Form 1-A Issuer Information UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 1-A
REGULATION A OFFERING STATEMENT
UNDER THE SECURITIES ACT OF 1933
OMB APPROVAL

FORM 1-A

OMB Number: 3235-0286


Estimated average burden hours per response: 608.0

1-A: Filer Information

Issuer CIK
0001509957
Issuer CCC
XXXXXXXX
DOS File Number
Offering File Number
024-11233
Is this a LIVE or TEST Filing? LIVE TEST
Would you like a Return Copy?
Notify via Filing Website only?
Since Last Filing?

Submission Contact Information

Name
Phone
E-Mail Address

1-A: Item 1. Issuer Information

Issuer Infomation

Exact name of issuer as specified in the issuer's charter
Can B Corp.
Jurisdiction of Incorporation / Organization
FLORIDA
Year of Incorporation
2005
CIK
0001509957
Primary Standard Industrial Classification Code
WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES
I.R.S. Employer Identification Number
20-3624118
Total number of full-time employees
10
Total number of part-time employees
4

Contact Infomation

Address of Principal Executive Offices

Address 1
960 South Broadway
Address 2
Suite 120
City
Hicksville
State/Country
NEW YORK
Mailing Zip/ Postal Code
11801
Phone
516-595-9544

Provide the following information for the person the Securities and Exchange Commission's staff should call in connection with any pre-qualification review of the offering statement.

Name
Arden Anderson, Esq.
Address 1
Address 2
City
State/Country
Mailing Zip/ Postal Code
Phone

Provide up to two e-mail addresses to which the Securities and Exchange Commission's staff may send any comment letters relating to the offering statement. After qualification of the offering statement, such e-mail addresses are not required to remain active.

Financial Statements

Industry Group (select one) Banking Insurance Other

Use the financial statements for the most recent period contained in this offering statement to provide the following information about the issuer. The following table does not include all of the line items from the financial statements. Long Term Debt would include notes payable, bonds, mortgages, and similar obligations. To determine "Total Revenues" for all companies selecting "Other" for their industry group, refer to Article 5-03(b)(1) of Regulation S-X. For companies selecting "Insurance", refer to Article 7-04 of Regulation S-X for calculation of "Total Revenues" and paragraphs 5 and 7 of Article 7-04 for "Costs and Expenses Applicable to Revenues".

Balance Sheet Information

Cash and Cash Equivalents
$ 390201.00
Investment Securities
$ 0.00
Total Investments
$
Accounts and Notes Receivable
$ 1520623.00
Loans
$
Property, Plant and Equipment (PP&E):
$ 1030519.00
Property and Equipment
$
Total Assets
$ 7188614.00
Accounts Payable and Accrued Liabilities
$ 646603.00
Policy Liabilities and Accruals
$
Deposits
$
Long Term Debt
$ 354840.00
Total Liabilities
$ 2244308.00
Total Stockholders' Equity
$ 4944306.00
Total Liabilities and Equity
$ 7188614.00

Statement of Comprehensive Income Information

Total Revenues
$ 774791.00
Total Interest Income
$
Costs and Expenses Applicable to Revenues
$ 2836663.00
Total Interest Expenses
$
Depreciation and Amortization
$ 285261.00
Net Income
$ -2315032.00
Earnings Per Share - Basic
$ -0.79
Earnings Per Share - Diluted
$ -0.64
Name of Auditor (if any)
BMKR, LLP

Outstanding Securities

Common Equity

Name of Class (if any) Common Equity
Common
Common Equity Units Outstanding
3840053
Common Equity CUSIP (if any):
13470W103
Common Equity Units Name of Trading Center or Quotation Medium (if any)
OTCQB

Preferred Equity

Preferred Equity Name of Class (if any)
Series A Preferred
Preferred Equity Units Outstanding
20
Preferred Equity CUSIP (if any)
000000000
Preferred Equity Name of Trading Center or Quotation Medium (if any)
N/A

Preferred Equity

Preferred Equity Name of Class (if any)
Series B Preferred
Preferred Equity Units Outstanding
0
Preferred Equity CUSIP (if any)
000000000
Preferred Equity Name of Trading Center or Quotation Medium (if any)
N/A

Preferred Equity

Preferred Equity Name of Class (if any)
Series C Preferred
Preferred Equity Units Outstanding
0
Preferred Equity CUSIP (if any)
000000000
Preferred Equity Name of Trading Center or Quotation Medium (if any)
N/A

Debt Securities

Debt Securities Name of Class (if any)
Convertible Notes
Debt Securities Units Outstanding
11110000
Debt Securities CUSIP (if any):
000000000
Debt Securities Name of Trading Center or Quotation Medium (if any)
N/A

1-A: Item 2. Issuer Eligibility

Issuer Eligibility

Check this box to certify that all of the following statements are true for the issuer(s)

1-A: Item 3. Application of Rule 262

Application Rule 262

Check this box to certify that, as of the time of this filing, each person described in Rule 262 of Regulation A is either not disqualified under that rule or is disqualified but has received a waiver of such disqualification.

Check this box if "bad actor" disclosure under Rule 262(d) is provided in Part II of the offering statement.

1-A: Item 4. Summary Information Regarding the Offering and Other Current or Proposed Offerings

Summary Infomation

Check the appropriate box to indicate whether you are conducting a Tier 1 or Tier 2 offering Tier1 Tier2
Check the appropriate box to indicate whether the financial statements have been audited Unaudited Audited
Types of Securities Offered in this Offering Statement (select all that apply)
Equity (common or preferred stock)
Does the issuer intend to offer the securities on a delayed or continuous basis pursuant to Rule 251(d)(3)? Yes No
Does the issuer intend this offering to last more than one year? Yes No
Does the issuer intend to price this offering after qualification pursuant to Rule 253(b)? Yes No
Will the issuer be conducting a best efforts offering? Yes No
Has the issuer used solicitation of interest communications in connection with the proposed offering? Yes No
Does the proposed offering involve the resale of securities by affiliates of the issuer? Yes No
Number of securities offered
10000000
Number of securities of that class outstanding
3840053

The information called for by this item below may be omitted if undetermined at the time of filing or submission, except that if a price range has been included in the offering statement, the midpoint of that range must be used to respond. Please refer to Rule 251(a) for the definition of "aggregate offering price" or "aggregate sales" as used in this item. Please leave the field blank if undetermined at this time and include a zero if a particular item is not applicable to the offering.

Price per security
$ 0.5000
The portion of the aggregate offering price attributable to securities being offered on behalf of the issuer
$ 5000000.00
The portion of the aggregate offering price attributable to securities being offered on behalf of selling securityholders
$ 0.00
The portion of the aggregate offering price attributable to all the securities of the issuer sold pursuant to a qualified offering statement within the 12 months before the qualification of this offering statement
$ 0.00
The estimated portion of aggregate sales attributable to securities that may be sold pursuant to any other qualified offering statement concurrently with securities being sold under this offering statement
$ 0.00
Total (the sum of the aggregate offering price and aggregate sales in the four preceding paragraphs)
$ 5000000.00

Anticipated fees in connection with this offering and names of service providers

Underwriters - Name of Service Provider
N/A
Underwriters - Fees
$ 0.00
Sales Commissions - Name of Service Provider
N/A
Sales Commissions - Fee
$ 0.00
Finders' Fees - Name of Service Provider
N/A
Finders' Fees - Fees
$ 0.00
Audit - Name of Service Provider
BMKR, LLP
Audit - Fees
$ 5000.00
Legal - Name of Service Provider
Austin Legal Group, APC
Legal - Fees
$ 40000.00
Promoters - Name of Service Provider
Promoters - Fees
$
Blue Sky Compliance - Name of Service Provider
Blue Sky Compliance - Fees
$
CRD Number of any broker or dealer listed:
0
Estimated net proceeds to the issuer
$ 4955000.00
Clarification of responses (if necessary)
The Company has not identified a selling agent; however, it may appoint one or more placement agents to sell this offering.

1-A: Item 5. Jurisdictions in Which Securities are to be Offered

Jurisdictions in Which Securities are to be Offered

Using the list below, select the jurisdictions in which the issuer intends to offer the securities

Selected States and Jurisdictions
ALABAMA
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW YORK
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING
DISTRICT OF COLUMBIA
PUERTO RICO
ALBERTA, CANADA
BRITISH COLUMBIA, CANADA
MANITOBA, CANADA
NEW BRUNSWICK, CANADA
NEWFOUNDLAND, CANADA
NOVA SCOTIA, CANADA
ONTARIO, CANADA
PRINCE EDWARD ISLAND, CANADA
QUEBEC, CANADA
SASKATCHEWAN, CANADA
YUKON, CANADA
CANADA (FEDERAL LEVEL)

Using the list below, select the jurisdictions in which the securities are to be offered by underwriters, dealers or sales persons or check the appropriate box

None
Same as the jurisdictions in which the issuer intends to offer the securities
Selected States and Jurisdictions

1-A: Item 6. Unregistered Securities Issued or Sold Within One Year

Unregistered Securities Issued or Sold Within One Year

None

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Can B Corp.
(b)(1) Title of securities issued
Common Stock
(2) Total Amount of such securities issued
1804236
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
$1,838,100 plus services and as incentive shares issued in conjunction with issuance of convertible debt.
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Can B Corp.
(b)(1) Title of securities issued
Options to purchase Common Stock
(2) Total Amount of such securities issued
56667
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
Services rendered. Value was negotiated between officers, directors and the issuer.
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Can B Corp.
(b)(1) Title of securities issued
Convertible Debt
(2) Total Amount of such securities issued
1110000
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
$1,008,545. Principal amount les original issuance discount.
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Act

(e) Indicate the section of the Securities Act or Commission rule or regulation relied upon for exemption from the registration requirements of such Act and state briefly the facts relied upon for such exemption
Section 4(a)(2) and Rule 506(b) of Regulation D

 

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

 

PRELIMINARY OFFERING CIRCULAR - SUBJECT TO COMPLETION

 

Explanation: Can B̅ Corp. is amending its Offering Statement filed on Form 1-A/A, filed with the Securities Exchange Commission on July 31, 2020, to set the price for the shares offered hereby and to update certain disclosures.

 

Can B̅ Corp.

 

 

Registrant’s principal address: 960 South Broadway, Suite 120 Hicksville, NY 11801

Registrant’s telephone number, including area code: 516-595-9544

Registrant’s website: https://canbcorp.com

 

Dated: September [●], 2020

 

Can B̅ Corp. (herein referred to as “we,” “us,” “our,” “CANB,” and the “Company”) is offering up to 10,000,000 shares of our common stock (the “Shares”) at a price of $0.50 per share, for gross proceeds of up to $5,000,000, before deduction of offering expenses, assuming all shares are sold. For more information on the securities offered hereby, please see the item titled “Securities Being Offered” on page 33. The minimum investment established for each investor is $500 unless such minimum is waived by the Company in its sole discretion. Shares offered by the Company will be sold through the Company’s executive officers and directors on a best-efforts basis. We may also engage sales agents licensed through the Financial Industry Regulatory Authority (“FINRA”) and pay such agents cash and/or stock-based compensation, which will be announced through a supplement to this Offering Circular.

 

Price of Common Stock  

Price to

Public [1]

   

Underwriting

Discount and

Commissions [2]

   

Proceeds to

Issuer [3]

   

Proceeds to

Other

Persons

 
Per Share   $ 0.50     $ 0.00     $ 0.50     $ 0.00  
Total Maximum   $ 5,000,000     $ 0.00     $ 5,000,000     $ 0.00  

 

(1) All amounts in this chart and circular are in U.S. dollars unless otherwise indicated.
(2) The Company’s Shares will be offered on a best efforts basis by the Company’s officers and directors. Accordingly, there are no underwriting fees or commissions currently associated with this offering; however, the Company may engage sales associates after this offering commences.
(3) We expect to incur approximately $50,000 in expenses relating to this offering, including legal, accounting, travel, printing and other miscellaneous expenses.

 

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

 

Our common stock is not now listed on any national securities exchange or the Nasdaq stock market. However, our stock is quoted on the OTC Market’s OTCQB® Venture Market under the symbol “CANB.” While our common stock is on the OTCQB® Venture Market, there has been limited trading volume. There is no guarantee that an active trading market will develop in our securities.

 

We qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act (“JOBS Act”).

 

This offering is being made pursuant to Tier 2 of Regulation A (Regulation A Plus), following the Form 1-A Offering Circular disclosure format.

 

This offering is highly speculative and these securities involve a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. See “Risk Factors” on Page 6.

 

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

 

 

 

 

TABLE OF CONTENTS

 

SUMMARY INFORMATION 3
   
RISK FACTORS 6
   
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS 15
   
DILUTION 15
   
PLAN OF DISTRIBUTION 15
   
USE OF PROCEEDS 17
   
DESCRIPTION OF BUSINESS 18
   
DESCRIPTION OF PROPERTY 23
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 23
   
DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES 27
   
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS 30
   
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS 31
   
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS 33
   
SECURITIES BEING OFFERED 33
   
FINANCIAL STATEMENTS F-1
   
EXHIBITS 35

 

  2  

 

 

SUMMARY INFORMATION

 

This summary highlights some of the information in this circular. It is not complete and may not contain all of the information that you may want to consider. To understand this offering fully, you should carefully read the entire circular, including the section entitled “Risk Factors,” before making a decision to invest in our securities. Unless otherwise noted or unless the context otherwise requires, the terms “we,” “us,” “our,” “CANB,” the “Company,” and “Can B̅ Corp.” refer to Can B̅ Corp. together with its wholly owned subsidiaries.

 

The Company

 

The Company was originally incorporated as WRAPMail, Inc. (“WRAP” or “WRAPmail”) in Florida on October 11, 2005 in order to tap into a largely un-serviced segment of the web-based advertising industry. 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 January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008, in order to acquire Prosperity’s office productivity software suite as a complement to WRAP’s existing intellectual property. After its acquisition, the Company transferred Prosperity’s operations to WRAP.

 

In early 2017, the Company transitioned into the hemp-derived cannabidiol (“CBD”) industry. On May 15, 2017, WRAP changed its name to Canbiola, Inc. to reflect its transition.

 

On or around October 5, 2017, the Company approved an increase of its common stock to 750,000,000 shares. On March 12, 2019, the Company approved an increase of its authorized shares to 1,500,000,000. The Company is also authorized to issue a total of 5,000,000 preferred shares, including 20 Series A Preferred Shares, 500,000 Series B Preferred Shares and 2,000 Series C Preferred Shares.

 

On January 16, 2019, the Company filed an amendment to its Articles of Incorporation to change the name of the Company to Can B̅ Corp. in order to segregate its corporate identity from its lead products branded under the “Canbiola” brand. On March 2, 2020, the Company filed an amendment to its Articles of Incorporation to effect a 300-to-1 reverse stock split of its issued and outstanding, but not authorized, common stock (the “Reverse Split”). Both actions were declared effective on March 6, 2020. The Reverse Split also affects the number of shares issuable upon conversion of the Company’s convertible securities, such as Preferred Stock, options and warrants.

 

As of August 31, 2020, we had approximately 3,840,053 shares of common stock, 20 shares of Series A Preferred Stock and no shares of Series B Preferred Stock or Series C Preferred Stock issued and outstanding. The Company’s common shares are currently quoted on OTC Market’s OTCQB® Venture Market under the symbol “CANB.”

 

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

 

Going Concern

 

The consolidated financial statements included in this Offering Circular 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 December 31, 2019, the Company had cash and cash equivalents of $46,540 and a working capital of $2,881,147. For the years ended December 31, 2019 and 2018, the Company had net loss of $4,592,470 and $4,112,277, 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.

 

  3  

 

 

Business Overview

 

The Company is a health and wellness company, producing and selling ingestible, wearable, and topical products, including products that contain cannabidiol (“CBD”). The Company’s primary business is the development, production and sale of products and delivery devices containing hemp-derived CBD. The Company’s products include drops/tinctures, oils, creams, moisturizers, chews, isolate, gel caps, concentrates, superfood drink mixes, and durable equipment. In addition, the Company has the license to develop and sell certain CBD and non-CBD products under the Lifeguard® lifestyle brand. The Company grows its own hemp biomass, which is processed by a third party and sent to the Company’s production facility in Lacey, Washington. CANB aims to be the premier provider of the highest quality natural hemp CBD products on the market through producing and sourcing the very best raw material and developing a variety of products we believe will improve people’s lives in a variety of areas.

 

In addition to its direct operations, the Company operates through subsidiaries. The Company develops and sells its “Canbiola” branded products, which are distributed directly by the Company through its website and by partnering doctors who recommend or sell the products to their customers. The Company’s products are produced at its state-of-the-art manufacturing facility in Lacey, WA owned by its wholly owned subsidiary, Pure Health Products, LLC (“Pure Health Products” or “PHP”). Pure Health Products also white labels the Company’s products to be sold by under other brand names by third parties (including its own “Seven Chakras” and “Pure Leaf Oil” brands) and produces private label products for third parties using such parties’ formulations. 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. and DuramedNJ LLC (collectively, “Duramed”). The Company’s hemp farming business is run through Green Grow Farms, Inc. (“Green Grow Farms” or “GGFI”), which was formed in August, 2019.

 

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

 

Emerging Growth Company

 

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

 

  (a) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,070,000,000 (as such amount is indexed for inflation every five years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;
     
  (b) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;
     
  (c) the date on which such issuer has, during the previous three-year period, issued more than $1,000,000,000 in nonconvertible debt; or
     
  (d) the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’

 

  4  

 

 

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

 

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

 

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

 

The Offering

 

This circular relates to the sale of 10,000,000 shares of our common stock (the “Shares”) at a price of $0.50 per share, for total offering proceeds of up to $5,000,000 if all offered shares are sold. There is no minimum offering amount and no provision to escrow or return investor funds if any minimum number of shares is not sold. The minimum investment amount established for each investor is $500. All funds raised by the Company from this offering will be immediately available for the Company’s use.

 

The aggregate purchase price to be paid by any investor for the securities sold hereby cannot exceed 10% of the greater of the investor’s annual income or net worth (for entity investors, revenues or net assets for the investor’s most recently completed fiscal year are used instead). The foregoing limitation does not apply to “accredited investors” and non-natural investors.

 

Shares offered by the Company will be sold by our directors and executive officers. We may also elect to engage licensed broker-dealers. No sales agents have yet been engaged to sell shares. All shares will be offered on a “best-efforts” basis. Investors may be publicly solicited through our website, investment websites, social media, or otherwise.

 

This offering will terminate at the earlier to occur of: (i) all shares offered hereby are sold, or (ii) one year from the date this offering circular is qualified with the SEC. Notwithstanding the foregoing, the Company may terminate this offering at any time or extend this offering by ninety (90) days, in its sole discretion.

 

ABOUT THIS CIRCULAR

 

We have prepared this Offering Circular to be filed with the SEC for our offering of securities. The Offering Circular includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular.

 

You should rely only on the information contained in this Offering Circular and its exhibits. We have not authorized any person to provide you with any information different from that contained in this Offering Circular. The information contained in this Offering Circular is complete and accurate only as of the date of this Offering Circular, regardless of the time of delivery of this Offering Circular or sale of our shares. This Offering Circular contains summaries of certain other documents, but reference is hereby made to the full text of the actual documents for complete information concerning the rights and obligations of the parties thereto. All documents relating to this offering and related documents and agreements, if readily available to us, will be made available to a prospective investor or its representatives upon request.

 

  5  

 

 

INDUSTRY AND MARKET DATA

 

The industry and market data used throughout this Offering Circular have been obtained from our own research, surveys or studies conducted by third parties and industry or general publications. Industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. We believe that each of these studies and publications is reliable. We have not engaged any person or entity to provide us with industry or market data.

 

TAX CONSIDERATIONS

 

No information contained herein, nor in any prior, contemporaneous or subsequent communication should be construed by a prospective investor as legal or tax advice. We are not providing any tax advice as to the acquisition, holding or disposition of the securities offered herein. In making an investment decision, investors are strongly encouraged to consult their own tax advisor to determine the U.S. Federal, state and any applicable foreign tax consequences relating to their investment in our securities. This written communication is not intended to be “written advice,” as defined in Circular 230 published by the U.S. Treasury Department

 

RISK FACTORS

 

Any investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our common stock. Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur. Our common stock is quoted on the OTCQB under the symbol “CANB”. This market is extremely limited and the prices quoted are not a reliable indication of the value of our common stock. As of the date of this Offering Circular, there has not been significant trading of shares of our common stock. The trading price could decline due to any of these risks, and an investor may lose all or part of his, her, or its investment. Some of these factors have affected our financial condition and operating results in the past or are currently affecting us. This Offering Circular also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this Offering Circular. In addition to the other information provided in this Offering Circular, you should carefully consider the following risk factors in evaluating our business and before purchasing any of our common stock. All material risks identified by the Company are discussed in this section.

 

Risks Related to this Offering and our Common Stock

 

You could experience substantial dilution in the book value per share of the common stock you purchase.

 

If we offer new stock at a price per share less than the net tangible book value per share, you could experience dilution should the net tangible book value per share drop below $0.50. Issuance of preferred shares as compensation and shares under convertible debt r derivative securities transactions could affect dilution.

 

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

 

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

 

  6  

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  7  

 

 

We do not anticipate paying any cash dividends.

 

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

 

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

 

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

 

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

 

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

 

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

 

Certain of our executive officers, directors and large stockholders own a significant percentage of our outstanding capital stock. As of August 31, 2020, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 9.41% of our outstanding shares of common stock and 32.76% of the eligible votes of the Company. Accordingly, our directors and executive officers have significant influence over our affairs due to their substantial ownership coupled with their positions on our management team and have substantial voting power to approve matters requiring the approval of our stockholders. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This concentration of ownership may prevent or discourage unsolicited acquisition proposals or offers for our common stock that some of our stockholders may believe is in their best interest.

