asset acquisition, the Company entered into employment agreements with two sellers.
The Company and BB entered into an employment agreement with Lebsock dated March 11, 2021 (the “Lebsock Agreement”) pursuant to which Lebsock will serve as the President of BB for a term of three (3) years. The term of the Lebsock Agreement will automatically renew for an additional 3-year term unless other terminated by either party. Lebsock will receive a base salary equal to $120,000 per year, subject to an annual increase of not less than 3% on each anniversary of the Lebsock Agreement during the term. The Company also agreed to issue a stock bonus to Lebsock in accordance with the Company’s Incentive Stock Option Plan (“ISOP”) in an amount of $100,000, and to pay Lebsock a defined percentage of the EBITDA for BB each calendar quarter (“Profit Split”) according to a mutually agreed performance target (“Target”). EBITDA is defined as the earnings before interest, depreciation, taxes, depreciation, and amortization and will be paid as reported by the Company’s accountant and as reviewed by the Company’s auditor. It will be accumulative on a quarter-to-quarter basis, meaning if one quarter has a negative EBITDA, it would be offset against the following quarter’s positive EBITDA distribution. Lebsock has the option to accept the Profit Split in either direct cash payment or Shares, or any combination, at Lebsock’s option. Shares would be valued at the prior 10-day closing price and issued under SEC Rule 144 restriction.
Effective March 16, 2021, BB entered into a Consulting Agreement (the “Schlosser Agreement”) with Schlosser pursuant to which Schlosser has agreed to provide consulting services to BB for a period of 3 months in exchange for compensation equal to $10,000 per month. Schlosser will also be entitled to reimbursement for certain work-related expenses. Pursuant to the Schlosser Agreement, Schlosser also agreed to assign to BB all inventions developed by Schlosser in connection with his services to BB. The Schlosser Agreement also contains certain non-compete and confidentiality provisions. Per the Acquisition Agreement, Schlosser was to receive an employment agreement similar to the Lebsock Agreement; however, BB and Schlosser elected to enter into the Schlosser Agreement instead.
| 9 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2021
Note 5 – Inventories
Inventories consist of:
| March 31, | December 31, | |||||||||||||||
| June 30, 2020 | December 31, 2019 | 2021 | 2020 | |||||||||||||
| Raw materials | $ | 359,213 | $ | 708,239 | $ | 284,192 | $ | 294,522 | ||||||||
| Finished goods | 14,620 | 76,258 | 47,759 | 50,432 | ||||||||||||
| Total | $ | 373,833 | $ | 784,497 | $ | 331,951 | $ | 344,954 | ||||||||
NOTE 5Note 6 – Notes ReceivableProperty and Equipment
Notes receivableProperty and equipment consist of:
| June 30, 2020 | December 31, 2019 | |||||||
| Note receivable dated November 30, 2015 from Stock Market Manager, Inc, interest at 3% per annum due November 30, 2020 | $ | 19,389 | $ | 19,389 | ||||
| Note receivable dated February 8, 2019 from an employee, weekly installments of $1,200 with interest at 8% per annum. | 2,898 | 4,879 | ||||||
| Note receivable dated March 3, 2020 from an employee, weekly installments of $125 with interest at 0% per annum. | 1,500 | - | ||||||
| Total | 23,787 | 24,268 | ||||||
| Current portion of notes receivable | (23,787 | ) | (24,268 | ) | ||||
| Noncurrent portion of notes receivable | $ | - | $ | - | ||||
| March 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Furniture and fixtures | $ | 21,724 | $ | 21,727 | ||||
| Office equipment | 12,378 | 12,378 | ||||||
| Manufacturing equipment | 397,229 | 397,230 | ||||||
| Medical equipment | 776,396 | 776,392 | ||||||
| Leasehold improvements | 26,902 | 26,902 | ||||||
| Total | 1,234,629 | 1,234,629 | ||||||
| Accumulated depreciation | (271,201 | ) | (239,650 | ) | ||||
| Net | $ | 963,428 | $ | 994,979 | ||||
Depreciation expense was $31,551 and $30,625 for the three months ended March 31, 2021 and 2020, respectively.
Note 7 – Goodwill and Intangible Assets
Intangible assets consist of:
| March 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Technology, IP and patents | $ | 929,015 | $ | 674,240 | ||||
| Hemp processing registration | 85,200 | 85,200 | ||||||
| Total | 1,014,215 | 759,440 | ||||||
| Accumulated amortization | (219,863 | ) | (236,431 | ) | ||||
| $ | 794,352 | $ | 523,009 | |||||
Amortization expense was $43,860 and $129,966 for the three months ended March 31, 2021 and 2020, respectively.
Amortization expense for the balance of 2021, and for each of the next five years and thereafter is estimated to be as follows:
| Nine months ended December 31, 2021 | $ | 113,029 | ||
| Fiscal year 2022 | 97,112 | |||
| Fiscal year 2023 | 97,112 | |||
| Fiscal year 2024 | 97,112 | |||
| Fiscal year 2025 | 86,970 | |||
| Thereafter | 303,017 | |||
| $ | 794,352 |
There was no goodwill activity during the three months ended March 31, 2021 or 2020.
NOTE 6 – PropertyCan B̅ Corp. and Equipment, NetSubsidiaries
Property and Equipment, net, consist of:
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Furniture & Fixtures | $ | 21,724 | $ | 19,018 | ||||
| Office Equipment | 12,378 | 12,378 | ||||||
| Manufacturing Equipment | 363,798 | 355,016 | ||||||
| Medical Equipment | 783,782 | 783,782 | ||||||
| Leasehold Improvements | 26,902 | 21,603 | ||||||
| Total | 1,208,584 | 1,191,797 | ||||||
| Accumulated depreciation | (178,065 | ) | (116,555 | ) | ||||
| Net | $ | 1,030,519 | $ | 1,075,242 | ||||
Notes to Consolidated Financial Statements
NOTE 7 – Intangible Assets, Net
Intangible assets, net, consist of:
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Video conferencing software acquired by Prosperity in December 2009 | $ | 30,000 | $ | 30,000 | ||||
| Enterprise and audit software acquired by Prosperity in April 2008 | 20,000 | 20,000 | ||||||
| Patent costs incurred by WRAP | 6,880 | 6,880 | ||||||
| Hemp license and technology | 1,000,000 | 1,000,000 | ||||||
| CBD technology | 198,655 | 198,655 | ||||||
| Platform account contract | 131,812 | - | ||||||
| Hemp processing use | 69,375 | - | ||||||
| Other | 3,548 | 3,548 | ||||||
| Total | 1,460,270 | 1,259,083 | ||||||
| Accumulated amortization and Impairment | (479,679 | ) | (202,521 | ) | ||||
| Net | $ | 980,591 | $ | 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 25,000 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. 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. On February 20, 2019, the Company issued 3,333 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.
