UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2020

 

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

 

For the transition period from __________ to __________

 

COMMISSION FILE NUMBER: 000-55753

 

Can B̅ Corp.

(Exact name of registrant as specified in its charter)

 

Florida   20-3624118

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

960 South Broadway, Suite 120

Hicksville, NY 11801

(Address of principal executive offices)

 

516-595-9544

(Registrant’s telephone number, including area code)

 

Canbiola, Inc.

(Former name, former address and former fiscal, if changed since last report)

 

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

 

Tile of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   CANB   N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [X] Smaller reporting company [X]
Emerging Growth Company [  ]    
(Do not check if smaller reporting company)    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

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

 

The number of shares of the registrant’s only class of common stock issued and outstanding as of August 14, 2020 was 3,840,053 shares.

 

 

 

 

 

 

Can B Corp

FORM 10-Q

June 30, 2020

 

TABLE OF CONTENTS

 

    Page No.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements  
  Consolidated Balance Sheets June 30, 2020 and December 31, 2019 3
  Consolidated Statements of Operations – Three and Six Months Ended June 30, 2020 and 2019 4
  Consolidated Statement of Comprehensive Loss – Three and Six Months Ended June 30, 2020 and 2019 5
  Consolidated Statement of Stockholders’ Deficiency Six months ended June 30, 2020 and 2019 6
  Consolidated Statements of Cash Flows – Six Months Ended June 30, 2020 and 2019 7
  Condensed Notes to Unaudited Consolidated Financial Statements. 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 26
Item 3 Quantitative and Qualitative Disclosures About Market Risk. 28
Item 4 Controls and Procedures. 28
PART II - OTHER INFORMATION
     
Item 1. Legal Proceedings 28
Item A. Risk Factors 28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3. Defaults Upon Senior Securities 29
Item 4. Mine Safety Disclosures 29
Item 5. Other Information 29
Item 6. Exhibits 29

 

2

 

 

PART 1 - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Can B̅ Corp. and Subsidiary

Consolidated Balance Sheets

 

   

(Unaudited)

June 30,

    December 31,  
    2020     2019  
Assets                
Current assets:                
Cash and cash equivalents   $ 390,201     $ 46,540  
Accounts receivable, less allowance for doubtful
accounts of $385,468 and $0, respectively 		    1,496,836       1,251,609  
Inventory     373,833       784,497  
Note Receivable     23,787       24,268  
Deposit - current     312,655       -  
Prepaid expenses - current     1,259,604       1,279,901  
Total current assets     3,856,916       3,386,815  
                 
Property and equipment, at cost less accumulated depreciation of $178,065 and $116,555, respectively     1,030,519       1,075,242  
                 
Other assets:                
Deposit - noncurrent     21,287       21,287  
Prepaid expenses - noncurrent     591,819       1,179,929  
Other receivable – noncurrent     23,581       58,206  
Intangible assets, net of accumulated amortization of $479,679 and $202,521, respectively     980,591       1,056,562  
Investment in Marketable Securities     550,000       -  
Goodwill     55,849       55,849  
Right-of-Use Asset, net of amortization of $25,208 and $6,280, respectively     78,052       96,980  
Total other assets     2,301,179       2,468,813  
                 
Total assets   $ 7,188,614     $ 6,930,870  
                 
Liabilities and Stockholders’ Deficiency                
Current liabilities:                
Accounts payable     377,307       226,467  
Accrued officers’ compensation     240,410       144,363  
Other accrued expenses payable     28,886       61,557  
Notes and loans payable     1,164,138       35,000  
Current portion of lease liability     40,941       38,281  
Total current liabilities     1,851,682       505,668  
                 
Long-term liabilities:                
Non-current portion of lease liability     37,786       58,998  
Notes and loans payable     354,840       -  
Total long-term liabilities     392,626       58,998  
                 
Total liabilities     2,244,308       564,666  
                 
Commitments and contingencies (Notes 15)                
                 
Stockholders’ equity:                
Preferred stock, authorized 5,000,000 shares:                
Series A Preferred stock, no par value:                
authorized 20 shares, issued and outstanding 20 shares, respectively     5,539,174       5,539,174  
Common stock, no par value; authorized 1,500,000,000 shares, issued and outstanding 3,421,338 and 2,680,937 shares, respectively     24,056,211       23,113,077  
Additional Paid-in capital     872,976       872,976  
Additional Paid-in capital – Stock Options (Note 12)     202,200       202,200  
Accumulated deficit     (25,726,255 )     (23,361,223 )
Total stockholders’ equity     4,944,306       6,366,204  
                 
Total liabilities and stockholders’ equity   $ 7,188,614     $ 6,930,870  

 

See notes to consolidated financial statements.

 

3

 

 

Can B̅ Corp and Subsidiary

Consolidated Statements of Operations

(Unaudited)

 

    Six Months Ended June 30,     Three Months Ended June 30,  
    2020     2019     2020     2019  
Revenues                        
Product Sales   $ 774,091     $ 1,147,139     $ 204,684     $ 631,779  
Service Revenue     700       3,600       400       1,800  
Total Revenues     774,791       1,150,739       205,084       633,579  
Cost of product sales     169,594       561,757       48,045       299,204  
Gross Profit     605,197       588,982       157,039       334,375  
                                 
Operating costs and expenses:                                
Officers and director’s compensation (including stock-based compensation of $622,671, $834,230, $30,000 and $336,882, respectively)     1,020,755       1,274,688       382,082       829,138  
Consulting fees (including stock-based compensation of $353,116, $953,914, $181,764 and $388,138, respectively)     423,022       1,091,086       206,614       427,335  
Advertising expense     260,035       153,762       141,205       127,374  
Hosting expense     12,136       7,917       5,793       7,467  
Rent expense     121,652       12,344       29,046       484  
Professional fees     325,136       112,016       134,958       74,180  
Depreciation of property and equipment     8,103       14,297       4,008       11,532  
Amortization of intangible assets     277,158       7,160       147,192       4,966  
Reimbursed Expenses     40,963       62,776       20,674       35,474  
Other     347,703       460,293       204,940       251,714  
                                 
Total operating expenses     2,836,663       3,196,339       1,276,512       1,769,664  
                                 
Loss from operations     (2,231,466 )     (2,607,357 )     (1,119,473 )     (1,435,289 )
                                 
Other income (expense):                                
Interest income     441       317       221       317  
Interest expense (including amortized finance cost of $69,645 $0, $58,967 and $0, respectively)     (82,782 )     (2,965 )     (68,898 )     (2,519 )
                                 
Other income (expense) - net     (82,341 )     (2,648 )     (68,677 )     (2,202 )
                                 
Loss before provision for income taxes     (2,313,807 )     (2,610,005 )     (1,188,150 )     (1,437,491 )
                                 
Provision for income taxes     1,225       -       275       -  
                                 
Net Loss   $ (2,315,032 )   $ (2,610,005 )   $ (1,188,425 )   $ (1,437,491 )
                                 
Net loss per common share - basic   $ (.79 )   $ (1.47 )   $ (0.39 )   $ (0.76 )
Net loss per common share - diluted   $ (0.64 )   $ (1.00 )   $ (0.32 )   $ (0.60 )
                                 
Weighted average common shares outstanding –                                
Basic     2,947,930       1,776,620       3,079,235       1,880,137  
Diluted     3,614,610       2,603,610       3,745,915       2,384,289  

 

See notes to consolidated financial statements.

 

4

 

 

Can B̅ Corp and Subsidiary

Consolidated Statements of Comprehensive Loss

(Unaudited)

 

    Six Months Ended June 30,     Three Months Ended June 30,  
    2020     2019     2020     2019  
                         
Net Loss   $ (2,315,032 )   $ (2,610,005 )   $ (1,188,425 )   $ (1,437,491 )
Other comprehensive loss:                                
Unrealized loss on marketable securities     (50,000 )     -       (42,500 )     -  
                                 
Comprehensive Loss   $ (2,365,032     $ (2,610,005 )   $ (1,230,925 )   $ (1,437,491 )

 

See notes to consolidated financial statements.

 

5

 

 

Can B̅ Corp. and Subsidiary

Consolidated Statements of Stockholders’ Deficiency (Unaudited)

 

    Preferred Stock A     Preferred Stock B     Preferred Stock C     Common Stock, no     Additional              
    , no par value     , $0.001 par value     , $0.001 par value     par value     Paid-in     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     Total  
                                                                   
Six Months Ended June 30, 2020                                                                                                         
Balance, January 1, 2020     20     $ 5,539,174       -     $ -       -     $ -       2,680,937     $ 23,113,077     $ 1,075,176     ($ 23,361,223 )   $ 6,366,204  
                                                                                         
Issuance of common stock in                                                                                        
 2020 for services rendered                                                     190,888       315,615                       315,615  
                                                                                         
Issuance of common stock in                                                                                        
2020 for 300:1 reverse stock split rounding                                                     2,460       -                       -  
                                                                                         
Issuance of common stock in 2020 pursuant to First Fire                                                                                        
note agreement                                                     119,508       295,780               ,       295,780  
                                                                                         
Issuance of common stock in 2020 pursuant to Labrys Fund Equities note agreement                                                     142,545       80,182                       80,182  
                                                                                         
Issuance of common stock in 2020 pursuant to Eagle Equities                                                                                        
note agreement                                                     20,000       8,745                       8,745  
                                                                                         
Issuance of common stock in 2020 for acquisition of intangible assets                                                     235,000       201,187                       201,187  
                                                                                         
Issuance of common stock in                                                                                        
 2020 for compensation                                                     30,000       41,625                       41,625  
                                                                                         
Net Loss                                                                             (2,315,032 )     ((2,315,032)  
                                                                                         
Other comprehensive loss                                                                             (50,000 )     (50,000 )
                                                                                         
Balance, June 30, 2020     20     $ 5,539,174       -     $ -       -     $ -       3,421,338     $ 24,056,211     $ 1,075,176     ($ 25,726,255 )   $ 4,944,306  
                                                                                         
Six Months Ended June 30, 2019                                                                                        
                                                                                         
Balance, January 1, 2019     18     $ 4,557,424       499,958     $ 479       -     $ -       1,468,554     $ 16,624,557     $ 1,075,176     ($ 18,786,753 )   $ 3,488,883  
                                                                                         
Issuance of common stock for retirement of Series A                                                                                        
Preferred Stock     (1 )     (10,500 )                                     33,333       10,500                       -  
                                                                                         
Issuance of common stock for retirement of Series B Preferred Stock                     (157,105 )     (157 )                     67,405       157                          
                                                                                         
Sale of common stock in Q1 & Q2 2019                                                     224,314       1,946,100                       1,946,100  
                                                                                      -  
Issuance of common stock in 2019 for acquisition of                                                                                        
technology                                                     28,333       148,655                       148,655  
                                                                                         
Issuance of common stock in 2019 for satisfaction of accrued                                                                                        
salaries                                                     2,227       54,340                       54,340  
                                                                                         
Issuance of common stock in                                                                                        
2019 for compensation and services rendered                                                     159,737       1,156,944                       1,156,944  
                                                                                         
Issuance of Series A Preferred stock pursuant to employment agreement     3       992,250                                                                       992,250  
                                                                                         
Net loss                                                                             (2,610,005 )     (2,610,005 )
                                                                                         
Balance, June 30, 2019     20     $ 5,539,174       342,853     $ 322       -     $ -       1,983,903     $ 19,941,253     $ 1,075,176     ($ 21,378,758 )   $ 6,366,204  

 

See notes to consolidated financial statements.