 

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

 

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

 

  8  

 

 

If we are unable to conclude that our internal control over financial reporting is effective, or when we are no longer a smaller reporting company, if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting because we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures, which could cause the price of our common stock to decline. Internal control deficiencies could also result in a restatement of our financial results in the future. As of July 8, 2020, we have concluded that are internal controls are not sufficient.

 

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

 

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

 

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

 

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

 

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

 

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

 

The best efforts structure of this offering may yield insufficient gross proceeds to fully execute our business plan.

 

Our officers and directors are offering shares of our common stock in this offering on a best efforts basis. Officers and directors are not required to sell any specific number or dollar amount of common stock, but will use their best efforts to sell the shares offered by us. As a “best efforts” offering, there can be no assurance that the offering contemplated by this prospectus will result in any proceeds being made available to us.

 

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

 

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

 

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

 

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

 

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

 

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

 

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Risks Related to our Business

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The CBD industry is highly competitive and subject to rapid change. The industry continues to expand and evolve as an increasing number of competitors and potential competitors enter the market. Many of these competitors and potential competitors have substantially greater financial, technological, managerial and research and development resources and experience than we have. Some of these competitors and potential competitors have more experience than we have in the development of CBD products, including validation procedures and regulatory matters. In addition, our products compete with product offerings from large and well-established companies that have greater marketing and sales experience and capabilities than we or our collaboration partners have. If we are unable to compete successfully, we may be unable to grow and sustain our revenue.

 

  11  

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The legality of certain products containing CBD is currently uncertain and the Company could be subject to enforcement action by the FDA and certain state regulatory agencies.

 

In 2018, the federal Farm Bill removed hemp as a Schedule I drug under the Controlled Substances Act and hemp may now be grown as a commodity crop, with restrictions; however, the 2018 Farm Bill did not specifically legalize CBD. Until Congress promulgates rules and regulations relating to hemp derived CBD, the “legal” status of CBD from hemp, or the processes the Company may have to implement (and at what expense), are still unknowns. A similar paradigm exists under various state laws with which the Company will have to comply. The FDA currently considers the addition of CBD to food products, cosmetics or supplements to be illegal and prohibits the advertisement of CBD products with health claims. In addition, the FDA has recently increased its review of and enforcement against CBD companies. Should the Company become subject to enforcement action by the FDA, it could be forced to spend significant sums defending against such enforcement and ultimately could be forced to stop offering some or all of its CBD products, which would materially, negatively affect the Company’s business and shareholders’ investments. In addition, notwithstanding the intense pressure on FDA to fast-track the CBD approval process, it is likely that the approval process for use of CBD in foods, cosmetics or supplements will take years.

 

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

 

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

 

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

 

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

 

The full impact of the COVID-19 outbreak continues to evolve as of the date of this Offering Circular. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the foreseeable future.

 

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SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS

 

Some of the statements in this Offering Circular are “forward-looking statements.” These forward-looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the factors set forth above under “Risk Factors.” The words “believe,” “expect,” “anticipate,” “intend,” “plan,” and similar expressions identify forward-looking statements. We caution you not to place undue reliance on these forward-looking statements.

 

We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any future or developments. However, the Private Securities Litigation Reform Act of 1995 is not available to us as a non-reporting issuer. Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Exchange Act expressly state that the safe harbor for forward looking statements does not apply to statements made in connection with an initial public offering.

 

DILUTION

 

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

 

Our net tangible book value as of June 30, 2020 was $3,907,866 or approximately $0.87 per share. Net tangible book value per share represents our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding.

 

Net tangible book value dilution per share of common stock to new investors represents the difference between the amount per share paid by purchasers in this offering and the as adjusted net tangible book value per share of common stock immediately after completion of this offering. After giving effect to our sale of the maximum offering amount of 10,000,000 shares at $0.50 per share for $5,000,000, assuming $50,000 in offering or other expenses, our as adjusted net tangible book value as of June 30, 2020 would have been approximately $8,857,866, or approximately $0.61 per share. This represents an immediate decrease in net tangible book value of approximately $0.26 per share to existing stockholders and an immediate increase in net tangible book value of $0.11 per share to investors of this offering.

 

If we do not sell the maximum offering amount and instead sell 75% of the shares offered hereby, or 7,500,000 shares at $0.50 per share for $3,750,000, assuming $50,000 in offering or other expenses, our as adjusted net tangible book value as of June 30, 2020 would have been approximately $7,607,866, or approximately $0.63 per share. This represents an immediate decrease in net tangible book value of approximately $0.24 per share to existing stockholders and an immediate increase in net tangible book value of $0.13 per share to investors of this offering.

 

Similarly, if we sold 50% of the shares offered hereby, or 5,000,000 shares at $0.50 per share for $2,500,000, assuming $50,000 in offering or other expenses, our as adjusted net tangible book value as of June 30, 2020 would have been approximately $6,357,866, or approximately $0.67 per share. This represents an immediate decrease in net tangible book value of approximately $0.20 per share to existing stockholders and an immediate increase in net tangible book value of $0.17 per share to investors of this offering.

 

Finally, if we sold 25% of the shares offered hereby, or 2,500,000 shares at $0.50 per share for $1,250,000, assuming $50,000 in offering or other expenses, our as adjusted net tangible book value as of June 30, 2020 would have been approximately $5,107,866, or approximately $0.73 per share. This represents an immediate decrease in net tangible book value of approximately $0.14 per share to existing stockholders and an immediate increase in net tangible book value of $0.23 per share to investors of this offering.

 

The above analysis is illustrated in the following table:

 

Public offering price per share   $ 0.50  
Net tangible book value per share as of June 30, 2020   $ 0.87  
If 100% Sold        
Decrease in net tangible book value per share attributable to new investors   $ 0.26  
Adjusted net tangible book value per share as of June 30, 2020   $ 0.61  
Increase per share to new investors in the offering   $ 0.11  
If 75% Sold        
Decrease in net tangible book value per share attributable to new investors   $ 0.24  
Adjusted net tangible book value per share as of June 30, 2020   $ 0.63  
Increase per share to new investors in the offering   $ 0.13  
If 50% Sold        
Decrease in net tangible book value per share attributable to new investors   $ 0.20  
Adjusted net tangible book value per share as of June 30, 2020   $ 0.67  
Increase per share to new investors in the offering   $ 0.17  
If 25% Sold        
Decrease in net tangible book value per share attributable to new investors   $ 0.14  
Adjusted net tangible book value per share as of June 30, 2020   $ 0.73  
Increase per share to new investors in the offering   $ 0.23  

 

The above calculations assume all 20 outstanding Series A preferred shares have been converted into 666,680 shares of common stock (which they have not) for a total of approximately 4,506,733 shares of common stock outstanding as of June 30, 2020 before accounting for the offering, but do not assume exercise of any other outstanding convertible securities in the Company. After accounting for the offering, there would have been approximately 14,506,733 shares outstanding if 100% of the offered shares were sold, 12,006,733 shares outstanding if 75% of the offered shares were sold, 9,506,733 shares outstanding if 50% of the offered shares were sold, and 7,006,733 shares outstanding if 25% of the offered shares were sold.

 

PLAN OF DISTRIBUTION

 

We currently plan to have our directors and executive officers sell the Shares offered by the Company on our behalf. Our officers and directors will receive no discounts or commissions. Our executive officers will deliver this circular to those persons who they believe might have interest in purchasing all or a part of this offering. The Company may generally solicit investors, including, but not limited to, the use of social media, newscasts, advertisements, roadshows and the like.

 

There is no minimum offering amount and no provision to escrow or return investor funds if any minimum number of shares is not sold. The minimum investment amount established for each investor is $500. All funds raised by the Company from this offering will be immediately available for the Company’s use. In lieu of cash, the Company may elect to accept the exchange of existing debt for shares offered hereby, pursuant to the terms of this Offering Circular.

 

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As of the date of this Offering Circular, we have not entered into any arrangements with any selling agents for the sale of the securities; however, we may engage one or more selling agents to sell the securities in the future. If we elect to do so, we will file a supplement to this circular to identify such selling agent(s).

 

Our directors and officers will not register as broker-dealers under Section 15 of the Securities Exchange Act of 1934 in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those conditions under which a person associated with an issuer may participate in the offering of the issuer’s securities and not be deemed to be a broker-dealer. The conditions are that:

 

the person is not statutorily disqualified, as that term is defined in Section 3(a)(39) of the Exchange Act, at the time of his participation; and
   
the person is not at the time of their participation an associated person of a broker-dealer; and
   
the person meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that he (i) primarily performs, or is intended primarily to perform at the end of the offering, substantial duties for or on behalf of the issuer otherwise than in connection with transactions in securities; and (ii) is not a broker or dealer, or an associated person of a broker or dealer, within the preceding 12 months; and (iii) does not participate in selling and offering of securities for any issuer more than once every 12 months other than in reliance on paragraphs (a)(4)(i) or (a)(4)(iii) of Rule 3a4-1 of the Exchange Act.

 

Our officers and directors are not statutorily disqualified, are not being compensated, and are not associated with a broker-dealer. They are and will continue to hold their positions as officers or directors following the completion of the offering and have not been during the past 12 months and are currently not brokers or dealers or associated with brokers or dealers. They have not nor will they participate in the sale of securities of any issuer more than once every 12 months.

 

Unless sooner withdrawn or canceled by us, the offering will continue until (i) the maximum offering amount has been sold, or (ii) one year from the date this offering circular is qualified with the SEC. Notwithstanding the foregoing, the Company may terminate this offering at any time or extend this offering by ninety (90) days, in its sole discretion.

 

OTC Markets Considerations

 

The OTC Markets is separate and distinct from the Nasdaq stock market or other national exchange. Nasdaq has no business relationship with issuers of securities quoted on the OTC Markets. The SEC’s order handling rules, which apply to Nasdaq-listed securities, do not apply to securities quoted on the OTC Markets.

 

Although the Nasdaq and other national stock markets have rigorous listing standards to ensure the high quality of their issuers, and can delist issuers for not meeting those standards; the OTC Markets has no listing standards. Rather, it is the market maker who chooses to quote a security on the system, files the application, and is obligated to comply with keeping information about the issuer in its files.

 

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Although we believe being listed on the OTC Markets increases liquidity for our stock, investors may have greater difficulty in getting orders filled than if we were on Nasdaq or other exchange. Investors’ orders may be filled at a price much different than expected when an order is placed. Trading activity in general is not conducted as efficiently and effectively on OTC Markets as with exchange-listed securities. Also, because OTC Markets stocks are usually not followed by analysts, there may be lower trading volume than for Nasdaq-listed securities.

 

Investors must contact a broker-dealer to trade OTC Markets securities. Investors do not have direct access to the quotation service. For OTC Markets securities, there only has to be one market maker.

 

USE OF PROCEEDS

 

The following table illustrates the amount of net proceeds to be received by the Company on the sale of the common shares offered hereby and the intended uses of such proceeds over an approximate twelve (12) month period. It is possible that we may not raise the entire $5,000,000 in shares being offered through this Offering Circular. In such case, we will reallocate the use of proceeds as the board of directors deems to be in the best interests of the Company in order to effectuate its business plan. The intended use of proceeds are as follows:

 

Capital Sources and Uses

 

      100%     75%     50%     25%
Gross Offering Proceeds   $ 5,000,000     $ 3,750,000     $ 5,000,000     $ 1,250,000  
Offering Costs(1)   $ 50,000     $ 50,000     $ 50,000     $ 50,000  
                                 
Use of Net Proceeds:                                
                                 
Compliance and Certification(2)   $ 300,000     $ 250,000     $ 145,000     $ 0  
Building and Equipment(3)   $ 965,000     $ 655,000     $ 370,000     $ 0  
Business Expansions(4)   $ 175,000     $ 115,000     $ 110,000     $ 0  
Marketing   $ 1,200,000     $ 800,000     $ 230,000     $ 0  
Research and Development   $ 575,000     $ 350,000     $ 225,000     $ 0  
Staffing Costs   $ 200,000     $ 100,000     $ 50,000     $ 0  
Debt Repayment(5)   $ 1,200,000     $ 1,200,000     $ 1,200,000     $ 1,200,000  
Working Capital(6)   $ 335,000     $ 230,000     $ 120,000     $ 0  

 

Notes:

 

(1) The Company expects to spend approximately $50,000 in expenses relating to this offering, including legal, accounting, travel, printing and other miscellaneous fees.
   
(2) The Company expects to use these funds for filing, legal, accounting, and other costs associated with maintaining SEC compliance. The Company also expects to spend approximately $90,000 to obtain Good Manufacturing Practices (GMP) certification.
   
(3) The Company expects to use these funds to buy and maintain equipment necessary for manufacturing its products and to build and expand on its facilities.
   
(4) The Company anticipates using these funds for new rollouts and to increase its presence in territories within the United States.
   
(5) The Company plans to pay down existing debt to four holders of promissory notes. One note has a principal amount of $550,000, matures on September 1, 2020, and bears interest at a rate of 12% per annum. The note is convertible into shares of the Company’s common stock (“Common Stock”) at any time at the lower of (i) $0.02 per share or (ii) 80% of closing price of the Common Stock on the date of conversion per share, subject to adjustment upon certain material events. The note is secured by a security interest encumbering all assets of the Company. The second note has a principal amount of $225,000, matures October 21, 2020, and has an interest rate of 12% per annum. The note is convertible into shares of the Company’s Common Stock at a price share equal to the lower of (i) $6.00 or (ii) 80% of the closing bid price of the Company’s Common Stock on the date of conversion per share subject to adjustment upon certain material events. The note is secured by a security interest encumbering all assets of the Company, which is subordinate to the security interest granted to the first noteholder. The third note has a principal amount of $220,000, matures on June 17, 2021, and bears interest at 12% per annum. The note is convertible into shares of the Company’s Common Stock at a price per share equal to 80% of the lowest closing bid price of the Company’s Common Stock during the twenty (20) trading days prior to the date of conversion, subject to adjustment upon certain material events. The fourth note has a principal amount of $115,000, matures on December 15, 2020, and has an interest rate of 12% per annum. The note is convertible into shares of the Company’s Common Stock at a price per share equal to 80% of the lowest closing bid price of the Company’s Common Stock during the twenty (20) trading days prior to the date of conversion, subject to adjustment upon certain material events. The foregoing descriptions are qualified in their entirety by the terms of the full text of the notes, attached hereto as exhibits. The proceeds raise from the notes are expected to be used for enhancing our manufacturing factory, expanding on and creating new product lines, marketing, and working capital.
   
(6) The Company will use working capital to pay for miscellaneous and general operating expenses.

 

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

 

DETERMINATION OF OFFERING PRICE

 

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

 

DESCRIPTION OF BUSINESS

 

Organization

 

We were originally incorporated as WRAPMail, Inc. (“WRAP” or “WRAPMail”) in Florida on October 11, 2005 in order to tap into a largely un-serviced segment of the web-based advertising industry. 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 January 5, 2015, WRAP acquired 100% ownership of Prosperity Systems, Inc. (“Prosperity”), a New York corporation incorporated on April 2, 2008, in order to acquire Prosperity’s office productivity software suite as a complement to WRAP’s existing intellectual property. After its acquisition, the Company transferred Prosperity’s operations to WRAP and is presently in the process of dissolving Prosperity.

 

In early 2017, the Company transitioned into the hemp-derived CBD industry. On May 15, 2017, WRAP changed its name to Canbiola, Inc. to reflect its transition.

 

On or around October 5, 2017, the Company approved an increase of its common stock to 750,000,000 shares. On March 12, 2019, the Company approved an increase of its authorized shares to 1,500,000,000. The Company is also authorized to issue a total of 5,000,000 preferred shares, including 20 Series A Preferred Shares and 500,000 Series B Preferred Shares.

 

The Company acquired 100% of the membership interests in Pure Health Products, LLC, a New York limited liability company (“Pure Health Products” or “PHP”) 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 in Nevada on November 29, 2018) and DuramedNJ LLC (incorporated in Nevada on May 29, 2019) (collectively, “Duramed”). Duramed began operating on or about February1, 2019. The Company’s hemp farming business is run through Green Grow Farms, Inc. (“Green Grow Farms”), which was formed in August, 2019. The Company’s wholly owned subsidiaries Radical Tactical LLC and NY Hemp Depot LLC (the “Hemp Depot”) are currently without operations.

 

On January 16, 2019, the Company filed an amendment to its Articles of Incorporation to change the name of the Company to Can B̅ Corp. On March 2, 2020, the Company filed an amendment to its Articles of Incorporation to effect a 300-to-1 reverse stock split of its issued and outstanding, but not authorized, common stock (the “Reverse Split”). Both actions were declared effective by FINRA on March 6, 2020. The Reverse Split will also affect the number of shares issuable upon conversion of the Company’s convertible securities, such as Preferred Stock, options and warrants.

 

Our fiscal year ends December 31. Our transfer agent is Transhare Corporation, located at 2849 Executive Drive, Suite 200, Clearwater, FL 33762.

 

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As of July 8, 2020, we had approximately 3,840,053 shares of common stock, 20 shares of Series A Preferred Stock and no shares of Series B Preferred Stock or Series C Preferred Stock issued and outstanding, as well as approximately 198 shareholders of record. The Company’s common shares are currently quoted on OTC Market’s OTCQB® Venture Market under the symbol “CANB.”

 

Business

 

We are a health and wellness company, producing and selling ingestible, wearable, and topical products, including products that contain CBD. The Company’s primary business is the development, production and sale of products and delivery devices containing hemp-derived CBD. The Company’s products include drops/tinctures, oils, creams, moisturizers, chews, isolate, gel caps, concentrates, superfood drink mixes, and durable equipment. In addition, the Company has the license to develop and sell certain CBD and non-CBD products under the Lifeguard® lifestyle brand. The Company grows its own hemp biomass, which is processed by a third party and sent to the Company’s production facility in Lacey, Washington. In addition to producing its own line of products, the Company generates revenues by white-label manufacturing CBD products for third parties. The Company also seeks to grow its operations through synergistic acquisitions of products and brands in the hemp industry. The Company aims to be the premier provider of the highest quality natural 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.

 

We do not intend to invest further in start-up companies or speculative investments. Our current acquisition strategy is to invest in targets that already generate revenue. We also intend to acquire entities whose operations can complement our own, such as, without limitation, a target having established a strong retail division but lacking a manufacturer to make its products. We are also contemplating acquiring distressed assets that we can incorporate into our current business operations. There are no acquisitions that are currently under consideration.

 

Business Segments

 

The Company is in the business of promoting health and wellness through its development and sale of products containing CBD (with no psychoactive THC), the production of hemp biomass, the licensing of durable medical devises, and the sale of non-CBD products such as sunscreen and lip balm.

 

  I- Pure Health Products – R&D, Manufacturing and “CBD” Business

 

The Company’s Research, Development, and core manufacturing arm also is a direct producer, seller and purveyor of products to private label products for multiple distributors of CBD products. The Company’s products contain CBD derived from hemp and include products such as oils, creams, moisturizers, isolate, and gel caps. In addition to offering white labeled products, the Company has developed its own line of proprietary products. The Company is always seeking synergistic value through acquisitions of products and brands in the hemp industry.

 

Cannabidiol is one of nearly 85 naturally occurring compounds (cannabinoids) found in industrial hemp (it is also contained in marijuana, but the Company’s products are derived only from hemp). CBD is non-psychoactive and is thought to have numerous uses, including, but not limited to, for pain, insomnia, epilepsy, anxiety, inflammation, and nausea. Unlike CBD derived from marijuana, CBD derived from the seeds and stalks of industrial hemp is generally considered “legal” in the U.S. so long as it contains less than 0.3% of “THC,” another, but psychoactive, cannabinoid found in cannabis. This purported “legal status” is because the 2018 Farm Bill removed hemp as a Schedule I drug under the Controlled Substances Act and hemp may now be grown as a commodity crop, with restrictions; however, the 2018 Farm Bill did not specifically legalize CBD. Until Congress promulgates rules and regulations relating to hemp derived CBD under the 2018 Farm Bill, the “legal” status of CBD from hemp, or the processes the Company may have to implement (and at what expense), are still unknowns. A similar paradigm exists under various state laws with which the Company will have to comply. The Company has all of its hemp based raw materials (isolate) tested by a 3rd party independent laboratory and those results are posted on the Company web site.

 

The Company’s medical office products are marketed under the tradename “Canbiola,” and sold via medical professionals referring customers to our products. The Company also manufactures and sells separately branded CBD products through its subsidiaries and websites. “Pure Leaf Oil is the Company’s retail consumer brand and is currently being sold via the Company’s website as well as direct internet sales and through certain retailers. Additionally, the Pure Leaf Oil products are targeted to be featured in the Company’s new line of vending machines, currently in test markets such as medical facilities and retail centers. Nu Wellness, our independent pharmacy brand, targets toward the over three-thousand independent retail drug stores nationally with its first product scheduled for rollout in the 3rd quarter 2020. The “Seven Chakras” brand is targeted toward health clubs, spas, and beauty lines and is expecting a major launch in the late 3rd quarter or early 4th quarter 2020 to include a full line of related topical products both with and without CBD. The Severn Chakras has a customer base and following and compliments the Canbiola and Pure Leaf Oil brands with additional new products such as bath bombs, stress relief products, and lotions. Seven Chakras has its own internet website and continues in its direct marketing to its customer base.

 

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In December, 2018, the Company acquired 100% of the membership interests in Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”), with which it had previously had an exclusive production agreement. PHP manufactures and packages the Company’s CBD infused products. PHP may also white label / rebrand the Company’s products pursuant to “white label agreements” entered into between the Company and/or PHP and third-party customers. Through PHP, the Company is able to control the manufacturing process of its products while reducing its production costs. In January, 2019, PHP acquired certain assets from Seven Chakras, LLC (“Seven Chakras”), a former competitor, which assets included the rights and title to (i) Seven Chakras’ proprietary formulas, methods, trade secrets, and know-how related to the production of Seven Chakras’ CBD products, (ii) Seven Chakras’ tradename, domain name, and social media sites, and (iii) other assets of Seven Chakras including but not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials.

