Can B Corp 10-Q for FY2021 Q2
Can B Corp (NASC)
About this 10-Q
Can B Corp filed this 10-Q on August 16, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $401.77K
- up 95.9% from $205.08K a year earlier
- Net loss
- $2.74M
- compared with a net loss of $1.23M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from __________ to __________
COMMISSION
FILE NUMBER:
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices)
(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 | ||
| 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.
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).
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 | ☐ | |
| ☒ | 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 ☒
The number of shares of the registrant’s only class of common stock issued and outstanding as of August 15, 2021 was shares.
Can B Corp.
FORM 10-Q
June 30, 2021
TABLE OF CONTENTS
| 2 |
PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements
Can B̅ Corp. and Subsidiaries
Consolidated Balance Sheets
| (Unaudited) | ||||||||
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, less allowance for doubtful accounts of $ | ||||||||
| Inventory | ||||||||
| Note receivable | ||||||||
| Operating lease right-of-use-asset - current | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets: | ||||||||
| Deposits | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Operating lease right-of-use-asset - noncurrent | - | |||||||
| Other noncurrent assets | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes and loans payable, net | ||||||||
| Operating lease liability - current | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Notes and loans payable, net | - | |||||||
| Operating lease liability - noncurrent | - | |||||||
| Total long-term liabilities | - | |||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, authorized shares: | ||||||||
| Series A Preferred stock, par value: shares authorized, issued and outstanding | ||||||||
| Series B Preferred stock, $ par value: shares authorized, issued and outstanding | - | - | ||||||
| Series C Preferred stock, $ par value: shares authorized, issued and outstanding | - | - | ||||||
| Series D Preferred stock, $ par value: shares authorized, issued and outstanding | - | |||||||
| Preferred Stock Value | - | - | ||||||
| Common stock, par value; shares authorized, and issued and outstanding at June 30, 2021 and December 31, 2020, respectively | ||||||||
| Treasury stock | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See notes to consolidated financial statements
| 3 |
Can B̅ Corp. and Subsidiaries
Consolidated Statement of Operations
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | ||||||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Service revenue | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income | - | |||||||||||||||
| Gain on debt extinguishment | - | - | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense | ( | ) | ( | ) | - | ( | ) | |||||||||
| Other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding - basic and diluted | ||||||||||||||||
See notes to consolidated financial statements
| 4 |
Can B̅ Corp. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2021 and 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Series C | Series D | Additional | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Treasury Stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, April 1, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services rendered | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock warrants and commitment shares in connection with convertible promissory note | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to note agreements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to note agreements, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for acquisition of intangible assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for acquisition of intangible assets, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for compensation, 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of common stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of common stock, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in lieu of note repayments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in lieu of note repayments, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for asset acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for asset acquisition, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock - reverse stock split rounding | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to FirstFire note agreement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to FirstFire note agreement, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, April 1, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services rendered | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to note agreements | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for acquisition of intangible assets | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for compensation | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2021 and 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Series C | Series D | Additional | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Treasury Stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Six months ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series C Preferred stock to Common stock | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of common stock | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in lieu of note repayments | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services rendered | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for asset acquisition | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock warrants and commitment shares in connection with convertible promissory note | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Six months ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services rendered | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock - reverse stock split rounding | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to FirstFire note agreement | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to note agreements | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for acquisition of intangible assets | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for compensation | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements
| 5 |
Can B̅ Corp. and Subsidiaries
Consolidated Statement of Cash Flows
| 2021 | 2020 | |||||||
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | - | |||||||
| Depreciation | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of original-issue-discounts | ||||||||
| Unrealized loss on investment | - | |||||||
| Bad debt expense | ||||||||
| Forgiveness of PPP loan | ( | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Deposits | ( | ) | - | |||||
| Other noncurrent assets | ||||||||
| Operating lease right-of-use asset | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Note receivable | - | |||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of intangible assets | ( | ) | - | |||||
| Investment in marketable security | - | ( | ) | |||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Proceeds received from notes and loans payable | ||||||||
| Proceeds from issuance of Series D Preferred Stock | - | |||||||
| Proceeds from sale of common stock | - | |||||||
| Repayments of notes and loans payable | ( | ) | ( | ) | ||||
| Deferred financing costs | - | ( | ) | |||||
| Net cash provided by financing activities | ||||||||
| Increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Non-cash Investing and Financing Activities: | ||||||||
| Issuance of common stock in lieu of repayments of notes payable | $ | $ | ||||||
| Amortization of prepaid issuance of common stock for services rendered | $ | $ | ||||||
| Issuance of common stock in asset acquisitions | $ | $ | ||||||
| Issuance of common stock for services rendered | $ | $ | ||||||
| Issuance of common stock warrants and commitment shares in connection with convertible promissory note | $ | $ | ||||||
See notes to consolidated financial statements
| 6 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2021
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
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 – Liquidity
The
consolidated financial statements have been prepared on a “going concern” basis, which contemplates the realization of assets
and liquidation of liabilities in a normal course of business. As of June 30, 2021, the Company had cash and cash equivalents of $
Note 3 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The accompanying unaudited 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, 2020 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, 2020 (“2020 Form 10-K”). The interim consolidated financial statements contained herein should be read in conjunction with the 2020 Form 10-K.
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.
| 7 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2021
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.
Management 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 2020 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 2020 Form 10-K.
Recently Adopted Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) issued the following accounting pronouncement which became effective for the Company in 2021, and which did not have a material impact on its condensed consolidated financial statements:
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which modifies ASC 740 to simplify the accounting for income taxes. ASU 2019-12 addresses the accounting for hybrid tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of legal entities not subject to tax, intraperiod tax allocation exception to incremental approach, ownership changes in investments - changes from a subsidiary to an equity method investment, ownership changes in investments - changes from an equity method investment to a subsidiary, interim period accounting for enacted changes in tax law and year-to-date loss limitation in interim period tax accounting.
Segment reporting
As of June 30, 2021, 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.
| 8 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2021
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 – Asset Acquisitions
Botanical Biotech Asset Acquisition
On
March 11, 2021, Company entered into an Asset Acquisition Agreement, which was fully executed on March 17, 2021, with multiple sellers
(each, a “Seller” and, collectively, the “Sellers”), pursuant to which the Sellers agreed to sell certain assets
to Company, and to transfer such assets to Botanical Biotech, LLC, a newly-formed, wholly-owned subsidiary of the Company (“Transferee”
or “BB”). The assets purchased (“BB Assets”) include certain materials and manufacturing equipment, marketing
or promotional designs, brochures, advertisements, concepts, literature, books, media rights, rights against any other person or entity
in respect of any of the foregoing and all other promotional properties, in each case primarily used, developed or acquired by the Sellers
for use in connection with the ownership and operation of the BB Assets. In exchange for the BB Assets the Company will pay the Seller
a maximum of $
In conjunction with the BB asset acquisition, the Company entered into employment agreements with two sellers.
The
Company and BB entered into an employment agreement with Lebsock dated March 11, 2021 (the “Lebsock Agreement”) pursuant
to which Lebsock will serve as the President of BB for a term of three (3) years. The term of the Lebsock Agreement will automatically
renew for an additional 3-year term unless other terminated by either party. Lebsock will receive a base salary equal to $
Effective
March 16, 2021, BB entered into a Consulting Agreement (the “Schlosser Agreement”) with Schlosser pursuant to which Schlosser
has agreed to provide consulting services to BB for a period of 3 months in exchange for compensation equal to $
| 9 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2021
Note 5 – Inventories
Inventories consist of:
Schedule of Inventories
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
Note 6 – Property and Equipment
Property and equipment consist of:
Summary of Property, Plant and Equipment
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Office equipment | ||||||||
| Manufacturing equipment | ||||||||
| Medical equipment | ||||||||
| Leasehold improvements | ||||||||
| Total | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
Depreciation
expense was $
Note 7 – Goodwill and Intangible Assets
Intangible assets consist of:
Schedule of Intangible Assets
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Technology, IP and patents | $ | $ | ||||||
| Hemp processing registration | ||||||||
| Total | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization
expense was $
Amortization expense for the balance of 2021, and for each of the next five years and thereafter is estimated to be as follows:
Schedule of Estimated Future Amortization Expense
| 2021 | ||||
| Six months ended December 31, 2021 | $ | |||
| Fiscal year 2022 | ||||
| Fiscal year 2023 | ||||
| Fiscal year 2024 | ||||
| Fiscal year 2025 | ||||
| Thereafter | ||||
| Intangible assets, net | $ |
There was no goodwill activity during the six months ended June 30, 2021 and 2020.
| 10 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2021
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 $
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 $
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 $
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 $
| 11 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2021
PPP Loan
In
2020, the Company received a loan under the U.S. Small Business Administration’s Paycheck Protection Program established under
the Coronavirus Aid Relief and Economic Security Act (“CARES act”) and related rules and regulations (the “PPP loan”)
of $
Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of such loans after eight weeks, if the loan is used for eligible purposes, including to fund payroll costs, mortgage interest, rent and/or utility costs, and meet certain other requirements, including, the maintenance of employment and compensation levels. The Company plans to use the entire PPP Loan for qualifying expenses and expects to qualify for full or partial forgiveness under the program.
In
May 2021, the Company received notice of forgiveness of the PPP loan in whole, including all accrued unpaid interest. In fiscal year
2021, the Company recorded the forgiveness of $
Related Party Loan
In
2020, the Company entered into a loan payable to a director of the Company with a principal balance of $
Note 9 – Stockholders’ Equity
Preferred Stock
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 shares of common stock. The shares of Series C Preferred Stock have voting rights as if fully converted.
| 12 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2021
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 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.
Common Stock
For
the six months ended June 30, 2021, the Company issued an aggregate of
Summary of Stock Options Activity
| Option Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | |||||||||||
| Outstanding, January 1, 2021 | $ | ||||||||||||
| Granted | $ | ||||||||||||
| Exercised | - | ||||||||||||
| Forfeited | - | ||||||||||||
| Expired | - | ||||||||||||
| Outstanding, June 30, 2021 | $ | ||||||||||||
| Option Shares | Weighted Average Grant-Date Fair Value | ||||||||
| Non-vested options, January 1, 2021 | $ | ||||||||
| Granted | $ | ||||||||
| Vested | |||||||||
| Forfeited | |||||||||
| Non-vested options, June 30, 2021 | $ | $ | |||||||
Note 11 – Income Taxes
The Company’s income tax provisions for the six and three months ended June 30, 2021 and 2020 reflect the Company’s estimates of the effective rates expected to be applicable for the respective full years, adjusted for any discrete events, which are recorded in the period that they occur. These estimates are reevaluated each quarter based on the Company’s estimated tax expense for the full year. The estimated effective tax rate includes the impact of valuation allowances in various jurisdictions.
Note 12 – Related Party Transactions
For
the six months ended June 30, 2021 and 2020, the Company paid fees to a service provider that is a relative of a director for professional
services in the amount of $
| 13 |
Can B̅ Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2021
Note 13 – Commitments and Contingencies
Employment Agreements
On
December 28, 2020, the Company entered into new three-year Employment Agreements with CEO Marco Alfonsi, CFO Stanley Teeple, and Pure
Health Products LLC Pasquale Ferro. Under these agreements, they are to receive a i) base salary of fifteen thousand dollars ($
Consulting Agreements
On
July 15, 2020, we engaged an advisor to provide consulting services under an Investor Relations and Advisory Agreement (the “Advisory
Agreement”). Pursuant to the Advisory Agreement, we agreed to pay the Consulting Firm a restricted common stock monthly fee of
$
Lease Agreements
We
determine if a contract contains a lease at inception. Our material operating lease is office space. Our leases generally have remaining
terms of
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an
underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases. Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term.