The hemp related license and technology was purchased from Shi Farms during the three months ended September 30, 2019. Hemp Depot has been amalgamated with Green Grow Farms, also a NY State Hemp License holder and intends to 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 under Green Grow Farms Inc.’s direction will amalgamate the cultivated off-take from the farmers, combine and fill “super-sacks” for shipping to a processing facility to produce high-grade isolate or distillate for use in Can B̅’s manufacturing facility in Lacey WA.
The hemp processing use agreement with Mediiusa Group, Inc. was entered during the three months ended June 30, 2020. On June 23, 2020, the Company issued 50,000 shares of CANB common stock valued at $69,375. Mediiusa Group, Inc. currently holds a valid Industrial Hemp Processor Registration in full force and effect with the State of New York under Registration: HEMP-P-000035 (the “Registration”) and is authorized to process Hemp, and has granted a five year agreement to processing of Hemp for oil, isolate, or crude for further use by the Company and/or for sale by the Company. During the Term of this Agreement, Mediiusa Group, Inc. agrees to allow CANB to process any and all of the subject Hemp under and/or in connection with the agreement under their above-mentioned Registration.
The platform account contract with SRAX, Inc. was entered during the three months ended June 30, 2020. On June 22, 2020, the Company issued 185,000 shares of CANB common stock valued at $131,812. The Platform Account is the SRAX Investors Relations platform to grant access to potential investors and customers via the SRAX website. SRAX grants Can B Corp a non-exclusive, non-transferable and non- sublicensable right to access and use the Platform during the Term, solely by the Authorized Users for User’s own internal business purposes, and in accordance with the terms and conditions of this Agreement. Company reserves all rights in or to the Platform not expressly granted to User in the Agreement. Can B will have previously unattainable access to its customer base for improved investor communication and development of sales opportunities of the Company’s products.
The other intangible assets relate to the document management and email marketing divisions. Since December 31, 2017, the Company do not expect any future positive cash flow from these divisions. Accordingly, the net carrying value of these intangible assets was reduced to $0.
NOTE 8 – Marketable Securities2021
Marketable securities consist of:
| June 30, 2020 | December 31, 2019 | |||||||
| Marketable securities, at cost | $ | 600,000 | $ | - | ||||
| Unrealized losses | (50,000 | ) | - | |||||
| Total marketable securities at fair value | $ | 550,000 | $ | - | ||||
NOTE 9Note 8 – Notes and Loans Payable
Convertible Promissory Notes
In December 2020, the Company entered into a convertible promissory note with Arena Special Opportunities Partners I, LP (“ASOP”). The principal balance of the note is $2,675,239 and loans payable consist of:it is to be utilized for working capital purposes. The note matures in September, 2021 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note was evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the ASOP convertible promissory note was issued with 3,426,280 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 3,426,280 shares of the Company’s common stock at an exercise price of $0.45 per share. The common stock purchase warrants issued to ASOP are considered derivatives, but satisfied the criteria for classification as equity instruments, and were bifurcated from the host contract - convertible promissory note and recorded in equity at their relative fair values with a corresponding debt discount recorded to the ASOP convertible promissory note. Aggregate amortization of the original issue discount for the three months ended March 31, 2021 and 2020 was $376,000 and $0, respectively. The principal balance outstanding at March 31, 2021 was $2,286,792. Subsequent to March 31, 2021, the maturity date of the note was extended to January 31, 2022.
| June 30, 2020 | December 31, 2019 | |||||||
| 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 FirstFire Global Opportunities Fund, LLC, net of original issue discount of $44,654, due September 1, 2020. | 550,000 | - | ||||||
| Loan payable to Pasquale Ferro, interest at 12% per annum, due December 2020. | 153,000 | 30,000 | ||||||
| Note payable to Labrys Fund, LP, net of original issue discount of $21,041, due October 21, 2020. | 225,000 | - | ||||||
| Note payable to EMA Financial, LLC, net of original issue discount of $10,522, due June 17, 2021. | 115,000 | - | ||||||
| Note payable to Eagle Equities, LLC, net of original issue discount of $27,645, due June 17, 2021. | 220,000 | - | ||||||
| Note payable to U.S. Small Business Administration (PPP), interest at 1% per annum. The note matures in May 2022. Payments are deferred for six months. | 194,940 | - | ||||||
| Note payable to U.S. Small Business Administration (EIDL), interest at 3.75% per annum. The note matures in June 2050. Payments are deferred for twelve months. | 159,900 | - | ||||||
| Total Notes and Loans Payable | 1,622,840 | 35,000 | ||||||
| Less: Unamortized Finance Cost | (103,862 | ) | - | |||||
| Total Notes and Loans Payable - Net | 1,518,978 | 35,000 | ||||||
| Less: Current Portion | (1,164,138 | ) | (35,000 | ) | ||||
| Long-term Portion | $ | 354,840 | $ | - | ||||
In December 2020, the Company entered into a convertible promissory note with Arena Special Opportunities Fund, LP (“ASOF”). The principal balance of the note is $102,539 and it is to be utilized for working capital purposes. The note matures in September, 2021 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note was evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the ASOF convertible promissory note was issued with 131,325 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 131,325 shares of the Company’s common stock at an exercise price of $0.45 per share. The common stock purchase warrants issued to ASOF are considered derivatives, but satisfied the criteria for classification as equity instruments, and were bifurcated from the host contract - convertible promissory note and recorded in equity at their relative fair values with a corresponding debt discount recorded to the ASOP convertible promissory note. Aggregate amortization of the original issue discount for the three months ended March 31, 2021 and 2020 was approximately $12,000 and $0, respectively. The principal balance outstanding at March 31, 2021 was $87,773. Subsequent to March 31, 2021, the maturity date of the note was extended to January 31, 2022.
