Notes
to Consolidated Financial Statements
Three
Months Ended March 31, 2020 and 2019
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 CBD infused pads, are marketed and sold through its wholly-owned subsidiaries,
Duramed Inc. (incorporated on November 29, 2018) and DuramedNJ LLC (incorporated on May 29, 2019)
(collectively, “Duramed”). Duramed began operating on or about February1, 2019. The Company’s wholly owned subsidiary,
Radical Tactical LLC (“Radical Tactical”), formed May 11, 2019, provides the marketplace with millennium targeted
product lines such as vapes, gums, and kratom. The Company’s hemp aggregation business is run through NY Hemp Depot LLC
(the “Hemp Depot”), which was formed on or around July 11, 2019. The Company’s hemp farming business
is run through Green Grow Farms, Inc. (“Green Grow Farms”), which was formed in August, 2019.
Effective December 27, 2010, WRAP effected
a 10-for-1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1-for-10 reverse stock
split of its common stock. Effective March 6, 2020 Can B̅ Corp effected a 300:1 reverse stock split of its common
stock.
On May 15, 2017, WRAP changed its name to
Canbiola, Inc. On March 6, 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. 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.
The
Company also owns document management and email marketing platforms which it is seeking to sell or repurpose.
For
the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity, Radical Tactical and NY
Hemp Depot had no activity for the periods presented. Financial information for PHP, Duramed and Green Grow Farms in the periods
have been consolidated with the Company’s financials.
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 March 31, 2020, the Company had cash and cash equivalents
of $52,274 and a working capital of $2,066,494. For the periods ended March 31, 2020 and 2019, the Company had net loss of $1,134,107
and $1,172,514, 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 – 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 $110,936
and $0 for the periods ended March 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 $2,125,587 and $2,299,435 at March 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) Marketable Securities
Marketable securities are recorded at fair
value with unrealized gains and losses included in income. The Company has classified its investments in 1,000,000 shares of Iconic
Brands, Inc. as trading securities.
(k)
Goodwill
The
Company does not amortize goodwill, but instead tests for impairment at least annually. When conducting the annual impairment
test for goodwill, the Company compares the estimated fair value of a reporting unit containing goodwill to its carrying value.
If the estimated fair value of the reporting unit is determined to be less than its carrying value, goodwill is reduced, and an
impairment loss is recorded.
(l)
Long-lived Assets
The
Company reviews long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation
of recoverability is required, the estimated undiscounted future cash flows associated with the asset is compared to the asset’s
carrying amount to determine if a write-down is required. If the undiscounted cash flows are less than the carrying amount, an
impairment loss is recorded to the extent that the carrying amount exceeds the fair value.
(m)
Revenue Recognition
The
Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed
to recognize revenue: (1) a legally enforceable contract that meets criterial standards as to composition and substance is identified;
(2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price,
with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is
allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the
customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based
on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and
the collectability of those amounts.
Private
Label Customers, Global CBD, LLC and TZ Wholesale, are wholesale distributors of the Company’s product, under their own
wholesale private label brand. The products are made to Company specifications and shipped directly to the wholesaler. The pricing
is predicated upon a volume discount negotiated at the time of the placement of the orders. Product is produced and labeled in
the Washington manufacturing facility and shipped directly to the Private Label customer who re-distributes to their retail and
other customers. The products are fully paid when shipped.
Revenue
from product sales is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped,
title has transferred, and collectability is reasonably assured.
The
Company’s Duramed Division provides a sam® Pro 2.0 medical device to patients through a doctor program whereby the physician
evaluates the patients’ needs for medical necessity, and if determined that the device use would be beneficial, writes a
prescription for the patient who signs a rental form, for a 35 day cycle for the unit, that is submitted to Duramed who bills
the appropriate insurance company. The insurance company pays the invoice, or a negotiated amount via arbitration, and that revenue
is reported as revenue when invoiced to the insurance carrier. The collected amount is reconciled with the invoice amount on a
daily basis.
