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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Fiscal Year Ended December 31, 2021

 

OR

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

 

For the Transition Period From ____________ to ____________

 

Commission File Number: 000-55753

 

Can B̅ Corp.

(f/k/a Canbiola, Inc.)

(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 Number)

 

960 South Broadway, Suite 120, Hicksville NY 11801

(Address of principal executive offices)

 

516-595-9544

Registrant’s telephone number, including area code:

 

None

Securities Registered Pursuant to Section 12(b) of the Act:

 

Tile of each class   Trading Symbol(s)   Name of each exchange on which registered
None   CANB   N/A

 

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, Nil par value per share

 

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 ☒ 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 ☒ 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.

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging Growth 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

 

The aggregate market value of voting stock held by non-affiliates of the registrant on December 31, 2021, was $13,502,693 based on the last reported sale price of the registrant’s Common Stock on the OTC Markets on that date.

 

As of April 13, 2022, the registrant had outstanding 3,325,814 shares of common stock, $0.00 par value per share.

 

 

 

 

 

 

Can B̅ Corp.

2019 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

 

Item No.   Description   Page
         
Cautionary Note Regarding Forward-Looking Statements   3
         
    PART I    
Item 1.   Business.   4
Item 1A.   Risk Factors.   7
Item 1B.   Unresolved Staff Comments.   7
Item 2.   Properties.   8
Item 3.   Legal Proceedings.   8
Item 4.   Mine Safety Disclosures.   9
         
    PART II    
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.   9
Item 6.   Selected Financial Data.   12
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.   12
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.   13
Item 8.   Financial Statements and Supplementary Data.   13
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.   14
Item 9A.   Controls and Procedures.   13
Item 9B.   Other Information.   14
         
    PART III    
Item 10.   Directors, Executive Officers and Corporate Governance.   14
Item 11.   Executive Compensation.   17
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.   19
Item 13.   Certain Relationships and Related Transactions, and Director Independence.   20
Item 14.   Principal Accounting Fees and Services.   20
         
    PART IV    
Item 15.   Exhibits, Financial Statement Schedules.   21
         
Signatures   24

 

2

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements contained or incorporated by reference in this Annual Report on Form 10-K are considered forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) concerning our business, results of operations, economic performance and/or financial condition, based on management’s current expectations, plans, estimates, assumptions and projections. Forward-looking statements are included, for example, in the discussions about:

 

  strategy;
  new product discovery and development;
  current or pending clinical trials;
  our products’ ability to demonstrate efficacy or an acceptable safety profile;
  actions by regulatory authorities;
  product manufacturing, including our arrangements with third-party suppliers;
  product introduction and sales;
  royalties and contract revenues;
  expenses and net income;
  credit and foreign exchange risk management;
  liquidity;
  asset and liability risk management;
  the outcome of litigation and other proceedings;
  intellectual property rights and protection;
  economic factors;
  competition; and
  legal risks.

 

Any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Forward-looking statements generally are identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “aims,” “plans,” “may,” “could,” “will,” “will continue,” “seeks,” “should,” “predict,” “potential,” “outlook,” “guidance,” “target,” “forecast,” “probable,” “possible” or the negative of such terms and similar expressions. Forward-looking statements are subject to change and may be affected by risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events, except as required by law, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws and other applicable laws.

 

We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements, and therefore you should not place too much reliance on them. These factors include, among others, those described herein, under “Risk Factors” and elsewhere in this Annual Report and in our other public reports filed with the Securities and Exchange Commission. It is not possible to predict or identify all such factors, and therefore the factors that are noted are not intended to be a complete discussion of all potential risks or uncertainties that may affect forward-looking statements. If these or other risks and uncertainties materialize, or if the assumptions underlying any of the forward-looking statements prove incorrect, our actual performance and future actions may be materially different from those expressed in, or implied by, such forward-looking statements. We can offer no assurance that our estimates or expectations will prove accurate or that we will be able to achieve our strategic and operational goals.

 

Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

 

Moreover, new risks regularly emerge, and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this prospectus are based on information available to us on the date of this Annual Report. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Annual Report.

 

3

 

 

PART I

 

Item 1. Business

 

Organization

 

We were originally incorporated as WrapMail, Inc. in Florida on October 11, 2005 in order to tap into a largely un-serviced segment of the web-based advertising industry. Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc., a New York corporation incorporated on April 2, 2008, in order to acquire Prosperity’s office productivity software suite as a complement to WRAP’s existing intellectual property. After its acquisition, the Company transferred Prosperity’s operations to WRAP; however, the Company does not currently actively operate its WRAP or Prosperity divisions pending decision on whether to hold on to, sell or repurpose such assets.

 

Around the first quarter of 2017, the Company began to transition into the health and wellness space, including the development, processing and sale of hemp derived products, and now operates three distinct divisions: retail sales, R&D and manufacturing, and durable medical devices. The Company also has a hemp cultivation division which is currently non-operational.

 

On May 15, 2017, WRAP changed its name to Canbiola, Inc. to reflect its transition. On March 6, 2020 CANB changed its name to “Can B̅ Corp.” in order to segregate its corporate identity from its lead products branded under the Canbiola™ brand.

 

Effective December 27, 2010, WRAP effected a 10 for 1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1 for 10 reverse stock split of its common stock. On March 6, 2020, Can B̅ effected a 1 for 300 reverse stock split of its common stock. The accompanying consolidated financial statements retroactively reflect these stock splits. On March 13, 2022, the Company effectuated a 1 for 15 reverse split of its stock.

 

Business Segments

 

The Company is in the business of promoting health and wellness through its development, manufacture and sale of products containing cannabinoids derived from hemp biomass and the licensing of durable medical devises.

 

Hemp is thought to contain anywhere from 60 to over 100 naturally occurring compounds (cannabinoids) thought to interact with cannabinoid receptors present on the surface of cells in various parts of the central nervous system. The effects of cannabinoids are thought to depend on the area of the brain involved. Cannabidiol (“CBD”) is probably one of the most well-known of these compounds, thought to have many beneficial uses. CBD is incorporated into many of the Company’s products; however, the Company has recently begun extracting and processing cannabinol (“CBN”), cannabigerol (“CBG”), delta-10 and delta-8 for its products and for wholesale to third-parties looking to incorporate such compounds into their products. The Company has all of its hemp based raw materials to incorporate into products tested by a 3rd party independent laboratory. The Company aims to be the premier provider of the highest quality natural hemp cannabinoid products on the market through sourcing the very best raw material and developing a variety of products it believes will improve people’s lives in a variety of areas.

 

  I- Pure Health Products

 

Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”) is the Company’s manufacturing arm. PHP manufactures all of the Company’s CBD products and also provides white label manufacturing and production services to third parties and performs research and development for the Company. Through PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. Pasquale Ferro is the president of PHP.

 

In December, 2018, the Company acquired 100% of the membership interests in Pure Health Products, with which it had had and has an exclusive production agreement, pursuant to an Acquisition Agreement (“PHP Acquisition Agreement”). In January, 2019, PHP acquired certain assets from Seven Chakras, LLC (“Seven Chakras”), a former competitor, which assets included the rights and title to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ CBD products, (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials.

 

4

 

 

The Company currently has four in-house branded CBD products that are manufactured by PHP and sold to consumers, Canbiola™, Nu Wellness™, Seven Chakras™ and Pure Leaf Oil™.

 

The Company’s Canbiola™ CBD products are sold via medical professionals under distribution agreements and directly by the Company via its website and vending machines. The Canbiola™ assets are held directly by the Company and include tinctures, soaps, bath soaks, cryo-gel, salves, massage oils, powders, capsules and roll-ons.

 

The Company’s Pure Leaf Oil™ assets are held by PHP. Pure Leaf Oil™ CBD products are sold via PHP’s website, direct to consumer via walk-in business, and through distributors and are meant for retail customers not referred through the medical community. Pure Leaf Oil™ products include massage oils, joint salves, bath salts, nano sprays, drops, and cryo-gels. PHP also holds the assets related to its Seven Chakras™ brand. Seven Chakras™ is targeted toward health clubs, spas, and beauty lines and CBD products include lotion, massage oils, roll-ons, isolate, powders, capsules, and bath soaks. Severn Chakras™ has its own internet website and direct markets to its customer base.

 

PHP has also created a new brand, Nu Wellness™, which it intends to market through distributors as an independent pharmacy brand targeted towards independent retail drug stores. Nu Wellness™ has yet to launch or make sales, which are intended to occur sometime in 2022.

 

All finished products are stored for time- quality measurement, and each batch of every product is sent to an independent third-party lab for a Certificate of Analysis (“COA”) of the finished products. These COA’s are both listed on our web site and available via the QR code on every retail package.

