UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
Can
B Corp.
(Name
of small business issuer in our charter)
Florida
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0001509957
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20-3624118
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(State
or other jurisdiction
of
incorporation or organization)
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(Primary
Standard Industrial
Classification
Code Number)
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IRS
Employer
Identification Number
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960
South Broadway, Suite 120
Hicksville,
NY
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11801
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(Address
of principal executive offices)
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(Zip
Code)
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Telephone:
(516) 595-9544
Marco
Alfonsi, CEO
960
South Broadway, Suite 120
Hicksville,
NY 11801
Telephone:
(516) 595-9544
(Name,
address and telephone number of agent for service)
Copies
to:
Arden
Anderson, Esq.
Austin
Legal Group, APC
3990
Old Town Avenue, Suite A-101
San
Diego, CA 92110
Phone:
619-924-9600
Approximate
date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering.
[ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company.
Large
accelerated filer
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[ ]
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Accelerated
Filer
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[ ]
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Non-accelerated
filer
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[X]
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Smaller
reporting company
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[X]
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Emerging
growth company
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[X]
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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 to Section 7(a)(2)(B) of the Securities Act. [ ]
CALCULATION
OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
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Amount to be
Registered(1)
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Proposed Maximum
Offering
Price
Per Share
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Proposed Maximum
Aggregate
Offering
Price
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Amount of
Registration
Fee(7)
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Common Stock, Nil par value per share
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3,557,605 shares
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(2)
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$
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0.4439
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(6)
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$
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1,579,220.86
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$
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172.29
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Common Stock, Nil par value per share
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409,417 shares
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(3)
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$
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0.4439
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(6)
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$
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181,740.21
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$
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19.83
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Common Stock, Nil par value per share
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9,912,851 shares
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(4)
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$
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0.4439
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(6)
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$
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4,400,314.56
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$
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480.07
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Common Stock, Nil par value per share
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619,851 shares
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(5)
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$
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0.4439
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(6)
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$
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275,151.86
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$
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30.02
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Total
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14,499,724 shares
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$
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0.4439
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$
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6,436,427.48
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$
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701.76
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(1)
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Pursuant
to Rule 416 under the Securities Act, the securities being registered hereunder include such indeterminate number of additional shares
of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.
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(2)
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Represents
shares of common stock of the Registrant issuable upon exercise of Common Stock Purchase Warrants to purchase 3,557,605 shares of
common stock exercisable at $0.45 per share, which were granted by the Company on December 10, 2020.
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(3)
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Represents
409,417 commitment shares of common stock issued pursuant to a Securities Purchase Agreement, dated December 10, 2020 (“SPA”),
between the Company and selling stockholders.
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(4)
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Represents
up to 9,912,851shares of common stock of the Registrant which may be issued, upon conversion of principal, owed by the Registrant
pursuant to those certain 12% Original Issue Discount Senior Secured Convertible Promissory Notes (each a “Note” and
collectively, the “Notes”) in the aggregate principal amount of $2,777,778 (approximately $2,377,777 currently outstanding),
which were sold by the Registrant on December 10, 2020, at the option of the holders thereof. The Notes are convertible into shares
of the Registrant’s common stock at any time, at a rate of $0.39 per share (“Conversion Price”), which Conversion
Price will be reduced if on the date seven days from conversion (the “True-Up Date”) the closing price of the Company’s
common stock quoted on OTCQB on the True-Up Date (the “Closing Price”) is less than the Conversion Price. In such instance,
the Company will pay an amount (the “True-Up Amount”) in either cash or such number of common shares having a value equal
to [(Conversion Price – (80% of the Closing Price)] * the aggregate value of the amount converted as set forth in the notice
of conversion. Notwithstanding the foregoing, the Conversion Price to be used in accordance with the formula in the preceding sentence
shall not be less than the lower of (a) $0.25 or (b) 50% of the average VWAP of the Company’s common stock for the trading
days prior to the applicable conversion date (the “Floor Price”) provided that if the Closing Price on the Maturity Date
(or the next trading day if such date is a Saturday, Sunday or a holiday) is not equal or exceeding the Floor Price as of such date,
the conversion price to be used in accordance with this formula shall be equal to 80% of the average VWAP of the Company’s
common stock for the two trading days immediately preceding the date of conversion to which a True-Up would be payable. The number
of shares of common stock to be delivered in satisfaction of the True-Up Amount to be delivered in accordance with this Section shall
be equal to True-Up Amount divided by the Conversion Price in effect on the Conversion Date. For purposes of this calculation, we
have assumed conversion at the Floor Price of $0.25.
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(5)
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Represents
up to 619,851 shares of common stock issuable if the Company elects to make interest payments on the Notes via shares henceforth.
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(6)
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Estimated
solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended (“Securities
Act”). The Proposed Maximum Offering Price Per Share and Proposed Maximum Aggregate Offering Price are based on the average
of the high ($0.48) and low ($0.4078) sale price of the Company’s common stock as reported on OTCQB Market on June 24, 2021,
which date is within five business days from the filing of this Registration Statement.
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(7)
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Calculated
by multiplying the Proposed Maximum Aggregate Offering Price by 0.0001091.
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We
hereby amend this registration statement on such date or dates as may be necessary to delay our effective date until we will file a further
amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant
to Section 8(a) may determine.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission, of which this prospectus is a part, shall have been declared effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
PRELIMINARY
PROSPECTUS - SUBJECT TO COMPLETION
Dated
June __, 2021
CAN
B CORP.
14,499,724
Shares of Common Stock
This
prospectus relates to the resale by the selling stockholders named herein of up to 14,499,724 shares of common stock, Nil par value per
share, which we refer to as common stock, of Can B Corp., which we refer to as “us,” “we,” the “Company,”
the “Registrant,” “Can B Corp.” or “CANB,” consisting of (i) 3,557,605 shares of the Company’s
common stock issuable upon exercise of those certain Common Stock Purchase Warrants dated December 10, 2020, which were granted to the
selling stockholders on the same date (the “Warrants”), (ii) 409,417 commitment shares of common stock (the “Commitment
Shares”) issued pursuant to a Securities Purchase Agreement, dated December 10, 2020 (“SPA”) between the Company and
selling stockholders, (iii) up to 9,912,851shares of common stock of the Registrant which may be issued, upon conversion of principal,
owed by the Registrant pursuant to those certain 12% Original Issue Discount Senior Secured Convertible Promissory Notes (each a “Note”
and collectively, the “Notes”) in the aggregate principal amount of $2,777,778 (approximately $2,377,777 currently outstanding),
which were sold by the Registrant on December 10, 2020 pursuant to the SPA, and (iv) up to 619,851 shares of the Company’s common
stock issuable if the Company elects to make interest payments on the notes via shares henceforth (the “Interest Shares”).
The
shares of common stock being offered by the selling stockholders (which term includes their respective donees, pledgees, transferees,
or other successors-in-interest) have been issued pursuant to a private offering transaction which closed on December 10, 2020, which
transaction is described in the section titled “Securities Purchase Agreement,” beginning on page 16. The selling stockholders
are described in greater detail under “Selling Stockholders”, beginning on page 17.
The
shares of common stock described in this prospectus may be offered for sale from time to time by the selling stockholders named herein.
The selling stockholders may offer and sell the shares in a variety of transactions as described under the heading “Plan of Distribution”
beginning on page 19, including transactions on any stock exchange, market or facility on which our common stock may be traded, in privately
negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to such market prices or at negotiated
prices. We have no basis for estimating either the number of shares of our common stock that will ultimately be sold by the selling stockholders
or the prices at which such shares will be sold. In addition, any securities covered by this prospectus which qualify for sale pursuant
to Rule 144 of the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.
We
are not selling any securities covered by this prospectus and will not receive any of the proceeds from the sale of such shares by the
selling stockholders. However, to the extent that the Warrants are exercised for cash, we will receive the payment of the exercise price
in connection with such exercise (see also “Use of Proceeds” on page 16 below). We are bearing all of the expenses in connection
with the registration of the shares of common stock and their qualification or exemption under state “Blue Sky” laws, but
all selling and other expenses incurred by the selling stockholders, including commissions and discounts, if any, attributable to the
sale or disposition of the shares will be borne by them.
The
selling stockholders and intermediaries through whom such securities are sold may be deemed “underwriters” within the meaning
of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the securities offered hereby, and any
profits realized or commissions received may be deemed underwriting compensation.
A
current prospectus must be in effect at the time of the sale of the shares of common stock discussed above and each selling stockholder
or dealer selling the common stock is required to deliver a current prospectus upon the sale.
Our
common stock is not now listed on any national securities exchange or the NASDAQ stock market. However, our common stock is quoted on
OTC Market’s OTCQB® Venture Market under the symbol “CANB.” The closing price for our common stock on June 24,
2021, was $0.45 per share.
Investing
in our securities involves risks. You should carefully consider the “risk factors” beginning on page 7 of this
prospectus and set forth in the documents incorporated by reference herein before making any decision to invest in our
securities.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is June __, 2021.
TABLE
OF CONTENTS
We
have prepared this prospectus as part of a registration statement that we filed with the SEC for the selling stockholders’ offering
of securities. The registration statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters
discussed in this prospectus. This prospectus relates to the resale by the selling stockholders listed in this prospectus of up to 14,499,724
shares of our common stock. We will not receive any proceeds from the resale of any of the shares by the selling stockholders. However,
to the extent that the Warrants are exercised for cash, we will receive the payment of the exercise price in connection with such exercise
(see also “Use of Proceeds” on page 16 below). We have agreed to pay for the expenses related to the registration of the
shares being offered by the selling stockholders.
You
should read this prospectus and the related exhibits filed with the SEC, together with additional information described below under “Reports
to Security Holders.”
This
prospectus is not an offer or solicitation relating to the securities in any jurisdiction in which such an offer or solicitation relating
to the securities is not authorized. You should not consider this prospectus to be an offer or solicitation relating to the securities
if the person making the offer or solicitation is not qualified to do so, or if it is unlawful for you to receive such an offer or solicitation.
You
should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf. Neither
we nor any underwriters have authorized any other person to provide you with any information different from that contained in this prospectus
or information furnished by us upon request as described herein. The information contained in this prospectus is complete and accurate
only as of the date of this prospectus, regardless of the time of delivery of this prospectus or sale of our shares. This prospectus
contains summaries of certain other documents, which summaries contain all material terms of the relevant documents and are believed
to be accurate, but reference is hereby made to the full text of the actual documents for complete information concerning the rights
and obligations of the parties thereto. Such information necessarily incorporates significant assumptions, as well as factual matters.
All documents relating to this offering and related documents and agreements, if readily available to us, will be made available to a
prospective investor or its representatives upon request.
We
will disclose any material changes in our affairs in a post-effective amendment to the registration statement of which this prospectus
is a part, or a prospectus supplement. We do not imply or represent by delivering this prospectus that CANB, or its business, financial
condition or results of operations, are unchanged after the date on the front of this prospectus is correct at any time after such date,
provided that we will amend or supplement this prospectus to disclose any material events which occur after the date of such prospectus
to the extent required by applicable law.
Persons
outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating
to, the offering of the securities and the distribution of this prospectus outside of the United States.
SUMMARY
INFORMATION
This
summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you
may want to consider. To understand this offering fully, you should carefully read the entire prospectus, including the section entitled
“Risk Factors,” before making a decision to invest in our securities. Unless otherwise noted or unless the context otherwise
requires, the terms “we,” “us,” “our,” the “Company,” the “Registrant,” “Can
B Corp.” and “CANB” refers to Can B Corp. together with its wholly owned subsidiaries. In instances where we refer
emphatically to “Can B Corp.” or where we refer to a specific subsidiary of ours by name, we are referring only to that specific
legal entity.
The
Company
Can
B Corp. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005 in order to tap into a largely
un-serviced segment of the web-based advertising industry. Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems,
Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008, in order to acquire Prosperity’s office
productivity software suite as a complement to WRAP’s existing intellectual property. After its acquisition, the Company transferred
Prosperity’s operations to WRAP and is presently in the process of dissolving Prosperity.
In
early 2017, the Company transitioned into the hemp derived CBD industry and changed its name to Canbiola, Inc. On March 6, 2020 CANB
changed its name to “Can B̅ Corp.” in order to segregate its corporate identity from its lead products branded under
the Canbiola™ brand.
The
Company’s common shares are currently quoted on OTC Market’s OTCQB® Venture Market under the symbol “CANB.”
Our
principal executive offices are located at 960 South Broadway, Suite 120, Hicksville NY 11801 and our telephone number is 516-595-9544.
We
qualify as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS
Act”) as we do not have more than $1,700,000,000 in annual gross revenue and did not have such amount as of December 31, 2020,
the last day of our last fiscal year. We are electing to use the extended transition period for complying with new or revised accounting
standards under Section 102(b)(1) of the JOBS Act.
As
an emerging growth company, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are otherwise
applicable to public companies. These provisions include, but are not limited to:
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being
permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in this annual report;
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not
being requested to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended
(“Sarbanes-Oxley Act”);
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reduced
disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and
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exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
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We
will remain an emerging growth company until the earliest to occur of: (i) our reporting $1 billion or more in annual gross revenues;
(ii) the end of fiscal year 2021; (iii) our issuance, in a three-year period, of more than $1 billion in non-convertible debt; and (iv)
the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million on the last business
day of our second fiscal quarter.
Business
Overview
The
Company, through its subsidiaries, is in the business of promoting health and wellness through its development, manufacture and sale
of products containing cannabinoids derived from hemp biomass (without psychoactive effect from THC) and the licensing of durable medical
devices.
The
Company’s primary business is the development, production and sale of products and delivery devices containing hemp derived cannabinoids,
including cannabidiol (“CBD”), cannabinol (“CBN”) and cannabigerol (“CBG”). The Company operates
four distinct health and wellness divisions: retail sales (Canbiola, Nu Wellness, Seven Chakras, and Pure Leaf Oil), R&D and manufacturing
(Pure Health Products and Botanical Biotech), durable medical devices (Duramed), and cultivation and processing (Green Grow Farms, Inc.).
The
statements found herein have not been evaluated by the Food and Drug Administration (FDA) and the Company’s products are not intended
to diagnose, treat, cure or prevent any disease or medical condition.
The
Offering
This
prospectus relates to the resale by the selling stockholders named herein of up to 14,499,724 shares of common stock, Nil par value per
share.
The
shares of common stock described in this prospectus may be offered for sale from time to time by the selling stockholders named herein.
The selling stockholders may offer and sell the shares in a variety of transactions, including transactions on any stock exchange, market
or facility on which our common stock may be traded, in privately negotiated transactions or otherwise at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated prices. In addition, any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.
As
of June 24, 2021, we have 16,667,655 shares of common stock outstanding, 20 shares of Series A Preferred Stock, no shares of Series B
Preferred Stock*, no shares of Series C Preferred Stock and 1,950 shares of Series D Preferred Stock outstanding. After this offering,
assuming the selling stockholders converted the entirety of the Notes at the Floor Price of $0.25 per share, and exercised all of the
Warrants, and assuming the Company paid all interest accrued on the Notes in shares of our common stock, we would have approximately
30,757,962 shares of common stock outstanding, assuming we do not issue shares in addition to those issuable to the selling stockholders.
*
It has come to our attention that the Company’s transfer agent still shows 227,590 Series B Preferred shares as being held by RedDiamond
Partners LLC (“RedDiamond”) due to an administrative oversight. Nonetheless, such shares were retired in exchange for 97,608
shares of common stock and rights to acquire an additional 35,667 shares of common stock issued to RedDiamond pursuant to an Exchange
Agreement dated August 13, 2019.
Use
of Proceeds
We
will not receive any of the proceeds from the sale or other disposition by the selling stockholders or their transferees of the shares
of common stock covered hereby. However, to the extent that the Warrants are exercised for cash, we will receive the payment of the exercise
price in connection with such exercise (see also “Use of Proceeds” on page 16 below).
Risk
Factors
An
investment in our common stock offered hereby is speculative and involves a high degree of risk. The Company and its business are subject
to numerous risks, including, among others, those associated with development of the Company’s product candidates, technology development,
the ability of the Company to obtain additional funds, and those associated with newer business enterprises. See the section titled “Risk
Factors” elsewhere in this prospectus
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. Before investing in our common stock, you should carefully consider the risks and
uncertainties described below, together with all of the other information in this prospectus, including our consolidated financial statements
and related notes. If any of the following risks materialize, our business, financial condition, operating results and prospects could
be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your
investment.
Risks
Related to this Offering and our Common Stock
You
could experience substantial dilution in the book value per share of the common stock you purchase.
If
we offer new stock at a price per share less than the net tangible book value per share. Issuance of preferred shares as compensation
and shares under convertible debt derivative securities transactions could also affect dilution.
We
are subject to the reporting requirements of federal securities laws, which is expensive.
We
are a public reporting company in the United States and, accordingly, subject to the information and reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and other federal securities laws, and the compliance obligations of
the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the
SEC and furnishing audited reports to stockholders causes our expenses to be higher than they would be if we remained a privately-held
company.
Our
stock price may be volatile, which may result in losses to our stockholders.
The
stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the OTCQB®,
where our shares of common stock are quoted, generally have been very volatile and have experienced sharp share-price and trading-volume
changes. The trading price of our securities is likely to remain volatile and could fluctuate widely in response to many factors, including
but not limited to the following, some of which are beyond our control:
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variations
in our operating results;
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changes
in expectations of our future financial performance, including financial estimates by securities analysts and investors;
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changes
in operating and stock price performance of other companies in our industry;
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additions
or departures of key personnel; and
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future
sales of our common stock.
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Domestic
and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic
and political conditions unrelated to our performance, may adversely affect the price of our common stock.
In
the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the
market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and resources.
Our
common shares are thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices
or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.
We
cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors,
including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors,
and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons,
they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of
our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when
trading activity in our shares is minimal, as compared to a seasoned issuer which has a large and steady volume of trading activity that
will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or
more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
The
market price for our common stock may be particularly volatile given that we are a relatively small company and have experienced losses
from operations that could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your
purchase price if at all, which may result in substantial losses to you.
We
do not anticipate paying any cash dividends.
We
presently do not anticipate that we will pay any dividends on any of our common stock in the foreseeable future. The payment of dividends,
if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment
of any dividends will be within the discretion of our Board of Directors (the “Board”). We presently intend to retain all
earnings to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.
Our
common stock may be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.
Our
common stock is considered a “penny stock”, and subject to the requirements of Rule 15g-9, promulgated under the Exchange
Act of 1934, as amended. “Penny stock” is generally defined as any equity security not traded on an exchange or quoted on
NASDAQ that has a market price of less than $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons
other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser and receive the purchaser’s consent prior to the
transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection
with any trades involving a stock defined as a penny stock. The required penny stock disclosures include the required delivery, prior
to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could
severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.
In addition, various state securities laws impose restrictions on transferring “penny stocks” and as a result, investors
in the common stock may have their ability to sell their shares of the common stock impaired.
We
may need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our
stockholders.
We
may require additional capital for the development and commercialization of our products and may require additional cash resources due
to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our
resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit
facility. The sale of additional equity securities could result in additional dilution to our stockholders. The incurrence of additional
indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict
our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
Our
principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters
subject to stockholder approval.
Certain
of our executive officers, directors and large stockholders own a significant percentage of our outstanding capital stock. Accordingly,
our directors and executive officers have significant influence over our affairs due to their substantial ownership coupled with their
positions on our management team and have substantial voting power to approve matters requiring the approval of our stockholders. For
example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of
any merger, sale of assets, or other major corporate transaction. This concentration of ownership may prevent or discourage unsolicited
acquisition proposals or offers for our common stock that some of our stockholders may believe is in their best interest.
If
we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy
and completeness of our reported financial information and the market price of our common stock may be negatively affected.
As
a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such
internal control. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control
over financial reporting and provide a management report on the internal control over financial reporting. If we have a material weakness
in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements
may be materially misstated. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion.
During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting,
our management will be unable to conclude that our internal control over financial reporting is effective. Moreover, when we are no longer
a smaller reporting company, our independent registered public accounting firm will be required to issue an attestation report on the
effectiveness of our internal control over financial reporting. Even if our management concludes that our internal control over financial
reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect
to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.
If
we are unable to conclude that our internal control over financial reporting is effective, or when we are no longer a smaller reporting
company, if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting because
we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures,
which could cause the price of our common stock to decline. Internal control deficiencies could also result in a restatement of our financial
results in the future. As of June 24, 2021, we have concluded that are internal controls are not sufficient.
If
securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding
our stock adversely, our stock price and trading volume could decline.
The
trading market for our common stock could be influenced by the research and reports that industry or securities analysts publish about
us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts
commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more
of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage
of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
We
may not register or qualify our securities with any state agency pursuant to blue sky regulations.
The
holders of our shares of common stock and persons who desire to purchase them in the future should be aware that there may be significant
state law restrictions upon the ability of investors to resell our shares. We currently do not intend to and may not be able to qualify
securities for resale in states which require shares to be qualified before they can be resold by our shareholders.
We
are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth
companies will make our common stock less attractive to investors.
We
are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. The Section 107
of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards
and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with
new or revised accounting standards under Section 102(b)(1) of the JOBS Act. Please refer to a discussion under “Risk Factors”
of the effect on our financial statements of such election.
As
an emerging growth company we are exempt from Section 404(b) of the Sarbanes Oxley Act. Section 404(a) requires Issuers to publish information
in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This
statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting
firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures
for financial reporting. As an emerging growth company, we are also exempt from Section 14A (a) and (b) of the Exchange, which require
the shareholder approval of executive compensation and golden parachutes.
We
have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of
the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public
and private companies until those standards apply to private companies. As a result of this election, our financial statements may not
be comparable to companies that comply with public company effective dates.
We could face significant penalties for our failure to comply with the terms of our outstanding convertible notes.
Our
various convertible notes contain positive and negative covenants and customary events of default including requiring us in many cases
to timely file SEC reports. In the event we fail to timely file our SEC reports in the future, or any other events of defaults occur
under the notes, we could face significant penalties and/or liquidated damages and/or the conversion price of such notes could be adjusted
downward significantly, all of which could have a material adverse effect on our results of operations and financial condition, or cause
any investment in the Company to decline in value or become worthless.
The
issuance and sale of common stock upon conversion of the convertible notes may depress the market price of our common stock.
If
sequential conversions of the convertible notes and sales of such converted shares take place, the price of our common stock may decline,
and as a result, the holders of the convertible notes will be entitled to receive an increasing number of shares in connection with conversions,
which shares could then be sold in the market, triggering further price declines and conversions for even larger numbers of shares, to
the detriment of our investors. The shares of common stock which the convertible notes are convertible into may be sold without restriction
pursuant to Rule 144. As a result, the sale of these shares may adversely affect the market price, if any, of our common stock.
