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Can B Corp

Date Filed : Nov 08, 2021

S-11forms-1.htm

 

Asfiled with the Securities and Exchange Commission on November 8, 2021

 

RegistrationStatement No. 333-

 

 

 

UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

Washington,D.C. 20549

 

FORMS-1

REGISTRATIONSTATEMENT UNDER THE SECURITIES ACT OF 1933

 

CANB CORP.

(Nameof small business issuer in our charter)

 

Florida   0001509957   20-3624118

(State or other jurisdiction

of incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

IRS Employer

Identification Number

 

 

960 South Broadway, Suite 120

Hicksville, NY

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

 

Telephone:(516) 595-9544

 

MarcoAlfonsi, CEO

960South Broadway, Suite 120

Hicksville,NY 11801

Telephone:(516) 595-9544

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

 

Copiesto:

 

Arden Anderson, Esq.   Robert F. Charron, Esq.
Dodson Robinette PLLC   Ellenoff Grossman & Schole LLP
1431 E. McKinney St. Suite 130   1345 Avenue of the Americas  
Denton, TX 76209   New York, New York 10105
(469) 444 - 9999    (212) 370-1300

 

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

 

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

 

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

 

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

 

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

 

Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reportingcompany.

 

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

 

CALCULATIONOF REGISTRATION FEE

 

Title of Each Class of
Securities to be Registered
 

Proposed Maximum
Aggregate
Offering Price

(1)(2)(3)

   Amount of
Registration Fee
 
Units consisting of shares of Common Stock, Nil par value per share, and Warrants to purchase shares of Common Stock, Nil par value per share  $10,000,000.00   $927 
Common Stock included as part of the Units   Included with Units above   $- 
           
Warrants to purchase shares of Common Stock included as part of the Units(4)   Included with Units above   $- 
Representative Warrants to purchase Common Stock(4)(5)  $-   $- 
Shares of Common Stock issuable upon exercise of theWarrants(5)  $10,000,000.00   $927 
Shares of Common Stock issuable upon exercise of Representative Warrants  $-   $- 
TOTAL REGISTRATION FEE  $20,000,000.00   $1,854.00 

 

(1) Pursuant to Rule 416 under the Securities Act, the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended (“Securities Act”).
(3) Includes the price of additional securities that the underwriters have the option to purchase to cover over-allotments, if any.
(4) In accordance with Rule 457(g) under the Securities Act, because the shares of the registrant’s common stock underlying the Warrants and the Representative Warrants are registered hereby, no separate registration fee is required with respect to the warrants registered hereby.
(5) We have agreed to issue to the representative of the several underwriters, who we refer to as the representative, warrants to purchase the number of shares of common stock in the aggregate equal to seven percent (7.0%) of the shares of common stock to be issued and sold in this offering (including shares of common stock sold to cover over-allotments, if any). The warrants are exercisable for a price per share equal to 125% of the public offering price.

 

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

 

 

 

 

 

 

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

 

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION  DATED [*] __, 2021

 

 

 

CANB CORP.

Units

EachUnit Consisting of

OneShare of Common Stock (Nil par value)

And

OneWarrant to Purchase One Share of Common Stock

 

CanB Corp, a Florida corporation (the “Company,” “us,” “we,” or “our”) is offering units(“Unit(s)”) at a price of $       per Unit. Each Unit will consist of one (1) share of our common stock and a warrant to purchaseone share of our common stock for a term of five years at an exercise price of $____.

 

Ourcommon stock is currently quoted on the OTC Market’s OTCQB® Venture Market under the symbol “CANB;” however, wehave applied to have our common stock listed on the Nasdaq Capital Market under the same symbol, which listing is a condition to thisoffering. However, we cannot guarantee that we will be successful in listing our common stock on the Nasdaq Capital Market and will notcomplete this offering unless we are so listed. On __________, 2021, the last reported sale for our common stock on OTC Market’sOTCQB® Venture Market was $____ per share.

 

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

 

Neitherthe Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passedupon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

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

 

(1) Represents an underwriting discount and commissions equal to 7.0% per share (or $           per share), which is the underwriting discount we have agreed to pay to the underwriters.
(2) Does not include a management fee equal to 1.0% of the total gross proceeds from the offering and accountable expenses up to $150,000 payable to H.C. Wainwright & Co., LLC as representative of the underwriters. See “Underwriting” beginning on page 19 of this prospectus for additional information regarding underwriting compensation.

 

Inaddition to the underwriting discounts listed above and the management fee and accountable expense allowance described in the footnote,we have agreed to issue upon the closing of this offering to H.C Wainwright & Co., LLC., as representative of the underwriters, warrantsthat will expire on the 5th anniversary of the commencement of sales in this offering entitling the representative to purchase7.0% of the total number of shares of common stock sold in this offering. The registration statement of which this prospectus is a partalso covers the underwriters’ warrants and the shares of common stock issuable upon the exercise thereof. For additional informationregarding our arrangement with the underwriters, please see “Underwriting” beginning on page 19.

 

Wehave granted the representative an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional           shares of common stock and/or              warrants on the same terms asthe other shares and warrants being purchased by the underwriters from us.

 

H.C.Wainwright & Co.

 

ThisProspectus is dated [*], 2021

 

 

 

 

TABLEOF CONTENTS

 

SUMMARY INFORMATION   5
     
RISK FACTORS   8
     
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS   17
     
USE OF PROCEEDS   18
     
DETERMINATION OF OFFERING PRICE   18
     
DILUTION   18
     
UNDERWRITING   19
     
DESCRIPTION OF SECURITIES   22
     
DESCRIPTION OF BUSINESS   25
     
DESCRIPTION OF PROPERTY   30
     
LEGAL PROCEEDINGS   30
     
MARKET PRICE, DIVIDENDS, AND RELATED STOCKHOLDER MATTERS   31
     
FINANCIAL STATEMENTS   F-1
     
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   33
     
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS   36
     
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS   37
     
EXECUTIVE AND DIRECTOR COMPENSATION   41
     
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES   45
     
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION   47
     
INDEMNIFICATION OF OFFICERS AND DIRECTORS   47
     
RECENT SALES OF UNREGISTERED SECURITIES   47
     
EXHIBITS   51
     
UNDERTAKINGS   52

 

 

 

 

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

 

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

 

Youshould rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf. Neitherwe nor any underwriters have authorized any other person to provide you with any information different from that contained in this prospectusor information furnished by us upon request as described herein. The information contained in this prospectus is complete and accurateonly as of the date of this prospectus, regardless of the time of delivery of this prospectus or sale of our shares. This prospectuscontains summaries of certain other documents, which summaries contain all material terms of the relevant documents and are believedto be accurate, but reference is hereby made to the full text of the actual documents for complete information concerning the rightsand obligations of the parties thereto. Such information necessarily incorporates significant assumptions, as well as factual matters.All documents relating to this offering and related documents and agreements, if readily available to us, will be made available to aprospective investor or its representatives upon request.

 

4
 

 

SUMMARYINFORMATION

 

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

 

TheCompany

 

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

 

Aroundthe first quarter of 2017, the Company began to transition into the health and wellness industry, offering products that incorporatehemp and hemp derivatives. On May 15, 2017, WRAP changed its name to “Canbiola, Inc.” On March 6, 2020 CANB changed its nameagain to “Can B̅ Corp.” in order to segregate its corporate identity from its lead products branded under the Canbiola™brand.

 

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

 

CanB. Corp.’s shares of common stock are currently quoted on OTC Market’s OTCQB® Venture Market under the symbol “CANB.”The Company is applying to be traded on NASQAQ’s Capital Market, which listing is a condition to this offering. No assurance canbe given that our application will be approved.

 

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

 

GoingConcern

 

Theaccompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financialstatements, the Company incurred a net loss of $5,851,512 during the year ended December 31, 2020 and as of that date, had an accumulateddeficit of 30,521,025. Due to recurring losses from operations and the accumulated deficit the Company has stated that substantial doubtexists about the Company’s ability to continue as a going concern.