PPP Loan
In 2020, the Company received a loan under the U.S. Small Business Administration’s Paycheck Protection Program established under the Coronavirus Aid Relief and Economic Security Act (“CARES act”) and related rules and regulations (the “PPP loan”) of $194,940.
Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of such loans after eight weeks, if the loan is used for eligible purposes, including to fund payroll costs, mortgage interest, rent and/or utility costs, and meet certain other requirements, including, the maintenance of employment and compensation levels. The Company plans to use the entire PPP Loan for qualifying expenses and expects to qualify for full or partial forgiveness under the program. However, the Company can provide no assurance that it will obtain forgiveness for any portion. The Company has submitted all appropriate forgiveness documentation and are awaiting word from the PPP
Related Party Loan
In 2020, the Company entered into a loan payable to a director of the Company with a principal balance of $224,000. The loan bore interest at 12% per annum and was due in December 2020. The Company subsequently paid the loan in full in February 2021.
NOTE 10 – Preferred StockCan B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2021
Note 9 – Stockholders’ Equity
Preferred Stock
Each share of Series A Preferred Stock is convertible into 33,334 shares of CANB common stock and is entitled to 66,666 votes. All Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shall rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock. In the event of a Liquidation Event, whether voluntary or involuntary, each holder may elect (i) to receive, in preference to the holders of Common Stock, a one-time liquidation preference on a per-share amount equal to the per-share value of preferred shares on the issuance date, as recorded in the Company’s financial records, or (ii) to participate pari passu with the Common Stock on an as-converted basis. Subject to any adjustments, the Series A holders shall be entitled to receive such dividends paid and distributions made to the holders of shares of Common Stock on an as converted basis.
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.
Each share of Series C Preferred Stock has preference to payment of dividends, if and when declared by the Company, compared to shares of our common stock. Each Preferred Series C share is convertible into 25,000 shares of common stock. The shares of Series C Preferred Stock have voting rights as if fully converted.
Each share of Series D Preferred Stock has 10,000 shares of voting rights only pari passu to common shares voting with no conversion rights and no equity participation. The Company can redeem Series D Preferred Stock at any time for par value.
On January 28, 2019,February 8, 2021, the Company’s Board of Directors approved the designation of the Series D Preferred Shares and the number of shares constituting such series, and the rights, powers, preferences, privileges and restrictions relating to such series. On March 27, 2021, the Company filed an amendment to its articles of incorporation to authorize 4,000 shares of a new Series D Preferred Stock with a par value of $0.001 each. All Series D Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shall rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock. Each Series D Preferred Share shall have voting rights equal to 10,000 shares of Common Stock, adjustable at any recapitalization of the Company’s stock. In the event of a liquidation event, whether voluntary or involuntary, each holder shall have a liquidation preference on a per-share amount equal to the par value of such holder’s Series D Preferred Shares. The holders shall not be entitled to receive distributions made or dividends paid to the Company’s other stockholders. Except as otherwise required by law, for as long as any Series D Preferred Shares remain outstanding, the Company shall have the option to redeem any outstanding share of Series D Preferred Shares at any time for a purchase price of par value per share of Series D Preferred Shares (“Price per Share”). Should the Company desire to purchase Series D Preferred Shares, the Company shall provide the Holder with written notice and a check or cash in an amount equal to the number of shares of Series D Preferred Shares being purchased multiplied by the Price per Share. The shares of Series D Preferred Shares so purchased shall be deemed automatically cancelled and the Holder shall return the certificates for such share to the Corporation. On or around March 27, 2021, the Company issued 33,333Mr. Alfonsi, Mr. Ferro, and Mr. Teeple Series D Preferred Stock in the amount of 600 shares each and to COO Philip Scala in the amount of 150 shares, collectively representing 19,500,000 voting shares.
Common Stock
For the three months ended March 31, 2021, the Company issued an aggregate of 5,732,000 shares of CANBCommon Stock under its Offering Statement on Form 1-A (File No. 024-11233) (the “Regulation A Offering”) currently in effect and an additional 130,758 shares of 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 67,405 shares of CANB common stock to RedDiamond in exchange for the retirement of 157,105 shares of CANB Series B Preferred Stock.
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 fair value of the issuance totaled at $1,203,000 and will be amortized over the vesting period of four years.
On April 26, 2019, the Company issued 6,436 shares of CANB common stock to RedDiamond in exchange for the retirement of 15,000 shares of CANB Series B Preferred Stock.
On May 1, 2019, the Company issued 8,581 shares of CANB common stock to RedDiamond in exchange for the retirement of 20,000 shares of CANB Series B Preferred Stock.
On May 9, 2019, the Company issued 23,710 shares of CANB common stock to RedDiamond in exchange for the retirement of 55,263 shares of CANB Series B Preferred Stock.
On June 7, 2019, the Company issued 10,726 shares of CANB common stock to RedDiamond in exchange for the retirement of 25,000 shares of CANB Series B Preferred Stock.
On August 13, 2019, the Company issued 97,607 shares of CANB common stock to RedDiamond in exchange for the retirement of 227,590 shares of CANB Series B Preferred Stock.
On December 16, 2019, the Company issued 35,666 shares of CANB common stock to RedDiamond as agreed for the early retirement of CANB Series B Preferred Stock converted in August 2019.
NOTE 11 – Common Stock
From January 4, 2019 to March 27, 2019, the Company issued aggregately 138,107 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 25,000 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 82,000 shares of CANB common stock to multiple consultants for services rendered.services.
From January 19, 2019Can B̅ Corp. and Subsidiaries
Notes to March 27, 2019, the Company issued aggregately 3,893 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 Consolidated Financial Statements
March 31, 2019.
