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As filed with the Securities and Exchange Commission on June 30, 2022

 

Registration Statement No. 333-260882

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

AMENDMENT NO. 4

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

CAN B CORP.

(Name of small business issuer in our charter)

 

Florida   0001509957   20-3624118

(State or other jurisdiction

of incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

IRS Employer

Identification Number

 

960 South Broadway, Suite 120

Hicksville, NY

  11801
 (Address of principal executive offices)   (Zip Code)

 

Telephone: (516) 595-9544

 

Marco Alfonsi, CEO

960 South Broadway, Suite 120

Hicksville, NY 11801

Telephone: (516) 595-9544

(Name, address and telephone number of agent for service)

 

Copies to:

 

Arden Anderson, Esq.   Robert F. Charron, Esq.

Dodson Robinette PLLC dba

Crowdfunding Lawyers                     

 

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

1431 E. McKinney St. Suite 130   New York, New York 10105
Denton, TX 76209   (212) 370-1300
(940) 205-5180    

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

 

Large accelerated filer Accelerated Filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

We hereby amend this registration statement on such date or dates as may be necessary to delay our effective date until we will file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 

 

 

 

 

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission, of which this prospectus is a part, shall have been declared effective.

 

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION  DATED June 30, 2022

 

 

 

CAN B CORP.

Up to 2,029,703 Class A Units consisting of common stock and Series X Warrants and

Up to 2,029,703 Class B Units consisting of pre-funded Series Y Warrants and Series X Warrants

 

Can B Corp, a Florida corporation (the “Company,” “us,” “we,” or “our”) is offering up to 2,029,703 Class A Units, with each Class A Unit consisting of one share of common stock, Nil par value per share, and one Series X Warrant (“Series X Warrant”) to purchase one share of common stock (together with the share of common stock underlying each Series X Warrant, the “Class A Units”) at an assumed public offering price of $5.05 per Class A Unit, which is the last reported sale price of our common stock OTC Markets Group OTCQB market as of May 20, 2022.

 

We are also offering to those purchasers whose purchase of Class A Units in this offering would result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock following the consummation of this offering, the opportunity to purchase, if such purchasers so choose, in lieu of the number of Class A Units that would result in ownership in excess of 4.99% (or, at the election of the purchaser, 9.99%), up to 2,029,703 Class B Units. Each Class B Unit consists of one pre-funded Series Y Warrant (“Series Y Warrants,” and together with the Series X Warrants, the “Warrants”) to purchase one share of common stock and one Series X Warrant (together with the share of common stock underlying each Series Y Warrant and each Series X Warrant, the “Class B Units” and, together with the Class A Units, the “Units”) at an assumed public offering price of $5.04999 per Class B Unit, which is the assumed public offering price per Class A Unit minus $0.0001 (the offering of the units to the public, the “Offering”).

 

Each Series Y Warrant included in the Class B Units entitles its holder to purchase one share of common stock at an exercise price per share of $0.0001. Each Series X Warrant included in the Class B Units entitles its holder to purchase one share of common stock at an assumed exercise price per share of $5.05 (which is the last reported sale price of our common stock OTC Markets Group OTCQB market as of May 20, 2022). The number of Class A Units sold in the offering shall be reduced on a one-to-one basis for each Class B Unit sold.

 

The Class A Units and Class B Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The shares of common stock and the Warrants comprising such units are immediately separable and will be issued separately despite being purchased together in this Offering. The Series X Warrants offered hereby may be exercised from time to time beginning on the issuance date and expire on the five-year anniversary of the issuance date. The Series Y Warrants offered hereby may be exercised from time to time beginning on the issuance date and until all of the Series Y Warrants are exercised in full.

 

We have applied to list our common stock and Series X Warrants on the Nasdaq Capital Market under the symbols “CANB” and “CANBW”, respectively. There is no assurance that our listing applications will be approved. We will not complete this Offering unless our applications are approved. There is no established trading market for the pre-funded warrants, and we do not expect a market to develop. We do not intend to apply for a listing for the pre-funded warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the pre-funded warrants will be limited.

 

This offering is highly speculative and these securities involve a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. See “Risk Factors” on Page 8.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

    Per Class A
Unit
    Per Class B
Unit
    Total  
Public offering price(1)   $       $       $    
Underwriting discounts and commissions(2)   $       $       $    
Proceeds to us, before expenses   $       $       $    

 

(1) The public offering price and underwriting discount corresponds to (a) in respect of the Class A Units (i) a public offering price per share of common stock of $       and (ii) a public offering price per Series X Warrant of $       and (b) in respect of the Class B Units (i) a public offering price per Series Y Warrant of $       and (ii) a public offering price per Series X Warrant of $       .
(2) Represents an underwriting discount and commissions equal to 7.0% per Unit (or $           per Unit), which is the underwriting discount we have agreed to pay to the underwriters. Does not include a management fee equal to 1.0% of the total gross proceeds from the offering and accountable expenses up to $150,000 payable to H.C. Wainwright & Co., LLC as representative of the underwriters. See “Underwriting” beginning on page 19 of this prospectus for additional information regarding underwriting compensation.

 

In addition to the underwriting discounts listed above and the management fee and accountable expense allowance described in the footnote, we have agreed to issue upon the closing of this offering to H.C Wainwright & Co., LLC., as representative of the underwriters, warrants that will expire on the 5th anniversary of the commencement of sales in this offering entitling the representative to purchase 7.0% of the total number of shares of common stock and/or pre-funded warrants sold in this offering. The registration statement of which this prospectus is a part also covers the representative’s warrants and the shares of common stock issuable upon the exercise thereof. For additional information regarding our arrangement with the underwriters, please see “Underwriting” beginning on page 19.

 

The Offering is being underwritten on a firm commitment basis. The underwriter may offer the securities from time to time to purchasers directly or through agents, through brokers in brokerage transactions on The Nasdaq Capital Market, to dealers in negotiated transactions or in a combination of such methods of sale, or otherwise, at fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices.

 

We have granted the representative an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional 279,546 shares of common stock and/or Series X Warrants on the same terms as the other shares and Series X Warrants being purchased by the underwriters from us (equal to 15% of the shares of common stock (including shares underlying the Series Y Warrants) and 15% of the Series X Warrants in the Offering).

 

H.C. Wainwright & Co.

 

This Prospectus is dated [*], 2022

 

 

 

 

TABLE OF CONTENTS

 

SUMMARY INFORMATION   5
     
RISK FACTORS   8
     
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS   17
     
USE OF PROCEEDS   18
     
DETERMINATION OF OFFERING PRICE   18
     
DILUTION   18
     
CAPITALIZATION   19
     
UNDERWRITING   19
     
DESCRIPTION OF SECURITIES   22
     
INTEREST OF NAMED EXPERTS   25
     
DESCRIPTION OF BUSINESS   25
     
DESCRIPTION OF PROPERTY   30
     
LEGAL PROCEEDINGS   30
     
MARKET PRICE, DIVIDENDS, AND RELATED STOCKHOLDER MATTERS   31
     
FINANCIAL STATEMENTS   F-1
     
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   33
     
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS   35
     
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS   36
     
EXECUTIVE AND DIRECTOR COMPENSATION   40
     
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES   44
     
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION   46
     
INDEMNIFICATION OF OFFICERS AND DIRECTORS   46
     
RECENT SALES OF UNREGISTERED SECURITIES   46
     
EXHIBITS   50
     
UNDERTAKINGS   51

 

 

 

 

We have prepared this prospectus as part of a registration statement that we filed with the SEC for our offering of securities. The registration statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC, together with additional information described below under “Additional Information.”

 

This prospectus is not an offer or solicitation relating to the securities in any jurisdiction in which such an offer or solicitation relating to the securities is not authorized. You should not consider this prospectus to be an offer or solicitation relating to the securities if the person making the offer or solicitation is not qualified to do so, or if it is unlawful for you to receive such an offer or solicitation.

 

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf. Neither we nor any underwriters have authorized any other person to provide you with any information different from that contained in this prospectus or information furnished by us upon request as described herein. The information contained in this prospectus is complete and accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or sale of our shares. This prospectus contains summaries of certain other documents, which summaries contain all material terms of the relevant documents and are believed to be accurate, but reference is hereby made to the full text of the actual documents for complete information concerning the rights and obligations of the parties thereto. Such information necessarily incorporates significant assumptions, as well as factual matters. All documents relating to this offering and related documents and agreements, if readily available to us, will be made available to a prospective investor or its representatives upon request.

 

4

 

 

SUMMARY INFORMATION

 

This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider. To understand this offering fully, you should carefully read the entire prospectus, including the section entitled “Risk Factors,” before making a decision to invest in our securities. Unless otherwise noted or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company,” and “CANB” refers to Can B Corp. together with its wholly owned subsidiaries. In instances where we refer emphatically to “Can B Corp.” or where we refer to a specific subsidiary of ours by name, we are referring only to that specific legal entity.

 

The Company

 

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

 

Around the first quarter of 2017, the Company began to transition into the health and wellness industry, offering products that incorporate hemp and hemp derivatives. On May 15, 2017, WRAP changed its name to “Canbiola, Inc.” On March 6, 2020 CANB changed its name again 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 Corp. effected a 1 for 300 reverse stock split of its common stock. As of February 14, 2022, the Company effectuated a 1 for 15 reverse stock split of its common stock. The accompanying consolidated financial statements retroactively reflect these stock splits.