 

5
 

 

BusinessOverview

 

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

 

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

 

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

 

EmergingGrowth Company

 

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

 

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

 

TheSection 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accountingstandards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complyingwith 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.

 

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

 

Wehave elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) ofthe JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for publicand private companies until those standards apply to private companies. As a result of this election, our financial statements may notbe comparable to companies that comply with public company effective dates.

 

6
 

 

THEOFFERING

 

Securities Offered by Us                Units, with each Unit consisting of one share of common stock and one warrant to purchase one share of common stock (       shares if the underwriter exercises the over-allotment option in full).
     
Warrants to Purchase Common Stock Offered by Us   Warrants to purchase up to one share of our common stock, which will be exercisable during the period commencing on the date of their issuance and ending five years from such date at an exercise price per share of common stock equal to     % of the combined public offering price per share of common stock and warrant in this offering. This prospectus also relates to the offering of the shares of our common stock issuable upon exercise of such warrants.
     
Option to Purchase Additional Securities   We have granted to the underwriter a 30-day option to purchase up to additional shares of common stock and/or warrants at the public offering price, less underwriting discounts and commissions on the same terms as set forth in this prospectus.
     
Common Stock to be Outstanding Immediately After this Offering   __________ shares (        shares if the underwriter exercises the over-allotment option in full), assuming no exercise of the warrants.
     
Use of Proceeds   We estimate that the net proceeds to us from this offering, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $       million, assuming an initial public offering price of $         per share and warrant, the last sale price of our common stock as reported on the OTCQB on ___________, 2021. In general, the Company will use net proceeds from this offering for operations, new product development, acquisitions, rent, and working capital.
     
Risk Factors   An investment in our securities offered hereby is speculative and involves a high degree of risk. The Company and its business are subject to numerous risks, including, among others, those associated with development of the Company’s product candidates, technology development, the ability of the Company to obtain additional funds, and those associated with newer business enterprises. See the section titled “Risk Factors” elsewhere in this prospectus.
     
OTC Markets Venture Market Symbol   “CANB”
     
Proposed NASDAQ Capital Market Listing and Symbol  

We have applied for our common stock to be listed on The NASDAQ Capital Market under the symbol “CANB”. The successful listing of our common stock on the NASDAQ is a condition of this offering. However, there can be no assurance that NASDAQ will approve our listing application.

 

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

 

Asof October 22, 2021, there were approximately 27,963,604 shares of common stock issued and outstanding, 20 shares of Series A PreferredStock, 1,950 of Series D Preferred Stock and no shares of Series B Preferred Stock or Series C Convertible Preferred Stock issued andoutstanding.

 

7
 

 

RISKFACTORS

 

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

 

RisksRelated to this Offering and our Common Stock

 

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

 

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

 

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

 

Thestock 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-volumechanges. The trading price of our securities is likely to remain volatile and could fluctuate widely in response to many factors, includingbut not limited to the following, some of which are beyond our control:

 

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

 

8
 

 

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

 

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

 

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

 

Wecannot 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 ofour shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more whentrading activity in our shares is minimal, as compared to a seasoned issuer which has a large and steady volume of trading activity thatwill generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader ormore active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

 

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

 

Wedo not anticipate paying any cash dividends.

 

Wepresently 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 paymentof any dividends will be within the discretion of our Board of Directors (the “Board”). We presently intend to retain allearnings to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.

 

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

 

Broker-dealerpractices 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 disclosuredocument that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide thecustomer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in thetransaction, 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 determinationthat 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 thatbecomes subject to the penny stock rules.

 

Wemay need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to ourstockholders.

 

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

 

9
 

 

Ourprincipal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matterssubject to stockholder approval.

 

Certainof our executive officers, directors and large stockholders own a significant percentage of our outstanding capital stock. Our executiveofficers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially own shares representingmore than a majority of the eligible votes of the Company. Accordingly, our directors and executive officers have significant influenceover our affairs due to their substantial ownership coupled with their positions on our management team and have substantial voting powerto 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 concentrationof ownership may prevent or discourage unsolicited acquisition proposals or offers for our common stock that some of our stockholdersmay believe is in their best interest.

 

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

 

Asa public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in suchinternal control. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal controlover financial reporting and provide a management report on the internal control over financial reporting. If we have a material weaknessin our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statementsmay 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 longera smaller reporting company, our independent registered public accounting firm will be required to issue an attestation report on theeffectiveness of our internal control over financial reporting. Even if our management concludes that our internal control over financialreporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respectto our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.

 

Ifwe are unable to conclude that our internal control over financial reporting is effective, or when we are no longer a smaller reportingcompany, if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting becausewe 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 financialresults in the future. As of July 8, 2020, we have concluded that are internal controls are not sufficient. NTD: is there a more recentupdate?

 

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

 

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

 

10
 

 

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

 

Wecurrently intend to use the net proceeds from this offering for general corporate purposes, including working capital. The intended useof proceeds from this offering is more particularly described in the Section titled “Use of Proceeds,” however, such descriptionis not binding and the actual use of proceeds may differ from the description contained therein. Accordingly, our management will havesignificant discretion and flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our managementwith regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whetherthe 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.

 

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

 

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

 

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

 

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

 

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

 

Weare an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. The Section 107of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standardsand such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying withnew 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.

 

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

 

Wehave elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) ofthe JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for publicand private companies until those standards apply to private companies. As a result of this election, our financial statements may notbe comparable to companies that comply with public company effective dates.

 

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

 

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

 

11
 

 

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

 

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

 

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

 

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

 

RisksRelated to our Business

 

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

 

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

 

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

 

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

 

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

 

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

 

Ourhistorical financial statements have been prepared under the assumption that we will continue as a going concern. Our independent registeredpublic accounting firm has expressed substantial doubt in our ability to continue as a going concern. Our ability to continue as a goingconcern 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 concernmay adversely affect our ability to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue asa going concern, our stockholders may lose some or all of their investment in the Company.

 

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

 

Ourfuture 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 skilledpersonnel as needed, our business could suffer. Significant turnover in our senior management could significantly deplete our institutionalknowledge held by our existing senior management team. We depend on the skills and abilities of these key personnel in managing the productacquisition, marketing and sales aspects of our business, any part of which could be harmed by turnover in the future. We do not haveany key person insurance.

 

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

 

Thehealth and wellness and hemp derivative industries are highly competitive and subject to rapid change. The industry continues to expandand evolve as an increasing number of competitors and potential competitors enter the market. Many of these competitors and potentialcompetitors have substantially greater financial, technological, managerial and research and development resources and experience thanwe have. Some of these competitors and potential competitors have more experience than we have in the development of hemp products, includingvalidation procedures and regulatory matters. In addition, our products compete with product offerings from large and well-establishedcompanies that have greater marketing and sales experience and capabilities than we or our collaboration partners have. If we are unableto compete successfully, we may be unable to grow and sustain our revenue.

 

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

 

Weanticipate that we will make substantial capital expenditures for research and product development work and acquisitions. If we cannotraise sufficient capital, we may have limited ability to expend the capital necessary to undertake or complete research and product developmentwork and acquisitions. There can be no assurance that debt or equity financing will be available or sufficient to meet these requirementsor for other corporate purposes, or if debt or equity financing is available, that it will be on terms acceptable to us. Moreover, futureactivities may require us to alter our capitalization significantly. Our inability to access sufficient capital for our operations couldhave a material adverse effect on our financial condition, results of operations or prospects.

 

Currentglobal financial conditions have been characterized by increased volatility which could negatively impact our business, prospects, liquidityand financial condition.

 

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

 

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

 

Asour 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 onmembers of management. Our management may not be able to accommodate those added responsibilities, and our failure to do so could preventus from effectively managing future growth, if any, and successfully growing our company.

 

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

 

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

 

Weengage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effecton us.

 

Wehave entered, and may continue to enter, into transactions with related parties for financing, corporate, business development and operationalservices, as detailed herein. Such transactions may not have been entered into on an arm’s-length basis, and we may have achievedmore 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 providethese services, including by terminating agreements with us, we may be unable to obtain replacements for these services on the same termswithout disruption to our business. This could have a material effect on our business, results of operations and financial condition.