 

The Company’s products are distributed through an array of methods including: 1- For Canbiola brand directly through doctors and medical offices, 2- For Pure Leaf Oil direct to consumer via walk-in business, internet and other distributors, 3- for Seven Chakras via direct sales and through internet sales. The Company’s newest brand, Nu Wellness, is distributed to independent pharmacies through distributor relationships. The white or private label business is sold direct to the companies for distribution through their own network of retailers.

 

  II- Duramed Division- Durable Medical Equipment

 

Through its medical device division, Duramed, Inc. and DuramedNJ LLC, the Company serves the post-surgery medical patient arena aiming to reduce the reliance of opiates in favor of a wearable ultrasound device to aid in recovery and pain reduction.

 

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

 

On May 29, 2019, the Company created DuramedNJ LLC to execute the same business strategy into the no-fault insurance market in New Jersey that it had developed in New York. That Company continues to develop opportunities into 2020.

 

  III- Hemp Production, Aggregation and Sale

 

On December 4, 2019, the Company entered into a Stock Purchase Agreement (the “GGFI Agreement” with Iconic Brands, Inc., a Nevada corporation (“ICNB”) and Green Grow Farms, Inc., a New York corporation (“GGFI” or “Green Grow” and, collectively with ICNB and the Company, the “Parties”). Pursuant to the terms of the GGFI Agreement, at closing, the Company received 51% equity interest in Green Grow (the “GG Shares”) in exchange for an aggregate of 37,500,000 pre-split shares of the Company’s common stock (the “Purchase Shares”). On June 30, 2020 (the “Valuation Date”), a valuation of the Purchase Shares was to be (and was) performed for the purpose of determining whether the Market Price Per Purchase Share (as defined in the GGFI Agreement) on the Valuation Date was less than $1,000,000. In the event that the aggregate Market Price Per Purchase Share on the Valuation Date was less than $1,000,000, the Company was to to the ICNB such a number of additional shares (“Additional Purchase Shares”) so that the aggregate value of aggregate shares issued to ICNB for the purchase of the GG Shares (taking into account the Purchase Shares and the Additional Purchase Shares) equaled $1,000,000. For purposes of the valuation, Market Price Per Purchase Share was to be determined based upon the 10-day average VWAP for the 10-day period ending on June 30, 2020. On June 30, 2020, it was determined that ICNB was owed an additional 418,714 shares, which it was issued.

 

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On March 3, 2020, the Company entered into an Agreement (the “Modification Agreement”) with Green Grow, New York Farm Group, Inc., a New York corporation (“NYFG”), Steven Apolant, an individual, and Peter Scalise, an individual, relating to the GGFI Agreement, as amended. Following the closing of the GGFI Agreement, the Company discovered that certain assets of GGFI were valued at less than the amount GGFI had previously represented. In light of the foregoing, pursuant to the Modification Agreement, NYFG agreed to assign to CANB (i) all of the equity interests in GGFI held by NYFG and (ii) 1,000,000 shares of ICNB’s common stock. Each party to the Modification Agreement also agreed to release the other parties thereto from all claims relating to the GGFI Agreement and the transactions contemplated thereby. As a result of the transaction contemplated by the Modification Agreement, the Company now owns 100% of GGFI.

 

On July 29, 2020, ICNB entered into an agreement whereby ICNB agreed to exchange its CANB Shares for CANB’s 1,000,000 ICNB’s shares.

 

Through GGFI, the Company grows its own hemp in New York and partners with third party growers in other states whereby GGFI provides the farmers with seed and training and splits profits with the farmers. GGFI supplies the Company with all hemp needed for the company to produce its CBD products, which hemp is processed by a third party and shipped to the Company’s production facility in Lacey, WA. The Company is currently exploring ways for it to run its own extraction facility, completely cutting out middlemen (note that the Company had entered into a jount venture agreement with NY – SHI, LLC, a New York limited liability company (“NY – SHI”), EWSD I LLC dba SHI Farms, a Delaware limited liability company (“SHI Farms”) to aggregate and process hemp biomass; however, SHI Farms breached and was unable to perform under the agreement- the Company is in the process of trying to recoup the shares issued to SHI Farms).

 

  IV- Licensing

 

On January 28, 2020, the Company entered into a License Agreement (the “Lifeguard Agreement”) with Lifeguard Licensing Corp., a Delaware corporation (“Lifeguard”). Pursuant to the Lifeguard Agreement, Lifeguard granted the Company the right to use its “Lifeguard” trademark (the “Mark”) in connection with the Company’s manufacture, marketing, distribution, and sale of products (the “License”). In consideration for the License, the Company agreed to pay Lifeguard a royalty equal to six percent (6%) of net sales of its Lifeguard branded products on a quarterly basis. The Company further agreed that, regardless of the net sales generated, each royalty payment will be in an amount not less than $60,000, which minimum amount will increase annually following December 31, 2021. The Lifeguard Agreement will continue until December 31, 2025, unless earlier terminated by the parties, and may be renewed for additional five (5)-year terms if certain performance conditions are met.

 

Under the License, the Company has various performance and sales obligations including initial product introduction timing and Lifeguard has various oversight rights such as audit rights, quality control and inspection rights. Licensor has the right to terminate the License in the event of certain breaches by the Company, at which point, the Company will be required all licensed material; however it will be permitted to sell its existing inventory so long as termination is not due to quality issues. Lifeguard and the Company have agreed to indemnify each other, which indemnification obligations will survive the termination of the Agreement. The Company also agreed to procure and maintain certain insurance policies for the benefit of the Company and Lifeguard.

 

The Lifeguard Agreement otherwise contains terms, conditions, and representation common with this type of transaction.

 

WRAPmail/Bullseye

 

The Company also owns a patented technology that combines custom marketing content with organization e-mail to provide a next generation marketing platform for organizations and personal use.. The Bullseye Productivity Suite is a cloud-based system that consolidates all necessary office productivity tools into one online experience, accessible everywhere when you need it with full disaster recovery mechanisms built in. All functions and features are audited to help users with corporate governance and compliance issues. The Company no longer sells or services these services.

 

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Intellectual Property

 

We own the following patents for our WRAPmail technology: US patent no. 8572275 issued on October 29, 2013. This patent expires in October 2033. On July 20, 2015, WRAPmail filed for a new patent under the title: Method, System and Software for Dynamically Extracting Content for Integration with Instant Messages, which application is still pending and not being actively pursued by the Company. The above patents relate to the document management and email marketing divisions. Due to diminishing revenue from these divisions, the Company’s accountant determined to reduce the fair value of these patents to $0.

 

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

 

Employees

 

The Company currently has a total of 14* employees, 10 of which are full-time and 4 are part-time. The Company also engages independent contractors under services agreements.

 

The Company employs. through its Pure Health Products LLC Division, two product researchers and CBD technology experts who, on a daily basis, set the quality standards and new product development status and time-line agendas under the direct supervision of the company’s management team. Additionally, there is a division president, three production personnel, and five sales/ marketing and fulfillment personnel.

 

Duramed, the medical device company, employs four people including the division president and 3 field operation personnel.

 

The remaining four people are corporate staff and general sales and are directly employed by the Company.

 

* We had 19 employees; however, due to the recent downturn in operations and revenue attributable to the COVID-19 outbreak, 5 of our employees have been temporarily furloughed until such time as the Company’s business returns to pre-outbreak levels.

 

Reports to Security Holders

 

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

 

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Government Regulation

 

The cultivation and sale of hemp and hemp products is federally regulated under the United States Farm Bill. The 2018 Farm Bill removed hemp as a Schedule 1 Substance under the Controlled Substances Act; however, rules and regulations relating to manufacture and sale of CBD products under the Farm Bill must still be promulgated and are expected to impact the Company’s operations. As the legal CBD industry and our product lines expand, it is uncertain what other statutory schemes and agencies will start to regulate our CBD products. The FDA currently still considers the addition of CBD to food products, cosmetics or supplements to be illegal and prohibits the advertisement of CBD products with health claims. The Company must also comply with each state’s laws relating to the sale of hemp-based CBD products. These regulations may affect, among others, the way the Company manufactures and distributes its products, the way the Company is taxed, the way the Company banks, the location of the Company’s facilities, the content and testing of the Company’s products, and the quality of the Company’s services.

 

The Company is presently growing and cultivating in New York State under a State License provided by its GGFI Division. Once processing the biomass into isolate, it is shipped to the Company’s manufacturing facility in Lacey WA under the provisions of the Farm Bill of 2018.

 

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

 

Bankruptcy, Receivership, Etc.

 

Not applicable.

 

Legal Proceedings

 

We are not aware of any pending or threatened legal proceedings in which we are involved.

 

Reclassification, Merger, Consolidation, Etc.

 

Not applicable.

 

DESCRIPTION OF PROPERTY

 

The Company does not currently own any real property. We do however lease office space in Hicksville, New York, and GGFI leases space in Bohemia, New York. The Company’s wholly-owned subsidiary, Pure Health Products, operates its manufacturing facility in Lacey, Washington.

 

The monthly lease payments are: Pure Health Products in Lacey WA $2,300, Can B̅ Corp. home office in Hicksville NY $3,350, and Green Grow Farms, Inc. in Bohemia NY $1,575.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

 

General

 

Can B̅ Corp. was originally formed as a Florida corporation on October 11, 2005, under the name of WrapMail, Inc. Effective January 5, 2015, we acquired 100% ownership of Prosperity Systems, Inc., which the Company is in the process of dissolving. Effective December 28, 2018, we acquired 100% ownership of Pure Health Products. 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 in Nevada on November 29, 2018) and DuramedNJ LLC (incorporated in Nevada on May 29, 2019). The Company’s wholly owned subsidiary, Radical Tactical LLC, 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, which was formed on July 11, 2019. The Company’s hemp farming business is run through Green Grow Farms, Inc., which was formed in August, 2019.

 

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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 - Fiscal Year Ended December 31, 2019

 

Year Ended December 31, 2019 compared with Year Ended December 31, 2018:

 

Revenues increased $1,636,900 from $668,603 in 2018 to $2,305,503 in 2019. The increase was due to the growth of CBD product and durable equipment sales.

 

Cost of product sales increased $193,050 from $405,534 in 2018 to $598,584 in 2019 due to the growth of product sales and outreach into additional market segments such as wholesale and private label opportunities.

 

Officers and director’s compensation and payroll taxes increased $784,579 from $1,478,987 in 2018 to $2,263,566 in 2019. The 2019 expense amount ($2,263,566) includes additional stock-based compensation of ($1,210,915) pursuant to their respective employment agreements and related payroll taxes ($39,962). The 2018 expense amount ($1,478,987) includes additional stock-based compensation of ($1,255,193) pursuant to their respective employment agreements and related payroll taxes ($2,559).

 

Consulting fees increased $412,741 from $1,669,443 in 2018 to $2,082,184 in 2019. The 2018 expense amount ($1,669,443) includes stock-based compensation of ($1,524,107), resulting from stock issued for the service of consultants. The 2019 expense amount ($2,041,934) includes stock-based compensation of ($1,858,837), resulting from stock issued for the service of consultants.

 

Advertising expense increased $249,125 from $84,316 in 2018 to $333,441 in 2019.

 

Hosting expense decreased $1,663 from $14,697 in 2018 to $13,034 in 2019.

 

Rent expense increased $179,803 from $67,165 in 2018 to $246,968 in 2019.

 

Professional fees increased $169,723 from $117,718 in 2018 to $287,441 in 2019.

 

Depreciation of property and equipment increased $7,154 from $5,473 in 2018 to $12,627 in 2019.

 

Amortization of intangible assets increased $142,093 from $0 in 2018 to $142,093 in 2019.

 

Reimbursed expenses increased $242,585 from $0 in 2018 to $242,585 in 2019.

 

Other operating expenses increased $426,053 from $241,044 in 2018 to $667,097 in 2019. The increase was due largely to higher commission fees, supplies expense and office expense in 2019 compared to 2018.

 

Net loss increased $480,193 from $4,112,277 in 2018 to $4,592,470 in 2019. The increase was due to the $2,612,193 increase in total operating expenses offset by the $690,234 decrease in other expense – net, the $2,084 increase in provision for income taxes and the $1,443,850 increase in gross profit.

 

Liquidity and Capital Resources - Fiscal Year Ended December 31, 2019

 

At December 31, 2019, the Company had cash and cash equivalents of $46,540 and a working capital of $2,881,147. Cash and cash equivalents decreased $761,207 from $807,747 at December 31, 2018 to $46,540 at December 31, 2019. For the year ended December 31, 2019, $3,312,495 was provided by financing activities, $2,413,420 was used in operating activities, and $1,660,282 was used in investing activities.

 

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Results of Operations - Fiscal Quarter Ended June 30, 2020

 

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.

 

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.

 

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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.

 

The Company presently has three operating divisions under its health and wellness umbrella.

 

1- Duramed Inc. is the Company’s durable medical device company focused on a doctor/patient device rental model that is insurance reimbursable via no-fault insurers. The device is a doctor prescribed, FDA approved portable ultrasound device that relieves pain and swelling and aids in post-surgical healing. The Company intends to expand this current business model into Medicare and Workman’s Compensation arenas. Additionally, the Company is looking to expand its product offerings for the medical community with braces and other post-surgical medical devices. The majority of the current inventory of devices is deployed at medical offices primarily in the Tri-State area of New York. Due to the recent COVID-19 outbreak, elective surgeries are not being performed in New York and this has caused a decrease in our medical device rentals. Nonetheless, once doctors are allowed to resume their surgeries and medical practices, the device rental business is expected to recover quickly. Duramed, now in its second year of operation, has honed its local sales and patient model and is primed for a regional rollout with an expanded tech-sales and support staff.

 

2- Pure Health Products, in operation since 2017, was acquired by the Company in December 2018. This research and development (“R&D”) laboratory and production facility is a fully functional developer and manufacturer of a line of products containing CBD. The facility is built in a “clean-room” sanitary environment for all storage, R&D and production. We plan to seek current Good Manufacturing Practices (“GMP”) certification. GMP certification can prove an organization’s management capabilities in product quality and safety assurance and can reduce risks in product quality and safety. We believe that achieving GMP certification will enhance our brand image, grants us more legitimacy within the industry, and set us apart from our competitors. PHP regularly sources its raw materials, and uses its own isolate extracted from its own hemp biomass, in the production of its CBD products. In March 2020, the Company purchased 100% of Green Grow Farms, Inc., which has a New York hemp cultivation license and currently grows its own hemp, making PHP’s operations fully vertically integrated. PHP has a complete line of CBD tinctures, salves, topicals and related products produced under various specialty branded lines including Seven Chakras (the spa line), Nu Wellness (the pharmacy line), Canbiola (the medical office line), Pure Leaf Oil (the retail line), as well as various custom manufacturing products for private label customers. While PHP has sufficient raw materials in house for several months of production, the COVID-19 outbreak has caused a reduction in sales and caused the manufacturing plant to ship orders but pause production.

 

3- The third division is Lifestyle Brands, which includes specialty product distribution, license of lifestyle brands, and development of new innovative CBD and non-CBD opportunities. The recently announced product offerings include CanB Superfoods, one of the Company’s non-CBD wellness products. CanB Superfoods is a powdered protein mix packed with a high volume of whole, raw superfoods, a smooth chocolate flavor derived from organic raw cacao that can be used as a meal-replacement or snack. The protein mix is non-GMO, vegan, gluten-free and contains goji berry, raw cacao, maca, hemp protein, lecithin, chia seed, flaxseed, green tea, yerba mate, pea protein, banana & vegan probiotics. Additionally, the Company has signed an exclusive license agreement with Lifeguard Licensing Corp. for the well-known Lifeguard ™ Brand name and logo for development and sale of both a CBD and non-CBD line of products. The wellness products will include lip care products such as balms, moisturizers, cold-sore, and topical pain relief products such as salves, sprays, and gels for sunburn relief, rashes, abrasions, and similar products. Consumable products may include energy shots, gummy bears and candy, and beverages such as fruit-based drinks, protein type drinks, carbonated type drinks, and similar. Furthermore, the Company is pursuing new line of Women’s Shave Club products as well as additional branded license opportunities. Development of our Lifestyle Brands has been slowed by the COVID-19 outbreak due to factors such as staff working from home. The Company also believes the peak sale season of its Lifeguard branded products has passed since the Lifeguard line focuses primarily on sun protective products such as sunscreen and lip balms with SPF and the United States is expected to be coping with the COVID-19 outbreak into the summer. Nonetheless, the Company’s management is utilizing the time to better prepare for our selling strategy and coordinating with our manufacturing facilities to give them ample time for production and distribution for a future rollout.

 

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DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES

 

Our board of directors is elected annually by our shareholders. The board of directors elects our executive officers annually. Our directors and executive officers as of July 8, 2020 are as follows:

 

Name   Position   Age   Term of Office
Marco Alfonsi   CEO, Director, Chairman   58   May 14, 2015 – Present
Stanley L. Teeple   CFO, Secretary, Director   72   October 21, 2018 – Present
Andrew Holtmeyer   VP of Business Development   59   February 14, 2018 – Present
Philip Scala   Interim COO   68   October 10, 2019 - Present
Frederick Alger Boyer Jr.   Independent Director   50   October 10, 2019 - Present
Ronald A. Silver   Independent Director   84   October 10, 2019 - Present
James F. Murphy   Independent Director   72   October 10, 2019 - Present
Pasquale Ferro   President of PHP   57   December 31, 2018 - Present
David Posel   COO of PHP   41   February 12, 2018 - Present

 

Marco Alfonsi, CEO and Chairman of the Board of Directors, has been a financial service professional for the past 20 years. Mr. Alfonsi was appointed director and CEO of the Company in or around January 2015. Immediately prior to that, he spent eight years serving as the CEO of Prosperity Systems, Inc. Prosperity specializes in the development and commercialization of cloud based platforms for managing business functions online.

 

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

 

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

 

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

 

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

 

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

 

Pasquale Ferro (“Pat” to his friends and co-workers), President of Pure health Products LLC, built Pure Health Products from the ground up inside a vacant warehouse including all mechanical, electrical, environmental, regulatory, and lab-quality specifications. Right out of school Pat began a career in real estate development both on the retail and commercial side of the business. Pat formed a company that would take new or distressed buildings (or anything in-between) and rehab and repair the facilities so they were commercially viable and move-in ready. During the course of this career Pat was often in charge of multiple work crews, union and non-union, for work in demolition, construction, plumbing, electrical, grounds crew and other professionally skilled tradesmen required to complete a building project.

 

Pat had his first foray into the manufacturing process in 2015 when he started Pure Health Products, LLC, which he developed into a regional research laboratory, new product development resource, and full-on production facility capable of producing capsules, tinctures, drops, salves, tablets and other products for the supplement and custom label community. Later in 2015, Pat connected with Marco Alfonsi, CEO of the Company, and became the production facility for all of the Company’s CBD based products. In late 2018, Pat sold Pure Health Products to the Company and became the President of that wholly-owned facility which he operates and manages today under a long term employment services agreement.

 

Andrew Holtmeyer, Vice President of Business Development, started his business career in the financial services sector. During his 20 year career on Wall Street, Mr. Holtmeyer worked at and built several investment firms that employed hundreds of salesmen. During the last 5 years of his career, he concentrated mostly on investment banking. After leaving the financial sector, Mr. Holtmeyer started a highly successful consulting firm, which concentrated on raising capital for small to mid-sized companies that were both private and public. After selling his consulting business, Mr. Holtmeyer started a very successful real estate business which is now run by his family.

 

David Posel, COO of Pure Health Products, LLC, served as the Company’s COO during 2018, when the Company’s operations were limited to its contractual arrangement with Pure Health Products. After the Company acquired PHP directly, Mr. Posel was transitioned to COO of PHP.

 

Frederick Alger Boyer, Jr., Independent Director, is President & CEO of Advance Care Medical, Inc., a vertically integrated healthcare network that bridges the gap between urgent/family care and the traditional hospital system by creating Comprehensive Care Centers™. Mr. Boyer has over 25 years of Wall Street experience having worked on both the investment side as well as the banking side of the business. Most recently he served as Head of Equities for the New York based investment bank H.C. Wainwright & Co., one of the country’s oldest and most trusted financial institutions, where he had overseen efforts in capital markets, sales, and trading. Prior to that he worked and or supervised teams at Rodman & Renshaw (a brokerage company), Oppenheimer & Co., Inc. (an investment bank and financial services company), Piper Jaffray (an investment bank and institutional securities firm), and Credit Suisse (a financial services company) in New York, San Francisco, and Minneapolis. In his various roles he has advised hundreds of companies in their financing efforts both publicly and privately. Mr. Boyer has numerous securities licenses and is a graduate of the University of California at Berkeley.

 

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

 

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

 

Board Committees

 

We have not yet established an audit committee, compensation committee, or nominating committee. During 2019, the functions ordinarily handled by these committees were handled by our entire Board of Directors.

 

Family Relationships

 

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

 

Director or Officer Involvement in Certain Legal Proceedings

 

Our current directors and executive officers have not at any time in the past five (5) years been convicted in a criminal proceeding (excluding traffic violations and other minor offenses) and no petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of any such officers or directors, or any partnership in which they were a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing.

 

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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

 

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers and directors for all services rendered in all capacities to us during the previous two fiscal years, as of December 31, 2019.

 

Executive Summary Compensation Table
Name and principal
position
  Year     Salary     Bonus    

Stock

awards

    Option
awards
   

Non-

equity

incentive

plan

comp.

   

Non-

qualified
deferred
comp.

earnings

   

All

other
comp.