 

Can B. Corp.’s shares of common stock are currently quoted on OTC Market’s OTCQB® Venture Market under the symbol “CANB.” We have applied to list our common stock and Series X Warrants on the Nasdaq Capital Market under the symbols “CANB” and “CANBW”, respectively. There is no assurance that our listing applications will be approved. We will not complete this offering unless our applications are approved. There is no established trading market for the pre-funded warrants, and we do not expect a market to develop. We do not intend to apply for a listing for the pre-funded warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the pre-funded warrants will be limited.

 

Our principal executive offices are located at 960 South Broadway, Suite 120, Hicksville NY 11801 and our telephone number is 516-595-9544.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred a net loss of $10,266,007 during the year ended December 31, 2021 and as of that date, had an accumulated deficit of $77,766,659. Due to recurring losses from operations and the accumulated deficit the Company has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

 

5

 

 

Business Overview

 

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

 

The Company’s primary business is the development, production and sale of products containing hemp derived cannabinoids, including, but not limited to, cannabidiol (“CBD”), cannabinol (“CBN”) cannabigerol (“CBG”), delta-8, and delta-10. The Company has five divisions: Pure Health Products (white label production, sales and operations, and lifestyle brand marketing), Hemp Operating Division (industrial hemp production, biomass and isolate processing, and R&D of cannabinoids), Green Grow Farms (licensed hemp growing and processing- inactive), Duramed (no fault, Medicare and workers’ comp durable medical equipment), and Imbibe Wellness Solutions (celebrity specific products and influencer branding, expected to launch 2022).

 

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.

 

Emerging Growth Company

 

We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:

 

  (a) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1.07 billion (as such amount is indexed for inflation every five years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;
     
  (b) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;
     
  (c) the date on which such issuer has, during the previous three-year period, issued more than $1.0 billion in nonconvertible debt; or
     
  (d) the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’

 

The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. Please refer to a discussion under “Risk Factors” of the effect on our financial statements of such election.

 

As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting. As an emerging growth company we are also exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes.

 

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

Investor Notes

 

The Company has recently raised $750,000 through the sale of convertible promissory notes to three unaffiliated investors. Each investor was given a 10% original issuance discount and warrants with 100% coverage of the amount of the notes. The Company may prepay the notes subject to a 10% prepayment penalty and must repay all of the notes if this registration statement is declared effective by the SEC and must repay at least 50% of the notes in the event of an alternative financing occurring after the Company has raised at least $1,250,000 in bridge financing. The Company has agreed to offer the investors the first right to participate in future financings, subject to certain exceptions.

 

On April 13, 2022, the Company entered into an amendment (“Amendment”) to certain transactional documents between the Company and Arena Special Opportunities Partners I, LP, a Delaware limited partnership (the “ASOP”) and Arena Special Opportunities Fund, LP, a Delaware limited partnership (“ASOF” and, collectively with ASOP, the “Holders”), whereby Holders agreed to extend the maturity date of certain promissory notes held by Holders to April 30, 2022, waive certain defaults under the related transactional documents, and agreed to provide consent to certain actions requiring Holder approval. In consideration for the foregoing, the Company agreed to pay Holders an aggregate of $300,000, payable upon closing of this offering. In addition, the Company has agreed to pay all interest due under the notes issued in 2020 in common stock and the notes issued in 2021 in cash upon such closing. The Company was also granted the option to further extend the maturity dates of the Holder’s notes for up to an additional two months, provided that for each month of extension, the Company will pay Holders $100,000, payable in the same manner as the above $300,000. The Company has informed the Holders of its intent to extend the maturity of the notes to June 30, 2022, for an additional $100,000 to be paid for by using a portion of the proceeds from the closing of this offering. In addition, on June 28, 2022, the Company and Holders executed an Exchange Agreement whereby the parties agreed that upon pricing of this offering following this Registration Statement being declared effective by the SEC, all principal, interest and fees due holders under its original $1,500,000 promissory note issued on or around May 17, 2021 (the “May 2021 Debt”) will be automatically exchanged for shares of common stock in the Company at a rate of $4.00 per share.

 

Accordingly, the Company intends to use partial proceeds from this offering to pay off the foregoing debt.

 

6

 

 

THE OFFERING

 

Securities Offered by Us  

Up to 2,029,703 Class A Units, with each Class A Unit consisting of one share of common stock, Nil par value per share, and one Series X Warrant to purchase one share of common stock at an assumed public offering price of $5.05 per Class A Unit, which is the last reported sale price of our common stock OTC Markets Group OTCQB™ market as of May 20, 2022.

 

We are also offering to those purchasers whose purchase of Class A Units in this offering would result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock following the consummation of this offering, the opportunity to purchase, if such purchasers so choose, in lieu of the number of Class A Units that would result in ownership in excess of 4.99% (or, at the election of the purchaser, 9.99%), up to 2,029,703 Class B Units. Each Class B Unit consists of one pre-funded Series Y Warrant to purchase one share of common stock and one Series X Warrant at an assumed public offering price of $5.04999 per Class B Unit, which is the assumed public offering price per Class A Unit minus $0.0001.

 

The number of Class A Units sold in the offering shall be reduced on a one-to-one basis for each Class B Unit sold.

     
Warrants to Purchase Common Stock Offered by Us  

Each Series Y Warrant included in the Class B Units entitles its holder to purchase one share of common stock at an exercise price per share of $0.0001. Each Series X Warrant included in the Units entitles its holder to purchase one share of common stock at an assumed exercise price per share of $5.05 (which is the last reported sale price of our common stock OTC Markets Group OTCQB market as of May 20, 2022. The Series X Warrants offered hereby may be exercised from time to time beginning on the issuance date and expire on the five-year anniversary of the issuance date. The Series Y Warrants offered hereby may be exercised from time to time beginning on the issuance date and until all of the Series Y Warrants are exercised in full.

 

We have applied to have the Series X Warrants listed on Nasdaq.

 

This prospectus also relates to the offering of the shares of our common stock issuable upon exercise of such Warrants.

     
Option to Purchase Additional Securities   The Offering is being underwritten on a firm commitment basis. We have granted to the underwriter a 30-day option to purchase up to ____ additional shares of common stock and/or ____ Series X Warrants at the public offering price, less underwriting discounts and commissions on the same terms as set forth in this prospectus (equal to 15% of the shares of common stock (including shares underlying the Series Y Warrants) and 15% of the Series X Warrants in the Offering).
     
Common Stock to be Outstanding Immediately After this Offering   As of May 20, 2022, there were approximately 3,325,814 shares of common stock issued and outstanding, 0 shares of Series A Preferred Stock, 0 shares of Series B Preferred Stock, 23 shares of Series C Preferred Stock, and 1,950 of Series D Preferred Stock issued and outstanding. Following this Offering, there will be 5,355,517 shares of common stock outstanding (assuming no Class B Units are sold and no exercise of the underwriters’ option to purchase additional securities and assuming no exercise of the Warrants).
     
Use of Proceeds   We estimate that the net proceeds to us from this offering, assuming the after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $9,230,000, assuming a public offering price of $5.05 per Unit, which was the last sale price of our common stock as reported on the OTCQB on May 20, 2022. In general, the Company will use net proceeds from this offering for operations, new product development, acquisitions, rent, repayment of debt, and working capital.
     
Risk Factors   An investment in our securities offered hereby is speculative and involves a high degree of risk. The Company and its business are subject to numerous risks, including, among others, those associated with development of the Company’s product candidates, technology development, the ability of the Company to obtain additional funds, and those associated with newer business enterprises. See the section titled “Risk Factors” elsewhere in this prospectus.
     
OTC Markets Venture Market Symbol   “CANB”
     
Proposed Nasdaq Capital Market Listing and Symbol  

We have applied for our common stock and Series X Warrants to be listed on The Nasdaq Capital Market under the symbols “CANB” and “CANBW”, respectively. The successful listing of our common stock and Series X Warrants on the Nasdaq is a condition of this Offering. However, there can be no assurance that Nasdaq will approve our listing applications. We will not complete this offering unless our applications are approved.

 

There is no established public trading market for the pre-funded warrants and we do not expect a market to develop. In addition, we do not intend to apply to list the pre-funded warrants on any national securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the pre-funded warrants will be limited.

 

7

 

 

RISK FACTORS

 

Investing in our securities involves a high degree of risk. Before investing in our securities, you should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including our consolidated financial statements and related notes. If any of the following risks materialize, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment.

 

Risks Related to this Offering and our Common Stock

 

We are subject to the reporting requirements of federal securities laws, which is expensive.

 

We are a public reporting company in the United States and, accordingly, subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders causes our expenses to be higher than they would be if we remained a privately-held company.

 

Our stock price may be volatile, which may result in losses to our stockholders.

 

The stock markets have experienced significant price and trading volume fluctuations, and the trading of our common stock has generally been very volatile and experienced sharp share-price and trading-volume changes. The trading price of our securities is likely to remain volatile and could fluctuate widely in response to many factors, including but not limited to the following, some of which are beyond our control:

 

  variations in our operating results;
     
  changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
     
  changes in operating and stock price performance of other companies in our industry;
     
  additions or departures of key personnel; and
     
  future sales of our common stock.

 

8

 

 

Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock.

 

In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

 

Our common stock is thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.

 

We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

 

The market price for our common stock may be particularly volatile given that we are a relatively small company and have experienced losses from operations that could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

 

We do not anticipate paying any cash dividends.

 

We presently do not anticipate that we will pay any dividends on any of our common stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our Board of Directors (the “Board”). We presently intend to retain all earnings to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.

 

Our common stock may be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.

 

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer, prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

 

We may need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.