(n)
Cost of Product Sales
The
cost of product sale is the total cost incurred to obtain a sale and the cost of the goods sold, and the Company’s policy
is to recognize it in the same manner as, and in conjunction with, revenue recognition. Cost of product sale primarily consisted
of the costs directly attributable to revenue recognized and includes expenses related to the production, packaging and labeling
of our CBD products.
(o)
Stock-Based Compensation
Stock-based
compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 718,
“Compensation – Stock Compensation” (“ASC718”) and ASC 505-50, “Equity – Based Payments
to Non-Employees.” In addition to requiring supplemental disclosures, ASC 718 addresses the accounting for share-based payment
transactions in which a company receives goods or services in exchange for (a) equity instruments of the company or (b) liabilities
that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity
instruments. ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based
payment transactions.
In
accordance with ASC 505-50, the Company determines the fair value of the stock-based payment as either the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity
instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either
(1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date
at which the counterparty’s performance is complete.
Options
and warrants
The
fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following
assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:
Risk-Free
Interest Rate.
We
utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
Expected
Volatility.
We
calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market
information to estimate the volatility of our own stock.
Dividend
Yield.
We
have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable
future and therefore used a dividend yield of zero.
Expected
Term.
The
expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected
term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.
Forfeitures.
Estimates
of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period
based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures
will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation
expense to be recognized in future periods.
(p)
Advertising
Advertising
costs are expensed as incurred and amounted to $118,830 and $26,388 for the periods ended March 31, 2020 and 2019, respectively.
(q)
Research and Development
Research
and development costs are expensed as incurred. In the period ended March 31, 2020 and 2019, the Company spent $25,000 and $17,500
in research and development which was expenses as spent, respectively.
(r)
Income Taxes
Income
taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of
the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect
for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred
tax assets will be realized.
The
Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification
Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain
positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a
respective taxing authority. The Company believes that it has not taken any uncertain tax positions and thus has not recorded
any liability.
(s)
Net Income (Loss) per Common Share
Basic
net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during
the period.
Diluted
net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities
(such as stock options and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted
net income (loss) per share are excluded from the calculation. For the periods presented, the diluted net loss per share calculation
excluded the effect of Series B preferred stocks and stock options outstanding (see Notes 10, 11 and 12).
(t)
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. As such, historical
periods will continue to be measured and presented under the previous guidance while current and future periods subject to this
new accounting guidance. Upon adoption we recorded a $100,681 right-of-use asset related to our one operating lease (see Note
15) and a $90,591 lease liability.
(u) Basis of presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2020.
(v)
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:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
Raw materials
|
|
$
|
359,091
|
|
|
$
|
708,239
|
|
|
|
|
|
|
|
|
|
|
Finished
goods
|
|
|
10,081
|
|
|
|
76,258
|
|
Total
|
|
$
|
369,172
|
|
|
$
|
784,497
|
|
NOTE
5 – Notes Receivable
Notes
receivable consist of:
|
|
March
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
|
|
|
$
|
19,389
|
|
|
|
|
|
|
|
|
|
|
Note receivable dated
February 8,2019 from an employee, weekly installments of $1,200 with interest at 8% per annum.
|
|
|
2,898
|
|
|
|
4,879
|
|
|
|
|
|
|
|
|
|
|
Note
receivable dated March 3, 2020 from an employee, weekly installments of $125 with interest at 0% per annum.
