10-Q 1 form10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2023

 

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

 

For the transition period from __________ to __________

 

COMMISSION FILE NUMBER: 000-55753

 

Can B Corp.

(Exact name of registrant as specified in its charter)

 

Florida   20-3624118

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

960 South Broadway, Suite 120

Hicksville, NY 11801

(Address of principal executive offices)

 

516-595-9544

(Registrant’s telephone number, including area code)

 

Canbiola, Inc.

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

 

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

 

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

 

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

 

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

 

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

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging Growth Company ☐    
(Do not check if smaller reporting company)      

 

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

 

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

 

The number of shares of the registrant’s only class of common stock issued and outstanding as of May 19, 2023 is 5,381,976.

 

 

 

 

 

 

Can B Corp.

FORM 10-Q

March 31, 2023

 

TABLE OF CONTENTS

 

    Page
    No.
  PART I. - FINANCIAL INFORMATION  
Item 1. Financial Statements  
  Consolidated Balance Sheets – March 31, 2021 and December 31, 2022 3
  Consolidated Statements of Operations – Three Months Ended March 31, 2023 and 2022 4
 

Consolidated Statement of Stockholders’ Equity Three Months Ended March 31, 2023 and 2022

 5
  Consolidated Statements of Cash Flows – Three Months Ended March 31, 2023 and 2022 6
  Condensed Notes to Unaudited Consolidated Financial Statements. 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 19
Item 3 Quantitative and Qualitative Disclosures About Market Risk. 20
Item 4 Controls and Procedures. 20
  PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 20
Item A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5. Other Information 21
Item 6. Exhibits 21

 

2

 

 

PART 1 – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Can B̅ Corp. and Subsidiaries

Consolidated Balance Sheets

 

         
   (Unaudited)     
   March 31,   December 31, 
   2023   2022 
Assets          
Current assets:          
Cash and cash equivalents  $196,248   $73,194 
Accounts receivable, less allowance for doubtful accounts of $1,071,393 and $985,082, respectively   6,892,514    6,586,210 
Inventory   2,032,175    2,024,053 
Note receivable   -    - 
Prepaid expenses and other current assets   28,472    21,024 
Total current assets   9,149,409    8,704,481 
           
Other assets:          
Deposits   235,787    165,787 
Intangible assets, net   104,144    107,144 
Property and equipment, net   5,100,470    5,432,357 
Right of use assets, net   974,230    1,136,883 
Other noncurrent assets   13,139    13,139 
Total other assets   6,427,770    6,855,310 
           
Total assets  $15,577,179   $15,559,791 
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable  $3,248,723   $3,140,408 
Accrued expenses   181,844    181,700 
Due to related party   330,243    295,243 
Notes and loans payable, net   8,310,743    7,951,196 
Warrant liabilities   123,625    203,043 
Operating lease liability - current   652,172    652,172 
Total current liabilities   12,847,350    12,423,762 
           
Long-term liabilities:          
Notes and loans payable, net   -    - 
Operating lease liability - noncurrent   275,593    438,104 
Total long-term liabilities   275,593    438,104 
           
Total liabilities  $13,122,943   $12,861,866 
           
Commitments and contingencies (Note 14)   -    - 
           
Stockholders’ equity:          
Preferred stock, authorized 5,000,000 shares:          
Series A Preferred stock, no par value: 20 shares authorized, 5 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively   5,320,000    5,320,000 
Series B Preferred stock, $0.001 par value: 500,000 shares authorized, 0 issued and outstanding   -    - 
Series C Preferred stock, $0.001 par value: 2,000 shares authorized, 1,100 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively   2,900,039    2,900,039 
Series D Preferred stock, $0.001 par value: 4,000 shares authorized, 4,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively   4    4 
Common stock, no par value; 1,500,000,000 shares authorized, 5,381,976 and 4,422,584 issued and outstanding at March 31, 2023 and December 31, 2022, respectively   80,172,548    79,614,986 
Common stock issuable, no par value; 36,248 shares at March 31, 2023 and December 31, 2022, respectively   119,586    119,586 
Treasury stock   (572,678)   (572,678)
Additional paid-in capital   8,944,609    8,006,822 
Accumulated deficit   (94,429,872)   (92,690,834)
Total stockholders’ equity   2,454,236    2,697,925 
           
Total liabilities and stockholders’ equity  $15,577,179   $15,559,791 

 

See notes to consolidated financial statements

 

3

 

 

Can B̅ Corp. and Subsidiaries

Consolidated Statement of Operations

 

         
   Three Months Ended 
   March 31, 
   2023   2022 
Revenues          
Product sales  $808,748   $1,310,396 
Service revenue   130,557    549,924 
Total revenues   939,305    1,860,320 
Cost of revenues   524,577    1,190,330 
Gross profit   414,727    669,990 
           
Operating expenses   1,849,630    3,861,997 
           
Loss from operations   (1,434,903)   (3,192,007)
           
Other income (expense):          
Other income   -    - 
Change in fair value of warrant liability   79,418    29,337 
Gain on debt extinguishment   -    - 
Interest expense   (333,967)   (322,227)
Other expense   (39,990)   - 
Other expense   (294,539)   (292,890)
           