 

We may require additional capital for the development and commercialization of our products and may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our stockholders. The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

 

9

 

 

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

 

Certain of our executive officers, directors and large stockholders own a significant percentage of our outstanding capital stock. Our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially own shares representing more than a majority of the eligible votes of the Company. Accordingly, our directors and executive officers have significant influence over our affairs due to their substantial ownership coupled with their positions on our management team and have substantial voting power to approve matters requiring the approval of our stockholders. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This concentration of ownership may prevent or discourage unsolicited acquisition proposals or offers for our common stock that some of our stockholders may believe is in their best interest.

 

If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.

 

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on the internal control over financial reporting. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, our management will be unable to conclude that our internal control over financial reporting is effective. Moreover, when we are no longer a smaller reporting company, our independent registered public accounting firm will be required to issue an attestation report on the effectiveness of our internal control over financial reporting. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.

 

If we are unable to conclude that our internal control over financial reporting is effective, or when we are no longer a smaller reporting company, if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting because we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures, which could cause the price of our common stock to decline. Internal control deficiencies could also result in a restatement of our financial results in the future. We have concluded that are internal controls have not been sufficient; however, we have begun to take steps to remediate such insufficiencies. We have communicated to our accounting review firm and audit that we have accomplished the following: (i) we have transitioned each operating subsidiary to a separate bookkeeping system (QuickBooks) and input data at each operating location on a daily basis vs. previously batching data and inputting at corporate office. Corporate then verifies data prior to accepting, (ii) we have a QuickBooks trained person with who inputs data on a real-time basis but not allowed at subsidiary level to access or make certain changes, (iii) we have installed for the hemp division companies (Botanical Biotech (Miami), TN Botanicals (TN), Co botanicals (CO) daily tracking procedures whereby every ounce and pound of raw materials (biomass or crude) is tracked by lot number from input to processing through to finished product, (iv) our accounts receivable tracking system, which is essentially our Duramed Division receivables, is now tracking by medical device unit number, by doctor, by location, by insurance billing company, and we have a far more refined software track and billing system than we did prior quarters, (v) we have consolidate banking to a master account with our primary bank (Investors Bank) by subsidiary and only have one independent subsidiary bank in TN for TN Botanicals which is managed for balances through Investors Bank, (vi) we have instituted a new procedure for any payables which requires double signatures to release any funds for any reason, (vii) we have changed merchant accounts to a single user to better tie out to bank balances and accounts receivable, and (viii) Pure Health Products, LLC, our production facility in Lacey WA in mid-November just received NSF Certification (National Sanitation Foundation), the highest certification possible which now allows us to bid and product products for major national retailers but also has the highest certification and maintenance program in the food supplement industry. NSF uses a sophisticated MARKOV software system to track ever incoming product and package, manage the formulation process and makes appropriate adjustments to every material and unit down to the gram.

 

If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

 

The trading market for our common stock could be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

 

10

 

 

Because our management will have broad discretion and flexibility in how the net proceeds from this offering are used, we may use the net proceeds in ways in which you disagree.

 

We currently intend to use the net proceeds from this offering for operations, new product development, acquisitions, rent, repayment of debt and general corporate purposes, including working capital. The intended use of proceeds from this offering is more particularly described in the Section titled “Use of Proceeds,” however, such description is not binding and the actual use of proceeds may differ from the description contained therein. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flow.

 

The offering price of our shares from the Company has been arbitrarily determined.

 

Our management has determined the shares offered by the Company. The price of the shares we are offering was arbitrarily determined based upon the illiquidity and volatility of our common stock, our current financial condition and the prospects for our future cash flows and earnings, and market and economic conditions at the time of the offering. The offering price for the common stock sold in this offering may be more or less than the fair market value for our common stock.

 

We may not register or qualify our securities with any state agency pursuant to blue sky regulations.

 

The holders of our shares of common stock and persons who desire to purchase them in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our shares. We currently do not intend to and may not be able to qualify securities for resale in states which require shares to be qualified before they can be resold by our shareholders.

 

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. Please refer to a discussion under “Risk Factors” of the effect on our financial statements of such election.

 

As an emerging growth company we are exempt from Section 404(b) of the Sarbanes Oxley Act. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting. As an emerging growth company, we are also exempt from Section 14A (a) and (b) of the Exchange, which require the shareholder approval of executive compensation and golden parachutes.

 

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

We could face significant penalties for our failure to comply with the terms of our outstanding convertible notes.

 

Our various convertible notes contain positive and negative covenants and customary events of default including requiring us in many cases to timely file SEC reports. In the event we fail to timely file our SEC reports in the future, or any other events of defaults occur under the notes, we could face significant penalties and/or liquidated damages and/or the conversion price of such notes could be adjusted downward significantly, all of which could have a material adverse effect on our results of operations and financial condition, or cause any investment in the Company to decline in value or become worthless.

 

11

 

 

The issuance and sale of common stock upon conversion of our convertible notes may depress the market price of our common stock.

 

If sequential conversions of the convertible notes and sales of such converted shares take place, the price of our common stock may decline, and as a result, the holders of the convertible notes will be entitled to receive an increasing number of shares in connection with conversions, which shares could then be sold in the market, triggering further price declines and conversions for even larger numbers of shares, to the detriment of our investors. The shares of common stock which the convertible notes are convertible into may be sold without restriction pursuant to Rule 144. As a result, the sale of these shares may adversely affect the market price, if any, of our common stock.

 

We have established preferred stock which can be designated by the Company’s Board of Directors without shareholder approval.

 

The Company has 5,000,000 shares of preferred stock authorized. The shares of preferred stock of the Company may be issued from time to time in one or more series, each of which shall have a distinctive designation or title as shall be determined by the board of directors of the Company prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as adopted by the board of directors. Because the board of directors is able to designate the powers and preferences of the preferred stock without the vote of a majority of the Company’s shareholders, shareholders of the Company will have no control over what designations and preferences the Company’s preferred stock will have. The issuance of shares of preferred stock or the rights associated therewith, could cause substantial dilution to our existing shareholders. Additionally, the dilutive effect of any preferred stock which we may issue may be exacerbated given the fact that such preferred stock may have voting rights and/or other rights or preferences which could provide the preferred shareholders with substantial voting control over us and/or give those holders the power to prevent or cause a change in control, even if that change in control might benefit our shareholders. As a result, the issuance of shares of preferred stock may cause the value of our securities to decrease.

 

You will experience immediate and substantial dilution when you purchase shares in this offering.

 

You will incur immediate and substantial dilution as a result of this offering. After giving effect to the assumed sale by us of 2,029,703 shares of our common stock in this offering at an assumed public offering price of $5.05 per Unit, the last reported sale price of our common stock on May 20, 2022, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, investors in this offering will suffer an immediate dilution of approximately $2.23 per share (assumes warrants are not exercised).

 

If we issue additional common stock, or securities convertible into or exchangeable or exercisable for common stock, our stockholders, including investors who purchase shares of common stock in this offering, may experience additional dilution, and any such issuances may result in downward pressure on the price of our common stock. We may not be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. See “Dilution” on page 18 of this prospectus for a more detailed discussion of the dilution you will incur in connection with this offering.

 

The Warrants are speculative in nature.

 

The Warrants offered in this offering do not confer any rights of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of our common stock at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the Series X Warrants may exercise their right to acquire the common stock and pay an assumed exercise price of $5.05 per share, prior to five (5) years from the date of issuance, after which date any unexercised Series X Warrants will expire and have no further value. In addition, there is no established trading market for the Warrants and there can be no assurance a trading market will develop, even upon the listing of the Series X Warrants. We do not intend to apply for a listing for the Series Y Warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Series Y Warrants will be limited.

 

The price of our common stock or Warrants may fluctuate substantially.

 

You should consider an investment in our common stock and Warrants to be risky, and you should invest in our Units only if you can withstand a significant loss and wide fluctuations in the market value of your investment. In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

 

Risks Related to our Business

 

Since we have a limited operating history in our industry, it is difficult for potential investors to evaluate our business.

 

Our short operating history in our industry may hinder our ability to successfully meet our objectives and makes it difficult for potential investors to evaluate our business or prospective operations. As an early stage company, we are subject to all the risks inherent in the financing, expenditures, operations, complications and delays inherent in a new business. Accordingly, our business and success faces risks from uncertainties faced by developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.

 

We may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts and could cause our business to fail.

 

We expect to need substantial additional funding to pursue additional product development and launch and commercialize our products. There are no assurances that future funding will be available on favorable terms or at all. If additional funding is not obtained, we may need to reduce, defer or cancel additional product development or overhead expenditures to the extent necessary. The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of operations.

 

If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts. Any of these events could significantly harm our business, financial condition and prospects.

 

12

 

 

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

 

Our historical financial statements have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has expressed substantial doubt in our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity financing or other capital, attain further operating efficiencies, reduce expenditures, and, ultimately, generate more revenue. The doubt regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue as a going concern, our stockholders may lose some or all of their investment in the Company.

 

We depend heavily on key personnel, and turnover of key senior management could harm our business.

 

Our future business and results of operations depend in significant part upon the continued contributions of our senior management personnel. If we lose their services or if they fail to perform in their current positions, or if we are not able to attract and retain skilled personnel as needed, our business could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend on the skills and abilities of these key personnel in managing the product acquisition, marketing and sales aspects of our business, any part of which could be harmed by turnover in the future. We do not have any key person insurance.

 

We expect to face intense competition, often from companies with greater resources and experience than we have.

 

The health and wellness and hemp derivative industries are highly competitive and subject to rapid change. The industry continues to expand and evolve as an increasing number of competitors and potential competitors enter the market. Many of these competitors and potential competitors have substantially greater financial, technological, managerial and research and development resources and experience than we have. Some of these competitors and potential competitors have more experience than we have in the development of hemp products, including validation procedures and regulatory matters. Moreover, some of these competitors may have patents or pending patent applications that our products infringe and for which we would need a license to become free to operate. In addition, our products compete with product offerings from large and well-established companies that have greater marketing and sales experience and capabilities than we or our collaboration partners have. If we are unable to compete successfully, we may be unable to grow and sustain our revenue.

