UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2020
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the transition period from __________ to __________
COMMISSION
FILE NUMBER: 000-55753
Can
B̅ Corp.
(Exact
name of registrant as specified in its charter)
|
Florida |
|
20-3624118 |
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
960
South Broadway, Suite 120
Hicksville,
NY 11801
(Address
of principal executive offices)
516-595-9544
(Registrant’s
telephone number, including area code)
Canbiola,
Inc.
(Former
name, former address and former fiscal, if changed since last
report)
Securities
Registered Pursuant to Section 12(b) of the Act:
|
Tile
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
|
Common
Stock |
|
CANB |
|
N/A |
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X] No
[ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer |
[ ] |
Accelerated
filer |
[ ] |
| Non-accelerated
filer |
[X] |
Smaller
reporting company |
[X] |
| Emerging
Growth Company |
[ ] |
|
|
|
(Do
not check if smaller reporting company) |
|
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). [ ] Yes [X]
No
The
number of shares of the registrant’s only class of common stock
issued and outstanding as of November 9, 2020 was 4,915,173
shares.
Can
B Corp
FORM
10-Q
September
30, 2020
TABLE
OF CONTENTS
PART 1 - FINANCIAL
INFORMATION
Item 1. Financial
Statements.
Can
B̅ Corp. and Subsidiary
Consolidated Balance
Sheets
| |
|
(Unaudited)
September
30,
|
|
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
|
Assets |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash
and cash equivalents |
|
$ |
45,506 |
|
|
$ |
46,540 |
|
Accounts
receivable, less allowance for doubtful accounts of $455,620 and
$253,483, respectively
|
|
|
1,740,147 |
|
|
|
1,251,609 |
|
| Inventory |
|
|
914,129 |
|
|
|
784,497 |
|
| Note
Receivable |
|
|
22,787 |
|
|
|
24,268 |
|
|
Prepaid expenses - current |
|
|
1,246,637 |
|
|
|
1,279,901 |
|
| Total
current assets |
|
|
3,969,206
|
|
|
|
3,386,815 |
|
| |
|
|
|
|
|
|
|
|
| Property and
equipment, at cost less accumulated depreciation of $209,554 and
$116,555, respectively |
|
|
1,025,859 |
|
|
|
1,075,242 |
|
| |
|
|
|
|
|
|
|
|
| Other assets: |
|
|
|
|
|
|
|
|
| Deposit -
noncurrent |
|
|
21,287 |
|
|
|
21,287 |
|
| Prepaid expenses -
noncurrent |
|
|
298,104 |
|
|
|
1,179,929 |
|
| Other receivable –
noncurrent |
|
|
24,492 |
|
|
|
58,206 |
|
| Intangible assets,
net of accumulated amortization of $649,077 and $202,521,
respectively |
|
|
811,193 |
|
|
|
1,056,562 |
|
| Goodwill |
|
|
55,849 |
|
|
|
55,849 |
|
|
Right-of-Use Asset, net of amortization of $35,024 and $6,280,
respectively |
|
|
68,236 |
|
|
|
96,980 |
|
| Total
other assets |
|
|
1,279,161 |
|
|
|
2,468,813 |
|
| |
|
|
|
|
|
|
|
|
| Total
assets |
|
$ |
6,274,226 |
|
|
$ |
6,930,870 |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficiency |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts
payable |
|
|
447,628 |
|
|
|
226,467 |
|
| Accrued officers’
compensation |
|
|
279,319 |
|
|
|
144,363 |
|
| Other accrued
expenses payable |
|
|
91,113 |
|
|
|
61,557 |
|
| Notes and loans
payable |
|
|
1,225,898 |
|
|
|
35,000 |
|
|
Current portion of lease liability |
|
|
42,322 |
|
|
|
38,281 |
|
| Total
current liabilities |
|
|
2,086,280 |
|
|
|
505,668 |
|
| |
|
|
|
|
|
|
|
|
| Long-term liabilities: |
|
|
|
|
|
|
|
|
| Non-current
portion of lease liability |
|
|
26,778 |
|
|
|
58,998 |
|
| Notes
and loans payable |
|
|
354,840 |
|
|
|
- |
|
| Total
long-term liabilities |
|
|
381,618 |
|
|
|
58,998 |
|
| |
|
|
|
|
|
|
|
|
| Total
liabilities |
|
|
2,467,898 |
|
|
|