 

  II- Hemp Operating Division

 

The Company’s hemp operating division performs R&D for the Company including for CBN, CBG, delta-8 and delta-10. It also produces industrial hemp and processes hemp biomass, isolate and isomers.

 

Around March 17, 2021, the Company acquired assets through its newly-formed, wholly-owned subsidiary, Botanical Biotech, LLC, a Nevada limited liability company (“BB” or “Botanical Biotech”). Such assets include certain materials and manufacturing equipment and marketing or promotional designs, brochures, advertisements, concepts, literature, books, media rights, rights against any other person or entity in respect of any of the foregoing and all other promotional properties, in each case primarily used, developed or acquired by the Sellers for use in connection with the ownership and operation of the BB Assets.

 

Around August 12, 2021, the Company and CO Botanicals LLC, a Nevada limited liability company and wholly owned subsidiary of CANB (“COB”) acquired hemp processing assets from TWS Pharma, LLC, a Wisconsin limited liability company and L7 TWS Pharma, LLC, a Wisconsin limited liability company. COB operates out of Mead, CO.

 

Around August 13, 2021 the Company and TN Botanicals LLC, a Nevada limited liability company and wholly owned subsidiary of CANB (“TNB”) acquired assets from Music City Botanicals, LLC, a Wisconsin limited liability company (“MCB”) including certain equipment, inventory, and intellectual property. TNB operates out of Mcminville, TN.

 

From its Miami lab, the Company processes hemp isolate into isomers such as CBN, CBG, delta-8 and delta-10. At its Tennessee location, the Company produces industrial hemp, processes hemp biomass to isolate, processes isolate to isomers such as CBN, CBG, delta-8 and delta-10, and performs research and development on cannabinoids such as such as CBN, CBG, delta-8, delta-10, CBD and CBDA. At its Colorado facilities, the Company produces industrial hemp and processes hemp biomass to isolate. The biomass and isolate processed by the Company may be produced by the Company or purchased from third parties. All of the Company’s end products contain .3% or less of THC (delta-9).

 

The Company is also in the process of building out an event/consumption lounge at its Miami lab for showcasing its products and building brand awareness. It is intended that he lounge will attract corporate executives, socialites, influencers and celebrities as a place where they can hang out and sample the Company’s products, including vapes and edibles (each non-THC). The lounge will have 1,500 sqft indoor space and a 1,000 sqft patio. The lounge will have a plug and play surround sound system, 140 inch hi-def 4k bridged TVs and host podcasts, karaoke, and DJ with stage capabilities and will offer bar grub and food truck menus. The Company has also executed a contract with a developer to build and operate additional lounges across the country, subject to certain terms and conditions, including the success of the Miami lounge once open.

 

  III- Durable Medical Equipment

 

Through its medical device division, Duramed, Inc. (“Duramed”) and Duramed MI LLC, a Nevada limited liability company fka DuramedNJ, LLC (“Duramed MI”), the Company serves the post-surgery medical patient arena aiming to aid in recovery and pain reduction.

 

5

 

 

In November 2018, the Company formed Duramed, Inc. to facilitate the manufacture and sale of durable medical equipment (“DME”) incorporating CBD. On January 14, 2019, Duramed entered into a Memorandum of Understanding (the “Sam MOU”) with Sam International (“Sam”) and ZetrOZ Systems LLC (“ZetrOZ” and, collectively with Sam, the “Manufacturers”). Pursuant to the Sam MOU, the Manufacturers granted Duramed the exclusive right to distribute sam® Pro 2.0 (SA271) and sam® Gel Coupling Patches (UB-14-72) within the United States for the Personal Injury Protection/No Fault Market during the term of the Sam MOU. Duramed has agreed to purchase monthly minimums from the Manufacturers at a price per Unit of $2,447. The exclusivity of the Distribution License granted to Duramed under the Sam MOU was dependent upon meeting the monthly minimum, which did not happen. In addition, Duramed was granted the right to distribute sam® Gel Capture Patches (UB-14-24). Duramed will get rebates of 2%-3% based on the volume of products sold by it. We did not meet the monthly minimums as contemplated by the Sam MOU and as such we are currently distributing the aforementioned products on an at-will, non-exclusive basis.

 

On May 29, 2019, the Company created Duramed MI to execute the same business strategy into the no-fault insurance market in New Jersey that it had developed in New York; however, Duramed MI is not currently operating in NJ and is in the process of moving its operations to Michigan, which have not begun yet. None of Duramed’s products are reimbursable under any federal program.

 

  IV- Green Grow Farms

 

Green Grow Farms, Inc., a New York corporation (“GGFI” or “Green Grow”) served as the Company’s hemp cultivation arm. Through GGFI, the Company grew its own hemp in New York and partnered with third party growers in other states whereby GGFI provided the farmers with seed and training and splits profits with the farmers. GGFI was to supply the Company with all hemp needed for the Company to produce its CBD products, which hemp would be processed by a third party and shipped to the Company’s production facility in Lacey, WA. Notwithstanding the foregoing, currently, it is less expensive to buy crude oil and isolate than to produce such from hemp grown by the Company. Accordingly, the Company has stopped its Green Grow operations in favor of buying raw products from third parties. If and when it makes economic sense to grow its own hemp again, the Company will resume Green Grow operations.

 

  V- Imbibe Wellness Solutions

 

On February 22, 2021, the Company entered into an agreement to purchase additional CBD brand assets from Imbibe Health Solutions, LLC, a Delaware limited liability company. The assets have been placed into the Company’s wholly owned subsidiary, Imbibe Wellness Solutions, LLC, a Nevada limited liability company (fka Radical Tactical LLC) (“Imbibe Wellness”), and include the intellectual property rights, including trademarks, logos, know how, formulations, productions procedures, copyrights, social media accounts, domain names and marketing materials relating to the Imbibe™ branded products, including a muscle and joint salve, unscented fizzy bath soak, CALM massage oil, Me x 3 Metabolic Energy (energy and dietary supplement), and Muscle, Joints & Back CBD Cryo Gel. Imbibe Wellness is intended to develop and sell specific celebrity endorsed products and products promoted through influencer branding, which brands are expected to launch in 2022. Walter Hoelzel is the president of Imbibe Wellness.

 

FDA DISCLAIMER

 

The statements found herein have not been evaluated by the Food and Drug Administration (FDA) and the Company’s products are not intended to diagnose, treat, cure or prevent any disease or medical condition.

 

Competitive Conditions

 

The CBD and cannabis markets are flooded with competition ranging from mom and pop operations to multi-million-dollar conglomerates, many with longer operating histories, more capital and/or more industry knowledge than the Company. The Company hopes to partner with or engage industry specialists to help set it apart from its numerous competitors. The Company believes that one of those points of differentiation will be its 3rd party independent testing “Certificate of Analysis” conducted on all of the CBD isolate products it purchases and posting of those lab results on its website. The three largest CBD companies known to the Company are Elixinol LLC, a UK based company with $37 million revenue, GW Pharmaceuticals also UK based with $19 million revenue, and Aurora Cannabis based in Canada with just over $19 million revenue. The top USA companies include Medical Marijuana, CV Sciences, Gaia Herbs, and Charlotte’s Web with respective revenues of $59, $48, $45, and $17 million. Worthy of note is that Charlotte’s Web is on the shelf right next to us at Northwell Health.

 

Hemp biomass and its derivative products have glutted the US market, benefiting our manufacturing divisions with less expensive product but causing our hemp cultivation and processing division to become financially imprudent until the oversupply issue has resolved. Thus, we have halted operations in such division for the time being but may resume such operations should a sound opportunity present. Although we have contract farm agreements in place to grow and harvest hemp biomass, other raw materials for our finished products have at least three sources of supply in the open market and we have little risk of any ingredient supply at this time.

 

Intellectual Property

 

The Company employs, through its Pure Health Product LLC division, two full time product researchers and developers and technology experts who, on a daily basis, set the quality standards and new product development status and time-line agendas under the direct supervision of the Company’s management team.

 

The Company has not been granted any patents or trademarks by the USPTO or by any patent or trademark office of a foreign nation.

 

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Employees

 

The Company, directly or through its subsidiaries, currently has 68 full-time employees.

 

Reports to Security Holders

 

Our common stock is registered under the Exchange Act and we are required to file current, quarterly and annual reports and other information with the SEC. You may read and copy any document that we file at the SEC’s public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings are available to you free of charge at the SEC’s web site at www.sec.gov. We are an electronic filer with the SEC and, as such, our information is available through the Internet site maintained by the SEC that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. This information may be found at www.sec.gov and posted on our website at www.canbcorp.com.