 

We have substantial capital requirements that, if not met, may hinder our operations.

 

We anticipate that we will make substantial capital expenditures for research and product development work and acquisitions. If we cannot raise sufficient capital, we may have limited ability to expend the capital necessary to undertake or complete research and product development work and acquisitions. There can be no assurance that debt or equity financing will be available or sufficient to meet these requirements or for other corporate purposes, or if debt or equity financing is available, that it will be on terms acceptable to us. Moreover, future activities may require us to alter our capitalization significantly. Our inability to access sufficient capital for our operations could have a material adverse effect on our financial condition, results of operations or prospects.

 

Current global financial conditions have been characterized by increased volatility which could negatively impact our business, prospects, liquidity and financial condition.

 

Current global financial conditions and recent market events have been characterized by increased volatility and the resulting tightening of the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guaranty that debt or equity financing, the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our initiatives, objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations will negatively impact our business, prospects, liquidity and financial condition.

 

13

 

 

We will need to grow the size of our organization, and we may experience difficulties in managing any growth we may achieve.

 

As our development and commercialization plans and strategies develop, we expect to need additional research, development, managerial, operational, sales, marketing, financial, accounting, legal, and other resources. Future growth would impose significant added responsibilities on members of management. Our management may not be able to accommodate those added responsibilities, and our failure to do so could prevent us from effectively managing future growth, if any, and successfully growing our company.

 

We may expend our limited resources to pursue a particular product and may fail to capitalize on products that may be more profitable or for which there is a greater likelihood of success.

 

Because we have limited financial and managerial resources, we have focused our efforts on particular products. As a result, we may forego or delay pursuit of opportunities with other products that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Any failure to improperly assess potential products could result in missed opportunities and/or our focus on products with low market potential, which would harm our business and financial condition.

 

We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us.

 

We have entered, and may continue to enter, into transactions with related parties for financing, corporate, business development and operational services, as detailed herein. Such transactions may not have been entered into on an arm’s-length basis, and we may have achieved more or less favorable terms because such transactions were entered into with our related parties. We rely, and will continue to rely, on our related parties to maintain these services. If the pricing for these services changes, or if our related parties cease to provide these services, including by terminating agreements with us, we may be unable to obtain replacements for these services on the same terms without disruption to our business. This could have a material effect on our business, results of operations and financial condition.

 

Such conflicts could cause an individual in our management to seek to advance his or her economic interests or the economic interests of certain related parties above ours. Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors, which could have a material adverse effect on our liquidity, results of operations and financial condition.

 

Any inability to protect our intellectual property rights could reduce the value of our technologies and brands, which could adversely affect our financial condition, results of operations and business.

 

Our business is dependent upon our trademarks, trade secrets and other intellectual property rights. There is a risk of certain valuable trade secrets being exposed to potential misappropriation. The efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. There is a risk that we may have insufficient resources to counter adequately such misappropriation or infringement through negotiation or the use of legal remedies. It may not be practicable or cost effective for us to fully protect our intellectual property rights in some countries or jurisdictions. If we are unable to successfully identify and stop unauthorized use of our intellectual property, we could lose potential revenue and experience increased operational and enforcement costs, which could adversely affect our financial condition, results of operations and business.

 

Our potential for rapid growth and our entry into new markets make it difficult for us to evaluate our current and future business prospects, and we may be unable to effectively manage any growth associated with these new markets, which may increase the risk of your investment and could harm our business, financial condition, results of operations and cash flow.

 

Our entry into the rapidly growing CBD, CBN, CBG and delta-8 markets may place a significant strain on our resources and increase demands on our executive management, personnel and systems, and our operational, administrative and financial resources may be inadequate. We may also not be able to effectively manage any expanded operations, or achieve planned growth on a timely or profitable basis, particularly if the number of customers using our technology significantly increases or their demands and needs change as our business expands. If we are unable to manage expanded operations effectively, we may experience operating inefficiencies, the quality of our products and services could deteriorate, and our business and results of operations could be materially adversely affected.

 

14

 

 

If we are unable to develop and maintain our brand and reputation for our product offerings, our business and prospects could be materially harmed.

 

Our business and prospects depend, in part, on developing and then maintaining and strengthening our brands and reputation in the markets we serve. If problems with our products or technologies cause customers to experience operational disruption or failure or delays, our brand and reputation could be diminished. If we fail to develop, promote and maintain our brand and reputation successfully, our business and prospects could be materially harmed.

 

If we or any of our suppliers or third-parties on which we rely for the development, manufacturing, marketing, or sale of our products fails to comply with regulatory requirements applicable to the development, manufacturing, marketing, and sale of our product candidates, regulatory agencies may take action against us or them, which could significantly harm our business.

 

Our product candidates, along with the development process, the manufacturing processes, labeling, advertising, and promotional activities for these products, are subject to continual requirements and review by the FDA and state and foreign regulatory bodies. Regulatory authorities subject a marketed product, its manufacturer, and the manufacturing facilities to continual review and periodic inspections. We, our suppliers, third-parties on which we rely, and our and their respective contractors, suppliers and vendors, will be subject to ongoing regulatory requirements, including complying with regulations and laws regarding advertising, promotion and sales of products (including applicable anti-kickback, fraud and abuse and other health care laws and regulations), required submissions of safety and other post-market information and reports, registration requirements, Clinical Good Manufacturing Practices (cGMP) regulations (including requirements relating to quality control and quality assurance, as well as the corresponding maintenance of records and documentation), and the requirements regarding the distribution of samples to physicians and recordkeeping requirements. Regulatory agencies may change existing requirements or adopt new requirements or policies. We, our suppliers, third-parties on which we rely, and our and their respective contractors, suppliers, and vendors, may be slow to adapt or may not be able to adapt to these changes or new requirements.

 

Failure to comply with regulatory requirements may result in any of the following:

 

  restrictions on our product candidates or manufacturing processes;
     
  warning letters;
     
  withdrawal of the products from the market;
     
  voluntary or mandatory recall;
     
  fines;
     
  suspension or withdrawal of regulatory approvals;
     
  refusal to approve pending applications or supplements to approved applications that we submit;
     
  product seizure;
     
  injunctions; or
     
  imposition of civil or criminal penalties.

 

We could be subject to costly product liability claims related to our products.

 

Since most of our products are intended for human use, we face the risk that the use of our products may result in adverse side effects to people. We face even greater risks upon further commercialization of our products. An individual may bring a product liability claim against us alleging that one of our products causes, or is claimed to have caused, an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without merit, could result in:

 

  the inability to commercialize our products;
     
  decreased demand for our products;
     
  regulatory investigations that could require costly recalls or product modifications;
     
  loss of revenue;
     
  substantial costs of litigation;
     
  liabilities that substantially exceed our product liability insurance, which we would then be required to pay ourselves;
     
  an increase in our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, if at all;
     
  the diversion of management’s attention from our business; and
     
  damage to our reputation and the reputation of our products.

 

Product liability claims may subject us to the foregoing and other risks, which could have a material adverse effect on our business, results of operations, financial condition, and prospects.

 

The Company could be subject to enforcement action by the FDA and certain state regulatory agencies for its products containing CBD or THC compounds.

 

In 2018, the federal Farm Bill removed hemp as a Schedule I drug under the Controlled Substances Act and hemp may now be grown as a commodity crop, with restrictions; however, the 2018 Farm Bill did not specifically legalize CBD. Until Congress promulgates rules and regulations relating to hemp derived cannabinoids, the “legal” status of such, or the processes the Company may have to implement (and at what expense), are still unknowns. A similar paradigm exists under various state laws with which the Company will have to comply. Further, the FDA currently considers the addition of CBD to food products, cosmetics or supplements to be illegal and also prohibits the advertisement of CBD products with health claims. In addition, the FTC under the Federal Trade Commission Act (“FTC Act”) requires that product advertising is truthful, substantiated and non-misleading. We believe that our advertising meets these guidelines; however, the FTC may bring a challenge at any time to evaluate our compliance with the FTC Act.

 

Further, the FDA has recently increased its review of and enforcement against CBD companies for violations of the Federal Food, Drug, and Cosmetic Act (“FCDA”), particularly with respect to the sale of food products containing CBD, claiming that CBD can treat medical conditions in humans or animals, promoting CBD products as dietary supplements, and adding CBD to human and animal foods. Should the Company become subject to enforcement action by the FDA, it could be forced to spend significant sums defending against such enforcement, pay significant fines and ultimately could be forced to stop offering some or all of its CBD products, which would materially, negatively affect the Company’s business and shareholders’ investments. The FDA can also subject individuals to criminal penalties, including fines and imprisonment, for violating certain provisions of the FDCA related to CBD products. In addition, notwithstanding the intense pressure on FDA to fast-track the CBD approval process, it is likely that the approval process for use of CBD or other cannabinoids in foods, cosmetics or supplements will take years and possible that it could never occur at all.

 

15

 

 

Due to the controversy over the cannabis plant within the United States, we face challenges getting our products into stores and into the hands of the end user.

 

The Company intends to release products that contain CBD derived from hemp that are legal within the U.S. However, it is possible we may face scrutiny and run into issues getting our products into stores due to hesitation by stores to carry any product at all affiliated with the cannabis plant, as well as federal, state and local regulations that may restrict our ability to sell cannabinoid products.

 

The Company’s production of Delta-8 THC and Delta-10 THC could subject it to enforcement action by certain federal and state regulatory agencies.