Loss before provision for income taxes   (1,729,442)   (3,484,897)
           
Provision for (benefit from) income taxes   9,596    - 
           
Net loss  $(1,739,038)  $(3,484,897)
           
Loss per share - basic and diluted  $(0.36)  $(1.10)
Weighted average shares outstanding - basic and diluted   4,896,524    3,154,004 

 

See notes to consolidated financial statements

 

4

 

 

Can B̅ Corp. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

 

Three Months Ended March 31, 2023 and 2022

 

                                                                 
   Series A   Series B   Series C   Series D           Common   Treasury   Additional         
   Preferred Stock   Preferred Stock   Preferred Stock   Preferred Stock   Common Stock   Stock   Stock   Paid-in   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Issuable   Shares   Amount   Capital   Deficit   Total 
Three months ended March 31, 2023                                                                                
                                                                                 
Balance, January 1, 2022   20   $28,440,000          -   $     -    23   $207,000    1,950   $       2    2,834,755   $49,676,847   $-    36,248   $(572,678)  $5,635,003   $(77,766,659)  $5,619,515 
                                                                                 
Issuance of common stock for services rendered   -    -    -    -    -    -    -    -    130,825    928,929    119,586    -    -    -    -    1,102,515 
                                                                                 
Issuance of common stock for asset acquisitions   -    -    -    -    -    -    -    -    190,505    1,767,498    -    -    -    -    -    1,767,498 
                                                                                 
Sale of common stock   -    -    -    -    -    -    -    -    51,282    500,000    -    -    -    -    -    500,000 
                                                                                 
Issuance of common stock in lieu of interest payments   -    -    -    -    -    -    -    -    10,150    73,078    -    -    -    -    -    73,078 
                                                                                 
Conversion of Series A preferred stock to common stock   (15)   (23,120,000)   -    -    -    -    -    -    33,345    23,120,000    -    -    -    -    -    - 
                                                                                 
Issuance of common stock for property and equipment   -    -    -    -    -    -    -    -    13,704    98,666    -    -    -    -    -    98,666 
                                                                                 
Stock-based compensation   -    -    -    -    -    -    -    -    -    -    -    -    -    571,819    -    571,819 
                                                                                 
Net loss   -    -    -    -    -    -    -    -    -    -         -    -    -    (3,484,897)   (3,484,897)
                                                                                 
Balance, March 31, 2022   5   $5,320,000    -   $-    23   $207,000    1,950   $2    3,264,566   $76,219,018   $119,586    36,248   $(572,678)  $6,206,822   $(81,251,556)  $6,248,194 
                                                                                 
Three months ended March 31, 2023                                                                                
                                                                                 
Balance, January 1, 2023   5   $5,320,000    -   $-    1,100   $2,900,039    4,000   $4    4,422,584   $79,614,986   $119,586    36,248   $(572,678)  $8,006,822   $(92,690,834)  $2,697,925 
                                                                                 
Issuance of common stock for services rendered   -    -    -    -    -    -    -    -    577,850    521,557    -    -    -    -    -    521,557 
                                                                                 
Warrants issued in connection with the issuanc of convertible note   -    -    -    -    -    -    -    -    -    -    -    -    -    937,787    -    937,787 
                                                                                 
Issuance of common stock in lieu of interest payments   -    -    -    -    -    -    -    -    360,000    36,005    -    -    -    -    -    36,005 
                                                                                 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    -    -    (1,739,038)   (1,739,038)
                                                                                 
Balance, March 31, 2023   5   $5,320,000    -   $-    1,100   $2,900,039    4,000   $4    5,360,434   $80,172,548   $119,586    36,248   $(572,678)  $8,944,609   $(94,429,872)  $2,454,236 

 

See notes to consolidated financial statements

 

5

 

 

Can B̅ Corp. and Subsidiaries

Consolidated Statement of Cash Flows

 

         
   Three Months Ended 
   March 31, 
   2023   2022 
Operating activities:          
Net loss  $(1,739,038)  $(3,484,897)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation   -    571,819 
Depreciation   346,887    359,404 
Amortization of intangible assets   3,000    10,026 
Amortization of original-issue-discounts   218,146    158,815 
Bad debt expense   86,365    2,898 
Change in fair value of warrant liability   (79,418)   (29,337)
Stock-based interest expense   36,005    73,078 
Stock-based consulting expense   521,557    1,102,515 
Changes in operating assets and liabilities:          
Accounts receivable   (392,669)   (791,609)
Inventory   (8,122)   (533,900)
Prepaid expenses   (7,448)   1,625 
Operating lease right-of-use asset   142    (20,492)
Accounts payable   108,316    985,710 
Accrued expenses   144    (500,185)
Net cash used in operating activities   (906,133)   (2,094,530)
           
Investing activities:          
Purchase of property and equipment   (15,000)   - 
Deposits paid   (70,000)   -)
Net cash used in investing activities   (85,000)   - 
           
Financing activities:          
Net proceeds received from notes and loans payable   1,730,000    1,382,300 
Proceeds from sale of common stock   -    500,000 
Repayments of notes and loans payable   (507,813)   (75,250)
Deferred financing costs   (143,000)   (38,690)
Amounts received from/repaid to related parties, net   35,000    (7,839)
Net cash provided by financing activities   1,114,187    1,760,521 
           