564,666 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and contingencies (Notes
15) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
| Preferred stock,
authorized 5,000,000 shares: |
|
|
|
|
|
|
|
|
| Series A Preferred
stock, no par value: |
|
|
|
|
|
|
|
|
| authorized 20
shares, issued and outstanding 20 shares, respectively |
|
|
5,539,174 |
|
|
|
5,539,174 |
|
| Common stock, no
par value; authorized 1,500,000,000 shares, issued and outstanding
3,786,338 and 2,680,937 shares, respectively |
|
|
24,711,409 |
|
|
|
23,113,077 |
|
| Additional Paid-in
capital |
|
|
872,976 |
|
|
|
872,976 |
|
| Additional Paid-in
capital – Stock Options (Note 12) |
|
|
202,200 |
|
|
|
202,200 |
|
| Treasury
stock |
|
|
(560,000 |
) |
|
|
- |
|
|
Accumulated deficit |
|
|
(26,959,431 |
) |
|
|
(23,361,223 |
) |
| Total
stockholders’ equity |
|
|
3,806,328 |
|
|
|
6,366,204 |
|
| |
|
|
|
|
|
|
|
|
| Total
liabilities and stockholders’ equity |
|
$ |
6,274,226 |
|
|
$ |
6,930,870 |
|
See
notes to consolidated financial statements.
Can
B̅ Corp and Subsidiary
Consolidated Statements of
Operations
(Unaudited)
| |
|
Nine Months Ended
September 30,
|
|
|
Three Months Ended
September 30,
|
|
| |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
| Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product Sales |
|
$ |
1,233,287 |
|
|
$ |
1,760,761 |
|
|
$ |
459,196 |
|
|
$ |
613,622 |
|
|
Service Revenue |
|
|
1,000 |
|
|
|
5,400 |
|
|
|
300 |
|
|
|
1,800 |
|
| Total Revenues |
|
|
1,234,287 |
|
|
|
1,766,161 |
|
|
|
459,496 |
|
|
|
615,422 |
|
| Cost
of product sales |
|
|
239,975 |
|
|
|
703,607 |
|
|
|
70,381 |
|
|
|
141,850 |
|
| Gross
Profit |
|
|
994,312 |
|
|
|
1,062,554 |
|
|
|
389,115 |
|
|
|
473,572 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Officers and
director’s compensation (including stock-based compensation of
$916,386, $1,018,786, $293,715 and $184,556, respectively) |
|
|
1,306,222 |
|
|
|
1,717,586 |
|
|
|
376,565 |
|
|
|
442,898 |
|
| Consulting fees
(including stock-based compensation of $457,377, $1,372,181,
$104,261 and $418,267, respectively) |
|
|
559,483 |
|
|
|
1,540,441 |
|
|
|
136,461 |
|
|
|
449,355 |
|
| Advertising
expense |
|
|
350,334 |
|
|
|
220,373 |
|
|
|
90,299 |
|
|
|
66,611 |
|
| Hosting
expense |
|
|
17,587 |
|
|
|
11,389 |
|
|
|
5,451 |
|
|
|
3,472 |
|
| Rent expense |
|
|
193,069 |
|
|
|
155,192 |
|
|
|
71,417 |
|
|
|
67,520 |
|
| Professional
fees |
|
|
401,419 |
|
|
|
194,468 |
|
|
|
76,283 |
|
|
|
82,452 |
|
| Depreciation of
property and equipment |
|
|
12,357 |
|
|
|
8,687 |
|
|
|
4,254 |
|
|
|
3,157 |
|
| Amortization of
intangible assets |
|
|
446,556 |
|
|
|
12,127 |
|
|
|
169,398 |
|
|
|
4,967 |
|
| Reimbursed
Expenses |
|
|
61,934 |
|
|
|
168,260 |
|
|
|
20,971 |
|
|
|
70,905 |
|
| Other |
|
|
649,453 |
|
|
|
578,775 |
|
|
|
210,652 |
|
|
|
217,499 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
operating expenses |
|
|
3,998,414 |
|
|
|
4,607,298 |
|
|
|
1,161,751 |
|
|
|
1,408,836 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from
operations |
|
|
(3,004,102 |
) |
|
|
(3,544,744 |
) |
|
|
(772,636 |
) |
|
|
(935,264 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
income |
|
|
645 |
|
|
|
519 |
|
|
|
204 |
|
|
|
202 |
|
| Gain (loss) on
investment |
|
|
(40,000
|
) |
|
|
-
|
|
|
|
10,000
|
|
|
|
-
|
|
|
Interest expense (including amortized finance cost of $531,835, $0,
$462,190 and $0, respectively) |
|
|
(551,581 |
) |
|
|
(6,879 |
) |
|
|
(468,799 |
) |
|
|
(6,037 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other
income (expense) - net |
|
|
(590,936 |
) |
|
|
(6,360 |
) |
|
|
(458,595 |
) |
|
|