 

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

 

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

 

Ourbusiness is dependent upon our trademarks, trade secrets, copyrights and other intellectual property rights. There is a risk of certainvaluable trade secrets being exposed to potential infringers. The efforts we have taken to protect our proprietary rights may not besufficient 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 insufficientresources to counter adequately such infringements through negotiation or the use of legal remedies. It may not be practicable or costeffective for us to fully protect our intellectual property rights in some countries or jurisdictions. If we are unable to successfullyidentify and stop unauthorized use of our intellectual property, we could lose potential revenue and experience increased operationaland enforcement costs, which could adversely affect our financial condition, results of operations and business.

 

Ourpotential 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 investmentand could harm our business, financial condition, results of operations and cash flow.

 

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

 

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Ifwe are unable to develop and maintain our brand and reputation for our product offerings, our business and prospects could be materiallyharmed.

 

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

 

Wecould be subject to costly product liability claims related to our products.

 

Sincemost of our products are intended for human use, we face the risk that the use of our products may result in adverse side effects topeople. We face even greater risks upon further commercialization of our products. An individual may bring a product liability claimagainst us alleging that one of our products causes, or is claimed to have caused, an injury or is found to be unsuitable for consumeruse. 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.

 

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

 

Thelegality of certain products containing hemp derivatives is currently uncertain and the Company could be subject to enforcement actionby the FDA and certain state regulatory agencies.

 

In2018, the federal Farm Bill removed hemp as a Schedule I drug under the Controlled Substances Act and hemp may now be grown as a commoditycrop, with restrictions; however, the 2018 Farm Bill did not specifically legalize CBD. Until Congress promulgates rules and regulationsrelating to hemp derived cannabinoids, the “legal” status of such, or the processes the Company may have to implement (andat 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 advertisementof 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 suchenforcement, pay significant fines and ultimately could be forced to stop offering some or all of its CBD products, which would materially,negatively affect the Company’s business and shareholders’ investments. In addition, notwithstanding the intense pressureon FDA to fast-track the CBD approval process, it is likely that the approval process for use of CBD or other cannabinoids in foods,cosmetics or supplements will take years.

 

15
 

 

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

 

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

 

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

 

Delta-8and Delta-10 are cannabis compounds that can cause effects similar to regular delta-9 THC, the main compound in cannabis that gets usershigh. They can be extracted from either hemp or marijuana, but all of the Company’s delta-8 products are made with hemp containingno more than 0.3% THC. Because of the 2018 Farm Bill, hemp can be legally grown and used for extractions all over the United States.Notwithstanding the foregoing, the legality of hemp derived Delta-8 and Delta-10 is in a gray area and varies from state-to-state, withsome states allowing, some not addressing specifically, and others banning due to similarity to delta-9. The federal legality of Delta-8and Delta-10 is still unknown and the government has yet to take a definitive position. Should the Company become subject to enforcementaction by federal or state agencies, it could be forced to spend significant sums defending against such enforcement and ultimately couldbe forced to stop offering some or all of its Delta-8 and/or Delta-10 products and/or be subject to other civil or criminal sanctions,which would materially, negatively affect the Company’s business and shareholders’ investments.

 

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

 

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

 

Thefull impact of the COVID-19 outbreak continues to evolve as of the date of this Offering Circular. As such, it is uncertain as to thefull magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is activelymonitoring 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 effectsof the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the foreseeable future. We have experiencednegative impacts from COVID in the form of reduced sales, delayed operations, inability to effectuate certain business plans, supplychain issues and the like.

 

Ouracquisitions may expose us to unknown liabilities.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SPECIALINFORMATION REGARDING FORWARD LOOKING STATEMENTS

 

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

 

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

 

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

 

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INDUSTRYAND MARKET DATA

 

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

 

USEOF PROCEEDS

 

Weestimate that the net proceeds we will receive from this offering will be approximately $        million($       million if the underwriter exercises its over-allotment option in full), based on the assumed publicoffering price of $ per Unit, the last reported sale price of our common stock on the OTCQB on , 2021, after deducting estimated underwritingdiscounts and commissions and estimated offering expenses payable by us. If the warrants are exercised in full, the estimated net proceedswill increase to $        million (or $        million if underwriter exercisesits over-allotment option in full).

 

A$1.00 increase (decrease) in the assumed public offering price of $       per Unit, would increase (decrease)the net proceeds that we receive from this offering by $        million, assuming that the numberof Units, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissionsand estimated offering expenses payable by us. An increase or decrease of 100,000 in the numberof Units offered by us, as set forth on the cover page of this prospectus, would increase or decrease net proceeds to us from this offeringapproximately by $         million, assuming no change in the assumed public offering price perUnit and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

Weintend to use the net proceeds of this offering for acquisitions, paying down debt and general working capital.

 

Theallocation of the Use of Proceeds among the categories of anticipated expenditures represents management’s best estimates basedon 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 totaloffering, may cause the Company to modify the above-described allocation of proceeds. The Company’s use of proceeds may vary significantlyin the event any of the Company’s assumptions prove inaccurate. We reserve the right to change the allocation of net proceeds fromthe offering as unanticipated events or opportunities arise.

 

DETERMINATIONOF OFFERING PRICE

 

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

 

DILUTION

 

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

 

Ournet tangible book value as of September 30, 2021 was $4,847,053, or approximately $0.18 per share. Net tangible book value per sharerepresents our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding as of September30, 2021, or 27,312,808 shares of common stock.

 

Aftergiving further effect to the sale of           Units in this offering, at an assumed sale price of $       per Unit, thelast reported sale price of our common stock on the OTCQB Market on         , 2021, and after deducting estimated underwritingdiscounts and commissions and estimated offering expenses payable by us, our pro forma as-adjusted net tangible book value as of September30, 2021 would have been $       million, or $      per share. This represents an immediateincrease in net tangible book value of $       per share to existing stockholders andan immediate dilution of $          per share to new investors purchasing Units in this offering.

 

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Thefollowing table illustrates this calculation on a per share basis.

 

Public offering price per Unit  $ 
Net tangible book value per share as of September 30, 2021  $0.18 
Increase in net tangible book value per share attributable to new investors  $ 
Adjusted net tangible book value per share as of September 30, 2021  $ 
Dilution per share to new investors in the offering  $ 

 

Ifthe underwriter exercises its option to purchase additional shares in full, our as-adjusted net tangible book value as of September 30,2021 would be $       million,or $       per share, representing an increase in the net tangiblebook value to existing stockholders of $       per share and immediatedilution of $       per share to new investors purchasing sharesof our common stock in this offering.

 

Thefollowing does not take into account conversion of preferred stock or exercise of warrants.

 

UNDERWRITING

 

Weare offering the units described in this prospectus through the underwriters named below. H.C. Wainwright & Co., LLC (“Wainwright”or the “Representative” is acting as book-running manager of the offering. Subject to the terms and conditions of the underwritingagreement, the underwriters have agreed to purchase the number of our securities set forth opposite its name below. A copy of the underwritingagreement will be filed as an exhibit to the registration statement of which this prospectus is part.

 

Underwriters   Units
H.C. Wainwright & Co., LLC    
Total    

 

Wehave been advised by the underwriters that they propose to offer the Units directly to the public at the public offering price set forthon the cover page of this prospectus. Any securities sold by the underwriters to securities dealers will be sold at the public offeringprice less a selling concession not in excess of $ per share and $ per warrant.

 

Theunderwriting agreement provides that the underwriters’ obligation to purchase the securities we are offering is subject to conditionscontained in the underwriting agreement.

 

Noaction has been taken by us or the underwriters that would permit a public offering of the Units, or the shares of common stock and warrantsincluded in the Units in any jurisdiction outside the United States where action for that purpose is required. None of our securitiesincluded in this offering may be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisementsin connection with the offer and sales of any of the securities offering hereby be distributed or published in any jurisdiction exceptunder circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receivethis prospectus are advised to inform themselves about and to observe any restrictions relating to this offering of securities and thedistribution of this prospectus. This prospectus is neither an offer to sell nor a solicitation of any offer to buy the securities inany jurisdiction where that would not be permitted or legal.