 

Delta-8 THC and delta-10 THC are cannabis compounds that can cause effects similar to delta-9 THC, the main compound in cannabis that causes psychoactive effects. Delta-8 THC and delta-10 THC can be extracted from either hemp or marijuana, but all of the Company’s delta-8 products are made with hemp containing no more than 0.3% THC. Because of the 2018 Farm Bill, hemp can be legally grown and used for extractions all over the United States. Notwithstanding the foregoing, the legality of hemp-derived delta-8 THC and delta-10 THC is in a gray area and varies from state-to-state, with some states allowing, some not addressing specifically, and others banning due to similarity to delta-9 THC. Although the federal legality of delta-8 THC and delta-10 THC is still unclear, the FDA has recently issued Warning Letters to five companies for selling products labeled as containing delta-8 tetrahydrocannabinol, noting that delta-8 THC has psychoactive and intoxicating effects and may be dangerous to consumers. The Warning Letters were primarily targeted at companies marketing the compound as unapproved treatments for various medical conditions or for other therapeutic uses, without adequate directions for use, or the addition of delta-8 THC in foods. Should the Company become subject to enforcement action by federal or state agencies, it could be forced to spend significant sums defending against such enforcement and ultimately could be forced to stop offering some or all of its delta-8 THC and/or delta-10 THC products and/or be subject to other civil or criminal sanctions, which would materially, negatively affect the Company’s business and shareholders’ investments.

 

The novel coronavirus disease of 2019 (“COVID-19”) has had, and continues to have, broad impacts on multiple sectors of the global economy, making it difficult to predict the extent of its impact on our business.

 

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

 

The full impact of the COVID-19 outbreak continues to evolve as of the date of this Offering Circular. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the foreseeable future. We have experienced negative impacts from COVID in the form of reduced sales, delayed operations, inability to effectuate certain business plans, supply chain issues and the like.

 

Our acquisitions may expose us to unknown liabilities.

 

Because we have acquired, and expect generally to acquire, all (or a majority of) the outstanding securities of certain of our acquisition targets, our investment in those companies are or will be subject to all of their liabilities other than their respective debts which we paid or will pay at the time of the acquisitions. If there are unknown liabilities or other obligations, our business could be materially affected. We may also experience issues relating to internal controls over financial reporting that could affect our ability to comply with the Sarbanes-Oxley Act, or that could affect our ability to comply with other applicable laws.

 

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If we fail to comply with government laws and regulations it could have a materially adverse effect on our business.

 

Our industry is subject to extensive federal, state and local laws and regulations that are extremely complex and for which, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation. We exercise care in structuring our operations to comply in all material respects with applicable laws to the extent possible. We will also take such laws into account when planning future operations and acquisitions. The laws, rules and regulations described above are complex and subject to interpretation. In the event of a determination that we are in violation of such laws, rules or regulations, or if further changes in the regulatory framework occur, any such determination or changes could have a material adverse effect on our business. There can be no assurance however that we will not be found in noncompliance in any particular situation.

 

Any failure to comply with all applicable federal and state anti-kickback laws may result in fines and other liabilities, which may adversely affect the Company’s results of operations and reputation.

 

The federal anti-kickback statute (the “AKS”) applies to Medicare, Medicaid and other state and federal programs. AKS prohibits the solicitation, offer, payment or receipt of remuneration in return for referrals or the purchase, or in return for recommending or arranging for the referral or purchase, of goods, including drugs, covered by the federal health care programs. At present, the Company does not participate in any federal programs and its products are not reimbursed by Medicare, Medicaid or any other state or federal program. The AKS is a criminal statute with criminal penalties, as well as potential civil and administrative penalties. The AKS, however, provides several statutory exceptions and regulatory “safe harbors” for particular types of transactions. Many states have similar fraud and abuse laws and their own anti-kickback laws, some of which can apply to all payors, and not just governmental payors. While the Company believes that it is in material compliance with both federal and state AKS laws, the AKS laws present different levels of risks as to two of the Company’s lines of business: (1) sale of the Company’s medical foods, and (2) sale of the Company’s medical devices.

 

At present, the Company’s products are not reimbursable under any federal program. If, however, that changes in the future and it were determined that the Company was not in compliance with the AKS, the Company could be subject to liability, and its operations could be curtailed, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, if the activities of its customers or other entity with which the Company has a business relationship were found to constitute a violation of the AKS and the Company, as a result of the provision of products or services to such customer or entity, were found to have knowingly participated in such activities, the Company could be subject to sanctions or liability under such laws, including civil and/or criminal penalties, as well as exclusion from government health programs. As a result of exclusion from government health programs, neither products nor services could be provided to any beneficiaries of any federal healthcare program.

 

We may not maintain sufficient insurance coverage for the risks associated with our business operations.

 

Risks associated with our business and operations include, but are not limited to, claims for wrongful acts committed by our officers, directors, and other representatives, the loss of intellectual property rights, the loss of key personnel, risks posed by natural disasters and risks of lawsuits from customers who are injured from or dissatisfied with our products. Any of these risks may result in significant losses. We cannot provide any assurance that our insurance coverage is sufficient to cover any losses that we may sustain, or that we will be able to successfully claim our losses under our insurance policies on a timely basis or at all. If we incur any loss not covered by our insurance policies, or the compensated amount is significantly less than our actual loss or is not timely paid, our business, financial condition and results of operations could be materially and adversely affected.

 

Our ability to service our indebtedness will depend on our ability to generate cash in the future.

 

Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general economic and market conditions and financial, competitive, legislative, regulatory and other factors that are beyond our control. Our business may not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service and other liquidity needs, which could result in our inability to comply with financial and other covenants contained in our debt agreements, our being unable to repay or pay interest on our indebtedness, and our inability to fund our other liquidity needs. If we are unable to service our debt obligations, fund our other liquidity needs and maintain compliance with our financial and other covenants, we could be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such alternatives may not be feasible or adequate.

 

On April 13, 2022, the Company entered into an Amendment to certain transactional documents between the Company and Arena Special Opportunities Partners I, LP, a Delaware limited partnership and Arena Special Opportunities Fund, LP, a Delaware limited partnership, whereby Holders agreed to extend the maturity date of certain promissory notes held by Holders to April 30, 2022, waive defaults under the related transactional documents, and agreed to provide consent to certain actions requiring Holder approval. In consideration for the foregoing, the Company agreed to pay Holders an aggregate of $300,000, payable upon closing of this offering. In addition, the Company has agreed to pay all interest due under the notes issued in 2020 in common stock and the notes issued in 2021 in cash upon such closing. The Company was also granted the option to further extend the maturity dates of the Holder’s notes for up to an additional two months, provided that for each month of extension, the Company will pay Holders $100,000, payable in the same manner as the above $300,000. The Company has elected to extend the maturity of the notes to June 30, 2022 for an additional $100,000 to be paid for by using a portion of the proceeds from the closing of this offering. In addition, on June 28, 2022, the Company and Holders executed an Exchange Agreement whereby the parties agreed that upon pricing of this offering following this Registration Statement being declared effective by the SEC, the May 2021 Debt will be automatically exchanged for shares of common stock in the Company at a rate of $4.00 per share.

 

SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS

 

This prospectus and the documents it incorporates contains forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.

 

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements.

 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any future or developments.

 

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INDUSTRY AND MARKET DATA

 

This prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for our product candidates, including data regarding market research, estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

 

USE OF PROCEEDS

 

We estimate that the net proceeds we will receive from this offering will be approximately $9,230,000 ($10,644,500 if the underwriter exercises its over-allotment option in full), based on the assumed public offering price of $5.05 per Unit, the last reported sale price of our common stock on the OTCQB on May 20, 2022, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will only receive additional proceeds from the exercise of the Series X Warrants issuable in connection with this Offering if the Series X Warrants are exercised and the holders of such Series X Warrants pay the exercise price in cash upon such exercise and do not utilize the cashless exercise provision of the Series X Warrants.

 

Each $1.00 increase (decrease) in the assumed public offering price per Class A Unit (or Class B Unit) would increase (decrease) the net proceeds to us by approximately $    million, assuming the number of units offered by us, as set forth on the cover page of this prospectus, remains the same, and assuming the exercise of all Series Y Warrants included in the Class B Units, no exercise of any of the Series X Warrants and no exercise of any option to purchase additional securities, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of units to be sold in this offering. Each increase (decrease) of 100,000 units offered by us would increase (decrease) the net proceeds to us by approximately $    million, assuming the assumed public offering price remains the same, and assuming the exercise of all Series Y Warrants included in the Class B Units, no exercise of any of the Series X Warrants and no exercise of any option to purchase additional securities, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

In general, the Company will use net proceeds from this offering for operations, new product development, acquisitions, rent, repayment of debt, and working capital. The Company intends to allocate up to $6,500,000 for the repayment of debt and accrued interest.

 

The allocation of the Use of Proceeds among the categories of anticipated expenditures represents management’s best estimates based on the current status of the Company’s proposed operations, plans, investment objectives, capital requirements, and financial conditions. Future events, including changes in economic or competitive conditions of our business plan or the completion of less than the total offering, may cause the Company to modify the above-described allocation of proceeds. The Company’s use of proceeds may vary significantly in the event any of the Company’s assumptions prove inaccurate. We reserve the right to change the allocation of net proceeds from the offering as unanticipated events or opportunities arise.

 

DETERMINATION OF OFFERING PRICE

 

In determining the offering price of the Units, we have considered a number of factors including, but not limited to, the current market price of our common stock, trading prices of our common stock over time, the illiquidity and volatility of our common stock, our current financial condition and the prospects for our future cash flows and earnings, market and economic conditions at the time of the offering, and Nasdaq bid requirements. The offering price for the Units sold in this offering may be more than the market price for our common stock.