 

Government Regulation

 

The cultivation and sale of hemp and hemp products is federally regulated under the United States Farm Bill. The 2018 Farm Bill removed hemp as a Schedule 1 Substance under the Controlled Substances Act; however, rules and regulations relating to manufacture and sale of CBD and other hemp derivative products under the Farm Bill must still be promulgated and are expected to impact the Company’s operations. As the industry and our product lines expand, it is uncertain what other statutory schemes and agencies will start to regulate our products. The FDA currently still considers the addition of CBD to food products, cosmetics or supplements to be illegal and prohibits the advertisement of CBD products with health claims. The Company must also comply with each state’s laws relating to the sale and manufacture, as applicable, of hemp-based products, with some states allowing the sale of cannabinoid products, some states limiting to medical purposes and some states banning outright. These regulations may affect, among others, the way the Company manufactures and distributes its products, the way the Company is taxed, the way the Company banks, the location of the Company’s facilities, the content and testing of the Company’s products, and the quality of the Company’s services. The Company has not sought or received approval of any of its products from the FDA or any state agency. Should the Company be sanctioned by the FDA or state agencies, it could materially, negatively impact the Company’s operations and revenue sources.

 

We are also subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing the Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other online services, and increase the cost of providing online services. These regulations and laws may cover sweepstakes, taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet and e-commerce. Unfavorable resolution of these issues may harm our business and results of operations. CBD sales are additionally state regulated for shipping and the Company maintains a current list.

 

Transfer Agent

 

We have engaged Transhare Corporation located at 2849 Executive Drive, Suite 200, Clearwater, FL 33762 as our transfer agent.

 

Item 1A. Risk Factors

 

We are a smaller reporting company and not required to provide the information in this Item.

 

Item 1B. Unresolved Staff Comments

 

Not applicable.

 

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Item 2. Properties

 

The Company does not currently own any real property. We do however lease office space in Hicksville, New York for $3,917 per month, out of which all subsidiaries other than PHP operate. The Company’s wholly-owned subsidiary, Pure Health Products, operates its manufacturing facility in Lacey, Washington with lease payments equal to $2,345 per month. The Company has leases for three (3) properties, as described below.

 

The Company leases approximately 7,408 square feet of the property located at 2041 NW 1st Avenue, Miami, FL 33127 (the “1st Property”). Base rent for the 1st Property is $16,000 per month, or $192,000 for the first year, except that if CANB pays the base rent in advance, the base rent amount for the first year will be reduced to $186,000. The base rent will increase by 5% each year during the term of the lease.

 

The Company leases an approximately 14,300 square foot building and related parcel located at 14320 Longs Peak Court, Mead, CO 80504 (the “LPC Property”) for base rent equal to $13,764 for the first year of the lease. Following the first year of the lease, on September 1 of each year, the base rent for the LPC Property will be increased by the greater of (i) 3%, or (ii) the difference between the Consumer Price Index for All Urban Consumers (as published by the Bureau of Labor Statistics) (“CPI”) for August 2021 compared to the CPI for August of the applicable year.

 

CANB leases an approximately 300,000 square foot facility situated on approximately 20 acres of industrial rated property located at 204 Red Road, McMinnville, TN 307110 (the “RR Property”) for base rent equal to $25,000 per month. The Company was granted an option to purchase the RR Property for a purchase price equal to fair market and appraised value and a right of first refusal to purchase the RR Property in the event the landlord receives a third-party offer to purchase the RR Property during the term of the lease.

 

CO Botanicals, LLC (“COB”), a wholly-owned subsidiary of Can B̅ Corp. leases the real properties located at 17171 County Road 21, Fort Morgan, CO 80701 and 12555 Energy Road, Fort Morgan, CO 80701 (collectively, the “Fort Morgan Properties”) on a month-to-month basis. Base rent for the Fort Morgan Properties is $22,250 per month.

 

Duramed leases an approximately 1,800 square feet office space located at 24901 Northwestern Highway, Southfield, MI. The lease term is for 18 months. Base rent for the lease term is $1,914 per month, or $22,963 for the first year. The base rent increases to $2,028 for the final six months.

 

Item 3. Legal Proceedings

 

On April 28, 2021, the Company was served with a commercial legal action against the Company and certain officers by David Weissberg and Donna Marino, who are investors in the Company (collectively, the “Investors”). The complaint was filed in the Supreme Court of the State of New York, County of Nassau, Index No. 605191/2021. The complaint alleges four causes of action.

 

The first cause of action alleges that the Company breached Securities Purchase Agreements with the Investors by failing to assist the Investors in getting opinion letters to remove the restrictive legends from their shares, even though the Company made introductions and requests to the Company’s counsel, provided supporting documents for the Investor’s shares, and ultimately the opinion letters could not be rendered because the Investors failed to submit required documentation to counsel.

 

The second cause of action is similar to the first but related to alleged misrepresentations regarding removing the restrictive legends from shares that were issued for services rather than purchased.

 

The third cause of action alleges that the Company mislead the Investors to invest $500,000. The final cause of action alleges that officers of the Company made misrepresentations regarding the value of the Company’s stock, which caused David Weissberg to owe more in taxes than he was expecting.

 

We have consulted with attorneys and believe the Investors’ complaints are without merit, factually inaccurate, and frivolous. We intend to vigorously defend ourselves against the aforementioned legal action and will likely bring counterclaims against the Investors.

 

8

 

 

Around November 24, 2021, a vendor of the Company filed amended suit against the Company in Florida, Case No. 2021 CA 001797, for monies allegedly owed and civil theft relating to such monies and related products and fraud in the inducement. We do not believe we owe such vendor any amount. The court has entered a default judgement against the Company for our failure to timely answer the complaint, which default has since been overturned.

 

Other than above, we are not aware of any pending or threatened legal proceedings in which we are involved.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

  

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock is listed for quotation on OTC Market’s OTCQB® Venture Market under the symbol “CANB.” Our common stock began trading in April 2011. Trading in our common stock has historically lacked consistent volume, and the market price has been volatile. Quotations of our common stock on OTCQB® reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions. We is applying to have our common stock traded on Nasdaq’s Capital Market.

 

The following table presents, for the periods indicated, the high and low bid prices of the Company’s common stock and is based upon information provided by OTC Market. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

 

2021
    High     Low  
First Quarter   $ 1.37       0.37  
Second Quarter   $ 0.65       0.27  
Third Quarter   $ 0.98       0.40  
Fourth Quarter   $ 0.75       0.40  

 

2020 (Post 300:1 Reverse Split)
    High     Low  
First Quarter   $ 6.30     $ 0.95  
Second Quarter   $ 1.98     $ 0.40  
Third Quarter   $ 1.80     $ 0.40  
Fourth Quarter   $ 0.67     $ 0.35  

 

The last reported sale price of the Company’s common stock as of April 14, 2022 was $5.36 per share.

 

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Record Holders

 

As of April 13, 2022, there were 3,325,814 shares of common stock issued and outstanding to approximately 392 shareholders of record.

 

Dividends

 

The Company paid $0 in in-kind dividends on its Series B Preferred Stock by the issuance of common stock to the Series B holders in 2020 and 2019. Each share of Series B Preferred Stock has the first preference to dividends, distributions and payments upon liquidation, dissolution and winding-up of the Company, and is entitled to an accrued cumulative but not compounding dividend at the rate of 5% per annum whether or not declared. After six months of the issuance date, such share and any accrued but unpaid dividends can be converted into common stock at the conversion price which is the lower of (i) $0.0101; or (ii) the lower of the dollar volume weighted average price of CANB common stock on the trading day prior to the conversion day or the dollar volume weighted average price of CANB common stock on the conversion day. The Series B Preferred Stock have no voting rights. There are no currently outstanding shares of Series B Preferred Stock*.

 

We do not anticipate paying any cash dividends in the foreseeable future. Except for its Series B Preferred Stock, of which there are none issued and outstanding*, the payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit our ability to pay dividends on our common stock other than those generally imposed by applicable state law.

 

* It has come to our attention that the Company’s transfer agent still shows 227,590 Series B Preferred shares as being held by RedDiamond Partners LLC (“RedDiamond”) due to an administrative oversight. Nonetheless, such shares were retired in exchange for 97,608 shares of common stock and rights to acquire an additional 35,667 shares of common stock issued to RedDiamond pursuant to an Exchange Agreement dated August 13, 2019.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

On July 28, 2020, the Company adopted an Incentive Stock Option Plan (“ISO”). The purpose of this Can B Corp. 2020 ISO (the “Plan”) is to attract, retain, and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company’s stockholders. The Plan is administered by the Compensation Committee or, in the Board’s sole discretion, the Board. The Compensation Committee shall be composed of two or more directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission. As used in this Plan, the term “Compensation Committee” shall be construed as if followed by the words “(if any);” and nothing in this Plan requires the Board to have a Compensation Committee. Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicable law, the Committee shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board or a Committee composed of members of the Board, to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Preferred Stock and/or Common Stock (collectively, “Stock”) to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Preferred Stock and/or Common Stock or other property or canceled or suspended; (vii) determine whether, to what extent and under what circumstances cash, shares of Stock, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant; (viii) interpret and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (ix) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (x) delegate ministerial duties to such of the Company’s employees as it so determines; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Subject to adjustment from time to time, a maximum of two thousand (2,000) shares of Class C Preferred Stock and ten million (10,000,000) shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares. The Committee shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company. Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option shall be ten years from the Grant Date. An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Committee from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.