    Total  
Marco Alfonsi(1)     2018     $ 104,500     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 104,500  
      2019     $ 180,000     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 180,000  
Stanley L. Teeple(2)     2018     $ 45,000     $ 0     $ 144,500     $ 118,200     $ 0     $ 0     $ 0     $ 307,700  
      2019     $ 180,000     $ 0     $ 372,667     $ 0     $ 0     $ 0     $ 0     $ 552,667  
Andrew Holtmeyer(3)     2018     $ 118,400     $ 0     $ 1,169,658     $ 0     $ 0     $ 0     $ 0     $ 1,288,058  
      2019     $ 180,000     $ 0     $ 105,485     $ 0     $ 0     $ 0     $ 0     $ 285,485  
David Posel (4)     2018     $ 60,000     $ 0     $ 58,720     $ 0     $ 0     $ 0     $ 0     $ 118,720  
      2019     $ 60,000     $ 0     $ 64,355     $ 0     $ 0     $ 0     $ 0     $ 124,355  
Pasquale Ferro (5)     2019     $ 180,000     $ 0     $ 527,425     $ 0     $ 0     $ 0     $ 0     $ 707,425  
Johnny Mack PhD (6)     2019     $ 31,154     $ 0     $ 89,513     $ 192,000     $ 0     $ 0     $ 0     $ 312,667  
Phil Scala (7)     2019     $ 7,500     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 7,500  

 

(1) Pursuant to an employment agreement entered on or around May 14, 2015, Marco Alfonsi was entitled to receive compensation of $6,000 per month through September 31, 2017 when the contract expired. On or around October 3, 2017, the Company entered into a new employment agreement with Mr. Alfonsi whereby he was entitled to receive $10,000 per month for a period of three years. Mr. Alfonsi also received one share of Series A Preferred Stock upon his execution of the new agreement. In addition, on or around October 4, 2017, the Company authorized the issuance of an additional two shares of Series A Preferred Stock to Mr. Alfonsi in consideration for cancellation of approximately $120,000 of deferred income owed to Mr. Alfonsi. The Company entered into a new employment agreement dated October 21, 2018 Mr. Alfonsi, pursuant to which Mr. Alfonsi agreed to continue to serve as the Company’s Chief Executive Officer (“CEO”) and accept appointment as Chairman of the Board of Directors (“Chairman”) for an initial term of four (4) years. He is entitled to receive $15,000 per month and other compensation under the new agreement.

 

(2) Pursuant to an employment agreement entered on or around October 15, 2018, Mr. Teeple serves as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The agreement also provides for compensation to Mr. Teeple of $15,000 cash per month and the issuance of 1 share of Series A Preferred Stock upon execution of the agreement. The fair value of the Series A preferred share is $578,000 and has a vesting period of four years. An additional share of Series A Preferred Stock was issued in April 2019 per the agreement. The fair value of the Series A Preferred share issued in April 2019 is $992,250 and has a vesting period of three years. In 2019 and 2018, the amortized portion of Series A preferred shares is $372,667 and $144,500, respectively.

 

(3) 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. On December 29, 2018, this Holtmeyer Agreement was terminated due to the execution of a new Holtmeyer Employment Agreement with Andrew W Holtmeyer. The Holtmeyer Employment Agreement provides that Mr. Holtmeyer serves as the Company’s Executive Vice President Business for a term of 4 years. The Holtmeyer Employment Agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 820 (post split) shares of common stock upon signing of the agreement. In 2018, the Company issued 5 shares of Series A preferred shares valued at $3,910,000. In 2019 and 2018, the amortized portion of Series A preferred shares is $105,485 and $1,169,658, respectively.

 

(4) On February 12, 2018, the Company executed an Executive Service Agreement (“Posel Agreement”) with David Posel. The Posel Agreement provides that Mr. Posel serves 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. In the fourth quarter of 2018, the Posel Agreement was terminated due to the execution of a new Employment Agreement between Pure Health Products, LLC and David Posel, pursuant to which Mr. Posel agreed to serve as PHP’s Chief Operating Officer. The fair value of the Series A preferred Stock is $373,000 and has a vesting period of four years. In 2019 and 2018, the amortized portion of Series A preferred Stock related to Mr. Posel’s service as an executive is $64,355 and $58,720, respectively.

 

  30  

 

 

(5) On December 28, 2018, the Company executed an Executive Service Agreement (“Ferro Agreement”) with Pasquale Ferro. The Ferro Agreement provides that Mr. Ferro serves as the President of Pure Health Products, LLC for a term of 4 years. The Ferro Agreement also provides for compensation to Mr. Ferro of $15,000 cash per month and the issuance of 5 shares of Series A Preferred Stock upon execution of the Ferro Agreement. The fair value of the Series A preferred shares is $2,109,700 and has a vesting period of four years. In 2019, the amortized portion of Series A preferred stock is $527,425.

 

(6) On July 10, 2019, the Company executed an Executive Service Agreement (“Mack Agreement”) with Johnny J. Mack. The Mack Agreement provides that Mr. Mack serves as the Chief Operating Officer for a term of 90 days. The Mack Agreement also provided for compensation to Mr. Mack of $7,500 cash per month and the issuance of 13,334 shares of common stock within 30 days of execution of the Mack Agreement. The fair value of the common shares was $89,513. On September 10, 2019, the Company executed a Mack Executive Service Agreement (“Second Agreement”) with Mr. Mack. The Second Agreement provides that Mr. Mack serves as the Chief Operating Officer for a term of 1 year. The Second Agreement also provides for compensation to Mr. Mack of $15,000 per month and the option to receive a total of 106,667 options (“Options”) to purchase shares of the Company’s common stock, with 26,667 Options vesting on the effective date and additional tranches of 26,667 Options vesting on each of the first, second, and third anniversaries of the Effective Date. On October 4, 2019, Mr. Mack resigned and is no longer with the Company. *Numbers have been adjusted to account for the Company’s reverse split.

 

(7) On October 11, 2019, the Company executed an Executive Service Agreement (“Scala Agreement”) with Phil Scala. The Scala Agreement provides that Mr. Scala serves as the Interim Chief Operating Officer for a term of 90 days. The Scala Agreement also provides for compensation to Mr. Scala of $2,500 cash per month. The Scala Agreement renews for additional 90-day periods unless terminated by either party. The Scala Agreement otherwise contains standard covenants and conditions.

 

On or around July 28, 2020, shareholders holding a majority of the Company’s voting stock approved an incentive stock plan titled the Can B̅ Corp. 2020 Incentive Stock Option Plan (the “Plan”). The Plan will be administered by the Board of Directors, or, in the Board’s sole discretion, our compensation committee, once established . Notwithstanding the foregoing, the compensation committee, or if no compensation committee has been appointed, the Board of Directors, may delegate administration of the Plan to a committee or committees of one or more members of the Board of Directors. Unless otherwise noted or unless the context otherwise requires, the term “Committee” refers to the applicable person or persons managing the Plan. Subject to adjustment from time to time as provided in the Plan, a maximum of Two Thousand (2,000) shares of Preferred Stock and Ten Million (10,000,000) shares of Common Stock shall be available for issuance under the Plan.

 

The Committee may grant awards under the Plan (“Awards”) in the form of Options, Stock Appreciation Rights, shares of the Company’s common stock (“Common Stock”), shares of the Company’s Series C Preferred Stock (“Series C Stock”), cash-based awards or other incentive payable in cash or property, or a combination of the foregoing, as may be designated by the Committee from time to time. An Award may be granted to any employee, officer or director of the Company or any of its subsidiaries (each, a “Related Company”) whom the Committee from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities. There are currently no specific performance goals or other criteria pursuant to which Awards may be granted under the Plan. No named executive officer has unexercised outstanding awards under the Plan.

 

The following table sets for the benefits or amounts that are anticipated be received by, or allocated to, our executive officers, key employees, and non-executive directors, pursuant to the Plan in the near future:

 

Name and position   Number of Series C Shares  
Marco Alfonsi, CEO, Director     200  
Stanley L. Teeple, CFO, Secretary, Director     200  
Phil Scala, Interim COO     8  
Pasquale Ferro, President of Pure Health Products     200  
Steven Apolant, President of Green Grow Farms, Inc.     200  
Executive Group [5 persons]     808  
Non-Executive Director Group     3  

 

No director has received cash compensation for their directorship. During the fiscal year 2019, the five (5) members of our Board of Directors received, as a group, options to purchase an aggregate of 30,000 post-split common shares of the Company. It should be noted that Messrs. Alfonsi and Teeple are directors of the Company and received additional compensation for services rendered as executive officers. We do not have a compensation committee and compensation for our directors and officers is determined by our Board of Directors.

 

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

 

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

 

The following table sets forth the ownership, as of August 31, 2020, of our common stock by each person known by us to be the beneficial owner of more than 10% of our outstanding voting stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.

 

There were 3,840,053 shares of common stock outstanding as of August 31, 2020, and 20 shares of Series A preferred stock issued and outstanding, which in aggregate represent 1,333,340 votes and are convertible into approximately 666,680 shares of common stock at any time. As of August 31, 2020, the Company had no shares of Series B Preferred Stock or Series C Preferred Stock issued or outstanding. There was a total of approximately 5,173,393 votes eligible to be cast in any Company vote as of August 31, 2020.

 

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

 

  31  

 

 

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

 

Name   Title   Number
of
Common
Shares
    % of
Common
Shares
    Number
of Series
A
Preferred
Shares
    % of
Series A
Preferred
Shares
    % of
Eligible
Votes
    Number of
Warrants
currently
exercisable
or
exercisable
in the next
60 days
 
Marco Alfonsi [1]   CEO, Director     197,998       5.16 %     5       25 %     10.27 %         0  
Stanley L. Teeple [2]   CFO, Director     13,861       0.36 %     4       20 %     5.42 %     0  
David Posel [3]   COO of Pure Health Products     0       0 %     1       5 %     1.29 %     0  
Pasquale Ferro [4]   President of Pure Health Products     104,602       2.72 %     5       25 %     8.47 %     0  
Phil Scala [5]   Interim COO     4,484       0.12 %     0       0 %     0.09 %     0  
Frederick Alger Boyer Jr. [6]   Independent Director     10,000       0.26 %     0       0.00 %     0.19 %     0  
Senator Ron Silver [7]   Independent Director     16,668       0.43 %     0       0.00 %     0.32 %     0  
James F. Murphy [8]   Independent Director     10,000       0.26 %     0       0.00 %     0.19 %     0  
All officers and directors as a group [8 persons]         357,613       9.31 %     15       75 %     26.24 %     0  
Andrew Holtmeyer [9]   VP of Business Development     3,695       0.10 %     5       25 %     6.51 %     0  

 

  (1) Marco Alfonsi owns approximately 197,998 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 166,670 shares and equal 333,335 votes. Prior to October 29, 2015, Mr. Alfonsi owned 270,000 shares of the Company’s common stock, at which time it was agreed that he would retire 166,666 shares of common stock for 5 shares of Series A Preferred Stock. In addition to the listed shares, five adult members of Mr. Alfonsi’s family hold an aggregate of 42,343 shares of common stock, which shares have not been included in the above calculations. *Numbers have been adjusted to account for the Company’s reverse stock split.
     
  (2) Stanley L. Teeple owns approximately 3,861 shares of common stock, options to purchase an additional 10,000 common shares, and 4 shares of Series A preferred stock, which are convertible into 133,336 shares and equal 266,668 votes.
     
  (3) David Posel owns 0 shares of common stock and 1 shares of Series A preferred stock, which is convertible into 33,334 shares and equals 66,667 votes.
     
  (4) Pasquale Ferro owns 69,119 common shares jointly with his wife and 35,483 common shares individually. Mr. Ferro holds 5 shares of Series A Preferred stock individually, which are convertible into 166,670 common shares and equal 333,335 votes. Mr. Ferro is the President of Pure Health Products, LLC, a wholly owned subsidiary of the Company. In addition to the listed shares, a member of Mr. Ferro’s family holds 8,335 shares of common stock, which shares have not been included in the above calculations
     
  (5) Phil Scala owns approximately 2,817 shares of common stock and options to purchase 1,667 common shares.

 

  32  

 

 

  (6) Frederick Alger Boyer Jr. holds options to purchase 10,000 common shares of the Company.
     
  (7) Ron Silver holds options to purchase 10,000 common shares of the Company and 6,668 shares of common stock.
     
  (8) James F. Murphy holds options to purchase 10,000 common shares of the Company.
     
  (9) Andrew Holtmeyer owns approximately 3,695 shares of common stock and 5 shares of Series A preferred stock, which are convertible into 166,670 shares and equal 333,335 votes.

 

The above table is based upon information derived from our stock records. Except as otherwise indicated herein and under applicable community property laws, we believe that the beneficial owners of our common stock listed above have sole voting and investment power with respect to the shares shown.

 

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

 

Except as described herein (or within the section entitled Executive Compensation of this prospectus), none of the following parties (each a “Related Party”) has, in our fiscal years ended 2017 and 2018, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:

 

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

 

LI Accounting Associates, LLC (“LIA”), an entity controlled by a relative of the Managing Member of PHP, is a vendor of CANB. At December 31, 2019, CANB did not have an account payable due to LIA. For the twelve months ended December 31, 2019, CANB had expenses to LIA of $10,750.

 

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

 

During the twelve months ended December 31, 2019, we had products and service sales to related parties totaling $0.

 

SECURITIES BEING OFFERED

 

The following description is a summary of the material rights of shareholders. Shareholder rights are dictated via the Company’s Articles of Incorporation and Bylaws. Each of the foregoing documents has been filed as an exhibit to this prospectus.

 

Common Stock

 

We are authorized to issue 1,500,000,000 shares of common stock, Nil par value per share. As of August 31, 2020, there were approximately 3,840,053 shares of common stock issued and outstanding, held by approximately 198 shareholders of record.

 

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

 

  33  

 

 

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

 

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

 

Preferred Stock

 

We are authorized to issue 5,000,000 shares of preferred stock, including 20 shares of Series A Preferred Stock, 500,000 shares of Series B Preferred Stock, and 2,000 shares of Series C Convertible Preferred Stock. As of August 31, 2020, there were 20 shares of Series A Preferred Stock and no shares of Series B Preferred Stock or Series C Convertible Preferred Stock issued and outstanding.

 

On or around July 28, 2020, shareholders holding a majority of the Company’s voting stock approved an amendment to the certificate of designation for the Series A Preferred Shares. Once the amendment is filed, the Series A Preferred Shares will have the following rights and privileges: All Series A Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shall rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock. In the event of the liquidation or winding up of the Company, whether voluntary or involuntary, each holder of Series A Preferred stock may elect (i) to receive, in preference to the holders of Common Stock, a one-time liquidation preference on a per-share amount equal to the per-share value of such Series A Shares on the applicable issuance date, as recorded in the Company’s financial records, or (ii) to participate pari passu with the Common Stock on an as-converted basis. The holders of Series A preferred Shares shall be entitled to receive such dividends paid and distributions made to the holders of shares of common stock to the same extent as if such holders had converted each preferred share held by each of them into shares of common stock. Each share of Series A Preferred Stock is entitled to 66,667 votes and may be converted into 33,334 shares of common stock. Par value for the Series A Preferred Shares will be $0.001.

 

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

 

Series C Convertible Preferred Stock ranks senior to all shares of Common Stock of the Company with respect to the preferences as to distributions of dividends and ranks pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock. The holders of Series C preferred Shares shall be entitled to receive such dividends paid and distributions made to the holders of shares of common stock to the same extent as if such holders had converted each preferred share held by each of them into shares of common stock. Par value for the Series A Preferred Shares will be $0.001. Each share of Series C Convertible Preferred Stock is entitled to 25,000 votes and may be converted into 25,000 shares of Common Stock. No shares of Series c Preferred Stock have been issued, but it is intended that such stock will be issued under the Company’s incentive Plan and otherwise as compensation for certain service providers, including officers and directors of the Company.

 

  34  

 

 

FINANCIAL STATEMENTS

 

CAN B̅ CORP. AND SUBSIDIARY

 

Index to Financial Statements

 

    Pages
     
Financial Statements    
     
Report of Independent Registered Public Accounting Firm for Years Ended December 31, 2019 and 2018   F-2
     
Consolidated Balance Sheets for Years Ended December 31, 2019 and 2018   F-3
     
Consolidated Statements of Operations and Comprehensive Loss for Years Ended December 31, 2019 and 2018   F-4
     
Consolidated Statements of Stockholders’ Equity for Years Ended December 31, 2019 and 2018   F-5
     
Consolidated Statements of Cash Flows for Years Ended December 31, 2019 and 2018   F-6
     
Notes to Consolidated Financial Statements for Years Ended December 31, 2019 and 2018   F-7
     
Consolidated Balance Sheets for Period Ended June 30, 2020   F-27
     
Consolidated Statements of Operations and Comprehensive Loss for Period Ended June 30, 2020   F-28
     
Consolidated Statements of Stockholders’ Equity for Period Ended June 30, 2020   F-30
     
Consolidated Statements of Cash Flows for Period Ended June 30, 2020   F-31
     
Notes to Consolidated Financial Statements for Period Ended June 30, 2020   F-32

 

  F-1  

 

 

BMKR,LLP

Certified Public Accountants

 

1200 Veterans Memorial Hwy., Suite 350

Hauppauge, New York 11788

T 631 293-5000

F 631 234-4272

www.bmkr.com

 

Thomas G. Kober, CPA Charles W. Blanchfield, CPA (Retired)
Alfred M. Rizzo, CPA Bruce A. Meyer, CPA (Retired)
Joseph Mortimer, CPA  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Can B Corp.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Can B Corp. (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

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

 

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

 

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

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred a net loss of $4,592,470 during the year ended December 31, 2019, and as of that date, had an accumulated deficit of $23,361,223. The Company is in arrears on accounts with certain vendor creditors which, among other things, cause the balances to become due on demand. The Company is not aware of any alternate sources of capital to meet such demands, if made.

 

As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

 

BMKR, LLP

 

We have served as the Company’s auditor since 2014.

Hauppauge, NY 11788

 

March 26, 2020

 

Member American Institute of Certified Public Accounts

Member Public Company Accounting Oversight Board

 

  F-2  

 

 

Can B̅ Corp. and Subsidiary

Consolidated Balance Sheets

 

    Year Ended December 31,  
    2019     2018  
Assets                
Current assets:                
Cash and cash equivalents   $ 46,540     $ 807,747  
Accounts receivable, less allowance for doubtful accounts of $0 and $0, respectively     1,251,609       39,172  
Inventory     784,497       87,104  
Note Receivable     24,268       -  
Prepaid expenses - current     1,279,901       210,351  
Total current assets     3,386,815       1,144,374  
                 
Property and equipment, at cost less accumulated depreciation of $116,555 and $20,248, respectively     1,075,242       59,619  
                 
Other assets:                
Deposit - noncurrent     21,287       48,726  
Prepaid expenses - noncurrent     1,179,929       2,365,719  
Note receivable - noncurrent     -       19,389  
Other receivable – noncurrent     58,206       -  
Intangible assets, net of accumulated amortization of $202,521 and $0, respectively     1,056,562       -  
Goodwill     55,849       55,849  
Right-of-Use Asset, net of amortization of $6,280 and $0, respectively     96,980       -  
Total other assets     2,468,813       2,489,683  
                 
Total assets   $ 6,930,870     $ 3,693,675  
                 
Liabilities and Stockholders’ Deficiency                
Current liabilities:                
Accounts payable   $ 226,467     $ 73,059  
Accrued officers’ compensation     144,363       68,750  
Other accrued expenses payable     61,557       43,778  
Notes and loans payable     35,000       19,205  
Current portion of lease liability     38,281       -  
Total current liabilities     505,668       204,792  
                 
Non-current portion of lease liability     58,998       -  
                 
Total liabilities     564,666       204,792  
                 
Commitments and contingencies (Notes 14)                
                 
Stockholders’ equity:                
Preferred stock, authorized 5,000,000 shares:                
Series A Preferred stock, no par value: authorized 20 shares, issued and outstanding 20 and 18 shares, respectively     5,539,174       4,557,424  
Series B Preferred stock, $0.001 par value: authorized 500,000 shares, issued and outstanding 0 and 499,958 shares, respectively     -       479  
Common stock, no par value; authorized 1,500,000,000 shares, issued and outstanding 2,680,937 and 1,468,554 shares, respectively     23,113,077       16,624,557  
Additional Paid-in capital     872,976       872,976  
Additional Paid-in capital – Stock Options (Note 11)     202,200       202,200  
Accumulated deficit     (23,361,223 )     (18,768,753 )
Total stockholders’ equity     6,366,204       3,488,883  
                 
Total liabilities and stockholders’ equity   $ 6,930,870     $ 3,693,675  

 

See notes to consolidated financial statements.

 

  F-3  

 

 

Can B̅ Corp. and Subsidiary

Consolidated Statements of Operations and Comprehensive Loss

Years Ended December 31, 2019 and 2018

 

    2019     2018  
Revenues                
Product Sales   $ 2,304,303     $ 651,978  
Service Revenue     1,200       16,625  
Total Revenues     2,305,503       668,603  
Cost of product sales     598,584       405,534  
Gross Profit     1,706,919       263,069  
                 
Operating costs and expenses:                
                 
Officers and director’s compensation (including stock-based Compensation of $1,210,915 and $1,255,193, respectively     2,263,566       1,478,987  
Consulting fees (including stock-based compensation of 1,858,837 and 1,524,107, respectively)     2,082,184       1,669,443  
Advertising expense     333,441       84,316  
Hosting expense     13,034       14,697  
Rent expense     246,968       67,165  
Professional fees     287,441       117,718  
Depreciation of property and equipment     12,627       5,473  
Amortization of intangible assets     142,093       -  
Reimbursed Expenses     242,585       -  
Other     667,097       241,044  
                 
Total operating expenses     6,291,036       3,678,843  
                 
Loss from operations     (4,584,117 )     (3,415,774 )
                 
Other income (expense):                
Loss on forgiveness of receivable from Pure Health Products     -       (85,827 )
Loss of debt conversions     -       (1,299,369  
Loss on stock issuance     -       (649,259 )
Interest income     2,524       10,325  
Income from derivative liability     -       1,591,137  
Interest expense (including amortization of debt discounts of $0 and 176,497, respectively     (8,793 )     (263,510 )
                 
Other income (expense) - net     (6,269 )     (696,503 )
                 
Loss before provision for income taxes     (4,590,386 )     (4,112,277 )
                 
Provision for income taxes     2,084       -  
                 
Loss and comprehensive loss     (4,592,470 )     (4,112,277 )
                 
Net loss per common share - basic     (2.23 )     (4.47 )
Net loss per common share - diluted     (1.71 )     (2.91 )
                 
Weighted average common shares outstanding –                
Basic     2,058,525       920,089  
Diluted     2,687,383       1,412,939  

 

See notes to consolidated financial statements.