Increase in cash and cash equivalents   123,054    (334,009)
Cash and cash equivalents, beginning of period   73,194    449,001 
Cash and cash equivalents, end of period  $196,248   $114,992 
           
Supplemental Cash Flow Information:          
Income taxes paid  $-   $- 
Interest paid  $-   $47,206 
Non-cash Investing and Financing Activities:          
Issuance of common stock in lieu of repayment of notes payable  $-   $- 
Issuance of common stock in asset acquisitions  $-   $1,767,498 
Issuance of common stock for property and equipment  $-   $98,666 
Debt discount associated with convertible note  $273,529   $225,015 
Conversion of Series A Preferred stock to common stock  $-   $23,120,000 
Issuance of common stock warrants in connection with convertible promissory note  $937,787   $- 

 

See notes to consolidated financial statements

 

6

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

Note 1 – Organization and Description of Business

 

Can B̅ Corp. was originally incorporated as WrapMail, Inc. (“WRAP”) in Florida on October 11, 2005. On May 15, 2017, WRAP changed its name to Canbiola, Inc. On January 16, 2020 Canbiola, Inc. changed its name to Can B̅ Corp. (the “Company”, “we”, “us”, “our”, “CANB”, “Can B̅” or “Registrant”).

 

The Company acquired 100% of the membership interests in Pure Health Products, LLC, a New York limited liability company (“PHP” or “Pure Health Products”) effective December 28, 2018. The Company runs it manufacturing operations through PHP and holds and sells several of its brands through PHP as well. The Company’s durable equipment products, such as sam® units with and without CBD infused pads, are marketed and sold through its wholly-owned subsidiaries, Duramed Inc. (incorporated on November 29, 2018) and Duramed MI LLC (fka DuramedNJ, LLC) (incorporated on May 29, 2019) (collectively, “Duramed”). Duramed began operating on or about February 1, 2019. Most of the Company’s consumer products include hemp derived cannabidiol (“CBD”); however, the Company has just recently begun extracting cannabinol (“CBN”) and cannabigerol (“CBG”) for wholesale to third-parties looking to incorporate such compounds into their products through its wholly owned subsidiaries, Botanical Biotech, LLC (incorporated March 10, 2021), TN Botanicals, LLC and CO Botanicals LLC (both incorporated in August 2021). These three subsidiaries have also begun synthesizing Delta-8 and Delta-10 from hemp. Delta-8 and Delta-10 can produce similar, though less potent, effects as delta-9 (commonly referred to as THC); however, the legality of hemp derived Delta-8 and Delta-10 are in a gray area and considered a potential loophole at this point due to the 2018 hemp bill. The Company’s other subsidiaries did not have operations during the year ended December 31, 2021.

 

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

 

Note 2 – Going Concern

 

The condensed consolidated financial statements have been prepared on a “going concern” basis, which contemplates the realization of assets and liquidation of liabilities in a normal course of business. As of March 31, 2023, the Company had cash and cash equivalents of $196,248 and negative working capital of $3,697,941. For the three months ended March 31, 2023 and 2022, the Company had incurred losses of $1,739,038 and $3,484,897, respectively. These factors raise substantial doubt as to the Company’s ability to continue as a going concern.

 

After careful consideration and analysis of the economics, supply chain, processing logistics, and management of manpower the Company decided to consolidate operations in its CO operations in Mead and Ft. Morgan. The company remains fully vertically integrated in legal hemp operations and sales with processing of hemp biomass and crude hemp oil into distillate, isolate, and ultimately into isomers. The Company moved all of its help processing equipment previously located in its Miami, FL operation under Botanical Biotech, LLC to its main hemp processing center in CO. The Company also terminated its lease with the Miami landlord. The Company moved all of the hemp processing equipment previously located in its McMinnville, TN operation under TN Botanicals, LLC to its main hemp processing center in CO.

 

As a result of these equipment moves, the Colorado operation will, once fully operational, improve operating efficiencies, increase management oversight, and be able to increase throughput by double verse the prior three independent operating facilities. The Company expects to have the consolidated operation fully operational by the end of fiscal 2022. Senior management of the Company will be on-site in CO during this consolidation period to ensure maximum efficiencies and continue operations during this rebuilding period. Immediate impact of the consolidation is elimination of duplicate lines, better coordination of customer orders, reduction in transportation charges, and manpower efficiencies with larger batch sizes and reduced personnel.

 

The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

Note 3 – Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Financial Statement Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these interim consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of the management of the Company, as defined below, these unaudited consolidated financial statements include all adjustments necessary to present fairly the information set forth therein. Results for interim periods are not necessarily indicative of results to be expected for a full year.

 

The consolidated balance sheet information as of December 31, 2022 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”). The interim consolidated financial statements contained herein should be read in conjunction with the 2022 Form 10-K.

 

7

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

Principles of Consolidation

 

The unaudited consolidated financial statements contained herein include the accounts of Can B Corp. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

 

Covid-19

 

Commencing in December 2019, the novel strain of coronavirus (“COVID-19”) began spreading throughout the world, including the first outbreak in the US in February 2020. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. COVID-19 has disrupted and continues to significantly disrupt local, regional, and global economies and businesses. The COVID-19 outbreak is disrupting supply chains and affecting production and sales across a range of industries. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on the Company’s customers, employees and vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact the Company’s financial condition and/or results of operations is uncertain.

