Notes
to Consolidated Financial Statements
Nine
Months Ended September 30, 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 and without 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
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 do not currently have operations.
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,
Radical Tactical and 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 September 30, 2020, the Company had cash and cash
equivalents of $45,506 and a working capital of $1,882,926. For the periods ended September 30, 2020 and 2019, the Company
had net loss of $3,598,208 and $3,551,104, 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 $202,137
and $0 for the periods ended September 30, 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 $1,225,887 and $2,784,450 at September 30, 2020
and 2019, respectively. The Company’s policy is to record stock-based compensation as prepaids and expense over the term
of employment and consulting agreements.
(h)
Property and Equipment, Net
Property
and equipment, net, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method
over the estimated useful lives of the respective assets. Maintenance and repairs are charged to operations as incurred.
(i)
Intangible Assets, Net
Intangible
assets, net, are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over
the estimated economic lives of the respective assets.
(j)
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, 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.
(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 $350,334 and $220,373 for the periods ended September 30, 2020 and 2019, respectively.
(p)
Research and Development
Research
and development costs are expensed as incurred. In the period ended September 30, 2020 and 2019, the Company spent $80,000 and
$45,000 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)
Basis of presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six-month period ended September 30, 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:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Raw materials
|
|
$
|
900,599
|
|
|
$
|
708,239
|
|
Finished goods
|
|
|
13,530
|
|
|
|
76,258
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
914,129
|
|
|
$
|
784,497
|
|
NOTE
5 – Notes Receivable
Notes
receivable consist of:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Note receivable dated November 30, 2015 from Stock Market Manager, Inc, interest at 3% per annum due November 30, 2020
|
|
$
|
19,389
|
|
|
$
|
19,389
|
|
|
|
|
|
|
|
|
|
|
Note receivable dated February 8, 2019 from an employee, weekly installments of $1,200 with interest at 8% per annum.
|
|
|
2,898
|
|
|
|
4,879
|
|
|
|
|
|
|
|
|
|
|
Note receivable dated March 3, 2020 from an employee, weekly installments of $125 with interest at 0% per annum.
|
|
|
500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
22,787
|
|
|
|
24,268
|
|
|
|
|
|
|
|
|
|
|
Current portion of notes receivable
|
|
|
(22,787
|
)
|
|
|
(24,268
|
)
|
Noncurrent portion of notes receivable
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
6 – Property and Equipment, Net
Property
and Equipment, net, consist of:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Furniture & Fixtures
|
|
$
|
21,724
|
|
|
$
|
19,018
|
|
|
|
|
|
|
|
|
|
|
Office Equipment
|
|
|
12,378
|
|
|
|
12,378
|
|
|
|
|
|
|
|
|
|
|
Manufacturing Equipment
|
|
|
390,627
|
|
|
|
355,016
|
|
|
|
|
|
|
|
|
|
|
Medical Equipment
|
|
|
783,782
|
|
|
|
783,782
|
|
|
|
|
|
|
|
|
|
|
Leasehold Improvements
|
|
|
26,902
|
|
|
|
21,603
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,235,413
|
|
|
|
1,191,797
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(209,554
|
)
|
|
|
(116,555
|
)
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
1,025,859
|
|
|
$
|
1,075,242
|
|
NOTE
7 – Intangible Assets, Net
Intangible
assets, net, consist of:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Video conferencing software acquired by Prosperity in December 2009
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Enterprise and audit software acquired by Prosperity in April 2008
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Patent costs incurred by WRAP
|
|
|
6,880
|
|
|
|
6,880
|
|
|
|
|
|
|
|
|
|
|
Hemp license and technology
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
CBD technology
|
|
|
198,655
|
|
|
|
198,655
|
|
|
|
|
|
|
|
|
|
|
Platform account contract
|
|
|
131,812
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Hemp processing use
|
|
|
69,375
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
3,548
|
|
|
|
3,548
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,460,270
|
|
|
|
1,259,083
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization and Impairment
|
|
|
(649,077
|
)
|
|
|
(202,521
|
)
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
811,193
|
|
|
$
|
1,056,562
|
|
Estimated
future amortization expense are as follows:
September 31,
|
|
Amount