We
have established preferred stock which can be designated by the Company’s Board of Directors without shareholder approval.
The
Company has 5,000,000 shares of preferred stock authorized. The shares of preferred stock of the Company may be issued from time to time
in one or more series, each of which shall have a distinctive designation or title as shall be determined by the board of directors of
the Company prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting
powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions
thereof as adopted by the board of directors. Because the board of directors is able to designate the powers and preferences of the preferred
stock without the vote of a majority of the Company’s shareholders, shareholders of the Company will have no control over what
designations and preferences the Company’s preferred stock will have. The issuance of shares of preferred stock or the rights associated
therewith, could cause substantial dilution to our existing shareholders. Additionally, the dilutive effect of any preferred stock which
we may issue may be exacerbated given the fact that such preferred stock may have voting rights and/or other rights or preferences which
could provide the preferred shareholders with substantial voting control over us and/or give those holders the power to prevent or cause
a change in control, even if that change in control might benefit our shareholders. As a result, the issuance of shares of preferred
stock may cause the value of our securities to decrease.
Risks
Related to our Business
Since
we have a limited operating history in our industry, it is difficult for potential investors to evaluate our business.
Our
short operating history in the hemp derived cannabinoid industry may hinder our ability to successfully meet our objectives and makes
it difficult for potential investors to evaluate our business or prospective operations. As an early stage company, we are subject to
all the risks inherent in the financing, expenditures, operations, complications and delays inherent in a new business. Accordingly,
our business and success faces risks from uncertainties faced by developing companies in a competitive environment. There can be no assurance
that our efforts will be successful or that we will ultimately be able to attain profitability.
We
may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our product development programs
or commercialization efforts and could cause our business to fail.
We
expect to need substantial additional funding to pursue additional product development and launch and commercialize our products. There
are no assurances that future funding will be available on favorable terms or at all. If additional funding is not obtained, we may need
to reduce, defer or cancel additional product development or overhead expenditures to the extent necessary. The failure to fund our operating
and capital requirements could have a material adverse effect on our business, financial condition and results of operations.
If
we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and
development programs or any future commercialization efforts. Any of these events could significantly harm our business, financial condition
and prospects.
Our
independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our
historical financial statements have been prepared under the assumption that we will continue as a going concern. Our independent registered
public accounting firm has expressed substantial doubt in our ability to continue as a going concern. Our ability to continue as a going
concern is dependent upon our ability to obtain additional equity financing or other capital, attain further operating efficiencies,
reduce expenditures, and, ultimately, generate more revenue. The doubt regarding our potential ability to continue as a going concern
may adversely affect our ability to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue as
a going concern, our stockholders may lose some or all of their investment in the Company.
We
depend heavily on key personnel, and turnover of key senior management could harm our business.
Our
future business and results of operations depend in significant part upon the continued contributions of our senior management personnel.
If we lose their services or if they fail to perform in their current positions, or if we are not able to attract and retain skilled
personnel as needed, our business could suffer. Significant turnover in our senior management could significantly deplete our institutional
knowledge held by our existing senior management team. We depend on the skills and abilities of these key personnel in managing the product
acquisition, marketing and sales aspects of our business, any part of which could be harmed by turnover in the future. We do not have
any key person insurance.
We
expect to face intense competition, often from companies with greater resources and experience than we have.
The
hemp derived cannabinoid industry is highly competitive and subject to rapid change. The industry continues to expand and evolve as an
increasing number of competitors and potential competitors enter the market. Many of these competitors and potential competitors have
substantially greater financial, technological, managerial and research and development resources and experience than we have. Some of
these competitors and potential competitors have more experience than we have in the development of hemp products, including validation
procedures and regulatory matters. In addition, our products compete with product offerings from large and well-established companies
that have greater marketing and sales experience and capabilities than we or our collaboration partners have. If we are unable to compete
successfully, we may be unable to grow and sustain our revenue.
We
have substantial capital requirements that, if not met, may hinder our operations.
We
anticipate that we will make substantial capital expenditures for research and product development work and acquisitions. If we cannot
raise sufficient capital, we may have limited ability to expend the capital necessary to undertake or complete research and product development
work and acquisitions. There can be no assurance that debt or equity financing will be available or sufficient to meet these requirements
or for other corporate purposes, or if debt or equity financing is available, that it will be on terms acceptable to us. Moreover, future
activities may require us to alter our capitalization significantly. Our inability to access sufficient capital for our operations could
have a material adverse effect on our financial condition, results of operations or prospects.
Current
global financial conditions have been characterized by increased volatility which could negatively impact our business, prospects, liquidity
and financial condition.
Current
global financial conditions and recent market events have been characterized by increased volatility and the resulting tightening of
the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guaranty that debt
or equity financing, the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our
initiatives, objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations
will negatively impact our business, prospects, liquidity and financial condition.
We
will need to grow the size of our organization, and we may experience difficulties in managing any growth we may achieve.
As
our development and commercialization plans and strategies develop, we expect to need additional research, development, managerial, operational,
sales, marketing, financial, accounting, legal, and other resources. Future growth would impose significant added responsibilities on
members of management. Our management may not be able to accommodate those added responsibilities, and our failure to do so could prevent
us from effectively managing future growth, if any, and successfully growing our company.
We
may expend our limited resources to pursue a particular product and may fail to capitalize on products that may be more profitable or
for which there is a greater likelihood of success.
Because
we have limited financial and managerial resources, we have focused our efforts on particular products. As a result, we may forego or
delay pursuit of opportunities with other products that later prove to have greater commercial potential. Our resource allocation decisions
may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Any failure to improperly assess
potential products could result in missed opportunities and/or our focus on products with low market potential, which would harm our
business and financial condition.
We
engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect
on us.
We
have entered, and may continue to enter, into transactions with related parties for financing, corporate, business development and operational
services, as detailed herein. Such transactions may not have been entered into on an arm’s-length basis, and we may have achieved
more or less favorable terms because such transactions were entered into with our related parties. We rely, and will continue to rely,
on our related parties to maintain these services. If the pricing for these services changes, or if our related parties cease to provide
these services, including by terminating agreements with us, we may be unable to obtain replacements for these services on the same terms
without disruption to our business. This could have a material effect on our business, results of operations and financial condition.
Such
conflicts could cause an individual in our management to seek to advance his or her economic interests or the economic interests of certain
related parties above ours. Further, the appearance of conflicts of interest created by related party transactions could impair the confidence
of our investors, which could have a material adverse effect on our liquidity, results of operations and financial condition.
Any
inability to protect our intellectual property rights could reduce the value of our technologies and brands, which could adversely affect
our financial condition, results of operations and business.
Our
business is dependent upon our trademarks, trade secrets, copyrights and other intellectual property rights. There is a risk of certain
valuable trade secrets being exposed to potential infringers. The efforts we have taken to protect our proprietary rights may not be
sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete.
In addition, protecting our intellectual property rights is costly and time consuming. There is a risk that we may have insufficient
resources to counter adequately such infringements through negotiation or the use of legal remedies. It may not be practicable or cost
effective for us to fully protect our intellectual property rights in some countries or jurisdictions. If we are unable to successfully
identify and stop unauthorized use of our intellectual property, we could lose potential revenue and experience increased operational
and enforcement costs, which could adversely affect our financial condition, results of operations and business.
Our
potential for rapid growth and our entry into new markets make it difficult for us to evaluate our current and future business prospects,
and we may be unable to effectively manage any growth associated with these new markets, which may increase the risk of your investment
and could harm our business, financial condition, results of operations and cash flow.
Our
entry into the rapidly growing hemp cannabinoid market may place a significant strain on our resources and increase demands on our executive
management, personnel and systems, and our operational, administrative and financial resources may be inadequate. We may also not be
able to effectively manage any expanded operations, or achieve planned growth on a timely or profitable basis, particularly if the number
of customers using our technology significantly increases or their demands and needs change as our business expands. If we are unable
to manage expanded operations effectively, we may experience operating inefficiencies, the quality of our products and services could
deteriorate, and our business and results of operations could be materially adversely affected.
If
we are unable to develop and maintain our brands and reputation for our product offerings, our business and prospects could be materially
harmed.
Our
business and prospects depend, in part, on developing and then maintaining and strengthening our brands and reputation in the markets
we serve. If problems with our products or technologies cause customers to experience operational disruption or failure or delays, our
brand and reputation could be diminished. If we fail to develop, promote and maintain our brand and reputation successfully, our business
and prospects could be materially harmed.
We
could be subject to costly product liability claims related to our products.
Since
most of our products are intended for human use, we face the risk that the use of our products may result in adverse side effects to
people. We face even greater risks upon further commercialization of our products. An individual may bring a product liability claim
against us alleging that one of our products causes, or is claimed to have caused, an injury or is found to be unsuitable for consumer
use. Any product liability claim brought against us, with or without merit, could result in:
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inability to commercialize our products;
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decreased
demand for our products;
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regulatory
investigations that could require costly recalls or product modifications;
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loss
of revenue;
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substantial
costs of litigation;
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liabilities
that substantially exceed our product liability insurance, which we would then be required to pay ourselves;
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an
increase in our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms,
if at all;
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the
diversion of management’s attention from our business; and
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damage
to our reputation and the reputation of our products.
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Product
liability claims may subject us to the foregoing and other risks, which could have a material adverse effect on our business, results
of operations, financial condition, and prospects.
The
legality of certain products containing CBD is currently uncertain and the Company could be subject to enforcement action by the FDA
and certain state regulatory agencies.
In
2018, the federal Farm Bill removed hemp as a Schedule I drug under the Controlled Substances Act and hemp may now be grown as a commodity
crop, with restrictions; however, the 2018 Farm Bill did not specifically legalize CBD. Until Congress promulgates rules and regulations
relating to hemp derived CBD, the “legal” status of CBD from hemp, or the processes the Company may have to implement (and
at what expense), are still unknowns. A similar paradigm exists under various state laws with which the Company will have to comply.
The FDA currently considers the addition of CBD to food products, cosmetics or supplements to be illegal and prohibits the advertisement
of CBD products with health claims. In addition, the FDA has recently increased its review of and enforcement against CBD companies.
Should the Company become subject to enforcement action by the FDA, it could be forced to spend significant sums defending against such
enforcement and ultimately could be forced to stop offering some or all of its CBD products, which would materially, negatively affect
the Company’s business and shareholders’ investments. In addition, notwithstanding the intense pressure on FDA to fast-track
the CBD approval process, it is likely that the approval process for use of CBD in foods, cosmetics or supplements will take years.
Due
to the controversy over the cannabis plant within the United States, we face challenges getting our products into stores and into the
hands of the end user.
The
Company intends to release products that contain CBD derived from hemp that are legal within the U.S. However, it is possible we may
face scrutiny and run into issues getting our products into stores due to hesitation by stores to carry any product at all affiliated
with the cannabis plant, as well as federal, state and local regulations that may restrict our ability to sell CBD products.
The
novel coronavirus disease of 2019 (“COVID-19”) has had, and continues to have, broad impacts on multiple sectors of the global
economy, making it difficult to predict the extent of its impact on our business.
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus
originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally
beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure
globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the date of this prospectus. 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.
Our
acquisitions may expose us to unknown liabilities.
Because
we have acquired, and expect generally to acquire, all (or a majority of) the outstanding securities of certain of our acquisition targets,
our investment in those companies are or will be subject to all of their liabilities other than their respective debts which we paid
or will pay at the time of the acquisitions. If there are unknown liabilities or other obligations, our business could be materially
affected. We may also experience issues relating to internal controls over financial reporting that could affect our ability to comply
with the Sarbanes-Oxley Act, or that could affect our ability to comply with other applicable laws.
If
we fail to comply with government laws and regulations it could have a materially adverse effect on our business.
Our
industry is subject to extensive federal, state and local laws and regulations that are extremely complex and for which, in many instances,
the industry does not have the benefit of significant regulatory or judicial interpretation. We exercise care in structuring our operations
to comply in all material respects with applicable laws to the extent possible. We will also take such laws into account when planning
future operations and acquisitions. The laws, rules and regulations described above are complex and subject to interpretation. In the
event of a determination that we are in violation of such laws, rules or regulations, or if further changes in the regulatory framework
occur, any such determination or changes could have a material adverse effect on our business. There can be no assurance however that
we will not be found in noncompliance in any particular situation.
We
may not maintain sufficient insurance coverage for the risks associated with our business operations.
Risks
associated with our business and operations include, but are not limited to, claims for wrongful acts committed by our officers, directors,
and other representatives, the loss of intellectual property rights, the loss of key personnel, risks posed by natural disasters and
risks of lawsuits from customers who are injured from or dissatisfied with our products. Any of these risks may result in significant
losses. We cannot provide any assurance that our insurance coverage is sufficient to cover any losses that we may sustain, or that we
will be able to successfully claim our losses under our insurance policies on a timely basis or at all. If we incur any loss not covered
by our insurance policies, or the compensated amount is significantly less than our actual loss or is not timely paid, our business,
financial condition and results of operations could be materially and adversely affected.
Our
ability to service our indebtedness will depend on our ability to generate cash in the future.
Our
ability to make payments on our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash
is subject to general economic and market conditions and financial, competitive, legislative, regulatory and other factors that are beyond
our control. Our business may not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service
and other liquidity needs, which could result in our inability to comply with financial and other covenants contained in our debt agreements,
our being unable to repay or pay interest on our indebtedness, and our inability to fund our other liquidity needs. If we are unable
to service our debt obligations, fund our other liquidity needs and maintain compliance with our financial and other covenants, we could
be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required
to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such
alternatives may not be feasible or adequate.
The Company’s
production of Delta-8 could subject it to enforcement action by certain federal and state regulatory agencies.
Delta-8 is a cannabis compound that can cause
effects similar to regular delta-9 THC, the main compound in cannabis that gets users high, though they are typically much less potent.
It can be extracted from either hemp or cannabis, but all of the Company’s delta-8 products are made with hemp containing no more
than 0.3% THC. Because of the 2018 Farm Bill, hemp can be legally grown and used for extractions all over the United States. Notwithstanding
the foregoing, the legality of hemp derived delta-8 is in a gray area and varies from state-to-state, with some states allowing delta-8,
some not addressing delta-8 specifically, and others banning delta-8 due to its similarity to delta-9. The federal legality of delta-8
is still unknown and the government has yet to take a definitive position. Should the Company become subject to enforcement action by
federal or state agencies, it could be forced to spend significant sums defending against such enforcement and ultimately could be forced
to stop offering some or all of its delta-8 products and/or be subject to other sanctions, which would materially, negatively affect
the Company’s business and shareholders’ investments.
SPECIAL
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This
prospectus and the documents it incorporates contains forward-looking statements. The words “believe,” “may,”
“will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,”
“could,” “would,” “project,” “plan,” “expect” and similar expressions that
convey uncertainty of future events or outcomes are intended to identify forward-looking statements.
These
forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk
Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new
risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business
or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances
discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied
in our forward-looking statements.
You
should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected
in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events
and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update and revise any
forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document
to reflect any future or developments.
INDUSTRY
AND MARKET DATA
This
prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for our product
candidates, including data regarding market research, estimates and forecasts prepared by our management. Information that is based on
estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events
or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly
stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared
by market research firms and other third parties, industry, medical and general publications, government data and similar sources. In
some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources
of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from
the same sources, unless otherwise expressly stated or the context otherwise requires.
USE
OF PROCEEDS
We
are registering the shares of common stock for the benefit of the selling stockholders. We are not selling any securities under this
prospectus and we will not receive any of the proceeds from the sale or other disposition by the selling stockholders or their transferees
of the shares of common stock covered hereby. However, to the extent that the Warrants are exercised for cash, we will receive up to
$1,600,922, which amount we plan to use for working capital and general corporate purposes. However, the timing and manner of use of
the net proceeds may vary, depending on the amount of actual proceeds received from the exercise of the Warrants, if any, the timing
of the receipt of such proceeds, our rate of growth and other factors. To the extent that any shares of common stock issuable upon exercise
of the Warrants are not registered under an effective registration statement under the Securities Act, such unregistered Warrants or
portion thereof are exercisable on a cashless basis pursuant to the terms of the Warrant agreements.
We
have agreed to pay all costs, expenses and fees relating to registering the shares of our common stock referenced in this prospectus.
The selling stockholders will pay any underwriting discounts and commissions and expenses incurred by the selling stockholders for brokerage,
accounting, tax or legal services or any other expenses incurred by the selling stockholders in disposing of the shares.
See
“Selling Stockholders” and “Plan of Distribution” described below.
DETERMINATION
OF OFFERING PRICE
The
selling stockholders will offer the shares at the prevailing market prices or privately negotiated price. The offering price of our common
stock does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other
established criteria of value. Our common stock may not trade at market prices in excess of the offering price as prices for common stock
in any public market will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity.
SECURITIES
PURCHASE AGREEMENT
On December 10, 2020 (the “Closing Date”), the Company closed the transactions contemplated by a Securities Purchase Agreement
dated the same day (the “Purchase Agreement”) entered into with the selling stockholders for the sale of convertible promissory
notes. Pursuant to the Purchase Agreement, the Company issued Original Issue Discount Senior Secured Convertible Promissory Notes with
the aggregate principal amount of $2,777,778 (the “Notes”) and warrants to purchase up to an aggregate of 3,557,605 shares
of the Company’s common stock (the “Warrants”) to the selling stockholders and entered into a Security Agreement, an
Intellectual Property Security Agreement, a Registration Rights Agreement, and a Holding Escrow Agreement (the foregoing, collectively
with the Purchase Agreement, Notes and Warrant, the “Transaction Documents”).
The
selling stockholders purchased the Notes, Warrants, and an aggregate of 409,437 commitment shares of the Company’s common stock
for a total purchase price equal to $2,500,000 (the “Purchase Price”).
The
Company has used a portion of the Purchase Price to fully repay its loans from FirstFire Global Opportunities Fund LLC, EMA Financial
LLC, Labrys Fund LP, and Eagle Equities LLC and to repay its Economic Injury Disaster Loan from the U.S. Small Business Administration.
The Company also agreed that $197,000 of the Purchase Price would be held in escrow until such time as all or any portion of the Paycheck
Protection Program (“PPP”) loan received by the Company is forgiven. The Company’s PPP loan, including interest accrued
thereon, was forgiven on May 20, 2021.
The
Notes accrue interest at a rate of 12% per annum, and this interest is payable quarterly in cash or shares (subject to certain conditions)
beginning on January 1, 2021. The Notes were originally to mature on September 10, 2021 but have subsequently been amended to extend
the maturity date to January 31, 2022. The Company’s obligations under the Notes are secured by all of the assets, including intellectual
property, of the Company and its subsidiaries. The Company’s obligations under the Notes are also guaranteed by the Company’s
subsidiaries.
The
Notes are convertible into common shares of the Company at a rate equal to $0.39 per share. The conversion price of the Notes may be
adjusted upon the occurrence of certain events and may be declared immediately due and payable by the selling stockholders in the event
the Company defaults on any terms of the Notes or the other Transaction Documents. The Notes contain provisions limiting each selling
stockholder’s ability to convert any portion of its Note if such conversion would cause the selling stockholder’s holdings
in the Company to exceed 4.99% of the Company’s issued and outstanding shares of common stock, which limit may be waived but under
no circumstances may any selling stockholder convert any portion of a Note that would cause the selling stockholder’s holdings
to exceed 9.99% of the Company’s issued and outstanding shares of common stock. The Company also agreed to register shares converted
by selling stockholders under one or more registration statements filed with the SEC.
The
Warrants are exercisable at a price of $0.45 per share or via cashless exercise in the event that the warrants are not registered within
180 days. The Warrants terminate on December 10, 2023. The Warrants contain provisions limiting each selling stockholder’s ability
to exercise the Warrants if such exercise would cause the selling stockholder’s holdings in the Company to exceed 4.99% of the
Company’s issued and outstanding shares of common stock, which limit may be waived but under no circumstances may any selling stockholder
exercise any Warrants that would cause the sell stockholder’s holdings to exceed 9.99% of the Company’s issued and outstanding
shares of common stock.
The
Transaction Documents contain other covenants and restrictions common with this type of transaction, including but not limited to, true-up,
anti-dilution, most favored nation and future participation clauses.
SELLING
STOCKHOLDERS
The
common stock being offered by the selling stockholders are those previously issued to the selling stockholders, and those issuable to
the selling stockholders, upon conversion of the Notes and exercise of the Warrants. For additional information regarding the issuances
of the Notes and shares of common stock, see “Securities Purchase Agreement” above. We are registering the shares of common
stock in order to permit the selling stockholders to offer the shares for resale from time to time. Except for the ownership of the Notes
and Warrants and the shares of common stock issuable upon conversion and/or exchange thereunder, the selling stockholders have not had
any material relationship with us within the past three years.
The
table below lists the selling stockholders and other information regarding the beneficial ownership of the shares of common stock by
each of the selling stockholders. The second column lists the number of shares of common stock beneficially owned by each selling stockholder,
based on its ownership of the shares of common stock, Warrants and Notes, as of June 24, 2021, assuming conversion of the Notes and exercise
of the Warrants held by the selling stockholders on that date, without regard to any limitations on conversion or exercise. The third
column lists the shares of common stock being offered by this prospectus by the selling stockholders.
In
accordance with the terms of a registration rights agreement with the selling stockholders, this prospectus generally covers the resale
of the sum of (i) commitment shares issued pursuant to the Purchase Agreement and, (ii) the maximum number of shares of common stock
issuable upon exercise of the Warrants, determined as if the outstanding warrants were exercised in full as of the trading day immediately
preceding the date this registration statement was initially filed with the SEC, (iii) the maximum number of shares of common stock issuable
upon conversion of the Notes, determined as if the outstanding notes were exercised in full as of the trading day immediately preceding
the date this registration statement was initially filed with the SEC, each as of the trading day immediately preceding the applicable
date of determination, and (iv) the maximum number of shares issuable should the Company elect to pay interest due on the Notes in shares
of common stock hereafter and all subject to adjustment as provided in the registration right agreement, without regard to any limitations
on the conversion and/or exercise of the notes and/or warrants. The fourth column assumes the sale of all of the shares offered by the
selling stockholders pursuant to this prospectus.
Under
the terms of the notes, a selling stockholder may not exercise the notes to the extent such exercise would cause such selling stockholder,
together with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed 9.99%
of our then outstanding common stock following such conversion and/or exercise, excluding for purposes of such determination shares of
common stock issuable upon conversion of the notes and/or exercise of the warrants which have not been converted and/or exercised. The
number of shares in the second column does not reflect this limitation. The selling stockholders may sell all, some or none of their
shares in this offering. See “Plan of Distribution.”