 

6

 

 

Can B̅ Corp. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

 

    Six Months Ended June 30,  
    2020     2019  
Operating Activities:                
Net loss   $ (2,315,032 )   $ (2,610,005 )
Adjustments to reconcile net loss to net                
cash used in operating activities:                
Stock-based compensation, net of prepaid stock-
based consulting fees 		    975,787       1,788,144  
Depreciation of property and equipment-General     8,103       14,296  
Depreciation of property and equipment-COGS     53,407       24,973  
Amortization of intangible assets     277,158       7,160  
Amortization of original-issue-discount     69,645       -  
Bad debt expense     131,985       -  
Changes in operating assets and liabilities:                
Accounts receivable     (377,212 )     (549,388 )
Inventory     410,664       (750 )
Prepaid expenses     (10,140 )     (7,850 )
Security deposit     -       28,940  
Other receivable     34,625       (20,225 )
Right-of-use asset     376       (7,457 )
Accounts payable     150,840       18,076  
Accrued officer’s compensation     96,047       -  
Other accrued expenses payable     (32,671 )     (10,601 )
                 
Net cash used in operating activities     (526,418 )     (1,324,687 )
                 
Investing Activities:                
                 
Note receivable     481       -  
Fixed assets additions     (16,787 )     (962,698 )
Intangible assets additions     -       (50,000 )
Investment in marketable security     (600,000 )     -  
                 
Net cash used in investing activities     (616,306 )     (1,012,698 )
                 
Financing Activities:                
Proceeds received from notes and loans payable     1,657,840       -  
Repayments of notes and loans payable     (70,000 )     (3,364 )
Note payable finance cost     (101,455 )     -  
Proceeds from sale of common stock     -       1,946,100  
                 
Net cash provided by financing activities     1,486,385       1,942,736  
                 
Increase (Decrease) in cash and cash equivalents     343,661       (394,649 )
                 
Cash and cash equivalents, beginning of period     46,540       807,747  
                 
Cash and cash equivalents, end of period   $ 390,201     $ 413,098  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:                
Income taxes paid   $ 1,225     $ -  
Interest paid   $ 13,137     $ -  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:                
                 
Issuance of common stock in acquisition of note payable (returnable shares)   $ 312,655     $ -  
                 
Issuance of common stock in acquisition of note payable (commitment shares)   $ 72,052     $ -  
                 
Amortization of prepaid issuance of common Stock for services rendered   $ 618,547     $ 497,220  
                 
Issuance of common stock in acquisition of intangible assets   $ 201,187     $ 148,635  
                 
Issuance of common stock in satisfaction of officer’s compensation   $ -     $ 54,340  

 

See notes to consolidated financial statements

 

7

 

 

Can B̅ Corp. and Subsidiary

Notes to Consolidated Financial Statements

Six Months Ended June 30, 2020 and 2019

 

NOTE 1 – Organization and Description of Business

 

Can B̅ Corp. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005. Effective January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008. The Company is in the process of dissolving Prosperity. The Company acquired 100% of the membership interests in Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”) effective December 28, 2018. The Company’s durable equipment products, such as sam® units with CBD infused pads, are marketed and sold through its wholly-owned subsidiaries, Duramed Inc. (incorporated on November 29, 2018) and DuramedNJ LLC (incorporated on May 29, 2019) (collectively, “Duramed”). Duramed began operating on or about February1, 2019. The Company’s wholly owned subsidiary, Radical Tactical LLC (“Radical Tactical”), formed May 11, 2019, provides the marketplace with millennium targeted product lines such as vapes, gums, and kratom. The Company’s hemp aggregation business is run through NY Hemp Depot LLC (the “Hemp Depot”), which was formed on or around July 11, 2019. The Company’s hemp farming business is run through Green Grow Farms, Inc. (“Green Grow Farms”), which was acquired in August, 2019.

 

Effective December 27, 2010, WRAP effected a 10-for-1 forward stock split of its common stock. Effective June 4, 2013, WRAP effected a 1-for-10 reverse stock split of its common stock. Effective March 6, 2020 Can B̅ Corp effected a 300:1 reverse stock split of its common stock.

 

On May 15, 2017, WRAP changed its name to Canbiola, Inc. On January 16, 2020 Canbiola, Inc. changed its name to Can B̅ Corp. (the “Company”, “we”, “us”, “our”, “CANB”, “Can B̅” or “Registrant”).

 

Can B̅ specializes in the production and sale of a variety of hemp-derived cannabidiol (“CBD”) products such as oils, creams, moisturizers, isolate, gel caps, spa products, and concentrates. Can B̅ is developing its own line of proprietary products as well as seeking synergistic value through acquisitions in the hemp industry. Can B̅ aims to be the premier provider of the highest quality hemp CBD products on the market through sourcing the very best raw material and developing a variety of products we believe will improve people’s lives in a variety of areas.

 

For the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity, Radical Tactical and NY Hemp Depot had no activity for the periods presented. Financial information for PHP, Duramed and Green Grow Farms in the periods have been consolidated with the Company’s financials.

 

NOTE 2 – Going Concern Uncertainty

 

The consolidated financial statements have been prepared on a “going concern” basis, which contemplates the realization of assets and liquidation of liabilities in a normal course of business. As of June 30, 2020, the Company had cash and cash equivalents of $390,201 and a working capital of $2,005,234. For the periods ended June 30, 2020 and 2019, the Company had net loss of $2,365,032 and $2,610,005, respectively. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company plans to improve its financial condition by raising capital through sales of shares of its common stock. Also, the Company plans to expand its operation of CBD products to increase its profitability. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

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NOTE 3 – Summary of Significant Accounting Policies

 

(a) Principles of Consolidation

 

The consolidated financial statements include the accounts of CANB and its wholly-owned subsidiaries, Pure Health Products, Duramed, Prosperity Radical Tactical and Green Grow Farms. All intercompany balances and transactions have been eliminated in consolidation.

 

(b) Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

(c) Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, notes and loans payable, accounts payable, and accrued expenses payable. Except for the noncurrent note receivable, the fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to the short term maturity of these instruments. Based on comparable instruments with similar terms, the fair value of the noncurrent note receivable approximates its carrying value.

 

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

(d) Cash and Cash Equivalents

 

The Company considers all liquid investments purchased with a maturity of three months or less to be cash equivalents.

 

(e) Accounts receivable

 

Accounts receivable are presented in the balance sheet net of the allowance for doubtful accounts. Accounts receivable are written off when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the Company’s historical losses, the existing economic conditions in the industry, and the financial stability of its customers. Bad debt expense was $131,985 and $0 for the periods ended June 30, 2020 and 2019.

 

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(f) Inventory

 

Inventories consist of raw materials and finished goods and are stated at the lower of cost or net realizable value. Cost is principally determined using the first-in, first-out (FIFO) method.

 

(g) Prepaid expenses

 

Prepaid expenses include stock-based officer, employee and consulting compensation of $1,836,523 and $3,226,390 at June 30, 2020 and 2019, respectively. The Company’s policy is to record stock-based compensation as prepaids and expense over the term of employment and consulting agreements.

 

(h) Property and Equipment, Net

 

Property and equipment, net, is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to operations as incurred.

 

(i) Intangible Assets, Net

 

Intangible assets, net, are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the estimated economic lives of the respective assets.

 

(j) Marketable Securities

 

Marketable securities are recorded at fair value with unrealized gains and losses included in income. The Company has classified its investments in 1,000,000 shares of Iconic Brands, Inc. as trading securities.

 

(k) Goodwill

 

The Company does not amortize goodwill, but instead tests for impairment at least annually. When conducting the annual impairment test for goodwill, the Company compares the estimated fair value of a reporting unit containing goodwill to its carrying value. If the estimated fair value of the reporting unit is determined to be less than its carrying value, goodwill is reduced, and an impairment loss is recorded.

 

(l) Long-lived Assets

 

The Company reviews long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation of recoverability is required, the estimated undiscounted future cash flows associated with the asset is compared to the asset’s carrying amount to determine if a write-down is required. If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value.

 

(m) Revenue Recognition

 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criterial standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts.

 

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Private Label Customers, Global CBD, LLC and TZ Wholesale, are wholesale distributors of the Company’s product, under their own wholesale private label brand. The products are made to Company specifications and shipped directly to the wholesaler. The pricing is predicated upon a volume discount negotiated at the time of the placement of the orders. Product is produced and labeled in the Washington manufacturing facility and shipped directly to the Private Label customer who re-distributes to their retail and other customers. The products are fully paid when shipped.

 

Revenue from product sales is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred, and collectability is reasonably assured.

 

The Company’s Duramed Division provides a sam® Pro 2.0 medical device to patients through a doctor program whereby the physician evaluates the patients’ needs for medical necessity, and if determined that the device use would be beneficial, writes a prescription for the patient who signs a rental form, for a 35 day cycle for the unit, that is submitted to Duramed who bills the appropriate insurance company. The insurance company pays the invoice, or a negotiated amount via arbitration, and that revenue is reported as revenue when invoiced to the insurance carrier. The collected amount is reconciled with the invoice amount on a daily basis.

 

(n) Cost of Product Sales

 

The cost of product sale is the total cost incurred to obtain a sale and the cost of the goods sold, and the Company’s policy is to recognize it in the same manner as, and in conjunction with, revenue recognition. Cost of product sale primarily consisted of the costs directly attributable to revenue recognized and includes expenses related to the production, packaging and labeling of our CBD products.