On February 5, 2019, the Company issued 6,667 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 3,333 shares of CANB common stock to owners of Seven Chakras pursuant to the Chakras Agreement dated January 31, 2019.
From April 1, 2019 through June 30, 2019 the Company issued an aggregate of 51,706 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 13,916 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 4,615 shares of Common Stock under the terms of executive employment agreements.
From April 1, 2019 through June 30, 2019, the Company issued an aggregate of 86,207 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 18,061 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 18,333 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 16,000 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 155,241 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 40,247 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 122,258 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 14,167 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 5,000 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 125,000 shares of CANB Common Stock under the terms of an inventory purchase agreement for total proceeds of $487,500.
From January 1, 2020 through March 31, 2020, the Company issued an aggregate of 27,500 shares of CANB Common Stock to multiple consultants for services rendered.
From January 1, 2020 through March 31, 2020, the company issued an aggregate of 31,335 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From January 1, 2020 through March 31, 2020, the Company issued an aggregate of 20,000 shares of CANB Common Stock to First Fire Global Opportunities Fund, LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.
From January 1, 2020 through March 31, 2020, the Company issued an aggregate of 99,508 shares of CANB Common Stock to FirstFire Global Opportunities Fund, LLC for returnable shares pursuant to a junior convertible promissory note purchase agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 111,734 shares of CANB Common Stock to multiple consultants for services rendered.
From April 1, 2020 through June 30, 2020, the company issued an aggregate of 20,319 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 30,000 shares of CANB Common Stock to an employee for services rendered.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 185,000 shares of CANB Common Stock to SRAX, Inc. according to a platform access agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 50,000 shares of CANB Common Stock to Mediiusa Group, Inc. according to a hemp processing use agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 24,545 shares of CANB Common Stock to Labrys Fund, L.P. for a commitment fee pursuant to a junior convertible promissory note purchase agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 118,000 shares of CANB Common Stock to Labrys Fund, L.P. for returnable shares pursuant to a junior convertible promissory note purchase agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 20,000 shares of CANB Common Stock to Eagle Equities, LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.2021
NOTE 12Note 10 – Stock Options and Warrants
A summary of stock options and warrants activity for the three months ended March 31, 2021 is as follows:
| Shares of Common Stock Exercisable Into | ||||||||||||
| Stock | ||||||||||||
| Options | Warrants | Total | ||||||||||
| Balance, December 31, 2019 | 20,167 | 7,492 | 27,659 | |||||||||
| Granted in 2019 | 56,667 | - | 56,667 | |||||||||
| Cancelled in 2019 | (167 | ) | - | (167 | ) | |||||||
| Exercised in 2019 | - | - | - | |||||||||
| Balance, December 31, 2019 | 76,667 | 7,492 | 84,159 | |||||||||
| Granted in Q1 & Q2 2020 | - | - | - | |||||||||
| Cancelled in Q1 & Q2 2020 | - | - | - | |||||||||
| Exercised in Q1 & Q2 2020 | - | - | - | |||||||||
| Balance, June 30, 2020 | 76,667 | 7,492 | 84,159 | |||||||||
| Option Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Outstanding, January 1, 2021 | 1,197,199 | $ | 0.40 | 5.00 | ||||||||
| Granted | 306,817 | $ | 0.44 | 5.00 | ||||||||
| Exercised | - | - | - | |||||||||
| Forfeited | - | - | - | |||||||||
| Expired | - | - | - | |||||||||
| Outstanding, March 31, 2021 | 1,504,016 | $ | 0.41 | 4.84 | ||||||||
Issued and outstanding stock options as of June 30, 2020 consist of:
| Year | Number Outstanding | Exercise | Year of | |||||||||
| Granted | And Exercisable | Price | Expiration | |||||||||
| 2018 | 20,000 | $ | 0.3 | 2023 | ||||||||
| 2019 | 56,667 | $ | 0.3 | 2022 | ||||||||
| 76,667 | ||||||||||||
On June 11, 2018, the Company granted 10,000 options of CANB common stock to Carl Dilley, a former director of the Company, in exchange for the retirement of a total of 10,000 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 $0.30 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) $8.40 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 10,000 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 $0.30 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) $11.82 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 26,667 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 $0.30 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) $7.20 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 10,000 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 $0.30 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) $6.30 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 June 30, 2020 consist of:
| Year | Number Outstanding | Exercise | Year of | |||||||
| Granted | And Exercisable | Price | Expiration | |||||||
| 2010 | 825 | $ | 300 | 2020 | ||||||
| 2018 | 6,667 | $ | 13.034 | (a) | 2023 | |||||
| Total | 7,492 | |||||||||
(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.
| Option Shares | Weighted Average Grant-Date Fair Value | |||||||
| Non-vested options, January 1, 2021 | 1,197,199 | $ | 0.35 | |||||
| Granted | 306,817 | $ | 0.41 | |||||
| Vested | - | - | ||||||
| Forfeited | - | - | ||||||
| Non-vested options, March 31, 2021 | $ | 1,504,016 | $ | 0.36 | ||||
NOTE 13Note 11 – Income Taxes
NoThe Company’s income tax provisions for income taxes were recordedthe three months ended March 31, 2021 and 2020 reflect the Company’s estimates of the effective rates expected to be applicable for the periods presented sincerespective full years, adjusted for any discrete events, which are recorded in the Company incurred net losses in those periods.
period that they occur. These estimates are reevaluated each quarter based on the Company’s estimated tax expense for the full year. The provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal incomeestimated effective tax rate includes the impact of 21% to pretax income (loss) as follows:
| Six Month Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| Expected income tax (benefit) at 21% | $ | (486.157 | ) | $ | (246,228 | ) | ||
| Non-deductible stock-based compensation | 204,915 | 173,921 | ||||||
| Increase in deferred income tax assets | ||||||||
| valuation allowance | 281,242 | 72,307 | ||||||
| Provision for (benefit from) income taxes | $ | - | $ | - | ||||
Deferred income tax assets consist of:
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Net operating loss carryforward | $ | 1,581,410 | $ | 1,300,168 | ||||
| Valuation allowance | (1,581,410 | ) | (1,300,168 | ) | ||||
| 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 $1,581,410 attributable to the future utilization of the $7,530,518 net operating loss carryforward as of June 30, 2020 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax assetvaluation allowances in the financial statements at June 30, 2020. 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, 2039 and 2040 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, $381,638, $499,288, $716,858, $1,503,282, and $1,339,245, respectively.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
The Company’s U.S. Federal and state income tax returns prior to 2015 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 2015 tax year returns expired in September 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 2020 and 2019.