 

DILUTION

 

All investors purchasing Units from the Company in this offering will experience immediate dilution, as exampled below, and all shareholders in the Company may be subject to dilution from the exercise of convertible securities currently outstanding in the Company, or if the Company issues more of its authorized stock.

 

Our net tangible book value as of March 31, 2022 was $5,859,569, or approximately $1.76 per share based on 3,325,814 shares of common stock outstanding as of May 20, 2022.

 

After giving further effect to the sale of 2,029,703 Class A Units (or Class B Units) in this Offering, at an assumed public offering price of $5.05 per Unit, the last reported sale price of our common stock on the OTCQB Market on May 20, 2022, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, and assuming the exercise of all Series Y Warrants included in the Class B Units, no exercise of any of the Series X Warrants and no exercise of any option to purchase additional securities, our as adjusted net tangible book value would have been approximately $15,089,569, or $2.82 per share.  This represents an immediate increase in net tangible book value of $1.06 per share to existing stockholders and immediate dilution of $2.23 per share to investors purchasing units in this Offering at the public offering price. The following table illustrates this per share dilution.

 

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The following table illustrates this calculation on a per share basis.

 

Assumed public offering price per Unit   $ 5.05  
Net tangible book value per share as of March 31, 2021   $ 1.76  
Increase in net tangible book value per share attributable to new investors   $ 1.06  
Adjusted net tangible book value per share as of March31, 2021   $ 2.82  
Dilution per share to new investors in the offering   $ 2.23  

 

If the underwriter exercises its option to purchase additional shares in full, our as-adjusted net tangible book value would be $16,504,069, or $2.92 per share, representing an increase in the net tangible book value to existing stockholders of $1.16 per share and immediate dilution of $2.13 per share to new investors purchasing shares of our common stock in this offering.

 

The following does not take into account conversion of preferred stock or exercise of warrants and assumes there has been no change in net tangible book value since March 31, 2022.

 

CAPITALIZATION

 

The following table sets forth Can B Corp.’s (the “Company”) cash and cash equivalents and capitalization at March 31, 2022:

 

  on an actual basis;
  on an as adjusted basis to give effect to (1) the issuance of Class A Units pursuant to this Offering, and the receipt of approximately $9,230,000 in net proceeds from the sale of such units, assuming an initial public offering price of $5.05 per share, which is the last reported sale price of our common stock OTC Markets Group OTCQB market as of May 20, 2022, after deducting underwriting discounts and commissions and estimated offering expenses, (2) the repayment of convertible debt, and (3) the application of the estimated net proceeds from the offering.

 

The following table assumes the exchange of the May 2021 Debt by the Arena Holders upon pricing of this offering:

 

    As of March 31, 2022  
    Actual     As
adjusted
(1)(2)(3)
 
             
Cash and cash equivalents   $ 114,992     $ 6,264,935  

Long-term debt, including current portions:

   

       
Convertible promissory notes     4,465,065       -  
Other long-term debt    

1,598,250

     

1,598,250

 

Notes and loans payable, net

    6,063,315       1,598,250  
Stockholders’ equity:                
Preferred stock, authorized 5,000,000 shares:     -       -  
Series A Preferred stock, no par value: 20 shares authorized, 5 shares issued and outstanding     5,320,000       5,320,000  
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

     

207,000

 
Series D Preferred stock, $0.001 par value: 4,000 shares authorized, 1,950 issued and outstanding     2       2  
Common stock, no par value; 1,500,000,000 shares authorized, 3,286,113 issued and outstanding     76,219,018       77,719,018  

Common stock issuable, no par value; 21,547 shares

    119,586       119,586  
Treasury stock     (572,678 )     8,657,322
Additional paid-in capital     6,206,822       6,206,822  
Accumulated deficit     (81,251,556 )     (81,251,556 )
Accumulated deficit     6,248,194       16,978,194  
                 
Total capitalization   $ 12,311,509     $ 18,576,444  

 

(1) Assumes that 2,029,703 Class A Units are sold in this offering at an assumed offering price of $5.05 per Class A Unit, which is the last reported sale price of our common stock OTC Markets Group OTCQB market as of May 20, 2022, and that the net proceeds thereof are approximately $9.23 million after deducting placement agent fees and our estimated expenses.

 

(2) Does not include the shares of common stock that may be issued under the warrants to be issued in this offering. Assumes only Class A Units are sold in this offering. To the extent we sell any Class B Units, the same aggregate number of common stock equivalents resulting from this offering would be convertible under the Series Y Warrants issued as part of the Class B Units.

 

(3) Assumes payment of all convertible debt and debt that would otherwise be due and payable upon consummation of the offering contemplated by this registration statement, excluding $1,500,000 which is to be converted to common stock at a price of $4.00 per share.

 

UNDERWRITING

 

We are offering the Units described in this prospectus through the underwriters named below. We have entered into an underwriting agreement, dated May __, 2022, with H.C. Wainwright & Co., LLC (“Wainwright” or the “Representative”), who is acting as book-running manager of the offering. Subject to the terms and conditions of the underwriting agreement, the underwriter has agreed to purchase the number of our securities set forth opposite its name below, if any are purchased. A copy of the underwriting agreement will be filed as an exhibit to the registration statement of which this prospectus is part.

  

Underwriter   Shares     Series Y Warrants     Series X Warrants  
H.C. Wainwright & Co., LLC                        
Total                                                           

 

We have been advised by the underwriter that it proposes to offer the Units directly to the public at the public offering price set forth on the cover page of this prospectus. Any securities sold by the underwriters to securities dealers will be sold at the public offering price less a selling concession not in excess of $    per share and $    per Series X Warrant.

 

The underwriting agreement provides that the underwriters’ obligation to purchase the securities we are offering is subject to conditions contained in the underwriting agreement.

 

No action has been taken by us or the underwriters that would permit a public offering of the Units, or the shares of common stock and warrants included in the Units in any jurisdiction outside the United States where action for that purpose is required. None of our securities included in this offering may be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sales of any of the securities offering hereby be distributed or published in any jurisdiction except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receive this prospectus are advised to inform themselves about and to observe any restrictions relating to this offering of securities and the distribution of this prospectus. This prospectus is neither an offer to sell nor a solicitation of any offer to buy the securities in any jurisdiction where that would not be permitted or legal.

 

The underwriter has advised us that it does not intend to confirm sales to any account over which it exercises discretionary authority.

 

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Underwriting Discount and Expenses

 

The underwriter may offer the securities from time to time to purchasers directly or through agents, or through brokers in brokerage transactions on The Nasdaq Capital Market, or to dealers in negotiated transactions or in a combination of such methods of sale, or otherwise, at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices, subject to receipt and acceptance by it and subject to its right to reject any order in whole or in part. The difference between the price at which the underwriter purchases securities from us and the price at which the underwriter resells such securities may be deemed underwriting compensation. If the underwriter effects such transactions by selling securities to or through dealers, such dealers may receive compensation in the form of discounts, concessions, or commissions from the underwriter and/or purchasers of securities for whom they may act as agents or to whom they may sell as principal.

 

The underwriter is offering the securities, subject to prior sale, when, as and if issued to and accepted by it, subject to approval of legal matters and other conditions specified in the underwriting agreement. The underwriter reserves the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

 

The following table summarizes the underwriting discount and commission to be paid to the underwriters by us.

 

   

Per

Class A Unit(1)

    Per Class B
Unit(1)
    Total    

Total with Full
Exercise of
Overallotment

 
Public offering price                                                             
Underwriting discount to be paid to the underwriters by us (7.0%)(2)(3)                                                        
Proceeds to us (before expenses)                                

 

(1) The public offering price and underwriting discount corresponds to a public offering price per share of common stock of $        and (ii) a public offering price per Series X Warrant of $       .
(2) We have also agreed to pay the representative $50,000 for non-accountable expenses, pay a management fee equal to 1.0% of the gross proceeds, to reimburse the accountable expenses of the representative, including legal fees, in this offering, up to a maximum of $150,000, and $15,950 for clearing costs.
(3) We have granted a 30 day option to the representative to purchase up to 279,546 additional shares of common stock (up to 15% of the shares of common stock, which includes shares underlying the Series Y Warrants) and/or additional warrants exercisable for up to an additional 279,546  shares of common stock (up to 15% of the ‌Series X Warrants sold in this offering) at the assumed public offering price per share of common stock and the assumed public offering price per warrant set forth above less the underwriting discounts and commissions solely to cover over-allotments, if any.

 

We estimate the total expenses payable by us for this offering to be approximately $     , which amount includes (i) the underwriting discount of $        and (ii) reimbursement of the accountable expenses of the underwriters, including the legal fees of the representative and (iii) other estimated company expenses of approximately $       which includes legal accounting printing costs and various fees associated with the registration and listing of our securities.

 

The securities we are offering are being offered by the underwriter subject to certain conditions specified in the underwriting agreement.

 

Over-allotment Option

 

We have granted to the underwriters an option exercisable not later than 30 days after the date of this prospectus to purchase up to a number of additional shares of common stock and/or Series X Warrants equal to 15.0% of the number of shares of common stock (including shares underlying the Series Y Warrants) sold in the primary offering and/or 15.0% of the Series X Warrants sold in the primary offering at the public offering price per share of common stock and the public offering price per Series X Warrant set forth on the cover page hereto less the underwriting discounts and commissions. The underwriter may exercise the option solely to cover overallotments, if any, made in connection with this offering. If any additional shares of common stock and/or Series X Warrants are purchased, the underwriters will offer these shares of common stock and/or Series X Warrants on the same terms as those on which the other securities are being offered.