 

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Equity Compensation Plan Information 

 

Plan Category   Number of Securities to be Issued Upon Excise of Outstanding Options, Warrants and Rights     Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights     Number of Securities Remaining Available for Future Issuances Under Equity Compensation Plans*  
Equity compensation plans approved by security holders     1,187,199     $          0.36       58,812.801  
Equity compensation plans not approved by security holders     -       -       -  
Total     1,187,199     $ 0.36       58,812,801  

 

* Represents 2,000 Series C Preferred Shares on an as-converted basis and 8,812,801 shares of common stock available under the Plan.

 

Sales of unregistered securities during the year ended December 31, 2021 are as follows:

 

Recent Sales of Unregistered Securities

 

From January 1, 2021 through December 31, 2021 the Company issued an aggregate of 814,336 shares of Common Stock under its Reg A-1 registration currently in effect and an additional 157,115 shares of common stock to various consultants for service

 

From January 1, 2021 through December 31, 2021 the Company issued an aggregate of 381,791 shares of Common Stock under various asset acquisition agreements.

 

From January 1, 2021 through December 31, 2021 the Company issued an aggregate of 111,874 shares of Common Stock under various note and related interest conversion agreements.

 

From January 1, 2021 through December 31, 2021 the Company issued an aggregate of 150 shares of Preferred C shares under multiple employment agreements. The Preferred C shares converted to 1,000,000 shares of Common Stock upon issuance.

 

With respect to the transactions noted above, each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a “sophisticated person”, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act of 1933.

 

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Item 6. Selected Financial Data

 

Not required for smaller reporting companies.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

General

 

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 as a wholly-owned subsidiary. The Company is presently in the process of dissolving Prosperity.

 

The Company is in the business of promoting health and wellness through its development, manufacture and sale of products containing cannabinoids derived from hemp biomass and the licensing of durable medical devises. Can B̅’s products include oils, creams, moisturizers, isolate, gel caps, spa products, and concentrates and lifestyle products. Can B̅ develops its own line of proprietary products as well seeks synergistic value through acquisitions in the hemp industry. Can B̅ aims to be the premier provider of the highest quality hemp derived products on the market through sourcing the best raw material and offering a variety of products we believe will improve people’s lives in a variety of areas.

 

Results of Operations

 

Year Ended December 31, 2021 compared with Year Ended December 31, 2020:

 

Revenues increased $2,894,160 from $1,709,669 in 2020 to $4,603,829 in 2021. The increase is due to the wind down of restrictions related to the Covid-19 Pandemic surrounding elective surgeries, enabling an increase in the usage of the Company’s Duramed product lines and ultrasound device associated with patient recovery. Additionally, due to asset acquisitions in 2021, the Company’s Music City Botanical and Botanical Biotech brands related to an increase of sales compared to 2020 of $1,709,669. Cost of product sales increased $1,333,668 from $278,062 in 2020 to $1,611,730 in 2021 in conjunction with the increase in revenue and production in 2021.

 

Consulting fees increased $2,198,334 from $778,062 in 2020 to $2,976,396 in 2021. The 2021 expense amount includes legal, accounting, and other consulting fees and services incurred during the year ending December 31, 2021.

 

Advertising expense increased $150,454 from $519,922 in 2020 to $670,376 in 2021.

 

Hosting expense decreased $5,963 from $22,781 in 2020 to $16,818 in 2021.

 

Rent expense increased $406,989 from $234,790 in 2020 to $641,779 in 2021.

 

Professional fees increased $328,370 from $533,213 in 2020 to $861,583 in 2021.

 

Depreciation of property and equipment increased $369,268 from $124,388 in 2020 to $493,656 in 2021.

 

Amortization of intangible assets decreased $610,221 from $658,910 in 2020 to $48,689 in 2021.

 

Other operating expenses increased $576,036 from $876,431 in 2020 to $1,452,467 in 2021. The increase was due largely to higher commission fees, supplies expense and office expenses in 2021 compared to 2020. In addition, stock-based compensation expense was approximately $2,395,000 for the year ended December 31, 2021.

 

Net loss increased $3,290,491 from $8,878,904 in 2020 to $12,169,395 in 2021. The increase was due to all factors discussed above and in addition an increase of $1,167,510 in interest expense.

 

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Liquidity and Capital Resources

 

As of December 31, 2021, the Company had cash and cash equivalents of $449,001 and negative working capital of $2,809,418. Cash and cash equivalents decreased $8,797 from $457,798 at December 31, 2020 to $449,001 at December 31, 2021. For the year ended December 31, 2021, $8,174,728 was provided by financing activities, $7,322,732 was used in operating activities, and $860,793 was used in investing activities.

 

The Company currently has no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.

 

We currently have no commitments with any person for any capital expenditures.

 

We have no off-balance sheet arrangements. It is anticipated that Green Grow will again begin operations later in 2022 as Pure Health Products revenue increases and the need for additional isolate is present. Today, the available oversupply of isolate makes it cheaper to buy quality product at the market than to grow, harvest, and extract from scratch. Duramed, Inc. is beginning to show improvements in office utilization of its ultrasound device as more surgery centers are reopening.

 

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

 

Not applicable.

 

Item 8. Financial Statements and Supplementary Data

 

Our Consolidated Financial Statements and Notes thereto, for the fiscal years ended December 31, 2021 and 2020 and the report of BF Borgers CPA PC, our independent registered public accounting firm, are set forth on pages F-1 through F-25 of this Annual Report.

 

Item 9A. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer (CEO), as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the CEO has concluded that our disclosure controls and procedures are ineffective to ensure that information disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. This determination was based on the small size of our accounting staff and the lack of segregation of duties.

 

To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Management Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

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Any internal control system, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

Management, with the participation of our Chief Executive Officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, because of the Company’s limited resources and limited number of employees, and the absence of an audit committee, management concluded that, as of December 31, 2021, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principle, which creates a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness means there is a risk that our financial reports or other filings may contain an error or inaccuracy or not submitted timely.

 

There was a material weakness in the Company’s internal control over financial reporting due to the fact that the Company did not have an adequate process established to ensure appropriate levels of review of accounting and financial reporting matters, which resulted in our closing process not identifying all required adjustments and disclosures in a timely fashion. We expect that the Company will need to hire accounting personnel with the requisite knowledge to improve the levels of review of accounting and financial reporting matters. The Company may experience delays in doing so and any such additional employees would require time and training to learn the Company’s business and operating processes and procedures. For the near-term future, until such personnel are in place, this will continue to constitute a material weakness in the Company’s internal control over financial reporting that could result in material misstatements in the Company’s financial statements not being prevented or detected.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934) during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

N/A

 

Item 9B. Other Information

 

None.

 

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 

Not Applicable.

 

Item 10. Directors, Executive Officers and Corporate Governance

 

Our board of directors is to be elected annually by our shareholders. The board of directors elects our executive officers annually. Our directors and executive officers as of March 31, 2022 are as follows:

 

Name   Age   Position
Marco Alfonsi   61   CEO, Director and Chairman since June 15, 2017
Stanley L. Teeple   73   CFO, Secretary and Director since October 1, 2018
Phil Scala   70   Interim COO since August 15, 2019
Frederick Alger Boyer, Jr.   53   Independent Director appointed October 9, 2019
Ronald A. Silver   86   Independent Director appointed October 9, 2019
James F. Murphy   74   Independent Director appointed October 9, 2019

 

Marco Alfonsi, CEO and Chairman Director has been a financial service professional for the past 20 years. Mr. Alfonsi was appointed director and CEO of the Company in or around January 2015. Immediately prior to that, he spent eight years serving as the CEO of Prosperity Systems, Inc.

 

14

 

 

Throughout his career, Mr. Alfonsi was directly and indirectly involved in raising over $100 million dollars for small and medium sized business. Prior to his involvement in the financial services industry, Mr. Alfonsi has owned, operated, financed and sold several businesses. Mr. Alfonsi successfully started and managed two companies (ExecuteDirect.com, and Bakers Express of New York, Inc.), and held senior management positions with a number of financial institutions, including: Global American Investments, Clark Street Capital and Basic Investors.