(5,835 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before provision for income
taxes |
|
|
(3,595,038 |
) |
|
|
(3,551,104 |
) |
|
|
(1,231,231 |
) |
|
|
(941,099 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Provision for
income taxes |
|
|
3,170 |
|
|
|
- |
|
|
|
1,945 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(3,598,208 |
) |
|
$ |
(3,551,104 |
) |
|
$ |
(1,233,176 |
) |
|
$ |
(941,099 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per
common share - basic |
|
$ |
1.16 |
) |
|
$ |
(1,85 |
) |
|
$ |
(0.37 |
) |
|
$ |
(0.43 |
) |
| Net loss per
common share - diluted |
|
$ |
(0.96 |
) |
|
$ |
(1,30 |
) |
|
$ |
(0.31 |
) |
|
$ |
(0.32 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
3,091,866 |
|
|
|
1,919,543 |
|
|
|
3,376,610 |
|
|
|
2,202,567 |
|
| Diluted |
|
|
3,758,546 |
|
|
|
2,724,442 |
|
|
|
4,043,290 |
|
|
|
2,962,167 |
|
See
notes to consolidated financial statements.
Can
B̅ Corp. and Subsidiary
Consolidated Statements of
Stockholders’ Deficiency (Unaudited)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
| |
|
Preferred
Stock A |
|
|
Preferred
Stock B |
|
|
Preferred
Stock C |
|
|
Common
Stock, no |
|
|
Treasury |
|
|
Paid-in |
|
|
|
|
|
|
|
| |
|
, no par
value |
|
|
, $0.001
par value |
|
|
, $0.001
par value |
|
|
par
value |
|
|
Stock |
|
|
Accumulated |
|
|
|
|
|
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
| Nine Months Ended September
30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, January 1, 2020 |
|
|
20 |
|
|
$ |
5,539,174 |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
2,680,937 |
|
|
$ |
23,113,077 |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
1,075,176 |
|
|
($ |
23,361,223 |
) |
|
$ |
6,366,204 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020
for services rendered |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
435,888 |
|
|
|
401,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401,059 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020
for 300:1 reverse stock split rounding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,460 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020
pursuant to First Fire note agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,508 |
|
|
|
295,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
295,780 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020
pursuant to Labrys Fund Equities note agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,545 |
|
|
|
80,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,182 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020
pursuant to Eagle Equities note agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
8,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,745 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020 for
acquisition of intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235,000 |
|
|
|
201,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
201,187 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020
for compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
41,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,625 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020
for interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185,000 |
|
|
|
77,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,775 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2020
for inventory |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
478,715 |
|
|
|
491,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
491,979 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Treasury stock acquired in 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(543,715 |