 

In response to COVID-19, the Company put into place certain restrictions, requirements and guidelines to protect the health of its employees and clients, including requiring that certain conditions be met before employees return to the Company’s offices. Also, to protect the health and safety of its employees, the Company’s daily execution has evolved into a largely virtual model. The Company plans to continue to monitor the current environment and may take further actions that may be required by federal, state or local authorities or that it determines to be in the interests of its employees, customers, and partners.

 

Use of Estimates

 

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses in those financial statements. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, inventory, goodwill, intangible assets and other long-lived assets, income taxes and deferred taxes. Descriptions of these policies are discussed in the Company’s 2022 Form 10-K. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and adjusts when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

 

Significant Accounting Policies

 

The Company’s significant accounting policies are described in “Note 3: Summary of Significant Accounting Policies” of our 2022 Form 10-K.

 

8

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

Segment reporting

 

As of March 31, 2023, the Company reports operating results and financial data in one operating and reportable segment. The Chief Executive Officer, who is the chief operating decision maker, manages the Company as a single profit center in order to promote collaboration, provide comprehensive service offerings across the entire customer base, and provide incentives to employees based on the success of the organization as a whole. Although certain information regarding selected products or services is discussed for purposes of promoting an understanding of the Company’s business, the chief operating decision maker manages the Company and allocates resources at the consolidated level.

 

Reclassifications

 

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

 

Note 4 – Fair Value Measurements

 

The carrying value and fair value of the Company’s financial instruments are as follows:

 

 

March 31, 2023                
   Level 1   Level 2   Level 3   Total 
Liabilities                    
Warrant liabilities  $—   $—   $123,625   $123,625 

 

As of December 31, 2022    
   Level 1   Level 2   Level 3   Total 
Liabilities                    
Warrant liabilities  $—   $—   $203,043   $203,043 

 

The fair value of the warrants outstanding was estimated using the Black-Scholes model. The application of the Black-Scholes model requires the use of a number of inputs and significant assumptions including volatility. The following reflects the inputs and assumptions used:

 

 

         
As of        
  

March 31,

2023

  

December 31,

2022

 
Stock price  $0.85   $1.30 
Exercise price  $6.40   $6.40 
Remaining term (in years)   4.4    0.46 
Volatility   159.2%   159%
Risk-free rate   3.6%   3.99%
Expected dividend yield   —%   —%

 

The warrant liabilities will be remeasured at each reporting period with changes in fair value recorded in other income (expense), net on the consolidated statements of operations. The change in fair value of the warrant liabilities was as follows:

 

 

Warrant liabilities     
Estimated fair value at December 31, 2021  $- 
Issuance of warrant liabilities   225,015 
Change in fair value   (29,337)
Estimated fair value at March 31, 2022  $195,678 
      
Estimated fair value at December 31, 2022  $203,043 
Change in fair value   (79,418)
Estimated fair value at March 31, 2023  $123,625 

 

9

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

Note 5 – Inventories

 

Inventories consist of:

 

 

         
   March 31,   December 31, 
   2023   2022 
Raw materials  $1,221,995   $829,844 
Finished goods   810,180    1,194,209 
Total  $2,032,175   $2,024,053 

 

Note 6 – Property and Equipment

 

Property and equipment consist of:

 

 

         
   March 31,   December 31, 
   2023   2022 
Furniture and fixtures  $21,724   $21,724 
Office equipment   12,378    12,378 
Manufacturing equipment   6,781,208    6,766,208 
Medical equipment   776,396    776,396 
Leasehold improvements   26,902    26,902 
Total   7,618,608    7,603,608 
Accumulated depreciation   (2,518,138)   (2,171,251)
Net  $5,100,470   $5,432,357 

 

Depreciation expense related to property and equipment was $346,887 and $359,404 for the three months ended March 31, 2023 and 2022, respectively.

 

Note 7 – Intangible Assets

 

Intangible assets consist of:

 

 

         
   March 31,   December 31, 
   2023   2022 
Technology, IP and patents  $119,998   $119,998 
Total   119,998    119,998 
Accumulated amortization   (15,854)   (12,854)
Intangible Assets,Net  $104,144   $107,144 

 

Amortization expense was $3,000 and $10,026 for the three months ended March 31, 2023 and 2022, respectively.

 

10

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

Amortization expense for the balance of 2023, and for each of the next five years and thereafter is estimated to be as follows:

 

 

      
Nine months ended December 31, 2023  $9,000 
Fiscal year 2024   12,000 
Fiscal year 2025   12,000 
Fiscal year 2026   12,000 
Fiscal year 2027   12,000 
Thereafter   47,144 
Intangible assets, net  $104,144 

 

Note 8 – Notes and Loans Payable

 

Convertible Promissory Notes

 

In December 2020, the Company entered into a convertible promissory note (“ASOP Note I”) with Arena Special Opportunities Partners I, LP (“ASOP”). The principal balance of the note is $2,675,239 and it is to be utilized for working capital purposes. The note matured on January 31, 2022 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the ASOP convertible promissory note was issued with 228,419 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 228,419 shares of the Company’s common stock at an exercise price of $6.75 per share. The common stock purchase warrants issued to ASOP are considered derivatives, but satisfied the criteria for classification as equity instruments, and were bifurcated from the host contract - convertible promissory note and recorded in equity at their relative fair values with a corresponding debt discount recorded to ASOP Note I. The principal balance outstanding at March 31, 2023 was $2,400,997.