 

  F-4  

 

 

Can B̅ Corp. and Subsidiary

Consolidated Statements of Stockholders’ Deficiency

Years Ended December 31, 2018 and 2019

 

    Preferred Stock A     Preferred Stock B     Common Stock     Additional              
    , no par value     , $0.001 par value     , no par value     Paid-in     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Deficit     Total  
                                                       
Balance, December 31, 2017     8     $ 243,537       157,985     $ 150       751,908     $ 12,524,042     $ 149,850     $ (14,647,476 )   ($ 1,729,897 )
                                                                         
Issuance of Series A Preferred Stock in 2018 pursuant to employment and consulting agreement     13       4,441,690                                                       4,441,690  
                                                                         
Sale of Series B Preferred Stock in 2018                     761,972       749                       723,126               723,875  
                                                                         
Issuance of common stock in 2018 for services rendered                                     64,486       656,306                       656,306  
                                                                         
Issuance of common stock in 2018 for Preferred B dividends                                     2,970       38,379               (9,000 )     29,379  
                                                                         
Issuance of common stock in 2018 in Satisfaction of debt and accrued interest                                     150,878       1,604,412                ,       1,604,412  
                                                                         
Issuance of common stock in 2018 for Warrant exercise                                     28,333       619,880                       619,880  
                                                                         
Issuance of common stock in 2018 in Satisfaction of accrued compensation                                     14,569       192,300                       192,300  
                                                                         
Issuance of common stock in 2018 for Acquisition of PureHealth, LLC                                     10,323       112,415                       112,415  
                                                                         
Issuance of stock options for retirement Of common shares                                     (10,000 )     (101,400 )     84,000               (17,400 )
                                                                         
Issuance of stock options                                                     118,200               118,200  
                                                                         
Sale of common stocks in 2018                                     99,404       850,000                       850,000  
                                                                         
Issuance of common stock and retirement of Series A preferred stock In 2018     (3 )     (127,803 )                     100,000       127,803                       -  
                                                                         
Issuance of common stock and retirement of Series B preferred stock In 2018                     (419,999 )     (420 )     255,683       420                       -  
                                                                         
Net loss                                                             (4,112,277 )     (4,112,277 )
                                                                         
Balance, December 31, 2018     18     $ 4,557,424       499,958     $ 479       1,468,554     $ 16,624,557     $ 1,075,176     $ (18,768,753 )   $ 3,488,883  
                                                                         
Issuance of Series A Preferred Stock in 2019 pursuant to employment agreement     3       992,250                                                       992,250  
                                                                         
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                     (499,958 )     (479 )     250,131       479                       -  
                                                                         
Sale of common stock in 2019                                     379,555       3,296,700                       3,296,700  
                                                                         
Issuance of common stock in 2019 for acquisition of technology and licenses                                     68,580       648,655                       648,655  
                                                                         
Issuance of common stock in 2019 for acquisition of inventory                                     125,000       487,500                       487,500  
                                                                         
Issuance of common stock in 2019 for satisfaction of accrued salaries                                     2,227       54,340                       54,340  
                                                                         
Issuance of common stock in 2019 for services rendered                                     353,557       1,990,346                       1,990,346  
                                                                         
Net loss                                                             (4,592,470 )     (4,592,470 )
                                                                         
      20     $ 5,539,174       -     $ -       2,680,937     $ 23,113,077     $ 1,075,176     $ (23,361,223 )   $ 6,366,204  

 

See notes to consolidated financial statements.

 

  F-5  

 

 

Can B̅ Corp. and Subsidiary

Consolidated Statements of Cash Flows

 

    Year Ended December 31,  
    2019     2018  
Operating Activities:                
Net loss   $ (4,592,470 )   $ (4,112,277 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock-based compensation, net of prepaid stock- based consulting fees     3,089,188       2,779,300  
Loss on forgiveness of receivable from PHP     -       85,827  
Loss on stock issuance     -       649,259  
Loss on debt conversion     -       1,299,369  
Debt issuance expense     -       14,000  
Expense from derivative liability     -       (1,591,137  
Depreciation of property and equipment     89,779       5,473  
Amortization of intangible assets     142,093       -  
Amortization of debt discounts     -       176,497  
Bad debt expense     253,483       -  
Changes in operating assets and liabilities:                
Accounts receivable     (1,465,920 )     (33,097 )
Inventory     (209,893 )     2,382  
Prepaid expenses     (4,760 )     -  
Security deposit     27,439       (34,939 )
Other receivable     (58,206 )     -  
Right-of-use asset     299          
Accounts payable     153,408       (115,235 )
Accrued officer’s compensation     144,363       85,900  
Other accrued expenses payable     17,777       35,109  
                 
Net cash used in operating activities     (2,413,420 )     (753,569 )
                 
Investing Activities:                
                 
Cash received from acquisition of PHP     -       404  
Note receivable - current     (4,879 )     -  
Fixed assets additions     (1,105,403 )        
Intangible assets additions     (550,000 )     (46,384 )
                 
Net cash used in investing activities     (1,660,282 )     (45,980 )
                 
Financing Activities:                
Proceeds received from notes and loans payable     35,000       155,000  
Repayments of notes and loans payable     (19,205 )     (123,231 )
Proceeds from sale of common stock     3,296,700       850,000  
Proceeds from sale of Series B preferred stock     -       723,875  
                 
Net cash provided by financing activities     3,312,495       1,605,644  
                 
(Decrease)Increase in cash and cash equivalents     (761,207 )     806,095  
                 
Cash and cash equivalents, beginning of period     807,747       1,652  
                 
Cash and cash equivalents, end of period   $ 46,540     $ 807,747  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:                
Income taxes paid   $ 2,084     $ -  
Interest paid   $ 8,793     $ -  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:                
                 
Issuance of common stock in acquisition of inventory   $ 487,500     $ -  
                 
Issuance of common stock in acquisition of intangible assets   $ 648,655     $ -  
                 
Amortization of prepaid issuance of common Stock for services rendered   $ 121,000     $ -  
                 
Issuance of common stock in satisfaction of officer’s compensation   $ 68,750     $ 282,200  
                 
Issuance of common stock in conversion of Series A Preferred Stock   $ 10,500     $ -  
                 
Issuance of common stock in retirement of Series B Preferred Stock   $ 479     $ -  
                 
Issuance of common stock in satisfaction of debt   $ -     $ 262,000  
                 
Issuance of common stock in acquisition of PHP   $ -     $ 178,997  
                 
Cancellation of note receivable and accrued interest in exchange for service   $ -     $ 19,611  
                 
Cancellation of note receivable and accrued interest in acquisition of PHP   $ -     $ 85,827,25  
                 
Issuance of common stock in satisfaction of accrued interest   $ -     $ 43,043  

 

See notes to consolidated financial statements.

 

  F-6  

 

 

Can B̅ Corp. and Subsidiary

Notes to Consolidated Financial Statements

Year Ended December 31, 2019 and 2018

 

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 newly formed subsidiaries, Duramed Inc. (incorporated in or around November 2018) and DuramedNJ LLC (incorporated in or around May 2019) (collectively, “Duramed”). Duramed began operating on or about February1, 2019. The Company’s wholly-owned subsidiary, Radical Tactical LLC (“Radical Tactical”), formed May, 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 in or around July, 2019. The Company’s hemp farming business is run through Green Grow Farms, Inc. (“Green Grow Farms”), which was formed 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. The accompanying consolidated financial statements retroactively reflect these stock splits of March 6, 2020 for a 300:1 reverse split.

 

On May 15, 2017, WRAP changed its name to Canbiola, Inc. On March 6, 2020 Canbiola, Inc. changed its name to Can B̅ Corp. (the “Company” or “CANB” or “Can B” 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.

 

The Company also owns document management and email marketing platforms which it is seeking to sell or repurpose.

 

For the periods presented, the assets, liabilities, revenues, and expenses are those of CANB. Prosperity, Radical Tactical, NY Hemp Depot and Green Grow Farms had no activity for the periods presented. Financial information for PHP and Duramed 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 December 31, 2019, the Company had cash and cash equivalents of $46,540 and a working capital of $2,881,147. For the years ended December 31, 2019 and 2018, the Company had net loss of $4,592,470 and $4,112,277, 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.

 

  F-7  

 

 

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 and Radical Tactical. 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 $253,483 and $0 for the years ended December 31, 2019 and 2018.

 

  F-8  

 

 

(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 $2,459,830 and $2,576,070 at December 31, 2019 and 2018, respectively. The Company’s policy is to record stock-based compensation as prepaids and expense over the term of employment and consulting agreements.

 

(h) Property and Equipment, Net

 

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

 

(i) Intangible Assets, Net

 

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

 

(j) Goodwill

 

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

 

(k) Long-lived Assets

 

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

 

(l) Revenue Recognition

 

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

 

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

 

  F-9  

 

 

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

 

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

 

(m) Cost of Product Sales

 

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

 

(m) Stock-Based Compensation

 

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

 

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

 

Options and warrants

 

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

 

Risk-Free Interest Rate.

 

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

 

Expected Volatility.

 

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

 

Dividend Yield.

 

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

 

  F-10  

 

 

Expected Term.

 

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

 

Forfeitures.

 

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

 

(o) Advertising

 

Advertising costs are expensed as incurred and amounted to $333,441 and $84,316 for the years ended December 31, 2019 and 2018, respectively.

 

(p) Research and Development

 

Research and development costs are expensed as incurred. In the period ended December 31, 2019 and 2018, the Company spent $150,000 and $75,000 in research and development which was expenses as spent, respectively.

 

(q) Income Taxes

 

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

 

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

 

(r) Net Income (Loss) per Common Share

 

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

 

Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation. For the periods presented, the diluted net loss per share calculation excluded the effect of Series B preferred stocks and stock options outstanding (see Notes 9, 10 and 11).

 

(s) 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. As such, historical periods will continue to be measured and presented under the previous guidance while current and future periods subject to this new accounting guidance. Upon adoption we recorded a $100,681 right-of-use asset related to our one operating lease (see Note 14) and a $90,591 lease liability.

 

  F-11  

 

 

(t) 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:

 

    December 31, 2019     December 31, 2018  
Raw materials   $ 708,239     $ 79,652  
                 
Finished goods     76,258       7,452  
Total   $ 784,497     $ 87,104  

 

NOTE 5 – Notes Receivable

 

Notes receivable consist of:

 

    December 31, 2019     December 31, 2018  
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.     4,879       -  
                 
Total     24,268       19,389  
                 
Current portion of notes receivable     (24,268 )     -  
Noncurrent portion of notes receivable   $ -     $ 19,389  

 

  F-12  

 

 

NOTE 6 – Property and Equipment, Net

 

Property and Equipment, net, consist of:

 

    December 31, 2019     December 31, 2018  
             
Furniture & Fixtures   $ 19,018     $ 19,018  
                 
Office Equipment     12,378       20,992  
                 
Manufacturing Equipment     355,016       46,384  
                 
Medical Equipment     783,782       -  
                 
Leasehold Improvements     21,603       -  
                 
Total     1,191,797       86,394  
                 
Accumulated depreciation     (116,555 )     (26,775 )
                 
Net   $ 1,075,242     $ 59,619  

 

NOTE 7 – Intangible Assets, Net

 

Intangible assets, net, consist of:

 

    December 31, 2019     December 31, 2018  
             
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       -  
                 
CBD technology     198,655       -  
                 
Other     3,548       3,548  
                 
Total     1,259,083       60,428  
                 
Accumulated amortization and Impairment     (202,521 )     (60,428 )
                 
Net   $ 1,056,562     $ -  

 

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, LLC (“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 (collectively, the “Assets”). 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.

 

  F-13  

 

 

The hemp related license and technology purchased from Shi Farms during the three months ended September 30, 2019. Hemp Depot will 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 will amalgamate the cultivated off-take from the farmers, combine and fill “super-sacks” for shipping to the processing facility in Colorado to produce high-grade isolate or distillate for use in Can B’s manufacturing facility in Lacey WA.

 

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

 

NOTE 8 – Notes and Loans Payable

 

Notes and loans payable consist of:

 

    December 31, 2019     December 31, 2018  
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 Carl Dilley, a director of the Company, interest at 12.99% per annum, due February 1, 2021     -       10,899  
                 
Loan payable to McKenzie Webster Limited (“MWL”), non-interest bearing, due on demand.     -       3,000  
                 
Loan payable to Pasquale Ferro, interest at 12% per annum, due December 2020.     30,000       -  
                 
Total   $ 35,000     $ 18,899  

 

NOTE 9 – 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.

 

On January 22, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.

 

  F-14  

 

 

On February 12, 2018, the Company issued 1 share of CANB Series A Preferred Stock to David Posel pursuant to a service agreement. The fair value of the issuance is $373,000 and will be amortized over the vesting period of four years.

 

On February 16, 2018, the Company issued 3 shares of CANB Series A Preferred Stock to Andrew Holtmeyer pursuant to a service agreement. The fair value of the issuance is $1,020,000 and will be amortized over the vesting period of one year.

 

On February 16, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.

 

On March 20, 2018, the Company issued 87,368 shares of CANB Series B Preferred Stock to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $83,000, or $0.95 per CANB Series B Preferred share.

 

On April 13, 2018, April 25, 2018, May 3, 2018, June 19, 2018 and June 25, 2018, RedDiamond Partners converted its 10,000 shares, 10,000 shares, 10,000 shares, 15,000 shares and 10,000 shares of CANB Series B Preferred Stock to 4,290 shares, 4,290 shares, 4,290 shares, 11,818 shares, and 7,879 shares of CANB common stock, respectively.

 

On May 14, 2018, the Company issued 1 share of CANB Series A Preferred Stock to a consultant pursuant to a Consulting Agreement dated May 11, 2018. The $150,000 fair value of the issuance was partially charged to consulting fees in the three months ended September 30, 2018.

 

From July 24, 2018 to September 26, 2018, RedDiamond Partners converted aggregately 263,263 shares of CANB Series B Preferred Stock to 179,466 shares of CANB common stock.

 

On August 28, 2018, September 14, 2018 and September 19, 2018, the Company issued 36,842 shares, 105,263 shares, and 105,263 shares of CANB Series B Preferred Stock, respectively, to RedDiamond Partners LLC (“RedDiamond”) pursuant to an amended Securities Purchase Agreement dated January 9, 2018, in exchange for proceeds of $35,000, $100,000 and $100,000, respectively, or $0.95 per CANB Series B Preferred share.

 

From October 2, 2018 to November 7, 2018, RedDiamond Partners converted aggregately 101,736 shares of CANB Series B Preferred Stock to 43,649 shares of CANB common stock.

 

On October 23, 2018 and November 14, 2018, the Company issued 200,000 shares and 52,500 shares of CANB Series B Preferred Stock, respectively, to RedDiamond Partners LLC (“RedDiamond”) in exchange for proceeds of $190,000 and $49,875, respectively, or $0.95 per CANB Series B Preferred share.

 

On December 28, 2018, Marco Alfonsi converted 3 shares of CANB Series A Preferred Stock to 100,000 shares of CANB common stock.

 

On December 29, 2018 the Company issued 8 shares of CANB Series A Preferred Stock to three officers of the company (1 share to Stanley L. Teeple, 5 shares to Pasquale Ferro and 2 shares to Andrew Holtmeyer), pursuant to the employment agreements with them. The fair value of the issuance totaled at $4,624,000 and will be amortized over the vesting period of four years.

 

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.

 

  F-15  

 

 

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 35,667 shares of CANB common stock to RedDiamond as agreed for the early retirement of CANB Series B Preferred Stock converted in August 2019.

 

NOTE 10 – Common Stock

 

On February 7, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $9,825 fair value of the 250,000 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.

 

On February 9, 2018, the Company issued 10,000 and 10,000 shares of CANB common stock to its two directors for services rendered, respectively. The $101,400 fair value of each 10,000 shares of CANB common stock was charged to directors fees in the three months ended March 31, 2018. The shares issued to one of the directors were converted to options at June 11, 2018 (see Note 11).

 

On February 13, 2018, the Company issued 500 shares of CANB common stock to a consultant for services rendered. The $5,085 fair value of the 500 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.

 

On February 14, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $8,500 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.

 

On February 19, 2018, the Company issued 500 shares of CANB common stock to a consultant for services rendered. The $5,280 fair value of the 500 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.

 

On February 26, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $11,375 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended March 31, 2018.

 

  F-16  

 

 

 

On March 1, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $10,900 fair value of the 833 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2018.

 

On March 20, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $6,500 fair value of the 833 shares of CANB common stock was charged to consulting fees in the three months ended March 31, 2018.

 

On April 13, 2018, April 25, 2018, May 3, 2018, June 19, 2018 and June 25, 2018, the Company issued 4,290 shares, 4,290 shares, 4,290 shares, 11,818 shares, and 7,879 shares of CANB common stock to RedDiamond in exchange for the retirement of 10,000 shares, 10,000 shares, 10,000 shares, 15,000 shares and 10,000 shares of CANB Series B Preferred Stock, respectively.

 

On May 9, 2018, the Company issued 417 shares of CANB common stock to a consultant for services rendered. The $1,812 fair value of the 417 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.

 

On May 29, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $5,000 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.

 

On May 31, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $4,600 fair value of the 833 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2018.

 

On June 4, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered.

 

The $5,750 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.

 

On June 11, 2018, the Company agreed to issue 9,165 shares of CANB common stock to a lender in satisfaction of notes payable of $15,000 and accrued interest payable of $4,246. The shares was issued at August 24, 2018.

 

On June 18, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $6,250 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended June 30, 2018.

 

On June 22, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $8,250 fair value of the 833 shares of CANB common stock was charged to consulting fees in the three months ended June 30, 2018.

 

From July 24, 2018 to September 26, 2018, the Company issued aggregately 179,466 shares of CANB common stock to RedDiamond in exchange for the retirement of 263,263 shares of CANB Series B Preferred Stock.

 

On July 31, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $3,225 fair value of the 833 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.

 

On August 9, 2018, Company received a conversion notice from a lender. As a result, 31,814 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $50,000 and accrued interest payable of $7,266 at August 21, 2018.

 

On August 28, 2018, the Company issued 6,667 shares of CANB common stock to a consultant for services rendered. The $159,600 fair value of the 6,667 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.

 

  F-17  

 

 

On September 6, 2018, the Company issued 1,000 shares of CANB common stock to a consultant for services rendered. The $16,500 fair value of the 1,000 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.

 

On September 6, 2018, the Company issued 1,667 shares of CANB common stock to a consultant for services rendered. The $27,500 fair value of the 1,667 shares of CANB common stock was charged to consulting fees in the three months ended September 30, 2018.

 

On September 6, 2018, the Company issued 28,101 shares of CANB common stock to a lender in satisfaction of notes payable of $38,500 and accrued interest payable of $7,867.

 

On September 7, 2018, the Company issued 17,072 shares of CANB common stock to a lender in satisfaction of notes payable of $25,000 and accrued interest payable of $3,169.

 

On September 7, 2018, the Company issued 33,486 shares of CANB common stock to a lender in satisfaction of notes payable of $50,000 and accrued interest payable of $10,274.

 

On September 8, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $11,500 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.

 

On September 10, 2018, the Company issued 1,667 shares of CANB common stock to a consultant for services rendered. The $19,950 fair value of the 1,667 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.

 

On September 17, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $10,750 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.

 

On September 18, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $13,725 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.

 

On September 20, 2018, the Company issued 24,691 shares of CANB common stock to an investor pursuant to a Stock Purchase Agreement dated September 17, 2018, in exchange for proceeds of $200,000, or $8.10 per CANB common share.

 

On September 21, 2018, the Company issued 833 shares of CANB common stock to a consultant for services rendered. The $14,500 fair value of the 833 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.

 

On September 25, 2018, the Company issued 6,667 shares of CANB common stock to a consultant for services rendered. The $97,400 fair value of the 6,667 shares of CANB common stock was partially charged to consulting fees in the three months ended September 30, 2018.

 

From October 2, 2018 to November 7, 2018, the Company issued aggregately 43,649 shares of CANB common stock to RedDiamond in exchange for the retirement of 101,736 shares of CANB Series B Preferred Stock.

 

From November 5, 2018 to December 28, 2018, the Company issued aggregately 7,083 shares of CANB common stock to multiple consultants for services rendered. The $80,665 fair value of the 7,083 shares of CANB common stock was partially charged to consulting fees in the three months ended December 30, 2018.

 

From December 3, 2018 to December 28, 2018, the Company issued aggregately 5,000 shares of CANB common stock to three board members for services rendered. The $62,342 fair value of the 5,000 shares of CANB common stock was charged to director fees in the three months ended December 30, 2018.

 

  F-18  

 

 

From December 3, 2018 to December 28, 2018, the Company issued aggregately 74,713 shares of CANB common stock to multiple investors pursuant to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $650,000.

 

On December 11, 2018, the Company issued 2,970 shares of CANB common stock to RedDiamond in satisfaction of dividend payable of $9,000.

 

On December 19, 2018, the Company issued 2,970 shares of CANB common stock to Auctus, LLC pursuant to a cashless exercise of stock options.

 

On December 21, 2018, Company received a conversion notice from a lender. As a result, 31,240 shares of CANB common stock was issued to the lender in satisfaction of notes payable of $83,500 and accrued interest payable of $10,221.