 

(o) Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 718, “Compensation – Stock Compensation” (“ASC718”) and ASC 505-50, “Equity – Based Payments to Non-Employees.” In addition to requiring supplemental disclosures, ASC 718 addresses the accounting for share-based payment transactions in which a company receives goods or services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.

 

In accordance with ASC 505-50, the Company determines the fair value of the stock-based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached, or (2) the date at which the counterparty’s performance is complete.

 

Options and warrants

 

The fair value of stock options and warrants is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the beginning of each year and utilized in all calculations for that year:

 

Risk-Free Interest Rate.

 

We utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.

 

Expected Volatility.

 

We calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market information to estimate the volatility of our own stock.

 

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Dividend Yield.

 

We have not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable future and therefore used a dividend yield of zero.

 

Expected Term.

 

The expected term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the warrant.

 

Forfeitures.

 

Estimates of option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

 

(p) Advertising

 

Advertising costs are expensed as incurred and amounted to $260,035 and $153,762 for the periods ended June 30, 2020 and 2019, respectively.

 

(q) Research and Development

 

Research and development costs are expensed as incurred. In the period ended June 30, 2020 and 2019, the Company spent $25,000 and $70,000 in research and development which was expenses as spent, respectively.

 

(r) Income Taxes

 

Income taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.

 

The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority. The Company believes that it has not taken any uncertain tax positions and thus has not recorded any liability.

 

(s) Net Income (Loss) per Common Share

 

Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.

 

Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation. For the periods presented, the diluted net loss per share calculation excluded the effect of Series B preferred stocks and stock options outstanding (see Notes 10, 11 and 12).

 

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(t) Reverse Stock-Split

 

On March 2, 2020, the Company filed an amendment to its Articles of Incorporation with the Florida Secretary of State to effect a 300-to-1 reverse stock split of its issued and outstanding, but not authorized, shares of Common Stock, as reported in the Company’s definitive Schedule 14C filed with the Securities and Exchange Commission on December 13, 2019.

 

All disclosures of common shares and per common share data in the accompanying financial statements and related notes reflect the reverse stock split for all periods presented.

 

(u) Recent Accounting Pronouncements

 

In 2016, the FASB issued ASU 2016-2 (Topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees will be required to recognize right of use assets and liabilities for most leases having terms of 12 months or more. Effective January 1, 2019, we adopted this new accounting guidance using the effective date transition method, which permits entities to apply the new lease standards using a modified retrospective transition approach at the date of adoption.

 

(v) Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.

 

(w) Reclassifications

 

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation. These reclassification adjustments had no effect on the Company’s previously reported net income.

 

NOTE 4 – Inventories

 

Inventories consist of:

 

    June 30,
2020 		    December 31,
2019 		 
Raw materials   $ 359,213     $ 708,239  
Finished goods     14,620       76,258  
                 
Total   $ 373,833     $ 784,497  

 

NOTE 5 – Notes Receivable

 

Notes receivable consist of:

 

    June 30,
2020 		    December 31,
2019 		 
Note receivable dated November 30, 2015 from Stock Market Manager, Inc, interest at 3% per annum due November 30, 2020   $ 19,389     $ 19,389  
                 
Note receivable dated February 8, 2019 from an employee, weekly installments of $1,200 with interest at 8% per annum.     2,898       4,879  
                 
Note receivable dated March 3, 2020 from an employee, weekly installments of $125 with interest at 0% per annum.     1,500       -  
                 
Total     23,787       24,268  
                 
Current portion of notes receivable     (23,787 )     (24,268 )
Noncurrent portion of notes receivable   $ -     $ -  

 

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NOTE 6 – Property and Equipment, Net

 

Property and Equipment, net, consist of:

 

    June 30,     December 31,  
    2020     2019  
             
Furniture & Fixtures   $ 21,724     $ 19,018  
                 
Office Equipment     12,378       12,378  
                 
Manufacturing Equipment     363,798       355,016  
                 
Medical Equipment     783,782       783,782  
                 
Leasehold Improvements     26,902       21,603  
                 
Total     1,208,584       1,191,797  
                 
Accumulated depreciation     (178,065 )     (116,555 )
                 
Net   $ 1,030,519     $ 1,075,242  

 

NOTE 7 – Intangible Assets, Net

 

Intangible assets, net, consist of:

 

    June 30,     December 31,  
    2020     2019  
             
Video conferencing software acquired by Prosperity in December 2009   $ 30,000     $ 30,000  
                 
Enterprise and audit software acquired  by Prosperity in April 2008     20,000       20,000  
                 
Patent costs incurred by WRAP     6,880       6,880  
                 
Hemp license and technology     1,000,000       1,000,000  
                 
CBD technology     198,655       198,655  
                 
Platform account contract     131,812       -  
                 
Hemp processing use     69,375       -  
                 
Other     3,548       3,548  
                 
Total     1,460,270       1,259,083  
                 
Accumulated amortization and Impairment     (479,679 )     (202,521 )
                 
Net   $ 980,591     $ 1,056,562  

 

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The CBD related technology were purchased from Hudilab, Inc. (“HUDI”) and Seven Chakras, LLC (“Seven Chakras”) during the three months ended March 31, 2019. On January 14, 2019, the Company and PHP (collectively, the “buyer”) entered into a License and Acquisition Agreement (the “LAA”) with HUDI. Pursuant to the LAA, HUDI will sell the technology owned by it to the buyer in exchange for 25,000 shares of CANB common stock. On January 14, 2019, the shares were issued to the owner of HUDI and valued at $131,625. On January 31, 2019, PHP entered into an Asset Purchase Agreement (the “Chakras Agreement”) with Seven Chakras. Pursuant to the Chakras Agreement, PHP purchased the rights and title to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ products containing cannabidiol (CBD), (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials. On February 20, 2019, the Company issued 3,333 shares of CANB common stock valued at $17,030 to owners of Seven Chakras as additional consideration, along with the $50,000 cash payments, pursuant to the Chakras Agreement.

 

The hemp related license and technology was purchased from Shi Farms during the three months ended September 30, 2019. Hemp Depot has been amalgamated with Green Grow Farms, also a NY State Hemp License holder and intends to contract with farmers in New York to grow hemp under a controlled program of specific strains, cultured feminized seeds, proven technology, and access to processing for their crop. NY Hemp Depot under Green Grow Farms Inc.’s direction will amalgamate the cultivated off-take from the farmers, combine and fill “super-sacks” for shipping to a processing facility to produce high-grade isolate or distillate for use in Can B̅’s manufacturing facility in Lacey WA.

 

The hemp processing use agreement with Mediiusa Group, Inc. was entered during the three months ended June 30, 2020. On June 23, 2020, the Company issued 50,000 shares of CANB common stock valued at $69,375. Mediiusa Group, Inc. currently holds a valid Industrial Hemp Processor Registration in full force and effect with the State of New York under Registration: HEMP-P-000035 (the “Registration”) and is authorized to process Hemp, and has granted a five year agreement to processing of Hemp for oil, isolate, or crude for further use by the Company and/or for sale by the Company. During the Term of this Agreement, Mediiusa Group, Inc. agrees to allow CANB to process any and all of the subject Hemp under and/or in connection with the agreement under their above-mentioned Registration.

 

The platform account contract with SRAX, Inc. was entered during the three months ended June 30, 2020. On June 22, 2020, the Company issued 185,000 shares of CANB common stock valued at $131,812. The Platform Account is the SRAX Investors Relations platform to grant access to potential investors and customers via the SRAX website. SRAX grants Can B Corp a non-exclusive, non-transferable and non- sublicensable right to access and use the Platform during the Term, solely by the Authorized Users for User’s own internal business purposes, and in accordance with the terms and conditions of this Agreement. Company reserves all rights in or to the Platform not expressly granted to User in the Agreement. Can B will have previously unattainable access to its customer base for improved investor communication and development of sales opportunities of the Company’s products.

 

The other intangible assets relate to the document management and email marketing divisions. Since December 31, 2017, the Company do not expect any future positive cash flow from these divisions. Accordingly, the net carrying value of these intangible assets was reduced to $0.

 

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NOTE 8 – Marketable Securities

 

Marketable securities consist of:

 

    June 30,
2020 		    December 31,
2019 		 
Marketable securities, at cost   $ 600,000     $               -  
Unrealized losses     (50,000 )     -  
                 
Total marketable securities at fair value   $ 550,000     $ -  

 

NOTE 9 – Notes and Loans Payable

 

Notes and loans payable consist of:

 

    June 30,
2020 		    December 31,
2019 		 
Note payable to brother of Marco Alfonsi, Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016 (now past due)   $ 5,000     $ 5,000  
                 
Note payable to FirstFire Global Opportunities Fund, LLC, net of original issue discount of $44,654, due September 1, 2020.     550,000       -  
                 
Loan payable to Pasquale Ferro, interest at 12% per annum, due December 2020.     153,000       30,000  
                 
Note payable to Labrys Fund, LP, net of original issue discount of $21,041, due October 21, 2020.     225,000       -  
                 
Note payable to EMA Financial, LLC, net of original issue discount of $10,522, due June 17, 2021.     115,000       -  
                 
Note payable to Eagle Equities, LLC, net of original issue discount of $27,645, due June 17, 2021.     220,000       -  
                 
Note payable to U.S. Small Business Administration (PPP), interest at 1% per annum. The note matures in May 2022. Payments are deferred for six months.     194,940       -  
                 
Note payable to U.S. Small Business Administration (EIDL), interest at 3.75% per annum. The note matures in June 2050. Payments are deferred for twelve months.     159,900       -  
                 
Total Notes and Loans Payable     1,622,840       35,000  
Less: Unamortized Finance Cost     (103,862 )     -  
Total Notes and Loans Payable - Net     1,518,978       35,000  
Less: Current Portion     (1,164,138 )     (35,000 )
Long-term Portion   $ 354,840     $ -  

 

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NOTE 10 – Preferred Stock

 

Each share of Series A Preferred Stock is convertible into 33,334 shares of CANB common stock and is entitled to 66,666 votes.

 

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

 

Each share of Series C Preferred Stock has preference to payment of dividends, if and when declared by the Company, compared to shares of our common stock. Each Preferred Series C share is convertible into 25,000 shares of common stock. The shares of Series C Preferred Stock have voting rights as if fully converted.

 

On January 28, 2019, the Company issued 33,333 shares of CANB common stock to a consultant of the Company in exchange for the retirement of 1 share of CANB Series A Preferred Stock.