 

Stanley L. Teeple –Mr. Teeple, CFO, Secretary, Director, was engaged from 2017-2018 with Solis Tek, Inc. (OTCQB:SLTK) a California based publicly traded corporation as Senior Vice President, Corporate Secretary , and Chief Compliance Officer. Solis Tek, Inc. a NV Corporation, is a developer of lighting and nutrient products, and most recently in cultivation and processing for the cannabis industry. Previously, from 2015-2016 Mr. Teeple was Chief Financial Officer and Secretary for Zonzia Media, Inc. (OTC:ZONX), a provider of streaming video and content to cable subscribers and hotel networks throughout the eastern US. From 2008 to 2014 Mr. Teeple was Chief Financial Officer and Secretary of Indigo-Energy, Inc. (OTC:IDGG) a publicly traded company in the oil and gas exploration business. Over the prior three plus decades Mr. Teeple through his turnaround consulting business, Stan Teeple, Inc., has held numerous senior management positions in several public and private companies across a broad spectrum of industries. Additionally, he has operated and worked for various court appointed trustees and principals as CEO, COO, and CFO in the entertainment, pharmaceuticals, food, travel, and tech industries. He operated his consulting business on a project-to-project basis and holds various other directorships. His businesses operational strengths include knowing how to manage and maximize the resources and preserve the integrity of a company from start-up through to maturity and corporate compliance in a regulatory environment.

 

Phil Scala, Interim Chief Operating Officer, 40 year career offers unique expertise in delivering the information needed to make informed decisions, whether in times of crisis or in the course of simply running our business; is highlighted by his 29 years of service with the FBI. Throughout his 29-year career with the FBI, he worked, supervised and lead investigations on nearly every type of federal crime, including securities fraud, white collar crime, money laundering, tax violations, narcotics, racketeering, homicide, violent crime, kidnappings, and public corruptions. Mr. Scala has been the recipient of numerous commendations and awards for outstanding service, notably the FBI Shield of Bravery, as a group commendation, as the SWAT team leader of the Al-Qaeda Bomb Factory Raid, on June 3, 1993.

 

Mr. Scala was assigned to the Criminal Division of the New York Office. He served in numerous assignments within the Organized crime branch and was sent to the Defense language Institute in Monterey, California to gain proficiency in the Italian/ Sicilian languages. From 2003-2008, Mr. Scala, developed and implemented the NY Office’s Leadership Development Program, which assisted relief supervisors develop excellence in leadership through mentoring, journalizing, “Best Practice” experiences, and accountability tools. The program was designed to be continuous, progressive, and measurable in assisting the FBI leaders maximize their leadership potential throughout their careers.

 

Mr. Scala received his Bachelor’s degree and Master of Business Administration in accounting from St. John’s University, he also earned a Master of Arts degree in Psychology from New York University.

 

15

 

 

Frederick Alger Boyer, Jr. Independent Director, is President & CEO of Advance Care Medical, Inc. - Mr. Boyer has over 25 years of Wall Street experience having worked on both the investment side as well as the banking side of the business Most recently he served as Head of Equities for the New York based investment bank H.C. Wainwright & Co. where he had overseen efforts in capital markets, sales, and trading. Prior to that he worked and or supervised teams at Rodman & Renshaw, Oppenheimer, Piper Jaffray, and Credit Suisse in New York, San Francisco, and Minneapolis. In his various roles he has advised hundreds of companies in their financing efforts both publicly and privately. Mr. Boyer has numerous securities licenses and is a graduate of the University of California at Berkeley.

 

Ronald A. Silver, Independent Director, was first elected to the Florida House of Representatives In 1978 and continued his tenure in that body until 1992. While in the Florida House, Silver served in major positions including Majority Whip (1984-1986) and Majority Leader (1986-1988). He also chaired various committees including the Select Committee on Juvenile Justice, Criminal Justice, Ethics and Elections and the subcommittee of Appropriations on General Government. He was then elected to the Florida Senate in 1992 and subsequently re-elected, serving as the Majority (Democratic) leader for the 1994 session. During his last term in the Senate he was designated by both the House and Senate as the Dean of the Legislature recognizing his standing as the longest serving member. His career as a lawmaker has yielded a vast and extensive knowledge of public policy issues and the legislative process, allowing him to be an advocate and servant for his diverse community. Throughout his tenure in the House and Senate, Mr. Silver has been known to tackle tough issues, transcend partisanship and build strong coalitions and in addition served on the Judiciary committee, which heard all condominium issues. As Senator, he served on a variety of committees, and was chairman of both the Appropriations Subcommittee on Health and Human Services and Criminal Justice. His career in the Senate has earned praise from his colleagues, in both the legislature and other branches of government throughout the nation. In 1993 Mr. Silver was elected Chairman of the Southern Legislative Conference (17 Southern States) of the Council of State Governments. Most recently, a new prescription drug plan of Medicare-eligible senior citizens in the State of Florida has been named “Silver Saver” in his honor. Since his retirement from the Senate in 2002, Mr. Silver also functions as President of his own consulting firm (Ron Silver & Associates) and maintains his law practice in Miami Beach, Florida. Mr. Silver is married with two children and three grandchildren.

 

James F. Murphy, Independent Director, brings more than 40 years of investigative and consulting experience as the Founder and President of Sutton Associates. From 1980 to 1984, Mr. Murphy was an Assistant Special Agent in Charge with the Federal Bureau of Investigation, responsible for a territory encompassing more than seven million people. His investigative specialties included organized crime, white-collar crime, labor racketeering and political corruption. From 1976 to 1980, Mr. Murphy was assigned to the Office of Planning and Evaluation at FBI headquarters, Washington, D.C. In this capacity, he evaluated and recommended changes in the FBI’s administrative and investigative programs. Since entering the private sector in 1984, Mr. Murphy has advanced the industry by developing systematic and professional protocols for performing due diligence, as well as other investigative services.

 

Board Committees

 

We have established an audit committee, compensation committee, or nominating committee. With one of the independent Directors sitting as chair of each committee. Mr. Ron Silver is Chairman of the Nominating Committee, Mr. James Murphy is Chairman of the Audit Committee, and Mr. Alger Boyer is Chairman of the Compensation Committee.

 

Family Relationships

 

There are no familial relationships between any of our officers and directors.

 

Director or Officer Involvement in Certain Legal Proceedings

 

Our current directors and executive officers have not been involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.

 

Director Independence

 

The Company is not currently listed on any national securities exchange that has a requirement that the board of directors be independent. However, in anticipation of a possible exchange up listing, and in an effort toward better Board oversight, the company has engaged three independent Directors making the independent outside directors a majority on the Board of Directors.

 

Code of Ethics

 

We have adopted a Code of Ethics that applies to all of our employees and officers, and the members of our Board of Directors. This Code of Ethics is posted on the Company’s website www.canbiola.com and applies to all executive officers including CEO, CFO and COO.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on our review of the reports filed by Reporting Persons, we believe that, during the year ended December 31, 2020, the following Reporting Persons did not meet all applicable Section 16(a) filing requirements: (i) Stanley Teeple, (ii) David Posel, and (iii Phil Scala. (iv.) Frederick Alger Boyer, (v.) Ronald Silver, (vi) James Murphy, (vi.) Pasquale Ferro, (vii.) Andrew Holtmeyer, (viii) Marco Alfonsi. Otherwise, we believe that the Reporting Persons met such filing requirements.

 

16

 

 

Item 11. Executive Compensation

 

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers and directors for all services rendered in all capacities to us during the previous two fiscal years, as of December 31, 2021.

 

Name and principal position   Year     Salary     Bonus     Stock awards     Option awards     Non-equity incentive plan comp.     Non-qualified deferred comp. earnings     All other comp.     Total  
Marco Alfonsi (1)     2020     $ 112,500     $ 0     $ 0     $ 93,906     $ 0     $ 0     $ 0     $ 206,406  
      2021     $ 107,142     $ 0     $ 2,512,500     $ 100,000     $ 0     $ 0     $ 0     $ 2,719,642  
Stanley L. Teeple (2)     2020     $ 112,500     $ 0     $ 469,301     $ 93,906     $ 0     $ 0     $ 0     $ 675,707  
      2021     $ 90,000     $ 0     $ 2,512,500     $ 100,000     $ 0     $ 0     $ 0     $ 2,702,500  
Pasquale Ferro (3)     2020     $ 112,500     $ 0     $ 528,870     $ 93,906     $ 0     $ 0     $ 0     $ 735,276  
      2021     $ 98,654     $ 0     $ 2,512,500     $ 100,000     $ 0     $ 0     $ 0     $ 2,711,154  
Phil Scala (4)     2020     $ 0     $ 0     $ 0     $ 93,906     $ 0     $ 0     $ 0     $ 93,906  
      2021     $

52,000

    $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $

52,000

 

 