NOTE 14 – 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.
| ||||
Three Months | Six Months Ended June 30, 2020 | |||||||
| Total profit for reportable segment | $ | 18,848 | $ | 279,190 | ||||
| Other income (expense) - net | - | (853 | ) | |||||
| Income before income taxes | $ | 18,848 | $ | 278,337 | ||||
NOTE 15 – Commitments and Contingenciesvarious jurisdictions.
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. 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 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 and chairman of the board for cash compensation of $15,000 per month. Pursuant to the new agreement, three of the eight previously issued shares of CANB Series A Preferred Stock were returned to the Company and converted into 30,000,000 common shares. 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.
On FebruaryNote 12 2018, the Company executed an Executive Service Agreement (“Posel Agreement”) with David Posel. The Posel Agreement provides that Mr. Posel services 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. The Posel 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. 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 (“Holtmeyer Agreement”) with Andrew W. Holtmeyer. The Holtmeyer Agreement provides that Mr. Holtmeyer serves 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. The Holtmeyer 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 Holtmeyer Agreement was terminated due to the execution of a new Employment Agreement with Andrew W Holtmeyer. The second agreement provides that Mr. Holtmeyer serves as the Company’s Executive Vice President Business for a term of 4 years. The second agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 829 shares of common stock upon signing of the agreement. Effective April 1, 2020, Mr. Holtmeyer’s compensation was changed to a straight commission on sales and collection based upon his efforts in lieu of any base compensation. He also received no further Company benefits but does retain his previously issued five shares of Series Preferred A Stock.
On October 15, 2018, the Company executed an Employment Agreement (“Teeple Agreement”) with Stanley L. Teeple. The Teeple Agreement provides that Mr. Teeple services as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The Teeple 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 Teeple Agreement. The Teeple 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 (“Ferro 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 Ferro 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.
Effective September 6, 2019 (the “Effective Date”), Can B̅ Corp. (the “Company” or “CANB”) approved the appointment of Johnny J. Mack (“Mack”) as its President and Chief Operating Officer. Mack had been serving as the Company’s interim COO. The Company and Mack have entered into a new Employee Services Agreement (the “Mack Agreement”) to memorialize the terms of the foregoing. In consideration for Mack’s services, Mack would (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 106,667 options (“Mack Options”) to purchase shares of the Company’s common stock, with 26,667 Mack Options vesting on the effective date and additional tranches of 26,667 Mack 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 $0.30 per share. 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 agreed to pay Mack a severance in the event the Mack 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 officer and director positions and the Company settled his termination for payment of all accrued expenses, payout of all accrued time and base compensation of $13,315 and retention of his already earned 26,667 options. Mr. Mack has left the Company.
In addition, on October 10th, 2019 the Company appointed 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, Mr. 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 Company’s normal policies and procedures. Mr. Scala will also receive options to buy 1,667 common shares of the Company at a price of $0.30 for a period of three years. The initial term of the agreement is for 90 days. The agreement renews for additional 90-day periods unless terminated by either party. The agreement otherwise contains standard covenants and conditions.
Consulting Agreements
On July 15, 2020, 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 $5,000 per month for the initial 3 months., $6,250 per month for months 4-6., $7,500 per month for month 7 and after. At CANB’s option, the monthly fee may be payable in part or in whole in cash. Monthly Fee, such amount shall be paid via issuance of restricted common shares of CANB. The shares are to be issued in the name of Tysadco Partners. The number of common shares earned each month shall be calculated and issued on a quarterly basis prior to each 90-day period and based on the value at the closing price on the last day of the preceding period. All common shares earned by the Consultant pursuant to this Agreement shall be issued by CANB on a quarterly basis. CT shall not have registration rights, and the shares may be sold subject to Rule 144.
On December 8, 2019, the Company executed a Consulting Agreement with Seacore Capital, Inc. (“Seacore”) for Seacore to serve as the Company’s consultant for stock compensation of a total of 8,333 restricted shares each quarter from 4th quarter 2019 through 3rd quarter 2020. 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. This lease was terminated in January 2019.
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.
The Company leases office space in numerous medical facilities under month-to-month agreements.
Rent expense for the period ended June 30, 2020 and 2019 was $121,652 and $12,344, respectively.
At June 30, 2020, the future minimum lease payments under non-cancellable operating leases were:
| Year ended December 31, 2020 | $ | 23,071 | ||
| Year ended December 31, 2021 | 47,055 | |||
| Year ended December 31, 2022 | 15,685 | |||
| Total | $ | 85,811 |
The lease liability of $78,727 at June 30, 2020 as presented in the Consolidated Balance Sheet represents the discounted (at our 10% estimated incremental borrowing rate) value of the future lease payments of 85,811 at June 30, 2020.
Major Customers– Related Party Transactions
For the sixthree months ended June 30,March 31, 2021 and 2020, there were no customersthe Company paid fees to a service provider that accountedis a relative of a director for more than 10%professional services in the amount of total revenues.$9,900 and $32,700, respectively.
For the six months ended June 30, 2020, there were no customer accounted for more than 10% of total revenues.
NOTE 16Note 13 – Related Party TransactionsCommitments and Contingencies
LI Accounting Associates,Employment Agreements
On December 28, 2020, the Company entered into new three-year Employment Agreements with CEO Marco Alfonsi, CFO Stanley Teeple, and Pure Health Products LLC (LIA),Pasquale Ferro. Under these agreements, they are to receive a i) base salary of fifteen thousand dollars ($15,000.00) per month, ii) is eligible to receive cash and or stock bonuses, iii) shall receive a stock bonus in accordance with the Company’s Incentive Stock Option Plan (“ISOP”) in an entity controlled by a relativeamount of one-hundred thousand dollars ($100,000) per year of the Managing Member PHP, isAgreement, iv) 200 shares of the Company’s Series C Preferred stock, v) usual and customary benefits including expense reimbursement, health and life insurance plan reimbursements and allowances. Phil Scala. Interim COO also received a vendorsimilar agreement with a base compensation of fifty-two thousand annually, $100,000 in ISO, and 20 Preferred C shares.