|
|
|
|
|
|
2021
|
|
$
|
616,837
|
|
2022
|
|
|
36,284
|
|
2023
|
|
|
36,284
|
|
2025
|
|
|
34,599
|
|
2026
|
|
|
19,868
|
|
Thereafter
|
|
|
67,321
|
|
|
|
|
|
|
Total
|
|
$
|
811,193
|
|
The
CBD related technology were purchased from Hudilab, Inc. (“HUDI”) and Seven Chakras, LLC (“Seven Chakras”)
during the three months ended March 31, 2019. On January 14, 2019, the Company and PHP (collectively, the “buyer”)
entered into a License and Acquisition Agreement (the “LAA”) with HUDI. Pursuant to the LAA, HUDI will sell the technology
owned by it to the buyer in exchange for 25,000 shares of CANB common stock. On January 14, 2019, the shares were issued to the
owner of HUDI and valued at $131,625. On January 31, 2019, PHP entered into an Asset Purchase Agreement (the “Chakras Agreement”)
with Seven Chakras. Pursuant to the Chakras Agreement, PHP purchased the rights and title to (i) Seven Chakras’ proprietary
formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ products containing cannabidiol
(CBD), (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including
but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials. On February
20, 2019, the Company issued 3,333 shares of CANB common stock valued at $17,030 to owners of Seven Chakras as additional consideration,
along with the $50,000 cash payments, pursuant to the Chakras Agreement.
The
hemp related license and technology was purchased from Shi Farms during the three months ended September 30, 2019. Hemp Depot
has remained dormant since the Shi Farms deal was consummated and no activity is contemplated. 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.
The
hemp processing use agreement with Mediiusa Group, Inc. was entered during the three months ended June 30, 2020. On June 23, 2020,
the Company issued 50,000 shares of CANB common stock valued at $69,375. Mediiusa Group, Inc. currently holds a valid Industrial
Hemp Processor Registration in full force and effect with the State of New York under Registration: HEMP-P-000035 (the “Registration”)
and is authorized to process Hemp, and has granted a five year agreement to processing of Hemp for oil, isolate, or crude for
further use by the Company and/or for sale by the Company. During the Term of this Agreement, Mediiusa Group, Inc. agrees to allow
CANB to process any and all of the subject Hemp under and/or in connection with the agreement under their above-mentioned Registration.
The
platform account contract with SRAX, Inc. was entered during the three months ended June 30, 2020. On June 22, 2020, the Company
issued 185,000 shares of CANB common stock valued at $131,812. The Platform Account is the SRAX Investors Relations platform to
grant access to potential investors and customers via the SRAX website. SRAX grants Can B Corp a non-exclusive, non-transferable
and non- sublicensable right to access and use the Platform during the Term, solely by the Authorized Users for User’s own
internal business purposes, and in accordance with the terms and conditions of this Agreement. Company reserves all rights in
or to the Platform not expressly granted to User in the Agreement. Can B will have previously unattainable access to its customer
base for improved investor communication and development of sales opportunities of the Company’s products.
The
other intangible assets relate to the document management and email marketing divisions. Since December 31, 2017, the Company
do not expect any future positive cash flow from these divisions. Accordingly, the net carrying value of these intangible assets
was reduced to $0.
NOTE
9 – Notes and Loans Payable
Notes
and loans payable consist of:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due).
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to FirstFire Global Opportunities Fund, LLC, net of original issue discount of $44,654, due September 1, 2020 (now past due).
|
|
|
550,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loan payable to Pasquale Ferro, interest at 12% per annum, due December 2020.
|
|
|
138,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to Labrys Fund, LP, net of original issue discount of $21,041, due October 21, 2020 (now past due).
|
|
|
225,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable to EMA Financial, LLC, net of original issue discount of $10,522, due June 17, 2021.
|
|
|
115,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable to Eagle Equities, LLC, net of original issue discount of $27,645, due June 17, 2021.
|
|
|
220,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable to U.S. Small Business Administration (PPP), interest at 1% per annum. The note matures in January 2023. Payments are deferred for ten months after the end of the covered period.
|
|
|
194,940
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable to U.S. Small Business Administration (EIDL), interest at 3.75% per annum. The note matures in June 2050. Payments are deferred for twelve months.
