10-Q/A: Can B Corp. Amends Q1 2024 Report Following Auditor Suspension, Reports Significant Losses

Sentiment:

Quarterly Report Amendment 16 July 2024 5:39 PM

Can B Corp. files an amended Q1 2024 report to incorporate a review by a new auditor after the SEC suspended BF Borgers, revealing a net loss of $6.16 million and the discontinuation of hemp operations.

Capital raiseThe company is dependent on third-party loans to fund its operations.The company is seeking to restructure outstanding indebtedness and raise capital through debt and/or equity markets.

Worse than expectedThe company's net loss significantly increased compared to the same period last year.Revenues decreased substantially year-over-year.The company discontinued its hemp operations, indicating a significant setback.

Summary

Can B Corp. has filed an amended quarterly report on Form 10-Q/A for the quarter ended March 31, 2024.
The amendment was necessary due to the permanent suspension of BF Borgers, the original independent registered public accounting firm, by the SEC.
The company reported a net loss of $6,161,169 for the three months ended March 31, 2024, compared to a net loss of $1,739,038 for the same period in 2023.
Revenues decreased to $369,096 from $939,305 year-over-year.
The company's hemp division was significantly impacted by an auction of assets under Article 9 of the Uniform Commercial Code, leading to its discontinuation.
The company's primary focus will now be on protecting and commercializing cannabis patents acquired by Nascent Pharma, collecting Duramed receivables, and reestablishing production of the Longevity Brand Superfood drink mix.
As of March 31, 2024, the company had cash and cash equivalents of $26,582 and negative working capital of $6,165,773, raising substantial doubt about its ability to continue as a going concern.
The company is currently funding its operations on a month-to-month basis through third-party loans.
The company is involved in several legal proceedings, including a lawsuit filed by Arena Special Opportunities Partners I, L.P. and its affiliates.

Sentiment

Score: 3

Explanation: The document presents a largely negative outlook due to significant losses, discontinued operations, and legal challenges. While there are some positive aspects, the overall financial health and future prospects of the company appear uncertain.

Positives

The company is focusing on protecting and commercializing cannabis patents acquired by Nascent Pharma.
The company is working to reestablish production of the Longevity Brand Superfood drink mix for Brooke Burke Body, Inc.

Negatives

The company reported a significant net loss of $6.16 million for Q1 2024.
Revenues decreased substantially compared to the same period last year.
The company discontinued its hemp operations, a previously significant part of its business.
The company has very low cash reserves and negative working capital.
The company is facing legal challenges from Arena Special Opportunities Partners I, L.P. and its affiliates.
The company's disclosure controls and procedures are deemed ineffective due to the small size of the accounting staff and lack of segregation of duties.

Risks

The company's ability to continue as a going concern is in substantial doubt due to its financial condition.
The company is dependent on third-party loans to fund its operations.
The company faces risks associated with legal proceedings.
The company's success depends on the commercialization of cannabis patents acquired by Nascent Pharma, which is not guaranteed.
The company's internal controls over financial reporting are ineffective.

Future Outlook

The company's primary focus will be on protecting and commercializing the cannabis patents acquired by Nascent, continuing to collect Duramed receivables, and reestablishing the Company's production of the Longevity Brand Superfood drink mix for Brooke Burke Body, Inc.

Management Comments

Management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
The company aims to be a 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 peoples lives in a variety of areas.

Industry Context

The company's shift away from hemp-derived products reflects the challenges and uncertainties in that market, while its focus on cannabis patents aligns with the growing interest in the broader cannabis industry.

Comparison to Industry Standards

It is difficult to compare Can B Corp.'s results directly to industry standards due to its unique combination of hemp, medical devices, and cannabis patents.
However, the company's financial performance is significantly weaker than many of its peers, particularly in terms of revenue and profitability.
Companies like Charlotte's Web and CV Sciences, which focus on CBD products, have faced similar challenges in recent years, including regulatory uncertainty and increased competition.
Medical device companies like ZetrOZ Systems LLC, which Can B Corp. has a Memorandum of Understanding with, typically have higher margins but also require significant investment in research and development.
Cannabis patent enforcement is a relatively new area, and it is difficult to benchmark Can B Corp.'s strategy against established players.