Consulting Agreements
On July 15, 2020, 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 $5,000 per month for the initial 3 months., $6,250 per month for months 4-6., $7,500 per month for month 7 and after. At CANB’s option, the monthly fee may be payable in part or in whole in cash. Monthly Fee, such amount shall be paid via issuance of restricted common shares of CANB. At June 30, 2020,The shares are to be issued in the name of Tysadco Partners. The number of common shares earned each month shall be calculated and issued on a quarterly basis prior to each 90-day period and based on the value at the closing price on the last day of the preceding period. All common shares earned by the Consultant pursuant to this Agreement shall be issued by CANB hason a quarterly basis.
| 13 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2021
Lease Agreements
We determine if a contract contains a lease at inception. Our material operating lease is office space. Our leases generally have remaining terms of 1-3 years. Generally, the lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods.
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an account payable dueunderlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to LIA totaling $6,600. For the sixmaturities of the leases. Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term.
The Company leases office space in numerous medical facilities offices under month-to-month agreements.
Rent expense for the three months ended June 30,March 31, 2021 and 2020 CANB had expenses to LIA of $42,600.was $71,448 and $92,606, respectively.
DuringAt March 31, 2021, the six months ended June 30, 2020, we had products and service sales to related parties totaling $0.future minimum lease payments under non-cancellable operating leases were:
| Nine months ended December 31, 2021 | $ | 35,291 | ||
| Fiscal year 2022 | 15,685 | |||
| $ | 50,976 |
NOTE 17Note 14 – Subsequent Events
In accordance with FASB ASC 855, Subsequent Events, theThe Company has evaluatedevaluates subsequent events through August 14, 2020,and transactions that occur after the balance sheet date up to the date on which thesethat the condensed consolidated financial statements are issued and as of that date, except as reported below, there were available to be issued. There were materialno subsequent events that required recognitionadjustment or additional disclosure in thesethe consolidated financial statements as follows:statements.
By written consentOn April 9, 2021 and after careful review by the majority of the Shareholders of Can B Corp.,April 21, 2021, respectively, the Company Shareholders approved an Incentive Stock Option Plan to be administered at the direction of the Board of Directors, and also approved a Certificate of Amendment to the Certificate of Designationacquired from auction certain farm equipment for the Company’s Preferred Series A stock.$160,165 in total.
TheOn April 28, 2021, the Company terminated its licensing agreement with Lifeguard Licensing Corp. and the parties settled all potential claims against each other.
On May 17, 2021, the Company executed an exchange agreement whereby sharesto sell $1,500,000 in convertible promissory notes to institutional investors for a purchase price of Iconic Brands, Inc. held$1,350,00. The notes will be convertible into the Company’s common stock at a base rate of $0.39, which will be adjustable upon the happening of certain events. The investors will also be issued warrants with a 50% coverage at an exercise price of $0.45, as well as 221,096 commitment shares. The notes will be secured by the company’s assets and guarantees of its subsidiaries. The foregoing transaction has yet to close. The Company were exchangedalso amended its existing notes with the same investors to extend their maturity to January 31, 2022 and to remove the requirement to seek investor approval for shares of stock in the Company held by Iconic Brands, Inc. The valuation of the respective shares were deemed to be an economic equal value exchange.
The Company’s Form A-1 was qualified on August 7, 2020.certain acquisition transactions.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Can B̅ Corp. was originally formedincorporated as aWrapMail, Inc. (“WRAP”) in Florida corporation on October 11, 2005, under the2005. On May 15, 2017, WRAP changed its name of WrapMail,to Canbiola, Inc. EffectiveOn January 5, 2015, we16, 2020 Canbiola, Inc. changed its name to Can B̅ Corp. (.
The Company acquired 100% ownership of Prosperity Systems,the membership interests in Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”) effective December 28, 2018. The Company runs it manufacturing operations through PHP and holds and sells several of its brands through PHP as well. The Company’s durable equipment products, such as sam® units with and without CBD infused pads, are marketed and sold through its wholly-owned subsidiaries, Duramed Inc., which (incorporated on November 29, 2018) and Duramed MI LLC (fka DuramedNJ, LLC) (incorporated on May 29, 2019) (collectively, “Duramed”). Duramed began operating on or about February 1, 2019. Most of the Company’s consumer products include hemp derived cannabidiol (“CBD”); however, the Company has just recently begun extracting cannabinol (“CBN”) and cannabigerol (“CBG”) for wholesale to third-parties looking to incorporate such compounds into their products through its wholly owned subsidiary, Botantical Biotech, LLC (incorporated March 10, 2021). Botanical Biotech has also begun synthesizing delta-8 from hemp. Delta-8 can produce similar, though less potent, effects as delta-9 (commonly referred to as THC); however, the legality of hemp derived delta-8 is in a gray area and considered a potential loophole at this point due to the 2018 hemp bill. The Company’s other subsidiaries did not have operations during Q1 2021.
The Company is in the processbusiness of dissolving. Effective December 28, 2018,promoting health and wellness through its development, manufacture and sale of products containing cannabinoids derived from hemp biomass and the licensing of durable medical devises. Can B̅’s products include oils, creams, moisturizers, isolate, gel caps, spa products, and concentrates and lifestyle products. Can B̅ develops its own line of proprietary products as well seeks synergistic value through acquisitions in the hemp industry. Can B̅ aims to be the premier provider of the highest quality hemp derived products on the market through sourcing the best raw material and offering a variety of products we acquired 100% ownershipbelieve will improve people’s lives in a variety of Pure Health Products. In November 2018, we formed Duramed, Inc. as a wholly-owned subsidiary. In May 2019, we formed DuramedNJ, LLC and Radical Tactical LLC, as wholly-owned subsidiaries. In July 2019, we formed NY Hemp Depot LLC, as a wholly-owned subsidiary. In August 2019, we acquired Green Grow Farms, Inc., as a wholly-owned subsidiary.areas.