 

Theunderwriters have advised us that they do not intend to confirm sales to any account over which they exercise discretionary authority.

 

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UnderwritingDiscount and Expenses

 

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

 

  

Per

Unit (1)

   Total  

Total with Full  

Exercise of  Overallotment

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

 

(1) The public offering price and underwriting discount corresponds to a public offering price per share of common stock of $        and (ii) a public offering price per warrant of $       .
(2) We have also agreed to pay the representative $50,000 for non-accountable expenses, pay a management fee equal to 1.0% of the gross proceeds, to reimburse the accountable expenses of the representative, including legal fees, in this offering, up to a maximum of $150,000, and $10,000 for clearing costs.
(3) We have granted a 30 day option to the representative to purchase up to        additional shares of common stock (up to 15% of the shares of common stock) and/or additional warrants exercisable for up to an additional        shares of common stock (up to 15% of the warrants sold in this offering) at the assumed public offering price per share of common stock and the assumed public offering price per warrant set forth above less the underwriting discounts and commissions solely to cover over-allotments, if any.

 

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

 

Thesecurities we are offering are being offered by the underwriters subject to certain conditions specified in the underwriting agreement.

 

Over-allotmentOption

 

Wehave granted to the underwriters an option exercisable not later than 30 days after the date of this prospectus to purchase up to a numberof additional shares of common stock and/or warrants equal to 15.0% of the number of shares of common stock sold in the primary offeringand/or 15.0% of the warrants sold in the primary offering at the public offering price per share of common stock and the public offeringprice per warrant set forth on the cover page hereto less the underwriting discounts and commissions. The underwriters may exercise theoption solely to cover overallotments, if any, made in connection with this offering. If any additional shares of common stock and/orwarrants are purchased, the underwriters will offer these shares of common stock and/or warrants on the same terms as those on whichthe other securities are being offered.

 

OtherRelationships

 

Uponcompletion of this offering, we have granted the representative a right of first refusal to act as exclusive bookrunner or placementagent in connection with any subsequent public or private offering of equity securities or other capital markets financing by us. Thisright of first refusal extends for 18 months from the closing date of this offering. The terms of any such engagement of the representativewill be determined by separate agreement. The representative and its respective affiliates may in the future engage in investment bankingand other commercial dealings in the ordinary course of business with us or our affiliates. The representative may in the future receivecustomary fees and commissions for these transactions.

 

NASDAQListing

 

Ourshares of common stock are quoted on the OTCQB under the symbol “CANB.” We have applied to list our common stock on The NASDAQCapital Market under the symbol “CANB.” We will not consummate this offering unless our common stock is approved for listingon The NASDAQ Capital Market. There is no established public trading market for the warrants, and we do not expect a market to develop.In addition, we do not intend to apply to list the warrants on any national securities exchange or other nationally recognized tradingsystem. Without an active trading market, the liquidity of the warrants will be limited.

 

Determinationof Offering Price

 

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

 

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

 

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

 

Lock-upAgreements

 

Ourofficers, directors and each of their respective affiliates and associated partners have agreed with the underwriters to be subject toa lock-up period of days following the date of this prospectus. This means that, during the applicable lock-up period, such persons maynot offer for sale, contract to sell, sell, distribute, grant any option, right or warrant to purchase, pledge, hypothecate or otherwisedispose of, directly or indirectly, any shares of our common stock or any securities convertible into, or exercisable or exchangeablefor, shares of our common stock. Certain limited transfers are permitted during the lock-up period if the transferee agrees to theselock-up restrictions. We have also agreed, in the underwriting agreement, to similar lock-up restrictions on the issuance and sale ofour securities for days following the closing of this offering, although we will be permitted to issue stock options or stock awardsto directors, officers and employees under our existing plans. The representative may, in its sole discretion and without notice, waivethe terms of any of these lock-up agreements.

 

TransferAgent and Registrar

 

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

 

PriceStabilization, Short Positions and Penalty Bids

 

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

 

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

 

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Thesestabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids, to the extent applicable, mayhave the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market priceof the common stock. As a result, the price of our securities may be higher than the price that might otherwise exist in the open market.Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactionsdescribed above may have on the price of our common stock. In addition, neither we nor the underwriters make any representations thatthe underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued withoutnotice.

 

Representative’sWarrants

 

Wewill issue to Wainwright or its designees warrants to purchase an aggregate number of shares of our common stock equal to 7.0% of thenumber of shares of common stock issued in this offering, at an exercise price per share equal to 125% of the public offering price (the“Representative’s Warrants”). The Representative’s Warrants will be exercisable, in whole or in part, upon issuanceand will expire on the fifth anniversary of the commencement of sales in this offering in accordance with FINRA Rule 5110(g)(8)(A).

 

Indemnification

 

Wehave agreed to indemnify the underwriters against certain liabilities, including certain liabilities arising under the Securities Actor to contribute to payments that the underwriters may be required to make for these liabilities.

 

DESCRIPTIONOF SECURITIES

 

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

 

CommonStock

 

Weare authorized to issue 1,500,000,000 shares of common stock, Nil par value per share. As of October 22, 2021, there were approximately27,963,604 shares of common stock issued and outstanding, held by approximately 219 shareholders of record.

 

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

 

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

 

Holdersof 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 rateably in the net assetslegally available for distribution to shareholders after the payment of all of our debts and other liabilities. There are not any provisionsin our Articles of Incorporation or our Bylaws that would prevent or delay change in our control.

 

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PreferredStock

 

Weare authorized to issue 5,000,000 shares of preferred stock, including 20 shares of Series A Preferred Stock, 500,000 shares of SeriesB Preferred Stock, 2,000 shares of Series C Convertible Preferred Stock, and 4,000 shares of Series D Preferred Stock. As of October22, 2021, there were 20 shares of Series A Preferred Stock, 1,950 of Series D Preferred Stock and no shares of Series B Preferred Stockor Series C Convertible Preferred Stock issued and outstanding.

 

Onor around July 28, 2020, shareholders holding a majority of the Company’s voting stock approved an amendment to the certificateof designation for the Series A Preferred Shares. Once the amendment is filed, the Series A Preferred Shares will have the followingrights and privileges: All Series A Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to liquidationpreferences and shall rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificateof 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 liquidationpreference on a per-share amount equal to the per-share value of such Series A Shares on the applicable issuance date, as recorded inthe Company’s financial records, or (ii) to participate pari passu with the Common Stock on an as-converted basis. The holdersof Series A preferred Shares shall be entitled to receive such dividends paid and distributions made to the holders of shares of commonstock to the same extent as if such holders had converted each preferred share held by each of them into shares of common stock. Eachshare of Series A Preferred Stock is entitled to 66,667 votes and may be converted into 33,334 shares of common stock. Par value forthe Series A Preferred Shares will be $0.001.

 

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

 

SeriesC Convertible Preferred Stock ranks senior to all shares of Common Stock of the Company with respect to the preferences as to distributionsof dividends and ranks pari passu to all current and future series of preferred stock, unless otherwise stated in the certificateof designation for such preferred stock. The holders of Series C preferred Shares shall be entitled to receive such dividends paid anddistributions made to the holders of shares of common stock to the same extent as if such holders had converted each preferred shareheld 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 CConvertible Preferred Stock is entitled to 25,000 votes and may be converted into 25,000 shares of Common Stock. No shares of SeriesC Preferred Stock are outstanding, but it is intended that such stock will be issued under the Company’s incentive Plan and otherwiseas compensation for certain service providers, including officers and directors of the Company.