(1) Pursuant to an employment agreement entered on or around May 14, 2015, Marco Alfonsi was entitled to receive compensation of $6,000 per month through September 31, 2017 when the contract expired. On or around October 3, 2017, the Company entered into a new employment agreement with Mr. Alfonsi whereby he was entitled to receive $10,000 per month for a period of three years. Mr. Alfonsi also received one share of Series A Preferred Stock upon his execution of the new agreement. In addition, on or around October 4, 2017, the Company authorized the issuance of an additional two shares of Series A Preferred Stock to Mr. Alfonsi in consideration for cancellation of approximately $120,000 of deferred income owed to Mr. Alfonsi. The Company entered into a new employment agreement dated October 21, 2018 Mr. Alfonsi, pursuant to which Mr. Alfonsi agreed to continue to serve as the Company’s Chief Executive Officer (“CEO”) and accept appointment as Chairman of the Board of Directors (“Chairman”) for an initial term of four (4) years. He is entitled to receive $15,000 per month and other compensation under the new agreement. On December 28, 2020, Marco Alfonsi signed a three year Employment Agreement. Under that agreement, he is to receive a i) base salary of fifteen thousand dollars ($15,000.00) per month, ii) is eligible to receive cash and or stock bonuses, iii) shall receive a stock bonus in accordance with the Company’s Incentive Stock Option Plan (“ISOP”) in an amount of one-hundred thousand dollars ($100,000) per year of the Agreement, iv) 200 shares of the Company’s Series C Preferred stock, and v) usual and customary benefits including expense reimbursement, health and life insurance plan reimbursements and allowances.

 

(2) Pursuant to an employment agreement entered on or around October 15, 2018, Mr. Teeple serves as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The Agreement also provided for compensation to Mr. Teeple of $15,000 cash per month and the issuance of 1 share of Series A Preferred Stock upon execution of the Agreement. The fair value of the Series A preferred share is $578,000 and has a conversion vesting (but not voting) period of four years. An additional three shares of Series A Preferred Stock were issued in April 2019 per a new employment Agreement. The fair value of the Series A Preferred share issued in April 2019 is $992,250 and has a conversion (but not voting) vesting period of three years. In 2020 and 2019, the amortized portion of Series A preferred shares is $469,301 and $372,667, respectively. On December 28, 2020, Stanley Teeple signed a new three-year Employment Agreement. Under that agreement, he is to receive a i) base salary of fifteen thousand dollars ($15,000.00) per month, ii) is eligible to receive cash and or stock bonuses, iii) shall receive a stock bonus in accordance with the Company’s ISOP in an amount of one-hundred thousand dollars ($100,000) per year of the Agreement, iv) 200 shares of the Company’s Series C Preferred stock, and v) usual and customary benefits including expense reimbursement, health and life insurance plan reimbursements and allowances.

 

17

 

 

(3) On December 28, 2018, the Company executed an Executive Service Agreement (“Ferro Agreement”) with Pasquale Ferro. The Ferro Agreement provides that Mr. Ferro serves as the President of Pure Health Products, LLC for a term of 4 years. The Ferro Agreement also provides for compensation to Mr. Ferro of $15,000 cash per month and the issuance of 5 shares of Series A Preferred Stock upon execution of the Ferro Agreement. The fair value of the Series A preferred shares is $2,109,700 and has a conversion (but not voting) vesting period of four years. In 2019, the amortized portion of Series A preferred stock is $527,425. On December 28, 2020, Pasquale Ferro signed a three year Employment Agreement. Under that agreement, he is to receive a i) base salary of fifteen thousand dollars ($15,000.00) per month, ii) is eligible to receive cash and or stock bonuses, iii) shall receive a stock bonus in accordance with the Company’s ISOP in an amount of one-hundred thousand dollars ($100,000) per year of the Agreement, iv) 200 shares of the Company’s Series C Preferred stock, and v) usual and customary benefits including expense reimbursement, health and life insurance plan reimbursements and allowances.

 

(4) On October 11, 2019, the Company executed an Executive Service Agreement (“Scala Agreement”) with Phil Scala. The Scala Agreement provides that Mr. Scala serves as the Interim Chief Operating Officer for a term of 90 days. The Scala Agreement also provides for compensation to Mr. Scala of $2,500 cash per month. On January 1, 2020, Scala and the Company extended the engagement until March 31, 2020. On December 28, 2020, Phil Scala signed a three-year Employment Agreement. Under that agreement, he is to receive a i) base salary of fifty-two thousand dollars per year, ii) is eligible to receive cash and or stock bonuses, iii) shall receive a stock bonus in accordance with the Company’s ISOP in an amount of one-hundred thousand dollars ($100,000), iv) 20 shares of the Company’s Series C Preferred stock, and v) usual and customary benefits including expense reimbursement, health and life insurance plan reimbursements and allowances.

 

As of 12-31-2020, there were Incentive Stock Option Awards issued to Marco Alfonsi, Pasquale Ferro, Stanley Teeple, and Phil Scala in the amount of $100,000 each. The Options were issued 12/29/2020 under the ISO Plan, at a strike price of $.361 per share for 277,008 shares for each of the 4 persons named.

 

18

 

 

The table below summarizes all compensation awarded to, earned by, or paid to our non-interested directors for all services rendered in all capacities to us during the previous two fiscal years, as of December 31, 2020.

 

Non-Interested Director Summary Compensation Table
Name and principal position   Year     Fees Earned or Paid in Cash    

Stock awards

(1)

    Option awards (2)     Non-equity incentive plan comp.     Non-qualified deferred comp. earnings     All other com.     Total  
Frederick A. Boyer     2020     $ 0     $ 8,870     $ 0     $ 0     $ 0     $ 0     $ 0  
Director     2021     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
Ronald Silver     2020     $ 0     $ 4,650     $ 5,625     $ 0     $ 0     $ 0     $ 5,625  
Director     2021     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
James F. Murphy     2020     $ 0     $ 8,870     $ 0     $ 0     $ 0     $ 0     $ 0  
Director     2021     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

 

  1) In September of 2020, both Boyer and Murphy were issued 10,000 each and in December 2020 both Boyer and Murphy were issued an additional 10,000 common shares each. Director Silver was issued 10,000 shares in September 2020.
  2) As of December 31, 2020, Directors Boyer, Silver and Murphy each owned 10 thousand options to exercise and purchase stock at $.30 at any time until 2023. In 2020, Mr. Silver was issued 12,500 vested options to exercise and purchase stock at $.40 at any time until 2025.

 

No director has received cash compensation for their directorship. We do have a compensation committee and compensation for our directors and officers is determined by our board of directors.

 

We reimburse Non-Employee Directors for actual out-of-pocket costs incurred to attend board meetings. No additional compensation is paid for attendance in person or by telephone at board meetings.

 

The table below summarizes all outstanding equity awards for officers, as of December 31, 2021.

 

Open for table

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following tables set forth the ownership, as of March 25, 2022, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding voting stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control. The Company’s principal office is the business address for each of the named shareholders.

 

Name   Title   Number of Common
Shares
    % of Common Shares     Number of Series D Preferred Shares     % of Series D Preferred Shares     % of
Eligible Votes
    Number of Warrants/Options currently exercisable or exercisable in the next 60 days(1)  
Marco Alfonsi   CEO, Director     357,650       12.24 %     600       30.77 %     16.51 %     18,467  
Stanley L. Teeple   CFO, Director     342,485       10.29 %     600       30.77 %     16.18 %     19,334  
Phil Scala   Interim COO     188       0.006 %     150       7.69 %     2.18 %     18,467  
Frederick A. Boyer   Director     8,001       0.241 %     0       0       0.241 %     667  
Ronald Silver   Director     7,780       0.234 %     0       0       0.234 %     1,500  
James F. Murphy   Director     8,001       0.241 %     0       0       0.241 %     667  
All officers and directors as a group [6 persons]         724,105       22.01 %     1,350       69.23 %     35.39 %     77,369  
Pasquale Ferro   President, Pure Health Products     340,307       10.78 %     600       30.77 %     16.13       18,467  
                                                     
White Hair Solutions , LLC   Shareholder     334,332       10.05 %     0       0       7.28          

 

  (1)

Shares of common stock subject to stock options or warrants currently exercisable or exercisable within 60 days of February 8, 2022 are deemed to be outstanding for computing the percentage ownership of the person holding such options or warrants and the percentage ownership of any group of which the holder is a member, but are not deemed outstanding for computing the percentage ownership of any other person.

 

There are 3,289,702 shares of common stock outstanding as of March 13,2022, 1,950 Series D preferred stock issued and outstanding, which in aggregate represent 1.300,000 votes and are non-convertible. There is a total of approximately 4,589,702 eligible to be cast in any Company vote as of March 13, 2022.