 

In December 2020, the Company entered into a convertible promissory note (“ASOF Note I”) with Arena Special Opportunities Fund, LP (“ASOF”). The principal balance of the note is $102,539 and it is to be utilized for working capital purposes. The note matured on January 31, 2022 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the ASOF convertible promissory note was issued with 8,755 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 8,755 shares of the Company’s common stock at an exercise price of $6.75 per share. The common stock purchase warrants issued to ASOF are considered derivatives, but satisfied the criteria for classification as equity instruments, and were bifurcated from the host contract - convertible promissory note and recorded in equity at their relative fair values with a corresponding debt discount recorded to ASOF Note I. The principal balance outstanding at March 31, 2023 was $87,773.

 

In May 2021, the Company entered into a convertible promissory note (“ASOP Note II”) with Arena Special Opportunities Partners I, LP. The principal balance of the note is $1,193,135 and it is to be utilized for working capital purposes. The note matured on January 31, 2022 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the ASOP convertible promissory note was issued with 101,978 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 101,978 shares of the Company’s common stock at an exercise price of $6.75 per share. The common stock purchase warrants issued to ASOP are considered derivatives, but satisfied the criteria for classification as equity instruments, and were bifurcated from the host contract - convertible promissory note and recorded in equity at their relative fair values with a corresponding debt discount recorded to ASOP Note II. The principal balance outstanding at March 31, 2023 was $1,073,250.

 

In May 2021, the Company entered into a convertible promissory note (“ASOF Note II”) with Arena Special Opportunities Fund, LP. The principal balance of the note is $306,865 and it is to be utilized for working capital purposes. The note matured on January 31, 2022 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the ASOP convertible promissory note was issued with 26,228 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 26,228 shares of the Company’s common stock at an exercise price of $6.75 per share. The common stock purchase warrants issued to ASOF are considered derivatives, but satisfied the criteria for classification as equity instruments, and were bifurcated from the host contract - convertible promissory note and recorded in equity at their relative fair values with a corresponding debt discount recorded to ASOF Note II. The principal balance outstanding at March 31, 2023 was $276,750.

 

The maturity dates for the above notes were extended to April 30, 2022 on April 14, 2022 in exchange for the Company’s promise to pay the holders $300,000. The holders agreed to allow the Company to extend the notes for two additional 30-day periods for $100,000 per extension. The holders also waived certain defaults under the notes. The Company has since elected to extend the maturity date to May 31, 2022 for the promise to pay an additional $100,000. As discussed below under “Forbearance and Amendment of Outstanding Notes,” ASOP and ASOF have agreed to forbear from exercising remedies under the notes until December 31, 2023 provided that the Company does not default on its obligations under the Forbearance Agreement.

 

11

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

On January 1, 2022, the Company entered into a convertible promissory note (“Empire Note”) with Empire Properties, LLC (“Empire”). The principal balance of the note is $52,319 and it is to be utilized for working capital purposes. The note matured on December 31, 2022 or due on demand subsequently to any major funding received by the Company in excess of $5,000,000 and all principal, accrued and unpaid interest is due at maturity at a rate of 8% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. The principal balance outstanding at March 31, 2023 was $52,319.

 

In March 2022, the Company entered into a convertible promissory note (“BL Note”) with Blue Lake Partners, LLC (“BL”). The principal balance of the note is $250,000 and it is to be utilized for working capital purposes. The note had an original maturity date of March 22, 2023 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the BL Note was issued with 39,062 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 39,062 shares of the Company’s common stock at an exercise price of $6.40 per share. The common stock purchase warrants issued to BL are considered derivatives and did not satisfy the criteria for classification as equity instruments and were bifurcated from the host contract - convertible promissory note and recorded as a liability at fair value with a corresponding debt discount recorded to the BL Note with subsequent changes in fair values recognized in the consolidated statement of operations at each reporting date. Effective February 27, 2023, in consideration of the Company repaying an aggregate of $66,667 under the BL Note, BL agreed to extend the maturity date of the BL Note until September 1, 2023 and reduce the percentage of the cash proceeds received by the Company from the issuance of equity or debt that BL can require the Company to apply to the repayment of the BL Note from 50% to 33%. The principal balance outstanding at March 31, 2023 was $183,333.