|
|
|
159,900
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loan payable to Senior Management Solutions, interest at 12% per annum, due December 2020.
|
|
|
5,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Notes and Loans Payable
|
|
|
1,612,840
|
|
|
|
35,000
|
|
Less: Unamortized Finance Cost
|
|
|
(32,102
|
)
|
|
|
-
|
|
Total Notes and Loans Payable – Net
|
|
|
1,580,738
|
|
|
|
35,000
|
|
Less: Current Portion
|
|
|
(1,225,898
|
)
|
|
|
(35,000
|
)
|
Long-term Portion
|
|
$
|
354,840
|
|
|
$
|
-
|
|
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. 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.
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.
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.
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.
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, Q2 & Q3 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled in Q1, Q2 & Q3 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised in Q1, Q2 & Q3 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
76,667
|
|
|
|
7,492
|
|
|
|
84,159
|
|
Issued
and outstanding stock options as of September 30, 2020 consist of:
Year
|
|
Number Outstanding
|
|
|
Exercise
|
|
|
Year of
|
|
Granted
|
|
And Exercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
20,000
|
|
|
$
|
0.3
|
|
|
|
2023
|
|
2019
|
|
|
56,667
|
|
|
$
|
0.3
|
|
|
|
2022
|
|
|
|
|
76,667
|
|
|
|
|
|
|
|
|
|
On
June 11, 2018, the Company granted 10,000 options of CANB common stock to Carl Dilley, a former director of the Company, in exchange
for the retirement of a total of 10,000 shares of CANB common stock from Carl Dilley. The options are exercisable for the purchase
of one share of the Registrant’s Common Stock at an exercise price of $0.30 per share. The Options are fully vested and
are exercisable as of the Grant Date and all shall expire June 11, 2023. The value of the Stock Options ($84,000) were calculated
using the Black Scholes option pricing model and the following assumptions: (i) $8.40 share price, (ii) 5 years term, (iii) 262.00%
expected volatility, (iv) 2.80% risk free interest rate and the difference between this value and the fair value of retired shares
was expensed in the quarterly period ended June 30, 2018.
On
October 21, 2018, the Company granted 10,000 options of CANB common stock to Stanley L. Teeple, an officer and Director of the
Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price
of $0.30 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire October 1, 2023.
The values of the Stock Options ($118,200) were calculated using the Black Scholes option pricing model and the following assumptions:
(i) $11.82 share price, (ii) 5 years term, (iii) 221.96% expected volatility, (iv) 3.05% risk free interest rate and the fair
value of options was expensed in the quarterly period ended December 31, 2018
On
September 9, 2019, the Company granted 26,667 options of CANB common stock to Johnny Mack, a former officer of the Company. The
options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.30 per
share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire September 9, 2022. The values
of the Stock Options ($192,000) were calculated using the Black Scholes option pricing model and the following assumptions: (i)
$7.20 share price, (ii) 3 years term, (iii) 242% expected volatility, (iv) 1.46% risk free interest rate and the fair value of
options was expensed in the quarterly period ended September 30, 2019.
On
October 15, 2019, the Company granted 10,000 options of CANB common stock each to Frederick Alger Boyer, Jr., Ronald A. Silver
and James F. Murphy, directors of the Company. The options are exercisable for the purchase of one share of the Registrant’s
Common Stock at an exercise price of $0.30 per share. The Options are fully vested and are exercisable as of the Grant Date and
all shall expire October 15, 2022. The values of the Stock Options ($63,000 each) were calculated using the Black Scholes option
pricing model and the following assumptions: (i) $6.30 share price, (ii) 3 years term, (iii) 242% expected volatility, (iv) 1.60%
risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2019.
Issued
and outstanding warrants as of September 30, 2020 consist of:
Year
|
|
Number Outstanding
|
|
|
Exercise
|
|
|
Year of
|
|
Granted
|
|
And Exercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
825
|
|
|
$
|
300
|
|
|
|
2020
|
|
2018
|
|
|
6,667
|
|
|
$
|
13.034
|
(a)
|
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,492
|
|
|
|
|
|
|
|
|
|
(a)
110% of the closing price of the Company’s common stock on the date that the Holder funds the full purchase price of the
Note.