|
|
|
1,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
23,787
|
|
|
|
24,268
|
|
|
|
|
|
|
|
|
|
|
Current
portion of notes receivable
|
|
|
(23,787
|
)
|
|
|
(24,268
|
)
|
Noncurrent
portion of notes receivable
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
6 – Property and Equipment, Net
Property
and Equipment, net, consist of:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Furniture
& Fixtures
|
|
$
|
21,724
|
|
|
$
|
19,018
|
|
|
|
|
|
|
|
|
|
|
Office Equipment
|
|
|
12,378
|
|
|
|
12,378
|
|
|
|
|
|
|
|
|
|
|
Manufacturing Equipment
|
|
|
360,137
|
|
|
|
355,016
|
|
|
|
|
|
|
|
|
|
|
Medical Equipment
|
|
|
783,782
|
|
|
|
783,782
|
|
|
|
|
|
|
|
|
|
|
Leasehold
Improvements
|
|
|
26,902
|
|
|
|
21,603
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,204,923
|
|
|
|
1,191,797
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
(147,179
|
)
|
|
|
(116,555
|
)
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
1,057,744
|
|
|
$
|
1,075,242
|
|
NOTE
7 – Intangible Assets, Net
Intangible
assets, net, consist of:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Video conferencing
software acquired by Prosperity in December 2009
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Enterprise and audit
software acquired by Prosperity in April 2008
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Patent costs incurred
by WRAP
|
|
|
6,880
|
|
|
|
6,880
|
|
|
|
|
|
|
|
|
|
|
Hemp license and technology
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
CBD technology
|
|
|
198,655
|
|
|
|
198,655
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
3,548
|
|
|
|
3,548
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,259,083
|
|
|
|
1,259,083
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization and Impairment
|
|
|
(332,487
|
)
|
|
|
(202,521
|
)
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
926,596
|
|
|
$
|
1,056,562
|
|
The CBD related technology were purchased
from Hudilab, Inc. (“HUDI”) and Seven Chakras, LLC (“Seven Chakras”) during the three months ended March
31, 2019. On January 14, 2019, the Company and PHP (collectively, the “buyer”) entered into a License and Acquisition
Agreement (the “LAA”) with HUDI. Pursuant to the LAA, HUDI will sell the technology owned by it to the buyer in exchange
for 7,500,000 (prior to 300:1 reverse split) shares of CANB common stock. On January 14, 2019, the shares were issued to the owner
of HUDI and valued at $131,625. On January 31, 2019, PHP entered into an Asset Purchase Agreement (the “Chakras Agreement”)
with Seven Chakras. 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 1,000,000 (prior to 300:1 reverse split) shares of CANB common stock valued at $17,030
to owners of Seven Chakras as additional consideration, along with the $50,000 cash payments, pursuant to the Chakras Agreement.
The hemp related license and technology purchased
from Shi Farms during the three months ended September 30, 2019. Hemp Depot has been amalgamated with Green Grow Farms, also
a NY State Hemp License holder and intends to contract with farmers in New York to grow hemp under a controlled program of
specific strains, cultured feminized seeds, proven technology, and access to processing for their crop. NY Hemp Depot under
Green Grow Farms Inc. direction will amalgamate the cultivated off-take from the farmers, combine and fill “super-sacks”
for shipping to a processing facility to produce high-grade isolate or distillate for use in Can B̅’s
manufacturing facility in Lacey WA.
The
other intangible assets relate to the document management and email marketing divisions. Since December 31, 2017, the Company
do not expect any future positive cash flow from these divisions. Accordingly, the net carrying value of these intangible assets
was reduced to $0.
NOTE
8 – Marketable Securities
Marketable securities consist of:
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Marketable securities, at cost
|
|
$
|
600,000
|
|
|
$
|
-
|
|
Unrealized losses
|
|
|
(7,500
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities at fair value
|
|
$
|
592,500
|
|
|
$
|
-
|
|
NOTE
9 – Notes and Loans Payable
Notes
and loans payable consist of:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
Note payable
to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past
due)
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to FirstFire
Global Opportunities Fund, LLC, net of original issue discount of $88,822, due September 1, 2020.
|
|
|
550,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loan
payable to Pasquale Ferro, interest at 12% per annum, due December 2020.
|
|
|
153,000
|
|
|
|
30,000
|
|
Total Notes and Loans
Payable
|
|
|
708,000
|
|
|
|
35,000
|
|
Less:
Unamortized Finance Cost
|
|
|
(88,822
|
)
|
|
|
-
|
|
Total Notes and Loans
Payable - Net
|
|
|
619,178
|
|
|
|
35,000
|
|
Less:
Current Portion
|
|
|
(619,178
|
)
|
|
|
(35,000
|
)
|
Long-term
Portion
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
10 – 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.
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.
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 at $1,203,000 and will be amortized over the vesting period of four years.