 

From February 21, 2019 to March 12, 2019, the Company issued aggregately 67,405 shares of CANB common stock to RedDiamond in exchange for the retirement of 157,105 shares of CANB Series B Preferred Stock.

 

On May 28, 2019, the Company issued 3 shares of CANB Series A Preferred Stock to Stanley L. Teeple pursuant to the employment agreement with him. The fair value of the issuance totaled at $1,203,000 and will be amortized over the vesting period of four years.

 

On April 26, 2019, the Company issued 6,436 shares of CANB common stock to RedDiamond in exchange for the retirement of 15,000 shares of CANB Series B Preferred Stock.

 

On May 1, 2019, the Company issued 8,581 shares of CANB common stock to RedDiamond in exchange for the retirement of 20,000 shares of CANB Series B Preferred Stock.

 

On May 9, 2019, the Company issued 23,710 shares of CANB common stock to RedDiamond in exchange for the retirement of 55,263 shares of CANB Series B Preferred Stock.

 

On June 7, 2019, the Company issued 10,726 shares of CANB common stock to RedDiamond in exchange for the retirement of 25,000 shares of CANB Series B Preferred Stock.

 

On August 13, 2019, the Company issued 97,607 shares of CANB common stock to RedDiamond in exchange for the retirement of 227,590 shares of CANB Series B Preferred Stock.

 

On December 16, 2019, the Company issued 35,666 shares of CANB common stock to RedDiamond as agreed for the early retirement of CANB Series B Preferred Stock converted in August 2019.

 

NOTE 11 – Common Stock

 

From January 4, 2019 to March 27, 2019, the Company issued aggregately 138,107 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $1,196,100.

 

On January 14, 2019, the Company issued 25,000 shares of CANB common stock to Hudilab, Inc. (“HUDI”), pursuant to a License and Acquisition Agreement for purchase of the technology owned by HUDI.

 

From January 18, 2019 to March 17, 2019, the Company issued aggregately 82,000 shares of CANB common stock to multiple consultants for services rendered.

 

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From January 19, 2019 to March 27, 2019, the Company issued aggregately 3,893 shares of CANB common stock to employee and officers of the Company pursuant to employee agreement and in satisfaction of accrued compensation for the quarter ended March 31, 2019.

 

On February 5, 2019, the Company issued 6,667 shares to the owner of TZ Wholesale LLC, pursuant to a Memorandum of Understanding (the “MOU”) dated November 9, 2018.

 

On February 20, 2019, the Company issued 3,333 shares of CANB common stock to owners of Seven Chakras pursuant to the Chakras Agreement dated January 31, 2019.

 

From April 1, 2019 through June 30, 2019 the Company issued an aggregate of 51,706 shares of CANB Common Stock to multiple consultants for services rendered.

 

From April 1, 2019 through June 30, 2019, the Company issued an aggregate of 13,916 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.

 

From April 1, 2019 through June 30, 2019, the Company issued an aggregate of 4,615 shares of Common Stock under the terms of executive employment agreements.

 

From April 1, 2019 through June 30, 2019, the Company issued an aggregate of 86,207 shares of CANB shares under the terms of the Stock Purchase Agreements for total proceeds of $750,000.

 

From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 18,061 shares of CANB Common Stock to multiple consultants for services rendered.

 

From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 18,333 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.

 

From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 16,000 shares of Common Stock under the terms of executive employment agreements.

 

From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 155,241 shares of CANB shares under the terms of the Stock Purchase Agreements for total proceeds of $1,350,600.

 

From July 1, 2019 through September 30, 2019, the Company issued an aggregate of 40,247 shares of CANB shares under the terms of the Joint Venture Agreement.

 

From October 1, 2019 through December 31, 2019, the Company issued an aggregate of 122,258 shares of CANB Common Stock to multiple consultants for services rendered.

 

From October 1, 2019 through December 31, 2019, the Company issued an aggregate of 14,167 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.

 

From October 1, 2019 through December 31, 2019, the Company issued an aggregate of 5,000 shares of Common Stock under the terms of executive employment agreements.

 

From October 1, 2019 through December 31, 2019, the Company issued an aggregate of 125,000 shares of CANB Common Stock under the terms of an inventory purchase agreement for total proceeds of $487,500.

 

From January 1, 2020 through March 31, 2020, the Company issued an aggregate of 27,500 shares of CANB Common Stock to multiple consultants for services rendered.

 

18

 

 

From January 1, 2020 through March 31, 2020, the company issued an aggregate of 31,335 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.

 

From January 1, 2020 through March 31, 2020, the Company issued an aggregate of 20,000 shares of CANB Common Stock to First Fire Global Opportunities Fund, LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.

 

From January 1, 2020 through March 31, 2020, the Company issued an aggregate of 99,508 shares of CANB Common Stock to FirstFire Global Opportunities Fund, LLC for returnable shares pursuant to a junior convertible promissory note purchase agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 111,734 shares of CANB Common Stock to multiple consultants for services rendered.

 

From April 1, 2020 through June 30, 2020, the company issued an aggregate of 20,319 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 30,000 shares of CANB Common Stock to an employee for services rendered.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 185,000 shares of CANB Common Stock to SRAX, Inc. according to a platform access agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 50,000 shares of CANB Common Stock to Mediiusa Group, Inc. according to a hemp processing use agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 24,545 shares of CANB Common Stock to Labrys Fund, L.P. for a commitment fee pursuant to a junior convertible promissory note purchase agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 118,000 shares of CANB Common Stock to Labrys Fund, L.P. for returnable shares pursuant to a junior convertible promissory note purchase agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 20,000 shares of CANB Common Stock to Eagle Equities, LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.

 

NOTE 12 – Stock Options and Warrants

 

A summary of stock options and warrants activity follows:

 

    Shares of Common Stock Exercisable Into  
    Stock              
    Options     Warrants     Total  
Balance, December 31, 2019     20,167       7,492       27,659  
Granted in 2019     56,667       -       56,667  
Cancelled in 2019     (167 )     -       (167 )
Exercised in 2019     -       -       -  
                         
Balance, December 31, 2019     76,667       7,492       84,159  
Granted in Q1 & Q2 2020     -       -       -  
Cancelled in Q1 & Q2 2020     -       -       -  
Exercised in Q1 & Q2 2020     -       -       -  
                         
Balance, June 30, 2020     76,667       7,492       84,159  

 

19

 

 

Issued and outstanding stock options as of June 30, 2020 consist of:

 

Year   Number Outstanding     Exercise     Year of  
Granted   And Exercisable     Price     Expiration  
                   
2018     20,000     $ 0.3       2023  
2019     56,667     $ 0.3       2022  
      76,667                  

 

On June 11, 2018, the Company granted 10,000 options of CANB common stock to Carl Dilley, a former director of the Company, in exchange for the retirement of a total of 10,000 shares of CANB common stock from Carl Dilley. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.30 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire June 11, 2023. The value of the Stock Options ($84,000) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $8.40 share price, (ii) 5 years term, (iii) 262.00% expected volatility, (iv) 2.80% risk free interest rate and the difference between this value and the fair value of retired shares was expensed in the quarterly period ended June 30, 2018.

 

On October 21, 2018, the Company granted 10,000 options of CANB common stock to Stanley L. Teeple, an officer and Director of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.30 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire October 1, 2023. The values of the Stock Options ($118,200) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $11.82 share price, (ii) 5 years term, (iii) 221.96% expected volatility, (iv) 3.05% risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2018

 

On September 9, 2019, the Company granted 26,667 options of CANB common stock to Johnny Mack, a former officer of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.30 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire September 9, 2022. The values of the Stock Options ($192,000) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $7.20 share price, (ii) 3 years term, (iii) 242% expected volatility, (iv) 1.46% risk free interest rate and the fair value of options was expensed in the quarterly period ended September 30, 2019.

 

On October 15, 2019, the Company granted 10,000 options of CANB common stock each to Frederick Alger Boyer, Jr., Ronald A. Silver and James F. Murphy, directors of the Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.30 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire October 15, 2022. The values of the Stock Options ($63,000 each) were calculated using the Black Scholes option pricing model and the following assumptions: (i) $6.30 share price, (ii) 3 years term, (iii) 242% expected volatility, (iv) 1.60% risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2019.

 

Issued and outstanding warrants as of June 30, 2020 consist of:

 

Year   Number Outstanding     Exercise     Year of
Granted   And Exercisable     Price     Expiration
                 
2010     825     $ 300     2020
2018     6,667     $ 13.034 (a)   2023
                     
Total     7,492              

 

(a) 110% of the closing price of the Company’s common stock on the date that the Holder funds the full purchase price of the Note.

 

20

 

 

NOTE 13 – Income Taxes

 

No provisions for income taxes were recorded for the periods presented since the Company incurred net losses in those periods.

 

The provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal income tax rate of 21% to pretax income (loss) as follows:

 

    Six Month Ended June 30,  
    2020     2019  
             
Expected income tax (benefit) at 21%   $ (486.157 )   $ (246,228 )
                 
Non-deductible stock-based compensation     204,915       173,921  
                 
Increase in deferred income tax assets                
 valuation allowance     281,242       72,307  
                 
Provision for (benefit from) income taxes   $ -     $ -  

 

Deferred income tax assets consist of:

 

    June 30,     December 31,  
    2020     2019  
             
Net operating loss carryforward   $ 1,581,410     $ 1,300,168  
                 
Valuation allowance     (1,581,410 )     (1,300,168 )
                 
Net   $ -     $ -  

 

Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred income tax asset of $1,581,410 attributable to the future utilization of the $7,530,518 net operating loss carryforward as of June 30, 2020 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the financial statements at June 30, 2020. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035, 2036, 2037, 2038, 2039 and 2040 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096, $166,911, $311,890, $25,511, $338,345, $381,638, $499,288, $716,858, $1,503,282, and $1,339,245, respectively.

 

Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.

 

The Company’s U.S. Federal and state income tax returns prior to 2015 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations on the 2015 tax year returns expired in September 2019.

 

The Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest or penalties paid during 2020 and 2019.

 

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NOTE 14 – Segment Information

 

The Company has one reportable segment: Durable Equipment Products.

 

The accounting policies of the segment described above are the same as those described in Summary of Significant Accounting Policies in Note 3. The Company evaluates the performance of the Durable Equipment Products segment based on income (loss) before income taxes, which includes interest income.