The Company leases office space in numerous medical facilities offices under month-to-month agreements.
Rent
expense for the six months ended June 30, 2021 and 2020 was $
At June 30, 2021, the future minimum lease payments under non-cancellable operating leases were:
Schedule of Future Minimum Lease Payments Under Non-cancellable Operating Leases
| 2021 | ||||
| Six months ended December 31, 2021 | $ | |||
| Fiscal year 2022 | ||||
| $ |
Note 14 – Subsequent Events
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the condensed consolidated financial statements are issued and as of that date, except as reported below, there were no subsequent events that required adjustment or disclosure in the consolidated financial statements.
On
August 12, 2021 the Company entered into an Equipment Acquisition Agreement with TWS Pharma, LLC, a Wisconsin limited liability company
and L7 TWS Pharma, LLC, a Wisconsin limited liability company (collectively, “TWS”) pursuant to which the Company agreed
to purchase certain equipment and inventory from TWS for a total purchase price equal to $
On
August 13, 2021 the Company entered into an Asset Purchase Agreement with Music City Botanicals, LLC, a Wisconsin limited liability company
(“MCB”) pursuant to which the Company agreed to purchase certain equipment, inventory, and intellectual property from MCB
for a total purchase price equal to $
| 14 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 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 subsidiary, Botantical Biotech, LLC (incorporated March 10, 2021). Botanical Biotech has also begun synthesizing delta-8 from hemp. Delta-8 can produce similar, though less potent, effects as delta-9 (commonly referred to as THC); however, the legality of hemp derived delta-8 is 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 six months ended June 30, 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.
The consolidated financial statements include the accounts of CANB and its operational wholly owned subsidiaries.
Results of Operations
Three months ended June 30, 2021 compared to three months ended June 30, 2020.
Revenues increased $196,682 from $205,084 in 2020 to $401,766 in 2021. The increase was due to the resumption of elective surgeries in 2021 which were temporarily paused through Q2 of 2020 due to the impact of the COVID-19 outbreak. Medical durable equipment utilized in elective surgeries is the Company’s primary medical device revenue. In addition, the increase was related to operations of the Company’s delta-8 synthesizing business which began in March 2021.
Cost of product sales increased $210,567 from $48,045 in 2020 to $258,612 in 2021 due to the increase in sales caused by increase in elective surgeries.
Operating expenses increased $1,452,486 from $1,276,512 in 2020 to $2,728,998 in 2021 as a direct result of professional fees incurred and attributable to the Company’s asset acquisitions and Regulation A offering.
Net loss increased $1,509,064 from $1,230,925 in 2020 to $2,739,989 in 2021. The increase was due to the $1,452,486 increase in total operating expenses coupled by the $13,885 decrease in gross profit.
Six months ended June 30, 2021 compared to six months ended June 30, 2020.
Revenues decreased $66,085 from $774,791 in 2020 to $708,706 in 2021. The decrease was due to the impact of the COVID-19 outbreak through the end of Q1 2021. The Company began to rebound and increase revenues compared to prior periods in Q2 of 2021 due to the resumption and surge of elective surgeries in Q2 2021. In addition, certain distributors lost clients due to business closings which had an additional impact on the Company’s overall revenue activity.
Cost of product sales increased $165,813 from $169,594 in 2020 to $335,407 in 2021 due to increase of inventory pricing in 2021 as well as operations of the Company’s delta-8 synthesizing business which began in March 2021.
| 15 |
Operating expenses increased $1,915,014 from $2,836,663 in 2020 to $4,751,677 in 2021 as a direct result of professional fees incurred and attributable to the Company’s asset acquisitions and Regulation A offering.
Net loss increased $2,554,839 from $2,365,032 in 2020 to $4,919,871 in 2021. The increase was due to the $1,915,014 increase in total operating expenses coupled by the $658,013 increase in interest expense, contrasted by gain on debt extinguishment of $196,899 due to forgiveness of the Company’s PPP loan.
Liquidity and Capital Resources
At June 30, 2021, the Company had cash and cash equivalents of $1,093,156 and a working capital of $1,040,562. Cash and cash equivalents increased $635,358 from $457,798 at December 31, 2020 to $1,093,156 at June 30, 2021. For the six months ended June 30, 2021, $4,167,002 was provided by financing activities, $3,187,638 was used in operating activities, and $344,006 was used in investing activities.
The Company currently has no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
We have no off-balance sheet arrangements.
Trend Information
The novel coronavirus disease of 2019 (“COVID-19”) outbreak has affected the Company’s operations as set forth above. The full impact of the COVID-19 outbreak continues to evolve. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the foreseeable future, however, as a direct result of medical offices closure in our primary area of operations, our sales for third quarter are down approximately 60% year over year and quarter over quarter. During the course of the pandemic situation, the Company laid off 80% of its workforce in the CBD business and are just now recovering those operations. Our inventory increased to over $500,000 due to lack of sales, but fortunately, the product shelf life exceeds two years so as sales increase, we expect inventory levels to level off at close to $200,000. Our Duramed division was tasked with 90% of the affiliate doctors ceasing operations for period from 4-8 months and are just now recovering full operations. Presently, our Duramed operations are at 60% of pre-COVID operational level. Our expectation that as business open, and in particular medical offices, that our recovery will progress in sync with the speed of the business openings and expect to be back to pre-COVID operational level by end of the 3rd quarter 2021.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of March 31, 2021, our principal executive officer and principal financial officer conducted an evaluation regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon the evaluation of these controls and procedures, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
| 16 |
(B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting in our fiscal quarter for the period March 31, 2021 covered by this Quarterly Report on Form 10-Q, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 28, 2021, the Company was served with a commercial legal action against the Company and certain officers by two investors of the Company (collectively, the “Investors”). The complaint was filed in the Supreme Court of the State of New York, County of Nassau, Index No. 605191/2021. The complaint alleges four causes of action including breach of contract and misrepresentations.
We have consulted with attorneys and believe the Investors’ complaints are without merit, factually inaccurate, and frivolous. We intend to vigorously defend ourselves against the aforementioned legal action and will likely bring counterclaims against the Investors.
Other than above, we are not aware of any pending or threatened legal proceedings in which we are involved.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide risk factors in this Form 10-Q, however The Company has been directly impacted and has experienced moderate interruption during this challenging COVID-19 pandemic. In accordance with applicable federal and state guidelines, the Company has implemented and prioritized strict social distancing measures, good manufacturing practices, proper sanitization measures, and new manufacturing guidelines. Although several Company customers have experienced business shutdowns during the last few weeks, this has dramatically impacted our online ordering and/or initiating new direct shipment orders. Additional COVID operating requirements to insure safety, handling requirements, sanitation requirements have placed a significant burden on order processing and fulfilment.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Sales of unregistered securities during the six months ended June 30, 2021 are as follows:
From January 1, 2021 through June 30, 2021 the Company issued an aggregate of 5,732,000 shares of Common Stock under its Reg A-1 registration currently in effect and an additional 406,114 shares of common stock to various consultants for services.
From January 1, 2021 through June 30, 2021 the Company issued an aggregate of 355,057 shares of Common Stock under an asset acquisition agreement with Botanical Biotech.
From January 1, 2021 through June 30, 2021 the Company issued an aggregate of 1,155,250 shares of Common Stock under various note conversion agreements.
From January 1, 2021 through June 30, 2021 the Company issued an aggregate of 150 shares of Preferred C shares under multiple employment agreements. The Preferred C shares converted to 3,750,000 shares of Common Stock upon issuance.
With respect to the transactions noted above, each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a “sophisticated person”, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
| 17 |
ITEM 6. EXHIBITS
| (1) | Filed with the Annual Report on Form 10-K filed with the SEC on April 2, 2020 and incorporated herein by reference. |
| (2) | Filed with the Form S-1 Registration Statement filed with the SEC on December 2, 2015 and incorporated herein by reference. |
| (3) | Filed with the Current Report on Form 8-K filed with the SEC on January 30, 2019 and incorporated herein by reference. |
| (4) | Filed with the Current Report on Form 8-K filed with the SEC on December 6, 2019 and incorporated herein by reference. |
| (5) | Filed with the Current Report on Form 8-K filed with the SEC on February 18, 2020 and incorporated herein by reference. |
| (6) | Filed with the Current Report on Form 8-K filed with the SEC on January 15, 2019 and incorporated herein by reference. |
| (7) | Filed with the Form 1-A/A, Part II, filed with the SEC on July 17, 2020 and incorporated herein by reference. |
| (8) | Filed with the Form 1-A POS, Part II, filed with the SEC on September 11, 2020 and incorporated herein by reference. |
| (9) | Filed with the Current Report on Form 8-K filed with the SEC on November 23, 2020 and incorporated herein by reference. |
| (10) | Filed with the Annual Report on Form 10-K filed with the SEC on April 14, 2021 and incorporated herein by reference. |
| (11) | Filed with the Quarterly Report on Form 10-Q filed with the SEC on May 21, 2021 and incorporated herein by reference. |
| 18 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Can B Corp. | ||
| Date: August 16, 2021 | By: | /s/ Marco Alfonsi |
| Marco Alfonsi, Chief Executive Officer | ||
| Date: August 16, 2021 | By: | /s/ Stanley L. Teeple |
| Stanley L. Teeple, Chief Financial Officer | ||
| 19 |
Exhibit 10.34
EQUIPMENT ACQUISITION AGREEMENT
This Equipment Acquisition Agreement (the “Agreement”) made as of the 12th day of August, 2021 by and between, Can B̅ Corp., a Florida corporation (“CANB”), CO Botanicals LLC, a Nevada limited liability company and wholly owned subsidiary of CANB (“Buyer”), and TWS Pharma, LLC, a Wisconsin limited liability company, and L7 TWS Pharma, LLC a Wisconsin limited liability company (each a “Seller” and collectively as, “Sellers”).