On
April 26, 2019, the Company issued 6,436 shares of CANB common stock to RedDiamond in exchange for the retirement of 15,000 shares
of CANB Series B Preferred Stock.
On
May 1, 2019, the Company issued 8,581 shares of CANB common stock to RedDiamond in exchange for the retirement of 20,000 shares
of CANB Series B Preferred Stock.
On
May 9, 2019, the Company issued 23,710 shares of CANB common stock to RedDiamond in exchange for the retirement of 55,263 shares
of CANB Series B Preferred Stock.
On
June 7, 2019, the Company issued 10,726 shares of CANB common stock to RedDiamond in exchange for the retirement of 25,000 shares
of CANB Series B Preferred Stock.
On
August 13, 2019, the Company issued 97,607 shares of CANB common stock to RedDiamond in exchange for the retirement of 227,590
shares of CANB Series B Preferred Stock.
On
December 16, 2019, the Company issued 35,666 shares of CANB common stock to RedDiamond as agreed for the early retirement of CANB
Series B Preferred Stock converted in August 2019.
NOTE
11 – Common Stock
From
January 4, 2019 to March 27, 2019, the Company issued aggregately 138,107 shares of CANB common stock to multiple investors pursuant
to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $1,196,100.
On
January 14, 2019, the Company issued 25,000 shares of CANB common stock to Hudilab, Inc. (“HUDI”), pursuant to a License
and Acquisition Agreement for purchase of the technology owned by HUDI.
From
January 18, 2019 to March 17, 2019, the Company issued aggregately 82,000 shares of CANB common stock to multiple consultants
for services rendered.
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.
NOTE
12 – 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, 2019
|
|
|
20,167
|
|
|
|
7,492
|
|
|
|
27,659
|
|
Granted
in 2019
|
|
|
56,667
|
|
|
|
-
|
|
|
|
56,667
|
|
Cancelled
in 2019
|
|
|
(167
|
)
|
|
|
-
|
|
|
|
(167
|
)
|
Exercised
in 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019
|
|
|
76,667
|
|
|
|
7,492
|
|
|
|
84,159
|
|
Granted
in Q1 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
in Q1 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
in Q1 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2020
|
|
|
76,667
|
|
|
|
7,492
|
|
|
|
84,159
|
|
Issued
and outstanding stock options as of March 31, 2020 consist of:
Year
|
|
Number Outstanding
|
|
|
Exercise
|
|
|
Year of
|
|
Granted
|
|
And Exercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
20,000
|
|
|
$
|
0.3
|
|
|
|
2023
|
|
2019
|
|
|
56,667
|
|
|
$
|
0.3
|
|
|
|
2022
|
|
|
|
|
76,667
|
|
|
|
|
|
|
|
|
|
On June 11, 2018, the Company granted 10,000
(as adjusted for the 300:1 reverse split in March 2020) 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 $0.001 per share.
The Options are fully vested and are exercisable as of the Grant Date and all shall expire June 11, 2023. The value of the Stock
Options ($84,000) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $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
(as adjusted for the 300:1 reverse split in March 2020) options of CANB common stock to Stanley L. Teeple, an officer and
Director of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an
exercise price of $0.001 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire
October 1, 2023. The values of the Stock Options ($118,200) were calculated using the Black Scholes option pricing model and the
following assumptions: (i) $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 (as adjusted for the 300:1 reverse split in March 2020) options of CANB common stock to Johnny Mack, a former officer
of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise
price of $0.001 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire September
9, 2022. The values of the Stock Options ($192,000) were calculated using the Black Scholes option pricing model and the following
assumptions: (i) $7.20 share price, (ii) 3 years term, (iii) 242% expected volatility, (iv) 1.46% risk free interest rate and
the fair value of options was expensed in the quarterly period ended September 30, 2019.
On
October 15, 2019, the Company granted 10,000 (as adjusted for the 300:1 reverse split in March 2020) options of CANB common
stock each to Frederick Alger Boyer, Jr., Ronald A. Silver and James F. Murphy, directors of the Company. The options are exercisable
for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.001 per share. The Options are
fully vested and are exercisable as of the Grant Date and all shall expire October 15, 2022. The values of the Stock Options ($63,000
each) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $6.30 share price, (ii)
3 years term, (iii) 242% expected volatility, (iv) 1.60% risk free interest rate and the fair value of options was expensed in
the quarterly period ended December 31, 2019.