 

   

Durable

Equipment

Products

 
Three months ended March 31, 2020        
Revenue from external customers     443,742  
Revenue from other segments     -  
Segment profit     259,489  
Segment assets     2,259,478  
         
Six months ended June 30, 2020        
Revenue from external customers     527,942  
Revenue from other segments     -  
Segment profit     278,337  
Segment assets     2,228,575  

 

   

Three Months
Ended
June 30,
2020

    Six Months
Ended
June 30,
2020 		 
             
Total profit for reportable segment   $ 18,848     $ 279,190  
Other income (expense) - net     -       (853 )
                 
Income before income taxes   $ 18,848     $ 278,337  

 

NOTE 15 – Commitments and Contingencies

 

Employment Agreements

 

On October 3, 2017, the Company executed an Executive Employment Agreement with Marco Alfonsi (“Alfonsi”) for Alfonsi to serve as the Company’s chief executive officer and interim chief financial officer and secretary for cash compensation of $10,000 per month. Pursuant to the agreement, the Company issued a share of CANB Series A Preferred Stock to Alfonsi on October 4, 2017. Alfonsi may terminate his employment upon 30 days written notice to the Company. The Company may terminate Alfonsi’s employment upon written notice to Alfonsi by a vote of the Board of Directors. At October 21, 2018, this former agreement was terminated due to the execution of a new Employment Agreement with Marco Alfonsi for Alfonsi to serve as the Company’s chief executive officer and chairman of the board for cash compensation of $15,000 per month. Pursuant to the new agreement, three of the eight previously issued shares of CANB Series A Preferred Stock were returned to the Company and converted into 30,000,000 common shares. Alfonsi may terminate his employment upon 30 days written notice to the Company. The new agreement has an initial term of four years and can be terminated upon the resignation or death of Mr. Alfonsi, and also can be terminated by the Company due to the failure or neglect of Mr. Alfonsi to perform his duties, or due to the misconduct of Mr. Alfonsi in connection with the performance.

 

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On February 12, 2018, the Company executed an Executive Service Agreement (“Posel Agreement”) with David Posel. The Posel Agreement provides that Mr. Posel services as the Company’s Chief Operating Officer for a term of 4 years. The Posel Agreement also provides for compensation to Mr. Posel of $5,000 cash per month and the issuance of 1 share of Series A Preferred Stock at the inception of the Posel Agreement. The Posel Agreement can be terminated upon the resignation or death of Mr. Posel, and also can be terminated by the Company due to the failure or neglect of Mr. Posel to perform his duties, or due to the misconduct of Mr. Posel in connection with the performance. On February 12, 2018, 1 share of CANB Series A Preferred Stock were issued to Mr. Posel. Since execution of the Posel Agreement, Mr. Posel has been re-assigned to COO for Pure Health Products, the Company’s subsidiary.

 

On February 16, 2018, the Company executed an Executive Service Agreement (“Holtmeyer Agreement”) with Andrew W. Holtmeyer. The Holtmeyer Agreement provides that Mr. Holtmeyer serves as the Company’s Executive Vice President Business for a term of 3 years. The Holtmeyer Agreement also provides for compensation to Mr. Holtmeyer of $10,000 cash per month and the issuance of 3, 2 and 1 share of Series A Preferred Stock at the beginning of each year. The Holtmeyer Agreement can be terminated upon the resignation or death of Mr. Holtmeyer, and also can be terminated by the Company due to the failure or neglect of Mr. Holtmeyer to perform his duties, or due to the misconduct of Mr. Holtmeyer in connection with the performance. At December 29, 2018, this Holtmeyer Agreement was terminated due to the execution of a new Employment Agreement with Andrew W Holtmeyer. The second agreement provides that Mr. Holtmeyer serves as the Company’s Executive Vice President Business for a term of 4 years. The second agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 829 shares of common stock upon signing of the agreement. Effective April 1, 2020, Mr. Holtmeyer’s compensation was changed to a straight commission on sales and collection based upon his efforts in lieu of any base compensation. He also received no further Company benefits but does retain his previously issued five shares of Series Preferred A Stock.

 

On October 15, 2018, the Company executed an Employment Agreement (“Teeple Agreement”) with Stanley L. Teeple. The Teeple Agreement provides that Mr. Teeple services as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The Teeple Agreement also provides for compensation to Mr. Teeple of $15,000 cash per month and the issuance of 1 share of Series A Preferred Stock proportionately vesting over four years beginning December 31, 2018 upon execution of the Teeple Agreement. The Teeple Agreement can be terminated upon the resignation or death of Mr. Teeple, and also can be terminated by the Company due to the failure or neglect of Mr. Teeple to perform his duties, or due to the misconduct of Mr. Teeple in connection with the performance. In May 2019 Mr. Teeple was granted an additional 3 shares of Series A Preferred.

 

On December 28, 2018, the Company executed an Employment Agreement (“Ferro Agreement”) with Pasquale Ferro for Mr. Ferro to serve as Pure Health Products’ president for cash compensation of $15,000 per month and the total issuance of 5 share of Series A Preferred Stock proportionately vesting at the beginning of each year for a term of 4 years. Mr. Ferro may terminate his employment upon 30 days written notice to the Company. The Ferro Agreement has an initial term of four years and can be terminated upon the resignation or death of Mr. Ferro, and also can be terminated by the Company due to the failure or neglect of Mr. Ferro to perform his duties, or due to the misconduct of Mr. Ferro in connection with the performance.

 

Effective September 6, 2019 (the “Effective Date”), Can B̅ Corp. (the “Company” or “CANB”) approved the appointment of Johnny J. Mack (“Mack”) as its President and Chief Operating Officer. Mack had been serving as the Company’s interim COO. The Company and Mack have entered into a new Employee Services Agreement (the “Mack Agreement”) to memorialize the terms of the foregoing. In consideration for Mack’s services, Mack would (i) receive a base salary of $15,000 per month, subject to increase after each yearly anniversary of the Agreement, (ii) be eligible to receive annual cash or stock bonuses, (iii) be entitled to four weeks’ vacation time and five paid days for illness in accordance with the Company’s policies, and (iv) receive a total of 106,667 options (“Mack Options”) to purchase shares of the Company’s common stock, with 26,667 Mack Options vesting on the effective date and additional tranches of 26,667 Mack Options vesting on each of the first, second, and third anniversaries of the Effective Date, assuming Mack’s continued employment. Each Option is exercisable at a price of $0.30 per share. The Company also agreed to hold harmless and indemnify Mack as authorized or permitted by law and the Company’s governing documents, as the same may be amended from time to time, except for acts constituting negligence or willful misconduct by Mack. The Company agreed to pay Mack a severance in the event the Mack Agreement is terminated by the Company without cause or by Mack for “good reason” or by reason of Mack’s death or disability. On October 4, 2019 Mack resigned from all of his officer and director positions and the Company settled his termination for payment of all accrued expenses, payout of all accrued time and base compensation of $13,315 and retention of his already earned 26,667 options. Mr. Mack has left the Company.

 

23

 

 

In addition, on October 10th, 2019 the Company appointed Philip Scala as its interim COO. Mr. Scala has acted as founder and CEO of Pathfinder Consultants International, Inc. (“Pathfinder”) since 2008. Pathfinder offers unique expertise and delivers the information you need to make informed decisions, whether in times of crisis or in the course of simply running your business. Prior to forming Pathfinder, Mr. Scala served the United States both as a Commissioned Officer in the US Army for five years followed by his 29 years of service with the FBI. Mr. Scala received his bachelor’s degree and Master of Business Administration in accounting from St. John’s University, he also earned a Master of Arts degree in Psychology from New York University. The Company has entered into an employment agreement with Mr. Scala. Pursuant to the agreement, Mr. Scala will receive a base salary of $2,500 per month. He will be entitled to incentive bonuses and pay increases in accordance with the Company’s normal policies and procedures. Mr. Scala will also receive options to buy 1,667 common shares of the Company at a price of $0.30 for a period of three years. The initial term of the agreement is for 90 days. The agreement renews for additional 90-day periods unless terminated by either party. The agreement otherwise contains standard covenants and conditions.

 

Consulting Agreements

 

On July 15, 2020, we engaged an advisor to provide consulting services under an Investor Relations and Advisory Agreement (the “Advisory Agreement”). Pursuant to the Advisory Agreement, we agreed to pay the Consulting Firm a restricted common stock monthly fee of $5,000 per month for the initial 3 months., $6,250 per month for months 4-6., $7,500 per month for month 7 and after. At CANB’s option, the monthly fee may be payable in part or in whole in cash. Monthly Fee, such amount shall be paid via issuance of restricted common shares of CANB. The shares are to be issued in the name of Tysadco Partners. The number of common shares earned each month shall be calculated and issued on a quarterly basis prior to each 90-day period and based on the value at the closing price on the last day of the preceding period. All common shares earned by the Consultant pursuant to this Agreement shall be issued by CANB on a quarterly basis. CT shall not have registration rights, and the shares may be sold subject to Rule 144.

 

On December 8, 2019, the Company executed a Consulting Agreement with Seacore Capital, Inc. (“Seacore”) for Seacore to serve as the Company’s consultant for stock compensation of a total of 8,333 restricted shares each quarter from 4th quarter 2019 through 3rd quarter 2020. The shares shall not have registration rights, and the shares may be sold subject to Rule 144.

 

Lease Agreements

 

On December 1, 2014, Prosperity entered into a lease agreement with KLAM, Inc. for office space in Hicksville, New York for an initial term of one year commencing December 1, 2014. The lease provides for monthly rentals of $2,500 and provides Prosperity an option to renew the lease after the initial term. The Company has continued to occupy this space after November 30, 2015 under a month to month arrangement at $2,500 per month. This lease was terminated in January 2019.

 

On September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100 for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate taxes. On August 6, 2018, the Company renewed the lease agreement for a term of 36 months starting November 1, 2018. The lease provides for monthly rentals of $3,193 for lease year 1, $3,289 for lease year 2, and $3,388 for lease year 3. In October 2019, the Company modified and extended the lease agreement for a term of 30 months starting November 1, 2019. The lease provides for monthly rentals of $3,807.05 for year 1 and $3,921.26 for the remaining eighteen months. The original $100,681 right-of-use asset and $90,591 lease liability was adjusted to $103,260 with the modification.

 

The Company leases office space in numerous medical facilities under month-to-month agreements.

 

Rent expense for the period ended June 30, 2020 and 2019 was $121,652 and $12,344, respectively.

 

24

 

 

At June 30, 2020, the future minimum lease payments under non-cancellable operating leases were:

 

Year ended December 31, 2020   $ 23,071  
Year ended December 31, 2021     47,055  
Year ended December 31, 2022     15,685  
Total   $ 85,811  

 

The lease liability of $78,727 at June 30, 2020 as presented in the Consolidated Balance Sheet represents the discounted (at our 10% estimated incremental borrowing rate) value of the future lease payments of 85,811 at June 30, 2020.