RECITALS
WHEREAS, Sellers hold title to certain equipment that may be used in connection with the operation of a business primarily engaged in the cultivation of hemp and extraction of hemp derived cannabinoids; and
WHEREAS, Buyer desires to acquire certain equipment of Sellers.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt of which is hereby acknowledged, the Seller and Buyer (each, a “Party” and, collectively, the “Parties”) hereby agree as follows:
AGREEMENT
1. ACQUISITION OF THE ASSETS
1.01. PURCHASED ASSETS. Upon the terms and subject to the conditions of this Agreement, at Closing (as defined in this Agreement), Sellers shall sell, convey, transfer, assign, and deliver to Buyer, and Buyer shall purchase from Sellers, free and clear of all claims, actions, suits, proceedings, debts, liens, encumbrances, security interests, demands, and liabilities of any kind (collectively, “Liens”), all of Sellers’ right, title, and interest in, to, and under all equipment set forth on Schedule 1.01 of this Agreement (the “Assets”). Schedule 1.01 will list each Asset and the Seller who owns such Asset as well as the allocation of the Purchase Price towards such Asset in accordance with Section 1.03. Notwithstanding the foregoing, Sellers shall have ninety (90) days to provide good and marketable title to the 2018 Ford F-750 Truck (VIN 1FDWX7DCXJDF03284), 2018 Nissan Titan (VIN 1N6BA1F3XJN530989), and Polaris Sportsman (each a “Vehicle” and collectively, “Vehicles”). For the avoidance of doubt, no other assets of Sellers are included in the transaction contemplated hereby and, accordingly, the same are not to be transferred hereunder and the terms “Assets” shall be interpreted to reflect the same.
| 1 of 14 |
| Initials: _____, _____, _____ |
1.02. CONSIDERATION FOR THE ASSETS. In consideration for the sale and transfer of the Assets, and subject to the terms and conditions of this Agreement, CANB and Buyer shall pay Sellers $5,316,774 (the “Purchase Price”), payable as follows: (i) $1,250,000 payable in a 12-month promissory note, substantially in the form of Exhibit 1.02(a), at 6% simple interest with monthly payments of $100,000 per month, with the first payment being due upon Closing and each payment being due on the same date each month thereafter. The first $500,000 of payments of the promissory note will be secured by 1,000,000 shares of CANB’s common stock pursuant to a stock power substantially in the form of Exhibit 1.02(b), to be held in escrow as agreed by CANB and Sellers pursuant to an escrow agreement substantially in the form of Exhibit 1.02(c). Should Buyer or CANB default in payment of the first $500,000 of note which default remains uncured pursuant to the terms of the promissory note, the shares will be issued to Sellers and should Buyer and CANB make the first $500,000 in payments under the promissory note, the stock power will be released to CANB, (ii) $125,000 in the form of shares of common stock of CANB (with standard restrictive legend, the “Shares”) issued to Master Smith Enterprises, LLC in exchange for its release of any and all claims against Buyer, Sellers, and the Assets, (iii) $125,000 in the form of Shares issued to Smith Systems, LLC in exchange for its release of any and all claims against Buyer, Sellers, and the Assets, and (iv) $3,800,000 in the form of Shares. All Shares issued pursuant to this Agreement shall be based upon a price of $0.62 per share. Notwithstanding the foregoing, at Closing, CANB shall withhold $1,750,000 of the Shares for a period of ninety (90) days from the Closing Date pursuant to an escrow agreement substantially in the form of Exhibit 1.02(d). Should Buyer or CANB discover during such period that the Assets are not in the same condition as they were when inspected by CANB in June 2021, any of the Assets are non-operational or materially defective, or Sellers’ representations in Section 2.03 of this Agreement are incorrect (“Defect”), and upon the expiration of thirty (30) days written notice with specificity of any Defect to Sellers, during which time Sellers shall have the right to inspect and repair the Defect, the Purchase Price shall be reduced by the value allocated to said piece of equipment pursuant to Section 1.03, which reduction shall be taken from the Shares withheld by CANB. Further, if Buyer does not receive good and marketable titles to any Vehicle within said 90-day period, the Purchase Price shall be reduced by the value of said Vehicle and it will not be included in the Assets being purchased by Buyer. Any amount remaining at the end of ninety (90) days and any applicable cure period will be delivered to Sellers. The Purchase Price will be allocated to Sellers in accordance with Schedule 1.02.
1.03. ALLOCATION. The Purchase Price will be allocated among the Assets as agreed by the parties in writing prior to Closing, and the parties will be bound by that allocation in reporting the transactions contemplated by this Agreement to any governmental authority (including without limitation the Internal Revenue Service).
1.04. CLOSING. The Closing shall take place at the offices of CANB, within three (3) business days from the date all Closing conditions have been satisfied, or at such other place, time or date (including by the exchange of facsimile and/or PDF signatures) as may be mutually agreed upon in writing by the Parties (the “Closing Date”).
2. REPRESENTATIONS OF THE SELLERS
Each Seller, hereby represents and warrants to CANB and Buyer as follows (liability for such representations and warranties shall be joint and several to the extent a Seller has actual knowledge of the representations or misrepresentations being made by the other Seller):
2.01. ORGANIZATION. Each Seller is duly organized, validly existing and in good standing under the laws of its State of incorporation or organization, and has all requisite power and authority to own its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.
| 2 of 14 |
| Initials: _____, _____, _____ |
2.02. MARKETABLE TITLE. Each Seller has good and marketable title to those Assets being sold by it, free and clear of any and all liens, charges, encumbrances or third-party rights whatsoever. If any such encumbrances exist at or prior to Closing they shall be released by such secured party at or prior to Closing. The use of the Assets is not subject to any lien, and such use does not encroach on the property or rights of any person. Notwithstanding the foregoing, Sellers represent and warrant that TWS Pharma, LLC is in the process of obtaining good and marketable title to the Vehicles.
2.03. TANGIBLE ASSETS. To each Seller’s actual knowledge, all tangible Assets are free from known defect (patent and latent), have been maintained in accordance with normal industry practice, are in good operating condition and repair (subject to normal wear and tear), and are suitable for the purposes for which they presently are used. To each Seller’s actual knowledge, there has been no change to the condition of the Assets since the inspection performed by CANB in June 2021.
2.04. CONSENT. Each Seller is not a party to, subject to or bound by any agreement (other than an agreement requiring certain notices and consents which have been given or obtained, as applicable) or any judgment, order, writ, prohibition, injunction or decree of any court or other governmental body which would prevent the execution or delivery of this Agreement by the Seller or the transfer, conveyance and sale of the Assets to the Buyer pursuant to the terms hereof.
2.05. AUTHORIZATION. The execution and delivery of this Agreement by each Seller and the agreements provided for herein, and the consummation by each Seller of all transactions contemplated hereunder and thereunder by each Seller, have been duly authorized by all requisite company action. This Agreement has been duly executed by each Seller. This Agreement and all other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which each Seller is a party constitute the valid and legally binding obligations of each Seller, enforceable against it in accordance with their respective terms. The execution, delivery and performance by each Seller of this Agreement and the agreements provided for herein, and the consummation by each Seller of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to each Seller; (b) violate any judgment, decree, order or award of any court, governmental body or arbitrator; or (c) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of each Seller pursuant to, any indenture, mortgage, deed of trust, security agreement or other instrument or agreement to which each Seller is a party or by which each Seller or any of its properties is or may be bound. Each Seller has the full right, power and authority to enter into, and execute this Agreement and to transfer, convey and sell to the Buyer the Assets owned by said Seller at the Closing. All corporate action of each Seller necessary for such execution and delivery and the performance hereof and thereof has been duly taken and, upon consummation of the purchase contemplated hereby, the Buyer will acquire from each Seller good and marketable title to the Assets owned by said Seller free and clear of all liens and encumbrances.
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2.06. ABSENCE OF UNDISCLOSED LIABILITIES. To each Seller’s actual knowledge, Sellers have disclosed to CANB in Schedule 2.06 all liabilities relating to or affecting the Assets owned by said Seller or its use or said Seller’s business to the extent it could affect the Assets.
2.07. LITIGATION. With respect to the Assets, there is no action, suit or proceeding to which each Seller is a party (either as a plaintiff or defendant) pending or threatened before any court or governmental agency, authority, body or arbitrator and, to the actual knowledge of each Seller, there is no basis for any such action, suit or proceeding; and there is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency enjoining or requiring either Seller to take any action of any kind with respect to the Assets.
2.08. CONTRACTS AND COMMITMENTS. Except as set forth in Schedule 2.08, neither Seller is a party to any contract relating to or effecting the Assets.
2.09. COMPLIANCE WITH AGREEMENTS AND LAWS. Neither Seller is in violation in any material respect of any law or regulation relating to its Assets.
2.10 FULL DISCLOSURE. There are no materially misleading statements in any of the representations and warranties made by either Seller in this Agreement, the Exhibits or Schedules to this Agreement, or any certificates or correspondence.
2.11 LEGEND. The Sellers acknowledge and agree that the certificate (or certificates) representing the Shares, shall bear substantially the following legend:
“SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY OTHER SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED EXCEPT (I) UPON EFFECTIVE REGISTRATION OF THE SECURITIES UNDER THE ACT AND OTHER APPLICABLE SECURITIES LAWS COVERING SUCH SECURITIES, OR (II) UPON ACCEPTANCE BY THE COMPANY OF AN OPINION OF COUNSEL IN SUCH FORM AND BY SUCH COUNSEL, OR OTHER DOCUMENTATION, AS IS SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED..”
2.12 SHARES. Each Seller: (a) is aware that the Shares are “restricted securities,” as defined in Rule 144 under the Act, and there is a limited market in which to trade the Shares, (b) has had a chance to review the business and financials of CANB and has reviewed the filings made by CANB with the SEC, (c) has had the opportunity to consult with counsel as to receipt of the Shares, (d) is sophisticated and or has experience investing in shares of development stage companies like CANB, (e) has a financial condition such that the Seller can afford to bear the economic risk of holding the Shares for an indefinite period of time and has adequate means for providing for the Seller’s current needs and personal contingencies, (f) can afford to suffer a complete loss of its investment in the Shares, (g) understands and has taken cognizance of all risk factors related to the receipt of the Shares, (h) agrees that the Shares are being acquired by the Seller for his/her/its own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Act, (i) has no present intention of selling or otherwise distributing the Shares in violation of the Securities Act, and (j) is an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act.
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3. REPRESENTATIONS OF CANB AND THE BUYER
CANB and the Buyer, jointly and severally, hereby represent and warrant to the Sellers that:
3.01. ORGANIZATION AND AUTHORITY. CANB and Buyer are duly organized, validly existing and in good standing under the laws of the State of their formation, and have all requisite power and authority (corporate and other) to own their properties and to carry on their business as now being conducted. CANB and Buyer have full power to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.
3.02. AUTHORIZATION. The execution and delivery of this Agreement by CANB and Buyer, and the agreements provided for herein, and the consummation by CANB and Buyer of the transactions contemplated hereby and thereby, have been duly authorized by all requisite corporate action. This Agreement and all such other agreements and written obligations entered into and undertaken in connection with the transactions contemplated hereby constitute the valid and legally binding obligations of CANB and Buyer, enforceable against CANB and Buyer in accordance with their respective terms. The execution, delivery and performance of this Agreement and the agreements provided for herein, and the consummation by CANB and Buyer of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to CANB and Buyer, (b) violate the provisions of CANB or Buyer’s formation documents, (c) violate any judgment, decree, order or award of any court, governmental body or arbitrator, or (d) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of CANB and Buyer pursuant to, any indenture, mortgage, deed of trust or other agreement or instrument to which Buyer is a party or by which Buyer is or may be bound.
3.03. SHARES. When issued, the Shares will be duly authorized, validly issued, fully-paid and non-assessable
3.04. ANTI-SANDBAGGING. CANB and Buyer acknowledge that they have had the opportunity to conduct due diligence and investigation with respect to Sellers and the Assets, and in no event shall either Seller have any liability to CANB or Buyer with respect to a breach of a representation or warranty under this Agreement if CANB or Buyer knew or should have known of such breach as of the Closing Date.
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4. ACCESS TO EQUIPMENT. From the date of this Agreement until the Closing Date, Sellers shall afford the officers, manager, attorneys, accountants and other authorized representatives of CANB and Buyer reasonable access upon reasonable notice and during normal business hours to inspect the Assets, so that the examining party may have an opportunity to make such inspection as it shall desire.