Name of Selling stockholder
|
|
Number of Shares of Common Stock Owned Prior to Offering
|
|
|
Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus
|
|
|
Number of Shares of Common Stock Owned After Offering
|
|
Arena Special Opportunities Partners I, LP (1)
|
|
|
13,967,426
|
|
|
|
13,967,426
|
|
|
|
0
|
|
Arena Special Opportunities Fund, LP (2)
|
|
|
532,298
|
|
|
|
532,298
|
|
|
|
0
|
|
(1)
Consists of (i) 394,304 shares of common stock, (ii) 9,549,873 shares of common stock issuable
upon the conversion of secured promissory notes, (iii) 5,549,873 shares of common stock issuable upon the payment of interest under the
secured promissory notes, and (iv) 3,426,280 shares of common stock issuable upon the exercise of warrants held by Arena Special
Opportunities Partners I, LP (“Partners Fund”). Arena Investors, LP (the “Investment
Manager”) is the investment adviser of, and may be deemed to beneficially own securities owned by, Partners Fund. Arena Special
Opportunities Partners (Onshore) GP, LLC is the general partner of, and may be deemed to beneficially own securities owned by, Opportunities
Fund. Arena Investors GP, LLC is the general partner of, and may be deemed to beneficially own securities owned by, the Investment Manager.
By virtue of his position as the CEO of the general partner of the Partners Fund and the CEO of the general partner of the Investment
Manager, Daniel Zwirn may be deemed to beneficially own securities owned by Partners Fund. Each of Mr. Zwirn, the Investment Manager,
Arena Investors GP, LLC and Arena Special Opportunities Partners (Onshore) GP, LLC (together, “Arena”), shares voting and
disposal power over the shares held by Partners Fund. Each of the persons set forth above other than Partners Fund disclaims beneficial
ownership of the shares beneficially owned by Partners Fund and this prospectus shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities. The address for Partners Fund is c/o Arena Investors LP, 405 Lexington
Avenue, 59th Floor, New York, New York 10174.
(2)
Consists of (i) 15,113 shares of common stock, (ii) 362,978 shares of common stock issuable upon
the conversion of secured promissory notes, (iii) 22,882 shares of common stock issuable upon the payment of interest under the secured
promissory notes, and (iv) 131,325 shares of common stock issuable upon the exercise of warrants held by Arena Special Opportunities
Fund, LP (“Opportunities Fund”). The Investment Manager is the investment adviser of,
and may be deemed to beneficially own securities owned by, Opportunities Fund. Arena Special Opportunities Fund (Onshore) GP, LLC is
the general partner of, and may be deemed to beneficially own securities owned by, Opportunities Fund. Arena Investors GP, LLC is the
general partner of, and may be deemed to beneficially own securities owned by, the Investment Manager. By virtue of his position as the
CEO of the general partner of the Opportunities Fund and the CEO of the general partner of the Investment Manager, Daniel Zwirn may be
deemed to beneficially own securities owned by Opportunities Fund. Each of Mr. Zwirn, the Investment Manager, Arena Investors GP, LLC
and Arena Special Opportunities Fund (Onshore) GP, LLC, shares voting and dispositive power over the shares held by Opportunities Fund.
Each of the persons set forth above other than Opportunities Fund disclaims beneficial ownership of the shares beneficially owned by
Opportunities Fund and this prospectus shall not be construed as an admission that any such person or entity is the beneficial owner
of any such securities. The address for Opportunities Fund is c/o Arena Investors LP, 405 Lexington Avenue, 59th Floor, New York, New
York 10174.
PLAN
OF DISTRIBUTION
Each
selling stockholder of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any
or all of their securities covered hereby on the principal trading market or any other stock exchange, market or trading facility on
which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may
use any one or more of the following methods when selling securities:
|
●
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ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
●
|
block
trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
|
|
●
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
●
|
an
exchange distribution in accordance with the rules of the applicable exchange;
|
|
●
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privately
negotiated transactions;
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|
●
|
settlement
of short sales;
|
|
●
|
in
transactions through broker-dealers that agree with the selling stockholders to sell a specified number of such securities at a stipulated
price per security;
|
|
●
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through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
|
|
●
|
a
combination of any such methods of sale; or
|
|
●
|
any
other method permitted pursuant to applicable law.
|
The
selling stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser)
in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in
excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or
markdown in compliance with FINRA IM-2440.
In
connection with the sale of the securities or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they
assume. The selling stockholders may also sell securities short and deliver these securities to close out their short positions, or loan
or pledge the securities to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the
delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer
or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The
selling stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Each selling stockholder has informed the Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the securities.
The
Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company
has agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under
the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders
without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for
the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar
effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule
of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable
state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is
complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously
engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M,
prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the
common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the selling stockholders
and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including
by compliance with Rule 172 under the Securities Act).
DESCRIPTION
OF SECURITIES
The
following description is a summary of the material rights of shareholders. Shareholder rights are dictated via the Company’s Articles
of Incorporation and Bylaws. Each of the foregoing documents has been filed as an exhibit to this prospectus.
Common
Stock
We
are authorized to issue 1,500,000,000 shares of common stock, Nil par value per share. As of June 24, 2021, there were approximately
16,667,655 shares of common stock issued and outstanding, held by approximately 203 shareholders of record.
Each
share of common stock entitles the holder to one vote, either in person or by proxy, at meetings of shareholders. The holders are not
permitted to vote their shares cumulatively. Shareholders may take action by written consent.
Holders
of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally
available. We have not paid any dividends to common shareholders since our inception, and we presently anticipate that all earnings,
if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board
of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements,
and other factors.
Holders
of our common stock have no pre-emptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions.
Upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share ratably in the net assets
legally available for distribution to shareholders after the payment of all of our debts and other liabilities. There are not any provisions
in our Articles of Incorporation or our Bylaws that would prevent or delay change in our control.
Preferred
Stock
We
are authorized to issue 5,000,000 shares of preferred stock, including 20 shares of Series A Preferred Stock, 500,000 shares of Series
B Preferred Stock, 2,000 shares of Series C Convertible Preferred Stock and 4,000 shares of Series D Preferred Stock. As of June 24,
2021, there were 20 shares of Series A Preferred Stock and no shares of Series B Preferred Stock* or Series C Convertible Preferred Stock
and 1,950 shares of Series D Preferred Stock issued and outstanding.
*
It has come to our attention that the Company’s transfer agent still shows 227,590 Series B Preferred shares as being held by RedDiamond
Partners LLC (“RedDiamond”) due to an administrative oversight. Nonetheless, such shares were retired in exchange for 97,608
shares of common stock and rights to acquire an additional 35,667 shares of common stock issued to RedDiamond pursuant to an Exchange
Agreement dated August 13, 2019.
On
or around July 28, 2020, shareholders holding a majority of the Company’s voting stock approved an amendment to the certificate
of designation for the Series A Preferred Shares. Once the amendment is filed, the Series A Preferred Shares will have the following
rights and privileges: All Series A 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 the liquidation or winding up of the Company, whether voluntary or involuntary,
each holder of Series A Preferred stock 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 such Series A Shares on the applicable 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. The holders
of Series A Preferred Shares shall be entitled to receive such dividends paid and distributions made to the holders of shares of common
stock to the same extent as if such holders had converted each preferred share held by each of them into shares of common stock. Each
share of Series A Preferred Stock is entitled to 66,667 votes and may be converted into 33,334 shares of common stock. Par value for
the Series A Preferred Shares will be $0.001.
Series
B Preferred Stock ranks senior to all other stock of the Company. Series B holders are entitled to quarterly dividends in cash or shares
of common stock. Series B stock is convertible into shares of common stock and the certificate of designation for the Series B Preferred
Stock contains anti-dilution and penalty provisions relating to the conversion into common stock. For a complete description of the rights
and privileges of Series B Preferred Stock, refer to the certificate of designation included herewith in Exhibit 3.1, which investors
should carefully review. There are no outstanding shares of Series b Preferred Stock and the Company does not intend to issue any additional
shares at this time.
Series
C Convertible Preferred Stock ranks senior to all shares of Common Stock of the Company with respect to the preferences as to distributions
of dividends and ranks pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate
of designation for such preferred stock. The holders of Series C preferred Shares shall be entitled to receive such dividends paid and
distributions made to the holders of shares of common stock to the same extent as if such holders had converted each preferred share
held by each of them into shares of common stock. Par value for the Series A Preferred Shares will be $0.001. Each share of Series C
Convertible Preferred Stock is entitled to 25,000 votes and may be converted into 25,000 shares of Common Stock.
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.
INTEREST
OF NAMED EXPERTS
The
financial statements of the Company for fiscal years ending December 31, 2019 and 2020 have been included herein in reliance upon the
reports of BMKR, LLP, certified public accountants upon the authority of said firm as experts in accounting and auditing.
DESCRIPTION
OF BUSINESS
Company
Overview
Can
B̅ Corp. (the “Company,” “CAN B,” “CANB,” “we,” “us,” and “our”)
was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005 in order to tap into a largely un-serviced
segment of the web-based advertising industry. Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”),
a New York corporation incorporated on April 2, 2008, in order to acquire Prosperity’s office productivity software suite as a
complement to WRAP’s existing intellectual property. After its acquisition, the Company transferred Prosperity’s operations
to WRAP; however, the Company does not currently actively operate its WRAP or Prosperity divisions pending decision on whether to hold
on to, sell or repurpose such assets.
Around
the first quarter of 2017, the Company began to transition into the hemp CBD industry and now operates four distinct health and wellness
divisions: retail sales (Canbiola, Nu Wellness, Seven Chakras, and Pure Leaf Oil), R&D and manufacturing (Pure Health Products and
Botanical Biotech), durable medical devices (Duramed), cultivation and processing (Green Grow Farms, Inc.)). On May 15, 2017, WRAP changed
its name to Canbiola, Inc. to reflect its transition. On March 6, 2020 CANB changed its name to “Can B̅ Corp.” in order
to segregate its corporate identity from its lead products branded under the Canbiola™ brand.
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. On March 6, 2020, Can B̅ effected a 1 for 300 reverse stock split of its common stock.
The accompanying consolidated financial statements retroactively reflect these stock splits.
Business
Segments
The
Company is in the business of promoting health and wellness through its development, manufacture and sale of products containing cannabinoids
derived from hemp biomass (without psychoactive effect from THC) and the licensing of durable medical devises.
Hemp
is thought to contain anywhere from 60 to over 100 naturally occurring compounds (cannabinoids) thought to interact with cannabinoid
receptors present on the surface of cells in various parts of the central nervous system. The effects of cannabinoids are thought to
depend on the area of the brain involved. Cannabidiol (“CBD”) is probably one of the most well-known of these compounds,
thought to have many beneficial uses. CBD is incorporated into many of the Company’s products; 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. The Company has all of its hemp based raw materials to incorporate into products tested by a 3rd
party independent laboratory. The Company aims to be the premier provider of the highest quality natural hemp CBD products on the market
through sourcing the very best raw material and developing a variety of products it believes will improve people’s lives in a variety
of areas.
FDA
DISCLAIMER
The
statements found herein have not been evaluated by the Food and Drug Administration (FDA) and the Company’s products are not intended
to diagnose, treat, cure or prevent any disease or medical condition.
The
Company currently has four in-house branded CBD products that are sold to consumers, Canbiola™, Nu Wellness™, Seven Chakras™
and Pure Leaf Oil™. On February 22, 2021, the Company entered into an agreement to purchase additional CBD brand assets from Imbibe
Health Solutions, LLC, a Delaware limited liability company. The assets will be placed into the Company’s wholly owned subsidiary,
Imbibe Wellness Solutions, LLC, a Nevada limited liability company (fka Radical Tactical LLC) (“Imbibe”), and will include
the intellectual property rights, including trademarks, logos, know how, formulations, productions procedures, copyrights, social media
accounts, domain names and marketing materials relating to the Imbibe™ branded products, including a muscle and joint salve, unscented
fizzy bath soak, CALM massage oil, Me x 3 Metabolic Energy (energy and dietary supplement), and Muscle, Joints & Back CBD Cryo Gel.
The acquisition of the Imbibe™ assets has not closed and is pending the Company’s due diligence.
The
Company’s Canbiola™ CBD products are sold via medical professionals under distribution agreements and directly by the Company
via its website and vending machines. The Canbiola™ assets are held directly by the Company and include tinctures, soaps, bath
soaks, cryo-gel, salves, massage oils, powders, capsules and roll-ons.
The
Company’s Pure Leaf Oil™ assets are held by its wholly owned subsidiary, Pure Health Products, LLC, a New York limited liability
company (“PHP” or “Pure Health Products”). Pure Leaf Oil™ CBD products are sold via PHP’s website,
direct to consumer via walk-in business, and through distributors and are meant for retail customers not referred through the medical
community. Pure Leaf Oil™ products include massage oils, joint salves, bath salts, nano sprays, drops, and cryo-gels. PHP also
holds the assets related to its Seven Chakras™ brand. Seven Chakras™ is targeted toward health clubs, spas, and beauty lines
and CBD products include lotion, massage oils, roll-ons, isolate, powders, capsules, and bath soaks. Severn Chakras™ has its own
internet website and direct markets to its customer base.
PHP
has also created a new brand, Nu Wellness™, which it intends to market through distributors as an independent pharmacy brand targeted
towards independent retail drug stores. Nu Wellness™ has yet to launch or make sales, which are intended to occur sometime in 2021.
|
II-
|
R&D
and Manufacturing
|
To
date, Pure Health Products has acted as the Company’s research and development and manufacturing arm. PHP manufactures all of the
Company’s CBD products and also provides white label manufacturing and production services to third parties. Through PHP, the Company
is able to control the manufacturing process of its products while reducing its production costs.
In
December, 2018, the Company acquired 100% of the membership interests in Pure Health Products, with which it had had and has an exclusive
production agreement, pursuant to an Acquisition Agreement (“PHP Acquisition Agreement”). In January, 2019, PHP acquired
certain assets from Seven Chakras, LLC (“Seven Chakras”), a former competitor, which assets included the rights and title
to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’
CBD products, (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including
but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials.
Around
March 17, 2021, the Company acquired assets through its newly-formed, wholly-owned subsidiary, Botanical Biotech, LLC, a Nevada limited
liability company (“BB” or “Botanical Biotech”). Such assets include certain materials and manufacturing equipment
and 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. BB has also engaged certain sellers of the BB
assets and lab technicians in order to perform research and development and manufacturing of CBG and CBN products to be sold to third
parties for incorporation into their products. The Company does not at this time intend to develop or market its own products containing
CBG or CBN. Through Botantical Biotech, LLC, the Company has also begun synthesizing delta-8 from hemp in its laboratory in Miami,
Florida. Delta-8 is a cannabis compound that can cause effects similar to regular delta-9 THC, the main compound in cannabis that gets
users high, though they are typically much less potent. It can be extracted from either hemp or cannabis, though all of the Company’s
delta-8 products are made with hemp containing no more than 0.3% THC.
|
III-
|
Durable
Medical Equipment
|
Through
its medical device division, Duramed, Inc. (“Duramed”) and Duramed MI LLC, a Nevada limited liability company fka DuramedNJ,
LLC (“Duramed MI”), the Company serves the post-surgery medical patient arena aiming to aid in recovery and pain reduction.
In
November 2018, the Company formed Duramed, Inc. to facilitate the manufacture and sale of durable medical equipment (“DME”)
incorporating CBD. On January 14, 2019, Duramed entered into a Memorandum of Understanding (the “Sam MOU”) with Sam International
(“Sam”) and ZetrOZ Systems LLC (“ZetrOZ” and, collectively with Sam, the “Manufacturers”). Pursuant
to the Sam MOU, the Manufacturers granted Duramed the exclusive right to distribute sam® Pro 2.0 (SA271) and sam® Gel Coupling
Patches (UB-14-72) within the United States for the Personal Injury Protection/No Fault Market during the term of the Sam MOU. Duramed
has agreed to purchase monthly minimums from the Manufacturers at a price per Unit of $2,447. The exclusivity of the Distribution License
granted to Duramed under the Sam MOU was dependent upon meeting the monthly minimum, which did not happen. In addition, Duramed was granted
the right to distribute sam® Gel Capture Patches (UB-14-24). Duramed will get rebates of 2%-3% based on the volume of products sold
by it. We did not meet the monthly minimums as contemplated by the Sam MOU and as such we are currently distributing the aforementioned
products on an at-will, non-exclusive basis.
On
May 29, 2019, the Company created Duramed MI to execute the same business strategy into the no-fault insurance market in New Jersey that
it had developed in New York; however, Duramed MI is not currently operating in NJ and is in the process of moving its operations to
Michigan, which have not begun yet.
|
IV-
|
Hemp
Production, Aggregation, Processing, and Sale
|
On
July 11, 2019, the Company entered into a Joint Venture Agreement (the “JV Agreement”) with NY – SHI, LLC, a New York
limited liability company (“NY – SHI”), EWSD I LLC dba SHI Farms, a Delaware limited liability company (“SHI
Farms”), Pivt Labs, LLC, a Nevada limited liability company fka NY Hemp Depot LLC (“Pivt”), a wholly-owned subsidiary
of CANB. Pursuant to the JV Agreement, NY – SHI and Pivt entered into a joint venture for the purpose of jointly implementing a
business model to aggregate and purchase fully-grown, harvested industrial hemp from third-party farmers in the State of New York. The
Joint Venture was not formally consummated and has been disbanded, with the parties executing a settlement agreement. Pursuant to the
settlement agreement, NY – Shi agreed to return all shares issued to it under the JV Agreement (which return has yet to be processed)
but was permitted to keep the cash payment of $500,000.00 made to it by the Company. Before the end of the joint venture NY – SHI’s
cultivating license was amended to add Pivt. Pivt currently has no operations but the Company does intend to use it for hemp cultivation
in the future, if and when it becomes economically viable to do so.
On
December 4, 2019, the Company entered into a Stock Purchase Agreement (the “GGFI Agreement” with Iconic Brands, Inc., a Nevada
corporation (“ICNB”) and Green Grow Farms, Inc., a New York corporation (“GGFI” or “Green Grow” and,
collectively with ICNB and the Company, the “Parties”). Pursuant to the terms of the GGFI Agreement, at closing, the Company
received 51% equity interest in Green Grow (the “GG Shares”) in exchange for an aggregate of 125,000 (post-split) shares
of the Company’s common stock (the “Purchase Shares”). On June 30, 2020 (the “Valuation Date”), a valuation
of the Purchase Shares was to be (and was) performed for the purpose of determining whether the Market Price Per Purchase Share (as defined
in the GGFI Agreement) on the Valuation Date was less than $1,000,000. In the event that the aggregate Market Price Per Purchase Share
on the Valuation Date was less than $1,000,000, the Company was to issue to the ICNB such a number of additional shares (“Additional
Purchase Shares”) so that the aggregate value of aggregate shares issued to ICNB for the purchase of the GG Shares (taking into
account the Purchase Shares and the Additional Purchase Shares) equaled $1,000,000. For purposes of the valuation, Market Price Per Purchase
Share was to be determined based upon the 10-day average VWAP for the 10-day period ending on June 30, 2020. On June 30, 2020, it was
determined that ICNB was owed an additional 418,714 shares, which it was issued.
On
March 3, 2020, the Company entered into an Agreement (the “Modification Agreement”) with Green Grow, New York Farm Group,
Inc., a New York corporation (“NYFG”), Steven Apolant, an individual, and Peter Scalise, an individual, relating to the GGFI
Agreement, as amended. Following the closing of the GGFI Agreement, the Company discovered that certain assets of GGFI were valued at
less than the amount GGFI had previously represented. In light of the foregoing, pursuant to the Modification Agreement, NYFG agreed
to assign to CANB (i) all of the equity interests in GGFI held by NYFG and (ii) 1,000,000 shares of ICNB’s common stock. Each party
to the Modification Agreement also agreed to release the other parties thereto from all claims relating to the GGFI Agreement and the
transactions contemplated thereby. As a result of the transaction contemplated by the Modification Agreement, the Company now owns 100%
of GGFI. On July 29, 2020, ICNB entered into an agreement whereby ICNB agreed to exchange its CANB Shares for CANB’s 1,000,000
ICNB shares.
Through
GGFI, the Company grew its own hemp in New York and partnered with third party growers in other states whereby GGFI provided the farmers
with seed and training and splits profits with the farmers. GGFI was to supply the Company with all hemp needed for the Company to produce
its CBD products, which hemp would be processed by a third party and shipped to the Company’s production facility in Lacey, WA.
Notwithstanding the foregoing, currently, it is less expensive to buy CBD isolate than to produce the isolate from hemp grown by the
Company. Accordingly, the Company has stopped its Green Grow operations in favor of buying raw products from third parties. If and when
it makes economic sense to grow its own hemp again, the Company will resume Green Grow operations.
On
January 28, 2020, the Company entered into a License Agreement (the “Lifeguard Agreement”) with LIFEGUARD LICENSING CORP.,
a Delaware corporation (“Lifeguard”). Pursuant to the Lifeguard Agreement, Lifeguard granted the Company the right to use
its LIFEGUARD® trademark (the “Mark”) in connection with the Company’s manufacture, marketing, distribution, and
sale of products (the “License”). Due to COVID 19, the Company was delayed in its production of LIFEGUARD®. Consequently,
the Company and Lifeguard terminated the Lifeguard Agreement and released any potential claims they had against each other.
Competitive
Conditions
The
CBD and cannabis markets are flooded with competition ranging from mom and pop operations to multi-million-dollar conglomerates, many
with longer operating histories, more capital and/or more industry knowledge than the Company. The Company hopes to partner with or engage
industry specialists to help set it apart from its numerous competitors. The Company believes that one of those points of differentiation
will be its 3rd party independent testing “Certificate of Analysis” conducted on all of the CBD isolate products
it purchases and posting of those lab results on its website. The three largest CBD companies known to the Company are Elixinol LLC,
a UK based company with $37 million revenue, GW Pharmaceuticals also UK based with $19 million revenue, and Aurora Cannabis based in
Canada with just over $19 million revenue. The top USA companies include Medical Marijuana, CV Sciences, Gaia Herbs, and Charlotte’s
Web with respective revenues of $59, $48, $45, and $17 million. Worthy of note is that Charlotte’s Web is on the shelf right next
to us at Northwell Health.