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:
|
|
Nine Month Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Expected income tax (benefit) at 21%
|
|
$
|
(755,624
|
)
|
|
$
|
(745,732
|
)
|
|
|
|
|
|
|
|
|
|
Non-deductible stock-based compensation
|
|
|
288,490
|
|
|
|
502,103
|
|
|
|
|
|
|
|
|
|
|
Non-deductible stock-based interest
|
|
|
81,991
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Increase in deferred income tax assets
|
|
|
|
|
|
|
|
|
valuation allowance
|
|
|
385,143
|
|
|
|
243,629
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
income tax assets consist of:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
1,685,311
|
|
|
$
|
1,300,168
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(1,685,311
|
)
|
|
|
(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 $1,685,311 attributable
to the future utilization of the $8,025,288 net operating loss carryforward as of September 30, 2020 will be realized.
Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the financial statements at
September 30, 2020. The Company will continue to review this valuation allowance and make adjustments as appropriate. The
net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, 2037,
2038, 2039 and 2040 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511,
$338,345, $381,638, $499,288, $716,858, $1,503,282, and $1,834,015, 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
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
|
|
Six months ended June 30, 2020
|
|
|
|
Revenue from external customers
|
|
|
527,942
|
|
Revenue from other segments
|
|
|
-
|
|
Segment profit
|
|
|
278,337
|
|
Segment assets
|
|
|
2,228,575
|
|
|
|
|
|
|
Nine months ended September 30, 2020
|
|
|
|
|
Revenue from external customers
|
|
|
808,547
|
|
Revenue from other segments
|
|
|
-
|
|
Segment profit
|
|
|
415,256
|
|
Segment assets
|
|
|
2,369,177
|
|
|
|
Three Months
Ended
September 30,
2020
|
|
|
Nine Months
Ended
September 30,
2020
|
|
|
|
|
|
|
|
|
Total profit for reportable segment
|
|
$
|
136,919
|
|
|
$
|
416,109
|
|
Other income (expense) - net
|
|
|
-
|
|
|
|
(853
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
136,919
|
|
|
$
|
415,256
|
|
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 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
December 1, 2014, Prosperity entered into a lease agreement with KLAM, Inc. for office space in Hicksville, New York for an initial
term of one year commencing December 1, 2014. The lease provides for monthly rentals of $2,500 and provides Prosperity an option
to renew the lease after the initial term. The Company has continued to occupy this space after November 30, 2015 under a month
to month arrangement at $2,500 per month. This lease was terminated in January 2019.
On
September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York
for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100
for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate
taxes. On August 6, 2018, the Company renewed the lease agreement for a term of 36 months starting November 1, 2018. The lease
provides for monthly rentals of $3,193 for lease year 1, $3,289 for lease year 2, and $3,388 for lease year 3. In October 2019,
the Company modified and extended the lease agreement for a term of 30 months starting November 1, 2019. The lease provides for
monthly rentals of $3,807 for year 1 and $3,921 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 September 30, 2020 and 2019 was $193,069 and $155,192, respectively.
At
September 30, 2020, the future minimum lease payments under non-cancellable operating leases were:
Year ended December 31, 2020
|
|
$
|
11,650
|
|
Year ended December 31, 2021
|
|
|
47,055
|
|
Year ended December 31, 2022
|
|
|
15,685
|
|
Total
|
|
$
|
74,390
|
|
The
lease liability of $69,100 at September 30, 2020 as presented in the Consolidated Balance Sheet represents the discounted (at
our 10% estimated incremental borrowing rate) value of the future lease payments of 74,390 at September 30, 2020.
Major
Customers
For
the nine months ended September 30, 2020, there were no customers that accounted for more than 10% of total revenues.
For
the nine months ended September 30, 2019, 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 September
30, 2020, CANB has an account payable due to LIA totaling $9,500. For the nine months ended September 30, 2020, CANB had expenses
to LIA of $54,500.
During
the nine months ended September 30, 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 November 9, 2020, the date
on which these consolidated financial statements were available to be issued. There were no material subsequent events that required
recognition or additional disclosure in these consolidated financial statements.
On November 3, 2020, Steve Apolant was terminated
and his duties for Green Grow Farms, Inc. have been assumed directly by CANB CEO Marco Alfonsi.