5. CONDITIONS TO OBLIGATIONS OF CANB
The obligations of CANB and Buyer under this Agreement are subject to the fulfillment, at the Closing Date, of the following conditions precedent, each of which may be waived in writing in the sole discretion of CANB and Buyer:
5.01. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE SELLERS; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. All representations and warranties of the Sellers shall be true and correct in all material respects on and as of the Closing Date as though such representations and warranties were made on and as of such date (except where such representations are made as of a specific date in which case such representations shall be true and correct as of such date), except for any changes permitted by the terms hereof or consented to in writing by CANB and Buyer. The Sellers shall have performed and complied with all terms, conditions, covenants, obligations, agreements and restrictions required by this Agreement to be performed or complied with by it prior to or at the Closing Date.
5.02. PERFORMANCE BY THE SELLERS. At the Closing, each Seller shall have delivered to the Buyer a certificate signed by such Seller or a duly authorized officer of the Seller, as applicable, as to the Seller’s compliance with Section 5.01 hereof.
5.03. Corporate Proceedings. all consents required to be taken on the part of the Seller to authorize or carry out this Agreement shall have been taken and the Sellers shall have delivered to Buyer a copy of the resolutions of its managers and members authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby.
5.04. ADVERSE PROCEEDINGS. No action or proceeding by or before any court or other governmental body shall have been instituted or threatened by any governmental body or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by this Agreement or which might affect the right of any Seller to transfer the Assets.
5.05 PROOF OF CLEAR TITLE. Sellers shall have each provided Buyer with proof of ownership of the Assets and removal of all Liens on the Assets.
5.06 OTHER AGREEMENTS. CANB shall, in good faith, negotiate and enter into definitive agreements and for the following, which closing of such transactions will be conditions subsequent to this sale of Assets, with the closings expected to occur within hours of each other:
(a) Joint venture processing agreement with Botanix Equities, LLC;
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(b) Leases for CANB’s lease of space in Mead and Fort Morgan, CO and a lease with Red Road Business Park, LLC for the property located at 204 Red Road, McMinnville, TN 37110; and
(c) Purchase of assets from Music City Botanicals LLC.
5.07. CLOSING DELIVERIES. At the Closing:
(a) The Seller shall deliver to the Buyer, or shall otherwise put the Buyer in sole and exclusive control of, all Assets free and clear all Liens or encumbrances;
(b) Seller shall deliver to CANB a certificate of the applicable secretary of the State as to the legal existence and good standing of such Seller in such state within three prior days of Closing; and
(c) the Sellers shall deliver to the Buyer one or more bills of sale or assignments of Assets to Buyer in such forms as approved by Buyer, duly executed by the applicable Seller or an authorized officer of the Seller, as applicable.
6. CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement are subject to the fulfillment, at the Closing Date, of the following conditions precedent, each of which may be waived in writing in the sole discretion of the Sellers:
6.01. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and warranties of Buyer in this Agreement shall be true on and as of the Closing Date as though such representations and warranties were made on and as of such date (except where such representations are made as of a specific date, in which case such representations shall be true and correct as of such date), except for any changes consented to in writing by the Sellers. Buyer shall have performed and complied with all terms, conditions, covenants, obligations, agreements and restrictions required by this Agreement to be performed or complied with by them prior to or at the Closing Date.
6.02. PERFORMANCE BY CANB AND BUYER. At the Closing, CANB and Buyer shall have delivered to the Sellers a certificate signed by a duly authorized officer of both CANB and Buyer as to the CANB’s and Buyer’s compliance with Section 6.01 hereof.
6.03. CORPORATE PROCEEDINGS. All corporate and other proceedings required to be taken on the part of CANB to authorize or carry out this Agreement shall have been taken.
6.04. CONSENTS. Buyer shall have received all requisite consents and approvals of all lenders, and other third parties whose consent or approval is required in order for the Buyer to consummate the transactions contemplated by this Agreement.
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6.05. ADVERSE PROCEEDINGS. No action or proceeding by or before any court or other governmental body shall have been instituted or threatened by any governmental body or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by this Agreement or which might reasonably be expected to adversely affect the obligation of Buyer to pay the Consideration to the Sellers.
7. INDEMNIFICATION
7.01. GENERAL.
(a) By the Sellers. The Sellers shall jointly and severally indemnify and hold harmless the CANB and Buyer, and their respective directors, officers, employees, agents, successors and assigns (the “Buyer Indemnitees”) from and against all actual claims, damages, losses, liabilities, costs and expenses including, without limitation, settlement costs and any reasonable legal, accounting or other expenses for investigating or defending any actions or threatened action (but expressly excluding indirect, incidental, exemplary, special, consequential or punitive damages (including, without limitation, diminution in value, loss of future revenue or income, or loss of business reputation or opportunity)) (collectively, the “Losses”) actually incurred by the Buyer Indemnitees in connection with each and all of the following:
(i) any misrepresentation or breach of any representation or warranty made by the Seller in this Agreement;
(ii) any breach of any covenant, agreement or obligation of the Sellers contained in this Agreement or any other agreement, instrument or document contemplated by this Agreement;
(iii) any liability of the Sellers;
(iv) any claims, suits, actions, proceedings (formal and informal), investigations, judgments, deficiencies, damages, settlements, liabilities, losses, costs and legal and other expenses arising out of or based upon the Sellers’ ownership of the Assets prior to Closing; and
(v) any claims made by third parties against the Sellers as a result of the transactions contemplated hereby, including but not limited to any labor/employment and tax related claims.
(b) By Buyer. Buyer shall indemnify and hold harmless the Seller and its respective stockholders, members, managers, directors, officers, employee, agents, successors and assigns (the “Seller Indemnitees”), from and against all Losses actually incurred by the Seller Indemnitees in connection with each and all of the following:
(i) any misrepresentation or breach of any representation or warranty made by Buyer in this Agreement;
(ii) any breach of any covenant, agreement or obligation of Buyer contained in this Agreement or any other agreement, instrument or document contemplated by this Agreement; and
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(iii) any claims, suits, actions, proceedings (formal and informal), investigations, judgments, deficiencies, damages, settlements, liabilities, losses, costs and legal and other expenses arising out of or based upon CANB’s and Buyer’s ownership of the Assets after Closing.
7.02. CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for indemnification under this Section 7, the party seeking indemnification (the “Indemnified Party”), shall promptly notify the other party (the “Indemnifying Party”) in writing of the claim and, when known, the facts constituting the basis for such claim. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third party, the notice shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. The Indemnified Party shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder without the prior written consent, which shall not be unreasonably withheld or delayed, of the Indemnifying Party; provided, however, that if a suit shall have been instituted against the Indemnified Party and the Indemnifying Party shall not have taken control of such suit after notification thereof as provided in Section 7.03 of this Agreement, the Indemnified Party shall have the right to settle or compromise such claim upon giving prior written notice to the Indemnifying Party as provided in Section 7.03.
7.03. DEFENSE BY THE INDEMNIFYING PARTY. In connection with any claim which may give rise to indemnity hereunder resulting from or arising out of any claim or legal proceeding by a person other than the Indemnified Party, the Indemnifying Party, at its sole cost and expense, may, upon written notice to the Indemnified Party, assume the defense of any such claim or legal proceeding if the Indemnifying Party acknowledges to the Indemnified Party in writing the obligation of the Indemnifying Party to indemnify the Indemnified Party with respect to all elements of such claim. If the Indemnifying Party assumes the defense of any such claim or legal proceeding, the Indemnifying Party shall select counsel reasonably acceptable to the Indemnified Party to conduct the defense of such claims or legal proceedings and at the sole cost and expense of the Indemnifying Party shall take all steps necessary in the defense or settlement thereof. The Indemnifying Party shall not consent to a settlement of, or the entry of any judgment arising from, any such claim or legal proceeding, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed) unless the settlement is only for cash and includes a full release of the Indemnifying Party. Without limitation, it shall not be deemed unreasonable to withhold consent to a settlement if equitable relief against the Indemnified Party is contemplated, awarded or stipulated, the Indemnified Party is required to make an admission of civil liability or to the commission of a crime, or money is required to be paid by the Indemnified Party. The Indemnified Party shall be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense. If the Indemnifying Party does not assume the defense of any such claim or litigation resulting therefrom within 30 days after the date such claim is made: (a) the Indemnified Party may defend against such claim or litigation in such manner as it may deem appropriate, including, but not limited to, settling such claim or litigation, after giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. If the Indemnifying Party thereafter seeks to question the manner in which the Indemnified Party defended such third-party claim or the amount or nature of any such settlement, the Indemnifying Party shall have the burden to prove by a preponderance of the evidence that the Indemnified Party did not defend or settle such third party claim in a reasonably prudent manner.
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7.04. SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION. All representations, warranties and covenants made by the Sellers, CANB, and the Buyer in this Agreement, with the express exception of representations and warranties of Seller pursuant to Section 2.03, or in any exhibit or schedule furnished in connection with this Agreement or the transactions between the parties contemplated hereby, shall survive the Closing and the consummation of the transactions contemplated hereby for thirty-six (36) months. Notwithstanding the foregoing, (a) the representations and warranties of the Sellers contained in Section 2.03 shall survive the Closing and the consummation of the transactions contemplated hereby for a period ninety (90) days and any claim for indemnification for breach of a representation and warranty made therein shall be limited to the reduction of the purchase price pursuant to Section 1.02, and (b) any valid claim that is properly asserted in writing pursuant to Section 7.01 and/or 7.02 prior to the expiration as provided in this Section 7.04 of the representation or warranty that is the basis for such claim shall survive until such claim is finally resolved and satisfied. Notwithstanding anything herein to the contrary, the covenants set forth herein at Section 7.01 hereof shall survive for an indefinite period of time unless otherwise set forth in such section.
8. RESTRICTIVE COVENANTS
8.01. CONFIDENTIALITY. The Parties acknowledge that the Confidential Information (as defined below) is a valuable and unique asset and covenants that it will not disclose any such Confidential Information after Closing to any person for any reason whatsoever, unless such information is (a) within the public domain through no wrongful act of the disclosing Party, (b) has been rightfully received from a third party without restriction and without breach of this Agreement, or (c) is required by law to be disclosed or is disclosed for purposes of defending claims related to the Seller in a manner designed to protect the confidentiality of the Confidential Information. “Confidential Information” means information relating to the business of the Parties that is not in the public domain or readily determinable by reference to publicly available sources and specifically including, without limitation, information and knowledge pertaining to products and services offered, innovations, ideas, plans, trade secrets, proprietary information, advertising, sales methods and systems, sales and profit figures, customer and client lists, and relationships with dealers, customers, and clients, suppliers and others who have business dealings with such parties.
8.02. NON-DISPARAGEMENT. No Party hereto will disparage or otherwise publish or communicate derogatory statements or opinions about any other party or their respective affiliates, practices, businesses, or personnel, to any person or entity, be it orally, in writing, or otherwise. For purposes of this Agreement, “derogatory” means a statement that detracts from one’s character, standing, or reputation.