 

On December 21, 2018, Company issued aggregately 14,569 shares of CANB common stock to four officers of the Company in satisfaction of accrued compensation of $192,300.

 

On December 28, 2018, the Company issued 10,328 shares of CANB common stock for the acquisition of Pure Health Products, LLC.

 

On December 28, 2018, the Company issued 819 shares of CANB common stock to an officer of the Company pursuant to the Employment Agreement dated December 29, 2018 with Andrew Holtmeyer. The $10,371 fair value of the issuance was charged to stock-based compensation in the three months ended December 31, 2018.

 

On December 29, the Company issued 100,000 shares of CANB common stock to Marco Alfonsi in exchange for the return of 3 shares of CANB Series A Preferred Stock owned by Marco Alfonsi.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  F-19  

 

 

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.

 

NOTE 11 – 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, 2017     167       825       992  
Granted in 2018     20,000       9,500       29,500  
Cancelled in 2018     -       -       -  
Exercised in 2018     -       (2,833 )     (2,833 )
                         
Balance, December 31, 2018     20,167       7,492       27,659  
Granted in Q1, Q2 & Q3 2019     56,667       -       56,667  
Cancelled in Q1, Q2 Q3, & Q4 2019     (167 )     -       (167 )
Exercised in Q1, Q2 Q3, & Q4 2019     -       -       -  
                         
Balance, December 31, 2019     76,667       7,492       84,159  

 

  F-20  

 

 

Issued and outstanding stock options as of December 31, 2019 consist of:

 

Year     Number Outstanding     Exercise     Year of  
Granted     And Exercisable     Price     Expiration  
                     
2018       20,000     $ 0.30       2023  
2019       56,667     $ 0.30        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 December 31, 2019 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.

 

  F-21  

 

 

NOTE 12 – 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:

 

    December 31,  
    2019     2018  
             
Expected income tax (benefit) at 21%   $ (964,419 )   $ (863,578 )
                 
Non-deductible stock-based compensation     648,729       583,653  
                 
Non-deductible amortization of debt discounts     -       37,064  
                 
Loss on stock issuance     -       136,344  
                 
Loss on debt conversion     -       272,867  
                 
Non-deductible expense from derivative liability     -       (334,139 )
                 
Loan forgiveness     -       18,024  
                 
Increase in deferred income tax assets valuation allowance     315,690       149,765  
                 
Provision for (benefit from) income taxes   $ -     $ -  

 

Deferred income tax assets consist of:

 

    December 31,
2019
    December 31,
2018
 
             
Net operating loss carryforward     1,300,168       984,478  
                 
Valuation allowance     (1,300,168 )     (984,478 )
                 
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 $1,300,168 attributable to the future utilization of the $6,191,273 net operating loss carryforward as of December 31, 2019 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income tax asset in the financial statements at December 31, 2019. 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 and 2039 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 and $1,503,282, 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.

 

  F-22  

 

 

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 2019 and 2018.

 

NOTE 13 – 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 December 31, 2019        
Revenue from external customers     466,920  
Revenue from other segments     -  
Segment profit     309,370  
Segment assets     1,994,845  
         
Twelve months ended December 31, 2019        
Revenue from external customers     1,436,403  
Revenue from other segments     -  
Segment profit     809,631  
Segment assets     1,994,845  

 

   

Three Months

Ended

December 31,
2019

   

Twelve Months

Ended

December 31,
2019

 
             
Total profit for reportable segment   $ 309,208     $ 810,060  
Other income (expense) - net     162       (429 )
                 
Income before income taxes   $ 309,370     $ 809,631  

 

NOTE 14 – 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 (see Note 9). 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 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 will be returned to the Company and converted into 100,000 common shares. On December 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.

 

  F-23  

 

 

On February 12, 2018, the Company executed an Executive Service Agreement (“Agreement”) with David Posel. The Agreement provides that Mr. Posel services as the Company’s Chief Operating Officer for a term of 4 years. The 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 Agreement. The 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 (see Note 9). 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 (“Agreement”) with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 3 years. The 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 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 Agreement was terminated due to the execution of a new Employment Agreement with Andrew W Holtmeyer. The Agreement provides that Mr. Holtmeyer services as the Company’s Executive Vice President Business for a term of 4 years. The Agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 819 shares of common stock upon signing of the agreement.

 

On October 15, 2018, the Company executed an Employment Agreement (“Agreement”) with Stanley L. Teeple. The Agreement provides that Mr. Teeple services as the Company’s Chief Financial Officer and Secretary for a term of 4 years. The 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 Agreement. The 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 (“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 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 “Agreement”) to memorialize the terms of the foregoing. In consideration for Mack’s services, Mack will (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 (“Options”) to purchase shares of the Company’s common stock, with 26,667 Options vesting on the effective date and additional tranches of 26,667 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 has agreed to pay Mack a severance in the event the 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 office 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.

 

  F-24  

 

 

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 otherwise contains standard covenants and conditions.

 

Consulting Agreements

 

On September 6, 2017, the Company executed a Consulting Agreement with T8 Partners LLC (“T8”) for T8 to serve as the Company’s consultant for stock compensation of a total of 33,333 restricted shares. Pursuant to the agreement, the Company issued 8,333 restricted shares of CANB common stock to T8 on September 7, 2017. Effective October 27, 2017, the Company terminated the agreement due to non-performance by T8. The Company won the arbitration proceedings against T8 and T8 has been ordered to return its shares to the Company.

 

On November 9, 2017, the Company executed a Consulting Agreement with Healthcare Advisory Group Company (“Healthcare”) for Healthcare to serve as the Company’s consultant for stock compensation of a total of 16,667 restricted shares. Pursuant to the agreement, the Company issued 8,333 restricted shares of CANB common stock to Healthcare on November 9, 2017. Effective March 6, 2018, the Company terminated the agreement due to non-performance by Healthcare.

 

On April 1, 2019, 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 $5,500 per month for consulting and services paid in advance of services each month. Starting May 1, 2019, the restricted common stock monthly fee will decrease to $4,000 per month. The number of shares to be issued will be calculated based on the closing price of our common shares on the 1st or preceding day of each month, if the 1st were to fall on a weekend or holiday. 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.

 

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.

 

  F-25  

 

 

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

 

Rent expense for the years ended December 31, 2019 and 2018 was $246,968 and $67,165, respectively.

 

At December 31, 2019, the future minimum lease payments under non-cancellable operating leases were:

 

Year ended December 31, 2020     $ 45,913  
Year ended December 31, 2021       47,055  
Year ended December 31, 2022       15,685  
           
Total     $ 108,653  

 

The lease liability of $97,279 at December 31, 2019 as presented in the Consolidated Balance Sheet represents the discounted (at our 10% estimated incremental borrowing rate) value of the future lease payments of 108,653 at December 31, 2019.

 

Major Customers

 

For the twelve months ended December 31, 2019, there were no customers that accounted for more than 10% of total revenues.

 

For the twelve months ended December 31, 2018, one customer accounted for approximately 16% of total revenues.

 

NOTE 15 – 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 December 31, 2019, CANB did not have an account payable due to LIA. For the twelve months ended December 31, 2019, CANB had expenses to LIA of $10,750.

 

During the twelve months ended December 31, 2019, we had products and service sales to related parties totaling $0.

 

NOTE 16 – Subsequent Events

 

In accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through November 1, 2019, 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:

 

The Company acquired 51% of Green Grow Farms, Inc. (GGFI) in December 2019 for 125,000 shares of CANB common stock. The remaining 49% of GGFI was held by New York Farm Group (NYFG). Post-closing of the original agreement, the Company discovered certain assets needed reassessment and reconsideration. In settlement of certain claims held by the Company as a result of the foregoing, NYFG agreed to assign the Company its 49% interest in GGFI and 1,000,000 shares of Iconic Brands, Inc (ICNB) stock in consideration for a release from the Company. The settlement agreement was executed on March 3, 2020.

 

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

 

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. 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 year ended December 31, 2020.

 

  F-26  

 

  

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.

 

  F-27  

 

 

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.

 

  F-28  

 

 

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.

 

  F-29  

 

 

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.

 

  F-30  

 

 

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

 

  F-31  

 

 

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.

 

  F-32  

 

 

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.

 

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.

 

  F-33  

 

 

(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.

 

(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.

 

  F-34  

 

 

(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.

 

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.

 

  F-35  

 

 

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

 

Expected Volatility.

 

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

 

Dividend Yield.

 

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

 

Expected Term.

 

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

 

Forfeitures.

 

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

 

(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.

 

  F-36  

 

 

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).

 

(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  

 

  F-37  

 

 

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   $ -     $ -  

 

NOTE 6 – Property and Equipment, Net

 

Property and Equipment, net, consist of:

 

    June 30, 2020     December 31, 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  

 

  F-38  

 

 

NOTE 7 – Intangible Assets, Net

 

Intangible assets, net, consist of:

 

    June 30, 2020     December 31, 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  

 

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.

 

  F-39  

 

 

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

 

NOTE 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     $ -  

 

  F-40  

 

 

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.

 

  F-41  

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  F-42  

 

 

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  

 

  F-43  

 

 

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.

 

  F-44  

 

 

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.

 

  F-45  

 

 

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.

 

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.

 

  F-46  

 

 

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.

 

  F-47  

 

 

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.

 

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  

 

  F-48  

 

 

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 1-A was qualified on August 7, 2020.

 

  F-49  

 

 

EXHIBITS

 

The following exhibits are filed with this offering circular:

 

Exhibit   Description
     
2.1   Articles of Incorporation, as amended(1)
2.2   Bylaws(2)
3.1   Articles of Amendment designating Series A Preferred Stock rights, as amended(1)
3.2   Articles of Amendment designating Series B Preferred Stock rights(1)
3.3   Securities Purchase Agreement with FirstFire Global Opportunities Fund, LLC(8)
3.4   Convertible Promissory Note with FirstFire Global Opportunities Fund, LLC(8)
3.5   Security Agreement with FirstFire Global Opportunities Fund, LLC(8)
3.6   Securities Purchase Agreement with Labrys Fund, LP (12)
3.7   Convertible Promissory Note with Labrys Fund, LP(15)
3.8   Securities Purchase Agreement with EMA Financial, LLC(14)
3.9   Convertible Promissory Note with EMA Financial, LLC(14)
3.10   Securities Purchase Agreement with Eagle Equities, LLC(14)
3.11   Convertible Promissory Note with Eagle Equities, LLC(14)
3,12   Form of Certificate(13)
3.13   Articles of Amendment designating Series C Preferred Stock rights(15)
4.1   Form of Subscription Agreement
6.1   Employment Agreement with Marco Alfonsi(3)
6.2   Employment Agreement with Stanley L. Teeple(3)
6.3   Employment Agreement with Andrew Holtmeyer(3)
6.4   Employment Agreement with Pasquale Ferro(3)
6.5   Employment Agreement with Phil Scala(1)
6.6   Asset Purchase Agreement with Pure Health Products(3)
6.7   Production Agreement with Pure Health Products(4)
6.8   Memorandum of Understanding with Sam International and ZetrOZ Systems LLC(5)
6.9   Asset Purchase Agreement with Seven Chakras, LLC(6)
6.10   Joint Venture Agreement with SHI Farms and NY – SHI(7)
6.11   Green Grow Stock Purchase Agreement(9)
6.12   Green Grow Modification and Lock Up Agreement(1)
6.13   License Agreement with Lifeguard Licensing Corp(10)
6.14   Can B̅ Corp. 2020 Incentive Stock Option Plan
7.1   Share Purchase Agreement with Prosperity Systems, Inc., dated January 5, 2015(2)
7.2   Membership Purchase Agreement with Pure Health Products(11)
10.1   Power of Attorney(16)
11.1   Consent of BMKR, LLP(15)
12.1   Opinion of Legality from Austin Legal Group, APC

 

(1) Filed with the Annual Report on Form 10-K filed with the SEC on April 2, 2020 and incorporated herein by reference.
(2) Filed with the Form S-1 Registration Statement filed with the SEC on December 2, 2015 and incorporated herein by reference.
(3) Filed with the Annual Report on Form 10-K filed with the SEC on April 16, 2019 and incorporated herein by reference.
(4) Filed with the Annual Report on Form 10-K filed with the SEC on April 6, 2018 and incorporated herein by reference.
(5) Filed with the Current Report on Form 8-K filed with the SEC on January 30, 2019 and incorporated herein by reference.
(6) Filed with the Current Report on Form 8-K filed with the SEC on February 26, 2019 and incorporated herein by reference.
(7) Filed with the Current Report on Form 8-K filed with the SEC on July 18, 2019 and incorporated herein by reference.
(8) Filed with the Current Report on Form 8-K filed with the SEC on January 14, 2020 and incorporated herein by reference.
(9) Filed with the Current Report on Form 8-K filed with the SEC on December 6, 2019 and incorporated herein by reference.
(10) Filed with the Current Report on Form 8-K filed with the SEC on February 18, 2020 and incorporated herein by reference.
(11) Filed with the Current Report on Form 8-K filed with the SEC on January 15, 2019 and incorporated herein by reference.
(12) Filed with the Current Report on Form 8-K filed with the SEC on May 19, 2020 and incorporated herein by reference.
(13) Filed with the Form 1-A, Part II, filed with the SEC on June 3, 2020 and incorporated herein by reference.
(14) Filed with the Current Report on Form 8-K filed with the SEC on June 24, 2020 and incorporated herein by reference.
(15) Filed with the Form 1-A/A, Part II, filed with the SEC on July 17, 2020 and incorporated herein by reference.
(16) Filed with the Form 1-A/A, Part II, filed with the SEC on July 31, 2020 and incorporated herein by reference.

 

  35  

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Hicksville, New York, on September 11, 2020.

 

  Can B̅ Corp.
     
September 11, 2020 By: /s/ Marco Alfonsi
  Name: Marco Alfonsi
  Title: Chief Executive Officer
    (Principal Executive Officer and Principal Accounting Officer)
     
September 11, 2020 By: /s/ Stanley L. Teeple
  Name: Stanley L. Teeple
  Title: Chief Financial Officer

 

Pursuant to the requirements of the Securities Act of 1933, this Offering Circular has been signed by the following persons in the capacities and on the date indicated.

 

Signature   Title   Date
         
/s/ Marco Alfonsi   Chief Executive Officer, Chairman, and Director   September 11, 2020
Marco Alfonsi        
         
/s/ Stanley L. Teeple   Chief Financial Officer, Secretary, and Director   September 11, 2020
Stanley L. Teeple        
         
*   Independent Director    
Frederick Alger Boyer Jr.        
         
*   Independent Director    
Ron Silver        
         
*   Independent Director    
James F. Murphy        
         
* /s/ Marco Alfonsi       September 11, 2020
 Marco Alfonsi        
 Attorney-in-fact        

 

  36  

 

 

Exhibit 4.1

 

Regulation A Subscription Booklet

 

for

 

Can B̅ Corp.

 

The decision to accept or reject a subscription shall be

made in the sole discretion of the CEO or Board of Directors of the Company.

 

 

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Can B̅ Corp.

 

 

 

Instructions to Prospective Purchasers:

 

This subscription booklet relates to the sale of up to 10,000,000 common shares of Can B̅ Corp., a Florida corporation (the “Company”) pursuant to the Company’s offering under Tier II of Regulation A, promulgated under the Securities Act of 1933, as amended (“Securities Act”).

 

You should examine the suitability of this type of investment in the context of your needs, investment objectives and financial capabilities and you should make independent investigation and decision as to suitability and as to the risk and potential gain involved with the Company. You are encouraged to consult your attorney, accountant, financial consultant or other business or tax adviser regarding the risks and merits of the proposed investment.

 

If after investigation and consultation with our advisors you desire to purchase shares of the Company, then please complete and execute the Subscription Agreement included in this Subscription Booklet and provide (i) a government issued form of picture identification (e.g., passport or driver license) or organizational documents if the investor is an entity, and (ii) a completed IRS Form W-9 (collectively, the “Subscription Documents”) to the Company as directed in the Subscription Agreement.

 

In connection with your subscription, you are required to fund the entire purchase price for your shares at a price of $0.50 per share (the “Subscription Amount”). The Subscription Documents should be delivered by mail at the below address or as otherwise directed by the Company and Subscription Amounts should be delivered by check or wire as below set forth.

 

Subscription Amounts may be delivered by check to “Can B̅ Corp.” or bank wire as follows:

 

  Check delivery address: Bank wires may be delivered to:
     
  Can B̅ Corp. Bank: Investors Bank
  960 South Broadway, Suite 120   Wantagh Branch
  Hicksville, NY 11801   1164 Wantagh Ave
    Wantagh, New York 11793
    Account name: Can B̅ Corp.
    Account number:
    Routing number:

 

Based on the representations contained in the Subscription Documents and other information of which the Company has actual knowledge, the Company will make the determination whether to proceed with the sale of shares. Any subscription for investment that is not accepted within 30 days is deemed automatically rejected. Rejected Subscription Amounts will be returned with accrued interest, if any.

 

Your answers will be kept confidential, except to the extent disclosure may be required under any federal or state laws. However, you hereby agree that the Company may present your Subscription Documents to its attorneys, transfer agent and such other parties as it, in its sole discretion, deems appropriate to assure itself that the proposed offer and sale of common shares of the Company will not result in a violation of (i) the registration provisions of the Securities Act, (ii) the securities or “blue sky” laws of any state or (iii) any anti-money laundering statute or regulation.

 

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, the Company encourages you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, the Company encourages you to refer to www.investor.gov.

 

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THIS INVESTMENT IS SUITABLE ONLY FOR PERSONS WHO CAN BEAR THE ECONOMIC RISK FOR AN INDEFINITE PERIOD OF TIME AND WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. FURTHERMORE, INVESTORS MUST UNDERSTAND THAT SUCH INVESTMENT IS ILLIQUID AND IS EXPECTED TO CONTINUE TO BE ILLIQUID FOR AN INDEFINITE PERIOD OF TIME.

 

 

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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND STATE SECURITIES OR BLUE SKY LAWS. ALTHOUGH AN OFFERING STATEMENT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), THAT OFFERING STATEMENT DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE MERITS OF THIS OFFERING OR THE ADEQUACY OR ACCURACY OF THE SUBSCRIPTION AGREEMENT OR ANY OTHER MATERIALS OR INFORMATION MADE AVAILABLE TO INVESTOR IN CONNECTION WITH THIS OFFERING THROUGH THE WEBSITE MAINTAINED BY THE COMPANY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

INVESTORS WHO ARE NOT “ACCREDITED INVESTORS” (AS THAT TERM IS DEFINED IN SECTION 501 OF REGULATION D PROMULGATED UNDER THE ACT) ARE SUBJECT TO LIMITATIONS ON THE AMOUNT THEY MAY INVEST, AS SET OUT IN SECTION 3 OF THE SUBSCRIPTION AGREEMENT. THE COMPANY IS RELYING ON THE REPRESENTATIONS AND WARRANTIES SET FORTH BY EACH INVESTOR IN THE SUBSCRIPTION DOCUMENTS AND THE OTHER INFORMATION PROVIDED BY INVESTOR IN CONNECTION WITH THIS OFFERING TO DETERMINE THE APPLICABILITY TO THIS OFFERING OF EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT.

 

PROSPECTIVE INVESTORS MAY NOT TREAT THE CONTENTS OF THIS SUBSCRIPTION BOOKLET, THE OFFERING STATEMENT OR ANY OF THE OTHER MATERIALS RELATING TO THE OFFERING AND PRESENTED TO INVESTORS ON THE COMPANY’S WEBSITE (COLLECTIVELY, THE “OFFERING MATERIALS”) OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY OR ANY OF ITS OFFICERS, EMPLOYEES OR AGENTS (INCLUDING “TESTING THE WATERS” MATERIALS) AS INVESTMENT, LEGAL OR TAX ADVICE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED. EACH PROSPECTIVE INVESTOR SHOULD CONSULT THE INVESTOR’S OWN COUNSEL, ACCOUNTANT AND OTHER PROFESSIONAL ADVISOR AS TO INVESTMENT, LEGAL, TAX AND OTHER RELATED MATTERS CONCERNING THE INVESTOR’S PROPOSED INVESTMENT.

 

THE OFFERING MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

 

THE COMPANY MAY NOT BE OFFERING THE SECURITIES IN EVERY STATE. THE OFFERING MATERIALS DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH THE SECURITIES ARE NOT BEING OFFERED.

 

THE INFORMATION PRESENTED IN THE OFFERING MATERIALS WAS PREPARED BY THE COMPANY SOLELY FOR THE USE BY PROSPECTIVE INVESTORS IN CONNECTION WITH THIS OFFERING. NO REPRESENTATIONS OR WARRANTIES ARE MADE AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN ANY OFFERING MATERIALS, AND NOTHING CONTAINED IN THE OFFERING MATERIALS IS OR SHOULD BE RELIED UPON AS A PROMISE OR REPRESENTATION AS TO THE FUTURE PERFORMANCE OF THE COMPANY.

 

THE COMPANY RESERVES THE RIGHT IN ITS SOLE DISCRETION AND FOR ANY REASON WHATSOEVER TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THE OFFERING AND/OR ACCEPT OR REJECT IN WHOLE OR IN PART ANY PROSPECTIVE INVESTMENT IN THE SECURITIES OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF SECURITIES SUCH INVESTOR DESIRES TO PURCHASE. EXCEPT AS OTHERWISE INDICATED, THE OFFERING MATERIALS SPEAK AS OF THEIR DATE. NEITHER THE DELIVERY NOR THE PURCHASE OF THE SECURITIES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THAT DATE.

 

 

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SUBSCRIPTION AGREEMENT

 

RETURN TO:

Can B̅ Corp.

960 South Broadway, Suite 120

Hicksville, NY 11801

marco@canbiola.com

 

INVESTOR INFORMATION
 
Name of Investor Social Security # or Tax I.D.
   