 

Major Customers

 

For the six months ended June 30, 2020, there were no customers that accounted for more than 10% of total revenues.

 

For the six months ended June 30, 2020, there were no customer accounted for more than 10% of total revenues.

 

NOTE 16 – Related Party Transactions

 

LI Accounting Associates, LLC (LIA), an entity controlled by a relative of the Managing Member PHP, is a vendor of CANB. At June 30, 2020, CANB has an account payable due to LIA totaling $6,600. For the six months ended June 30, 2020, CANB had expenses to LIA of $42,600.

 

During the six months ended June 30, 2020, we had products and service sales to related parties totaling $0.

 

NOTE 17 – Subsequent Events

 

In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through August 14, 2020, the date on which these consolidated financial statements were available to be issued. There were material subsequent events that required recognition or additional disclosure in these consolidated financial statements as follows:

 

By written consent and after careful review by the majority of the Shareholders of Can B Corp., the Company Shareholders approved an Incentive Stock Option Plan to be administered at the direction of the Board of Directors, and also approved a Certificate of Amendment to the Certificate of Designation for the Company’s Preferred Series A stock.

 

The Company executed an exchange agreement whereby shares of Iconic Brands, Inc. held by the Company were exchanged for shares of stock in the Company held by Iconic Brands, Inc. The valuation of the respective shares were deemed to be an economic equal value exchange.

 

The Company’s Form A-1 was qualified on August 7, 2020.

 

25

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Can B̅ Corp. was originally formed as a Florida corporation on October 11, 2005, under the name of WrapMail, Inc. Effective January 5, 2015, we acquired 100% ownership of Prosperity Systems, Inc., which the Company is in the process of dissolving. Effective December 28, 2018, we acquired 100% ownership of Pure Health Products. In November 2018, we formed Duramed, Inc. as a wholly-owned subsidiary. In May 2019, we formed DuramedNJ, LLC and Radical Tactical LLC, as wholly-owned subsidiaries. In July 2019, we formed NY Hemp Depot LLC, as a wholly-owned subsidiary. In August 2019, we acquired Green Grow Farms, Inc., as a wholly-owned subsidiary.

 

We manufacture and sell products containing CBD. We also provide document, project, marketing and sales management systems to our residual business clients through our website and proprietary software, which divisions are being wound down. The consolidated financial statements include the accounts of CANB and its wholly owned subsidiary Pure Health Products from the date of its acquisition on December 28, 2018.

 

Results of Operations

 

Three months ended June 30, 2020 compared with three months ended June 30, 2019.

 

Revenues decreased $428,495 from $633,579 in 2019 to $205,084 in 2020. The decrease was due to the impact of the COVID-19 outbreak.

 

Cost of product sales decreased $251,159 from $299,204 in 2019 to $48,045 in 2020 due to the reduction in sales caused by the Covid-19 outbreak.

 

Officers and director’s compensation and payroll taxes decreased $447,056 from $829,138 in 2019 to $382,082 in 2020. The 2019 expense amount ($829,138) includes additional stock-based compensation of ($336,882) pursuant to their respective employment agreements and related payroll taxes ($10,968). The 2020 expense amount ($382,082) includes additional stock-based compensation of ($30,000) pursuant to their respective employment agreements and related payroll taxes ($6,923).

 

Consulting fees decreased $220,721 from $427,335 in 2019 to $206,614 in 2020. The 2019 expense amount ($427,335) includes stock-based compensation of $388,138, resulting from stock issued for the service of consultants. The 2020 expense amount ($206,614) includes stock-based compensation of $181,764, resulting from stock issued for the service of consultants.

 

Advertising expense increased $13,831 from $127,374 in 2019 to $141,205 in 2020.

 

Hosting expense decreased $1,674 from $7,467 in 2019 to $5,793 in 2020.

 

Rent expense increased $28,562 from $484 in 2019 to $29,046 in 2020.

 

Professional fees increased $60,778 from $74,180 in 2019 to $134,958 in 2020.

 

Depreciation of property and equipment decreased $7,524 from $11,532 in 2019 to $4,008 in 2020.

 

Amortization of intangible assets increased $142,226 from $4,966 in 2019 to $147,192 in 2020.

 

Reimbursed expenses decreased $14,800 from $35,474 in 2019 to $20,674 in 2020.

 

Other operating expenses decreased $46,774 from $251,714 in 2019 to $204,940 in 2020.

 

Net loss decreased $249,066 from $1,437,491 in 2019 to $1,188,425 in 2020. The decrease was due to the $493,152 decrease in total operating expenses offset by the $66,475 increase in other expense – net, the $275 increase in provision for income taxes and the $177,336 decrease in gross profit.

 

Six months ended June 30, 2020 compared with six months ended June 30, 2019.

 

Revenues decreased $375,948 from $1,150,739 in 2019 to $774,791 in 2020. The decrease was due to the impact of the COVID-19 outbreak.

 

Cost of product sales decreased $392,163 from $561,757 in 2019 to $169,594 in 2020 due to the reduction in sales caused by the Covid-19 outbreak.

 

26

 

 

Officers and director’s compensation and payroll taxes decreased $253,933 from $1,274,688 in 2019 to $1,020,755 in 2020. The 2019 expense amount ($1,274,688) includes additional stock-based compensation of ($834,230) pursuant to their respective employment agreements and related payroll taxes ($9,586). The 2020 expense amount ($1,020,755) includes additional stock-based compensation of ($622,671) pursuant to their respective employment agreements and related payroll taxes ($25,052).

 

Consulting fees decreased $668,064 from $1,091,086 in 2019 to $423,022 in 2020. The 2019 expense amount ($1,091,086) includes stock-based compensation of $953,914, resulting from stock issued for the service of consultants. The 2020 expense amount ($423,022) includes stock-based compensation of $353,116, resulting from stock issued for the service of consultants.

 

Advertising expense increased $106,273 from $153,762 in 2019 to $260,035 in 2020.

 

Hosting expense increased $4,219 from $7,917 in 2019 to $12,136 in 2020.

 

Rent expense increased $109,308 from $12,344 in 2019 to $121,652 in 2020.

 

Professional fees increased $213,120 from $112,016 in 2019 to $325,136 in 2020.

 

Depreciation of property and equipment decreased $6,194 from $14,297 in 2019 to $8,103 in 2020.

 

Amortization of intangible assets increased $269,998 from $7,160 in 2019 to $277,158 in 2020.

 

Reimbursed expenses decreased $21,813 from $62,776 in 2019 to $40,963 in 2020.

 

Other operating expenses decreased $112,590 from $460,293 in 2019 to $347,703 in 2020.

 

Net loss decreased $294,973 from $2,610,005 in 2019 to $2,315,032 in 2020. The decrease was due to the $359,676 decrease in total operating expenses offset by the $79,693, increase in other expense – net, the $1,225 increase in provision for income taxes and the $16,215 increase in gross profit.

 

Liquidity and Capital Resources

 

At June, 2020, the Company had cash and cash equivalents of $390,201 and a working capital of $2,005,234. Cash and cash equivalents increased $343,661 from $46,540 at December 31, 2019 to $390,201 at June 30, 2020. For the six months ended June 30, 2020, $1,486,385 was provided by financing activities, $526,418 was used in operating activities, and $616,306 was used in investing activities.

 

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

 

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

 

We have no off-balance sheet arrangements.

 

Trend Information

 

The novel coronavirus disease of 2019 (“COVID-19”) outbreak has affected the Company’s operations as set forth above. The full impact of the COVID-19 outbreak continues to evolve. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the foreseeable future, however, as a direct result of medical offices closure in our primary area of operations, our sales for second quarter are down approximately 60% year over year and quarter over quarter. Our expectation that as business open, and in particular medical offices, that our recovery will progress in sync with the speed of the business openings.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

None.

 

ITEM 4. CONTROLS AND PROCEDURES

 

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

As of June 30, 2020, our principal executive officer and principal financial officer conducted an evaluation regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon the evaluation of these controls and procedures, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

 

(B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

There were no changes in our internal control over financial reporting in our fiscal quarter for the period June 30, 2020 covered by this Quarterly Report on Form 10-Q, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

 

PART II-OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently a party to any legal proceedings.

 

ITEM 1A. RISK FACTORS

 

As a smaller reporting company, we are not required to provide risk factors in this Form 10-Q, however The Company has been directly impacted and has experienced moderate interruption during this challenging COVID-19 pandemic. In accordance with applicable federal and state guidelines, the Company has implemented and prioritized strict social distancing measures, good manufacturing practices, proper sanitization measures, and new manufacturing guidelines. Although several Company customers have experienced business shutdowns during the last few weeks, this had not dramatically impacted our online ordering and/or initiating new direct shipment orders.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Sales of unregistered securities during the six months ended June 30, 2020 are as follows:

 

From January 1, 2020 through March 31, 2020, the company issued an aggregate of 27,500 shares of CANB Common Stock to multiple consultants for services rendered.

 

From January 1, 2020 through March 31, 2020, the company issued an aggregate of 31,335 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.

 

From January 1, 2020 through March 31, 2020, the company issued an aggregate of 20,000 shares of CANB Common Stock to FirstFire Global Opportunities Fund, LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.

 

From January 1, 2020 through March 31, 2020, the company issued an aggregate of 99,508 shares of CANB Common Stock to FirstFire Global Opportunities Fund, LLC for returnable shares pursuant to a junior convertible promissory note purchase agreement.

 

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From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 111,734 shares of CANB Common Stock to multiple consultants for services rendered.

 

From April 1, 2020 through June 30, 2020, the company issued an aggregate of 20,319 shares of CANB Common Stock to members of the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 30,000 shares of CANB Common Stock to an employee for services rendered.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 185,000 shares of CANB Common Stock to SRAX, Inc. according to a platform access agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 50,000 shares of CANB Common Stock to Mediiusa Group, Inc. according to a hemp processing use agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 24,545 shares of CANB Common Stock to Labrys Fund, L.P. for a commitment fee pursuant to a junior convertible promissory note purchase agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 118,000 shares of CANB Common Stock to Labrys Fund, L.P. for returnable shares pursuant to a junior convertible promissory note purchase agreement.

 

From April 1, 2020 through June 30, 2020, the Company issued an aggregate of 20,000 shares of CANB Common Stock to Eagle Equities, LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.