 

NasdaqListing

 

Our shares of common stock are quoted on the OTCQB under the symbol “CANB.” We have applied to list our common stock and Series X Warrants on The Nasdaq Capital Market under the symbol “CANB” and “CANBW”, respectively. There is no assurance that our listing application will be approved. We will not consummate this offering unless our common stock and Series X Warrants are approved for listing on The Nasdaq Capital Market. There is no established public trading market for the pre-funded warrants, and we do not expect a market to develop. In addition, we do not intend to apply to list the pre-funded warrants on any national securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the pre-funded warrants will be limited.

 

Determination of Offering Price

 

The public offering price of the securities offered by this prospectus will be determined by negotiation between us and the underwriters among the factors considered in determining the public offering price of the Units were;

 

  our history and our prospects;
  the industry in which we operate;
  our past and present operating results;
  the previous experience of our executive officers; and
  the general condition of the securities markets at the time of this offering, including discussions between the underwriters and prospective investors.

 

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The offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the securities sold in this offering. That price is subject to change as a result of market conditions and other factors and we cannot assure you that the securities sold in this offering can be resold at or above the public offering price.

 

Lock-up Agreements

 

Our officers, directors and each of their respective affiliates and associated partners have agreed with the underwriters to be subject to a lock-up period of ninety (90) days following the date of this prospectus. This means that, during the applicable lock-up period, such persons may not offer for sale, contract to sell, sell, distribute, grant any option, right or warrant to purchase, pledge, hypothecate or otherwise dispose of, directly or indirectly, any shares of our common stock or any securities convertible into, or exercisable or exchangeable for, shares of our common stock. Certain limited transfers are permitted during the lock-up period if the transferee agrees to these lock-up restrictions. We have also agreed, in the underwriting agreement, to similar lock-up restrictions on the issuance and sale of our securities for days following the closing of this offering, although we will be permitted to issue stock options or stock awards to directors, officers and employees under our existing plans. The representative may, in its sole discretion and without notice, waive the terms of any of these lock-up agreements.

 

Transfer Agent and Registrar

 

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

 

Price Stabilization, Short Positions and Penalty Bids

 

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:

 

  Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
     
  Over-allotment involves sales by the underwriter of shares in excess of the number of shares the underwriter is obligated to purchase, which creates a short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriter is not greater than the number of shares that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriter may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.
     
  Syndicate covering transactions involve purchases of shares of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase shares through the over-allotment option. If the underwriter sells more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriter is concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
     
  Penalty bids permit a syndicate representative to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

 

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These stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids, to the extent applicable, may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our securities may be higher than the price that might otherwise exist in the open market. Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor the underwriters make any representations that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

 

Representative’s Warrants

 

We will issue to Wainwright or its designees warrants to purchase an aggregate number of shares of our common stock equal to 7.0% of the number of shares of common stock issued in this offering, at an exercise price per share equal to 125% of the public offering price (the “Representative’s Warrants”). The Representative’s Warrants will be exercisable, in whole or in part, upon issuance and will expire on the fifth anniversary of the commencement of sales in this offering in accordance with FINRA Rule 5110(g)(8)(A). Pursuant to FINRA Rule 5110(e), the Representative Warrants and any shares of common stock issued upon exercise of the Representative Warrants shall not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of commencement of sales of this offering, except the transfer of any security: (i) by operation of law or by reason of reorganization of the issuer; (ii) to any FINRA member firm participating in the offering and the officers, partners, registered persons or affiliates thereof, if all securities so transferred remain subject to the lock-up restriction set forth above for the remainder of the time period; (iii) if the aggregate amount of our securities held by the Representative or related persons does not exceed 1% of the securities being offered; (iv) that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund and the participating members in the aggregate do not own more than 10% of the equity in the fund; (v) the exercise or conversion of any security, if all securities remain subject to the lock-up restriction set forth above for the remainder of the time period; (vi) if we meet the registration requirements of Forms S-3, F-3 or F-10; or (vii) back to us in a transaction exempt from registration with the SEC. The Representative Warrants and the shares of common stock underlying the Representative Warrants are registered on the registration statement of which this prospectus forms a part.

 

Tail

 

In the event that any investors that were contacted about this offering or were introduced to us in connection with this offering by the underwriter provide any capital to us in a public or private offering or other financing or capital-raising transaction of any kind within twelve months following the date of the expiration or termination of our engagement of the underwriter, we shall pay the underwriter certain cash and warrant compensation on the gross proceeds from such investors.

 

Indemnification

 

We have agreed to indemnify the underwriter against certain liabilities, including certain liabilities arising under the Securities Act or to contribute to payments that the underwriter may be required to make for these liabilities.

 

DESCRIPTION OF SECURITIES

 

The following description is a summary of the material rights of shareholders and Warrant holders. Shareholder rights are dictated via the Company’s Articles of Incorporation and Bylaws. The rights of holders of Series Y Warrants and Series X Warrants are dictated by the terms of the Series Y Warrants and Series X Warrants, respectively. Each of the foregoing documents has been filed as an exhibit to this prospectus. The following brief summary of the material terms and provisions of the Warrants is subject to, and qualified in its entirety by, the applicable form of Warrant.

 

Units 

 

We are offering up to 2,029,703 Class A Units, with each Class A Unit consisting of one share of common stock and one Series X Warrant to purchase one share of common stock at an exercise price per share of $        , together with the share of common stock underlying each Series X Warrant, at an assumed public offering price of $5.05 per Class A Unit, which is the last reported sale price of our common stock on OTCQB on May 20, 2022. The Class A Units will not be certificated and the shares of common stock and Series X Warrants comprising such units are immediately separable and will be issued separately but will be purchased together in this Offering.

 

We are also offering to those purchasers whose purchase of Class A Units in this Offering would result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock following the consummation of this Offering, the opportunity to purchase, in lieu of the number of Class A Units that would result in ownership in excess of 4.99% (or, at the election of the purchaser, 9.99%), up to 2,029,703 Class B Units. Each Class B Unit consists of one Series Y Warrant to purchase one share of common stock at an exercise price per share of $0.0001 and one Series X Warrant to purchase one share of common stock at an exercise price per share of $     , together with the share of common stock underlying each Warrant, at an assumed public offering price of $5.04999 per Class B Unit, which is the public offering price per Class A Unit minus $0.0001. The Class B Units will not be certificated and the Series Y Warrants and Series X Warrants comprising such units are immediately separable and will be issued separately but will be purchased together in this Offering. The number of Class A Units sold in the offering shall be reduced on a one-to-one basis for each Class B Unit sold.

 

Common Stock

 

We are authorized to issue 1,500,000,000 shares of common stock, Nil par value per share. As of May 20, 2022, there were approximately 3,325,814 shares of common stock issued and outstanding, held by approximately 392 shareholders of record.

 

Each share of common stock entitles the holder to one vote, either in person or by proxy, at meetings of shareholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the shareholders of our common stock who hold, in the aggregate, more than fifty percent (50%) of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. Shareholders may take action by written consent.

 

Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available. We have not paid any dividends to common stockholders since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.

 

Holders of our common stock have no pre-emptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all of our debts and other liabilities. There are not any provisions in our Articles of Incorporation or our Bylaws that would prevent or delay change in our control.

 

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Preferred Stock

 

We are authorized to issue 5,000,000 shares of preferred stock, including 20 shares of Series A Preferred Stock, 500,000 shares of Series B Preferred Stock, 2,000 shares of Series C Convertible Preferred Stock, and 4,000 shares of Series D Preferred Stock. As of May 20, 2022, there were 23 shares of Series C Preferred Stock, 1,950 of Series D Preferred Stock and no shares of Series B Preferred Stock or Series A Convertible Preferred Stock issued and outstanding.

 

On or around July 28, 2020, shareholders holding a majority of the Company’s voting stock approved an amendment to the certificate of designation for the Series A Preferred Shares. Once the amendment is filed, the Series A Preferred Shares will have the following rights and privileges: All Series A Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shall rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock. In the event of the liquidation or winding up of the Company, whether voluntary or involuntary, each holder of Series A Preferred stock may elect (i) to receive, in preference to the holders of Common Stock, a one-time liquidation preference on a per-share amount equal to the per-share value of such Series A Shares on the applicable issuance date, as recorded in the Company’s financial records, or (ii) to participate pari passu with the Common Stock on an as-converted basis. The holders of Series A preferred Shares shall be entitled to receive such dividends paid and distributions made to the holders of shares of common stock to the same extent as if such holders had converted each preferred share held by each of them into shares of common stock. Each share of Series A Preferred Stock is entitled to 4,445 votes and may be converted into 2,223 shares of common stock (each after adjusting for recent 1 for 15 reverse stock split). Par value for the Series A Preferred Shares is $0.001.

 

Series B Preferred Stock ranks senior to all other stock of the Company. Series B holders are entitled to quarterly dividends in cash or shares of common stock. Series B stock is convertible into shares of common stock and the certificate of designation for the Series B Preferred Stock contains anti-dilution and penalty provisions relating to the conversion into common stock. For a complete description of the rights and privileges of Series B Preferred Stock, refer to the certificate of designation included herewith in Exhibit 3.1, which investors should carefully review. There are no outstanding shares of Series B Preferred Stock and the Company does not intend to issue any additional shares at this time.