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 operational wholly owned subsidiary Pure Health Products from the date of its acquisition on December 28, 2018.subsidiaries.
Results of Operations
Three months ended June 30, 2020March 31, 2021 compared with three months ended June 30, 2019.March 31, 2020.
Revenues decreased $428,495$262,767 from $633,579$569,707 in 20192020 to $205,084$306,940 in 2020.2021. The decrease was due to the impact of the COVID-19 outbreak.outbreak which resulted in the termination of elective surgeries which is the Company’s primary medical device revenue. In addition, certain distributors lost clients due to business closings which had an additional impact on the Company’s overall revenue activity.
Cost of product sales decreased $251,159$44,754 from $299,204$121,549 in 20192020 to $48,045$76,795 in 20202021 due to the reduction in sales caused by the Covid-19COVID-19 outbreak.
OfficersOperating expenses increased $462,528 from $1,560,151 in 2020 to $2,022,679 in 2021 as a direct result of professional fees incurred and director’s compensationattributable to the Company’s asset acquisitions and payroll taxes decreased $447,056 from $829,138 in 2019 to $382,082 in 2020. The 2019 expense amount ($829,138) includes additional stock-based compensation of ($336,882) pursuant to their respective employment agreements and related payroll taxes ($10,968). The 2020 expense amount ($382,082) includes additional stock-based compensation of ($30,000) pursuant to their respective employment agreements and related payroll taxes ($6,923).
Consulting fees decreased $220,721 from $427,335 in 2019 to $206,614 in 2020. The 2019 expense amount ($427,335) includes stock-based compensation of $388,138, resulting from stock issued for the service of consultants. The 2020 expense amount ($206,614) includes stock-based compensation of $181,764, resulting from stock issued for the service of consultants.
Advertising expense increased $13,831 from $127,374 in 2019 to $141,205 in 2020.
Hosting expense decreased $1,674 from $7,467 in 2019 to $5,793 in 2020.
Rent expense increased $28,562 from $484 in 2019 to $29,046 in 2020.
Professional fees increased $60,778 from $74,180 in 2019 to $134,958 in 2020.
Depreciation of property and equipment decreased $7,524 from $11,532 in 2019 to $4,008 in 2020.
Amortization of intangible assets increased $142,226 from $4,966 in 2019 to $147,192 in 2020.
Reimbursed expenses decreased $14,800 from $35,474 in 2019 to $20,674 in 2020.
Other operating expenses decreased $46,774 from $251,714 in 2019 to $204,940 in 2020.Regulation A offering.
Net loss decreased $249,066increased $1,045,775 from $1,437,491$1,134,107 in 20192020 to $1,188,425$2,179,882 in 2020.2021. The decreaseincrease was due to the $493,152 decrease$462,528 increase in total operating expenses offsetcoupled by the $66,475$366,059 increase in other expense – net, the $275 increase$825 decrease in provision for income taxes and the $177,336$218,013 decrease in gross profit.
Six months ended June 30, 2020 compared with six months ended June 30, 2019.
Revenues decreased $375,948 from $1,150,739 in 2019 to $774,791 in 2020. The decrease was due to the impact of the COVID-19 outbreak.
Cost of product sales decreased $392,163 from $561,757 in 2019 to $169,594 in 2020 due to the reduction in sales caused by the Covid-19 outbreak.
Officers and director’s compensation and payroll taxes decreased $253,933 from $1,274,688 in 2019 to $1,020,755 in 2020. The 2019 expense amount ($1,274,688) includes additional stock-based compensation of ($834,230) pursuant to their respective employment agreements and related payroll taxes ($9,586). The 2020 expense amount ($1,020,755) includes additional stock-based compensation of ($622,671) pursuant to their respective employment agreements and related payroll taxes ($25,052).
Consulting fees decreased $668,064 from $1,091,086 in 2019 to $423,022 in 2020. The 2019 expense amount ($1,091,086) includes stock-based compensation of $953,914, resulting from stock issued for the service of consultants. The 2020 expense amount ($423,022) includes stock-based compensation of $353,116, resulting from stock issued for the service of consultants.
Advertising expense increased $106,273 from $153,762 in 2019 to $260,035 in 2020.
Hosting expense increased $4,219 from $7,917 in 2019 to $12,136 in 2020.
Rent expense increased $109,308 from $12,344 in 2019 to $121,652 in 2020.
Professional fees increased $213,120 from $112,016 in 2019 to $325,136 in 2020.
Depreciation of property and equipment decreased $6,194 from $14,297 in 2019 to $8,103 in 2020.
Amortization of intangible assets increased $269,998 from $7,160 in 2019 to $277,158 in 2020.
Reimbursed expenses decreased $21,813 from $62,776 in 2019 to $40,963 in 2020.
Other operating expenses decreased $112,590 from $460,293 in 2019 to $347,703 in 2020.
Net loss decreased $294,973 from $2,610,005 in 2019 to $2,315,032 in 2020. The decrease was due to the $359,676 decrease in total operating expenses offset by the $79,693, increase in other expense – net, the $1,225 increase in provision for income taxes and the $16,215 increase in gross profit.
Liquidity and Capital Resources
At June, 2020,March 31, 2021, the Company had cash and cash equivalents of $390,201$1,677,076 and a working capital of $2,005,234.$2,984,648. Cash and cash equivalents increased $343,661$1,219,278 from $46,540$457,798 at December 31, 20192020 to $390,201$1,677,076 at June 30, 2020.March 31, 2021. For the sixthree months ended June 30, 2020, $1,486,385March 31, 2021, $2,883,137 was provided by financing activities, $526,418$1,486,329 was used in operating activities, and $616,306$177,530 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.