 

(1) As of March 15, 2022, Marco, Alfonsi owns approximately 5,197,998 shares of common stock. In addition to the listed shares, five adult members of Mr. Alfonsi’s family hold an aggregate of 42,343 shares of common stock, which shares have not been included in the above calculations.

 

The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities.

 

Except as otherwise indicated and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. Unless stated otherwise, the business address for these shareholders is 960 South Broadway, Suite 120, Hicksville, NY 11801.

 

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Item 13. Certain Relationships and Related Party Transactions, and Director Independence

 

Can B̅ Corp.’s Corporate Governance Guidelines establish standards for evaluating Director independence and requires that a majority of Directors be independent. The Board determines the independence of each Director under Nasdaq governance standards. Those standards identify the types of relationships that, if material, could impair independence. The Board determined that, under the Nasdaq listing standards, the following non-employee Directors are independent: Frederick A. Boyer, Ronald Silver and James F. Murphy. Our non-independent directors are Marco Alfonsi and Stanley L. Teeple.

 

Except as described herein (or within the section entitled Executive Compensation of this report), none of the following parties (each a “Related Party”) has, in our fiscal years ended 2019 and 2020, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:

 

  any of our directors or officers;
  any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; or
  any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the above persons.

 

LI Accounting Associates, LLC (“LIA”), an entity controlled by a relative of the Managing Member PHP, is a vendor of Can B̅ Corp. As of December 31, 2021, the Company had accounts payable due to LIA of $5,000. For the twelve months ended December 31, 2021, the Company had expenses to LIA of $28,100.

 

Pasquale Ferro, President of Pure Health Products LLC, manages the R&D and manufacturing of the Company products sold via other subsidiary companies. Mr. Ferro is also a substantial shareholder of the Company but receives no direct compensation from Can B, Corp. other than outlined in his Employment Agreement.

 

In 2020, the Company entered into a loan payable to an executive officer of Pure Health Products of the Company with a principal balance of $224,000. The loan bore interest at 12% per annum and was due in December 2020. The loan remains unpaid but current.

 

During the twelve months ended December 31, 2021, we had products and service sales to related parties totaling $0.

 

Item 14. Principal Accounting Fees and Services

 

The following table sets forth fees billed to us by BF Borgers CPA PC, our independent registered public accounting firm and BKMR, LLC, our previous independent registered public accounting firm during the fiscal years ended December 31, 2021 and December 31, 2020 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as audit fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.

 

    December 31, 2021     December 31, 2020  
             
Audit Fees   $ 103,312     $ 99,233  
Audited Related Fees   $ 0     $ 0  
Tax Fees   $ 0     $ 0  
All Other Fees   $ 0     $ 0  

 

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PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

Exhibits Schedule

 

The following exhibits are filed with this Annual Report:

 

Exhibit   Description
2.1   Share Purchase Agreement with Prosperity Systems, Inc., dated January 5, 2015(2)
2.2   Membership Purchase Agreement with Pure Health Products(6)
2.3   Green Grow Stock Purchase Agreement(4)
2.4   Green Grow Modification Agreement(1)
3.1   Articles of Incorporation, as amended(1)
3.2   Bylaws(2)
4.1   Articles of Amendment designating Series A Preferred Stock rights, as amended(9)
4.2   Articles of Amendment designating Series B Preferred Stock rights(1)
4.3   Articles of Amendment designating Series C Preferred Stock rights(7)
4.4   Articles of Amendment designating Series D Preferred Stock rights(10)
10.1   Employment Agreement with Marco Alfonsi dated December 29, 2020(10)
10.2   Employment Agreement with Stanley L. Teeple dated December 29, 2020(10)
10.3   Employment Agreement with Pasquale Ferro dated December 29, 2020(10)
10.4   Employment Agreement with Phil Scala dated December 29, 2020(10)
10.5   Commission Agreement with Andrew Holtmeyer(10)

 

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10.6   Employment Agreement with Bradley Lebsock(10)
10.7   Memorandum of Understanding with Sam International and ZetrOZ Systems LLC(3)
10.8   Can B̅ Corp. 2020 Incentive Stock Option Plan(8)
10.9   Arena Securities Purchase Agreement(10)
10.10   ASOF Original Issue Discount Senior Secured Convertible Promissory Note(10)
10.11   ASOF Warrant to Purchase Common Stock(10)
10.12   ASOP Original Issue Discount Senior Secured Convertible Promissory Note(10)
10.14   ASOP Warrant to Purchase Common Stock(10)
10.15   Arena Security Agreement(10)
10.16   Arena Intellectual Property Security Agreement(10)
10.17   Arena Registration Rights Agreement(10)
10.18   Arena Holding Escrow Agreement(10)
10.19   Arena Guaranty Agreement from Company Subsidiaries(10)
10.20   Amendment to 2020 ASOF Promissory Note(11)
10.21   Amendment to 2020 ASOP Promissory Note(11)
10.22   2021 Arena Securities Purchase Agreement(11)
10.23   2021 ASOF Original Issue Discount Senior Secured Convertible Promissory Note(11)
10.24   2021 ASOF Warrant to Purchase Common Stock(11)
10.25   2021 ASOP Original Issue Discount Senior Secured Convertible Promissory Note(11)
10.26   2021 ASOP Warrant to Purchase Common Stock(11)
10.27   2021 Arena Registration Rights Agreement(11)
10.28   2021 Addendum to Arena Security Agreement(11)
10.29   2021 Addendum to Arena Intellectual Property Security Agreement(11)
10.30   2021 Addendum to Arena Guaranty Agreement from Company Subsidiaries(11)
10.31   Asset Acquisition Agreement with Imbibe(10)
10.32   Equipment Acquisition Agreement with TWS(12)
10.33   Promissory Note to TWS(12)
10.34   Asset Purchase Agreement with MCB(12)
10.35   Commercial Lease with Makers Developments LLC(13)
10.36   Single-Tenant NNN Lease Agreement with CS2 Real Estate Holdings, LLC(13)
10.37   Commercial Lease with Red Road Business Park(13)

 

22

 

 

10.38   Asset Acquisition Agreement with various Sellers (Botanical Biotech)(10)
10.39   PrimeX Distribution Agreement
10.40   American Development Partners development agreement
10.41   Mast Hill Securities Purchase and Related Agreements(14)
10.42   Blue Lake Partners Securities Purchase and Related Agreements(14)
14.1   Code of Ethics(1)
21.1   List of Subsidiaries(10)
31.1   Chief Executive Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Chief Financial Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema
101.CAL   Inline XBRL Taxonomy Extension Calculation
101.DEF   Inline XBRL Taxonomy Extension Definition
101.LAB   Inline XBRL Taxonomy Extension Labels
101.PRE   Inline XBRL Taxonomy Extension Presentation

 

(1) Filed with the Annual Report on Form 10-K filed with the SEC on April 2, 2020 and incorporated herein by reference.
(2) Filed with the Form S-1 Registration Statement filed with the SEC on December 2, 2015 and incorporated herein by reference.
(3) Filed with the Current Report on Form 8-K filed with the SEC on January 30, 2019 and incorporated herein by reference.
(4) Filed with the Current Report on Form 8-K filed with the SEC on December 6, 2019 and incorporated herein by reference.
(5) Filed with the Current Report on Form 8-K filed with the SEC on February 18, 2020 and incorporated herein by reference.
(6) Filed with the Current Report on Form 8-K filed with the SEC on January 15, 2019 and incorporated herein by reference.
(7) Filed with the Form 1-A/A, Part II, filed with the SEC on July 17, 2020 and incorporated herein by reference.
(8) Filed with the Form 1-A POS, Part II, filed with the SEC on September 11, 2020 and incorporated herein by reference.
(9) Filed with the Current Report on Form 8-K filed with the SEC on November 23, 2020 and incorporated herein by reference.
(10) Filed with the Annual Report on Form 10-K filed with the SEC on April 14, 2021 and incorporated herein by reference.
(11) Filed with the Quarterly Report on Form 10-Q filed with the SEC on May 21, 2021 and incorporated herein by reference.
(12) Filed with the Current Report on Form 8-K filed with the SEC on August 17, 2021 and incorporated herein by reference.

(13)

Filed with the Current Report on Form 8-K filed with the SEC on September 1, 2021 and incorporated herein by reference.

(14) Filed with the Current Report on Form 8-K filed with the SEC on March 31, 2022 and incorporated herein by reference

 

 

23

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Can B̅ Corp.
     
Date: April 15, 2022 By: /s/ Marco Alfonsi
  Name: Marco Alfonsi
  Title: Chief Executive Officer
    (Principal Executive Officer and Principal Accounting Officer)
     
Date: April 15, 2022 By: /s/ Stanley L. Teeple
  Name: Stanley L. Teeple
  Title: Chief Financial Officer

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Marco Alfonsi   Chief Executive Officer, Director and Chairman   April 15, 2022
Marco Alfonsi   (Principal Executive Officer)    
         
/s/ Stanley L. Teeple   Secretary, CFO and Director   April 15, 2022
Stanley L. Teeple   (Principal Financial and Accounting Officer)    
         
/s/ Frederick Alger Boyer Jr.   Independent Director   April 15, 2022
Frederick Alger Boyer Jr.        
         