8.03. ADDITIONAL TERMS. The provisions of this Article 8 will survive Closing to the maximum extent permitted by law.
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9. TERMINATION OF AGREEMENT
9.01. TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be terminated by the mutual written agreement of the parties hereto prior to the Closing Date. Any party not in breach may terminate this Agreement if the Closing Date has not occurred within ninety (90) days from the date of this Agreement, provided that such date may be extended by the mutual written consent of the parties.
9.02. TERMINATION BY REASON OF BREACH. This Agreement may be terminated by the mutual agreement of Sellers, if at any time prior to the Closing there shall occur a material breach of any of the representations, warranties or covenants of Buyer or the failure by Buyer to perform any condition or obligation hereunder, and may be terminated by Buyer, if at any time prior to the Closing there shall occur a material breach of any of the representations, warranties or covenants of the Sellers or the failure of the Sellers to perform any condition or obligation hereunder. Written notice of any such termination must be delivered by the terminating Party to the non-terminating Party and non-terminating Party shall have thirty (30) days to cure said breach. If such breach shall remain uncured by such thirtieth (30th) day then this Agreement may be terminated.
10. NOTICES
All notices, requests, consents, instructions and other communications required or permitted to be given hereunder shall be in writing and sent by nationally-recognized, next-day delivery service or mailed by certified or registered mail, return receipt requested, postage prepaid, or by facsimile transmission confirmed in writing by next-day delivery service or by e-mail, to the address, facsimile number, or e-mail address as set forth next to each party’s name of the signature page hereof, as the same may be amended by any party by providing written notice of the same to the other parties. Receipt of such notices shall be deemed to occur on the date of actual receipt if delivered by registered or certified mail, if sent by facsimile or e-mail six (6) hours from the time of transmission (provided such facsimile or E-mail is sent within two hours prior to the end of normal business hours on a business day or, if not, on the next business day) and confirmed in writing by next-day delivery service, or one (1) business day after it is sent by nationally-recognized, next-day delivery service.
11. SUCCESSORS AND ASSIGNS
Neither this Agreement nor any of the rights or obligations under this Agreement, may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any party hereto without the prior written consent of the other party hereto, and any such assignment without such prior written consent shall be null and void; provided, however, that (i) the Buyer may, without the prior written consent of the Sellers, assign all or any portion of its rights and obligations under this Agreement to one (1) or more of its direct or indirect wholly-owned subsidiaries and (ii) that Sellers, without prior written consent of CANB or Buyers, may assign all or any portion of their rights, but not obligations, under this Agreement to a third-party. Subject to the preceding sentence, this Agreement shall be binding upon, shall inure to the benefit of, and shall be enforceable by the parties hereto and their permitted successors and assigns, including all limitations on transfer and ownership of the Shares as restricted securities under the law. No assignment shall relieve the assigning party of any of its obligations hereunder.
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12. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS
(a) This Agreement, all Schedules and Exhibits hereto, and all agreements and instruments to be delivered by the parties pursuant hereto represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersede all prior oral and written and all contemporaneous oral negotiations, commitments and understandings between such parties. This Agreement may only be modified or amended by a written instrument executed by the parties hereto.
(b) If the provisions of any Exhibit or Schedule to this Agreement are inconsistent with the provisions of this Agreement, the provisions of the Agreement shall prevail. The Exhibits and Schedules attached hereto are hereby incorporated as integral parts of this Agreement.
13. SEVERABILITY
Any provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction.
14. EXPENSES
Except as otherwise expressly provided herein, each party will pay all their respective fees and expenses (including, without limitation, legal and accounting fees and expenses) incurred by them in connection with the transactions contemplated hereby. The Sellers shall be responsible for payment of all sales or transfer taxes arising out of the conveyance of the Assets.
15. GOVERNING LAW/JURISDICTION
This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties hereto (a) submits to the exclusive jurisdiction of any state or federal court sitting in the State of New York in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in any other court and (e) waives any right it may have to a trial by jury with respect to any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Each party is entitled to bring an action for temporary or preliminary injunctive relief at any time in any court of competent jurisdiction in order to prevent irreparable injury that might result from a breach of this Agreement.
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16. SECTION HEADINGS
The section headings are for the convenience of the parties and in no way alter, modify, amend, limit, or restrict the contractual obligations of the Parties.
17. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. Counterparts may be executed and delivered using electronic means, which in each case will have the same effect as a counterpart manually signed and delivered.
18. PREVAILING PARTY
If a party brings a claim or lawsuit against the another party to this Agreement to interpret or enforce any of the terms of this Agreement, the prevailing party shall, in addition to all other damages, be entitled to reasonable attorneys’ fees and costs, costs of witnesses, and costs of investigation from the non-prevailing party.
19. THIRD PARTY BENEFICIARIES
This Agreement is not intended to and shall not be construed to give any third party any interest or rights (including, without limitation, any third-party beneficiary rights) with respect to or in connection with any agreement or provision contained herein or contemplated hereby.
20. FURTHER ASSURANCES
Each of the parties hereto shall from time to time at the request of the other parties hereto, and without further consideration, execute and deliver to such other party such further instruments of assignment, transfer, conveyance and confirmation and take such other action as the other party may reasonably request in order to more effectively fulfill the purposes of this Agreement.
21. CONSULTATION WITH INDEPENDENT COUNSEL
The Parties have had the opportunity to consult with their own legal counsel and other advisors and are entering into this Agreement voluntarily and with a full understanding of the meaning and legal effects of each provision contained in this Agreement. In the event of any dispute regarding the interpretation of any provision of this Agreement, the Parties agree that this Agreement and the provisions hereof shall not be construed against any one party as the drafter of this Agreement.
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IN WITNESS WHEREOF, this Equipment Acquisition Agreement has been duly executed by the Parties hereto as of the date first above written.
| CANB: | Can B Corp. | |
| By: | ||
| Name: | Marco Alfonsi, CEO |
| BUYER: | CO Botanicals LLC | |
| Can B Corp., its Manager | ||
| By: | ||
| Name: | Marco Alfonsi, CEO of CANB |
| SELLERS: | ||
| TWS Pharma, LLC | ||
| By: | ||
| Name: | David Stock | |
| Title: | Manager | |
| By: | ||
| Name: | Lance Lins | |
| Title: | Manager |
| L7 TWS Pharma, LLC | ||
| By: | ||
| Name: | David Stock | |
| Title: | Manager |
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Exhibit 1.01(a)
Promissory Note
| Initials: _____, _____, _____ |
Exhibit 1.01(b)
Stock Power
| Initials: _____, _____, _____ |
Exhibit 1.01(c)
Note Escrow Agreement
| Initials: _____, _____, _____ |
Exhibit 1.01(d)
Share Escrow Agreement
| Initials: _____, _____, _____ |
Schedule 1.01
Assets
| Initials: _____, _____, _____ |
Schedule 1.02
Allocation of Purchase Price
| Initials: _____, _____, _____ |
Schedule 2.06
Liabilities
| Initials: _____, _____, _____ |
Schedule 2.08
Contracts
| Initials: _____, _____, _____ |
Exhibit 10.35
PROMISSORY NOTE
| Loan Amount: | $1,250,000.00 |
FOR VALUE RECEIVED, Can B̅ Corp., a Florida corporation (“Payor”), promises to pay to TWS Pharma, LLC, a Wisconsin limited liability company, (“Payee”), the principal sum of One Million Two Hundred Fifty Thousand and 00/100 Dollars ($1,250,000.00) (this amount is called “Principal”), together with interest on the unpaid Principal balance and accumulated interest at the rate of six percent (6%) simple interest per annum, for a term of twelve (12) months, to be paid on or before the date twelve months from Closing (the “Maturity Date”).
This Note has been executed and delivered pursuant to and in accordance with the terms and conditions of that certain Equipment Purchase Agreement dated of even date herewith (the “Purchase Agreement”), by and between Payor and Payee. All terms and conditions of the Purchase Agreement are incorporated in this Note and made a part of this Note. Capitalized terms used in this Note that are not otherwise defined in this Note shall have the respective meanings set forth in the Purchase Agreement.
1. Payments. Payor shall make twelve (12) equal monthly payments of principal and interest of One Hundred, Seven Thousand, Five Hundred, Eighty-Three Dollars and Four Cents ($107,583.04) to Payee commencing at Closing and on the same day of each month thereafter during the term of this Note and a final payment of all outstanding Principal and interest on the Maturity Date. All payments of Principal and interest on this Note shall be made by check at Payee’s address, 2222 American Boulevard, De Pere, WI 54115, or at such other place as Payee shall designate to Payor in writing or by wire transfer of immediately available funds to an account designated by Payee in writing. If the payment of Principal or interest on this Note is due on a day that is not a business day, such payment shall be due on the next succeeding business day, and such extension of time shall be taken into account in calculating the amount of interest payable under this Note. Business day means any day other than a Saturday, Sunday, or Federal holiday. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest and then to Principal.
2. Security. The first $500,000 of payments under this Note is secured by a stock power, which shall be held in Escrow pursuant to an Escrow Agreement executed by Payor and Payee. The Payee shall be entitled to all the benefits of the security as provided in the stock power, provided that the Payee shall not be obligated to proceed first against the collateral but may proceed directly on this Note. In the event the Payee proceeds against the collateral and the proceeds of same are inadequate to pay any amounts due on this Note, the Payor shall remain liable for any deficiency.
3. Prepayment. Payor may, without premium or penalty, at any time and from time to time, prepay all or any portion of the outstanding Principal balance due under this Note, provided that each such prepayment is accompanied by accrued interest on the amount of Principal prepaid calculated to the date of such prepayment. Any partial prepayments of Principal shall be applied against the Principal balance outstanding.
4. Default. The occurrence of any one or more of the following events with respect to Payor shall constitute an event of default hereunder (“Event of Default”):
(a) If Payor fails to pay any past due payment of Principal or interest on this Note on its due date and then within five (5) business days of Payor’s receipt of written notice from Payee of failure to make payment. Five (5) business days shall be computed from the date of Payor’s receipt of Payee’s written notice to Payor of the past due payment.
(b) If Payor fails to comply with or to perform any other term, obligation, covenant, or condition contained in this Note, the Purchase Agreement, or in any other agreement between Payor and Payee.
(c) If, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors (a “Bankruptcy Law”), Payor: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consent to the appointment of a trustee, receiver, assignee, liquidator, or similar official; (iv) makes an assignment for the benefit of its creditors; or (v) becomes insolvent or takes or fails to take any action which constitutes an admission of its inability to pay its debts when due.
(d) If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against Payor in an involuntary case; (ii) appoints a trustee, receiver, assignee, liquidator, or similar official for Payor or substantially all of Payor’s properties; or (iii) orders the liquidation of Payor; and (iv) in each case the order or decree is not dismissed within sixty (60) days.
(e) Upon the dissolution of Payor or Payor’s sale of substantially all of its assets, or other termination of Payor’s existence as a going concern.
5. Remedies. Upon the occurrence of an Event of Default, Payor shall pay interest at the rate of eighteen percent (18.00%) per annum of the entire amount in default until Payor has cured all defaults. Additionally, Payee may exercise any and all rights and remedies available to it under applicable law, including, without limitation, the right to accelerate and collect from Payor all indebtedness due under this Note. Payor shall pay all reasonable costs and expenses incurred by or on behalf of Payee in connection with Payee’s exercise of any or all of its rights and remedies under this Note, including, without limitation, Payee’s reasonable attorneys’ fees, expenses for bankruptcy proceedings (including, efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Payor will also pay any courts costs, in addition to all other sums provided by law.