Issued
and outstanding warrants as of March 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,492
|
|
|
|
|
|
|
|
|
|
(a)
110% of the closing price of the Company’s common stock on the date that the Holder funds the full purchase price of the
Note.
NOTE
13 – 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:
|
|
Three Month March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Expected income tax (benefit) at 21%
|
|
$
|
(238,162
|
)
|
|
$
|
(246,228
|
)
|
|
|
|
|
|
|
|
|
|
Non-deductible stock-based compensation
|
|
|
27,802
|
|
|
|
173,921
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investment
|
|
|
1,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in deferred income tax assets valuation allowance
|
|
|
208,785
|
|
|
|
72,307
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
income tax assets consist of:
|
|
March 31
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
|
1,508,953
|
|
|
|
1,300,168
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(1,508,953
|
)
|
|
|
(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 $1,508,953 attributable to the future utilization of the $7,185,488 net operating loss carryforward as of March 31,
2020 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the financial
statements at March 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 $994,215, respectively.
Current
tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership
occurs. Therefore, the amount available to offset future taxable income may be limited.
The
Company’s U.S. Federal and state income tax returns prior to 2015 are closed and management continually evaluates expiring
statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations
on the 2015 tax year returns expired in September 2019.
The
Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would
include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest
or penalties paid during 2020 and 2019.
NOTE
14 – Segment Information
The
Company has one reportable segment: Durable Equipment Products.
The
accounting policies of the segment described above are the same as those described in Summary of Significant Accounting Policies
in Note 3. The Company evaluates the performance of the Durable Equipment Products segment based on income (loss) before income
taxes, which includes interest income.
|
|
Durable
Equipment
Products
|
|
Three months ended March 31, 2020
|
|
|
|
|
Revenue from external customers
|
|
|
443,742
|
|
Revenue from other segments
|
|
|
-
|
|
Segment profit
|
|
|
259,489
|
|
Segment assets
|
|
|
2,259,478
|
|
|
|
|
|
|
Twelve months ended December 31, 2019
|
|
|
|
|
Revenue from external customers
|
|
|
1,436,403
|
|
Revenue from other segments
|
|
|
-
|
|
Segment profit
|
|
|
809,631
|
|
Segment assets
|
|
|
1,994,845
|
|
|
|
Three Months
Ended
March 31, 2020
|
|
|
Twelve Months
Ended
December 31, 2019
|
|
|
|
|
|
|
|
|
Total profit for reportable segment
|
|
$
|
260,341
|
|
|
$
|
810,060
|
|
Other income (expense) - net
|
|
|
(852
|
)
|
|
|
(429
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
259,489
|
|
|
$
|
809,631
|
|
NOTE
15 – Commitments and Contingencies
Employment
Agreements
On October 3, 2017, the Company executed an
Executive Employment Agreement with Marco Alfonsi (“Alfonsi”) for Alfonsi to serve as the Company’s chief executive
officer and interim chief financial officer and secretary for cash compensation of $10,000 per month. Pursuant to the agreement,
the Company issued a share of CANB Series A Preferred Stock to Alfonsi on October 4, 2017. 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 245,789 shares of common stock (prior to 300:1 reverse stock split) upon signing of the agreement.
On October 15, 2018, the Company executed
an Employment Agreement (“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 32,000,000 options (“Mack Options”) to purchase shares of the Company’s
common stock, with 8,000,000 Mack Options vesting on the effective date and additional tranches of 8,000,000 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 $0.001 per share (prior to 300:1 reverse stock split). The Company also agreed to hold
harmless and indemnify Mack as authorized or permitted by law and the Company’s governing documents, as the same may be
amended from time to time, except for acts constituting negligence or willful misconduct by Mack. The Company 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 8 million 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 500,000 common shares of the Company at a price of $0.001 (prior to 300:1 reverse stock split) for a period
of three years. The initial term of the agreement is for 90 days. The agreement renews for additional 90-day periods unless
terminated by either party. The agreement otherwise contains standard covenants and conditions.