 

AllSeries D Preferred Stock shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shallrank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designationfor such preferred stock. Each Series D Preferred share shall have voting rights equal to 10,000 shares of Common Stock, adjustable atany recapitalization of the Company’s stock. In the event of a liquidation event, whether voluntary or involuntary, each holdershall have a liquidation preference on a per-share amount equal to the par value of such holder’s Series D Preferred shares. Theholders shall not be entitled to receive distributions made or dividends paid to the Company’s other stockholders. Except as otherwiserequired by law, for as long as any Series D Preferred shares remain outstanding, the Company shall have the option to redeem any outstandingshare of Series D Preferred shares at any time for a purchase price of par value per share of Series D Preferred shares (“Priceper Share”). Should the Company desire to purchase Series D Preferred shares, the Company shall provide the Holder with writtennotice and a check or cash in an amount equal to the number of shares of Series D Preferred shares being purchased multiplied by thePrice per Share. The shares of Series D Preferred shares so purchased shall be deemed automatically cancelled and the Holder shall returnthe certificates for such share to the Corporation. Each share of Series D Preferred Stock has a par value of $0.001. On or around March27, 2021, the Company issued Mr. Alfonsi, Mr. Ferro, and Mr. Teeple Series D Preferred Stock in the amount of 600 shares each and toCOO Philip Scala in the amount of 150 shares, collectively representing 19,500,000 voting shares.

 

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WarrantsOffered in this Offering

 

Thefollowing summary of certain terms and provisions of the warrants to purchase common stock that are being offered hereby is not completeand is subject to, and qualified in its entirety by, the provisions of the warrants, the form of which is filed as an exhibit to theregistration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisionsof the form of warrant for a complete description of the terms and conditions of the warrants. The warrants will be issued in certificatedform.

 

Durationand Exercise Price

 

Thewarrants are exercisable from and after the date of their issuance and expire on the fifth anniversary of such date, at an exercise priceper share of common stock equal to of the combined public offering price per Unit in this offering. The holder of a warrant willnot be deemed a holder of our underlying common stock until the warrant is exercised. No fractional shares of common stock will be issuedin connection with the exercise of warrant. Instead, for any such fractional share that would have otherwise been issued upon exerciseof a warrant, we will round such fraction down to the next whole share.

 

Exercisability

 

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

 

CashlessExercise

 

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

 

Transferability

 

Subjectto applicable laws, a warrant may be transferred at the option of the holder upon surrender of the warrant to us together with the appropriateinstruments of transfer.

 

FractionalShares

 

Nofractional shares of common stock will be issued upon the exercise of warrant. Rather, the number of shares of common stock to be issuedwill be rounded to the nearest whole number.

 

TradingMarket

 

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

 

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Rightas a Stockholder

 

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

 

FundamentalTransaction

 

Inthe event of a fundamental transaction, as described in the warrants and generally including any reorganization, recapitalization orreclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets,our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any personor group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrantswill be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holderswould have received had they exercised the warrants immediately prior to such fundamental transaction.

 

INTERESTOF NAMED EXPERTS

 

Thefinancial statements of the Company for fiscal years ending December 31, 2019 and 2020 have been included herein in reliance upon thereports of BMKR, LLP and BF Borger CPA PC, certified public accountants upon the authority of said firms as experts in accounting andauditing.

 

DESCRIPTIONOF BUSINESS

 

Organization

 

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

 

Aroundthe first quarter of 2017, the Company began to transition into the hemp CBD industry and now operates three distinct: retail sales (Canbiola,Nu Wellness, Seven Chakras, and Pure Leaf Oil), R&D and manufacturing (Pure Health Products and Botanical Biotech), and durable medicaldevices (Duramed). The Company also has a cultivation division (Green Grow Farms, Inc.) which is currently non-operational. On May 15,2017, WRAP changed its name to Canbiola, Inc. to reflect its transition. On March 6, 2020 CANB changed its name to “Can B̅Corp.” in order to segregate its corporate identity from its lead products branded under the Canbiola™ brand.

 

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

 

BusinessSegments

 

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

 

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

 

FDADISCLAIMER

 

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

 

  I- Pure Health Products

 

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

 

InDecember, 2018, the Company acquired 100% of the membership interests in Pure Health Products, with which it had had and has an exclusiveproduction agreement, pursuant to an Acquisition Agreement (“PHP Acquisition Agreement”). In January, 2019, PHP acquiredcertain assets from Seven Chakras, LLC (“Seven Chakras”), a former competitor, which assets included the rights and titleto (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 includingbut not limited to raw materials, equipment, packaging and labeling materials, mailing lists, and marketing materials.

 

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

 

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

 

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

 

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

 

  II- Hemp Operating Division

 

TheCompany’s hemp operating division performs R&D for the Company including for CBN, CBG, delta-8 and delta-10. It also producesindustrial hemp and process hemp biomass, isolate and isomers.

 

AroundMarch 17, 2021, the Company acquired assets through its newly-formed, wholly-owned subsidiary, Botanical Biotech, LLC, a Nevada limitedliability company (“BB” or “Botanical Biotech”). Such assets include certain materials and manufacturing equipmentand marketing or promotional designs, brochures, advertisements, concepts, literature, books, media rights, rights against any otherperson or entity in respect of any of the foregoing and all other promotional properties, in each case primarily used, developed or acquiredby the Sellers for use in connection with the ownership and operation of the BB Assets. BB has also engaged certain sellers of the BBassets and lab technicians in order to perform research and development and manufacturing of CBG and CBN products to be sold to thirdparties for incorporation into their products. The Company does not at this time intend to develop or market its own products containingCBG or CBN. The Company has also begun synthesizing delta-8 from hemp in its laboratory in Miami, Florida. Delta-8 is a cannabis compoundthat can cause effects similar to delta-9 THC, the main compound in cannabis that gets users high. It can be extracted from either hempor marijuana, though all of the Company’s delta-8 products are made with hemp containing no more than 0.3% THC.

 

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

 

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

 

  III- Durable Medical Equipment

 

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

 

InNovember 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”). Pursuantto the Sam MOU, the Manufacturers granted Duramed the exclusive right to distribute sam® Pro 2.0 (SA271) and sam® Gel CouplingPatches (UB-14-72) within the United States for the Personal Injury Protection/No Fault Market during the term of the Sam MOU. Duramedhas agreed to purchase monthly minimums from the Manufacturers at a price per Unit of $2,447. The exclusivity of the Distribution Licensegranted to Duramed under the Sam MOU was dependent upon meeting the monthly minimum, which did not happen. In addition, Duramed was grantedthe right to distribute sam® Gel Capture Patches (UB-14-24). Duramed will get rebates of 2%-3% based on the volume of products soldby it. We did not meet the monthly minimums as contemplated by the Sam MOU and as such we are currently distributing the aforementionedproducts on an at-will, non-exclusive basis.

 

OnMay 29, 2019, the Company created Duramed MI to execute the same business strategy into the no-fault insurance market in New Jersey thatit had developed in New York; however, Duramed MI is not currently operating in NJ and is in the process of moving its operations toMichigan, which have not begun yet.

 

  IV- Green Grow Farms

 

OnJuly 11, 2019, the Company entered into a Joint Venture Agreement (the “JV Agreement”) with NY – SHI, LLC, a New Yorklimited liability company (“NY – SHI”), EWSD I LLC dba SHI Farms, a Delaware limited liability company (“SHIFarms”), Pivt Labs, LLC, a Nevada limited liability company fka NY Hemp Depot LLC (“Pivt”), a wholly-owned subsidiaryof CANB. Pursuant to the JV Agreement, NY – SHI and Pivt entered into a joint venture for the purpose of jointly implementing abusiness model to aggregate and purchase fully-grown, harvested industrial hemp from third-party farmers in the State of New York. TheJoint Venture was not formally consummated and has been disbanded, with the parties executing a settlement agreement. Pursuant to thesettlement agreement, NY – Shi agreed to return all shares issued to it under the JV Agreement (which return has yet to be processed)but was permitted to keep the cash payment of $500,000.00 made to it by the Company. Before the end of the joint venture NY – SHI’scultivating license was amended to add Pivt. Pivt currently has no operations but the Company does intend to use it for hemp cultivationin the future, if and when it becomes economically viable to

 

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OnDecember 4, 2019, the Company entered into a Stock Purchase Agreement (the “GGFI Agreement” with Iconic Brands, Inc., a Nevadacorporation (“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 Companyreceived 51% equity interest in Green Grow (the “GG Shares”) in exchange for an aggregate of 125,000 (post-split) sharesof the Company’s common stock (the “Purchase Shares”). On June 30, 2020 (the “Valuation Date”), a valuationof the Purchase Shares was to be (and was) performed for the purpose of determining whether the Market Price Per Purchase Share (as definedin the GGFI Agreement) on the Valuation Date was less than $1,000,000. In the event that the aggregate Market Price Per Purchase Shareon the Valuation Date was less than $1,000,000, the Company was to issue to the ICNB such a number of additional shares (“AdditionalPurchase Shares”) so that the aggregate value of aggregate shares issued to ICNB for the purchase of the GG Shares (taking intoaccount the Purchase Shares and the Additional Purchase Shares) equaled $1,000,000. For purposes of the valuation, Market Price Per PurchaseShare 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 wasdetermined that ICNB was owed an additional 418,714 shares, which it was issued.