Street Address
 
City State Zip Code
     
Phone Email State/Nation of Residency
     
Name and Title of Authorized Representative, if investor is an entity or custodial account
 
Type of Entity or Custodial Account (IRA, Keogh, corporation, partnership, trust, limited liability company, etc.)
 
Jurisdiction of Organization Date of Organization Account Number

 

WHEREAS, the Company is offering up to 10,000,000 shares of its common stock at a price of $0.50 per share pursuant to its Form 1-A, as amended from time to time (“Offering Statement”), filed with the Securities and Exchange Commission under Tier II of Regulation A promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

 

1. The undersigned (“Investor”) hereby subscribes for the dollar amount (“Subscription Amount”) and number of common shares (“Shares”) of Can B̅ Corp., a Florida corporation (the “Company”) as indicated on the signature page hereto.

 

2. The Shares will be held by the undersigned as:

 

______INDIVIDUAL INVESTOR ______ CUSTODIAN ENTITY ______ TENANTS-IN-COMMON
     
______COMMUNITY PROPERTY ______ CORPORATION ______ JOINT TENANTS
     
______LLC ______ PARTNERSHIP ______ TRUST

 

If the Shares are intended to be held as Community Property, as Tenants-In-Common or Joint Tenancy, then each party (spouse) should execute this Agreement.

 

If the Shares are being acquired by an entity (corporation, partnership, LLC or trust), then additional documentation of the organization and authorization to invest may be required by the Company. Such documents may include, without limitation: articles/certificates of incorporation, by-laws, operating/partnership agreements, certificates of trust or resolutions to invest.

 

3. Generally, no sale may be made to Investor in this offering if the aggregate purchase price Investor pays is more than 10% of the greater of Investor’s annual income or net worth. Different rules apply to accredited investors and non-natural persons. Investor hereby represents that its investment does not exceed applicable thresholds set forth in Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, the Company encourages you to refer to www.investor.gov.

 

 

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4. To induce the Company to accept this subscription, the Investor hereby agrees and represents that:

 

(a) The Investor has transferred, by wire or by check, funds equal to the Subscription Amount to the Company concurrently with submitting this Subscription Agreement, unless otherwise agreed by the Company.

 

(b) Within five (5) days after receipt of a written request from the Company, the Investor shall provide such information and execute and deliver such documents as the Company may reasonably request to comply with any and all laws and ordinances to which the Company may be subject, including the securities laws of the United States or any other applicable jurisdiction.

 

(c) The Company has entered into, and from time to time may enter into, separate subscription agreements with other investors for the sale of Shares to such other investors. The sale of Shares to such other investors and this sale of the Shares shall be separate sales and this Subscription Agreement and the other subscription agreements shall be separate agreements.

 

(d) The Investor understands the meaning and legal consequences of, and that the Company intends to rely upon, the representations and warranties contained in Sections 3, 4, 5 and 6 hereof, and the Investor hereby agrees to indemnify and hold harmless the Company and each any manager, member, officer, employee, agent or affiliate thereof from and against any and all loss, damage or liability due to or arising out of a breach of any representation or warranty of the Investor.

 

5. The Investor hereby represents and warrants that that the Investor is an Accredited Investor, as defined by Rule 501 of Regulation D under the Securities Act of 1933, and Investor meets at least one of the following criteria (initial all that apply) or that Investor is an unaccredited investor and meets none of the following criteria (initial as applicable):

 

  _____ The Investor is a natural person (individual) whose own net worth, taken together with the net worth of the Investor’s spouse, exceeds $1,000,000, excluding equity in the Investor’s principal residence unless the net effect of his or her mortgage results in negative equity, the Investor should include any negative effects in calculating his or her net worth
     
  _____ The Investor is a natural person (individual) who had an individual income in excess of $200,000 (or joint income with the Investor spouse in excess of $300,000) in each of the two previous years and who reasonably expects a gross income of the same this year.
     
  _____ The Investor is an entity as to which all the equity owners are Accredited Investors. If this paragraph is initialed, the Investor represents and warrants that the Investor has verified all such equity owners’ status as an Accredited Investor.
     
  _____ The Investor is either (i) a corporation, (ii) an organization described in Section 501(c)(3) of the Internal Revenue Code, (iii) a trust, or (iv) a partnership, in each case not formed for the specific purpose of acquiring the securities offered, and in each case with total assets in excess of $5,000,000.
     
  _____ The Investor is not an Accredited Investor and does not meet any of the above criteria.

 

6. The Investor hereby further represents, warrants, acknowledges and agrees that:

 

(a) The information provided by the Investor is true and correct in all respects as of the date hereof and the Investor hereby agrees to promptly notify the Company and supply corrective information to the Company if, prior to the consummation of its investment in the Company, any of such information becomes inaccurate or incomplete.

 

(b) The Investor, if an individual, is over 21 years of age, and the address set forth above is the true residence and domicile of the Investor, and the Investor has no present intention of becoming a resident or domiciliary of any other state or jurisdiction. If a corporation, trust, partnership or other entity, the Investor has its principal place of business at the address set forth above.

 

 

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(c) The Investor has had an opportunity to ask questions of and receive answers from the Company, or a person or persons acting on its behalf, concerning the Company and the terms and conditions of this investment, and all such questions have been answered to the full satisfaction of the Investor.

 

(d) Except as set forth in this Subscription Agreement, no representations or warranties have been made to the Investor by the Company or any partner, agent, employee or affiliate thereof.

 

(e) The Investor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Company and making an informed investment decision with respect thereto. The Investor has consulted its own advisers with respect to its proposed investment in the Company.

 

(f) The Investor is not making this subscription in any manner as a representative of a charitable remainder unitrust or a charitable remainder trust.

 

(g) The Investor has the financial ability to bear the economic risk of the Investor’s investment, including a complete loss thereof, has adequate means for providing for its current needs and possible contingencies and has no need for liquidity in its investment.

 

(h) Investor is acquiring Shares for its own account and not with a view towards distribution.

 

(i) The Investor acknowledges and understands that:

 

(i) The Shares are a speculative investment and involve a substantial degree of risk;

 

(ii) The Company does not have a significant financial or operating history;

 

(iii) The Shares are being offered pursuant to Regulation A under the Securities Act and have not been registered or qualified under any state blue sky or securities law; and

 

(iv) Any federal income tax treatment which may be currently available to the Investor may be lost through adoption of new laws or regulations, amendments to existing laws or regulations or changes in the interpretations of existing laws and regulations.

 

(j) The Investor has carefully reviewed and understands the Company’s Offering Statement, as amended or supplemented, and exhibits included therewith.

 

(k) The Investor represents and warrants that (i) the Shares are to be purchased with funds that are from legitimate sources in connection with its regular business activities and which do not constitute the proceeds of criminal conduct; (ii) the Shares are not being acquired, and will not be held, in violation of any applicable laws; (iii) the Investor is not listed on the list of Specially Designated Nationals and Blocked Persons maintained by the United States Office of Foreign Assets Control (“OFAC”); and (iv) the Investor is not a senior foreign political figure, or any immediate family member close associate of a senior foreign political figure.

 

(l) If the Investor is an individual retirement account, qualified pension, profit sharing or other retirement plan, or governmental plans or units (all such entities are herein referred to as a “Retirement Trust”), the Investor represents that the investment in the Company by the Retirement Trust has been authorized by the appropriate person or persons and that the Retirement Trust has consulted its counsel with respect to such investment and the Investor represents that it has not relied on any advice of the Manager or its affiliates in making its decision to invest in the Company.

 

(m) Neither the execution and delivery of this Agreement nor the fulfillment of or compliance with the terms and provisions hereof, will conflict with, or result in a breach or violation of any of the terms, conditions or provisions of, or constitute a default under, any contract, agreement, mortgage, indenture, lease, instrument, order, judgment, statute, law, rule or regulation to which Investor is subject.

 

 

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(n) Investor has all requisite power and authority to (i) execute and deliver this Agreement, and (ii) to carry out and perform its obligations under the terms of this Agreement. This Agreement has been duly authorized, executed and delivered and constitutes the legal, valid and binding obligation of Investor, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting the enforcement of creditors’ rights generally in effect from time to time and by general principles of equity.

 

7. It is understood that this subscription is not binding on the Company until accepted by the Company. The Company may accept or reject this subscription in whole or in part.

 

8. The Company reserves the right to request such information as is necessary to verify the identity of the Investor. The Investor shall promptly on demand provide such information and execute and deliver such documents as the Company may request to verify the accuracy of the Investor’s representations and warranties herein or to comply with the USA PATRIOT Act of 2001, as amended (the “Patriot Act”), certain anti-money laundering laws or any other law or regulation to which the Company may be subject (the “Relevant Legislation”). In addition, by executing this Subscription Agreement the Investor authorizes the Company to provide the Company’s legal counsel and any other appropriate third party with information regarding the Investor’s account, until the authorization is revoked by the Investor in writing to the Company.

 

9. The Company represents and warrants to the Investor that:

 

(a) The Company is duly formed and validly existing in good standing as a corporation under the laws of the State of Florida, and has all requisite power and authority to carry on its business as now conducted.

 

(b) The execution, delivery and performance by the Company of this Subscription Agreement have been authorized by all necessary action on behalf of the Company, and this Subscription Agreement is a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms.

 

10. Miscellaneous.

 

(a) All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities may require.

 

(b) This Subscription Agreement is not transferable or assignable by Subscriber without the prior written consent of the Company.

 

(c) The representations, warranties and agreements contained herein shall be deemed to be made by and be binding upon Subscriber and its heirs, executors, administrators and successors and shall inure to the benefit of the Company and its successors and assigns.

 

(d) None of the provisions of this Subscription Agreement may be waived, changed or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by the Company and Subscriber.

 

(e) The invalidity, illegality or unenforceability of one or more of the provisions of this Subscription Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Subscription Agreement in such jurisdiction or the validity, legality or enforceability of this Subscription Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

 

(f) This Subscription Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.

 

 

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(g) The terms and provisions of this Subscription Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person.

 

(h) The headings used in this Subscription Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

 

(i) This Subscription Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

(j) No failure or delay by any party in exercising any right, power or privilege under this Subscription Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law

 

(k) Notice, requests, demands and other communications relating to this Subscription Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have been duly given if and when (a) delivered personally, on the date of such delivery; or (b) mailed by registered or certified mail, postage prepaid, return receipt requested, in the third day after the posting thereof; or (c) emailed, telecopied or cabled, on the date of such delivery to the respective parties at the addresses set forth on the signature page hereto with respect to the Investor and first above set forth with respect to the Company.

 

[EXECUTION PAGE FOLLOWS]

 

 

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IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on the date set forth below.

 

_________________, 20___  
Date   Name of Investor
     
$_________________  
Subscription Amount   Signature
     
 
# of Common Shares   Title (if the Investor is not a natural person)

 

Signatures of Additional Investors, as necessary:

 

 
Name of Investor   Name of Investor
     
 
Signature   Signature
     
 
Title (if the Investor is not a natural person)   Title (if the Investor is not a natural person)

 

Company Acceptance:

 

The foregoing subscription is hereby accepted on behalf of the Company the ____ day of _______________, 20___.

 

The Subscription in the amount of $_________________ is accepted for ____________ Common Shares.

 

Signed:    
Name: Marco Alfonsi  
Title: Chief Executive Officer  

 

 

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Exhibit 6.14

 

CAN B CORP.

2020 INCENTIVE STOCK OPTION PLAN

 

SECTION 1. PURPOSE

 

The purpose of this Can B Corp. 2020 Incentive Stock Option Plan (the “Plan”) is to attract, retain, and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company’s stockholders.

 

SECTION 2. DEFINITIONS

 

Certain capitalized terms used in the Plan have the meanings set forth in Appendix A

 

SECTION 3. ADMINISTRATION

 

3.1 Administration of the Plan.

 

The Plan shall be administered by the Compensation Committee or, in the Board’s sole discretion, the Board. The Compensation Committee shall be composed of two or more directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission. As used in this Plan, the term “Compensation Committee” shall be construed as if followed by the words “(if any);” and nothing in this Plan requires the Board to have a Compensation Committee.

 

3.2 Delegation.

 

Notwithstanding the foregoing, the Compensation Committee, or if no Compensation Committee has been appointed, the Board, may delegate administration of the Plan to a committee or committees of one or more members of the Board. The Committee shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Members of any Committee shall serve for such term as the Board may determine, subject to removal by the Board at any time. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable. To the extent consistent with applicable law, the Board or the Committee may authorize one or more officers of the Company to grant Awards to designated classes of Eligible Persons, within limits specifically prescribed by the Board or the Compensation Committee; provided, however, that no such officer shall have or obtain authority to grant Awards to himself or herself or to any person then subject to Section 16 of the Exchange Act. All references in the Plan to the “Committee” shall be, as applicable, to the Board, the Compensation Committee or any other committee or any officer to whom the Board or the Compensation Committee has delegated authority to administer the Plan.

 

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3.3 Administration and Interpretation by Committee.

 

(a) Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicable law, the Committee shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board or a Committee composed of members of the Board, to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Preferred Stock and/or Common Stock (collectively, “Stock”) to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Preferred Stock and/or Common Stock or other property or canceled or suspended; (vii) determine whether, to what extent and under what circumstances cash, shares of Stock, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant; (viii) interpret and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (ix) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (x) delegate ministerial duties to such of the Company’s employees as it so determines; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.

 

(b) The Committee shall have the right, without stockholder approval, to cancel or amend outstanding Options or SARs for the purpose of repricing, replacing or regranting such Options or SARs with Options or SARs that have a purchase or grant price that is less than the purchase or grant price for the original Options or SARs except in connection with adjustments provided in Section 15.

 

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(c) The effect on the vesting of an Award of a Company-approved leave of absence or a Participant’s working less than full-time shall be determined by the Company’s chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Committee, whose determination shall be final.

 

(d) Decisions of the Committee shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person. A majority of the members of the Committee may determine its actions.

 

SECTION 4. SHARES SUBJECT TO THE PLAN

 

4.1 Authorized Number of Shares.

 

Subject to adjustment from time to time as provided in Section 15.1, a maximum of Two Thousand (2,000) shares of Preferred Stock and Ten Million (10,000,000) shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.

 

4.2 Share Usage.

 

(a) Shares of Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. Any shares of Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding obligations in connection with an Award, or (ii) covered by an Award that is settled in cash, or in a manner such that some or all of the shares of Stock covered by the Award are not issued, shall be available for Awards under the Plan. The number of shares of Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Stock subject or paid with respect to an Award.

 

(b) The Committee shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.

 

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(c) Notwithstanding anything in the Plan to the contrary, the Committee may grant Substitute Awards under the Plan. Substitute Awards shall not reduce the number of shares authorized for issuance under the Plan. In the event that an Acquired Entity has shares available for awards or grants under one or more preexisting plans not adopted in contemplation of such acquisition or combination, then, to the extent determined by the Committee, the shares available for grant pursuant to the terms of such preexisting plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to holders of common stock of the entities that are parties to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the number of shares of Stock authorized for issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of such preexisting plans, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or a Related Company prior to such acquisition or combination. In the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger or consolidation is completed is approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Committee without any further action by the Committee, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such awards shall be deemed to be Participants.

 

(d) Notwithstanding the other provisions in this Section 4.2, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1, subject to adjustment as provided in Section 15.1.

 

SECTION 5. ELIGIBILITY

 

An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Committee from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.

 

SECTION 6. AWARDS

 

6.1 Form, Grant and Settlement of Awards.

 

The Committee shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone or in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Committee shall determine.

 

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6.2 Evidence of Awards.

 

Awards granted under the Plan shall be evidenced by a written document, including an electronic, notice or agreement that shall contain such terms, conditions, limitations and restrictions as the Committee shall deem advisable and that are not inconsistent with the Plan.

 

6.3 Deferrals.

 

The Committee may permit or require a Participant to defer receipt of the payment of any Award if and to the extent set forth in the instrument evidencing the Award at the time of grant. If any such deferral election is permitted or required, the Committee, in its sole discretion, shall establish rules and procedures for such payment deferrals, which may include the grant of additional Awards or provisions for the payment or crediting of interest or dividend equivalents, including converting such credits to deferred stock unit equivalents; provided, however, that the terms of any deferrals under this Section 6.3 shall comply with all applicable law, rules and regulations, including, without limitation, Section 409A of the Code.

 

6.4 Dividends and Distributions.

 

Participants may, if and to the extent the Committee so determines and sets forth in the instrument evidencing the Award at the time of grant, be credited with dividends paid with respect to shares of Stock underlying an Award in a manner determined by the Committee in its sole discretion. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Stock, Restricted Stock or Stock Units.

 

SECTION 7. OPTIONS

 

7.1 Grant of Options.

 

The Committee may grant Options designated as Incentive Stock Options or Nonqualified Stock Options. Nonqualified Stock Options may not be granted for Preferred Stock.

 

7.2 Option Exercise Price.

 

The exercise price for shares purchased under an Option shall be at least 100% of the Fair Market Value on the Grant Date (and shall not be less than the minimum exercise price required by Section 422 of the Code with respect to Incentive Stock Options), except in the case of Substitute Awards. Notwithstanding the foregoing, a Non-qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 409A of the Code.

 

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7.3 Term of Options.

 

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option shall be ten years from the Grant Date.

 

7.4 Exercise of Options.

 

The Committee shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Committee at any time.

 

To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to or as directed or approved by the Company of a properly executed Notice of Exercise in accordance with procedures established by the Board or Committee, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement, if any, and such representations and agreements as may be required by the Board or Committee, accompanied by payment in full as described in Sections 7.5 and 13. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Committee.

 

7.5 Payment of Exercise Price.

 

The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Committee for that purchase, which forms may include:

 

(a) cash;

 

(b) by certified or bank check;

 

(c) having the Company withhold shares of Stock that would otherwise be issued on exercise of the Option that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

 

(d) tendering (either actually or, so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

 

(e) so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or

 

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(f) such other consideration as the Committee may permit.

 

 

7.6 Effect of Termination of Service.

 

In the event a Participant’s service with this Company is terminated, the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Board or Committee at any time:

 

(a) Any portion of an Option that is not vested and exercisable on the date of a Participant’s Termination of Service shall expire on such date.

 

(b) Any portion of an Option that is vested and exercisable on the date of a Participant’s Termination of Service shall expire on the earliest to occur of:

 

(i) if the Participant’s Termination of Service occurs for reasons other than Cause, Retirement, Disability or death, the date that is three months after such Termination of Service;

 

(ii) if the Participant’s Termination of Service occurs by reason of Retirement, Disability or death, the one-year anniversary of such Termination of Service; and

 

(iii) the Option Expiration Date.

 

Notwithstanding the foregoing, if a Participant dies after his or her Termination of Service but while an Option is otherwise exercisable, the portion of the Option that is vested and exercisable on the date of such Termination of Service shall expire upon the earlier to occur of (a) the Option Expiration Date and (b) the one-year anniversary of the date of death, unless the Committee determines otherwise.

 

Also notwithstanding the foregoing, in case a Participant’s Termination of Service occurs for Cause, all Options granted to the Participant (vested or unvested) shall automatically expire upon first notification to the Participant of such termination, unless the Committee determines otherwise. If a Participant’s employment or service relationship with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant’s rights under any Option shall likewise be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after a Participant’s Termination of Service, any Option then held by the Participant may be immediately terminated by the Committee, in its sole discretion.

 

(c) If the exercise of the Option following a Participant’s Termination of Service, but while the Option is otherwise exercisable, would be prohibited solely because the issuance of Stock would violate either the registration requirements under the Securities Act or the Company’s insider trading policy, then the Option shall remain exercisable until the earlier of (i) the Option Expiration Date and (ii) the expiration of a period of three months (or such longer period of time as determined by the Committee in its sole discretion) after the Participant’s Termination of Service during which the exercise of the Option would not be in violation of such Securities Act or insider trading policy requirements.

 

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Notwithstanding the foregoing, if a Participant does not exercise his or her vested Option on or before the date (i) ninety (90) days following the Termination of Service or (ii) twelve (12) months following Termination of Service due to Disability or death (in case of death, exercise may be by Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon Participant’s death), Participant’s Option will not qualify as an Incentive Stock Option and will be treated and taxed as a Nonqualified Stock Option.

 

7.7 Repurchase and Forfeiture Restrictions.

 

Options (and any compensation paid or shares issued under the Options) are subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company, and any compensation recovery policy otherwise required by applicable law. Notwithstanding anything to the contrary contained herein, the Committee may, in its sole discretion, provide in an Award Agreement or otherwise that the Committee may cancel such Award if the Participant has engaged in or engages in any Detrimental Activity. The Committee may, in its sole discretion, also provide in an Award Agreement or otherwise that (i) if the Participant has engaged in or engages in Detrimental Activity, the Participant will forfeit any gain realized on the vesting, exercise or settlement of any Award, and must repay the gain to the Company and (ii) if the Participant receives any amount in excess of what the Participant should have received under the terms of the Award for any reason (including, without limitation, by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable laws.

 

SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS

 

Notwithstanding any other provisions of the Plan, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code, or any successor provision, and any applicable regulations thereunder, including, to the extent required thereunder, the following:

 

8.1 Dollar Limitation.

 

To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Stock with respect to which a Participant’s Incentive Stock Options become exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted.

 

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8.2 Eligible Employees.

 

Individuals who are not employees of the Company or one of its parent or subsidiary corporations may not be granted Incentive Stock Options.

 

8.3 Exercise Price.

 

The exercise price of an Incentive Stock Option shall be at least 100% of the Fair Market Value of the Stock on the Grant Date, and in the case of an Incentive Stock Option granted to a Participant who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a “Ten Percent Stockholder”), shall not be less than 110% of the Fair Market Value of the Stock on the Grant Date. The determination of more than 10% ownership shall be made in accordance with Section 422 of the Code.