Hemp
and CBD biomass has glutted the US market, benefiting our manufacturing divisions with less expensive product but causing our hemp cultivation
and processing division to become financially imprudent until the oversupply issue has resolved. Thus, we have halted operations in such
division for the time being but may resume such operations should a sound opportunity present. Although we have contract farm agreements
in place to grow and harvest well over 100 acres of hemp biomass in three states, other raw materials for our finished products have
at least three sources of supply in the open market and we have little risk of any ingredient supply at this time.
Intellectual
Property
We
won the following patents for our WRAPmail technology: US Patent no. 8572275 issued on October 29, 2013. This patent expires in October
2022. On July 20, 2015, WRAPmail filed for a new patent under the title Method, System and Software for Dynamically Extracting Content
for integration with Instant Messages, which application is still pending and not being actively pursued by the Company. The above patents
relate to the document management and email marketing divisions which are not presently being developed. Due to diminishing revenue from
this division, the Company accountant determined to reduce the fair value of these patents to $0.
The
Company employs through its Pure Health Product LLC division, two full time product researchers and developers and technology experts
who, on a daily basis, set the quality standards and new product development status and time-line agendas under the direct supervision
of the Company’s management team. All finished products are stored for time- quality measurement, and EVERY batch of every product
is sent to an independent third-party lab for a Certificate of Analysis (“COA”) of the finished products. These COA’s
are both listed on our web site and available via the QR code on every retail package.
The
Company has not registered any of its trademarks with the USPTO or any state agency.
Employees
The
Company, directly or through its subsidiaries, currently has 17 employees, 15 of which are full-time employees, one who is part-time,
and one who is under a service agreement.
The
Company employs through its Pure Health Products LLC Division, two full time product researchers and CBD technology experts who, on a
daily basis, set the quality standards and new product development status and time-line agendas under the direct supervision of the company’s
management team. Additionally, there is a division president, three production personnel and five sales/ marketing and fulfillment personnel.
Duramed,
the medical device company employs four people including the division manager and 3 field operation personnel.
Botanical
Biotech employs a division President, lab mangers, and one contract lab product designer.
The
remaining three people are corporate staff and are directly employed by the Company.
Reports
to Security Holders
Our
common stock is registered under the Securities Exchange Act of 1934 and we are required to file current, quarterly and annual reports
and other information with the SEC. You may read and copy any document that we file at the SEC’s public reference facilities at
100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities.
Our SEC filings are available to you free of charge at the SEC’s web site at www.sec.gov. We are an electronic filer with the SEC
and, as such, our information is available through the Internet site maintained by the SEC that contains reports, proxy and information
statements and other information regarding issuers that file electronically with the SEC. This information may be found at www.sec.gov
and posted on our website at www.canbiola.com.
We
do not incorporate information on our website into this prospectus or any supplement to this prospectus and you should not consider any
information on, or that can be accessed through, our website as part of this prospectus or any supplement to this prospectus (other than
those filings with the SEC that we specifically incorporate by reference into this prospectus or any supplement to this prospectus).
Research
and Development
In
fiscal year 2020 and 2019 we spent $165,000 and $150,000 respectively, in research and development which was expensed as spent.
Government
Regulation
The
cultivation and sale of hemp and hemp products is federally regulated under the United States Farm Bill. The 2018 Farm Bill removed hemp
as a Schedule 1 Substance under the Controlled Substances Act; however, rules and regulations relating to manufacture and sale of CBD
products under the Farm Bill must still be promulgated and are expected to impact the Company’s operations. As the CBD industry
and our product lines expand, it is uncertain what other statutory schemes and agencies will start to regulate our CBD products. The
FDA currently still considers the addition of CBD to food products, cosmetics or supplements to be illegal and prohibits the advertisement
of CBD products with health claims. The Company must also comply with each state’s laws relating to the sale of hemp-based CBD
products, with some states allowing the sale of CBD, some states limiting to medical purposes and some states banning outright. These
regulations may affect, among others, the way the Company manufactures and distributes its products, the way the Company is taxed, the
way the Company banks, the location of the Company’s facilities, the content and testing of the Company’s products, and the
quality of the Company’s services. The Company has not sought or received approval of any of its products from the FDA or any state
agency. Should the Company be sanctioned by the FDA or state agencies, it could materially, negatively impact the Company’s operations
and revenue sources.
The Company’s production
of delta-8 may be subject to government regulation. The legality of hemp derived delta-8 is in a gray area and varies from state-to-state,
with some states allowing delta-8, some not addressing delta-8 specifically, and others banning delta-8 due to its similarity to delta-9.
The federal legality of delta-8 is still unknown and the government has yet to take a definitive position. The Company may not sell delta-8
in the states that prohibit it and must comply with the state regulations in the states that do permit delta-8, including Florida. Compliance
with such regulations could be difficult, time consuming and costly. Should the Company fail to comply with any regulations or prohibitions,
it could be subject to significant sanctions.
We
are also subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing the
Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other online services,
and increase the cost of providing online services. These regulations and laws may cover sweepstakes, taxation, tariffs, user privacy,
data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, broadband
residential Internet access and the characteristics and quality of services. It is not clear how existing laws governing issues such
as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet and e-commerce. Unfavorable resolution
of these issues may harm our business and results of operations. CBD sales are additionally state regulated for shipping and the Company
maintains a current list.
Transfer
Agent
We
have engaged Transhare Corporation located at 2849 Executive Drive, Suite 200, Clearwater, FL 33762 as our transfer agent.
DESCRIPTION
OF PROPERTY
The
Company does not currently own any real property. We do however lease office space in Hicksville, New York. The Company’s wholly-owned
subsidiary, Pure Health Products, operates its manufacturing facility in the state of Washington.
The
lease payments are: Pure Health Products in Lacey WA $2,345 per month, Can B̅ Corp. home office in Hicksville NY $3,917 per month,
out of which all subsidiaries other than Botanical Biotech and PHP operate.
Botanical
Biotech has taken over a short-term lease where the lab and production facilities are set up for full operation in Miami, FL while it
scouts for a more suitable location. Once a new lease decision is made, the move, if decided upon, and consequent set-up would take approximately
three days to relocate.
LEGAL
PROCEEDINGS
On
April 28, 2021, the Company was served with a commercial legal action against the Company and certain officers by David Weissberg and
Donna Marino, who are investors in 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.
The
first cause of action alleges that the Company breached Securities Purchase Agreements with the Investors by failing to assist the Investors
in getting opinion letters to remove the restrictive legends from their shares, even though the Company made introductions and requests
to the Company’s counsel, provided supporting documents for the Investor’s shares, and ultimately the opinion letters could
not be rendered because the Investors failed to submit required documentation to counsel.
The
second cause of action is similar to the first but related to alleged misrepresentations regarding removing the restrictive legends from
shares that were issued for services rather than purchased.
The
third cause of action alleges that the Company mislead the Investors to invest $500,000. The final cause of action alleges that officers
of the Company made misrepresentations regarding the value of the Company’s stock, which caused David Weissberg to owe more in
taxes than he was expecting.
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 aware of any pending or threatened legal proceedings in which we are involved.
MARKET
PRICE, DIVIDENDS, AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
common stock is not registered or traded on any national stock market or NASDAQ but is listed for quotation on OTC market’s OTCQB®
Venture Market under the symbol “CANB.” Our common stock began trading April 2011. Trading in our common stock has historically
lacked consistent volume, and the market price has been volatile.
The
following table presents, for the periods indicated, the high and low bid prices of the Company’s common stock and is based upon
information provided by OTC Market. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down, or commission,
and may not necessarily represent actual transactions.
2020 (Post 300:1 Reverse Split)
|
|
|
High
|
|
|
Low
|
|
First Quarter
|
|
$
|
6.30
|
|
|
$
|
0.95
|
|
Second Quarter
|
|
$
|
1.98
|
|
|
$
|
0.40
|
|
Third Quarter
|
|
$
|
1.80
|
|
|
$
|
0.40
|
|
Fourth Quarter
|
|
$
|
0.67
|
|
|
$
|
0.35
|
|
2019 (Pre- 300:1 Reverse Split adjusted for post-split numbers)
|
|
|
High
|
|
|
Low
|
|
First Quarter
|
|
$
|
29.40
|
|
|
$
|
11.93
|
|
Second Quarter
|
|
$
|
18.45
|
|
|
$
|
11.10
|
|
Third Quarter
|
|
$
|
13.17
|
|
|
$
|
12.90
|
|
Fourth Quarter
|
|
$
|
6.90
|
|
|
$
|
5.94
|
|
The
last reported sale price of the Company’s common stock as of June 24, 2021 was $0.45 per share.
Record
Holders
As
of June 24, 2021, there were 16,667,655 shares of common stock issued and outstanding to approximately 203 shareholders of record.
Dividends
The
Company paid $0 in in-kind dividends on its Series B Preferred Stock by the issuance of common stock to the Series B holders in 2020
and 2019. Each share of Series B Preferred Stock has the first preference to dividends, distributions and payments upon liquidation,
dissolution and winding-up of the Company, and is entitled to an accrued cumulative but not compounding dividend at the rate of 5% per
annum whether or not declared. After six months of the issuance date, such share and any accrued but unpaid dividends can be converted
into common stock at the conversion price which is the lower of (i) $0.0101; or (ii) the lower of the dollar volume weighted average
price of CANB common stock on the trading day prior to the conversion day or the dollar volume weighted average price of CANB common
stock on the conversion day. The Series B Preferred Stock have no voting rights. There are no currently outstanding shares of Series
B Preferred Stock*.
We
do not anticipate paying any cash dividends in the foreseeable future. Except for its Series B Preferred Stock, of which there are none
issued and outstanding*, the payment of dividends is within the discretion of our Board of Directors and will depend on our earnings,
capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit our ability to
pay dividends on our common stock other than those generally imposed by applicable state law.
*
It has come to our attention that the Company’s transfer agent still shows 227,590 Series B Preferred shares as being held by RedDiamond
Partners LLC (“RedDiamond”) due to an administrative oversight. Nonetheless, such shares were retired in exchange for 97,608
shares of common stock and rights to acquire an additional 35,667 shares of common stock issued to RedDiamond pursuant to an Exchange
Agreement dated August 13, 2019.
Securities
Authorized for Issuance under Equity Compensation Plans
On
July 28, 2020, the Company adopted an Incentive Stock Option Plan (“ISO”). The purpose of this Can B Corp. 2020 ISO (the
“Plan”) is to attract, retain, and motivate employees, officers, directors, consultants, agents, advisors and independent
contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company
and to align their interests and efforts to the long-term interests of the Company’s stockholders. The Plan is administered by
the Compensation Committee or, in the Board’s sole discretion, the Board. The Compensation Committee shall be composed of two or
more directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange
Act, or any successor definition adopted by the Securities and Exchange Commission. As used in this Plan, the term “Compensation
Committee” shall be construed as if followed by the words “(if any);” and nothing in this Plan requires the Board to
have a Compensation Committee. Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicable
law, the Committee shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions
of the Plan as may from time to time be adopted by the Board or a Committee composed of members of the Board, to (i) select the Eligible
Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each
Participant under the Plan; (iii) determine the number of shares of Preferred Stock and/or Common Stock (collectively, “Stock”)
to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v)
approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances
Awards may be settled in cash, shares of Preferred Stock and/or Common Stock or other property or canceled or suspended; (vii) determine
whether, to what extent and under what circumstances cash, shares of Stock, other property and other amounts payable with respect to
an Award shall be deferred either automatically or at the election of the Participant; (viii) interpret and administer the Plan and any
instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (ix) establish such rules and regulations
as it shall deem appropriate for the proper administration of the Plan; (x) delegate ministerial duties to such of the Company’s
employees as it so determines; and (xi) make any other determination and take any other action that the Committee deems necessary or
desirable for administration of the Plan. Subject to adjustment from time to time, a maximum of two thousand (2,000) shares of Class
C Preferred Stock and ten million (10,000,000) shares of Common Stock shall be available for issuance under the Plan. Shares issued under
the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.
The Committee shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants
or rights earned or due under other compensation plans or arrangements of the Company. Subject to earlier termination in accordance with
the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option shall be ten years from the Grant Date.
An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Committee from time to time
selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to
the Company or any Related Company that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raising
transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.
Equity
Compensation Plan Information
Plan Category
|
|
Number of Securities to be Issued Upon Excise of Outstanding Options, Warrants and Rights
|
|
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
|
|
|
Number of Securities Remaining Available for Future Issuances Under Equity Compensation Plans*
|
|
Equity compensation plans approved by security holders
|
|
|
1,187,199
|
|
|
$
|
0.36
|
|
|
|
58,812.801
|
|
Equity compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
1,187,199
|
|
|
$
|
0.36
|
|
|
|
58,812,801
|
|
|
●
|
Represents
2,000 Series C Preferred Shares on an as-converted basis and 8,812,801 shares of common stock available under the Plan.
|
FINANCIAL
STATEMENTS AND NOTES
CAN
B̅ CORP. AND SUBSIDIARY
Index
to Financial Statements
|
|
Pages
|
|
|
|
Financial
Statements
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm for Years Ended December 31, 2020 and 2019
|
|
F-2
|
|
|
|
Consolidated Balance Sheets for Years Ended December 31, 2020 and 2019
|
|
F-3
|
|
|
|
Consolidated Statements of Operations and Comprehensive Loss for Years Ended December 31, 2020 and 2019
|
|
F-4
|
|
|
|
Consolidated Statements of Stockholders’ Equity for Years Ended December 31, 2020 and 2019
|
|
F-5
|
|
|
|
Consolidated Statements of Cash Flows for Years Ended December 31, 2020 and 2019
|
|
F-6
|
|
|
|
Notes to Consolidated Financial Statements for Years Ended December 31, 2020 and 2019
|
|
F-7
|
|
|
|
Consolidated Balance Sheets for Quarters Ended March 31, 2021 and 2020
|
|
F-26
|
|
|
|
Consolidated Statements of Operations and Comprehensive Loss for Quarters Ended March 31, 2021 and 2020
|
|
F-27
|
|
|
|
Consolidated Statements of Stockholders’ Equity for Quarters Ended March 31, 2021 and 2020
|
|
F-28
|
|
|
|
Consolidated Statements of Cash Flows for Quarters Ended March 31, 2021 and 2020
|
|
F-29
|
|
|
|
Notes to Consolidated Financial Statements for Quarters Ended March 31, 2021 and 2020
|
|
F-30
|
BMKR, LLP
|
|
|
Certified Public Accountants
|
|
|
T 631-293-5000
|
1200 Veterans Memorial Hwy., Suite 350
|
F 631-234-4272
|
Hauppauge, New York 11788
|
www.bmkr.com
|
Thomas
G. Kober CPA
|
Brian
Mayhew, CPA
|
Charles
W. Blanchfield CPA (Retired)
|
Alfred
M. Rizzo CPA
|
Moises
Sa, CPA
|
Bruce
A. Meyer CPA (Retired)
|
Joseph
Mortimer CPA
|
Matthew
Papadopoulos, CPA
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders
of Can B Corp.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Can B Corp. (the “Company”)
as of December 31, 2020 and 2019, and the related consolidated statements of operations,
stockholders’ equity, and cash flows
for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial
statements). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and
the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity
with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S.
federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the
financial statements, the Company incurred a net loss of $5,851,512 during the year ended December 31, 2020 and as of that date,
had an accumulated deficit of 30,521,025. Due to recurring losses from operations and the accumulated deficit the Company has
stated that substantial doubt exists about the Company’s ability to continue as a going concern.
Management’s
evaluation of the events and conditions and management’s plans regarding these matters are discussed in note 2. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified
with respect to that matter.
Critical
Audit Matters
Critical
audit matters arising from the current period audit of the financial statements that were communicated or required to be communicated
to the audit committee and that (1) relate to accounts or disclosure that are material to the financial statements and (2) involve
especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way
our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit maters below, providing
separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation
of common stock and stock options issued for compensation or services
As
discussed in note 10 to the financial statement, the Company issued $1,988,256 of common stock in 2020 to compensate employees,
pay for services or acquire assets. The value of the shares issued is subjective because a discount is applied due to a lack of
marketability. The stock issued is restricted for six months due to rule 144.The value of the stock issued is pervasive throughout
the financial statement for both 2020 and 2019.
We
identified the evaluation of the sufficiency of audit evidence over the value of the common stock and options issued as a critical
audit matter.
The
procedures we performed to address this critical audit matter included evaluating the appropriateness of the methodology used
to compute the discount and verifying the data inputs.
Accounting
for and valuation of asset purchases
The
Company has made acquisitions and or entered into agreements to acquire intellectual property, hemp processing agreements or other
business arrangements that require complex judgements as to the proper accounting principle, valuation and the appropriate amortization
period. The Company has treated these transactions as asset acquisitions, see note 7.
We
identified the assessment of the asset acquisition value and whether the transaction should be accounted for as an asset or business
acquisition as a critical audit matter.
The
procedures performed to address the mater included; obtaining and reviewing to legal documents for each transaction, examining
the support for the consideration paid to ensure proper valuation and evaluating estimated useful life. We also evaluated if the
assets acquired constitute a business as defined by generally accepted accounting principles.
Revenue
recognition for durable medical equipment
The
revenue recognition related to durable medical equipment is particularly challenging because of the slow pace of collections and
the challenging nature of medical billing and state regulation. In addition, the fact that the Duramed subsidiary is a new business
with a new product operating in the current corona virus adds to the challenging nature.
We
identified the Company’s revenue recognition policy for durable medical equipment and the sufficiency of audit evidence
as a critical accounting matter.
The
procedures performed to address the matter included; testing the billing during the year, confirming the billing during the year
and accounts receivable at year end with the third party biller, examining subsequent cash collections and inquiry of the Company’s
outside attorney that is a specialist in this area.
Convertible
debt
The
Company issued $ 2,800,000 of convertible debt during the year. The accounting for convertible debt is complex due to the various
accounting treatments possible based on the terms of the agreement.
We
identified the Company’s accounting for convertible debt and the valuation of related warrants as a critical audit matter.
The
procedures performed to address this matter included: reviewing the agreements, confirming significant terms with the lender and
assessing the valuation method used to determine the value of the warrants, recalculating those values.
/s/
BMKR, LLP
BMKR,LLP
We
have served as the Company’s auditor since 2014. Hauppauge,
NY 11788
April
12, 2021
Member
American Institute of Certified Public Accountants
Member
Public Company Accounting Oversight Board
Can
B̅ Corp. and Subsidiary
Consolidated
Balance Sheets
|
|
Year
Ended December 31,
|
|
|
|
2020
|
|
|
2019
(Restated)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
457,798
|
|
|
$
|
46,540
|
|
Accounts
receivable, less allowance for doubtful
accounts of $485,848 and $0, respectively
|
|
|
2,003,064
|
|
|
|
1,251,609
|
|
Inventory
|
|
|
344,954
|
|
|
|
784,497
|
|
Note
Receivable
|
|
|
2,898
|
|
|
|
24,268
|
|
Prepaid
expenses - current
|
|
|
1,209,126
|
|
|
|
1,279,901
|
|
Total
current assets
|
|
|
4,017,840
|
|
|
|
3,386,815
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, at cost less accumulated depreciation of $239,650 and $116,555, respectively
|
|
|
994,979
|
|
|
|
1,075,242
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposit
- noncurrent
|
|
|
21,287
|
|
|
|
21,287
|
|
Prepaid
expenses - noncurrent
|
|
|
7,405
|
|
|
|
1,179,929
|
|
Other
receivable – noncurrent
|
|
|
12,910
|
|
|
|
58,206
|
|
Intangible
assets, net of accumulated amortization of $236,431 and $202,521, respectively
|
|
|
523,009
|
|
|
|
1,339,907
|
|
Goodwill
|
|
|
55,849
|
|
|
|
55,849
|
|
Right-of-Use
Asset, net of amortization of $45,086 and $6,280, respectively
|
|
|
58,174
|
|
|
|
96,980
|
|
Total
other assets
|
|
|
678,634
|
|
|
|
2,752,158
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
5,691,453
|
|
|
$
|
7,214,215
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Deficiency
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
153,640
|
|
|
$
|
226,467
|
|
Accrued
officers’ compensation
|
|
|
147,133
|
|
|
|
144,363
|
|
Other
accrued expenses payable
|
|
|
53,362
|
|
|
|
61,557
|
|
Notes
and loans payable
|
|
|
1,827,531
|
|
|
|
35,000
|
|
Current
portion of lease liability
|
|
|
43,506
|
|
|
|
38,281
|
|
Total
current liabilities
|
|
|
2,225,172
|
|
|
|
505,668
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
Non-current
portion of lease liability
|
|
|
15,492
|
|
|
|
58,998
|
|
Notes
and loans payable
|
|
|
194,940
|
|
|
|
-
|
|
Total
long-term liabilities
|
|
|
210,432
|
|
|
|
58,998
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
2,435,604
|
|
|
|
564,666
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
(Notes 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, authorized 5,000,000 shares:
|
|
|
|
|
|
|
|
|
Series
A Preferred stock, no par value: authorized 20 shares, issued and outstanding 20, respectively
|
|
|
5,539,174
|
|
|
|
5,539,174
|
|
Series
B Preferred stock, $0.001 par value: authorized 500,000 shares, issued and outstanding 0, respectively
|
|
|
-
|
|
|
|
-
|
|
Common
stock, no par value; authorized 1,500,000,000 shares, issued and outstanding 5,544,590 and 2,680,937 shares, respectively
|
|
|
26,111,978
|
|
|
|
24,323,712
|
|
Treasury
stock
|
|
|
(572,678
|
)
|
|
|
-
|
|
Additional
Paid-in capital
|
|
|
872,976
|
|
|
|
872,976
|
|
Additional
Paid-in capital – Stock Options (Note 11)
|
|
|
962,323
|
|
|
|
583,200
|
|
Additional
Paid-in capital – Warrants
|
|
|
728,100
|
|
|
|
-
|
|
Accumulated
deficit
|
|
|
(30,386,024
|
)
|
|
|
(24,669,513
|
)
|
Total
stockholders’ equity
|
|
|
3,255,849
|
|
|
|
6,649,549
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
5,691,453
|
|
|
$
|
7,214,215
|
|
See
notes to consolidated financial statements.