 

OnMarch 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 GGFIAgreement, as amended. Following the closing of the GGFI Agreement, the Company discovered that certain assets of GGFI were valued atless than the amount GGFI had previously represented. In light of the foregoing, pursuant to the Modification Agreement, NYFG agreedto 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 partyto the Modification Agreement also agreed to release the other parties thereto from all claims relating to the GGFI Agreement and thetransactions 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 1,000,000ICNB shares.

 

ThroughGGFI, the Company grew its own hemp in New York and partnered with third party growers in other states whereby GGFI provided the farmerswith seed and training and splits profits with the farmers. GGFI was to supply the Company with all hemp needed for the Company to produceits CBD products, which hemp would be processed by a third party and shipped to the Company’s production facility in Lacey, WA.Notwithstanding the foregoing, currently, it is less expensive to buy CBD isolate than to produce the isolate from hemp grown by theCompany. Accordingly, the Company has stopped its Green Grow operations in favor of buying raw products from third parties. If and whenit makes economic sense to grow its own hemp again, the Company will resume Green Grow operations.

 

  V- Imbibe Wellness Solutions

 

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

 

CompetitiveConditions

 

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

 

28
 

 

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

 

IntellectualProperty

 

Wewon the following patents for our WRAPmail technology: US Patent no. 8572275 issued on October 29, 2013. This patent expires in October2022. On July 20, 2015, WRAPmail filed for a new patent under the title Method, System and Software for Dynamically Extracting Contentfor integration with Instant Messages, which application is still pending and not being actively pursued by the Company. The above patentsrelate to the document management and email marketing divisions which are not presently being developed. Due to diminishing revenue fromthis division, the Company accountant determined to reduce the fair value of these patents to $0.

 

TheCompany employs, through its Pure Health Product LLC division, two full time product researchers and developers and technology expertswho, on a daily basis, set the quality standards and new product development status and time-line agendas under the direct supervisionof the Company’s management team. All finished products are stored for time- quality measurement, and EVERY batch of every productis sent to an independent third-party lab for a Certificate of Analysis (“COA”) of the finished products. These COA’sare both listed on our web site and available via the QR code on every retail package.

 

TheCompany has not registered any of its trademarks with the USPTO or any state agency.

 

Employees

 

TheCompany, directly or through its subsidiaries, currently has 23 employees, 21 of which are full-time employees and 2 of which are part-time.

 

Reportsto Security Holders

 

Ourcommon stock is registered under the Exchange Act and we are required to file current, quarterly and annual reports and other informationwith 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 filingsare 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 statementsand other information regarding issuers that file electronically with the SEC. This information may be found at www.sec.gov and postedon our website at www.canbcorp.com.

 

GovernmentRegulation

 

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

 

29
 

 

Weare also subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing theInternet 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, broadbandresidential Internet access and the characteristics and quality of services. It is not clear how existing laws governing issues suchas property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet and e-commerce. Unfavorable resolutionof these issues may harm our business and results of operations. CBD sales are additionally state regulated for shipping and the Companymaintains a current list.

 

TransferAgent

 

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

 

DESCRIPTIONOF PROPERTY

 

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

 

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

 

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

 

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

 

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

 

LEGALPROCEEDINGS

 

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

 

30
 

 

Thefirst cause of action alleges that the Company breached Securities Purchase Agreements with the Investors by failing to assist the Investorsin getting opinion letters to remove the restrictive legends from their shares, even though the Company made introductions and requeststo the Company’s counsel, provided supporting documents for the Investor’s shares, and ultimately the opinion letters couldnot be rendered because the Investors failed to submit required documentation to counsel.

 

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

 

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

 

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

 

Wehave been informed that a vendor of the Company has or intends to initiate action against the Company in Florida for monies allegedlyowed. We do not believe we owe such vendor any amount and have not been served with suit.

 

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

 

MARKETPRICE, DIVIDENDS, AND RELATED STOCKHOLDER MATTERS

 

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

 

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

 

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

 

 

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

 

2019 (Pre- 300:1 Reverse Split adjusted for post-split numbers)
   High   Low 
First Quarter  $29.40   $11.93 
Second Quarter  $18.45   $11.10 
Third Quarter  $13.17   $12.90 
Fourth Quarter  $6.90   $5.94 

 

Thelast reported sale price of the Company’s common stock as of October 22, 2021 was $0.60 per share.

 

31
 

 

RecordHolders

 

Asof October 22, 2021, there were 27,963,604 shares of common stock issued and outstanding to approximately 219 shareholders of record.

 

Dividends

 

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

 

Wedo not anticipate paying any cash dividends in the foreseeable future. Except for its Series B Preferred Stock, of which there are noneissued and outstanding*, the payment of dividends is within the discretion of our Board of Directors and will depend on our earnings,capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit our ability topay dividends on our common stock other than those generally imposed by applicable state law.

 

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

 

SecuritiesAuthorized for Issuance under Equity Compensation Plans

 

OnJuly 28, 2020, the Company adopted an Incentive Stock Option Plan (“ISO”). The purpose of this Can B Corp. 2020 ISO (the“Plan”) is to attract, retain, and motivate employees, officers, directors, consultants, agents, advisors and independentcontractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Companyand to align their interests and efforts to the long-term interests of the Company’s stockholders. The Plan is administered bythe Compensation Committee or, in the Board’s sole discretion, the Board. The Compensation Committee shall be composed of two ormore directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3(b)(3) promulgated under the ExchangeAct, or any successor definition adopted by the Securities and Exchange Commission. As used in this Plan, the term “CompensationCommittee” shall be construed as if followed by the words “(if any);” and nothing in this Plan requires the Board tohave a Compensation Committee. Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicablelaw, the Committee shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisionsof 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 EligiblePersons 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 eachParticipant 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 circumstancesAwards may be settled in cash, shares of Preferred Stock and/or Common Stock or other property or canceled or suspended; (vii) determinewhether, to what extent and under what circumstances cash, shares of Stock, other property and other amounts payable with respect toan Award shall be deferred either automatically or at the election of the Participant; (viii) interpret and administer the Plan and anyinstrument evidencing an Award, notice or agreement executed or entered into under the Plan; (ix) establish such rules and regulationsas it shall deem appropriate for the proper administration of the Plan; (x) delegate ministerial duties to such of the Company’semployees as it so determines; and (xi) make any other determination and take any other action that the Committee deems necessary ordesirable for administration of the Plan. Subject to adjustment from time to time, a maximum of two thousand (2,000) shares of ClassC Preferred Stock and ten million (10,000,000) shares of Common Stock shall be available for issuance under the Plan. Shares issued underthe Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.The Committee shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grantsor rights earned or due under other compensation plans or arrangements of the Company. Subject to earlier termination in accordance withthe terms of the Plan and the instrument evidencing the Option, the maximum term of an Option shall be ten years from the Grant Date.An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Committee from time to timeselects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered tothe Company or any Related Company that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raisingtransaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.