 

In March 2022, the Company entered into a convertible promissory note (“MH Note”) with Mast Hill Fund, LP (“MH”). The principal balance of the note is $350,000 and it is to be utilized for working capital purposes. The note had an original maturity date of March 22, 2023 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered a derivative and therefore has been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the MH Note was issued with 39,062 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 39,062 shares of the Company’s common stock at an exercise price of $6.40 per share. The common stock purchase warrants issued to MH are considered derivatives and did not satisfy the criteria for classification as equity instruments and were bifurcated from the host contract - convertible promissory note and recorded as a liability at fair value with a corresponding debt discount recorded to the MH Note with subsequent changes in fair values recognized in the consolidated statement of operations at each reporting date. Effective February 27, 2023, in consideration of the Company repaying an aggregate of $93,333 under the MH Note, MH agreed to extend the maturity date of the MH Note until September 1, 2023 and reduce the percentage of the cash proceeds received by the Company from the issuance of equity or debt that MH can require the Company to apply to the repayment of the BL Note from 50% to 33%. The principal balance outstanding at March 31, 2023 was $256,667.

 

In April 2022, the Company entered into a convertible promissory note (“FM Note”) with Fourth Man, LLC (“FM”). The principal balance of the note is $150,000 and it is to be utilized for working capital purposes. The note had an original maturity date of April 22, 2023 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered derivatives and therefore have been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the FM Note was issued with 23,437 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 23,437 shares of the Company’s common stock at an exercise price of $6.40 per share. The common stock purchase warrants issued to FM are considered derivatives and did not satisfy the criteria for classification as equity instruments and were bifurcated from the host contract - convertible promissory note and recorded as a liability at fair value with a corresponding debt discount recorded to the FM Note with subsequent changes in fair values recognized in the consolidated statement of operations at each reporting date. Effective February 27, 2023, in consideration of the Company repaying an aggregate of $40,000 under the FM Note, FM agreed to extend the maturity date of the FM Note until September 1, 2023 and reduce the percentage of the cash proceeds received by the Company from the issuance of equity or debt that FM can require the Company to apply to the repayment of the FM Note from 50% to 33%. The principal balance outstanding at March 31, 2023 was $110,000.

 

12

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

In June 2022, the Company entered into a convertible promissory note (“Alumni Note”) with Alumni Capital, LP (“Alumni”). The principal balance of the note is $62,500 and it is to be utilized for working capital purposes. The note had an original maturity date of June 6, 2023 which was extended until September 1, 2023 effective February 27, 2023. All principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The holder can require the full payment of the note if the Company completes an offering of its common stock that results in an uplisting of its common stock to a national securities exchange. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered derivatives and therefore have been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the Alumni Note was issued with 9,766 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 9,766 shares of the Company’s common stock at an exercise price of $6.40 per share. The common stock purchase warrants issued to Alumni are considered derivatives and did not satisfy the criteria for classification as equity instruments and were bifurcated from the host contract - convertible promissory note and recorded as a liability at fair value with a corresponding debt discount recorded to the Alumni Note with subsequent changes in fair values recognized in the consolidated statement of operations at each reporting date. The principal balance outstanding at March 31, 2023 was $62,500.

 

In August 2022, the Company entered into a convertible promissory note (“WN”) with Walleye Opportunities Master Fund Ltd. (“WOMF”). The principal balance of the note is $385,000 and it is to be utilized for working capital purposes. The note matures on August 30, 2023 and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. The conversion options contained in the convertible promissory note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered derivatives and therefore have been recorded in liabilities as part of the convertible promissory note and not bifurcated. In addition, the WN Note was issued with 71,296 common stock warrants. The common stock purchase warrants entitle the holder to purchase an aggregate of up to 71,296 shares of the Company’s common stock at an exercise price of $5.40 per share. The common stock purchase warrants issued to WOMF are considered derivatives and did not satisfy the criteria for classification as equity instruments and were bifurcated from the host contract - convertible promissory note and recorded as a liability at fair value with a corresponding debt discount recorded to the WN with subsequent changes in fair values recognized in the consolidated statement of operations at each reporting date. The principal balance outstanding at March 31, 2023 was $385,000.

 

In January 2023 the Company entered into a convertible promissory note (“Tysadco Note VI”) with Tysadco Partners, LLC (“Tysadco”). The principal balance of the note was $100,000 and it was to be utilized for working capital purposes. The note had a maturity date of April 12, 2023, and all principal, accrued and unpaid interest is due at maturity at a rate of 12% per annum. Effective January 31, 2023, Tysadco agreed to exchange the Tysdaco Note VI and other notes held by Tysdaco in the aggregate principal amount of $752,000 having maturity dates between August 24, 2022 and March 19, 2023 for a single note that matures on September 1, 2023. Contemporaneous with this exchange, Tysadco assigned the combined note to ClearThink Capital Partners, LLC and the Company issued 130,000 shares of common stock to ClearThink Capital Partners, LLC. The conversion options contained in the combined note were evaluated for derivative accounting under ASC 815, Derivatives and Hedging, and determined not to be considered derivatives and therefore have been recorded in liabilities as part of the convertible promissory note and not bifurcated. The principal balance of the combined note at March 31, 2023 was $937,500.

.

On March 2, 2023, the Company completed the sale of a promissory note (the “Note”) in the principal amount of $1,823,529 to WOMF pursuant to a Securities Purchase Agreement dated as of February 27, 2023. The purchase price of the Note was $1,550,000, representing a 15% original issue discount. The Note is non-interest bearing, except in the case of the event of a default, in which case interest will accrue from the date of the default at a rate equal to the lower of 18% per annum or the maximum rate permitted by law.