Consulting
Agreements
On
April 1, 2019, we engaged an advisor to provide consulting services under an Investor Relations and Advisory Agreement (the “Advisory
Agreement”). Pursuant to the Advisory Agreement, we agreed to pay the Consulting Firm a restricted common stock monthly
fee of $5,500 per month for consulting and services paid in advance of services each month. Starting May 1, 2019, the restricted
common stock monthly fee will decrease to $4,000 per month. The number of shares to be issued will be calculated based on the
closing price of our common shares on the 1st or preceding day of each month, if the 1st were to fall on a weekend or holiday.
The shares shall not have registration rights, and the shares may be sold subject to Rule 144.
On
December 8, 2019, the Company executed a Consulting Agreement with Seacore Capital, Inc. (“Seacore”) for Seacore to
serve as the Company’s consultant for stock compensation of a total of 8,333 restricted shares each quarter from 4th
quarter 2019 through 3rd quarter 2020. The shares shall not have registration rights, and the shares may be sold
subject to Rule 144.
Lease
Agreements
On December 1, 2014, Prosperity entered into
a lease agreement with KLAM, Inc. for office space in Hicksville, New York for an initial term of one year commencing December
1, 2014. The lease provides for monthly rentals of $2,500 and provides Prosperity an option to renew the lease after the initial
term. The Company continued to occupy this space after November 30, 2015 under a month to month arrangement at $2,500 per month.
This lease was terminated in January 2019.
On
September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York
for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100
for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate
taxes. On August 6, 2018, the Company renewed the lease agreement for a term of 36 months starting November 1, 2018. The lease
provides for monthly rentals of $3,193 for lease year 1, $3,289 for lease year 2, and $3,388 for lease year 3. In October 2019,
the Company modified and extended the lease agreement for a term of 30 months starting November 1, 2019. The lease provides for
monthly rentals of $3,807.05 for year 1 and $3,921.26 for the remaining eighteen months. The original $100,681 right-of-use asset
and $90,591 lease liability was adjusted to $103,260 with the modification.
The
Company leases office space in numerous medical facilities under month-to-month agreements.
Rent
expense for the period ended March 31, 2020 and 2019 was $92,606 and $11,860, respectively.
At
March 31, 2020, the future minimum lease payments under non-cancellable operating leases were:
Year ended December 31, 2020
|
|
$
|
34,492
|
|
Year ended December 31, 2021
|
|
|
47,055
|
|
Year ended December 31, 2022
|
|
|
15,685
|
|
|
|
|
|
|
Total
|
|
$
|
97,232
|
|
The
lease liability of $88,119 at March 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 97,232 at March 31, 2020.
Major
Customers
For
the three months ended March 31, 2020, there were no customers that accounted for more than 10% of total revenues.
For
the three months ended March 31, 2020, there were no customer accounted for more than 10% of total revenues.
NOTE
16 – 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 March
31, 2020, CANB has an account payable due to LIA totaling $11,700. For the three months ended March 31, 2020, CANB had expenses
to LIA of $32,700.
During
the three months ended March 31, 2020, we had products and service sales to related parties totaling $0.
NOTE
17 – Subsequent Events
In
accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through May 20, 2020, 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 April 21, 2020, the Company signed
a Secured Convertible Promissory Note with Labrys Fund LP for a principal amount of $225,000. The 6-month note carries 12% annual
interest, a 10% OID, and has conversion rights at the lesser of $6 or 80% of the closing stock price per share at the time of
conversion and is more fully disclosed in a recently filed Form 8K.
On April 24. 2020, the Company was granted
a loan from Investors Bank in the amount of approximately $193,250 under the Paycheck Protection Program (“PPP”).
The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides
for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses.
The
loan and accrued interest are forgivable after eight weeks as long as the Company uses the loan proceeds for eligible purposes,
including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced
if the Company terminates employees or reduces salaries during the eight-week period.
The
unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first
six months.