 

EquityCompensation Plan Information

 

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

 

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

 

32
 

 

FINANCIAL STATEMENTSAND NOTES

 

CANB̅ CORP. AND SUBSIDIARY

 

Indexto Financial Statements

 

    Pages
     
Financial Statements    
     
Report of Independent Registered Public Accounting Firm for Years Ended December 31, 2020 and 2019   F-2
     
Consolidated Balance Sheets for Years Ended December 31, 2020 and 2019   F-3
     
Consolidated Statements of Operations and Comprehensive Loss for Years Ended December 31, 2020 and 2019   F-4
     
Consolidated Statements of Stockholders’ Equity for Years Ended December 31, 2020 and 2019   F-5
     
Consolidated Statements of Cash Flows for Years Ended December 31, 2020 and 2019   F-6
     
Notes to Consolidated Financial Statements for Years Ended December 31, 2020 and 2019   F-7
     
Consolidated Balance Sheets for Quarters Ended September 30, 2021 and 2020   F-26
     
Consolidated Statements of Operations and Comprehensive Loss for Quarters Ended September 30, 2021 and 2020   F-27
     
Consolidated Statements of Stockholders’ Equity for Quarters Ended September 30, 2021 and 2020   F-28
     
Consolidated Statements of Cash Flows for Quarters Ended September 30, 2021 and 2020   F-29
     
Notes to Consolidated Financial Statements for Quarters Ended September 30, 2021 and 2020   F-30

 

F-1
 

 

 

 

 

 

BMKR, LLP

   
Certified Public Accountants  
  T 631-293-5000
1200 Veterans Memorial Hwy., Suite 350 F 631-234-4272
Hauppauge, New York 11788 www.bmkr.com

 

 

 

Thomas G. Kober CPA Brian Mayhew, CPA Charles W. Blanchfield CPA (Retired)
Alfred M. Rizzo CPA Moises Sa, CPA Bruce A. Meyer CPA (Retired)
Joseph Mortimer CPA Matthew Papadopoulos, CPA  

 

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Tothe Board of Directors and

Stockholdersof Can B Corp.

 

Opinionon the Financial Statements

 

Wehave audited the accompanying consolidated balance sheets of Can B Corp. (the Company”)as of December 31, 2020 and 2019, and the related consolidated statements of operations,stockholders’ equity, and cash flowsfor each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financialstatements). In our opinion, the financialstatements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, andthe results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformitywith accounting principles generally accepted in the United States of America.

 

Basisfor Opinion

 

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

 

Weconducted our audits in accordance with the standards of the PCAOB. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit ofits internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal controlover financial reporting, but not for the purpose of expressing an opinion on theeffectiveness of the Companys internal control over financial reporting.Accordingly, we express no such opinion.

 

Ouraudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due toerror 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 evaluatingthe overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

GoingConcern

 

Theaccompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in thefinancial statements, the Company incurred a net loss of $5,851,512 during the year ended December 31, 2020 and as of that date,had an accumulated deficit of 30,521,025. Due to recurring losses from operations and the accumulated deficit the Company hasstated that substantial doubt exists about the Company’s ability to continue as a going concern.

 

Management’sevaluation of the events and conditions and management’s plans regarding these matters are discussed in note 2. The financialstatements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modifiedwith respect to that matter.

 

CriticalAudit Matters

 

Criticalaudit matters arising from the current period audit of the financial statements that were communicated or required to be communicatedto the audit committee and that (1) relate to accounts or disclosure that are material to the financial statements and (2) involveespecially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any wayour opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit maters below, providingseparate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

Valuationof common stock and stock options issued for compensation or services

 

Asdiscussed in note 10 to the financial statement, the Company issued $1,988,256 of common stock in 2020 to compensate employees,pay for services or acquire assets. The value of the shares issued is subjective because a discount is applied due to a lack ofmarketability. The stock issued is restricted for six months due to rule 144.The value of the stock issued is pervasive throughoutthe financial statement for both 2020 and 2019.

 

Weidentified the evaluation of the sufficiency of audit evidence over the value of the common stock and options issued as a criticalaudit matter.

 

Theprocedures we performed to address this critical audit matter included evaluating the appropriateness of the methodology usedto compute the discount and verifying the data inputs.

 

Accountingfor and valuation of asset purchases

 

TheCompany has made acquisitions and or entered into agreements to acquire intellectual property, hemp processing agreements or otherbusiness arrangements that require complex judgements as to the proper accounting principle, valuation and the appropriate amortizationperiod. The Company has treated these transactions as asset acquisitions, see note 7.

 

Weidentified the assessment of the asset acquisition value and whether the transaction should be accounted for as an asset or businessacquisition as a critical audit matter.

 

Theprocedures performed to address the mater included; obtaining and reviewing to legal documents for each transaction, examiningthe support for the consideration paid to ensure proper valuation and evaluating estimated useful life. We also evaluated if theassets acquired constitute a business as defined by generally accepted accounting principles.

 

Revenuerecognition for durable medical equipment

 

Therevenue recognition related to durable medical equipment is particularly challenging because of the slow pace of collections andthe challenging nature of medical billing and state regulation. In addition, the fact that the Duramed subsidiary is a new businesswith a new product operating in the current corona virus adds to the challenging nature.

 

Weidentified the Company’s revenue recognition policy for durable medical equipment and the sufficiency of audit evidenceas a critical accounting matter.

 

Theprocedures performed to address the matter included; testing the billing during the year, confirming the billing during the yearand accounts receivable at year end with the third party biller, examining subsequent cash collections and inquiry of the Company’soutside attorney that is a specialist in this area.

 

Convertibledebt

 

TheCompany issued $ 2,800,000 of convertible debt during the year. The accounting for convertible debt is complex due to the variousaccounting treatments possible based on the terms of the agreement.

 

Weidentified the Company’s accounting for convertible debt and the valuation of related warrants as a critical audit matter.

 

Theprocedures performed to address this matter included: reviewing the agreements, confirming significant terms with the lender andassessing the valuation method used to determine the value of the warrants, recalculating those values.

 

/s/BMKR, LLP

BMKR,LLP

 

Wehave served as the Company’s auditor since 2014. Hauppauge,NY 11788

April12, 2021

 

MemberAmerican Institute of Certified Public Accountants

MemberPublic Company Accounting Oversight Board

 

F-2
 

 

CanB̅ Corp. and Subsidiary

ConsolidatedBalance Sheets

 

   2020  

2019

(Restated)

 
   Year Ended December 31, 
   2020  

2019

(Restated)

 
Assets          
Current assets:          
Cash and cash equivalents  $457,798   $46,540 
Accounts receivable, less allowance for doubtful
accounts of $485,848 and $0, respectively
   2,003,064    1,251,609 
Inventory   344,954    784,497 
Note Receivable   2,898    24,268 
Operating lease right-of-use-asset - current   35,790     
Prepaid expenses - current   1,209,126    1,279,901 
Total current assets   4,017,840    3,386,815 
           
Property and equipment, at cost less accumulated depreciation of $239,650 and $116,555, respectively   994,979    1,075,242 
           
Other assets:          
Deposit - noncurrent   21,287    21,287 
Prepaid expenses - noncurrent   7,405    1,179,929 
Other receivable – noncurrent   12,910    58,206 
Intangible assets, net of accumulated amortization of $236,431 and $202,521, respectively   523,009    1,339,907 
Goodwill   55,849    55,849 
Operating lease right-of-use-asset - noncurrent   22,384     
Other noncurrent assets   20,315     
Right-of-Use Asset, net of amortization of $45,086 and $6,280, respectively   58,174    96,980 
Total other assets   678,634    2,752,158 
           
Total assets  $5,691,453   $7,214,215 
           
Liabilities and Stockholders’ Deficiency          
Current liabilities:          
Accounts payable  $153,640   $226,467 
Accrued expenses   200,495     
Due to related party   -     
Accrued officers’ compensation   147,133    144,363 
Other accrued expenses payable   53,362    61,557 
Notes and loans payable   1,827,531    35,000 
Current portion of lease liability   43,506    38,281 
Total current liabilities   2,225,172    505,668 
           
Long-term liabilities          
Non-current portion of lease liability   15,492    58,998 
Notes and loans payable   194,940    - 
Total long-term liabilities   210,432    58,998 
           
Total liabilities   2,435,604    564,666 
           
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, respectively   5,539,174    5,539,174 
Series B Preferred stock, $0.001 par value: authorized 500,000 shares, issued and outstanding 0, respectively   -    - 
Preferred Stock Value          
Common stock, no par value; authorized 1,500,000,000 shares, issued and outstanding 5,544,590 and 2,680,937 shares, respectively   26,111,978    24,323,712 
Treasury stock   (572,678)   - 
Additional Paid-in capital   872,976    872,976 
Additional Paid-in capital – Stock Options (Note 11)   962,323    583,200 
Additional Paid-in capital – Warrants   728,100    - 
Accumulated deficit   (30,386,024)   (24,669,513)
Total stockholders’ equity   3,255,849    6,649,549 
           
Total liabilities and stockholders’ equity  $5,691,453   $7,214,215 

 

Seenotes to consolidated financial statements.