 

The Note is payable in nine (9) monthly installments of $232,500 each, consisting of a $227,941 principal reduction payment and a $4,559 redemption fee, commencing on April 27, 2023. The Company’s obligations under the note are secured by a security interest in the Company’s deposit accounts and the deposit accounts of the Company’s subsidiaries. In addition, each the Company’s subsidiaries has agreed that if an event of default occurs under the Note, the subsidiary will pay to WOMF an amount equal to 10% of revenues received during the prior month from the sale of goods or services or collections of accounts receivable.

 

13

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

The Note requires the Company to use reasonable commercial efforts to complete an offering which will result in an uplisting of its common stock to a national securities exchange within a reasonable time following the issuance of the Note. The Note contains certain negative covenants, including a prohibition on the incurrence of debt that is senior or pari passu to the indebtedness represented by the Note, the creation of liens on the Company’s assets, the payment of dividends and other distributions on the Company’s common stock, the repurchase of the Company’s common stock, the sale of a significant portion of the Company’s assets and the repayment of indebtedness other than existing indebtedness.

 

The Company may elect to pay all or a portion of a monthly installment due under the Note by converting such amount into shares of the Company’s common stock at a price of $4.00 per share, subject to adjustment in accordance with the terms of the Note. If the Company does not pay an installment when due it is deemed an election by the Company to convert the installment payment into common stock at a price equal to the lower of $4.00 per share or 90% of the lowest daily volume weighted average price of the common stock during the five trading days preceding the conversion date. WOMF has the right to determine the timing of any such conversion. WOMF may elect at any time to convert amounts payable under the Note into shares of the Company’s common stock at a conversion price of $4.00 per share, subject to adjustment in accordance with the terms of the Note.

 

If the Company receives cash proceeds from any source, including payments from customers or from the issuance of equity or debt, WOMF can require the Company to apply 100% of such proceeds to the repayment of the Note.

 

If the Company completes a placement of securities, WOMF will have the right to accept such new securities in lieu of the Note and Warrant. For so long as the Note is outstanding, if the Company issues a security or amends the terms of a security issued before the issue date of the Note, and WOMF believes that terms of the new or amended security are more favorable to the holder than the terms provided to WOMF, WOMF may require that such terms become part of WOMF’s transaction documents with the Company.

 

In the event of a default under the Note, the Company shall be required to pay WOMF an amount equal to the amount determined by multiplying the principal amount then outstanding plus default interest by 135%, plus costs of collection. WOMF may elect to accept payment of any such amount in cash and/or shares of the Company’s common stock, valued for this purpose at the lower of the conversion price then in effect or a 60% discount to the lowest volume weighted average price of the common stock during the five trading days preceding the conversion date.

 

WOMF has been granted a right of first refusal to participate in future financing transactions conducted by the Company.

 

As additional consideration for the purchase of the Note, the Company issued WOMF a warrant (the “Warrant”) to purchase 1,307,190 shares of the Company’s common stock at an exercise price equal to 90% of the lowest volume weighted average price of the common stock during the five trading days preceding the date of exercise. The Warrant contains a cashless exercise provision and is exercisable at any time during the period beginning on August 27, 2023 and ending on August 27, 2028. In addition, a warrant issued by the Company to WOMF in August 2022 was amended to change the exercise price of the warrant from $5.40 per share to the lower of $5.40 per share or the lowest volume weighted average price of the common stock during the five trading days preceding its exercise.

 

The Company has entered into a Registration Rights Agreement with WOMF pursuant to which the Company has agreed to file a registration statement with the Securities and Exchange Commission by April 13, 2023 to register the shares of common stock issuable upon the conversion of the Note and the exercise of the Warrant for public resale. If the Company fails to file the registration statement by April 13, 2023 or have the registration statement declared effective by the deadlines set forth in the Registration Rights Agreement, the Company will be required to make a payment of 2% of the amount then owed under the Note for each 30 day period after the applicable deadline that the Company does not file the registration statement or the registration statement is not declared. WOMF has also been granted piggyback registration rights with respect to the shares of common stock issuable upon the conversion of the Note and the exercise of the Warrant. Each of the Note and Warrant grants full ratchet anti-dilution protection to WOMF in the event that the Company issues common stock or rights to purchase common stock at a price less than the conversion or exercise price then in effect.

 

14

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

Forbearance and Amendment of Outstanding Notes.

 

Contemporaneous with the sale of the Note and Warrant to WOMF, ASOP and ASOF (collectively, “Arena”), who hold promissory notes with an unpaid principal balance of approximately $3,877,000 which became due on April 30, 2022 (the “Arena Notes”), entered into a Forbearance Agreement with the Company pursuant to which they agreed to forbear from exercising remedies under the Arena Notes until December 31, 2024 provided that the Company does not default on its obligations under the Forbearance Agreement.

 

The Forbearance Agreement requires the Company and/or Company’s subsidiaries, Duramed, Inc. and Duramed MI, LLC (together the “Duramed Subsidiaries”) to remit to Arena on a monthly basis certain accounts receivable collected by the Company and/or the Duramed Subsidiaries until the total amount collected is $5,700,000. The Company and the Duramed Subsidiaries have assigned their rights to these receivables to Arena.