) |
|
|
- |
|
|
|
543,715 |
|
|
|
(560,000 |
) |
|
|
|
|
|
|
|
|
|
|
(560,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,598,208 |
) |
|
|
(3,598,208 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, September 30, 2020 |
|
|
20 |
|
|
$ |
5,539,174 |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
3,786,338 |
|
|
$ |
24,711,409 |
|
|
|
543,715 |
|
|
$ |
(560,000 |
) |
|
$ |
1,075,176 |
|
|
$ |
(26,959,431 |
) |
|
$ |
3,806,328 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30,
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, January 1, 2019 |
|
|
18 |
|
|
$ |
4,557,424 |
|
|
|
499,958 |
|
|
$ |
479 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,468,554 |
|
|
$ |
16,624,557 |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
1,075,176 |
|
|
$ |
(18,768,753 |
) |
|
$ |
3,488,883 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for
retirement of Series A Preferred Stock |
|
|
(1 |
) |
|
|
(10,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,333 |
|
|
|
10,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for
retirement of Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
|
(157,105 |
) |
|
|
(157 |
) |
|
|
|
|
|
|
|
|
|
|
67,405 |
|
|
|
157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sale of common stock in Q1 Q2 & Q3
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
379,555 |
|
|
|
3,296,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,296,700 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2019 for
acquisition of technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,580 |
|
|
|
648,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
648,655 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2019 for
satisfaction of accrued salaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,227 |
|
|
|
54,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,340 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in 2019 for
compensation and services rendered |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,131 |
|
|
|
1,552,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,552,755 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of Series A Preferred stock
pursuant to employment agreement |
|
|
3 |
|
|
|
992,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
992,250 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,551,104 |
) |
|
|
(3,551,104 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, September 30, 2019 |
|
|
20 |
|
|
$ |
5,539,174 |
|
|
|
342,853 |
|
|
$ |
322 |
|
|
|
- |
|
|
$ |
- |
|
|
|
2,231,785 |
|
|
$ |
22,187,664 |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
1,075,176 |
|
|
$ |
(22,319,857 |
) |
|
$ |
6,482,479 |
|
See
notes to consolidated financial statements.
Can
B̅ Corp. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
| |
|
Nine Months Ended September 30, |
|
| |
|
2020 |
|
|
2019 |
|
| Operating Activities: |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(3,598,208 |
) |
|
$ |
(3,551,104 |
) |
| Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Stock-based
compensation, net of prepaid stock- based consulting fees |
|
|
1,373,763 |
|
|
|
2,390,967 |
|
| Stock-based
interest expense |
|
|
390,430 |
|
|
|
- |
|
| Depreciation of
property and equipment-General |
|
|
12,357 |
|
|
|
8,687 |
|
| Depreciation of
property and equipment-COGS |
|
|
80,642 |
|
|
|
49,390 |
|
| Amortization of
intangible assets |
|
|
446,556 |
|
|
|
12,127 |
|
| Amortization of
original-issue-discount |
|
|
141,404 |
|
|
|
- |
|
| Bad debt
expense |
|
|
202,137 |
|
|
|
- |
|
| Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts
receivable |
|
|
(690,675 |
) |
|
|
(956,353 |
) |
| Inventory |
|
|
362,348 |
|
|
|
(14,095 |
) |
| Prepaid
expenses |
|
|
(15,990 |
) |
|
|
(6,226 |
) |
| Security
deposit |
|
|
- |
|
|
|
28,940 |
|
| Other
receivable |
|
|
33,714 |
|
|
|
(31,225 |
) |
| Right-of-use
asset |
|
|
565 |
|
|
|
580 |
|
| Accounts
payable |
|
|
221,161 |
|
|
|
9,482 |
|
| Accrued officer’s
compensation |
|
|
134,956 |
|
|
|
- |
|
| Other
accrued expenses payable |
|
|
29,556 |
|
|
|
645 |
|
| |
|
|
|
|
|
|
|
|
| Net
cash used in operating activities |
|
|
(875,284 |
) |
|
|
(2,058,185 |
) |
| |
|
|
|
|
|
|
|
|
| Investing Activities: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Note
receivable |
|
|
1,481 |
|
|
|
- |
|
| Fixed assets
additions |
|
|
(43,616 |
) |
|
|
(1,017,300 |
) |
|
Intangible assets additions |
|
|
- |
|
|
|
(550,000 |
) |
| |
|
|
|
|
|
|
|
|
| Net
cash used in investing activities |
|
|
(42,135 |
) |
|
|
(1,567,300 |
) |
| |
|
|
|
|
|
|
|
|
| Financing Activities: |
|
|
|
|
|
|
|
|
| Proceeds received
from notes and loans payable |
|
|
1,667,840 |
|
|
|
5,000 |
|
| Repayments of
notes and loans payable |
|
|
(90,000 |
) |
|
|
(12,894 |
) |
| Note payable
finance cost |
|
|
(101,455 |
) |
|
|
- |
|
| Acquisition of
treasury stock |
|
|
(560,000
|
) |
|
|
-
|
|
|
Proceeds from sale of common stock |
|
|
- |
|
|
|
3,296,700 |
|
| |
|
|
|
|
|
|
|
|
| Net cash
provided by financing activities |
|
|
916,385 |
|
|
|
3,288,806 |
|
| |
|
|
|
|
|
|
|
|
| Increase (Decrease) in cash and cash
equivalents |
|
|
(1,034 |
) |
|
|
(336,679 |
) |
| |
|
|
|
|
|
|
|
|
| Cash and cash
equivalents, beginning of period |
|
|
46,540 |
|
|
|
807,747 |
|
| |
|
|
|
|
|
|
|
|
| Cash and cash
equivalents, end of period |
|
$ |
45,506 |
|
|
$ |
471,068 |
|
| |
|
|
|
|
|
|
|
|
| SUPPLEMENTAL CASH FLOW
INFORMATION: |
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
3,170 |
|
|
$ |
- |
|
|
Interest paid |
|
$ |
19,746 |
|
|
$ |
6,879 |
|
| |
|
|
|
|
|
|
|
|
| NON-CASH INVESTING AND FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Issuance of
common stock in acquisition of note payable (interest expense) |
|
$ |
390,430 |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Issuance of
common stock in acquisition of note payable (commitment
shares) |
|
$ |
72,052 |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Amortization of
prepaid issuance of common Stock for services rendered |
|
$ |
931,079 |
|
|
$ |
497,220 |
|
| |
|
|
|
|
|
|
|
|
| Issuance of
common stock in acquisition of intangible assets |
|
$ |
201,187 |
|
|
$ |
648,655 |
|
| |
|
|
|
|
|
|
|
|
| Issuance of
common stock in satisfaction of officer’s compensation |
|
$ |
- |
|
|
$ |
54,340 |
|
| |
|
|
|
|
|
|
|
|
| Issuance of
common stock in acquisition of inventory |
|
$ |
491,980 |
|
|
$ |
- |
|
See
notes to consolidated financial statements
Can
B̅ Corp. and Subsidiary
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.
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Can
B̅ Corp. was originally formed as a Florida corporation on October
11, 2005, under the name of WrapMail, Inc. Effective January 5,
2015, we acquired 100% ownership of Prosperity Systems, Inc., which
the Company is in the process of dissolving. Effective December 28,
2018, we acquired 100% ownership of Pure Health Products. In
November 2018, we formed Duramed, Inc. as a wholly-owned
subsidiary. In May 2019, we formed DuramedNJ, LLC and Radical
Tactical LLC, as wholly-owned subsidiaries. In July 2019, we formed
NY Hemp Depot LLC, as a wholly-owned subsidiary. In August 2019, we
acquired Green Grow Farms, Inc., as a wholly-owned
subsidiary.