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6. Waiver. The rights and remedies of Payee under this Note shall be cumulative and not alternative. No waiver by Payee of any right or remedy under this Note shall be effective unless in a writing signed by Payee. Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege by Payee will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law, (a) no claim or right of Payee arising out of this Note can be discharged by Payee, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing signed by Payee; (b) no waiver that may be given by Payee will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on Payor will be deemed to be a waiver of any obligation of Payor or of the right of Payee to take further action without notice or demand as provided in this Note. Payor hereby waives presentment, demand, protest and notice of dishonor and protest and all other notices required by law.
7. JURY WAIVER. PAYEE AND PAYOR HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PAYEE OR PAYOR AGAINST THE OTHER.
8. Governing Law. The validity of this Note, its interpretations and any disputes arising from, or relating in any way to this Note, shall be governed by the internal laws of New york, without regard to conflict of law principles.
9. Jurisdiction. The Parties consent to the exclusive personal jurisdiction of the federal courts located in the Eastern District of Wisconsin or the Wisconsin state court located in Brown County, Wisconsin over any action arising out of or relating to this Note and waives any objection they may now or hereafter have to venue or to convenience of forum.
10. Interpretation. This Note is intended by Payor and Payee as the final expression of this Note and as a complete and exclusive statement of its terms, there being no conditions to the enforceability of this Note. This Note may not be supplemented or modified except in writing.
11. Notices. Any notice required or permitted to be given hereunder shall be given in accordance with the Purchase Agreement.
12. Severability. If any provision in this Note is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Note will remain in full force and effect. Any provision of this Note held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
13. Assignment. This Note may not be assigned by Payor without Payee’s prior written consent, which may be withheld in Payee’s sole discretion. This Note may be assigned by Payee. Upon receipt of notice of assignment, Payor shall make all future payments due under this Note to the assignee as directed in writing by Payee.
14. Binding Effect. This Note will be binding in all respects upon Payor and its successors in interest and inure to the benefit of Payee and its successors and assigns.
15. Construction. The headings in this Note are provided for convenience only and will not affect its construction or interpretation. All words used in this Note will be construed to be of such gender or number as the circumstances require.
[Signature Page Follows]
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IN WITNESS WHEREOF, Payor has executed and delivered this Note on the 12th day of August, 2021.
| PAYOR: | ||
| CAN B CORP. | ||
| By: | Marco Alfonsi | |
| Its: | CEO | |
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Exhibit 10.36
ASSET PURCHASE AGREEMENT
This Asset Acquisition Agreement (the “Agreement”) is made as of August 13, 2021 by and between, Can B̅ Corp., a Florida corporation (the “CANB”), TN Botanicals, LLC, a Nevada limited liability company and wholly owned subsidiary of CANB (“Buyer”), and Music City Botanicals, LLC, a Wisconsin limited liability company (“Seller”).
RECITALS
WHEREAS, Seller hold title to certain assets that may be used in connection with the operation of a business primarily engaged in the extraction and processing of hemp derived cannabinoids; and
WHEREAS, Buyer desires to acquire certain equipment, raw materials and inventory of Seller.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt of which is hereby acknowledged, Seller and Buyer (each, a “Party” and, collectively, the “Parties”) hereby agree as follows:
AGREEMENT
1. ACQUISITION OF THE ASSETS
1.01. PURCHASED ASSETS. Subject to the terms and conditions set forth in this Agreement, Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller the following assets (the “Assets”) on the Closing Date free and clear of all liens and encumbrances:
| (a) | All equipment, tools, furniture, and fixtures listed on attached Schedule 1.01(a), together with any replacements or additions to the equipment made before the Closing; | |
| (b) | All inventories of supplies, raw materials, parts, works in progress, and finished goods owned by Seller, together with any replacements or additions to the inventories made before the Closing, including without limitation those items listed on Schedule 1.01(b) but excluding inventory disposed of in the ordinary course of Seller’s business; | |
| (c) | Leasehold interests and leasehold improvements installed by Seller on the premises located at 204 Red Road, Suite 200, McMinnville, TN 37110; | |
| (d) | All of Seller’s rights under purchase orders, including those entered into in the ordinary course of business before the Closing; | |
| (e) | Seller’s goodwill; | |
| (f) | All patents, trademarks, trade names, copyrights, service marks, and domain names of Seller, all registrations for them, all applications pending for them, and all other proprietary rights and intangible property of Seller, including trade secrets, inventions, technology, software, operating systems, customer lists, customer relationships, customer agreements, customer understandings, drawings, blueprints, know-how, formulae, slogans, processes, and operating rights and all other similar items and all such items acquired by Seller or coming into existence on or before the Closing Date, including without limitation the Intellectual Property relating to the products listed on Schedule 1.01(f); |
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| (g) | To the extent transferable, all approvals, authorizations, consents, licenses, permits, franchises, tariffs, orders, and other registrations of any federal, state, or local court or other governmental department, commission, board, bureau, agency, or instrumentality held by Seller and required or appropriate for the conduct of the business of Seller, including without limitation all such items granted or received on or before the Closing Date; and | |
| (h) | All choses in action, causes of action, rights of recovery and setoff, warranty rights, and other similar rights of Seller relating to the Assets, including without limitation all such items arising or acquired on or before the Closing Date. |
1.02. LIABILITIES. Buyer will assume responsibility for all unfilled orders from customers of Seller assigned to Buyer pursuant to Section 1.01 and will assume responsibility of payment for purchase orders for inventory items purchased by Buyer that have been placed by Seller before the Closing but that will not be delivered until after the Closing. Otherwise, Buyer will not assume and will not be liable for any liabilities of Seller, known or unknown, contingent or absolute, accrued or other, and the Assets will be free of all liabilities, obligations, liens, and encumbrances at Closing. Without limiting the generality of the foregoing, Buyer will not be responsible for any of the following:
| (a) | Liabilities, obligations, or debts of Seller, whether fixed, contingent, or mixed, and whether based on events occurring before or after the Closing, including without limitation those based on tort, contract, statutory, or other claims or involving fines or penalties payable to any governmental authority; | |
| (b) | Liabilities, obligations, or debts of Seller for any federal, state, or local tax, including without limitation federal income taxes, state income and excise taxes, state and local real and personal property taxes, and federal, state, and local withholding and payroll taxes; | |
| (c) | Liabilities or obligations of Seller to employees for salaries, bonuses, or health and welfare benefits or with respect to any profit-sharing, stock bonus, pension, retirement, stock purchase, option, bonus, or deferred compensation plan or for any other benefits or compensation (including without limitation accrued vacation); | |
| (d) | Liabilities or obligations of Seller for employee severance payments or arrangements resulting from termination of Seller’s employees; |
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| (e) | Liabilities or obligations of Seller relating to issuances of securities; | |
| (f) | Liabilities or obligations of Seller relating to any violation of state, local or federal law; | |
| (g) | Liabilities or obligations of Seller incurred in connection with distributions to members or any corporate dissolution; and | |
| (h) | Liabilities or obligations of Seller under any environmental law. |
1.03. CONSIDERATION FOR THE ASSETS. In consideration for the sale and transfer of the Assets, and subject to the terms and conditions of this Agreement, Buyer shall pay Seller $1,394,324 (the “Purchase Price”), payable as follows: (i) $498,259 payable in cash, and (ii) $896,065 payable in the form of shares of common stock of CANB (with standard restrictive legend, the “Shares”) at a price per share equal to the average closing price of the common stock of CANB during the ten (10) consecutive trading days immediately preceding the Closing Date. The Purchase Price will be increased or decreased, as agreed by the Parties based on the Parties’ accounting of the Assets at or prior to Closing. Seller agrees not to dispose of or alter any of the Assets following such accounting.
1.04. ALLOCATION. The Purchase Price will be allocated among the Assets as agreed by the parties in writing prior to Closing, and the parties will be bound by that allocation in reporting the transactions contemplated by this Agreement to any governmental authority (including without limitation the Internal Revenue Service).
1.05. CLOSING. The Closing shall take place at the offices of CANB, within three (3) business days from the date all Closing conditions have been satisfied, or at such other place, time or date (including by the exchange of facsimile and/or PDF signatures) as may be mutually agreed upon in writing by the Parties (the “Closing Date”).
2. REPRESENTATIONS OF SELLER
Seller hereby represents and warrants to CANB and Buyer as follows:
2.01. ORGANIZATION. Seller is duly organized, validly existing and in good standing under the laws of its State of incorporation or organization, and has all requisite power and authority to own its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.
2.02. MARKETABLE TITLE. Seller has good and marketable title to the Assets, free and clear of any and all Liens, charges, encumbrances or third-party rights whatsoever. If any such encumbrances exist at or prior to Closing they shall be released by such secured party at or prior to Closing. The use of the Assets is not subject to any Lien, and such use does not encroach on the property or rights of any person.
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2.03. TANGIBLE ASSETS. All tangible Assets are free from defect (patent and latent), have been maintained in accordance with normal industry practice, are in good operating condition and repair (subject to normal wear and tear) and are suitable for the purposes for which they presently are used and presently are proposed to be used.
2.04. CONSENT. Seller is not a party to, subject to or bound by any agreement (other than an agreement requiring certain notices and consents which have been given or obtained, as applicable) or any judgment, order, writ, prohibition, injunction or decree of any court or other governmental body which would prevent the execution or delivery of this Agreement by Seller or the transfer, conveyance and sale of the Assets to Buyer pursuant to the terms hereof.
2.05. AUTHORIZATION. The execution and delivery of this Agreement by Seller and the agreements provided for herein, and the consummation by Seller of all transactions contemplated hereunder and thereunder by Seller, have been duly authorized by all requisite company action. This Agreement has been duly executed by Seller. This Agreement and all other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which Seller is a party constitute the valid and legally binding obligations of Seller, enforceable against it in accordance with their respective terms. The execution, delivery and performance by Seller of this Agreement and the agreements provided for herein, and the consummation by Seller of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to Seller; (b) violate any judgment, decree, order or award of any court, governmental body or arbitrator; or (c) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of Seller pursuant to, any indenture, mortgage, deed of trust, security agreement or other instrument or agreement to which Seller is a party or by which Seller or any of its properties is or may be bound. Seller has the full right, power and authority to enter into, and execute this Agreement and to transfer, convey and sell to Buyer the Assets at the Closing. All corporate action of Seller necessary for such execution and delivery and the performance hereof and thereof has been duly taken and, upon consummation of the purchase contemplated hereby, Buyer will acquire from Seller good and marketable title to the Assets free and clear of all liens and encumbrances.
2.06. ABSENCE OF UNDISCLOSED LIABILITIES. Seller has disclosed to CANB in Schedule 2.06 all liabilities relating to or affecting the Assets or their use. or Seller’s business Seller shall retain any and all liability and/or obligation, secured or unsecured whether accrued, absolute, contingent, unasserted or otherwise, except as expressly set forth herein.