Can
B̅ Corp. and Subsidiary
Consolidated
Statements of Operations and Comprehensive Loss
Years
Ended December 31, 2020 and 2019
|
|
2020
|
|
|
2019
(Restated)
|
|
Revenues
|
|
|
|
|
|
|
|
|
Product
Sales
|
|
$
|
1,708,419
|
|
|
$
|
2,304,303
|
|
Service
Revenue
|
|
|
1,250
|
|
|
|
1,200
|
|
Total Revenues
|
|
|
1,709,669
|
|
|
|
2,305,503
|
|
Cost
of product sales
|
|
|
278,062
|
|
|
|
598,584
|
|
Gross
Profit
|
|
|
1,431,607
|
|
|
|
1,706,919
|
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers
and director’s compensation (including stock-based Compensation of $1,589,224 and $1,587,060, respectively
|
|
|
2,077,713
|
|
|
|
2,639,711
|
|
Consulting
fees (including stock-based compensation of 669,956 and 2,831,232, respectively)
|
|
|
778,062
|
|
|
|
3,014,329
|
|
Advertising
expense
|
|
|
519,922
|
|
|
|
333,441
|
|
Hosting
expense
|
|
|
22,781
|
|
|
|
13,034
|
|
Rent
expense
|
|
|
234,790
|
|
|
|
246,968
|
|
Professional
fees
|
|
|
533,213
|
|
|
|
287,441
|
|
Depreciation
of property and equipment
|
|
|
16,475
|
|
|
|
12,627
|
|
Amortization
of intangible assets
|
|
|
658,910
|
|
|
|
142,093
|
|
Reimbursed
Expenses
|
|
|
87,718
|
|
|
|
242,585
|
|
Other
|
|
|
876,431
|
|
|
|
667,097
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
5,806,015
|
|
|
|
7,599,326
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(4,374,408
|
)
|
|
|
(5,892,407
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Gain
(loss) on disposal of assets - net
|
|
|
(374,116
|
)
|
|
|
-
|
|
Loss
on investment
|
|
|
(40,000
|
)
|
|
|
|
|
EIDL
Grant
|
|
|
10,000
|
|
|
|
-
|
|
Interest
income (forfeited) - net
|
|
|
(3,068
|
)
|
|
|
2,524
|
|
Interest
expense (including amortization finance cost of $725,287 and $0, respectively
|
|
|
(931,615
|
)
|
|
|
(8,793
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense) - net
|
|
|
(1,338,799
|
)
|
|
|
(6,269
|
)
|
|
|
|
|
|
|
|
|
|
Loss before provision
for income taxes
|
|
|
(5,713,207
|
)
|
|
|
(5,898,676
|
)
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
3,304
|
|
|
|
2,084
|
|
|
|
|
|
|
|
|
|
|
Loss
and comprehensive loss
|
|
|
(5,716,511
|
)
|
|
|
(5,900,760
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic
|
|
|
(1.62
|
)
|
|
|
(2.87
|
)
|
Net
loss per common share - diluted
|
|
|
(1.36
|
)
|
|
|
(2.20
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
–
|
|
|
|
|
|
|
|
|
Basic
|
|
|
3,534,739
|
|
|
|
2,058,525
|
|
Diluted
|
|
|
4,201,419
|
|
|
|
2,687,383
|
|
See
notes to consolidated financial statements.
Can
B̅ Corp. and Subsidiary
Consolidated
Statements of Stockholders’ Deficiency
Years
Ended December 31, 2019 (Restated) and 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred
Stock A
|
|
|
Preferred
Stock B
|
|
|
Preferred Stock C
|
|
|
Common
Stock, no
|
|
|
Treasury
|
|
|
Paid-in
|
|
|
|
|
|
|
|
|
|
,
no par value
|
|
|
,
$0.001 par value
|
|
|
,
$0.001 par value
|
|
|
par
value
|
|
|
Stock
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2018
|
|
|
18
|
|
|
$
|
4,557,424
|
|
|
|
499,958
|
|
|
$
|
479
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,468,554
|
|
|
$
|
16,624,557
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
1,075,176
|
|
|
$
|
(18,768,753
|
)
|
|
$
|
3,488,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Series A Preferred stock pursuant to employment agreement
|
|
|
3
|
|
|
|
992,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
992,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
(499,958
|
)
|
|
|
(479
|
)
|
|
|
|
|
|
|
|
|
|
|
250,131
|
|
|
|
479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock in Q1 Q2 & Q3 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
379,555
|
|
|
|
3,296,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,296,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2019 for acquisition of technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,580
|
|
|
|
932,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
932,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2019 for acquisition of inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
487,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
487,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2019 for satisfaction of accrued salaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,227
|
|
|
|
33,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2019 for compensation and services rendered
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
353,557
|
|
|
|
2,938,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,938,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
381,111
|
|
|
|
|
|
|
|
381,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,900,760
|
)
|
|
|
(5,900,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2019
|
|
|
20
|
|
|
$
|
5,539,174
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
2,680,937
|
|
|
$
|
24,323,712
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
1,456,176
|
|
|
$
|
(24,669,513
|
)
|
|
$
|
6,649,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2020 for services rendered
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
941,199
|
|
|
|
584,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
584,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,032
|
|
|
|
357,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
357,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 pursuant to Arena note agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
409,417
|
|
|
|
129,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2020 for acquisition of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
285,000
|
|
|
|
217,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2020 for compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
41,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2020 for interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185,000
|
|
|
|
77,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in 2020 for inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
478,715
|
|
|
|
491,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
491,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
stock acquired in 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(543,715
|
)
|
|
|
-
|
|
|
|
543,715
|
|
|
|
(560,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(560,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock in 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600,000
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shi Farms shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500,000
|
)
|
|
|
|
|
|
|
(12,678
|
)
|
|
|
|
|
|
|
|
|
|
|
(512,678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
379,123
|
|
|
|
|
|
|
|
379,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
728,100
|
|
|
|
|
|
|
|
728,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,716,511
|
)
|
|
|
(5,716,511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2020
|
|
|
20
|
|
|
$
|
5,539,174
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
5,544,590
|
|
|
$
|
26,111,978
|
|
|
|
543,715
|
|
|
$
|
(572,678
|
)
|
|
$
|
2,563,399
|
|
|
$
|
(30,386,024
|
)
|
|
$
|
3,255,849
|
|
See
notes to consolidated financial statements.
Can
B̅ Corp. and Subsidiary
Consolidated
Statements of Cash Flows
|
|
Year
Ended December 31,
|
|
|
|
|
2020
|
|
|
|
2019
Restated
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,716,511
|
)
|
|
$
|
(5,900,760
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock-based
compensation, net of prepaid stock- based consulting fees
|
|
|
2,259,180
|
|
|
|
4,397,478
|
|
Stock-based
interest expense
|
|
|
451,680
|
|
|
|
-
|
|
Gain
(loss) on disposal of asset - net
|
|
|
(147,863
|
)
|
|
|
-
|
|
Depreciation
of property and equipment
|
|
|
124,388
|
|
|
|
89,779
|
|
Amortization
of intangible assets
|
|
|
658,910
|
|
|
|
142,093
|
|
Amortization
of debt discounts
|
|
|
273,607
|
|
|
|
-
|
|
Bad
debt expense
|
|
|
270,919
|
|
|
|
253,483
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,022,374
|
)
|
|
|
(1,465,920
|
)
|
Inventory
|
|
|
931,523
|
|
|
|
(209,893
|
)
|
Prepaid
expenses
|
|
|
(10,797
|
)
|
|
|
(4,760
|
)
|
Security
deposit
|
|
|
-
|
|
|
|
27,439
|
|
Other
receivable
|
|
|
57,974
|
|
|
|
(58,206
|
)
|
Right-of-use
asset
|
|
|
525
|
|
|
|
299
|
|
Accounts
payable
|
|
|
(72,827
|
)
|
|
|
153,408
|
|
Accrued
officer’s compensation
|
|
|
2,770
|
|
|
|
144,363
|
|
Other
accrued expenses payable
|
|
|
(8,195
|
)
|
|
|
17,777
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,947,091
|
)
|
|
|
(2,413,420
|
)
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
receivable
|
|
|
21,370
|
|
|
|
(4,879
|
)
|
Fixed
assets additions
|
|
|
(50,219
|
)
|
|
|
(1,105,403
|
)
|
Proceeds
from disposal of asset
|
|
|
3,600
|
|
|
|
-
|
|
Intangible
assets additions
|
|
|
-
|
|
|
|
(550,000
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(25,249
|
)
|
|
|
(1,660,282
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds
received from notes and loans payable
|
|
|
4,521,618
|
|
|
|
35,000
|
|
Repayments
of notes and loans payable
|
|
|
(1,359,900
|
)
|
|
|
(19,205
|
)
|
Note
payable finance cost
|
|
|
(518,120
|
)
|
|
|
-
|
|
Proceeds
from sale of common stock
|
|
|
300,000
|
|
|
|
3,296,700
|
|
Acquisition
of treasury stock
|
|
|
(560,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
2,383,598
|
|
|
|
3,312,495
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
in cash and cash equivalents
|
|
|
411,258
|
|
|
|
(761,207
|
)
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
46,540
|
|
|
|
807,747
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
457,798
|
|
|
$
|
46,540
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW
INFORMATION:
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
3,304
|
|
|
$
|
2,084
|
|
Interest
paid
|
|
$
|
206,328
|
|
|
$
|
8,793
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING
AND FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in acquisition of inventory
|
|
$
|
491,980
|
|
|
$
|
487,500
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in acquisition of intangible assets
|
|
$
|
217,011
|
|
|
$
|
404,345
|
|
|
|
|
|
|
|
|
|
|
Amortization
of prepaid issuance of common Stock for services rendered
|
|
$
|
1,254,096
|
|
|
$
|
121,000
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in acquisition of note payable (commitment shares)
|
|
$
|
929,734
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in acquisition of note payable (interest expense)
|
|
$
|
451,680
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in satisfaction of officer’s compensation
|
|
$
|
-
|
|
|
$
|
47,563
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in conversion of Series A Preferred Stock
|
|
$
|
-
|
|
|
$
|
10,500
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in retirement of Series B Preferred Stock
|
|
$
|
-
|
|
|
$
|
479
|
|
See
notes to consolidated financial statements.
Can
B̅ Corp. and Subsidiary
Notes
to Consolidated Financial Statements
Year
Ended December 31, 2020 and 2020
NOTE
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 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 February1,
2019. The Company’s hemp farming business is run through Green Grow Farms, Inc. (“Green Grow Farms”), which
was acquired in August, 2019. The Company’s other subsidiary companies did not have operations in 2020.
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 specializes in the production and sale of a variety of hemp-derived cannabidiol (“CBD”) products such as oils,
creams, moisturizers, isolate, gel caps, spa products, and concentrates and non-hemp lifestyle products. Can B̅ is developing
its own line of proprietary products as well as seeking synergistic value through acquisitions in the hemp industry. Can B̅
aims to be the premier provider of the highest quality hemp CBD products on the market through sourcing the very best raw material
and developing a variety of products we believe will improve people’s lives in a variety of areas.
For
the periods presented, the assets, liabilities, revenues, and expenses are those of CAN B and its operational subsidiaries. Financial
information for PHP, Duramed and Green Grow Farms in the periods have been consolidated with the Company’s financials. Prosperity,
Imbibe Wellness Solutions, LLC fka Radical Tactical and Pivt labs, LLC fka NY Hemp Depot had no activity for the periods presented.
NOTE
2 – Going Concern Uncertainty
The
consolidated financial statements have been prepared on a “going concern” basis, which contemplates the realization
of assets and liquidation of liabilities in a normal course of business. As of December 31, 2020, the Company had cash and cash
equivalents of $457,798 and a working capital of $1,118,857. For the years ended December 31, 2020 and 2019, the Company had net
loss of $5,851,512 and $5,900,760, respectively. As a result, cash flows may not be sufficient to meet obligations or sustain
operations. The Company has plans to improve its financial condition and cash flow. Management believes these plans will alleviate
the going concern issue. These plans include:
|
○
|
Satisfying
accrued but unpaid compensation through the issuance of stock.
|
|
○
|
From
January 1,2021 through March 31,2021 the Company raised $2,716,000 from sale of common stock.
|
|
○
|
The
Company intends to raise additional capital from the sale of common stock.
|
|
○
|
Increase
sales of products through additional product offerings.
|
|
○
|
Increase
product sales through expanded marketing programs.
|
The
consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue
as a going concern.
NOTE
3 – Summary of Significant Accounting Policies
(a)
Principles of Consolidation
The
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 eliminated in consolidation.
(b)
Use of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
(c)
Fair Value of Financial Instruments
The
Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, notes and loans
payable, accounts payable, and accrued expenses payable. Except for the noncurrent note receivable, the fair value of these financial
instruments approximate their carrying amounts reported in the balance sheets due to the short term maturity of these instruments.
Based on comparable instruments with similar terms, the fair value of the noncurrent note receivable approximates its carrying
value.
Pursuant
to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the
fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes
the inputs into three levels that may be used to measure fair value:
Level
1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or
liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities
in markets with insufficient volume or infrequent transactions (less active markets); or model derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant
to the measurement of the fair value of the assets or liabilities.
(d)
Cash and Cash Equivalents
The
Company considers all liquid investments purchased with a maturity of three months or less to be cash equivalents.
(e)
Accounts receivable
Accounts
receivable are presented in the balance sheet net of the allowance for doubtful accounts. Accounts receivable are written off
when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the Company’s historical
losses, the existing economic conditions in the industry, and the financial stability of its customers. Bad debt expense was $270,919
and $0 for the periods ended December 31, 2020 and 2019.
(f)
Inventory
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.
(g)
Prepaid expenses
Prepaid
expenses include stock-based officer, employee and consulting compensation of $1,216,531 and $2,459,830 at December 31,
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)
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.
(k)
Long-lived Assets
The
Company reviews long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation
of recoverability is required, the estimated undiscounted future cash flows associated with the asset is compared to the asset’s
carrying amount to determine if a write-down is required. If the undiscounted cash flows are less than the carrying amount, an
impairment loss is recorded to the extent that the carrying amount exceeds the fair value.
(l)
Revenue Recognition
The
Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed
to recognize revenue: (1) a legally enforceable contract that meets criterial standards as to composition and substance is identified;
(2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price,
with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is
allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the
customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based
on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and
the collectability of those amounts.
Private
Label Customers 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.
(m)
Cost of Product Sales
The
cost of product sale is the total cost incurred to obtain a sale and the cost of the goods sold, and the Company’s policy
is to recognize it in the same manner as, and in conjunction with, revenue recognition. Cost of product sale primarily consisted
of the costs directly attributable to revenue recognized and includes expenses related to the production, packaging and labeling
of our CBD products.
(n)
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.
(o)
Advertising
Advertising
costs are expensed as incurred and amounted to $519,922 and $333,441 for the years ended December 31, 2020 and 2019, respectively.
(p)
Research and Development
Research
and development costs are expensed as incurred. In the period ended December 31, 2020 and 2019 the Company spent
$165,000nd $150,000 in research and development which was expenses as spent, respectively.
(q)
Income Taxes
Income
taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of
the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect
for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred
tax assets will be realized.
The
Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification
Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain
positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a
respective taxing authority. The Company believes that it has not taken any uncertain tax positions and thus has not recorded
any liability.
(r)
Net Income (Loss) per Common Share
Basic
net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during
the period.
Diluted
net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities
(such as stock options and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted
net income (loss) per share are excluded from the calculation. For the periods presented, the diluted net loss per share calculation
excluded the effect of Series B preferred stocks and stock options outstanding (see Notes 10, 11 and 12).
(s)
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.
(t)
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.
(u)
Reclassifications
Certain
amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation.
These reclassification adjustments had no effect on the Company’s previously reported net income.
NOTE
4 – Inventories
Inventories
consist of:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Raw materials
|
|
$
|
294,522
|
|
|
$
|
708,239
|
|
|
|
|
|
|
|
|
|
|
Finished goods
|
|
|
50,432
|
|
|
|
76,258
|
|
Total
|
|
$
|
344,954
|
|
|
$
|
784,497
|
|
NOTE
5 – Notes Receivable
Notes
receivable consist of:
|
|
December
31,
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
|
|
|
|
|
|
|
|
|
|
|
Note receivable
dated February 8,2019 from an employee, weekly installments of $1,200 with interest at 8% per annum.
|
|
|
2,898
|
|
|
|
4,879
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,898
|
|
|
|
24,268
|
|
|
|
|
|
|
|
|
|
|
Current portion
of notes receivable
|
|
|
(2,898
|
)
|
|
|
(24,268
|
|
Noncurrent portion
of notes receivable
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
6 – Property and Equipment, Net
Property
and Equipment, net, consist of:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
|
|
|
|
|
|
|
Furniture & Fixtures
|
|
$
|
21,727
|
|
|
$
|
19,018
|
|
|
|
|
|
|
|
|
|
|
Office Equipment
|
|
|
12,378
|
|
|
|
12,378
|
|
|
|
|
|
|
|
|
|
|
Manufacturing Equipment
|
|
|
397,230
|
|
|
|
355,016
|
|
|
|
|
|
|
|
|
|
|
Medical Equipment
|
|
|
776,392
|
|
|
|
783,782
|
|
|
|
|
|
|
|
|
|
|
Leasehold
Improvements
|
|
|
26,902
|
|
|
|
21,603
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,234,629
|
|
|
|
1,191,797
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
(239,650
|
)
|
|
|
(116,555
|
)
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
994,979
|
|
|
$
|
1,075,242
|
|
Depreciation
expense was $124,388 and $89,779 for the years ended December 31, 2020 and 2019, respectively.
NOTE
7 – Intangible Assets, Net
Intangible
assets, net, consist of:
|
|
December
31,
2020
|
|
|
December
31,
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
|
|
|
|
|
|
|
|
|
|
|
CBD technology
|
|
|
482,000
|
|
|
|
482,000
|
|
|
|
|
|
|
|
|
|
|
Platform account
contract
|
|
|
131,812
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Hemp processing
use
|
|
|
85,200
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
3,548
|
|
|
|
3,548
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
759,440
|
|
|
|
1,542,428
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization and Impairment
|
|
|
(236,431
|
)
|
|
|
(202,521
|
)
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
523,009
|
|
|
$
|
1,339,907
|
|
Estimated
future amortization expense are as follows:
December 31,
|
|
Amount
|
|
|
|
|
|
2021
|
|
$
|
120,513
|
|
2022
|
|
|
65,591
|
|
2023
|
|
|
65,591
|
|
2025
|
|
|
65,591
|
|
2026
|
|
|
55,449
|
|
Thereafter
|
|
|
150,274
|
|
|
|
|
|
|
Total
|
|
$
|
523,009
|
|
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 $382,500. 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 $49,500 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 remained dormant since the Shi Farms deal was consummated and no activity is contemplated. As a result, the Company has
written off the remaining intangible asset from Shi Farms. The Company subsequently acquired 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. Grow Farms Inc. intends to 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, if and when it becomes financially
prudent for the Company to do so.
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. On December 12, 2020, the company issued 50,000 shares
of CANB common stock valued at $15,825. Mediiusa Group, Inc. currently holds a valid Industrial Hemp Processor Registration in
full force and effect with the State of New York 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 for one year. 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 – Notes and Loans Payable
Notes
and loans payable consist of:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
|
|
|
|
|
|
|
Loan payable to Pasquale
Ferro, interest at 12% per annum, due December 2020.
|
|
$
|
224,000
|
|
|
$
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to brother of Marco Alfonsi,
Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016.
|
|
|
-
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to Arena Special Opportunities
Partners I, LP, due September 10, 2021.
|
|
|
2,675,239
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable to Arena Special Opportunities
Fund, LP, due September 10, 2021.
|
|
|
102,539
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable
to U.S. Small Business Administration (PPP), interest at 1% per annum. The note matures in January 2023. Payments are deferred
for ten months after the end of the covered period. The Note has been submitted to the SBA for forgiveness within the bank
guidelines.
|
|
|
194,940
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Notes and Loan Payable
|
|
|
3,196,718
|
|
|
|
35,000
|
|
Less: Unamortized Finance Cost
|
|
|
(1,174,247
|
)
|
|
|
-
|
|
Less: Current
Portion
|
|
|
(1,827,531
|
)
|
|
|
(35,000
|
)
|
Long-term Portion
|
|
$
|
194,940
|
|
|
$
|
-
|
|
NOTE
9 – 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, the Company issued 33,333 shares of CANB common stock to a consultant of the Company in exchange for the retirement
of 1 share of CANB Series A Preferred Stock.
From
February 21, 2019 to March 12, 2019, the Company issued aggregately 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 $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.
From
January 1, 2021 through March 25, 2021, the Company issued 1,950 shares of CANB Series Preferred D Stock to officers of the
Company.
In
March 2021, the Company issued 50 Preferred C shares each to Marco Alfonsi, Stanley Teeple, and Pasquale Ferro for services rendered.
Each Preferred C was immediately issuable as common at 25 thousand to one so the total issuance was 1,250,000 common shares for
each recipient.
NOTE
10 – 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.
From
January 19, 2019 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 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.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 145,000 shares of CANB Common Stock to multiple consultants
for services rendered.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 100,000 shares of CANB Common Stock to members of
the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 478,715 shares of CANB Common Stock to members of
the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
July 1, 2020 through September 30, 2020, the Company received an aggregate of 543,715 shares of CANB Common Stock from an exchange
agreement whereby shares of Iconic Brands, Inc. held by the Company were exchanged for shares of stock in the Company held by
Iconic Brands, Inc.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 478,715 shares of CANB Common Stock for the acquisition
of inventory.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 185,000 shares of CANB Common Stock to FirstFire Global
Opportunities Fund, LLC pursuant to a junior convertible promissory note purchase agreement.
On
July 29, 2020, CANB and Iconic Brands (ICNB) completed a share exchange whereby the one million shares of ICNB common stock held
by CANB were exchanged for a fair value exchange of five hundred forty three thousand seven hundred fifteen shares of CANB in
order to settle a contract valuation true-up with ICNB for the purchase of Green Grow Farms, Inc.
From
October 1, 2020 through December 31, 2020, the company issued an aggregate of 435,311 shares of CANB Common Stock to multiple
consultants for services rendered.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 70,000 shares of CANB Common Stock to members of
the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 50,000 shares of Common Stock under the terms of
hemp processing use agreement.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 600,000 shares of Common Stock under the terms of
Stock Purchase Agreements for total proceeds of $300,000.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 193,524 shares of Common Stock to FirstFire Global
as agreed for conversion shares related to a note payable.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 394,304 shares of CANB Common Stock to Arena Special
Opportunities Partners I, LP for a commitment fee pursuant to a securities purchase agreement.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 15,133 shares of CANB Common Stock to Arena Special
Opportunities Fund, LP for a commitment fee pursuant to a securities purchase agreement.
From January 1, 2021 through March 25, 2021 the Company
issued an aggregate of 5,932,000 shares of Common Stock under its Regulation A registration currently in effect and an additional 130,750
shares of common stock to various consultants for services.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 355,057 shares of Common Stock under an asset acquisition
agreement with Botanical Biotech.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 355,250 shares of Common Stock under note conversion
agreement.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 600,000 shares of Common Stock under a note conversion
agreement.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 150 shares of Preferred C shares under multiple employment
agreements. The Preferred C shares converted to 3,750,000 shares of Common Stock upon issuance.