 

Series C Convertible Preferred Stock ranks senior to all shares of Common Stock of the Company with respect to the preferences as to distributions of dividends and ranks pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock. The holders of Series C preferred Shares shall be entitled to receive such dividends paid and distributions made to the holders of shares of common stock to the same extent as if such holders had converted each preferred share held by each of them into shares of common stock. Par value for the Series A Preferred Shares will be $0.001. Each share of Series C Convertible Preferred Stock is entitled to 1,667 votes and may be converted into 1,667 shares of Common Stock (each after adjusting for the reverse stock split). No shares of Series C Preferred Stock are outstanding, but it is intended that such stock will be issued under the Company’s incentive Plan and otherwise as compensation for certain service providers, including officers and directors of the Company.

 

All Series D Preferred Stock shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shall rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock. Each Series D Preferred share shall have voting rights equal to 667 (after adjustment for reverse stock split) shares of Common Stock, adjustable at any recapitalization of the Company’s stock. In the event of a liquidation event, whether voluntary or involuntary, each holder shall have a liquidation preference on a per-share amount equal to the par value of such holder’s Series D Preferred shares. The holders shall not be entitled to receive distributions made or dividends paid to the Company’s other stockholders. Except as otherwise required by law, for as long as any Series D Preferred shares remain outstanding, the Company shall have the option to redeem any outstanding share of Series D Preferred shares at any time for a purchase price of par value per share of Series D Preferred shares (“Price per Share”). Should the Company desire to purchase Series D Preferred shares, the Company shall provide the Holder with written notice and a check or cash in an amount equal to the number of shares of Series D Preferred shares being purchased multiplied by the Price per Share. The shares of Series D Preferred shares so purchased shall be deemed automatically cancelled and the Holder shall return the certificates for such share to the Corporation. Each share of Series D Preferred Stock has a par value of $0.001. On or around March 27, 2021, the Company issued Mr. Alfonsi, Mr. Ferro, and Mr. Teeple Series D Preferred Stock in the amount of 600 shares each and to COO Philip Scala in the amount of 150 shares, collectively representing 1,300,000 voting shares after adjusting for the recent reverse stock split.

 

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Series XWarrants Offered in this Offering

 

The following summary of certain terms and provisions of the Series X Warrants to purchase common stock that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions of the Series X Warrants, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of Series X Warrant for a complete description of the terms and conditions of the Series X Warrants. The Series X Warrants will be issued in book-entry form and will initially be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC pursuant to a warrant agency agreement between us and Transhare Corporation, as the warrant agent.

 

Duration and Exercise Price

 

The Series X Warrants are exercisable from and after the date of their issuance and expire on the fifth anniversary of such date, at an exercise price per share of common stock equal to $_____. The holder of a Series X Warrant will not be deemed a holder of our underlying common stock until such warrant is exercised. No fractional shares of common stock will be issued in connection with the exercise of Series X Warrant. Instead, for any such fractional share that would have otherwise been issued upon exercise of a Series X Warrant, we will round such fraction up to the next whole share.

 

Exercisability

 

The Series X Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us or the warrant agent a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of the Series X Warrant to the extent that the holder would own more than 4.99% of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of beneficial ownership of outstanding stock after exercising the holder’s Series X Warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series X Warrants. Purchasers of warrants in this offering may also elect prior to the issuance of the Series X Warrants to have the initial exercise limitation set at 9.99% of our outstanding common stock.

 

Cashless Exercise

 

If, at the time a holder exercises its Series X Warrants, a registration statement registering the issuance of the shares of common stock underlying the Series X Warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Series X Warrants.

 

Transferability

 

Subject to applicable laws, a Series X Warrant may be transferred at the option of the holder upon surrender of the Series X Warrant to us together with the appropriate instruments of transfer.

 

Fractional Shares

 

No fractional shares of common stock will be issued upon the exercise of a Series X Warrant. Rather, the number of shares of common stock to be issued will be rounded up to the nearest whole number.

 

Trading Market

 

There is no established public trading market for the Series X Warrants, and there is no assurance a market will develop. We are in the process of applying to have the Series X Warrants listed on Nasdaq under the symbol “CANBW”. We will not consummate this offering unless our shares of common stock and Series X Warrants are approved for listing on Nasdaq. Without an active trading market, the liquidity of the Series X Warrants will be limited.

 

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Right as a Stockholder

 

Except as otherwise provided in the Warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the Warrants do not have the rights or privileges of holders of our common stock with respect to the shares of common stock underlying the warrants, including any voting rights, until they exercise their warrants. The warrants will provide that holders have the right to participate in distributions or dividends paid on our common stock.

 

Fundamental Transaction

 

In the event of a fundamental transaction, as described in the Series X Warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the Series X Warrants will be entitled to receive upon exercise of such Series X Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction. Additionally, as more fully described in the Series X Warrant, in the event of certain fundamental transactions, the holders of the Series X Warrants will be entitled to receive consideration in an amount equal to the Black Scholes value of the Series X Warrants on the date of consummation of the transaction.

 

Series Y Warrants Included in the Class B Units

 

The material terms and provisions of the Series Y Warrants being offered pursuant to this prospectus are summarized below. This summary of some provisions of the Series Y Warrants is not complete. For the complete terms of the Series Y Warrants, you should refer to the form of Series Y Warrant filed as an exhibit to the registration statement of which this prospectus forms a part. The Series Y Warrants that are purchased in the Offering as part of the units will be issued as separate warrant certificates.

 

Each Class B Unit includes one Series Y Warrant to purchase one share of common stock at an exercise price equal to $0.0001 per share at any time until the Series Y Warrants are exercised in full. The Series Y Warrants issued in this Offering will be governed by the terms of such Series Y Warrant and will be issued in certificated form. The holder of a Series Y Warrant will not be deemed a holder of our underlying common stock until the Series Y Warrant is exercised, except as set forth in the Series Y Warrant.

 

Subject to certain limitations as described below, the Series Y Warrants are immediately exercisable upon issuance on the closing date and may be exercised at any time until the Series Y Warrants are exercised in full. Pursuant to the terms of the Series Y Warrants, a holder of Series Y Warrants will not have the right to exercise any portion of its Series Y Warrants if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of common stock in excess of 4.99% (or, at the election of the purchaser prior to the date of issuance, 9.99%) of the shares of our common stock then outstanding after giving effect to such exercise; provided, however, that upon notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation; provided that in no event shall the Beneficial Ownership Limitation exceed 9.99% and any increase in the Beneficial Ownership Limitation will not be effective until 61 days following notice of such increase from the holder to us.

 

The exercise price and the number of shares issuable upon exercise of the Series Y Warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock. The Series Y Warrant holders must pay the exercise price in cash upon exercise of the Series Y Warrants, unless such Series Y Warrant holders are utilizing the cashless exercise provision of the Series Y Warrants.

 

In addition, in the event we consummate a merger or consolidation with or into another person or other reorganization event in which our common shares are converted or exchanged for securities, cash or other property, or we sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of our assets or we or another person acquire 50% or more of our outstanding shares of common stock, then following such event, the holders of the Series Y Warrants will be entitled to receive upon exercise of such Series Y Warrants the same kind and amount of securities, cash or property which the holders would have received had they exercised their Series Y Warrants immediately prior to such fundamental transaction. Any successor to us or surviving entity shall assume the obligations under the Series Y Warrants.

 

Upon the holder’s exercise of a Series Y Warrant, we will issue the shares of common stock issuable upon exercise of the Series Y Warrant within two trading days following our receipt of a notice of exercise, provided that payment of the exercise price has been made (unless exercised via the “cashless” exercise provision). Prior to the exercise of any Series Y Warrants to purchase common stock, holders of the Series Y Warrants will not have any of the rights of holders of the common stock purchasable upon exercise, including the right to vote, except as set forth therein.

 

We intend to use commercially reasonable efforts to have the registration statement, of which this prospectus forms a part, effective when the Series Y Warrants are exercised. At the election of the Series Y Warrant holder, in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, such holder may elect instead, at any time until the Series Y Warrants are exercised in full, to exercise via a “cashless” exercise provision and to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Series Y Warrants.

 

INTEREST OF NAMED EXPERTS

 

The financial statements of the Company for fiscal years ending December 31, 2020 and 2021 have been included herein in reliance upon the reports of BF Borger CPA PC, certified public accountants upon the authority of said firm as experts in accounting and auditing.

 

DESCRIPTION OF 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. On February 14, 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.

 

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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.

 

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.

 

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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 the 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.

 

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.

 

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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 U.S. 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.

 

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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.

 

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 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.

 

29

 

 

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

 

Transfer Agent

 

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

 

DESCRIPTION OF PROPERTY

 

The Company does not currently own any real property. We do however lease office space in Hicksville, New York for $3,917 per month, out of which all subsidiaries other than Botanical Biotech and 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 also recently entered into leases for three (3) new 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.

 

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.

 

30

 

 

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.

 

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.

 

MARKET PRICE, DIVIDENDS, AND RELATED STOCKHOLDER MATTERS

 

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 are 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.

 

2022 (Post 15 for 1 Reverse Split)
    High     Low  
First Quarter   $ 9.00       4.50  

 

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 May 20, 2022 was $5.05 per share.

 

31

 

 

Record Holders

 

As of May 20, 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.

 

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.

 

32

 

 

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

 

Consolidated Balance Sheets for Quarters Ended March 31, 2022 and 2021 F-23
   
Consolidated Statements of Operations and Comprehensive Loss for Quarters Ended March 31, 2022 and 20201 F-24
   
Consolidated Statements of Stockholders’ Equity for Quarters Ended March 31, 2022 and 2021 F-25
   
Consolidated Statements of Cash Flows for Quarters Ended March 31, 2022 and 2021 F-26
   
Notes to Consolidated Financial Statements for Quarters Ended March 31, 2022 and 2021 F-27

 

F- 1

 

 

FINANCIAL STATEMENTS AND NOTES

  

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     -