We
manufacture and sell lifestyle health and wellness products, such
as oils, creams, moisturizers, isolate, gel caps, spa products, and
concentrates, both containing and void of CBD, which we sell
directly and through distributors. Through our Duramed division, we
supply medical devices for use via doctor prescriptions for
post-surgery and accident patients. Our subsidiary, Green Grow
Farms, 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.
Green 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. We also have
previously provided document, project, marketing and sales
management systems to our residual business clients through our
website and proprietary software, which operations are being wound
down. The consolidated financial statements include the accounts of
CANB and its wholly owned subsidiary Pure Health Products, wholly
owned Green Grow Farms, Inc, and wholly owned Duramed
subsidiaries.
Results
of Operations
Three
months ended September 30, 2020 compared with three months ended
September 30, 2019.
Revenues
decreased $155,926 from $615,422 in 2019 to $459,496 in 2020. The
decrease was due to the impact of the COVID-19 outbreak.
Cost
of product sales decreased $71,469 from $141,850 in 2019 to $70,381
in 2020 due to the reduction in sales caused by the COVID-19
outbreak.
Officers
and director’s compensation and payroll taxes decreased $66,333
from $442,898 in 2019 to $376,565 in 2020. The 2019 expense amount
($442,898) includes additional stock-based compensation of
($184,556) pursuant to their respective employment agreements. The
2020 expense amount ($376,565) includes additional stock-based
compensation of ($293,715) pursuant to their respective employment.
The decrease was due to the impact of the COVID-19
outbreak.
Consulting
fees decreased $312,894 from $449,355 in 2019 to $136,461 in 2020.
The 2019 expense amount ($449,355) includes stock-based
compensation of $418,267, resulting from stock issued for the
service of consultants. The 2020 expense amount ($136,461) includes
stock-based compensation of $104,261, resulting from stock issued
for the service of consultants.
Advertising
expense increased $23,688 from $66,611 in 2019 to $90,299 in
2020.
Hosting
expense increased $1,979 from $3,472 in 2019 to $5,451 in
2020.
Rent
expense increased $3,897 from $67,520 in 2019 to $71,417 in
2020.
Professional
fees decreased $6,169 from $82,452 in 2019 to $76,283 in
2020.
Depreciation
of property and equipment increased $1,097 from $3,157 in 2019 to
$4,254 in 2020.
Amortization
of intangible assets increased $164,431 from $4,967 in 2019 to
$169,398 in 2020.
Reimbursed
expenses decreased $49,934 from $70,905 in 2019 to $20,971 in
2020.
Other
operating expenses decreased $6,847 from $217,499 in 2019 to
$210,652 in 2020.
Net loss increased $292,077 from $941,099 in 2019 to $1,233,176 in
2020. The decrease was due to the $247,085 decrease in total
operating expenses offset by the $452,760 increase in other expense
– net, the $1,945 increase in provision for income taxes and the
$84,457 decrease in gross profit.
Nine
months ended September 30, 2020 compared with nine months ended
September 30, 2019.
Revenues
decreased $531,874 from $1,766,161 in 2019 to $1,234,287 in 2020.
The decrease was due to the impact of the COVID-19
outbreak.
Cost
of product sales decreased $463,632 from $703,607 in 2019 to
$239,975 in 2020 due to the reduction in sales caused by the
COVID-19 outbreak.
Officers
and director’s compensation and payroll taxes decreased $411,364
from $1,717,586 in 2019 to $1,306,222 in 2020. The 2019 expense
amount ($1,717,586) includes additional stock-based compensation of
($1,018,786) pursuant to their respective employments. The 2020
expense amount ($1,306,222) includes additional stock-based
compensation of ($916,386) pursuant to their respective employment
agreements.
Consulting
fees decreased $980,958 from $1,540,441 in 2019 to $559,483 in
2020. The 2019 expense amount ($1,540,441) includes stock-based
compensation of $1,372,181, resulting from stock issued for the
service of consultants. The 2020 expense amount ($559,483) includes
stock-based compensation of $457,377, resulting from stock issued
for the service of consultants.
