CANB.Can B CORP
10-Q: Can B Corp. Reports Q2 2024 Results, Shifts Focus to Cannabis Patents
Sentiment:
Quarterly Report
Can B Corp. announces its Q2 2024 results and a strategic shift towards commercializing cannabis patents after discontinuing its hemp operations.
Capital raiseThe company's ability to continue operations is dependent on raising capital through debt and/or equity markets.The company is seeking litigation funding to support Nascents patent protection efforts.
Worse than expectedThe company's revenues decreased compared to the previous year.The company reported a net loss.The company has negative working capital.
Summary
- Can B Corp. reported its financial results for the quarter ended June 30, 2024.
- The company has shifted its business focus to commercializing and enforcing cannabis patents acquired by its subsidiary, Nascent Pharma, LLC.
- This shift follows the discontinuation of the company's hemp operations due to the impact of an auction conducted by Arena Special Opportunities Partners I, L.P. and its affiliates.
- The company will continue to collect Duramed receivables and reestablish the production of the Longevity Brand Superfood drink mix for Brooke Burke Body, Inc.
- Revenues for the three months ended June 30, 2024, decreased by $148,306 compared to the same period in 2023.
- Revenues for the six months ended June 30, 2024, decreased by $718,515 compared to the same period in 2023.
- The company incurred a net loss of $2,028,623 for the three months ended June 30, 2024, and a net loss of $8,189,792 for the six months ended June 30, 2024.
- As of June 30, 2024, the company had cash and cash equivalents of $0 and negative working capital of $7,133,025.
- The company's ability to continue operations is dependent on protecting and commercializing cannabis patents, raising litigation funding, collecting Duramed receivables, reestablishing production for Brooke Burke Body, Inc., restructuring debt, and raising capital.
- The company's disclosure controls and procedures are deemed ineffective due to the small size of the accounting staff and the lack of segregation of duties.
Sentiment
Score: 3
Explanation: The document presents a challenging financial situation with a strategic shift that introduces uncertainty. The company's ability to continue as a going concern is questionable, and the ineffective disclosure controls add to the negative sentiment.
Positives
- The company is focusing on commercializing cannabis patents, which could provide a new revenue stream.
- The company is working to restructure outstanding indebtedness.
- The company is reestablishing the production of the Longevity Brand Superfood drink mix for Brooke Burke Body, Inc.
Negatives
- The company discontinued its hemp operations, which previously supported the durable medical equipment business.
- The company has a significant accumulated deficit of $110,670,490 as of June 30, 2024.
- The company has negative working capital of $7,133,025 as of June 30, 2024.
- The company's disclosure controls and procedures are deemed ineffective.
- The company's revenues have decreased compared to the previous year.
- The company is in default of certain terms of their Forbearance Agreement with Arena Special Opportunities Partners I, LP and Arena Special Opportunities Fund, LP.
Risks
- The company's ability to continue as a going concern is uncertain.
- The company is dependent on raising capital through debt and/or equity markets.
- The company faces legal proceedings, including a lawsuit filed by Arena.
- The company's disclosure controls and procedures are ineffective.
- The company's revenues have decreased compared to the previous year.
- The company is in default of certain terms of their Forbearance Agreement with Arena Special Opportunities Partners I, LP and Arena Special Opportunities Fund, LP.
Future Outlook
The company's future outlook is focused on protecting and commercializing cannabis patents acquired by Nascent, continuing to collect Duramed receivables, and reestablishing the production of the Longevity Brand Superfood drink mix for Brooke Burke Body, Inc.
Industry Context
The company's shift to commercializing cannabis patents reflects a strategic move in response to challenges in the hemp industry and aims to capitalize on the potential of the cannabis market.
Legal Proceedings
- 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 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.
- The Company, received a notice from Arena Special Opportunities Partners I, LP, Arena Special Opportunities Fund, LP and Arena Investors, LP (collectively, the Arena Entities or Arena) advising that by virtue of defaults in the performance of the obligations of the Company and its subsidiaries to the Arena Entities, the Arena Entities intended to conduct a public auction of certain assets of the Company and its subsidiaries under Article 9 of the Uniform Commercial Code.