NOTE
11 – Stock Options and Warrants
A
summary of stock options and warrants activity follows:
|
|
Shares
of Common Stock Exercisable Into
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Warrants
|
|
|
Total
|
|
Balance, December 31, 2018
|
|
|
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 2020
|
|
|
1,120,532
|
|
|
|
3,557,605
|
|
|
|
4,678,137
|
|
Cancelled 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2020
|
|
|
1,197,199
|
|
|
|
3,565,097
|
|
|
|
4,762,296
|
|
Issued
and outstanding stock options as of December 31, 2020 consist of:
Year
|
|
Number
Outstanding
|
|
|
Exercise
|
|
|
Year
of
|
|
Granted
|
|
And
Exercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
20,000
|
|
|
$
|
0.30
|
|
|
|
2023
|
|
2019
|
|
|
56,667
|
|
|
$
|
0.30
|
|
|
|
2022
|
|
2020
|
|
|
1,120,532
|
|
|
$
|
0.361
|
|
|
|
2025
|
|
|
|
|
1,197,199
|
|
|
|
|
|
|
|
|
|
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) 463,34% 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) 463,34% 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.
On December 9, 2020, the Company granted 12,500
options of CANB common stock to Ronald A. Silver, a 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 $0.50 per share. The Options are fully vested and are
exercisable as of the Grant Date and all shall expire December 9, 2025. The values of the Stock Option ($12,500) was calculated
using the Black Scholes option pricing model and the following assumptions: (i) $.45 share price, (ii) 5 years term, (iii) 168%
expected volatility, (iv). 41% risk free interest rate and the fair value of options was expensed in the quarterly period ended
December 31, 2020.
On
December 29, 2020, the Company granted 277,008 options of CANB common stock each to Stanley Teeple, Pasquale Ferro, Phil Scala
and Marco Alfonsi, Officers of the Company. The options are exercisable for the purchase of one share of the Registrant’s
Common Stock at an exercise price of $0.36 per share. The Options are fully vested and are exercisable as of the Grant Date and
all shall expire December 29, 2025. The values of the Stock Options ($140,997 each) were calculated using the Black Scholes option
pricing model and the following assumptions: (i) $.51 share price, (ii) 5 years term, (iii) 168% expected volatility, (iv). 41%
risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2020.
Issued
and outstanding warrants as of December 31, 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
|
|
2020
|
|
|
3,557,605
|
|
|
$
|
1,273,623
|
|
|
|
2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,565,097
|
|
|
|
|
|
|
|
|
|
(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.
NOTE
12 – Income Taxes
No
provisions for income taxes were recorded for the periods presented since the Company incurred net losses in those periods.
The
provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal income tax rate of
21% to pretax income (loss) as follows:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Expected
income tax (benefit) at 21%
|
|
$
|
(1,200,467
|
)
|
|
$
|
(1,239,160
|
)
|
|
|
|
|
|
|
|
|
|
Non-deductible stock-based
compensation
|
|
|
474,428
|
|
|
|
923,470
|
|
|
|
|
|
|
|
|
|
|
Non-deductible stock-based
interest
|
|
|
94,853
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Increase
in deferred income tax assets valuation allowance
|
|
|
631,186
|
|
|
|
315,690
|
|
|
|
|
|
|
|
|
|
|
Provision
for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
income tax assets consist of:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
|
1,931,355
|
|
|
|
1,300,168
|
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
(1,931,355
|
)
|
|
|
(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 $1,931,355 attributable to the future utilization of the $9,196,924 net operating loss carryforward
as of December 31, 2020 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income
tax asset in the financial statements at December 31, 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 $3,005,651, 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 2016 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 2016 tax year returns expired in September 2020.
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
13 – Segment Information
The
Company has one reportable segment: Durable Equipment Products.
The
accounting policies of the segment described above are the same as those described in Summary of Significant Accounting Policies
in Note 3. The Company evaluates the performance of the Durable Equipment Products segment based on income (loss) before income
taxes, which includes interest income.
|
|
Durable
Equipment
Products
|
|
Three months
ended December 31, 2020
|
|
|
|
|
Revenue
from external customers
|
|
|
367,673
|
|
Revenue
from other segments
|
|
|
-
|
|
Segment
profit
|
|
|
276,226
|
|
Segment
assets
|
|
|
2,603,379
|
|
|
|
|
|
|
Twelve months
ended December 31, 2020
|
|
|
|
|
Revenue
from external customers
|
|
|
1,176,220
|
|
Revenue
from other segments
|
|
|
-
|
|
Segment
profit
|
|
|
691,482
|
|
Segment
assets
|
|
|
2,603,379
|
|
|
|
Three
Months
Ended
December
31, 2020
|
|
|
Twelve
Months
Ended
December
31, 2020
|
|
|
|
|
|
|
|
|
Total
profit for reportable segment
|
|
$
|
278,719
|
|
|
$
|
694,828
|
|
Other
income (expense) - net
|
|
|
(2,493
|
)
|
|
|
(3,346
|
)
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
276,226
|
|
|
$
|
691,482
|
|
NOTE
14 – Commitments and Contingencies
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 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 amount of one-hundred thousand dollars ($100,000) per
year of the Agreement, 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 similar
agreement with a base compensation of fifty-two thousand annually, $100,000 in ISO, and 20 Preferred C shares. The foregoing agreements
have replaced the agreements described below.
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
February 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 will receive 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
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 offices under month-to-month agreements.
Rent
expense for the years ended December 31, 2020 and 202019 was $234,790 and $246,968, respectively.
At
December 31, 2020, the future minimum lease payments under non-cancellable operating leases were:
Year ended December 31, 2021
|
|
|
47,055
|
|
Year ended December 31, 2022
|
|
|
15,685
|
|
|
|
|
|
|
Total
|
|
$
|
62,740
|
|
The
lease liability of $43,506 at December 31, 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 $62,740 at December 31, 2020.
Major
Customers
For
the twelve months ended December 31, 2020, there were no customers that accounted for more than 10% of total revenues.
For
the twelve months ended December 31, 2019, there were no customers that accounted for more than 10% of total revenues.
NOTE
15 – Related Party Transactions
LI
Accounting Associates, LLC (LIA), an entity controlled by a relative of the Managing Member PHP, is a vendor of CANB. At December
31, 2020, CANB did not have an account payable due to LIA. For the twelve months ended December 31, 2020, CANB had expenses to
LIA of $64,400.
During
the twelve months ended December 31, 2020, we had products and service sales to related parties totaling $0.
NOTE
16 – Prior Period Adjustment
The
accompanying consolidated financial statements of the Company have been restated to correct an error made in the prior year. The
error relates to an understatement of intangible assets by $283,345 and an understatement of stock- based compensation of $1,308,290.
Retained earnings as of December 31, 2020 has been adjusted for the effect of the restatement on the prior year.
NOTE
17 – Subsequent
Events
In
accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through March 25, 2021, the
date on which these consolidated financial statements were available to be issued. There were material subsequent events that required
recognition or additional disclosure in these consolidated financial statements as follows:
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain
of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community
as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic,
based on the rapid increase in exposure globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full
magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively
monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce.
Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the
effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the year ended December 31,
2021.
On
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 Mr. 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.
On
February 22, 2021, the Company entered into a material definitive agreement with its wholly owned subsidiary, Radical Tactical,
LLC, a Nevada limited liability company and Imbibe Health Solutions, LLC, a Delaware limited liability company (“Imbibe”),
pursuant to which Imbibe agreed to sell certain of its assets to Radical Tactical. The assets to be purchased (“Assets”)
include the intellectual property rights, including trademarks, logos, know how, formulations, productions procedures, copyrights,
social media accounts, domain names and marketing materials relating to its branded products containing CBD, including a muscle
and joint salve, unscented fizzy bath soak, CALM massage oil, Me x 3 Metabolic Energy (energy and dietary supplement), and Muscle,
Joints & Back CBD Cryo Gel; inventory; and goodwill. In exchange for the Assets, the Company has agreed to pay Imbibe Sixty-Five
Thousand Dollars ($65,000) in the form of shares of common stock of the Company (with standard restricted legend, the “Shares”)
at a price per share equal to the average price of the common stock of the Company during the ten (10) consecutive trading days
immediately preceding the closing.
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; goodwill associated therewith; and 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 originally agreed to pay the Sellers the fair value of the BB Assets,
as determined by a neutral third-party appraiser selected by the Company and Sellers. Notwithstanding the foregoing, the parties
have agreed that, in lieu of engaging a third-party evaluator, the Company will pay the Seller a maximum of $355,056.78, 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.
The
Board of Directors had previously designed a Preferred Series C share designation and included that issuance in the Employment
Agreements of CEO Marco Alfonsi, CFO, Stanley L. Teeple, and Pure Health Products LLC President Pasquale Ferro in the amount of
200 shares each. Previously the Board had released the issuance of 100 of those shares. The Company released the remaining 100
shares granted under those agreements on March 23, 2021. Out of the 200 each authorized, 50 have been issued to each employee.
In
January 1, 2021, the Company issued a convertible promissory note to KORR Acquisition Group, Inc. in the principal amount of $175,000
for consulting services provided. The note had a maturity of one year and accrued interest at a rate of 6% per annum. On or around
March 26, the Company paid the note in full. KORR used the proceeds from the Note and re-invested it through the Company’s
Regulation A offering.
Can
B̅ Corp. and Subsidiaries
Consolidated
Balance Sheets
|
|
(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
Can
B̅ Corp. and Subsidiaries
Consolidated
Statement of Operations
|
|
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
Can
B̅ Corp. and Subsidiaries
Consolidated
Statement of Stockholders’ Equity
|
|
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
Can
B̅ Corp. and Subsidiaries
Consolidated
Statement of Cash Flows
|
|
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
Can
B̅ Corp. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2021
Note
1 – Organization and Description of Business
Can
B̅ Corp. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005. 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”).
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 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 business of 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 believe will improve
people’s lives in a variety of areas.
Note
2 – Liquidity
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 March 31, 2021, the Company had cash and cash equivalents of $1,677,076
and a working capital of $2,984,648. For the periods ended March 31, 2021 and 2020, the Company had net loss of $2,179,882 and
$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.
Note
3 – Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Financial Statement Presentation
The
accompanying unaudited consolidated financial statements have been prepared in accordance 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.
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 as of the date of the
financial statements and the reported amounts of revenues and expenses in 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 Company’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 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.
Significant
Accounting Policies
The
Company’s significant accounting policies are described in “Note 3: Summary of Significant 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
Company in 2021, and which did not have a material impact on its condensed consolidated financial statements:
In
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 simplify 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 year-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 the chief operating decision maker, manages the Company as a single profit center in order to promote collaboration,
provide comprehensive service offerings across the entire customer base, and provide incentives to employees based on the success of
the organization as a whole. Although certain information regarding selected products or services is discussed for purposes of promoting
an understanding of the Company’s business, the chief operating decision maker manages the Company and allocates resources at the
consolidated level.
Can
B̅ Corp. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2021
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 loss.
Note
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.
Can
B̅ Corp. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2021
Note
5 – Inventories
Inventories
consist of:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Raw materials
|
|
$
|
284,192
|
|
|
$
|
294,522
|
|
Finished goods
|
|
|
47,759
|
|
|
|
50,432
|
|
Total
|
|
$
|
331,951
|
|
|
$
|
344,954
|
|
Note
6 – Property and Equipment
Property
and equipment consist of:
|
|
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 $129,996 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.
Can
B̅ Corp. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2021
Note
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 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.
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.
Can
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
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 Mr. 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 Common 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 various consultants for services.
Can
B̅ Corp. and Subsidiaries
Notes
to Consolidated Financial Statements
March
31, 2021
Note
10 – Stock Options
A
summary of stock options activity for the three months ended March 31, 2021 is as follows:
|
|
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
|
|
|
|
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
11 – Income Taxes
The
Company’s income tax provisions for the three months ended March 31, 2021 and 2020 reflect the Company’s estimates of the
effective rates expected to be applicable for the respective full years, adjusted for any discrete events, which are recorded in the
period that they occur. These estimates are reevaluated each quarter based on the Company’s estimated tax expense for the full
year. The estimated effective tax rate includes the impact of valuation allowances in various jurisdictions.
Note
12 – Related Party Transactions
For
the three months ended March 31, 2021 and 2020, the Company paid fees to a service provider that is a relative of a director for professional
services in the amount of $9,900 and $32,700, respectively.
Note
13 – Commitments and Contingencies
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 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 amount of one-hundred thousand dollars ($100,000) per year of the Agreement, 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 similar 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. 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.
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 underlying 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 the maturities 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 March 31, 2021 and 2020 was $71,448 and $92,606, respectively.
At
March 31, 2021, the 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
14 – Subsequent Events
The
Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the condensed consolidated
financial statements are issued and as of that date, except as reported below, there were no subsequent events that required adjustment
or disclosure in the consolidated financial statements.
On
April 9, 2021 and April 21, 2021, respectively, the Company acquired from auction certain farm equipment for $160,165 in total.
On
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 agreement
to sell $1,500,000 in convertible promissory notes to institutional investors. The notes are convertible into the Company’s common
stock at a base rate of $0.39, which is adjustable upon the happening of certain events. The investors were also issued warrants with
a 50% coverage at an exercise price of $0.45, as well as commitment shares.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Can
B̅ Corp. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005. 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 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 business of 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 believe will improve
people’s lives in a variety of areas.
The
consolidated financial statements include the accounts of CANB and its operational wholly owned subsidiaries.
Results
of Operations for Year Ended December 31, 2020 Compared with Year Ended December 31, 2019
Revenues
decreased $595,834 from $2,305,503 in 2019 to $1,709,669 in 2020. The decrease was due to the COVID-19 pandemic. Essentially, nationally
elective surgeries were curtailed in favor of emergency use of all operating rooms and facilities, which dramatically curtailed the use
of our ultrasound device associated with patient recovery. Additionally, distributor and medical office sales of our main-line CBD products
such as tinctures and salves, were diminished due to closing and limited access to medical office facilities, again directly tied to
the COVID pandemic.
Cost
of product sales decreased $320,522 from $598,584 in 2019 to $278,062 in 2020 due to an oversupply of Hemp and CBD biomass in the market.
Officers
and director’s compensation and payroll taxes decreased $561,998 from $2,639,711 in 2019 to $2,077,713 in 2020. The 2020 expense
amount ($2,077,713) includes additional stock-based compensation of ($1,589,224) pursuant to their respective employment agreements and
related payroll taxes ($33,705). The 2019 expense amount ($2,639,711) includes additional stock-based compensation of ($1,587,060) pursuant
to their respective employment agreements and related payroll taxes ($39,962).
Consulting
fees decreased $2,236,267 from $3,014,329 in 2019 to $778,062 in 2020. The 2020 expense amount ($778,062) includes stock-based compensation
of ($669,956), resulting from stock issued for the service of consultants. The 2019 expense amount ($3,014,329) includes stock-based
compensation of ($2,831,232), resulting from stock issued for the service of consultants.
Advertising
expense increased $186,481 from $333,441 in 2019 to $519,922 in 2020.
Hosting
expense increased $9,747 from $13,034 in 2019 to $22,781 in 2020.
Rent
expense decreased $12,178 from $246,968 in 2019 to $234,790 in 2020.
Professional
fees increased $245,772 from $287,441 in 2019 to $533,213 in 2020.
Depreciation
of property and equipment increased $3,848 from $12,627 in 2019 to $16,475 in 2020.
Amortization
of intangible assets increased $516,817 from $142,093 in 2019 to $658,910 in 2020.
Reimbursed
expenses decreased $154,867 from $242,585 in 2019 to $87,718 in 2020.
Other
operating expenses increased $209,334 from $667,097 in 2019 to $876,431 in 2020. The increase was due largely to higher commission fees,
supplies expense and office expense in 2020 compared to 2019.
Net
loss decreased $184,249 from $5,900,760 in 2019 to $5,716,511 in 2020. The increase was due to the $1,793,311 decrease in total operating
expenses offset by the $1,332,530 increase in other expense – net, the $1,220 increase in provision for income taxes and the $275,312
decrease in gross profit.
Liquidity
and Capital Resources Year Ended December 31, 2020 Compared with Year Ended December 31, 2019
At
December 31, 2020, the Company had cash and cash equivalents of $457,798 and a working capital of $1,792,668. Cash and cash equivalents
increased $411,258 from $46,540 at December 31, 2019 to $457,798 at December 31, 2020. For the year ended December 31, 2020, $2,383,598
was provided by financing activities, $1,947,091 was used in operating activities, and $25,249 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. It is anticipated that Green Grow will again begin operations later in 2021 as Pure Health Products
revenue increases and the need for additional isolate is present. Today, the available oversupply of isolate makes it cheaper to buy
quality product at the market than to grow, harvest, and extract from scratch. Duramed, Inc. is beginning to show improvements in office
utilization of its ultrasound device as more surgery centers are reopening.
Results
of Operations for Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020
Revenues
decreased $262,767 from $569,707 in 2020 to $306,940 in 2021. The decrease was due to the impact of the COVID-19 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 $44,754 from $121,549 in 2020 to $76,795 in 2021 due to the reduction in sales caused by the COVID-19 outbreak.
Operating
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 attributable
to the Company’s asset acquisitions and Regulation A offering.
Net
loss increased $1,045,775 from $1,134,107 in 2020 to $2,179,882 in 2021. The increase was due to the $462,528 increase in total operating
expenses coupled by the $366,059 increase in other expense – net, the $825 decrease in provision for income taxes and the $218,013
decrease in gross profit.
Liquidity
and Capital Resources for Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020
At
March 31, 2021, the Company had cash and cash equivalents of $1,677,076 and a working capital of $2,984,648. Cash and cash equivalents
increased $1,219,278 from $457,798 at December 31, 2020 to $1,677,076 at March 31, 2021. For the three months ended March 31, 2021, $2,883,137
was provided by financing activities, $1,486,329 was used in operating activities, and $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
have no off-balance sheet arrangements.
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 third 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 and expect to be back to pre-COVID operational level by end of the 2nd quarter 2021.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
Dismissal
of BMKR, LLP
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(i)
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On
June 29, 2021, Can B̅ Corp. (the “Company”) dismissed BMKR, LLP (“BMKR”) as the Company’s independent
registered public accounting firm.
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(ii)
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BMKR’s
audit reports on the financial statements of the Company for the fiscal years ended December 31, 2020 and 2019 contained no adverse
opinion or disclaimer of opinion, nor were they qualified as to uncertainty, audit scope or accounting principles except that such
reports included an explanatory paragraph describing the uncertainty of the Company’s ability to continue as a going concern,
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(iii)
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The
dismissal of BMKR was agreed to by the Company’s Board of Directors and Audit Committee.
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(iv)
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During
the fiscal years ended December 31, 2020 and 2019, and through June 29, 2021, there were no “disagreements” (as such
term is defined in Item 304 of Regulation S-K) or reportable events ( as described under Item 304(a)(1)(v) of Regulation S-K) with
BMKR on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement,
if not resolved to their satisfaction, would have caused BMKR to make reference to the subject matter of the disagreement in connection
with its reports.
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(v)
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The
Company provided BMKR with its disclosures in this Current Report on Form 8-K disclosing the dismissal of BMKR and requested in writing
that BMKR furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether or not they agree
with such disclosures. BMKR’s response is filed as an exhibit to this Current Report on Form 8-K.
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Appointment
of BF Borger CPA PC
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(i)
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Following
a careful deliberation and competitive process among various accounting firms, on June 28, 2021, 2021, the Company engaged BF Borger
CPA PC (“BFB”) as the Company’s independent registered public accounting firm, beginning the fiscal quarter ending
June 30, 2021.
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(ii)
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Prior
to retaining BFB, the Company did not consult with BFB regarding either: (i) the application of accounting principles to a specified
transaction, either contemplated or proposed, or the type of audit opinion that might be rendered on the Company’s financial
statements; or (ii) any matter that was the subject of a “disagreement” or a “reportable event” (as those
terms are defined in Item 304 of Regulation S-K).”
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DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
Our
board of directors is to be elected annually by our shareholders. The board of directors elects our executive officers annually. Our
directors and executive officers as of June 24, 2021 are as follows:
Name
|
|
Age
|
|
Position
|
Marco
Alfonsi
|
|
60
|
|
CEO,
Director and Chairman since May 14, 2015
|
Stanley
L. Teeple
|
|
72
|
|
CFO,
Secretary and Director since October 1, 2018
|
Phil
Scala
|
|
69
|
|
Interim
COO since October 10, 2019
|
Pasquale
Ferro
|
|
60
|
|
President,
Pure Health Products since December 31, 2018
|
David
Posel
|
|
43
|
|
COO.
Pure Health Products- since February 12, 2018
|
Frederick
Alger Boyer, Jr.
|
|
52
|
|
Independent
Director since October 10, 2019
|
Ronald
A. Silver
|
|
85
|
|
Independent
Director since October 10, 2019
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James
F. Murphy
|
|
73
|
|
Independent
Director since October 10, 2019
|
Marco
Alfonsi, CEO and Chairman Director has been a financial service professional for the past 20 years. Mr. Alfonsi was appointed director
and CEO of the Company in or around January 2015. Immediately prior to that, he spent eight years serving as the CEO of Prosperity Systems,
Inc.
Throughout
his career, Mr. Alfonsi was directly and indirectly involved in raising over $100 million dollars for small and medium sized business.
Prior to his involvement in the financial services industry, Mr. Alfonsi has owned, operated, financed and sold several businesses. Mr.
Alfonsi successfully started and managed two companies (ExecuteDirect.com, and Bakers Express of New York, Inc.), and held senior management
positions with a number of financial institutions, including: Global American Investments, Clark Street Capital and Basic Investors.
Stanley
L. Teeple –Mr. Teeple, CFO, Secretary, Director, was engaged from 2017-2018 with Solis Tek, Inc. (OTCQB: SLTK) a California
based publicly traded corporation as Senior Vice President, Corporate Secretary, and Chief Compliance Officer. Solis Tek, Inc. a NV Corporation,
is a developer of lighting and nutrient products, and most recently in cultivation and processing for the cannabis industry. Previously,
from 2015-2016 Mr. Teeple was Chief Financial Officer and Secretary for Zonzia Media, Inc. (OTC:ZONX), a provider of streaming video
and content to cable subscribers and hotel networks throughout the eastern US. From 2008 to 2014 Mr. Teeple was Chief Financial Officer
and Secretary of Indigo-Energy, Inc. (OTC:IDGG) a publicly traded company in the oil and gas exploration business. Over the prior three
plus decades Mr. Teeple through his turnaround consulting business, Stan Teeple, Inc., has held numerous senior management positions
in several public and private companies across a broad spectrum of industries. Additionally, he has operated and worked for various court
appointed trustees and principals as CEO, COO, and CFO in the entertainment, pharmaceuticals, food, travel, and tech industries. He operated
his consulting business on a project-to-project basis and holds various other directorships. His businesses operational strengths include
knowing how to manage and maximize the resources and preserve the integrity of a company from start-up through to maturity and corporate
compliance in a regulatory environment.