Advertising
expense increased $129,961 from $220,373 in 2019 to $350,334 in
2020.
Hosting
expense increased $6,198 from $11,389 in 2019 to $17,587 in
2020.
Rent
expense increased $37,877 from $155,192 in 2019 to $193,069 in
2020.
Professional
fees increased $206,951 from $194,468 in 2019 to $401,419 in
2020.
Depreciation
of property and equipment increased $3,670 from $8,687 in 2019 to
$12,357 in 2020.
Amortization
of intangible assets increased $434,429 from $12,127 in 2019 to
$446,556 in 2020.
Reimbursed
expenses decreased $106,326 from $168,260 in 2019 to $61,934 in
2020.
Other
operating expenses increased $70,678 from $578,775 in 2019 to
$649,453 in 2020.
Net loss increased $47,104 from $3,551,104 in 2019 to $3,598,208 in
2020. The decrease was due to the $608,884 decrease in total
operating expenses offset by the $584,576, increase in other
expense – net, the $3,170 increase in provision for income taxes
and the $68,242 decrease in gross profit.
Liquidity
and Capital Resources
At September 30, 2020, the Company had cash and cash equivalents of
$45,506 and a working capital of $1,882,926. Cash and cash
equivalents decreased $1,034 from $46,540 at December 31, 2019 to
$45,506 at September 30, 2020. For the nine months ended September
30, 2020, $916,385 was provided by financing activities, $875,284
was used in operating activities, and $42,135 was used in investing
activities.
The
Company currently has no agreements, arrangements or understandings
with any person to obtain funds through bank loans, lines of credit
or any other sources although it is in negotiations with a senior
secured lender to replace all of the current convertible notes
which expire prior to the end of the year..
We
currently have no commitments with any person for any capital
expenditures other than a 2021 commitment for marketing, sales, and
royalty payments to Lifeguard Licensing in the amount of
$360,000
We
have no off-balance sheet arrangements.
Trend
Information
The
novel coronavirus disease of 2019 (“COVID-19”) outbreak has
affected the Company’s operations as set forth above. The full
impact of the COVID-19 outbreak continues to evolve. As such, it is
uncertain as to the full magnitude that the pandemic will have on
our financial condition, liquidity, and future results of
operations. Management is actively monitoring the impact of the
global situation on our financial condition, liquidity, operations,
suppliers, industry, and workforce. Given the daily evolution of
the COVID-19 outbreak and the global responses to curb its spread,
we are not able to estimate the effects of the COVID-19 outbreak on
our results of operations, financial condition, or liquidity for
the foreseeable future, however, as a direct result of medical
offices closure in our primary area of operations, our sales for
third quarter are down approximately 60% year over year and quarter
over quarter. During the course of the pandemic situation, the
Company laid off 80% of its workforce in the CBD business and are
just now recovering those operations. Our inventory increased to
over $500,000 due to lack of sales, but fortunately, the product
shelf life exceeds two years so as sales increase, we expect
inventory levels to level off at close to $200,000. Our Duramed
division was tasked with 90% of the affiliate doctors ceasing
operations for period from 4-8 months and are just now recovering
full operations. Presently, our Duramed operations are at 60% of
pre-COVID operational level. Our expectation that as business open,
and in particular medical offices, that our recovery will progress
in sync with the speed of the business openings and expect to be
back to pre-COVID operational level by end of the 1st
quarter 2021.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND
PROCEDURES
(A)
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of
September 30, 2020, our principal executive officer and principal
financial officer conducted an evaluation regarding the
effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon
the evaluation of these controls and procedures, our principal
executive officer and principal financial officer concluded that
our disclosure controls and procedures were not effective as of the
end of the period covered by this report.
(B)
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There
were no changes in our internal control over financial reporting in
our fiscal quarter for the period September 30, 2020 covered by
this Quarterly Report on Form 10-Q, that have materially affected,
or are reasonably likely to materially affect our internal control
over financial reporting.