Legal Proceedings

The company is involved in several legal proceedings, including a lawsuit filed by Arena Special Opportunities Partners I, L.P. and its affiliates.
The company was served with a commercial legal action against the Company and certain officers by David Weissberg and Donna Marino.
A vendor of the Company filed an amended suit against the Company in Florida, Case No. 2021 CA 001797, for monies allegedly owed and civil theft relating to such monies and related products and fraud in the inducement.
A Complaint was filed by Evexia Plus, LLC against Can B Corp. in a product payment trade dispute. Case Number 63-CV-2022-900692.00 in the Circuit Court of Tuscaloosa County, AL.
Quality Plaza Realty, LLC, the landlord of the Company's Hicksville, New York office, filed petitions in the District Court of the County of Nassau, New York in October 2023 seeking a judgment of $33,916.16 for unpaid rent and repossession of the premises.

Related Party Transactions

The Company has entered into a promissory note with Pat Ferro, a co-founder of the Company, with a total amount outstanding of $366,243 as of March 31, 2024.

Stakeholder Impact

Shareholders face significant risk due to the company's financial instability and legal challenges.
Employees may be affected by the discontinuation of the hemp division and reduced staff at Duramed.
Customers may experience changes in product availability and service quality.
Suppliers and creditors face increased risk of non-payment.

Next Steps

The company will focus on protecting and commercializing the cannabis patents acquired by Nascent Pharma.
The company will continue to collect Duramed receivables.
The company will work to reestablish production of the Longevity Brand Superfood drink mix for Brooke Burke Body, Inc.

Key Dates

Date	Description
2005-10-11	Can B Corp. was originally incorporated as WrapMail, Inc.
2017-05-15	WrapMail, Inc. changed its name to Canbiola, Inc.
2018-12-28	The Company acquired 100% of the membership interests in Pure Health Products, LLC.
2019-02-01	Duramed began operating on or about this date.
2020-01-16	Canbiola, Inc. changed its name to Can B Corp.
2020-12-31	Date of convertible promissory notes with Arena Special Opportunities Partners I, LP (ASOP) and Arena Special Opportunities Fund, LP (ASOF).
2021-05-31	Date of convertible promissory notes with Arena Special Opportunities Partners I, LP and Arena Special Opportunities Fund, LP.
2022-03-31	Date of convertible promissory note with Blue Lake Partners, LLC (BL) and Mast Hill Fund, LP (MH).
2022-04-30	Date of convertible promissory note with Fourth Man, LLC (FM).
2022-06-30	Date of convertible promissory note with Alumni Capital, LP (Alumni).
2022-08-31	Date of convertible promissory note with Walleye Opportunities Master Fund Ltd. (WOMF).
2023-01-31	Date of convertible promissory note (Tysadco Note VI) with Tysadco Partners, LLC (Tysadco).
2023-02-27	Effective date of amendments to BL Note, MH Note, and FM Note.
2023-03-02	Date of sale of a promissory note to WOMF pursuant to a Securities Purchase Agreement.
2023-05-31	Date of promissory note issued to WOMF.
2023-09-30	Arena notified the Company that it was in default of certain obligations under the Forbearance Agreement.
2023-10-27	Date of sale of a promissory note to WOMF pursuant to a Securities Purchase Agreement.
2024-03-14	Auction of the assets of the Company's hemp division was conducted under Article 9 of the Uniform Commercial Code.
2024-03-31	End of the quarterly period for this report.
2024-04-07	Arena filed a complaint in the Supreme Court, County of New York against the Company.
2024-06-30	The Company's Board of Directors concluded that it was no longer feasible to continue the Company's hemp operations.
2024-07-10	The number of shares of the registrants only class of common stock issued and outstanding as of this date is 61,909,230.
2024-07-16	Date of report filing.

Keywords

Can B Corp, financial results, hemp, cannabis, Nascent Pharma, Duramed, legal proceedings, going concern, convertible notes, warrants, financial statements, SEC, audit

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.