- Arena filed a complaint in the Court against the Company, it subsidiaries and certain officers of the Company and its subsidiaries alleging tortious interference with the auction and seeking a declaratory judgment that the Company is in breach of the Arena Notes and the Forbearance Agreement and that Arena has the right to auction certain equipment held at a Company facility that is not owned by the Company or any of its subsidiaries.
- Quality Plaza Realty, LLC, the landlord of the Companys 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.
Stakeholder Impact
- Shareholders: The shift in business focus and financial challenges may impact shareholder value.
- Employees: The discontinuation of hemp operations and reduced staff at Duramed may lead to job losses.
- Customers: The discontinuation of hemp-derived products may affect customers who rely on those products.
- Creditors: The company's ability to repay debts is uncertain, potentially impacting creditors.
Next Steps
- Protecting and commercializing the cannabis patents acquired by Nascent.
- Raising litigation funding to support Nascents patent protection efforts.
- Continuing to collect Duramed receivables.
- Reestablishing the Companys production of the Longevity Brand Superfood drink mix for Brooke Burke Body, Inc.
- Restructuring outstanding indebtedness.
- Raising of capital through the debt and/or equity markets.
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 note (ASOP Note I) with Arena Special Opportunities Partners I, LP (ASOP). |
| 2021-05-31 | Date of convertible promissory note (ASOP Note II) with Arena Special Opportunities Partners I, LP. |
| 2022-01-01 | Date of convertible promissory note (Empire Note) with Empire Properties, LLC (Empire). |
| 2022-03-31 | Date of convertible promissory note (BL Note) with Blue Lake Partners, LLC (BL). |
| 2022-03-31 | Date of convertible promissory note (MH Note) with Mast Hill Fund, LP (MH). |
| 2022-04-30 | Date of convertible promissory note (FM Note) with Fourth Man, LLC (FM). |
| 2022-06-30 | Date of convertible promissory note (Alumni Note) with Alumni Capital, LP (Alumni). |
| 2022-08-31 | Date of convertible promissory note (WN) 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 agreements to extend maturity dates of 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 | Date of promissory note issued to ClearThink Capital Partners, LLC (ClearThink). |
| 2023-10-27 | Date of sale of a promissory note (the Initial Note) to WOMF pursuant to a Securities Purchase Agreement. |
| 2023-12-01 | Date the Company received a notice from Arena Special Opportunities Partners I, LP, Arena Special Opportunities Fund, LP and Arena Investors, LP (collectively, the Arena Entities or Arena) advising that by virtue of defaults in the performance of the obligations of the Company and its subsidiaries to the Arena Entities, the Arena Entities intended to conduct a public auction of certain assets of the Company and its subsidiaries under Article 9 of the Uniform Commercial Code. |
| 2023-12-31 | Arena agreed to forbear from exercising remedies under the Arena Notes until this date. |
| 2024-02-29 | Date the Company completed the sale of a promissory note in the principal amount of $75,000 to ClearThink. |
| 2024-03-14 | Auction of the assets of the Company's hemp division was conducted under Article 9 of the Uniform Commercial Code. |
| 2024-04-07 | Arena filed a complaint in the Court against the Company, it subsidiaries and certain officers of the Company and its subsidiaries alleging tortious interference with the auction and seeking a declaratory judgment that the Company is in breach of the Arena Notes and the Forbearance Agreement and that Arena has the right to auction certain equipment held at a Company facility that is not owned by the Company or any of its subsidiaries. |
| 2024-06-30 | End of the quarterly period. |
| 2024-07-31 | In July 2024, the Company settled a lawsuit brought against the Company in Florida pursuant to a Settlement Agreement which requires the Company to pay $ 50,000 to the plaintiff upon the recovery by Nascent of damages in excess of $ 5,000,000 from prospective litigation to enforce Nascents patent rights. |
| 2024-08-19 | Date of report. |
Keywords
cannabis patents, hemp operations, financial results, going concern, Duramed, Nascent Pharma, convertible notes, legal proceedings, liquidity, revenue
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