 

8.4 Option Term.

 

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Incentive Stock Option shall not exceed ten years, and in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, shall not exceed five years.

 

8.5 Exercisability.

 

An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than three months after the date of a Participant’s Termination of Service if termination was for reasons other than death or disability, (b) more than one year after the date of a Participant’s Termination of Service if termination was by reason of disability, or (c) after the Participant has been on leave of absence for more than 90 days, unless the Participant’s reemployment rights are guaranteed by statute or contract.

 

8.6 Taxation of Incentive Stock Options.

 

In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year after the date of exercise.

 

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A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Participant shall give the Company prompt notice of any disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such holding periods.

 

8.7 Code Definitions.

 

For the purposes of this Section 8 “disability,” “parent corporation” and “subsidiary corporation” shall have the meanings attributed to those terms for purposes of Section 422 of the Code.

 

SECTION 9. STOCK APPRECIATION RIGHTS

 

9.1 Grant of Stock Appreciation Rights.

 

The Committee may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Committee shall determine in its sole discretion. An SAR may be granted in tandem with an Option or alone (“freestanding”). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. An SAR may be exercised upon such terms and conditions and for the term as the Committee determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term of a freestanding SAR shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.

 

9.2 Payment of SAR Amount.

 

Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Preferred Stock and/or Common Stock on the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Committee as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Committee in its sole discretion.

 

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9.3 Waiver of Restrictions.

 

Subject to Section 18.5, the Committee, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate.

 

SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS

 

10.1 Grant of Stock Awards, Restricted Stock and Stock Units.

 

The Committee may grant Stock Awards, Restricted Stock, and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Committee shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.

 

10.2 Vesting of Restricted Stock and Stock Units.

 

Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant’s release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Committee, and subject to the provisions of Section 13, (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become freely transferable by the Participant, and (b) Stock Units shall be paid in shares of Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.

 

10.3 Waiver of Restrictions.

 

Subject to Section 18.5, the Committee, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate.

 

SECTION 11. PERFORMANCE AWARDS

 

11.1 Performance Shares.

 

The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares shall consist of a unit valued by reference to a designated number of shares of Stock, the value of which may be paid to the Participant by delivery of shares of Stock or, if set forth in the instrument evidencing the Award, of such property as the Committee shall determine, including, without limitation, cash, shares of Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. Subject to Section 18.5, the amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.

 

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11.2 Performance Units.

 

The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units shall consist of a unit valued by reference to a designated amount of property other than shares of Preferred Stock and/or Common Stock, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, shares of Preferred Stock and/or Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. Subject to Section 18.5, the amount to be paid under an Award of Performance Units may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.

 

SECTION 12. OTHER STOCK OR CASH-BASED AWARDS

 

Subject to the terms of the Plan and such other terms and conditions as the Committee deems appropriate, the Committee may grant other incentives payable in cash or in shares of Stock under the Plan.

 

SECTION 13. WITHHOLDING

 

The Company may require the Participant to pay to the Company the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award (“tax withholding obligations”) and (b) any amounts due from the Participant to the Company or to any Related Company (“other obligations”). The Company shall not be required to issue any shares of Stock or otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.

 

The Committee may permit or require a Participant to satisfy all or part of the Participant’s tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become due from the Company to the Participant, (c) having the Company withhold a number of shares of Stock that would otherwise be issued to the Participant (or become vested, in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, or (d) surrendering a number of shares of Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations. The value of the shares so withheld or tendered may not exceed the employer’s minimum required tax withholding rate.

 

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SECTION 14. ASSIGNABILITY

 

No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent the Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant’s death. During a Participant’s lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Committee, in its sole discretion, may permit a Participant to assign or transfer an Award subject to such terms and conditions as the Committee shall specify.

 

SECTION 15. ADJUSTMENTS

 

15.1 Adjustment of Shares.

 

In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company’s corporate or capital structure results in (a) the outstanding shares of Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Stock, then the Committee shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2; and (iii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Committee, as to the terms of any of the foregoing adjustments shall be conclusive and binding.

 

Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 15.1 but shall be governed by Sections 15.2 and 15.3, respectively.

 

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15.2 Dissolution or Liquidation.

 

To the extent not previously exercised or settled, and unless otherwise determined by the Committee in its sole discretion, Awards shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Committee, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.

 

15.3 Change in Control.

 

Notwithstanding any other provision of the Plan to the contrary, unless the Committee shall determine otherwise in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, in the event of a Change in Control:

 

(a) All outstanding Awards, other than Performance Shares and Performance Units, shall become fully and immediately exercisable, and all applicable deferral and restriction limitations or forfeiture provisions shall lapse, immediately prior to the Change in Control and shall terminate at the effective time of the Change in Control; provided, however, that with respect to a Change in Control that is a Company Transaction, such Awards shall become fully and immediately exercisable, and all applicable deferral and restriction limitations or forfeiture provisions shall lapse, only if and to the extent such Awards are not converted, assumed or replaced by the Successor Company.

 

For the purposes of this Section 15.3(a), an Award shall be considered converted, assumed or replaced by the Successor Company if following the Company Transaction the option or right confers the right to purchase or receive, for each share of Preferred Stock and/or Common Stock subject to the Award immediately prior to the Company Transaction, the consideration (whether stock, cash or other securities or property) received in the Company Transaction by holders of Preferred Stock and/or Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Company Transaction is not solely common stock of the Successor Company, the Committee may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option, for each share of Stock subject thereto, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Stock in the Company Transaction. The determination of such substantial equality of value of consideration shall be made by the Committee, and its determination shall be conclusive and binding.

 

(b) All Performance Shares or Performance Units earned and outstanding as of the date the Change in Control is determined to have occurred shall be payable in full at the target level in accordance with the payout schedule pursuant to the instrument evidencing the Award. Any remaining Performance Shares or Performance Units (including any applicable performance period) for which the payout level has not been determined shall be prorated at the target payout level up to and including the date of such Change in Control and shall be payable in full at the target level in accordance with the payout schedule pursuant to the instrument evidencing the Award. Any existing deferrals or other restrictions not waived by the Committee in its sole discretion shall remain in effect.

 

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(c) Notwithstanding Sections 15.3(a) and 15.3(b), the Committee, in its sole discretion, may (unless otherwise provided in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company) instead provide in the event of a Change in Control that is a Company Transaction (i) for adjustments to the Plan and outstanding Awards as contemplated by Section 15.1 or (ii) that a Participant’s outstanding Awards shall terminate upon or immediately prior to such Company Transaction and that such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (x) the value of the per share consideration received by holders Stock in the Company Transaction, or, if the Company Transaction is a sale of assets or otherwise does not result in direct receipt of consideration by holders of Stock, the value of the deemed per share consideration received, in each case as determined by the Committee in its sole discretion, multiplied by the number of shares of Stock subject to such outstanding Awards (to the extent then vested and exercisable or whether or not then vested and exercisable, as determined by the Committee in its sole discretion) exceeds (y) if applicable, the respective aggregate exercise price or grant price for such Awards.

 

15.4 Further Adjustment of Awards.

 

Subject to Sections 15.2 and 15.3, the Committee shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change in control of the Company, as defined by the Committee, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Committee may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Committee may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change in control that is the reason for such action.

 

15.5 No Limitations.

 

The grant of Awards shall in no way affect the Company’s right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

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15.6 Fractional Shares.

 

In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.

 

15.7 Section 409A of the Code.

 

Notwithstanding anything in this Plan to the contrary, (a) any adjustments made pursuant to this Section 15 or any other amendments to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code and (b) any adjustments made pursuant to this Section 15 or any other amendments to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment or amendment the Awards either (i) continue not to be subject to Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code.

 

SECTION 16. MARKET STANDOFF

 

In the event of an underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, no person may sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any shares issued pursuant to an Award granted under the Plan without the prior written consent of the Company or its underwriters. Such limitations shall be in effect for such period of time as may be requested by the Company or such underwriters; provided, however, that in no event shall such period exceed (a) 180 days after the effective date of the registration statement for such public offering or (b) such longer period requested by the underwriter as is necessary to comply with regulatory restrictions on the publication of research reports (including, but not limited to, NYSE Rule 472 or NASD Conduct Rule 2711).

 

In the event of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company’s outstanding Preferred Stock and/or Common Stock effected as a class without the Company’s receipt of consideration, any new, substituted or additional securities distributed with respect to any shares issued as or pursuant to an Award under the Plan shall be immediately subject to the provisions of this Section 16, to the same extent such shares are at such time covered by such provisions.

 

In order to enforce the limitations of this Section 16, the Company may impose stop-transfer instructions with respect to the purchased shares until the end of the applicable standoff period.

 

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SECTION 17. AMENDMENT AND TERMINATION

 

17.1 Amendment, Suspension or Termination.

 

The Board or the Compensation Committee may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the Plan; and provided, further, that any amendment that requires stockholder approval may be made only by the Board and not by the Compensation Committee. Subject to Section 17.3, the Committee may amend the terms of any outstanding Award, prospectively or retroactively.

 

17.2 Term of the Plan.

 

Unless sooner terminated as provided herein, the Plan shall terminate ten years from the Effective Date. After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten years after the later of: (a) the adoption of the Plan by the Board and (b) the adoption by the Board of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code.

 

17.3 Consent of Participant.

 

The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant’s consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a “modification” that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 15 shall not be subject to these restrictions.

 

SECTION 18. GENERAL

 

18.1 No Individual Rights.

 

No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.

 

Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant’s employment or other relationship at any time, with or without cause.

 

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18.2 Issuance of Shares.

 

Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company’s counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.

 

The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.

 

As a condition to the exercise of an Option or any other receipt of Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant’s own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel (satisfactory to the Company, in its sole discretion) is provided stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Committee may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.

 

To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Preferred Stock and/or Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

 

18.3 Indemnification.

 

Each person who is or shall have been a member of the Board, or a committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company’s approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person’s own behalf. This duty to indemnify shall not apply to the extent that (i) such loss, cost, liability or expense is a result of such person’s own willful misconduct or (ii) such indemnification is expressly prohibited by statute.

 

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The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company’s certificate of incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.

 

18.4 No Rights as a Stockholder.

 

Unless otherwise provided by the Committee or in the instrument evidencing the Award or in a written employment, services or other agreement, no Award, other than a Stock Award, shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.

 

18.5 Compliance with Laws and Regulations.

 

In interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an “incentive stock option” within the meaning of Section 422 of the Code.

 

Any Award granted pursuant to the Plan is intended to comply with the requirements of Section 409A of the Code, including any applicable regulations and guidance issued thereunder, and including transition guidance, to the extent Section 409A of the Code is applicable thereto, and the terms of the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with this intention to the extent the Committee deems necessary or advisable to comply with Section 409A of the Code and any official guidance issued thereunder. Any payment or distribution that is to be made under the Plan (or pursuant to an Award under the Plan) to a Participant who is a “specified employee” of the Company within the meaning of that term under Section 409A of the Code and as determined by the Committee, on account of a “separation from service” within the meaning of that term under Section 409A of the Code, may not be made before the date which is six months after the date of such “separation from service,” unless the payment or distribution is exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. Notwithstanding any other provision in the Plan, the Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A of the Code; provided, however, that the Committee makes no representations that Awards granted under the Plan shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to Awards granted under the Plan.

 

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18.6 Participants in Other Countries or Jurisdictions.

 

Without amending the Plan, the Committee may grant Awards to Eligible Persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified or tax-efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.

 

18.7 No Trust or Fund.

 

The Plan is intended to constitute an “unfunded” plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Preferred Stock and/or Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.

 

18.8 Successors.

 

All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.

 

18.9 Severability.

 

If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Committee’s determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.

 

18.10 Choice of Law and Venue.

 

The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Florida without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Florida.

 

18.11 Legal Requirements.

 

The granting of Awards and the issuance of shares of Stock under the Plan are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

SECTION 19. EFFECTIVE DATE

 

The effective date (the “Effective Date”) is the date on which the Plan is adopted by the Board. If the stockholders of the Company do not approve the Plan within 12 months after the Board’s adoption of the Plan, any Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options.

 

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APPENDIX A

DEFINITIONS

 

As used in the Plan,

 

Acquired Entity” means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines.

 

Award” means any Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit, Performance Share, Performance Unit, cash-based award or other incentive payable in cash or in shares of Preferred Stock and/or Common Stock as may be designated by the Committee from time to time.

 

Award Agreement” means the agreement accompanying each Can B Corp. Stock Option Grant Notice which provides the terms, conditions, and restrictions for each Award granted under this Plan.

 

Board” means the Board of Directors of the Company.

 

Cause,” unless otherwise defined in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means dishonesty, fraud, serious or willful misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited by law (except minor violations), in each case as determined by the Company’s chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Committee, whose determination shall be conclusive and binding.

 

Change in Control,” unless the Committee determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means the occurrence of any of the following events:

 

(i) An acquisition by any individual, entity or group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of either (1) the then outstanding shares of Common Stock of the Company (the “Outstanding Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the exercise, exchange or conversion of any Convertible Securities unless such securities were themselves acquired directly from the Company, (2) any acquisition by the Company; (3) any acquisition by John Hwang or any Entity that he controls, or (4) any acquisition by any Person pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of the definition of “Company Transaction”; or

 

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(ii) Within any period of 24 consecutive months, a change in the composition of the Board such that the individuals who, immediately prior to such period, constituted the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes hereof, that any individual who becomes a member of the Board during such period, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or

 

(iii) A Company Transaction; or

 

(iv) The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company, other than to an entity pursuant to a transaction which would comply with clauses (1), (2) and (3) of the definition of “Company Transaction”, assuming for this purpose that such transaction were a Company Transaction.

 

For purposes of the definition of “Change of Control” and “Company Transaction”, a series of transactions undertaken with a common purpose shall be treated as a single transaction that begins at the consummation of the first transaction in the series and ends at the consummation of the last transaction in the series.

 

Company” means Can B. Corp., a Florida corporation.

 

Company Transaction” means the consummation of (i) a reorganization, merger or consolidation of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company and its direct and indirect subsidiaries taken as a whole, except in each case a transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such transaction will beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such transaction (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets, either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such transaction, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (2) no Person (other than the Company) will beneficially own, directly or indirectly, more than twenty-five percent (25%) of, respectively, the outstanding shares of common stock of the Company resulting from such transaction or the combined voting power of the outstanding voting securities of such Company entitled to vote generally in the election of directors, except to the extent that such ownership existed with respect to the Company prior to the transaction, and (3) individuals who were members of the Board immediately prior to the approval by the stockholders of the Company of such transaction will constitute at least a majority of the members of the board of directors of the Company resulting from such transaction.

 

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Convertible Security” means any security convertible into or exchangeable for shares of Preferred Stock and/or Common Stock of the Company, or any option, warrant or other right to acquire shares of Preferred Stock and/or Common Stock of the Company.

 

Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

Committee” has the meaning set forth in Section 3.2.

 

Common Stock” means the common stock of the Company.

 

Compensation Committee” means the Compensation Committee (if any) of the Board.

 

Detrimental Activity” means any of the following: (i) unauthorized disclosure of any confidential or proprietary information of the Company or any of its Affiliates; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Company or any of its subsidiaries for Cause; (iii) the breach of any non-competition, non-solicitation, non-disparagement or other agreement containing restrictive covenants, with the Company or its Affiliates; (iv) fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion; or (v) any other conduct or act determined to be materially injurious, detrimental or prejudicial to any interest of the Company or any of its Affiliates, as determined by the Committee in its sole discretion.

 

Disability,” unless otherwise defined by the Committee for purposes of the Plan or in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Company’s chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Committee, whose determination shall be conclusive and binding.

 

Effective Date” has the meaning set forth in Section 19.

 

Eligible Person” means any person eligible to receive an Award as set forth in Section 5.

 

Entity” means any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act).

 

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Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

Fair Market Value” means the closing price for the Preferred Stock and/or Common Stock on any given date during regular trading, or if not trading on that date, such price on the last preceding date on which the Preferred Stock and/or Common Stock was traded, unless determined otherwise by the Committee using such methods or procedures as it may establish.

 

Grant Date” means the later of (a) the date on which the Committee completes the corporate action authorizing the grant of an Award or such later date specified by the Committee and (b) the date on which all conditions precedent to an Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.

 

Incentive Stock Option” means an Option granted with the intention that it qualify as an “incentive stock option” as that term is defined for purposes of Section 422 of the Code or any successor provision.

 

including”, “include”, “includes” and words of similar import shall be construed broadly as if followed by the phrase “without limitation”.

 

Nonqualified Stock Option” means an Option other than an Incentive Stock Option.

 

Option” means a right to purchase Preferred Stock and/or Common Stock granted under Section 7.

 

Option Expiration Date” means the last day of the maximum term of an Option.

 

Outstanding Company Common Stock” has the meaning set forth in the definition of “Change in Control.”

 

Outstanding Company Voting Securities” has the meaning set forth in the definition of “Change in Control.”

 

Parent Company” means a company or other entity which as a result of a Company Transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries.

 

Participant” means any Eligible Person to whom an Award is granted.

 

Performance Award” means an Award of Performance Shares or Performance Units granted under Section 11.

 

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Performance Share” means an Award of units denominated in shares of Preferred Stock and/or Common Stock granted under Section 11.1.

 

Performance Unit” means an Award of units denominated in cash or property other than shares of Preferred Stock and/or Common Stock granted under Section 11.2.

 

Plan” means this Can B Corp. 2020 Incentive Stock Option Plan.

 

Preferred Stock” means the Preferred Class C Series Stock of the Company.

 

‘‘Related Company” means any entity that is directly or indirectly controlled by, in control of or under common control with the Company.

 

Restricted Stock” means an Award of shares of Preferred Stock and/or Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Committee.

 

Retirement,” unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means “Retirement” as defined for purposes of the Plan by the Committee or the Company’s chief human resources officer or other person performing that function or, if not so defined, means Termination of Service on or after the date the Participant reaches “normal retirement age,” as that term is defined in Section 411(a)(8) of the Code.

 

Securities Act” means the Securities Act of 1933, as amended from time to time.

 

Stock,” means, as applicable, Common Stock and/or Preferred Stock of the Company.

 

Stock Appreciation Right” or “SAR” means a right granted under Section 9.1 to receive the excess of the Fair Market Value of a specified number of shares of Preferred Stock and/or Common Stock over the grant price.

 

Stock Award” means an Award of shares of Preferred Stock and/or Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Committee.

 

Stock Unit” means an Award denominated in units of Preferred Stock and/or Common Stock granted under Section 10.

 

Substitute Awards” means Awards granted or shares of Stock issued by the Company in substitution or exchange for awards previously granted by an Acquired Entity.

 

Successor Company” means the surviving company, the successor company or Parent Company, as applicable, in connection with a Company Transaction.

 

Termination of Service” means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Company’s chief human resources officer or other person performing that function or, with respect to directors and executive officers, by the Committee, whose determination shall be conclusive and binding. Transfer of a Participant’s employment or service relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Committee determines otherwise, a Termination of Service shall be deemed to occur if the Participant’s employment or service relationship is with an entity that has ceased to be a Related Company. A Participant’s change in status from an employee of the Company or a Related Company to a consultant, advisor or independent contractor of the Company or a Related Company or a change in status from a consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company, shall not be considered a Termination of Service.

 

Vesting Commencement Date” means the Grant Date or such other date selected by the Committee as the date from which an Award begins to vest.

 

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PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS

SUMMARY PAGE

 

Date of Board

Action

  Action  

Section/Effect

of Amendment

 

Date of Shareholder

Approval

             
July 28, 2020  

Initial Plan Adoption

      July 28, 2020

 

  26  

 

 

Exhibit 12.1

 

Austin Legal Group, APC
Lawyers
3990 Old Town Ave, Ste A-101
San Diego, CA 92110
 
Licensed in California & Hawaii & Arizona
Telephone
(619) 924-9600
 
  Facsimile Writer’s Email:
  (619) 881-0045 arden@austinlegalgroup.com

 

Can B̅ Corp.

960 South Broadway, Suite 120

Hicksville, NY 11801

 

September 11, 2020

 

Re: Form 1-A Offering Statement

 

Ladies and Gentlemen:

 

We have acted as counsel to Can B̅ Corp., a Florida corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission (the “SEC”) of a Regulation A Offering Statement on Form 1-A, as amended (the “Offering Statement”), relating to the sale by the Company of up to 10,000,000 shares of the Company’s common stock (“Company Shares”) at a price of $0.50 per share. This opinion is being delivered in accordance with the requirements of Part III of Form 1-A.

 

In rendering this opinion, we have examined (i) the Offering Statement and the exhibits thereto, (ii) certain resolutions of the board of directors of the Company, relating to the issuance and sale of the Shares, and (iii) such other records, instruments and documents as we have deemed advisable in order to render this opinion. In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. As to certain factual matters, we have relied upon resolutions and representations of the board of directors of the Company and have not sought independently to verify such matters.

 

Based on the foregoing, we are of the opinion that, when sold and issued against payment therefor as described in the Offering Statement, the Company Shares will be validly authorized, legally issued, fully paid and non-assessable.

 

Our opinion herein is expressed solely with respect to the Florida Statutes, as currently in effect, and we express no opinion as to whether the laws of any jurisdiction are applicable to the subject matter hereof. No opinion is being rendered hereby with respect to the truth, accuracy or completeness of the Offering Statement or any portion thereof.

 

The information set forth herein is as of the date hereof. We assume no obligation to supplement this opinion letter if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof. Our opinion is expressly limited to the matters set forth above, and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company, the Company Shares, the Offering Statement, or the circular included therein.

 

We hereby consent to the filing of this opinion as an exhibit to the Offering Statement. In giving such consent, we do not believe that we are “experts” within the meaning of such term as used in the Securities Act of 1933, as amended, or the rules and regulations of the SEC issued thereunder with respect to any part of the Offering Statement, including this opinion as an exhibit or otherwise.

 

Very truly yours,
   
/s/ Austin Legal Group, APC

 

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