 

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

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

3.1A   Articles of Incorporation, as amended(1)
3.1B   Articles of Amendment with Series C Certificate of Designation
3.2   Bylaws(2)
10.1   Hemp processing use agreement with Mediiusa Group, Inc.
10.2   Platform Account Contract with SRAX, Inc.
10.3   Stock Exchange Agreement with Iconic Brands, Inc.
31.1   Chief Executive Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Chief Financial Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

(1)   Filed with the Annual Report on Form 10-K filed with the SEC on April 2, 2020 and incorporated herein by reference.
(2)   Filed with the Form S-1 Registration Statement filed with the SEC on December 2, 2015 and incorporated herein by reference.
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Can B Corp.
     
Date: August 19, 2020 By: /s/ Marco Alfonsi
    Marco Alfonsi, Chief Executive Officer
     
Date: August 19, 2020 By: /s/ Stanley L. Teeple
    Stanley L. Teeple, Chief Financial Officer

 

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Exhibit 3.1B

 

 

     
 

 

 

     
 

 

 

     
 

 

 

     
 

 

 

     
 

 

 

 

 

 

EXHIBIT B

 

CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE

SERIES C CONVERTIBLE PREFERRED STOCK OF CAN B̅ CORP.

 

I, Marco Alfonsi, hereby certify that I am the Chief Executive Officer of Can B̅ Corp. (the “Company”), a corporation organized and existing under the Florida Business Corporation Act (the “FBCA”), and further do hereby certify:

 

That, pursuant to the authority expressly conferred upon the Board of Directors of the Company (the “Board”) by the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), the Board on May 26, 2020, adopted the following resolutions creating a series of shares of preferred stock designated as Series C Convertible Preferred Stock, none of which shares have been issued:

 

RESOLVED, that the Board hereby designates the Series C Convertible Preferred Stock and the number of shares constituting such series, and fixes the rights, powers, preferences, privileges and restrictions relating to such series in addition to any set forth in the Articles of Incorporation as follows:

 

TERMS OF SERIES C CONVERTIBLE PREFERRED STOCK

 

1. Designation and Number of Shares. There shall hereby be created and established a series of preferred stock of the Company designated as “Series C Convertible Preferred Stock” (the “Preferred Shares”). The authorized number of Preferred Shares shall be 2,000 shares. Each Preferred Share shall have a par value of $0.001. Capitalized terms not defined herein shall have the meanings as set forth in Section 17 below.

 

2. Ranking. All Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to the preferences as to distributions of dividends 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 merger or consolidation of the Company with or into another corporation, the Preferred Shares shall maintain their relative rights, powers, preferences, privileges, and designations provided for herein and no such merger or consolidation shall result inconsistent therewith.

 

3. Dividends.

 

(a) From and after the date of issuance of each share of Preferred Shares (the “Initial Issuance Date”), each holder of a Preferred Share (each, a “Holder” and collectively, the “Holders”) shall be entitled to receive dividends (the “Dividends”) when, as, and if declared by the Board. Dividends shall be paid by the Company out of funds legally available therefor, in shares of Common Stock or cash, at a rate equal to the amount of Dividends payable to each shares of Common Stock multiplied by the Conversion Rate, as adjusted, for each Preferred Share held. Dividends shall be non-cumulative and not compounding and, if applicable, shall be payable quarterly, on the date or dates designated by the Board of Directors (each, a “Dividend Date”). If a Dividend Date is not a Business Day (as defined below), then the Dividend shall be due and payable on the Business Day immediately following such Dividend Date.

 

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(b) Dividends shall be payable on each Dividend Date, to the Holders of record of the Preferred Shares on the applicable Dividend Date, in shares of Common Stock (the “Dividend Shares”); provided, however, that the Company may, at its option, pay Dividends on any Dividend Date in cash (the “Cash Dividends”) or in a combination of Cash Dividends and Dividend Shares. The Company shall deliver a written notice (each, a “Dividend Election Notice”) to each Holder (the date such notice is delivered to all of the Holders, the “Dividend Notice Date”), which notice confirms that Dividends to be paid on such Dividend Date shall be paid as Cash Dividends, Dividend Shares, or as a combination of Dividend Shares and Cash Dividends and, in any event, specifies the amount of Dividends that shall be paid as Cash Dividends and the amount of Dividends, if any, that shall be paid in Dividend Shares.

 

(c) When any Dividend Shares are to be paid on an Dividend Date to any Holder, the Company shall (i) (A) provided that (x) the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and (y) such Dividend Shares to be so issued are eligible for resale pursuant to Rule 144 (as defined in the Securities Agreement), credit such aggregate number of Dividend Shares to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit and Withdrawal at Custodian system, or (B) if either of the immediately preceding clauses (x) or (y) is not satisfied, issue and deliver on the applicable Dividend Date, to the address set forth in the register maintained by the Company for such purpose or to such address as specified by such Holder in writing to the Company at least two (2) Business Days prior to the applicable Dividend Date, a certificate, registered in the name of such Holder or its designee, for the number of Dividend Shares to which such Holder shall be entitled and (ii) with respect to each Dividend Date, pay to such Holder, in cash by wire transfer of immediately available funds, the amount of any Cash Dividend. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Dividend Shares.

 

4. Conversion. Each Preferred Share shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined below) on the terms and conditions set forth in this Section 4.

 

(a) Holder’s Conversion Right. At any time or times after the Initial Issuance Date, each Holder shall be entitled to convert any whole number of Preferred Shares into validly issued, fully paid and non-assessable shares of Common Stock in accordance with Section 4(c) at the Conversion Rate (as defined below).

 

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(b) Conversion Rate. The number of validly issued, fully paid and non-assessable shares of Common Stock issuable upon conversion (the “Conversion Shares”) of each Preferred Share pursuant to Section 4(a) shall be 25,000 (the “Conversion Rate”). No fractional shares of Common Stock are to be issued upon the conversion of any Preferred Shares. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.

 

(c) Mechanics of Conversion. The conversion of each Preferred Share shall be conducted in the following manner:

 

(i) Holder’s Conversion. To convert Preferred Shares into validly issued, fully paid and non-assessable shares of Common Stock on any date (a “Conversion Date”), a Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of Preferred Shares subject to such conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company. If required by Section 4(c)(vi), within three (3) Trading Days following a conversion of any such Preferred Shares into Common Shares as aforesaid, such Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Company the original certificates representing the share(s) of Preferred Shares (the “Preferred Share Certificates”) so converted as aforesaid.

 

(ii) Company’s Response. On or before the second (2nd) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile or electronic mail an acknowledgment of confirmation, in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to such Holder and the Transfer Agent, which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the fifth (5th) Trading Day following the date of receipt by the Company of such Conversion Notice, the Company shall (1) provided that (x) the Transfer Agent is participating in DTC Fast Automated Securities Transfer Program and (y) such Conversion Shares to be so issued are eligible for resale pursuant to Rule 144 (as defined in the Securities Agreement) credit such aggregate number of Conversion Shares to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if either of the immediately preceding clauses (x) or (y) are not satisfied, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of Conversion Shares to which such Holder shall be entitled. If the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for conversion pursuant to Section 4(c)(vi) is greater than the number of Preferred Shares being converted, then the Company shall if requested by such Holder, as soon as practicable and in no event later than five (5) Trading Days after receipt of the Preferred Share Certificate(s) and at its own expense, issue and deliver to such Holder (or its designee) a new Preferred Share Certificate representing the number of Preferred Shares not converted.

 

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(iii) Record Holder. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

 

(iv) Company’s Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to a Holder within five (5) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise) (the “Share Delivery Deadline”), a certificate for the number of shares of Common Stock to which such Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit such Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion of any Preferred Shares (as the case may be) (a “Conversion Failure”), then, in addition to all other remedies available to such Holder, such Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned (as the case may be) any Preferred Shares that have not been converted pursuant to such Holder’s Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to the terms of this Certificate of Designation or otherwise.

 

(v) Pro Rata Conversion; Disputes. In the event the Company receives a Conversion Notice from more than one Holder for the same Conversion Date and the Company can convert some, but not all, of such Preferred Shares submitted for conversion, the Company shall convert from each Holder electing to have Preferred Shares converted on such date a pro rata amount of such Holder’s Preferred Shares submitted for conversion on such date based on the number of Preferred Shares submitted for conversion on such date by such Holder relative to the aggregate number of Preferred Shares submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to a Holder in connection with a conversion of Preferred Shares, the Company shall issue to such Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 22.

 

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(vi) Book-Entry. Notwithstanding anything to the contrary set forth in this Section 4, upon conversion of any Preferred Shares in accordance with the terms hereof, no Holder thereof shall be required to physically surrender the certificate representing the Preferred Shares to the Company following conversion thereof unless (A) the full or remaining number of Preferred Shares represented by the certificate are being converted (in which event such certificate(s) shall be delivered to the Company as contemplated by this Section 4(c)(vi)) or (B) such Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of Preferred Shares upon physical surrender of any Preferred Shares. Each Holder and the Company shall maintain records showing the number of Preferred Shares so converted by such Holder and the dates of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of the certificate representing the Preferred Shares upon each such conversion. In the event of any dispute or discrepancy, such records of such Holder establishing the number of Preferred Shares to which the record holder is entitled shall be controlling and determinative in the absence of manifest error. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any Preferred Shares, the number of Preferred Shares represented by such certificate may be less than the number of Preferred Shares stated on the face thereof. Each certificate for Preferred Shares shall bear one or more legends, including the following legend:

 

ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATION RELATING TO THE SHARES OF SERIES C PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 4(c)(vi) THEREOF. THE NUMBER OF SHARES OF SERIES C PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES C PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(vi) OF THE CERTIFICATE OF DESIGNATION RELATING TO THE SHARES OF SERIES C PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE.

 

(d) Taxes. The Holder shall pay any and all documentary, stamp, transfer (but only in respect of the registered holder thereof), issuance and other similar taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon the conversion of Preferred Shares.

 

(e) Stockholder Approval. Notwithstanding anything herein to the contrary, the Company shall not issue any shares of Common Stock upon conversion of any Preferred Shares or otherwise pursuant to this Certificate of Designation, until the Company obtains the Stockholder Approval, to the extent such Stockholder Approval is necessary for such issuance.

 

5. Adjustment of Conversion Rate upon Subdivision or Combination of Common Stock. If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Rate in effect immediately prior to such subdivision will be proportionately increased. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Rate in effect immediately prior to such combination will be proportionately reduced. Any adjustment pursuant to this Section 5 shall become effective immediately after the effective date of such subdivision or combination.