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Trend Information
The novel coronavirus disease of 2019 (“COVID-19”) outbreak has affected the Company’s operations as set forth above. The full impact of the COVID-19 outbreak continues to evolve. 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 foreseeable future, however, as a direct result of medical offices closure in our primary area of operations, our sales for secondthird quarter are down approximately 60% year over year and quarter over quarter. During the course of the pandemic situation, the Company laid off 80% of its workforce in the CBD business and are just now recovering those operations. Our inventory increased to over $500,000 due to lack of sales, but fortunately, the product shelf life exceeds two years so as sales increase, we expect inventory levels to level off at close to $200,000. Our Duramed division was tasked with 90% of the affiliate doctors ceasing operations for period from 4-8 months and are just now recovering full operations. Presently, our Duramed operations are at 60% of pre-COVID operational level. Our expectation that as business open, and in particular medical offices, that our recovery will progress in sync with the speed of the business openings.openings and expect to be back to pre-COVID operational level by end of the 1st quarter 2021.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of June 30, 2020,March 31, 2021, our principal executive officer and principal financial officer conducted an evaluation regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon the evaluation of these controls and procedures, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
(B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting in our fiscal quarter for the period June 30, 2020March 31, 2021 covered by this Quarterly Report on Form 10-Q, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
On April 28, 2021, the Company was served with a commercial legal action against the Company and certain officers by two investors of the Company (collectively, the “Investors”). The complaint was filed in the Supreme Court of the State of New York, County of Nassau, Index No. 605191/2021. The complaint alleges four causes of action including breach of contract and misrepresentations.
We have consulted with attorneys and believe the Investors’ complaints are without merit, factually inaccurate, and frivolous. We intend to vigorously defend ourselves against the aforementioned legal action and will likely bring counterclaims against the Investors.
Other than above, we are not currently a party toaware of any pending or threatened legal proceedings.proceedings in which we are involved.
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As a smaller reporting company, we are not required to provide risk factors in this Form 10-Q, however The Company has been directly impacted and has experienced moderate interruption during this challenging COVID-19 pandemic. In accordance with applicable federal and state guidelines, the Company has implemented and prioritized strict social distancing measures, good manufacturing practices, proper sanitization measures, and new manufacturing guidelines. Although several Company customers have experienced business shutdowns during the last few weeks, this had nothas dramatically impacted our online ordering and/or initiating new direct shipment orders. Additional COVID operating requirements to insure safety, handling requirements, sanitation requirements have placed a significant burden on order processing and fulfilment.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Sales of unregistered securities during the sixthree months ended June 30, 2020March 31, 2021 are as follows:
From January 1, 20202021 through March 31, 2020,2021 the companyCompany issued an aggregate of 27,5005,732,000 shares of CANB Common Stock under its Reg A-1 registration currently in effect and an additional 130,758 shares of common stock to multiplevarious consultants for services rendered.services.
From January 1, 20202021 through March 31, 2020,2021 the companyCompany issued an aggregate of 31,335355,057 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.under an asset acquisition agreement with Botanical Biotech.
From January 1, 20202021 through March 31, 2020,2021 the companyCompany issued an aggregate of 20,000355,250 shares of CANB Common Stock to FirstFire Global Opportunities Fund, LLC for a commitment fee pursuant to a junior convertible promissoryunder note purchaseconversion agreement.
From January 1, 20202021 through March 31, 2020, the company issued an aggregate of 99,508 shares of CANB Common Stock to FirstFire Global Opportunities Fund, LLC for returnable shares pursuant to a junior convertible promissory note purchase agreement.
From April 1, 2020 through June 30, 2020,2021 the Company issued an aggregate of 111,734800,000 shares of CANB Common Stock to multiple consultants for services rendered.under a note conversion agreement.
From AprilJanuary 1, 20202021 through June 30, 2020, the company issued an aggregate of 20,319 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From April 1, 2020 through June 30, 2020,March 31, 2021 the Company issued an aggregate of 30,000150 shares of CANBPreferred C shares under multiple employment agreements. The Preferred C shares converted to 3,750,000 shares of Common Stock to an employee for services rendered.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 185,000 shares of CANB Common Stock to SRAX, Inc. according to a platform access agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 50,000 shares of CANB Common Stock to Mediiusa Group, Inc. according to a hemp processing use agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 24,545 shares of CANB Common Stock to Labrys Fund, L.P. for a commitment fee pursuant to a junior convertible promissory note purchase agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 118,000 shares of CANB Common Stock to Labrys Fund, L.P. for returnable shares pursuant to a junior convertible promissory note purchase agreement.
From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 20,000 shares of CANB Common Stock to Eagle Equities, LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.upon issuance.
With respect to the transactions noted above, each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a “sophisticated person”, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
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| (1) | Filed with the Annual Report on Form 10-K filed with the SEC on April 2, 2020 and incorporated herein by reference. | |
| (2) | Filed with the Form S-1 Registration Statement filed with the SEC on December 2, 2015 and incorporated herein by reference. | |
| (3) | Filed with the Current Report on Form 8-K filed with the SEC on January 30, 2019 and incorporated herein by reference. | |
| (4) | Filed with the Current Report on Form 8-K filed with the SEC on December 6, 2019 and incorporated herein by reference. | |
| (5) | Filed with the Current Report on Form 8-K filed with the SEC on February 18, 2020 and incorporated herein by reference. | |
| (6) | Filed with the Current Report on Form 8-K filed with the SEC on January 15, 2019 and incorporated herein by reference. | |
| (7) | Filed with the Form 1-A/A, Part II, filed with the SEC on July 17, 2020 and incorporated herein by reference. | |
| (8) | Filed with the Form 1-A POS, Part II, filed with the SEC on September 11, 2020 and incorporated herein by reference. | |
| (9) | Filed with the Current Report on Form 8-K filed with the SEC on November 23, 2020 and incorporated herein by reference. | |
| (10) | Filed with the Annual Report on Form 10-K filed with the SEC on April 14, 2021 and incorporated herein by reference. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Can B Corp. | ||
| Date: | By: | /s/ Marco Alfonsi |
| Marco Alfonsi, Chief Executive Officer | ||
| Date: | By: | /s/ Stanley L. Teeple |
| Stanley L. Teeple, Chief Financial Officer | ||