Phil
Scala, Interim Chief Operating Officer, 40 year career offers unique expertise in delivering the information needed to make informed
decisions, whether in times of crisis or in the course of simply running our business; is highlighted by his 29 years of service with
the FBI. Throughout his 29-year career with the FBI, he worked, supervised and lead investigations on nearly every type of federal crime,
including securities fraud, white collar crime, money laundering, tax violations, narcotics, racketeering, homicide, violent crime, kidnappings,
and public corruptions. Mr. Scala has been the recipient of numerous commendations and awards for outstanding service, notably the FBI
Shield of Bravery, as a group commendation, as the SWAT team leader of the Al-Qaeda Bomb Factory Raid, on June 3, 1993.
Mr.
Scala was assigned to the Criminal Division of the New York Office. He served in numerous assignments within the Organized crime branch
and was sent to the Defense language Institute in Monterey, California to gain proficiency in the Italian/ Sicilian languages. From 2003-2008,
Mr. Scala, developed and implemented the NY Office’s Leadership Development Program, which assisted relief supervisors develop
excellence in leadership through mentoring, journalizing, “Best Practice” experiences, and accountability tools. The program
was designed to be continuous, progressive, and measurable in assisting the FBI leaders maximize their leadership potential throughout
their careers.
Mr.
Scala received his Bachelor’s degree and Master of Business Administration in accounting from St. John’s University, he also
earned a Master of Arts degree in Psychology from New York University.
Pasquale
Ferro (“Pat” to his friends and co-workers), President of Pure Health Products LLC, built Pure Health Products from the
ground up inside a vacant warehouse including all mechanical, electrical, environmental, regulatory, and lab-quality specifications.
Right out of school Pat began a career in real estate development both on the retail and commercial side of the business. Pat formed
a company that would take new or distressed buildings (or anything in-between) and rehab and repair the facilities so they were commercially
viable and move-in ready. During the course of this career Pat was often in charge of multiple work crews, union and non-union, for work
in demolition, construction, plumbing, electrical, grounds crew and other professionally skilled tradesmen required to complete a building
project.
Pat
had his first foray into the manufacturing process in 2015 when he started Pure Health Products, LLC, which he developed into a regional
research laboratory, new product development resource, and full-on production facility capable of producing capsules, tinctures, drops,
salves, tablets and other products for the supplement and custom label community. Later in 2015, Pat connected with Marco Alfonsi, CEO
of the Company, and became the production facility for all of the Company’s CBD based products. In late 2018, Pat sold Pure Health
Products to the Company and became the President of that wholly-owned facility which he operates and manages today under a long term
employment services agreement.
David
Posel, COO of Pure Health Products, LLC, 40, served as the Company’s COO during 2018, when the Company’s operations were
limited to its contractual arrangement with Pure Health Products. After acquiring PHP directly, Mr. Posel was transitioned to COO of
PHP.
Frederick
Alger Boyer, Jr. Independent Director, is President & CEO of Advance Care Medical, Inc. - Mr. Boyer has over 25 years of Wall
Street experience having worked on both the investment side as well as the banking side of the business Most recently he served as Head
of Equities for the New York based investment bank H.C. Wainwright & Co. where he had overseen efforts in capital markets, sales,
and trading. Prior to that he worked and or supervised teams at Rodman & Renshaw, Oppenheimer, Piper Jaffray, and Credit Suisse in
New York, San Francisco, and Minneapolis. In his various roles he has advised hundreds of companies in their financing efforts both publicly
and privately. Mr. Boyer has numerous securities licenses and is a graduate of the University of California at Berkeley.
Ronald
A. Silver, Independent Director, was first elected to the Florida House of Representatives In 1978 and continued his tenure in that
body until 1992. While in the Florida House, Silver served in major positions including Majority Whip (1984-1986) and Majority Leader
(1986-1988). He also chaired various committees including the Select Committee on Juvenile Justice, Criminal Justice, Ethics and Elections
and the subcommittee of Appropriations on General Government. He was then elected to the Florida Senate in 1992 and subsequently re-elected,
serving as the Majority (Democratic) leader for the 1994 session. During his last term in the Senate he was designated by both the House
and Senate as the Dean of the Legislature recognizing his standing as the longest serving member. His career as a lawmaker has yielded
a vast and extensive knowledge of public policy issues and the legislative process, allowing him to be an advocate and servant for his
diverse community. Throughout his tenure in the House and Senate, Mr. Silver has been known to tackle tough issues, transcend partisanship
and build strong coalitions and in addition served on the Judiciary committee, which heard all condominium issues. As Senator, he served
on a variety of committees, and was chairman of both the Appropriations Subcommittee on Health and Human Services and Criminal Justice.
His career in the Senate has earned praise from his colleagues, in both the legislature and other branches of government throughout the
nation. In 1993 Mr. Silver was elected Chairman of the Southern Legislative Conference (17 Southern States) of the Council of State Governments.
Most recently, a new prescription drug plan of Medicare-eligible senior citizens in the State of Florida has been named “Silver
Saver” in his honor. Since his retirement from the Senate in 2002, Mr. Silver also functions as President of his own consulting
firm (Ron Silver & Associates) and maintains his law practice in Miami Beach, Florida. Mr. Silver is married with two children and
three grandchildren.
James
F. Murphy, Independent Director, brings more than 40 years of investigative and consulting experience as the Founder and President
of Sutton Associates. From 1980 to 1984, Mr. Murphy was an Assistant Special Agent in Charge with the Federal Bureau of Investigation,
responsible for a territory encompassing more than seven million people. His investigative specialties included organized crime, white-collar
crime, labor racketeering and political corruption. From 1976 to 1980, Mr. Murphy was assigned to the Office of Planning and Evaluation
at FBI headquarters, Washington, D.C. In this capacity, he evaluated and recommended changes in the FBI’s administrative and investigative
programs. Since entering the private sector in 1984, Mr. Murphy has advanced the industry by developing systematic and professional protocols
for performing due diligence, as well as other investigative services.
Board
Committees
We
have established an audit committee, compensation committee, and nominating committee, with one of the independent directors sitting
as chair of each committee and the remaining independent directors as the other members. Mr. Ron Silver is Chairman of the Nominating
Committee, Mr. James Murphy is Chairman of the Audit Committee, and Mr. Alger Boyer is Chairman of the Compensation Committee.
Family
Relationships
There
are no familial relationships between any of our officers and directors.
Director
or Officer Involvement in Certain Legal Proceedings
Our
current directors and executive officers have not been involved in any legal proceedings as described in Item 401(f) of Regulation S-K
in the past ten years.
Director
Independence
The
Company is not currently listed on any national securities exchange that has a requirement that the board of directors be independent.
However, in anticipation of a possible exchange up listing, and in an effort toward better Board oversight, the company has engaged three
independent Directors making the independent outside directors a majority on the Board of Directors.
Code
of Ethics
We
have adopted a Code of Ethics that applies to all of our employees and officers, and the members of our Board of Directors. This Code
of Ethics is posted on the Company’s website www.canbiola.com and applies to all executive officers including CEO, CFO and COO.
EXECUTIVE
AND DIRECTOR COMPENSATION
The
table below summarizes all compensation awarded to, earned by, or paid to our executive officers and directors for all services rendered
in all capacities to us during the previous two fiscal years, as of December 31, 2020.
Executive Summary Compensation Table
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Name and principal position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock awards
|
|
|
Option awards
|
|
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Non-equity incentive plan comp.
|
|
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Non-qualified deferred comp. earnings
|
|
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All other comp.
|
|
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Total
|
|
Marco Alfonsi (1)
|
|
|
2019
|
|
|
$
|
180,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
180,000
|
|
|
|
|
2020
|
|
|
$
|
112,500
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
93,906
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
206,406
|
|
Stanley L. Teeple(2)
|
|
|
2019
|
|
|
$
|
180,000
|
|
|
$
|
0
|
|
|
$
|
372,667
|
|
|
$
|
117,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
669,667
|
|
|
|
|
2020
|
|
|
$
|
112,500
|
|
|
$
|
0
|
|
|
$
|
469,301
|
|
|
$
|
93,906
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
675,707
|
|
Andrew Holtmeyer (3)
|
|
|
2019
|
|
|
$
|
180,000
|
|
|
$
|
0
|
|
|
$
|
105,485
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
285,485
|
|
|
|
|
2020
|
|
|
$
|
6,000
|
|
|
|
0
|
|
|
$
|
211,549
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
217,549
|
|
David Posel (4)
|
|
|
2019
|
|
|
$
|
60,000
|
|
|
$
|
0
|
|
|
$
|
64,355
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
124,355
|
|
|
|
|
2020
|
|
|
$
|
60,000
|
|
|
$
|
0
|
|
|
$
|
64,531
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
124,531
|
|
Pasquale Ferro (5)
|
|
|
2019
|
|
|
$
|
180,000
|
|
|
$
|
0
|
|
|
$
|
527,425
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
707,425
|
|
|
|
|
2020
|
|
|
$
|
112,500
|
|
|
$
|
0
|
|
|
$
|
528,870
|
|
|
$
|
93,906
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
735,276
|
|
Phil Scala (6)
|
|
|
2019
|
|
|
$
|
7,500
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
7,500
|
|
|
|
|
2020
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
93,906
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
93,906
|
|
(1)
Pursuant to an employment agreement entered on or around May 14, 2015, Marco Alfonsi was entitled to receive compensation of $6,000 per
month through September 31, 2017 when the contract expired. On or around October 3, 2017, the Company entered into a new employment agreement
with Mr. Alfonsi whereby he was entitled to receive $10,000 per month for a period of three years. Mr. Alfonsi also received one share
of Series A Preferred Stock upon his execution of the new agreement. In addition, on or around October 4, 2017, the Company authorized
the issuance of an additional two shares of Series A Preferred Stock to Mr. Alfonsi in consideration for cancellation of approximately
$120,000 of deferred income owed to Mr. Alfonsi. The Company entered into a new employment agreement dated October 21, 2018 Mr. Alfonsi,
pursuant to which Mr. Alfonsi agreed to continue to serve as the Company’s Chief Executive Officer (“CEO”) and accept
appointment as Chairman of the Board of Directors (“Chairman”) for an initial term of four (4) years. He is entitled to receive
$15,000 per month and other compensation under the new agreement. On December 28, 2020, Marco Alfonsi signed a three year Employment
Agreement. Under that agreement, he is 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 amount of one-hundred thousand dollars ($100,000) per year of the Agreement, iv) 200 shares of the Company’s
Series C Preferred stock, and v) usual and customary benefits including expense reimbursement, health and life insurance plan reimbursements
and allowances.
(2)
Pursuant to an employment agreement entered on or around October 15, 2018, Mr. Teeple serves as the Company’s Chief Financial Officer
and Secretary for a term of 4 years. The Agreement also provided for compensation to Mr. Teeple of $15,000 cash per month and the issuance
of 1 share of Series A Preferred Stock upon execution of the Agreement. The fair value of the Series A preferred share is $578,000 and
has a conversion vesting (but not voting) period of four years. An additional three shares of Series A Preferred Stock were issued in
April 2019 per a new employment Agreement. The fair value of the Series A Preferred share issued in April 2019 is $992,250 and has a
conversion (but not voting) vesting period of three years. In 2020 and 2019, the amortized portion of Series A preferred shares is $469,301
and $372,667, respectively. On December 28, 2020, Stanley Teeple signed a new three-year Employment Agreement. Under that agreement,
he is 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 ISOP in an amount of one-hundred thousand dollars ($100,000)
per year of the Agreement, iv) 200 shares of the Company’s Series C Preferred stock, and v) usual and customary benefits including
expense reimbursement, health and life insurance plan reimbursements and allowances.
(3)
On February 16, 2018, the Company executed an Executive Service Agreement (“Holtmeyer Agreement”) with Andrew W Holtmeyer.
The Holtmeyer Agreement provides that Mr. Holtmeyer 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. On December 29, 2018, this Holtmeyer Agreement was terminated due to the execution
of a new Holtmeyer Employment Agreement with Andrew W Holtmeyer. The Holtmeyer Employment Agreement provides that Mr. Holtmeyer serves
as the Company’s Executive Vice President Business for a term of 4 years. The Holtmeyer Employment Agreement also provides for
compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 245,789 shares of common stock upon signing of the agreement.
In 2018, the Company issued 5 shares of Series A Preferred Shares. April 1, 2020 Mr. Holtmeyer’s Employment Agreement was terminated
in favor of a variable rate Commission Agreement with the Company.
(4)
On February 12, 2018, the Company executed an Executive Service Agreement (“Posel Agreement”) with David Posel. The Posel
Agreement provides that Mr. Posel serves as the Company’s Chief Operating Officer for a term of 4 years. The Posel Agreement also
provides for compensation to Mr. Posel of $5,000 cash per month and the issuance of 1 share of Series A Preferred Stock at the inception
of the Posel Agreement. In the fourth quarter, this Posel Agreement was terminated due to the execution of a new Posel Employment Agreement
between Pure Health Products, LLC and David Posel. The fair value of the Series A Preferred Stock is $373,000 and has a conversion (but
not voting) vesting period of four years. In 2020 and 2019, the amortized portion of Series A Preferred Stock related to Mr. Posel’s
service as an executive is $64,531 and $64,355, respectively.
(5)
On December 28, 2018, the Company executed an Executive Service Agreement (“Ferro Agreement”) with Pasquale Ferro. The Ferro
Agreement provides that Mr. Ferro serves as the President of Pure Health Products, LLC for a term of 4 years. The Ferro Agreement also
provides for compensation to Mr. Ferro of $15,000 cash per month and the issuance of 5 shares of Series A Preferred Stock upon execution
of the Ferro Agreement. The fair value of the Series A preferred shares is $2,109,700 and has a conversion (but not voting) vesting period
of four years. In 2019, the amortized portion of Series A preferred stock is $527,425. On December 28, 2020, Pasquale Ferro signed a
three year Employment Agreement. Under that agreement, he is 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
ISOP in an amount of one-hundred thousand dollars ($100,000) per year of the Agreement, iv) 200 shares of the Company’s Series
C Preferred stock, and v) usual and customary benefits including expense reimbursement, health and life insurance plan reimbursements
and allowances.
(6)
On October 11, 2019, the Company executed an Executive Service Agreement (“Scala Agreement”) with Phil Scala. The Scala Agreement
provides that Mr. Scala serves as the Interim Chief Operating Officer for a term of 90 days. The Scala Agreement also provides for compensation
to Mr. Scala of $2,500 cash per month. On January 1, 2020, Scala and the Company extended the engagement until March 31, 2020. On December
28, 2020, Phil Scala signed a three-year Employment Agreement. Under that agreement, he is to receive a i) base salary of fifty-two thousand
dollars per year, ii) is eligible to receive cash and or stock bonuses, iii) shall receive a stock bonus in accordance with the Company’s
ISOP in an amount of one-hundred thousand dollars ($100,000), iv) 20 shares of the Company’s Series C Preferred stock, and v) usual
and customary benefits including expense reimbursement, health and life insurance plan reimbursements and allowances.
As
of December 31, 2020, there were Incentive Stock Option Awards issued to Marco Alfonsi, Pasquale Ferro, Stanley Teeple, and Phil Scala
in the amount of $100,000 each. The Options were issued 12/29/2020 under the ISO Plan, at a strike price of $.361 per share for 277,008
shares for each of the 4 persons named.
The
table below summarizes all compensation awarded to, earned by, or paid to our non-interested directors for all services rendered in all
capacities to us during the previous two fiscal years, as of December 31, 2020.
Non-Interested Director Summary Compensation Table
|
Name and principal position
|
|
Year
|
|
Fees Earned or Paid in Cash
|
|
|
Stock awards(1)
|
|
|
Option awards (2)
|
|
|
Non-equity incentive plan comp.
|
|
|
Non-qualified deferred comp. earnings
|
|
|
All other com.
|
|
|
Total
|
|
Frederick A. Boyer
|
|
2019
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
63,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
63,000
|
|
Director
|
|
2020
|
|
$
|
0
|
|
|
$
|
8,870
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
8,870
|
|
Ronald Silver
|
|
2019
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
63,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
63,000
|
|
Director
|
|
2020
|
|
$
|
0
|
|
|
$
|
4,650
|
|
|
$
|
5,625
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
10,275
|
|
James F. Murphy
|
|
2019
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
63,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
63,000
|
|
Director
|
|
2020
|
|
$
|
0
|
|
|
$
|
8,870
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
8,870
|
|
|
(1)
(2)
|
In
September of 2020, both Boyer and Murphy were issued 10,000 common shares each and in December 2020 both Boyer and Murphy were issued
an additional 10,000 common shares each. Director Silver was issued 10,000 shares in September 2020.
As
of December 31, 2020, Directors Boyer, Silver and Murphy each owned 10 thousand options to exercise and purchase stock at $.30 at
any time until 2023. In 2020, Mr. Silver was issued 12,500 vested options to exercise and purchase stock at $.50 at any time until
2025.
|
No
director has received cash compensation for their directorship. We have a compensation committee and compensation for our directors and
officers is determined by our compensation committee.
We
reimburse non-employee directors for actual out-of-pocket costs incurred to attend board meetings. No additional compensation is paid
for attendance in person or by telephone at board meetings.
The
table below summarizes all outstanding equity awards for officers, as of December 31, 2020.
Outstanding Equity Awards at Fiscal Year-End
|
Name and principal position
|
|
Grant Date
|
|
Grant Type
|
|
Number of Securities Underlying Unexercised Options Exercisable
|
|
|
Number of Securities Underlying Unexercised Options Unexercisable
|
|
|
Option Exercise Price
|
|
|
Option Expiration Date
|
Stanley Teeple - CFO
|
|
10/21/18
|
|
Stock Options
|
|
|
10,000
|
|
|
|
0
|
|
|
$
|
.30
|
|
|
10/20/23
|
Johnny Mack PhD – Ex COO
|
|
9/9/19
|
|
Stock Options
|
|
|
26,667
|
|
|
|
0
|
|
|
$
|
.30
|
|
|
9/8/24
|
Frederick A. Boyer - Director
|
|
10/15/19
|
|
Stock Options
|
|
|
10,000
|
|
|
|
0
|
|
|
$
|
.30
|
|
|
10/14/24
|
Ronald Silver - Director
|
|
10/15/19
|
|
Stock Options
|
|
|
10,000
|
|
|
|
0
|
|
|
$
|
.30
|
|
|
10/14/24
|
James F. Murphy - Director
|
|
10/15/19
|
|
Stock Options
|
|
|
10,000
|
|
|
|
0
|
|
|
$
|
.30
|
|
|
10/14/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald Silver - Director
|
|
12/9/20
|
|
Stock Options
|
|
|
12,500
|
|
|
|
0
|
|
|
$
|
.50
|
|
|
12/9/25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley Teeple – CFO
|
|
12/29/20
|
|
Stock Options
|
|
|
277,008
|
|
|
|
0
|
|
|
$
|
.361
|
|
|
12/29/25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pasquale Ferro - President
|
|
12/29/20
|
|
Stock Options
|
|
|
277,008
|
|
|
|
0
|
|
|
$
|
.361
|
|
|
12/29/25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phil Scala - COO
|
|
12/29/20
|
|
Stock Options
|
|
|
277,008
|
|
|
|
0
|
|
|
$
|
.361
|
|
|
12/29/25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marco Alfonsi - CEO
|
|
12/29/20
|
|
Stock Options
|
|
|
277,008
|
|
|
|
0
|
|
|
$
|
.361
|
|
|
12/29/25
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following tables set forth the ownership, as of June 24, 2021, of our common stock by each person known by us to be the beneficial owner
of more than 5% of any class of our outstanding voting stock, our directors, and our executive officers and directors as a group. To
the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted.
There are not any pending or anticipated arrangements that may cause a change in control. The Company’s principal office is the
business address for each of the named shareholders.
There
are 16,667,655 shares of common stock outstanding as of June 24, 2021, 20 shares of Series A preferred stock issued and outstanding,
which in aggregate are convertible into approximately 666,667 shares of common stock at any time and represent 1,333,333 votes, and 1,950
Series D preferred stock issued and outstanding, which in aggregate represent 19,500,000 votes and are non-convertible. There is a total
of approximately 37,501,000 eligible to be cast in any Company vote as of June 24, 2021.
The
information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of
the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person
is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of
the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as
to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise
of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same
securities.
Except
as otherwise indicated and under applicable community property laws, we believe that the beneficial owners of our common stock listed
below have sole voting and investment power with respect to the shares shown. Unless stated otherwise, the business address for these
shareholders is 960 South Broadway, Suite 120, Hicksville, NY 11801.