 

F-3
 

 

CanB̅ Corp. and Subsidiary

ConsolidatedStatements of Operations and Comprehensive Loss

YearsEnded December 31, 2020 and 2019

 

   2020  

2019

(Restated)

 
Revenues          
Product Sales  $1,708,419   $2,304,303 
Service Revenue   1,250    1,200 
Total Revenues   1,709,669    2,305,503 
Cost of product sales   278,062    598,584 
Gross Profit   1,431,607    1,706,919 
           
Operating costs and expenses:          
           
Officers and director’s compensation (including stock-based Compensation of $1,589,224 and $1,587,060, respectively   2,077,713    2,639,711 
Consulting fees (including stock-based compensation of 669,956 and 2,831,232, respectively)   778,062    3,014,329 
Advertising expense   519,922    333,441 
Hosting expense   22,781    13,034 
Rent expense   234,790    246,968 
Professional fees   533,213    287,441 
Depreciation of property and equipment   16,475    12,627 
Amortization of intangible assets   658,910    142,093 
Reimbursed Expenses   87,718    242,585 
Other   876,431    667,097 
           
Total operating expenses   5,806,015    7,599,326 
           
Loss from operations   (4,374,408)   (5,892,407)
           
Other income (expense):          
Other income          
Gain on debt extinguishment          
Gain (loss) on disposal of assets - net   (374,116)   - 
Loss on investment   (40,000)     
EIDL Grant   10,000    - 
Interest income (forfeited) - net   (3,068)   2,524 
Interest expense (including amortization finance cost of $725,287 and $0, respectively   (931,615)   (8,793)
Other (expense) income          
           
Other income (expense) - net   (1,338,799)   (6,269)
           
Loss before provision for income taxes   (5,713,207)   (5,898,676)
           
Provision for income taxes   3,304    2,084 
           
Loss and comprehensive loss   (5,716,511)   (5,900,760)
           
Loss per share - basic and diluted          
Net loss per common share - basic   (1.62)   (2.87)
Net loss per common share - diluted   (1.36)   (2.20)
           
Weighted average common shares outstanding –          
Weighted average shares outstanding - basic and diluted          
Basic   3,534,739    2,058,525 
Diluted   4,201,419    2,687,383 

 

Seenotes to consolidated financial statements.

 

F-4
 

 

CanB̅ Corp. and Subsidiary

ConsolidatedStatements of Stockholders’ Deficiency

YearsEnded December 31, 2019 (Restated) and 2020

 

   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
                           Additional         
   Preferred Stock A   Preferred Stock B   Preferred Stock C   Common Stock, no   Treasury   Paid-in         
   , no par value   , $0.001 par value   , $0.001 par value   par value   Stock   Accumulated         
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
                                                     
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 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 Q1 Q2 & Q3 2019                                 379,555    3,296,700                        3,296,700 
                                                                  
Issuance of common stock in 2019 for acquisition of technology                                 68,580    932,000                        932,000 
                                                                  
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    33,153                        33,153 
                                                                  
Issuance of common stock in 2019 for compensation and services rendered                                 353,557    2,938,823                        2,938,823 

Issuance of common stock in 2020 for servicesrendered 

                                                                 
Issuance of common stock in 2020 for services rendered, shares                                                                 
Issuance of common stock in 2020 for 300:1 reverse stock split rounding                                                                 
Issuance of common stock in 2020 for 300:1 reverse stock split rounding, shares                                                                 
Issuance of common stock in 2020 pursuant to First Fire note agreement                                                                 
Issuance of common stock in 2020 pursuant to First Fire note agreement, shares                                                                 
Issuance of common stock in 2020 pursuant to Labrys Fund Equities note agreement                                                                 
Issuance of common stock in 2020 pursuant to Labrys Fund Equities note agreement, shares                                                                 
Issuance of common stock in 2020 pursuant to Eagle Equities note agreement                                                                 
Issuance of common stock in 2020 pursuant to Eagle Equities note agreement                                                                 
Issuance of common stock in 2020 pursuant to Arena note agreement                                                                 
Issuance of common stock in 2020 pursuant to Arena note agreement, shares                                                                 
Issuance of common stock in 2020 for acquisition of intangible assets                                                                 
Issuance of common stock in 2020 for acquisition of intangible assets, shares                                                                 
Issuance of common stock in 2020 for compensation                                                                 
Issuance of common stock in 2020 for compensation, shares                                                                 
Issuance of common stock in 2020 for interest                                                                 
Issuance of common stock in 2020 for interest, shares                                                                 
Issuance of common stock in 2020 for inventory                                                                 
Issuance of common stock in 2020 for inventory, shares                                                                 
Treasury stock acquired                                                                 
Treasury stock acquired, shares                                                                 
Issuance of common stock warrants and commitment shares in connection with convertible promissory note                                                                 
Issuance of common stock for asset acquisitions                                                                 
Issuance of common stock for asset acquisition, shares                                                                 
Issuance of common stock in lieu of interest payment                                                                 
Issuance of common stock in lieu of interest payment, shares                                                                 
Issuance of preferred stock                                                                 
Issuance of preferred stock, shares                                                                 
Conversion of Series C Preferred stock to Common stock                                                                 
Conversion of Series C Preferred stock to Common stock, shares                                                                 
Issuance of common stock presuant to note agreements                                                                 
Issuance of common stock presuant to note agreements, shares                                                                 
Issuance of common stock for compensation, shares                                                                 
Issuance of common stock for inventory                                                                 
Issuance of common stock for inventory, shares                                                                 
Issuance of common stock in lieu of note repayments                                                                 
Issuance of common stock in lieu of note repayments, shares                                                                 
Issuance of common stock - reverse stock split rounding, shares                                                                 
Issuance of common stock pursuant to FirstFire note agreement                                                                 
Issuance of common stock pursuant to FirstFire note agreement, shares                                                                 
                                                                  
Stock options                                                     381,111         381,111 
                                                                  
Net loss                                                  (5,900,760)   (5,900,760)
                                                                  
Balance, December 31, 2019   20   $5,539,174    -   $-    -   $-    2,680,937   $24,323,712    -   $-   $1,456,176   $(24,669,513)  $6,649,549 
                                                                  
Issuance of common stock in 2020 for services rendered                                 941,199    584,338                        584,338 
                                                                  
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                                 313,032    357,030                        357,030 
                                                                  
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 pursuant to Arena note agreement                                 409,417    129,580                        129,580 
                                                                  
Issuance of common stock in 2020 for acquisition of intangible assets                                 285,000    217,012                        217,012 
                                                                  
Issuance of common stock in 2020 for compensation                                 30,000    41,625                        41,625 
                                                                  
Issuance of common stock in 2020 for interest                                 185,000    77,775                        77,775 
                                                                  
Issuance of common stock in 2020 for inventory                                 478,715    491,979                        491,979 
                                                                  
Treasury stock acquired in 2020                                 (543,715)   -    543,715    (560,000)             (560,000)
                                                                  
Sale of common stock in 2020                                 600,000    300,000                        300,000 
                                                                  
Shi Farms shares                                      (500,000)        (12,678)             (512,678)
                                                                  
Stock options                                                     379,123         379,123