2.07. LITIGATION.
(a) there is no action, suit or proceeding to which Seller is a party (either as a plaintiff or defendant) pending or to Seller’s actual knowledge, threatened before any court or governmental agency, authority, body or arbitrator and, to the actual knowledge of Seller, there is no basis for any such action, suit or proceeding;
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(b) neither Seller nor, to the actual knowledge of Seller, any officer, director or representative of Seller, have been permanently or temporarily enjoined by any order, judgment or decree of any court or any governmental agency, authority or body from engaging in or continuing any conduct or practice in connection with the businesses, assets, or properties of Seller; and
(c) to Seller’s actual knowledge, there is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency enjoining or requiring Seller to take any action of any kind with respect to its business, assets or properties.
2.08. INTELLECTUAL PROPERTY. Schedule 2.08 attached hereto sets forth a true, correct and complete, in all material respects, list and, where appropriate, a description of, all Assets of Seller which constitute material items of Intellectual Property owned by, or used or useful in connection with the business of, Seller, including, but not limited to, supplier and customer lists and related relationships, product formula and production processes, research and development and work in progress, trade secrets, know-how, any other confidential information of Seller, United States and foreign patents, trade names, trademarks, trade name and trademark registrations, copyrights and copyright registrations, and applications for any of the foregoing (the “Intellectual Property”) transferred hereby, and a true, correct and complete list of all material licenses or similar agreements or arrangements to which Seller is a party, either as licensee or licensor, with respect to the Intellectual Property. Except as otherwise disclosed in Schedule 2.08:
(a) Seller is the sole and exclusive owner of all right, title and interest in and to the Intellectual Property;
(b) Seller has the right and authority to use, and Buyer shall have the right to continue to use immediately after the Closing (in a manner consistent with current use), the Intellectual Property in connection with the conduct of Seller’s business in the manner presently conducted, and to the actual knowledge of Seller, such use or continuing use does not and will not conflict with, infringe upon or violate any rights of any other person, corporation or entity;
(c) Seller has received notice of, and does not have actual knowledge of any basis for, a pleading or threatened claim, interference action or other judicial or adversarial proceeding against Seller that any of the operations, activities, products, services or publications of Seller or any of its customers or distributors infringes or will infringe any patent, trademark, trade name, copyright, trade secret or other property right of a third party, or that it is illegally or otherwise using the trade secrets, formulae or property rights of others;
(d) there are no outstanding nor, to the actual knowledge of Seller, any threatened disputes or other disagreements with respect to any research and development in process or licenses or similar agreements or arrangements or with respect to infringement by a third party of any of the Intellectual Property;
(e) no officer or director of Seller nor, to the actual knowledge of Seller, any member or manager of Seller, or any spouse, child or other relative or affiliate thereof, owns directly or indirectly, in whole or in part, any of the Intellectual Property;
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(f) Seller does not have any knowledge that any third party is infringing, or has threatened to infringe upon or otherwise violate, any of the Intellectual Property in which Seller has ownership rights;
(g) All key employees and consultants of Seller who are involved in the design, review, evaluation or development of the Intellectual Property have executed a nondisclosure and assignment of inventions agreement (a “Confidentiality Agreement”);
(h) None of the employees or consultants of Seller are subject to any contractual or legal restrictions that might interfere with the use of his or her best efforts to promote the interests of Seller’s business. No employee of Seller has entered into any Contract that restricts or limits in any way the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign or disclose information concerning his or her work to anyone other than Seller; and
(i) To the knowledge of Seller, no employee or consultant of Seller (1) has used any other person or entity’s trade secrets or other information that is confidential in the course of his or her work or (2) is, or is currently expected to be, in default under any term of any Contract relating to the Intellectual Property, or any Confidentiality Agreement or any other Contract or any restrictive covenant relating to the Intellectual Property, or the development or exploitation thereof.
2.09. CONTRACTS AND COMMITMENTS.
(a) Schedule 2.09 attached hereto contains a true, complete and correct list of the following contracts, agreements, arrangements or other understandings, whether written or oral (collectively, the “Contracts”) which relate to the Assets being sold:
(i) all Contracts, agreements, commitments, purchase orders or other understandings or arrangements to which Seller or any of its property is bound which (A) involve payments or receipts by Seller of more than $5,000 in the case of any single contract, agreement, commitment, understanding or arrangement under which full performance (including payment) has not been rendered by all parties thereto or (B) under which the consequences of a default or termination would reasonably be expected to have a material adverse effect;
(ii) all material agency, distributor, sales representative, franchise or similar agreements to which Seller is a party or by which Seller or any of its property is bound;
(iii) all Contracts imposing a non-competition or non-solicitation obligation on Seller; and
(iv) any other material agreements or contracts entered into by Seller, excluding all non-disclosure agreements between a Seller and third parties.
(b) Except as set forth on Schedule 2.09:
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(i) each Contract is a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms, and Seller does not have any actual knowledge that any Contract is not a valid and binding agreement of the other parties thereto, except where the failure to be a valid and binding Agreement would not reasonably be expected to result in a Material Adverse Effect.
(ii) Seller has fulfilled all material obligations required pursuant to the Contracts to have been performed by Seller, on its part prior to the date hereof, and Seller has no reason to believe that Seller will not be able to fulfill, when due, all of its obligations under the Contracts which remain to be performed after the date hereof, except where the failure to fulfill all material obligations required pursuant the contract would not reasonably be expected to result in a Material Adverse Effect;
(iii) Seller is not in breach of or default under any Contract, and no event has occurred which with the passage of time or giving of notice or both would constitute such a default, result in a loss of rights or result in the creation of any lien, charge or encumbrance, thereunder or pursuant thereto, except for such breach, default or events that would not reasonably be expected to result in a Material Adverse Effect; and
(iv) to the actual knowledge of Seller, there is no existing breach or default by any other party to any Contract, and no event has occurred which with the passage of time or giving of notice or both would constitute a default by such other party, result in a loss of rights or result in the creation of any lien, charge or encumbrance thereunder or pursuant thereto, except for such breach, default or events that would not reasonably be expected to result in a Material Adverse Effect.
2.10. COMPLIANCE WITH AGREEMENTS AND LAWS. To its actual knowledge, Seller has all requisite licenses, permits and certificates, including environmental, health and safety permits, from federal, state and local authorities necessary to conduct its business and own and operate its Assets (collectively, the “Permits”). To Seller’s actual knowledge, no Seller is in violation in any material respect of any law or regulation relating to its Assets. To Seller’s actual knowledge, the business of Seller as conducted since the date the business commenced operations has not violated, and on the date hereof does not violate, in any material respect, any federal, state, local or foreign laws, regulations or orders (including, but not limited to, any of the foregoing relating to employment discrimination, immigration, occupational safety, environmental protection, hazardous waste, conservation, or corrupt practices.
2.11 SELLER BENEFIT PLANS. Seller does not have, nor has ever had, any employee benefit plans. Seller has no written contracts with its employees.
2.12 CUSTOMERS AND SUPPLIERS. With respect to the Assets, Schedule 2.12 attached hereto sets forth a true, correct and complete list of (a) the name of each customer of Seller, and (b) the names of suppliers (by dollar volume) of Seller. Except as otherwise set forth on Schedule 2.12 Seller has good customer and supplier relations and none of the customers or suppliers of Seller has notified Seller that it intends to discontinue or materially diminish its relationship with Seller.
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2.13 FULL DISCLOSURE. There are no materially misleading statements in any of the representations and warranties made by Seller in this Agreement, the Exhibits or Schedules to this Agreement, or any certificates or correspondence.
2.14 LEGEND. Seller acknowledges and agrees that the certificate (or certificates) representing the Shares, shall bear substantially the following legend:
“SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY OTHER SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED EXCEPT (I) UPON EFFECTIVE REGISTRATION OF THE SECURITIES UNDER THE ACT AND OTHER APPLICABLE SECURITIES LAWS COVERING SUCH SECURITIES, OR (II) UPON ACCEPTANCE BY THE COMPANY OF AN OPINION OF COUNSEL IN SUCH FORM AND BY SUCH COUNSEL, OR OTHER DOCUMENTATION, AS IS SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED..”
2.15 SHARES. Seller: (a) is aware that the Shares are “restricted securities,” as defined in Rule 144 under the Act, and there is a limited market in which to trade the Shares, (b) has had a chance to review the business and financials of CANB and has reviewed the filings made by CANB with the SEC, (c) has had the opportunity to consult with counsel as to receipt of the Shares, (d) is sophisticated and or has experience investing in shares of development stage companies like CANB, (e) has a financial condition such that Seller can afford to bear the economic risk of holding the Shares for an indefinite period of time and has adequate means for providing for Seller’s current needs and personal contingencies, (f) can afford to suffer a complete loss of its investment in the Shares, (g) understands and has taken cognizance of all risk factors related to the receipt of the Shares, (h) agrees that the Shares are being acquired by Seller for his/her/its own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Act, (i) has no present intention of selling or otherwise distributing the Shares in violation of the Securities Act, and (j) is an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act.
3. REPRESENTATIONS OF BUYER
Buyer represents and warrants to Seller that:
3.01. ORGANIZATION AND AUTHORITY. Buyer is duly organized, validly existing and in good standing under the laws of the State of its formation, and has all requisite power and authority (corporate and other) to own its properties and to carry on its business as now being conducted. Buyer has full power to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.
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3.02. AUTHORIZATION. The execution and delivery of this Agreement by Buyer, and the agreements provided for herein, and the consummation by Buyer of the transactions contemplated hereby and thereby, have been duly authorized by all requisite corporate action. This Agreement and all such other agreements and written obligations entered into and undertaken in connection with the transactions contemplated hereby constitute the valid and legally binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. The execution, delivery and performance of this Agreement and the agreements provided for herein, and the consummation by Buyer of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to Buyer, (b) violate the provisions of Buyer’s formation documents, (c) violate any judgment, decree, order or award of any court, governmental body or arbitrator, or (d) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of Buyer pursuant to, any indenture, mortgage, deed of trust or other agreement or instrument to which Buyer is a party or by which Buyer is or may be bound.
3.03. SHARES. When issued, the Shares will be duly authorized, validly issued, fully-paid and non-assessable
4. ACCESS TO EQUIPMENT
From the date of this Agreement until the Closing Date, Seller shall afford the officers, manager, attorneys, accountants and other authorized representatives of Buyer reasonable access upon reasonable notice and during normal business hours to inspect the Assets, so that the examining party may have an opportunity to make such inspection as it shall desire.
5. CONDITIONS TO OBLIGATIONS OF CANB
The obligations of CANB and Buyer under this Agreement are subject to the fulfillment, at the Closing Date, of the following conditions precedent, each of which may be waived in writing in the sole discretion of CANB and Buyer:
5.01. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF SELLER; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. All representations and warranties of Seller shall be true and correct in all material respects on and as of the Closing Date as though such representations and warranties were made on and as of such date (except where such representations are made as of a specific date in which case such representations shall be true and correct as of such date), except for any changes permitted by the terms hereof or consented to in writing by CANB and Buyer. Seller shall have performed and complied with all terms, conditions, covenants, obligations, agreements and restrictions required by this Agreement to be performed or complied with by it prior to or at the Closing Date.
5.02. PERFORMANCE BY SELLER. At the Closing, Seller shall have delivered to Buyer a certificate signed by a duly authorized manager of Seller certifying Seller’s compliance with Section 5.01 hereof.
5.03. Corporate Proceedings. all consents required to be taken on the part of Seller to authorize or carry out this Agreement shall have been taken and Seller shall have delivered to Buyer a copy of the resolutions of its managers and members authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby.