PART II-OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
We
are not currently a party to any legal proceedings.
ITEM 1A. RISK FACTORS
As a
smaller reporting company, we are not required to provide risk
factors in this Form 10-Q, however The Company has been directly
impacted and has experienced moderate interruption during this
challenging COVID-19 pandemic. In accordance with applicable
federal and state guidelines, the Company has implemented and
prioritized strict social distancing measures, good manufacturing
practices, proper sanitization measures, and new manufacturing
guidelines. Although several Company customers have experienced
business shutdowns during the last few weeks, this has dramatically
impacted our online ordering and/or initiating new direct shipment
orders. Additional COVID operating requirements to insure safety,
handling requirements, sanitation requirements have placed a
significant burden on order processing and fulfilment.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
Sales
of unregistered securities during the nine months ended September
30, 2020 are as follows:
From
January 1, 2020 through March 31, 2020, the company issued an
aggregate of 27,500 shares of CANB Common Stock to multiple
consultants for services rendered.
From
January 1, 2020 through March 31, 2020, the company issued an
aggregate of 31,335 shares of CANB Common Stock to members of the
Advisory Board, Medical Advisory Board, and Sports Advisory Board
for services rendered.
From
January 1, 2020 through March 31, 2020, the company issued an
aggregate of 20,000 shares of CANB Common Stock to FirstFire Global
Opportunities Fund, LLC for a commitment fee pursuant to a junior
convertible promissory note purchase agreement.
From
January 1, 2020 through March 31, 2020, the company issued an
aggregate of 99,508 shares of CANB Common Stock to FirstFire Global
Opportunities Fund, LLC for returnable shares pursuant to a junior
convertible promissory note purchase agreement.
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 60,000 shares of CANB Common Stock for the acquisition
of inventory.
From
July 1, 2020 through September 30, 2020, the Company issued an
aggregate of 185,000 shares of CANB Common Stock to FirstFire
Global Opportunities Fund, LLC pursuant to a junior convertible
promissory note purchase agreement.
With
respect to the transactions noted above, each of the recipients of
securities of the Company was an accredited investor, or is
considered by the Company to be a “sophisticated person”, inasmuch
as each of them has such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and
risks of receiving securities of the Company. No solicitation was
made and no underwriting discounts were given or paid in connection
with these transactions. The Company believes that the issuance of
its securities as described above was exempt from registration with
the Securities and Exchange Commission pursuant to Section 4(a)(2)
and/or Regulation D of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4. MINE SAFETY
DISCLOSURES
Not
applicable.
ITEM 5. OTHER
INFORMATION
None.
ITEM 6. EXHIBITS
|
(1) |
|
Filed
with the Annual Report on Form 10-K filed with the SEC on April 2,
2020 and incorporated herein by reference. |
| (2) |
|
Filed
with the Form S-1 Registration Statement filed with the SEC on
December 2, 2015 and incorporated herein by reference. |
| (3) |
|
Filed
with the Quarterly Report on Form 10-Q filed with the SEC on August
19, 2020 and incorporated herein by reference. |
| (4) |
|
Filed
with the Current Report on Form 8-K filed with the SEC on January
14, 2020 and incorporated herein by reference. |
| (5) |
|
Filed
with the Current Report on Form 8-K filed with the SEC on June 24,
2020 and incorporated herein by reference. |
| (6) |
|
Filed
with the Form 1-A/A Offering Statement filed with the SEC on July
17, 2020 and incorporated herein by reference. |
| (7) |
|
Filed
with the Current Report on Form 8-K filed with the SEC on February
18, 2020 and incorporated herein by reference. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
| |
Can B
Corp. |
|
|
|
|
| Date:
November 16, 2020 |
By: |
/s/
Marco Alfonsi |
| |
|
Marco
Alfonsi, Chief Executive Officer |
| |
|
|
| Date:
November 16, 2020 |
By: |
/s/
Stanley L. Teeple |
| |
|
Stanley
L. Teeple, Chief Financial Officer |
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