Name
|
|
Title
|
|
Number of Common
Shares
|
|
|
% of Common Shares
|
|
|
Number of Series A Preferred Shares
|
|
|
% of Series A Preferred Shares
|
|
|
Number of Series D Preferred Shares
|
|
|
% of Series D Preferred Shares
|
|
|
% of
Eligible Votes
|
|
|
Number of Warrants currently exercisable or exercisable in the next 60 days
|
|
Marco Alfonsi [1]
|
|
CEO, Director
|
|
|
1,447,998
|
|
|
|
8.69
|
%
|
|
|
5
|
|
|
|
25
|
%
|
|
|
600
|
|
|
|
30.77
|
%
|
|
|
20.75
|
%
|
|
|
277,008
|
|
Stanley L. Teeple [2]
|
|
CFO, Director
|
|
|
1,253,861
|
|
|
|
7.52
|
%
|
|
|
4
|
|
|
|
20
|
%
|
|
|
600
|
|
|
|
30.77
|
%
|
|
|
20.05
|
%
|
|
|
287,008
|
|
David Posel [3]
|
|
COO, Pure Health Products
|
|
|
0
|
|
|
|
0.0
|
%
|
|
|
1
|
|
|
|
5
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0.18
|
%
|
|
|
0
|
|
Pasquale Ferro [4]
|
|
President, Pure Health Products
|
|
|
1,354,602
|
|
|
|
8.13
|
%
|
|
|
5
|
|
|
|
25
|
%
|
|
|
600
|
|
|
|
30.77
|
%
|
|
|
20.50
|
%
|
|
|
277,008
|
|
Phil Scala [5]
|
|
Interim COO
|
|
|
2,816
|
|
|
|
0.02
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
150
|
|
|
|
7.69
|
%
|
|
|
4.01
|
%
|
|
|
277,008
|
|
Frederick A. Boyer [6]
|
|
Director
|
|
|
20,000
|
|
|
|
0.12
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0.05
|
%
|
|
|
10,000
|
|
Ronald Silver [6]
|
|
Director
|
|
|
16,668
|
|
|
|
0.10
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0.04
|
%
|
|
|
22,500
|
|
James F. Murphy [6]
|
|
Director
|
|
|
20,000
|
|
|
|
0.12
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0.05
|
%
|
|
|
10,000
|
|
All officers and directors as a group [8 persons]
|
|
|
|
|
4,115,945
|
|
|
|
24.69
|
%
|
|
|
15
|
|
|
|
75
|
%
|
|
|
1,950
|
|
|
|
100
|
%
|
|
|
65.64
|
%
|
|
|
1,160,532
|
|
Andrew Holtmeyer [7]
|
|
VP of Business Development
|
|
|
3,695
|
|
|
|
0.02
|
|
|
|
5
|
|
|
|
25
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
0.00
|
%
|
|
|
0
|
|
|
(1)
|
As
of June 24, 2021, Marco, Alfonsi owns approximately 1,447,996 shares of common stock, 5 shares of Series A preferred stock, which
are convertible into approximately 166,667 shares and equal 333,334 votes, and 600 shares
of Series D preferred stock, which represent 6,000,000 votes. Prior to October 29, 2015, Mr. Alfonsi owned 270,000 shares of the
Company’s common stock, at which time it was agreed that he would retire 166,666 shares of common stock for 5 shares of Series
A Preferred Stock. Mr. Alfonsi owns 277,008 options to exercise and purchase stock at $0.361 at any time until 2025. In addition
to the listed shares, five adult members of Mr. Alfonsi’s family hold an aggregate of 42,343 shares of common stock, which
shares have not been included in the above calculations.
|
|
|
|
|
(2)
|
As
of June 24, 2021, Stanley L. Teeple owns approximately 1,253,269 shares of common stock, 4 shares of Series A preferred stock, which
are convertible into approximately 133,334 shares and equal 266,667 votes, and 600 shares
of Series D preferred stock, which represent 6,000,000 votes. Mr. Teeple owns 10,000 options to exercise and purchase stock at $0.001
at any time until October 2023 and 277,008 options to exercise and purchase stock at $0.361 at any time until 2025.
|
|
|
|
|
(3)
|
As
of June 24, 2021, David Posel owns 0 shares of common stock and 1 shares of Series A preferred stock, which is convertible into 33,334
shares and equals 66,666 votes.
|
|
|
|
|
(4)
|
As
of June 24, 2021, Pasquale Ferro owns 69,119 shares of common stock jointly with his wife, approximately 1,285,483 shares of common
stock individually, 5 shares of Series A preferred stock, which are convertible into approximately
166,667 shares and equal 333,334 votes, and 600 shares of Series D preferred stock, which represent 6,000,000 votes. Mr. Ferro
owns 277,008 options to exercise and purchase stock at $0.361 at any time until 2025.
|
|
|
|
|
(5)
|
As
of June 24, 2021, Phil Scala owns approximately 2,816 shares of common stock and 150 shares of Series D preferred stock, which represent
1,500,000 votes. Mr. Scala owns 277,008 options to exercise and purchase stock at $0.361 at any time until 2025.
|
|
|
|
|
(6)
|
As
of June 24, 2021, Directors Boyer, Silver and Murphy each owned 10,000 options to exercise and purchase stock at $0.30 at any time
until 2023. Mr. Silver owned 12,500 options to exercise and purchase stock at $0.50 at any time until 2025. As of June 24, 2021,
directors Boyer and Murphy each held 20,000 common shares and director Silver held 16,668 shares of common stock.
|
|
|
|
|
(7)
|
As
of June 24, 2021, Andrew
Holtmeyer owns approximately 3,695 shares of common stock and 5 shares of Series A preferred stock, which are convertible into approximately
166,667 shares and equal 333,334 votes.
|
There
are no persons known by us to be the beneficial owner of more than 5% of our outstanding voting stock, excluding our directors and our
executive officers.
.
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Can
B̅ Corp.’s Corporate Governance Guidelines establish standards for evaluating Director independence and requires that a majority
of Directors be independent. The Board determines the independence of each Director under Nasdaq governance standards. Those standards
identify the types of relationships that, if material, could impair independence. The Board determined that, under the Nasdaq listing
standards, the following non-employee Directors are independent: Frederick A. Boyer, Ronald Silver and James F. Murphy. Our non-independent
directors are Marco Alfonsi and Stanley L. Teeple.
Except
as described herein (or within the section entitled Executive Compensation of this report), none of the following parties (each a “Related
Party”) has, in our fiscal years ended 2019 and 2020, had any material interest, direct or indirect, in any transaction with us
or in any presently proposed transaction that has or will materially affect us:
●
|
any
of our directors or officers;
|
|
|
●
|
any
person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding
shares of common stock; or
|
|
|
●
|
any
member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the above persons.
|
LI
Accounting Associates, LLC (“LIA”), an entity controlled by a relative of the Managing Member PHP, is a vendor of Can B̅
Corp. At December 31, 2020, the Company did not have an account payable due to LIA. For the twelve months ended December 31, 2020, the
Company had expenses to LIA of $64,400.
Pasquale
Ferro, President of Pure Health Products LLC, manages the R&D and manufacturing of the Company products sold via other subsidiary
companies. Mr. Ferro is also a substantial shareholder of the Company but receives no direct compensation from Can B, Corp. other than
outlined in his Employment Agreement.
During
the twelve months ended December 31, 2020, we had products and service sales to related parties totaling $0.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES
Our
Bylaws, subject to the provisions of Florida Law, contain provisions which allow the corporation to indemnify any person against liabilities
and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service
to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the
corporation. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers
and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
PART
II- INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table is an itemization of all estimated expenses, without consideration to future contingencies, incurred or expected
to be incurred by us in connection with the issuance and distribution of the securities being offered by this prospectus.
ITEM
|
|
AMOUNT
|
|
|
|
|
|
SEC Registration Fee
|
|
$
|
669.15
|
|
Legal Fees and Expenses
|
|
$
|
25,000.00
|
|
Accounting Fees and Expenses
|
|
|
|
|
Transfer Agent Fees
|
|
|
|
|
Total
|
|
$
|
25,669.15
|
|
INDEMNIFICATION
OF OFFICERS AND DIRECTORS
There
are not indemnification provisions in our Articles of Incorporation. Our Bylaws provide as follows:
The
Corporation shall, to the maximum extent and in the manner permitted by the Florida law, indemnify each of its directors and officers
against expenses (including attorneys’ fees), judgments, fines, settlements, and other amounts actually and reasonably incurred
in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the Corporation. A “director”
or “officer” of the Corporation includes any person (i) who is or was a director or officer of the Corporation, (ii) who
is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the Corporation or
of another enterprise at the request of such predecessor corporation.
RECENT
SALES OF UNREGISTERED SECURITIES
Recent
Sales of Unregistered Securities
The
following is a summary of transactions involving sales of our securities within the past three years that were not registered under the
Securities Act of 1933, as amended (the “Securities Act”). Each offer and sale was exempt from registration under either
Section 4(a)(2) of the Securities Act and/or Rule 506(b) or Rule 504 under Regulation D of the Securities Act, unless otherwise indicated.
From
July 24, 2018 to September 26, 2018, the Company issued aggregately 179,466 shares of CANB common stock to RedDiamond in exchange for
the retirement of 263,263 shares of CANB Series B Preferred Stock.
On
July 31, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $3,225 fair value of the
833 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.
On
August 9, 2018, Company received a conversion notice from a lender. As a result, 31,814 shares of CANB common stock was issued to the
lender in satisfaction of notes payable of $50,000 and accrued interest payable of $7,266 at August 21, 2018.
On
August 28, 2018, the Company issued 6,667 shares of CANB common stock to a consultant for services rendered. The $159,600 fair value
of the 6,667 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On
September 6, 2018, the Company issued 1,000 shares of CANB common stock to a consultant for services rendered. The $16,500 fair value
of the 1,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On
September 6, 2018, the Company issued 1,667 shares of CANB common stock to a consultant for services rendered. The $27,500 fair value
of the 1,667 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.
On
September 6, 2018, the Company issued 28,101 shares of CANB common stock to a lender in satisfaction of notes payable of $38,500 and
accrued interest payable of $7,867.
On
September 7, 2018, the Company issued 17,072 shares of CANB common stock to a lender in satisfaction of notes payable of $25,000 and
accrued interest payable of $3,169.
On
September 7, 2018, the Company issued 33,486 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and
accrued interest payable of $10,274.
On
September 8, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $11,500 fair value of
the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On
September 10, 2018, the Company issued 1,667 shares of CANB common stock to a consultant for services rendered. The $19,950 fair value
of the 1,667 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On
September 17, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $10,750 fair value
of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On
September 18, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $13,725 fair value
of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On
September 20, 2018, the Company issued 24,691 shares of CANB common stock to an investor pursuant to a Stock Purchase Agreement dated
September 17, 2018, in exchange for proceeds of $200,000, or $8.10 per CANB common share.
On
September 21, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $14,500 fair value
of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
On
September 25, 2018, the Company issued 6,667 shares of CANB common stock to a consultant for services rendered. The $97,400 fair value
of the 6,667 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.
From
October 2, 2018 to November 7, 2018, the Company issued aggregately 43,649 shares of CANB common stock to RedDiamond in exchange for
the retirement of 101,736 shares of CANB Series B Preferred Stock.
From
November 5, 2018 to December 28, 2018, the Company issued aggregately 7,083 shares of CANB common stock to multiple consultants for services
rendered. The $80,665 fair value of the 7,083 shares of CANB common stock was partially charged to consulting fees in the three months
ended December 30, 2018.
From
December 3, 2018 to December 28, 2018, the Company issued aggregately 5,000 shares of CANB common stock to three board members for services
rendered. The $62,342 fair value of the 5,000 shares of CANB common stock was charged to director fees in the three months ended December
30, 2018.
From
December 3, 2018 to December 28, 2018, the Company issued aggregately 74,713 shares of CANB common stock to multiple investors pursuant
to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $650,000.
On
December 11, 2018, the Company issued 2,970 shares of CANB common stock to RedDiamond in satisfaction of dividend payable of $9,000.
On
December 19, 2018, the Company issued 2,970 shares of CANB common stock to Auctus, LLC pursuant to a cashless exercise of stock options.
On
December 21, 2018, Company received a conversion notice from a lender. As a result, 31,240 shares of CANB common stock was issued to
the lender in satisfaction of notes payable of $83,500 and accrued interest payable of $10,221.
On
December 21, 2018, Company issued aggregately 14,569 shares of CANB common stock to four officers of the Company in satisfaction of accrued
compensation of $192,300.
On
December 28, 2018, the Company issued 10,328 shares of CANB common stock for the acquisition of Pure Health Products, LLC.
On
December 28, 2018, the Company issued 819 shares of CANB common stock to an officer of the Company pursuant to the Employment Agreement
dated December 29, 2018 with Andrew Holtmeyer. The $10,371 fair value of the issuance was charged to stock-based compensation in the
three months ended December 31, 2018.
On
December 28, 2018, the Company issued 100,000 shares of CANB common stock to Marco Alfonsi in exchange for the return of 3 shares of
CANB Series A Preferred Stock owned by Marco Alfonsi.
On
December 29, 2018, the Company issued (i) 5 Series A Preferred shares to Pasquale Ferro, (ii) 2 Series A Preferred shares to Andy Holtmeyer,
and (iii) 1 Series A Preferred share to Stanley L. Teeple, pursuant to employment agreements with each of the foregoing.
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.
From
January 19, 2019 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 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.
On
May 25, 2019, the Company issued 3 Series A Preferred shares to Stanley L. Teeple pursuant to an employment agreement.
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.
On
or around December 13, 2019, the Company entered into a purchase agreement with FirstFire Global Opportunities Fund, LLC, pursuant to
which FirstFire purchased a Convertible Promissory Note in the aggregate principal amount of $550,000 in consideration for $500,000.
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 FirstFire 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.
On
or around May 12, 2020, the Company closed the transactions contemplated by a purchase agreement with Labrys Fund, LP, pursuant to which
Labrys purchased a Secured Convertible Promissory Note in the principal amount of $225,000 for $204,545 in immediately available funds.
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.
On
or around June 15, 2020, the Company closed the transactions contemplated by a purchase agreement with EMA Financial, LLC, pursuant to
which EMA purchased a 12% Convertible Promissory Note in the principal amount of $115,000 for $104,000 in immediately available funds.
On
or around June 19, 2020, the Company closed the transactions contemplated by a purchase agreement with Eagle Equities, LLC, pursuant
to which Eagle purchased a 12% Convertible Promissory Note in the principal amount of $220,000 for $200,000 in immediately available
funds.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 145,000 shares of CANB Common Stock to multiple consultants
for services rendered.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 100,000 shares of CANB Common Stock to members of the Advisory
Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 478,715 shares of CANB Common Stock to members of the Advisory
Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
July 1, 2020 through September 30, 2020, the Company received an aggregate of 543,715 shares of CANB Common Stock from an exchange agreement
whereby shares of Iconic Brands, Inc. held by the Company were exchanged for shares of stock in the Company held by Iconic Brands, Inc.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 60,000 shares of CANB Common Stock for the acquisition of
inventory.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 185,000 shares of CANB Common Stock to FirstFire Global Opportunities
Fund, LLC pursuant to a junior convertible promissory note purchase agreement.
From
October 1, 2020 through December 31, 2020, the company issued an aggregate of 435,311 shares of CANB Common Stock to multiple consultants
for services rendered. The aggregate amount of consideration received totaled $161,123.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 70,000 shares of CANB Common Stock to members of the Advisory
Board, Medical Advisory Board, and Sports Advisory Board for services rendered. The aggregate amount of consideration received totaled
$22,155.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 50,000 shares of Common Stock under the terms of hemp processing
use agreement. The aggregate amount of consideration received totaled $15,825.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 600,000 shares of Common Stock under the terms of Stock
Purchase Agreements for total proceeds of $300,000. The aggregate offering price under the Stock Purchase Agreement totaled $.50.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 193,524 shares of Common Stock to FirstFire Global as agreed
for conversion shares related to a note payable. The aggregate amount of consideration received totaled $61,250.
On
December 10, 2020, the Company closed the transactions contemplated by a Securities Purchase Agreement dated the same day entered into
with a group of institutional investors for the sale of convertible promissory notes. Pursuant to the purchase agreement, the Company
issued Original Issue Discount Senior Secured Convertible Promissory Notes with the aggregate principal amount of $2,777,778 and warrants
to purchase up to an aggregate of 3,557,605 shares of the Company’s common stock to the investors. The investors purchased the
aforementioned notes, warrants, and an aggregate of 409,437 commitment shares of the Company’s common stock for a total purchase
price equal to $2,500,000.
From
January 1, 2021 through March 31, 2021 the Company issued an aggregate of 6,887,250 shares of Common Stock under its Regulation A offering
statement currently in effect. The aggregate offering price under the Stock Purchase Agreement totaled $.50.
From
January 1, 2021 through March 31, 2021 the Company issued an aggregate 130,750 shares of common stock to various consultants for services.
The aggregate amount of consideration received totaled $31,635.
From
January 1, 2021 through March 31, 2021 the Company issued an aggregate of 355,057 shares of Common Stock under an asset acquisition agreement
with Botanical Biotech. LLC for asset purchase which was half in cash and half in equity issuance. The aggregate amount of consideration
received totaled $137,673.
From
January 1, 2021 through March 31, 2021 the Company issued an aggregate of 355,250 shares of Common Stock under note conversion agreement.
From
January 1, 2021 through March 31, 2021 the Company issued an aggregate of 800,000 shares of Common Stock under a note conversion agreement.
From
January 1, 2021 through March 31, 2021 the Company issued an aggregate of 150 shares of Preferred C shares under multiple employment
agreements. The Preferred C shares converted to 3,750,000 shares of Common Stock upon issuance. The aggregate amount of consideration
received totaled $145,063.
In
March through April 2021 the Board of Directors authorized issuance of Preferred D, voting rights only shares, each holding voting rights
of 10,000 common to 1 Preferred D, to Marco Alfonsi, Stanley Teeple, and Pasquale Ferro in the amount of 600 shares each and to Philip
Scala in the amount of 150 shares.
On
May 24, 2021, the Company entered into a Securities Purchase Agreement with a group of institutional investors for the sale of convertible
promissory notes. Pursuant to the purchase agreement, the Company issued Original Issue Discount Senior Secured Convertible Promissory
Notes with the aggregate principal amount of $1,500,000 and warrants to purchase up to an aggregate of 1,923,087 shares of the Company’s
common stock to the investors. The investors purchased the aforementioned notes, warrants, and an aggregate of 221,096 commitment shares
of the Company’s common stock for a total purchase price equal to $1,350,000.
EXHIBITS
The
following exhibits are filed with this offering circular:
Exhibit
|
|
Description
|
|
|
|
2.1
|
|
Share Purchase Agreement with Prosperity Systems, Inc., dated January 5, 2015(2)
|
2.2
|
|
Membership Purchase Agreement with Pure Health Products(6)
|
2.3
|
|
Green Grow Stock Purchase Agreement(4)
|
2.4
|
|
Green Grow Modification Agreement(1)
|
2.5
|
|
Green Grow Settlement Agreement
|
3.1
|
|
Articles of Incorporation, as amended(1)
|
3.2
|
|
Bylaws(2)
|
4.1
|
|
Articles of Amendment designating Series A Preferred Stock rights, as amended(9)
|
4.2
|
|
Articles of Amendment designating Series B Preferred Stock rights(1)
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4.3
|
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Articles of Amendment designating Series C Preferred Stock rights(7)
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4.4
|
|
Articles of Amendment designating Series D Preferred Stock rights(10)
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5.1
|
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Opinion of Legality from Austin Legal Group, APC
|
10.1
|
|
Employment Agreement with Marco Alfonsi dated December 29, 2020(10)
|
10.2
|
|
Employment Agreement with Stanley L. Teeple dated December 29, 2020(10)
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10.3
|
|
Employment Agreement with Pasquale Ferro dated December 29, 2020(10)
|
10.4
|
|
Employment Agreement with Phil Scala dated December 29, 2020(10)
|
10.5
|
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Commission Agreement with Andrew Holtmeyer(10)
|
10.6
|
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Employment Agreement with Bradley Lebsock(10)
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10.7
|
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Consulting Agreement with Jordan Schlosser(10)
|
10.8
|
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Memorandum of Understanding with Sam International and ZetrOZ Systems LLC(3)
|
10.9
|
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Settlement Agreement with Lifeguard Licensing Corp.(11)
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10.10
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Can B̅ Corp. 2020 Incentive Stock Option Plan(8)
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10.11
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Arena Securities Purchase Agreement(10)
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10.12
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ASOF Original Issue Discount Senior Secured Convertible Promissory Note(10)
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10.13
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ASOF Warrant to Purchase Common Stock(10)
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10.14
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ASOP Original Issue Discount Senior Secured Convertible Promissory Note(10)
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10.15
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ASOP Warrant to Purchase Common Stock(10)
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10.16
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Arena Security Agreement(10)
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10.17
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Arena Intellectual Property Security Agreement(10)
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10.18
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Arena Registration Rights Agreement(10)
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10.19
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Arena Holding Escrow Agreement(10)
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10.20
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Arena Guaranty Agreement from Company Subsidiaries(10)
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10.21
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Amendment to 2020 ASOF Promissory Note(11)
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10.22
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Amendment to 2020 ASOP Promissory Note(11)
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10.23
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2021 Arena Securities Purchase Agreement(11)
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10.24
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2021 ASOF Original Issue Discount Senior Secured Convertible Promissory Note(11)
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10.25
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2021 ASOF Warrant to Purchase Common Stock(11)
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10.26
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2021 ASOP Original Issue Discount Senior Secured Convertible Promissory Note(11)
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10.27
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2021 ASOP Warrant to Purchase Common Stock(11)
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10.28
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2021 Arena Registration Rights Agreement(11)
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10.29
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2021 Addendum to Arena Security Agreement(11)
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10.30
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2021 Addendum to Arena Intellectual Property Security Agreement(11)
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10.31
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2021 Addendum to Arena Guaranty Agreement from Company Subsidiaries(11)
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10.32
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Asset Acquisition Agreement with Imbibe(10)
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10.33
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Asset Acquisition Agreement with various Sellers (Botanical Biotech)
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14.1
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Code of Ethics(1)
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21.1
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List of Subsidiaries(10)
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23.1
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Consent of BMKR, LLP
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101.INS
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Inline
XBRL Instance Document
|
101.SCH
|
|
Inline
XBRL Taxonomy Extension Schema
|
101.CAL
|
|
Inline
XBRL Taxonomy Extension Calculation
|
101.DEF
|
|
Inline
XBRL Taxonomy Extension Definition
|
101.LAB
|
|
Inline
XBRL Taxonomy Extension Labels
|
101.PRE
|
|
Inline
XBRL Taxonomy Extension Presentation
|
(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.
|
(11)
|
Filed
with the Quarterly Report on Form 10-Q filed with the SEC on May 21, 2021 and incorporated herein by reference.
|
UNDERTAKINGS
The
undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
(i)
Include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii)
Reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement; and
(iii)
Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser each prospectus filed by the registrant
pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part
of and included in the registration statement; and each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7)
as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)
for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and
included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the
date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication
of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on our behalf by the
undersigned, thereunto duly authorized, in New York, New York on June 30, 2021.
|
Can
B Corp.
|
June
30, 2021
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|
|
|
By:
|
/s/
Marco Alfonsi
|
|
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Marco
Alfonsi
|
|
|
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities
and on the date indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Marco Alfonsi
|
|
Chief
Executive Officer, Director and Chairman
|
|
June
30, 2021
|
Marco
Alfonsi
|
|
(Principal
Executive Officer)
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|
|
|
|
|
|
|
/s/
Stanley L. Teeple
|
|
Secretary,
CFO and Director
|
|
June
30, 2021
|
Stanley
L. Teeple
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
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|
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/s/
Frederick Alger Boyer Jr.
|
|
Independent
Director
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June
30, 2021
|
Frederick
Alger Boyer Jr.
|
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/s/
Ron Silver
|
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Independent
Director
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|
June
30, 2021
|
Ron
Silver
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|
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|
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/s/
James Murphy
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Independent
Director
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|
June
30, 2021
|
James
Murphy
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