 

If Arena fully exercises warrants to purchase shares of the Company’s common stock that were previously issued to it, and the aggregate market value of the shares acquired is less than $1,500,000, the Company must pay to Arena an amount equal to such difference.

 

As a condition to the closing of the sale of the Note and Warrant to the WOMF, certain terms of certain promissory notes previously issued by the Company were amended, including the following:

 

  ● in consideration of an increase in the aggregate principal amount by $10,000 and an increase in the interest rate to 18% per annum, the holder of notes in the aggregate principal amount of $150,000 agreed to waive his right to require the Company to repay a $50,000 note upon the Company’s receipt of $1,500,000 of financing and extend maturity dates from November 18, 2021 and January 22, 2023 to September 1, 2023;
     
  ● in consideration of the Company’s agreement to provide a product credit for future orders of $50,000, the holder of a promissory note in the principal amount of $150,000 agreed to extend the maturity date from August 10, 2022 to September 1, 2023;
     
  ● the maturity date of a promissory note in the principal amount of $1,250,000 was extended from August 12, 2022 until the earlier of September 1, 2023 or the date that the Company completes an offering resulting in an uplisting of its common stock to the Nasdaq Capital Market;
     
  ● in consideration of the repayment of a total of $232,500 under the notes, the holders of promissory notes in the aggregate principal amount of $435,000 issued in October and November 2022 that bore interest at 18% per annum and were past due agreed to exchange the notes for new notes that mature on September 1, 2023 and bear interest at 15% per annum; and

 

TWS Note

 

On August 12, 2021, pursuant to an Equipment Acquisition Agreement, the Company entered into a twelve-month promissory note of $1,250,000 with payments of $100,000 per month and interest at 6%. As of March 31, 2023, the total amount outstanding was $1,050,000.

 

Other Loans

 

On November 18, 2021, the Company entered into a $100,000 unsecured promissory note agreement with a lender. The promissory note accrues interest at a rate of 10% per annum and is due within twelve months or due on demand subsequently to any major funding received by the Company in excess of $3,000,000. As of March 31, 2023 the total amount outstanding was $100,000.

 

15

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

During the year ended December 31, 2022, the Company entered into various agreements relating to the sales of future receivables for an aggregate purchase amount of approximately $450,000. The aggregate principal amounts are payable in weekly installments ranging from $2,917 through $453 until such time the obligations are fully satisfied. As of December 31, 2022, the total amounts outstanding were approximately $65,000.

 

On February 11, 2022, the Company entered into a $175,000 unsecured promissory note agreement with a lender. The promissory note accrues interest at a rate of 16% per annum and is due within six months or due on demand subsequently to any major funding received by the Company in excess of $2,000,000. As of March 31, 2023 the total amount outstanding was $175,000.

 

On August 18, 2022, the Company entered into a $250,000 unsecured promissory note agreement with a lender. The promissory note accrues interest at a rate of 16% per annum and is due within three months or due on demand subsequently to any major funding received by the Company in excess of $1,000,000. As of March 31, 2023 the total amount outstanding was $250,000.

 

On October 14, 2022, the Company entered into a $115,000 unsecured promissory note agreement with a lender. The promissory note accrues interest at a rate of 18% per annum and was due on October 31, 2022. As of March 31, 2023 the total amount outstanding was $65,000.

 

On October 14, 2022, the Company entered into a $230,000 unsecured promissory note agreement with a lender. The promissory note accrues interest at a rate of 18% per annum and was due on October 31, 2022. As of march 31, 2023 the total amount outstanding was $122,500.

 

On November 17, 2022, the Company entered into a $200,000 unsecured promissory note agreement with a lender. The promissory note accrues interest at a rate of 18% per annum and was due on December 17, 2022. As of March 31, 2023 the total amount outstanding was $125,000.

 

Note 9 – Stockholders’ Equity

 

Preferred Stock

 

Each share of Series A Preferred Stock is convertible into 218 shares of CANB common stock and is entitled to 4,444 votes. All Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shall rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock. In the event of a Liquidation Event, whether voluntary or involuntary, each holder may elect (i) to receive, in preference to the holders of Common Stock, a one-time liquidation preference on a per-share amount equal to the per-share value of preferred shares on the issuance date, as recorded in the Company’s financial records, or (ii) to participate pari passu with the Common Stock on an as-converted basis. Subject to any adjustments, the Series A holders shall be entitled to receive such dividends paid and distributions made to the holders of shares of Common Stock on an as converted basis.

 

16

 

 

Can B̅ Corp. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2023

 

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

 

Each share of Series C Preferred Stock has preference to payment of dividends, if and when declared by the Company, compared to shares of our common stock. Each Preferred Series C share is convertible into 1,667 shares of common stock. The shares of Series C Preferred Stock have voting rights as if fully converted.

 

On February 8, 2021, the Company’s Board of Directors approved the designation of the Series D Preferred Shares and the number of shares constituting such series, and the rights, powers, preferences, privileges and restrictions relating to such series. On March 27, 2021, the Company filed an amendment to its articles of incorporation to authorize 4,000 shares of a new Series D Preferred Stock with a par value of $0.001 each. All Series D Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shall rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation for such preferred stock.