 

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6. Authorized Shares.

 

(a) Reservation. So long as any of the Preferred Shares are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares, as of any given date, the sum of 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Preferred Shares issued or issuable by the Company and assuming, for purposes hereof, that all the Preferred Shares have been issued and without taking into account any limitations on the issuance of securities set forth herein (the “Required Amount”). The initial number of shares of Common Stock reserved for conversions of the Preferred Shares and each adjustment in the number of shares so reserved shall be allocated pro rata among the Holders based on the number of Preferred Shares held by each Holder on the Initial Issuance Date or adjustment in the number of reserved shares (as the case may be) (the “Authorized Share Allocation”). In the event a Holder shall sell or otherwise transfer any of such Holder’s Preferred Shares, each transferee shall be allocated a pro rata portion of such Holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Preferred Shares shall be allocated to the remaining Holders of Preferred Shares, pro rata based on the number of Preferred Shares then held by such Holders.

 

(b) Insufficient Authorized Shares. If, notwithstanding Section 7(a) and not in limitation thereof, at any time while any of the Preferred Shares remain outstanding the Company does not have a sufficient number of authorized and unissued shares of Common Stock to satisfy its obligation to have available for issuance upon conversion of the Preferred Shares at least a number of shares of Common Stock equal to the Required Amount, then the Company shall take all action necessary to increase the Company’s available authorized shares of Common Stock to an amount sufficient to allow the Company to reserve and have available the Required Amount for all of the Preferred Shares then outstanding.

 

7. Voting Rights. Each Preferred Share, while such Preferred Share remains unconverted, shall have voting rights equal to the Conversion Rate. To the extent that under the FBCA the vote of the holders of the Preferred Shares, voting separately as a class or series as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the holders of all of the Preferred Shares, voting together in the aggregate and not in separate series unless required under the FBCA, represented at a duly held meeting at which a quorum is presented or by written consent of all of the Preferred Shares (except as otherwise may be required under the FBCA), voting together in the aggregate and not in separate series unless required under the FBCA, shall constitute the approval of such action by both the class or the series, as applicable. To the extent that under the FBCA holders of the Preferred Shares are entitled to vote on a matter with holders of shares of Common Stock, voting together as one class, each Preferred Share shall entitle the Holder thereof to cast 25,000 votes, subject to adjustment pursuant to Section 5. Holders of the Preferred Shares shall be entitled to written notice of all stockholder meetings or written consents (and copies of proxy materials and other information sent to stockholders) with respect to which they would be entitled by vote, which notice would be provided pursuant to the Company’s bylaws and the FBCA.

 

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8. Liquidation, Dissolution, Winding-Up. In the event of a Liquidation Event, no Holder of Preferred Shares shall be entitled to receive distributions, of cash or otherwise, unless such Holder is also a holder of Common Stock or other securities of the Company, and then only in proportion to such Common Stock or other securities held by such Holder.

 

9. Participation. Subject to any adjustments pursuant to Section 5, the Holders shall, as holders of Preferred Shares, 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 (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of shares of Common Stock.

 

10. Lost or Stolen Certificates. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificates representing Preferred Shares (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of an indemnification undertaking by the applicable Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of the certificate(s), the Company shall execute and deliver new certificate(s) of like tenor.

 

11. Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder or the Company in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. This Certificate of Designation shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed against any Person as the drafter hereof.

 

12. Notices. The Company shall provide each Holder of Preferred Shares with prompt written notice of all actions taken pursuant to the terms of this Certificate of Designation, including in reasonable detail a description of such action and the reason therefor. Whenever notice is required to be given under this Certificate of Designation, unless otherwise provided herein, such notice must be in writing and shall be given in accordance with the Securities Agreement.

 

13. Transfer of Preferred Shares. A Holder may only transfer some or all of its Preferred Shares with the prior written consent of the Company.

 

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14. Preferred Shares Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holders), a register for the Preferred Shares, in which the Company shall record the name, address and facsimile number of the Persons in whose name the Preferred Shares have been issued, as well as the name and address of each transferee. The Company may treat the Person in whose name any Preferred Shares is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any properly made transfers.

 

15. Stockholder Matters; Amendment.

 

(a) Stockholder Matters. Any stockholder action, approval or consent required, desired or otherwise sought by the Company pursuant to the FBCA, the Articles of Incorporation, this Certificate of Designation or otherwise with respect to the issuance of Preferred Shares may be effected by written consent of the Company’s stockholders or at a duly called meeting of the Company’s stockholders, all in accordance with the applicable rules and regulations of the FBCA. This provision is intended to comply with the applicable sections of the FBCA permitting stockholder action, approval and consent affected by written consent in lieu of a meeting.

 

(b) Amendment. This Certificate of Designation or any provision hereof may be amended by obtaining the affirmative vote at a meeting duly called for such purpose, or written consent without a meeting in accordance with the FBCA, of the Required Holders, voting separate as a single class, and with such other stockholder approval, if any, as may then be required pursuant to the FBCA and the Articles of Incorporation.

 

16. Payments to Holders. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Certificate of Designation, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing, provided that such Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and such Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Certificate of Designation is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.

 

17. Certain Defined Terms. For purposes of this Certificate of Designation, the following terms shall have the following meanings:

 

(a) “1934 Act” means the Securities Exchange Act of 1934, as amended.

 

(b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

 

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(c) “Common Stock” means (i) the Company’s shares of common stock, Nil par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(d) “Conversion Rate” means 25,000, subject to adjustment as set forth herein.

 

(e) “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than fifty percent (50%) of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than fifty percent (50%) of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination); or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of fifty percent (50%) of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

 

(f) “Liquidation Event” means, whether in a single transaction or series of transactions, the voluntary or involuntary liquidation, dissolution or winding up of the Company or such Subsidiaries the assets of which constitute all or substantially all of the assets of the business of the Company and its Subsidiaries, taken as a whole.

 

(g) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

(h) “Principal Market” means the OTCPINK, OTCQB, OTCQX, or any national securities exchange on which the Company’s Common Stock is listed.

 

(i) “Required Holders” means the holders of at least 51% of the outstanding Preferred Shares.

 

9
 

 

(j) “Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act of 1933, as amended, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

 

(k) “SEC” means the Securities and Exchange Commission or the successor thereto.

 

(l) “Securities” means, collectively, the Preferred Shares and the shares of Common Stock issuable upon conversion of the Preferred Shares.

 

(m) “Securities Agreement” for each Holder shall mean the Securities Agreement and between the Company and the Holder pursuant to which the Holder acquired its Preferred Share(s).

 

(n) “Stockholder Approval” means, for the purposes of this Certificate of Designation and any other Transaction Document, the affirmative approval of the stockholders of the Company providing for the Company’s issuance of all of the Securities as described in the Transaction Documents in accordance with applicable law and the rules and regulations of the Principal Market.

 

(o) “Subscription Date” of a holder means the date the Securities Agreement is duly executed by all parties thereto.

 

(p) “Subsidiary” or “Subsidiaries” means any subsidiary of the Company, including, where applicable, any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

(q) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Required Holders.

 

(r) “Transaction Documents” for any Holder means this Certificate of Designation, the Securities, the Securities Agreement and each of the other agreements and instruments entered into or delivered by the Company or the Holder in connection with the transactions contemplated thereby, all as may be amended from time to time in accordance with the terms hereof or thereof.

 

(s) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers, trustees or other similar governing body of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation of Series C Convertible Preferred Stock to be signed by its Chief Executive Officer on this ___ day of May, 2020.

 

  COMPANY
   
  By:
  Name: Marco Alfonsi
  Title: Chief Executive Officer

 

10
 

 

EXHIBIT I

CAN B̅ CORP.

 

CONVERSION NOTICE

 

Reference is made to the Certificate of Designation, Preferences and Rights of the Series C Convertible Preferred Stock of Can B̅ Corp. (the “Certificate of Designation”). In accordance with and pursuant to the Certificate of Designation, the undersigned hereby elects to convert the number of shares of Series C Convertible Preferred Stock, $0.001 par value per share (the “Preferred Shares”), of Can B̅ Corp., a Florida corporation (the “Company”), indicated below into shares of common stock, $0.001 value per share (“Common Shares”), of the Company, as of the date specified below.

 

Date of Conversion:
   
Number of Preferred Shares to be converted:
   
Share certificate number:
   
Tax ID Number (If applicable):
   
Conversion Rate**:
   
Number of Common Shares to be issued:

 

Please issue the Common Shares into which the Preferred Shares are being converted in the following name and to the following address:

 

Issue to: _______________________________________________________________
 
                 _______________________________________________________________
 
Address: _______________________________________________________________
 
Telephone Number: ______________________________________________________
 
Facsimile Number: _______________________________________________________
 
Holder:

 

Signature: ___________________________________________________
 
Name/Title: _________________________________________________
 
Dated: _______________________________________________

 

Account Number (if electronic book entry transfer): ___________________________________________
 
Transaction Code Number (if electronic book entry transfer): ___________________________________

 

** Subject to adjustment pursuant to Section 5 of the Certificate of Designation.

 

11
 

 

EXHIBIT II

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs [  ] to issue the above indicated number of shares of Common Stock in accordance with the Irrevocable Transfer Agent Instructions dated __________, 20___ from the Company and acknowledged and agreed to by [  ].

 

  COMPANY NAME
   
  By:             
  Name:  
  Title:  

 

12

 

 

Exhibit 10.1

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

 

Exhibit 10.2

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

Exhibit 10.3

 

 

 
 

   

 

 
 

  

 

 
 

    

 

 
 

  

 

 

 

 

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Marco Alfonsi, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Can B Corp.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
     
   b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
   c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
     
  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Dated: August 19, 2020   By: /s/ Marco Alfonsi
    Marco Alfonsi, Chief Executive Officer (Principal Executive Officer)

 

 

 

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Stanley L. Teeple, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Can B Corp..;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
     
  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
     
  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Dated: August 19, 2020   By: /s/ Stanley L. Teeple
    Stanley L. Teeple, Chief Financial Officer (Principal Financial Officer)

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Can B Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Marco Alfonsi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 19, 2020 By: /s/ Marco Alfonsi
   

Marco Alfonsi

Chief Executive Officer

    (Principal Executive Officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Can B Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Marco Alfonsi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

 

  (3) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (4) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 19, 2020 By: /s/ Stanley L. Teeple
   

Stanley L. Teeple,

Chief Financial Officer

(Principal Financial Officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.