/s/ Ron Silver   Independent Director   April 15, 2022
Ron Silver        
       
/s/ James Murphy   Independent Director   April 15, 2022
James Murphy        

 

24

 

 

Can B Corp. and Subsidiaries  
Index to Financial Statements  
   
Consolidated Financial Statements  
   
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets F-3
   
Consolidated Statements of Operations F-4
   
Consolidated Statements of Stockholders’ Equity F-5
   
Consolidated Statements of Cash Flows F-6
   
Notes to Consolidated Financial Statements. F-7

 

F- 1
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the shareholders and the board of directors of Can B Corp.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Can B Corp. as of December 31, 2021 and 2020, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Critical Audit Matter

 

Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

 

We determined that there are no critical audit matters.

 

/S/ BF Borgers CPA PC

We have served as the Company’s auditor since 2021

Lakewood, CO

April 15, 2022

PCAOB No. 5041

 

F- 2
 

 

Can B̅ Corp. and Subsidiaries

Consolidated Balance Sheets

 

    December 31,     December 31,  
    2021     2020  
Assets                
Current assets:                
Cash and cash equivalents   $ 449,001     $ 457,798  
Accounts receivable, less allowance for doubtful accounts of $547,241 and $485,848, respectively     3,646,677       2,003,064  
Inventory     2,553,438       344,954  
Note receivable     2,898       2,898  
Prepaid expenses and other current assets     1,625       8,152  
Total current assets     6,653,639       2,816,866  
                 
Property and equipment, net     7,052,926       994,979  
                 
Other assets:                
Deposits     165,787       21,287  
Intangible assets, net     369,015       -  
Right of use assets, net     2,220,134       58,174  
Other noncurrent assets     13,139       20,315  
Total other assets     2,768,075       99,776  
                 
Total assets   $ 16,474,640     $ 3,911,621  
                 
Liabilities and Stockholders’ Equity                
Current liabilities:                
Accounts payable   $ 1,163,284     $ 153,640  
Accrued expenses     2,407,528       200,495  
Due to related party     218,273       -  
Notes and loans payable, net     4,865,749       1,827,531  
Operating lease liability - current     808,223       43,506  
Total current liabilities     9,463,057       2,225,172  
                 
Long-term liabilities:                
Notes and loans payable, net     -       194,940  
Operating lease liability - noncurrent     1,392,068       15,492  
Total long-term liabilities     1,392,068       210,432  
                 
Total liabilities   $ 10,855,125     $ 2,435,604  
                 
Commitments and contingencies (Note 13)     -       -  
                 
Stockholders’ equity:                
Preferred stock, authorized 5,000,000 shares:                
Series A Preferred stock, no par value: 20 shares authorized, issued and outstanding     28,440,000       28,440,000  
Series B Preferred stock, $0.001 par value: 500,000 shares authorized, 0 issued and outstanding     -       -  
Series C Preferred stock, $0.001 par value: 2,000 shares authorized, 23 issued and outstanding     207,000       5,607,000  
Series D Preferred stock, $0.001 par value: 4,000 shares authorized, 1,950 issued and outstanding     2       -  
Common stock, no par value; 1,500,000,000 shares authorized, 2,834,756 and 369,639 issued and outstanding at December 31, 2021 and 2020, respectively     49,676,847       30,874,270  
Treasury stock     (572,678 )     (572,678 )
Additional paid-in capital     5,635,003       2,724,689  
Accumulated deficit     (77,766,659 )     (65,597,264 )
Total stockholders’ equity     5,619,515       1,476,017  
                 
Total liabilities and stockholders’ equity   $ 16,474,640     $ 3,911,621  

 

See notes to consolidated financial statements

 

F- 3
 

 

Can B̅ Corp. and Subsidiaries

Consolidated Statement of Operations

 

    2021     2020  
    Year Ended  
    December 31,  
    2021     2020  
Revenues                
Product sales   $ 4,156,281     $ 1,708,419  
Service revenue     447,548       1,250  
Total revenues     4,603,829       1,709,669  
Cost of revenues     1,611,730       278,062  
Gross profit     2,992,099       1,431,607  
                 
Operating expenses     13,258,106       8,968,408  
                 
Loss from operations     (10,266,007 )     (7,536,801 )
                 
Other income (expense):                
Other income     2,991       10,000  
Gain from forgiveness of debt     196,889       -  
Interest expense     (2,102,193 )     (934,683 )
Other expense     -       (414,116 )
Other expense     (1,902,313 )     (1,338,799 )
                 
Loss before provision for income taxes     (12,168,320 )     (8,875,600 )
                 
Provision for income taxes     1,075       3,304  
                 
Net loss   $ (12,169,395 )   $ (8,878,904 )
                 
Loss per share - basic and diluted   $ (9.06 )   $ (37.68 )
Weighted average shares outstanding - basic and diluted     1,343,219       235,649  

 

See notes to consolidated financial statements

 

F- 4
 

 

Can B̅ Corp. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

 

                                                                                           
    Series A     Series B     Series C     Series D                       Additional              
    Preferred Stock     Preferred Stock     Preferred Stock     Preferred Stock     Common Stock     Treasury Stock     Paid-in     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     Total  
Balance, December 31, 2019     20     $ 5,539,174       -     $ -     -     $ -       -     $  -       178,729     $ 24,323,712       -     $ -     $ 1,456,176     $ (24,669,513 )   $ 6,649,549  
                                                                                                                         
Opening balance adjustments           22,900,826       -       -     623       5,607,000     -     -       -       3,778,521        -       -       -       (32,048,847     237,500   
                                                                                                                         
Issuance of common stock for services rendered     -       -       -       -     -       -       -       -       62,747       1,568,109       -       -       -       -       1,568,109  
                                                                                                                         
Issuance of common stock - reverse stock split rounding     -       -       -       -       -       -       -       -       164       -       -       -       -       -       -  
                                                                                                                         
Issuance of common stock pursuant to note agreements     -       -       -       -       -       -       -       -       59,000       575,537       -       -       -       -       575,537  
                                                                                                                         
Issuance of common stock for acquisition of intangible assets     -       -       -       -       -       -       -       -       19,000       217,012       -       -       -       -       217,012  
                                                                                                                         
Issuance of common stock for compensation     -       -       -       -       -       -       -       -       2,000       41,625       -       -       -       -       41,625  
                                                                                                                         
Issuance of common stock in lieu of interest payment     -       -       -       -       -       -       -       -       12,333       77,775       -       -       -       -       77,775  
                                                                                                                         
Issuance of common stock for inventory     -       -       -       -       -       -       -       -       31,914       491,979       -       -       -       -       491,979  
                                                                                                                         
Treasury stock acquired     -       -       -       -       -       -       -       -       (36,248 )     -       36,248       (560,000 )     -       -       (560,000 )
                                                                                                                         
Sale of common stock     -       -       -       -       -       -       -       -       40,000       300,000       -       -       -       -       300,000  
                                                                                                                         
Shi Farms shares     -       -       -       -       -       -       -       -       -       (500,000 )     -       (12,678 )     -       -       (512,678 )
                                                                                                                         
Stock-based compensation     -       -       -       -       -       -       -       -       -       -       -       -       540,413       -       540,413  
                                                                                                                         
Issuance of common stock warrants in connection with convertible promissory notes payable     -       -       -       -       -       -       -       -       -       -       -       -       728,100       -       728,100  
                                                                                                                         
Net loss     -       -       -       -       -       -       -       -       -       -       -       -       -       (8,878,904 )     (8,878,904 )
                                                                                                                         
Balance, December 31, 2020     20     $ 28,440,000       -     $ -       623     $ 5,607,000       -     $ -       369,639     $ 30,874,270       36,248     $ (572,678 )   $ 2,724,689     $ (65,597,264 )   $ 1,476,017  
                                                                                                                         
Issuance of preferred stock     -       -       -       -       -       -       1,950       2       -       -       -       -       -       -       2  
                                                                                                                         
Conversion of Series C Preferred stock to Common stock     -       -       -       -       (600 )     (5,400,000 )     -       -       1,000,000       5,400,000       -       -       -       -       -  
                                                                                                                         
Sale of common stock     -       -       -       -       -       -       -       -       814,336       6,555,453       -       -       -       -       6,555,453  
                                                                                                                         
Issuance of common stock in lieu of note repayments     -       -       -       -       -       -       -       -       77,017       537,748       -       -       -       -       537,748