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5.04. ADVERSE PROCEEDINGS. No action or proceeding by or before any court or other governmental body shall have been instituted or threatened by any governmental body or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by this Agreement or which might affect the right of Seller to transfer the Assets.
5.05 PROOF OF CLEAR TITLE. Seller shall have each provided Buyer with proof of ownership of the Assets and removal of all Liens on the Assets.
5.06 OTHER AGREEMENTS. CANB shall have entered into definitive agreements and for the following, which closing of such transactions will be be conditions subsequent to this sale of Assets, with the closings expected to occur within hours of each other:
(a) Joint venture processing agreement with Botanix Equities, LLC;
(b) Leases for CANB’s lease of space in Mead and Fort Morgan, CO and Tennessee processing facility; and
(c) Purchase of assets from TWS Pharma LLC and L7 TWS Pharma LLC.
5.07. CLOSING DELIVERIES. At the Closing:
(a) Seller shall deliver to Buyer, or shall otherwise put Buyer in sole and exclusive control of, all Assets free and clear all Liens or encumbrances;
(b) Seller shall deliver to CANB a certificate of the applicable secretary of the State as to the legal existence and good standing of such Seller in such state within three prior days of Closing; and
(c) Seller shall deliver to Buyer one or more bills of sale or assignments of Assets to Buyer in such forms as approved by Buyer, duly executed by the applicable Seller or an authorized officer of Seller, as applicable.
6. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are subject to the fulfillment, at the Closing Date, of the following conditions precedent, each of which may be waived in writing in the sole discretion of Seller:
6.01. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF BUYER; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and warranties of Buyer in this Agreement shall be true on and as of the Closing Date as though such representations and warranties were made on and as of such date (except where such representations are made as of a specific date, in which case such representations shall be true and correct as of such date), except for any changes consented to in writing by Seller. Buyer shall have performed and complied with all terms, conditions, covenants, obligations, agreements and restrictions required by this Agreement to be performed or complied with by them prior to or at the Closing Date.
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6.02. CORPORATE PROCEEDINGS. All corporate and other proceedings required to be taken on the part of CANB to authorize or carry out this Agreement shall have been taken.
6.03. CONSENTS. Buyer shall have received all requisite consents and approvals of all lenders, and other third parties whose consent or approval is required in order for Buyer to consummate the transactions contemplated by this Agreement.
6.04. ADVERSE PROCEEDINGS. No action or proceeding by or before any court or other governmental body shall have been instituted or threatened by any governmental body or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by this Agreement or which might reasonably be expected to adversely affect the obligation of Buyer to pay the Purchase Price to Seller.
7. INDEMNIFICATION
7.01. GENERAL.
(a) By Seller. Seller shall indemnify and hold harmless Buyer, and its respective directors, officers, employees, agents, successors and assigns (the “Buyer Indemnitees”) from and against all actual claims, damages, losses, liabilities, costs and expenses including, without limitation, settlement costs and any reasonable legal, accounting or other expenses for investigating or defending any actions or threatened action (but expressly excluding indirect, incidental, exemplary, special, consequential or punitive damages (including, without limitation, diminution in value, loss of future revenue or income, or loss of business reputation or opportunity)) (collectively, the “Losses”) actually incurred by Buyer Indemnitees in connection with each and all of the following:
(i) any misrepresentation or breach of any representation or warranty made by Seller in this Agreement;
(ii) any breach of any covenant, agreement or obligation of Seller contained in this Agreement or any other agreement, instrument or document contemplated by this Agreement;
(iii) any liability of Seller;
(iv) any claims, suits, actions, proceedings (formal and informal), investigations, judgments, deficiencies, damages, settlements, liabilities, losses, costs and legal and other expenses arising out of or based upon the use of the Assets prior to Closing; and
(v) any claims made by third parties against Seller as a result of the transactions contemplated hereby, including but not limited to any labor/employment and tax related claims.
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(b) By Buyer. Buyer shall indemnify and hold harmless Seller and its respective stockholders, members, managers, directors, officers, employee and agents (the “Seller Indemnitees”), from and against all Losses actually incurred by Seller Indemnitees to the extent caused by Buyer in connection with each and all of the following:
(i) any misrepresentation or breach of any representation or warranty made by Buyer in this Agreement; and
(ii) any breach of any covenant, agreement or obligation of Buyer contained in this Agreement or any other agreement, instrument or document contemplated by this Agreement.
7.02. CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for indemnification under this Section 7, the party seeking indemnification (the “Indemnified Party”), shall promptly notify the other party (the “Indemnifying Party”) in writing of the claim and, when known, the facts constituting the basis for such claim. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third party, the notice shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. The Indemnified Party shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder without the prior written consent, which shall not be unreasonably withheld or delayed, of the Indemnifying Party; provided, however, that if a suit shall have been instituted against the Indemnified Party and the Indemnifying Party shall not have taken control of such suit after notification thereof as provided in Section 7.03 of this Agreement, the Indemnified Party shall have the right to settle or compromise such claim upon giving prior written notice to the Indemnifying Party as provided in Section 7.03.
7.03. DEFENSE BY THE INDEMNIFYING PARTY. In connection with any claim which may give rise to indemnity hereunder resulting from or arising out of any claim or legal proceeding by a person other than the Indemnified Party, the Indemnifying Party, at its sole cost and expense, may, upon written notice to the Indemnified Party, assume the defense of any such claim or legal proceeding if the Indemnifying Party acknowledges to the Indemnified Party in writing the obligation of the Indemnifying Party to indemnify the Indemnified Party with respect to all elements of such claim. If the Indemnifying Party assumes the defense of any such claim or legal proceeding, the Indemnifying Party shall select counsel reasonably acceptable to the Indemnified Party to conduct the defense of such claims or legal proceedings and at the sole cost and expense of the Indemnifying Party shall take all steps necessary in the defense or settlement thereof. The Indemnifying Party shall not consent to a settlement of, or the entry of any judgment arising from, any such claim or legal proceeding, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed) unless the settlement is only for cash and includes a full release of the Indemnifying Party. Without limitation, it shall not be deemed unreasonable to withhold consent to a settlement if equitable relief against the Indemnified Party is contemplated, awarded or stipulated, the Indemnified Party is required to make an admission of civil liability or to the commission of a crime, or money is required to be paid by the Indemnified Party. The Indemnified Party shall be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense. If the Indemnifying Party does not assume the defense of any such claim or litigation resulting therefrom within 30 days after the date such claim is made: (a) the Indemnified Party may defend against such claim or litigation in such manner as it may deem appropriate, including, but not limited to, settling such claim or litigation, after giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. If the Indemnifying Party thereafter seeks to question the manner in which the Indemnified Party defended such third-party claim or the amount or nature of any such settlement, the Indemnifying Party shall have the burden to prove by a preponderance of the evidence that the Indemnified Party did not defend or settle such third party claim in a reasonably prudent manner.
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7.04. SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION. All representations, warranties and covenants made by Seller and Buyer in this Agreement, or in any instrument or document furnished in connection with this Agreement or the transactions contemplated hereby, shall survive the Closing and the consummation of the transactions contemplated hereby for 36 months. Notwithstanding the foregoing, (a) the representations and warranties of Seller contained in Article 2 shall survive the Closing and the consummation of the transactions contemplated hereby without limitation for the applicable statute of limitations, and (b) any valid claim that is properly asserted in writing pursuant to Section 7.01 and/or 7.02 prior to the expiration as provided in this Section 7.04 of the representation or warranty that is the basis for such claim shall survive until such claim is finally resolved and satisfied. Notwithstanding anything herein to the contrary, the covenants set forth herein at Section 7.01 hereof shall survive for an indefinite period of time unless otherwise set forth in such section.
8. RESTRICTIVE COVENANTS
8.01. CONFIDENTIALITY. The Parties acknowledge that the Confidential Information (as defined below) is a valuable and unique asset and covenants that it will not disclose any such Confidential Information after Closing to any person for any reason whatsoever, unless such information is (a) within the public domain through no wrongful act of the disclosing Party, (b) has been rightfully received from a third party without restriction and without breach of this Agreement, or (c) is required by law to be disclosed or is disclosed for purposes of defending claims related to Seller in a manner designed to protect the confidentiality of the Confidential Information. “Confidential Information” means information relating to the business of the Parties that is not in the public domain or readily determinable by reference to publicly available sources and specifically including, without limitation, information and knowledge pertaining to products and services offered, innovations, ideas, plans, trade secrets, proprietary information, advertising, sales methods and systems, sales and profit figures, customer and client lists, and relationships with dealers, customers, and clients, suppliers and others who have business dealings with such parties.
8.02. NON-DISPARAGEMENT. No Party hereto will disparage or otherwise publish or communicate derogatory statements or opinions about any other party or their respective affiliates, practices, businesses, or personnel, to any person or entity, be it orally, in writing, or otherwise. For purposes of this Agreement, “derogatory” means a statement that detracts from one’s character, standing, or reputation.
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8.03. NON-COMPETITION. To the fullest extent permitted by law, immediately following the Closing Date, Seller and its principals, by their signatures hereunder, agree that they shall not in any way compete with Buyer or CANB (collectively, “Company”), either individually or through any competing business, by developing, selling, or marketing any hemp-based cannabinoid product, or any product in which a likelihood of confusion may exist within the commercial cannabis market. For purposes of this Agreement, the term “competing business” means any person, business, service provider, operation or other program that offers products or services similar to those offered by Company. For purposes of this Agreement, directly or indirectly engaging in any competing business means participating in a business which competes, either as an owner, partner, agent or employee of such business. For purposes of this Agreement, “likelihood of confusion” means the likelihood that a consumer would reasonably believe a product developed by Seller outside of this Agreement is associated with Company due to the similarities portrayed between such product and a product developed by Company.
8.04. SURVIVAL. The provisions of this Article 8 will survive Closing to the maximum extent permitted by law.
9. TERMINATION OF AGREEMENT
9.01. TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be terminated by the mutual written agreement of the parties hereto prior to the Closing Date. Any party not in breach may terminate this Agreement if the Closing Date has not occurred within ninety (90) days from the date of this Agreement, provided that such date may be extended by the mutual written consent of the parties.
9.02. TERMINATION BY REASON OF BREACH. This Agreement may be terminated by Seller if at any time prior to the Closing there shall occur a material breach of any of the representations, warranties or covenants of Buyer or the failure by Buyer to perform any condition or obligation hereunder, and may be terminated by Buyer, if at any time prior to the Closing there shall occur a material breach of any of the representations, warranties or covenants of Seller or the failure of Seller to perform any condition or obligation hereunder. Written notice of any such termination must be delivered by the terminating Party to the non-terminating Party and non-terminating Party shall have thirty (30) days to cure said breach. If such breach shall remain uncured by such thirtieth (30th) day then this Agreement may be terminated.
10. NOTICES
All notices, requests, consents, instructions and other communications required or permitted to be given hereunder shall be in writing and sent by nationally-recognized, next-day delivery service or mailed by certified or registered mail, return receipt requested, postage prepaid, or by facsimile transmission confirmed in writing by next-day delivery service or by e-mail, to the address, facsimile number, or e-mail address as set forth next to each party’s name of the signature page hereof, as the same may be amended by any party by providing written notice of the same to the other parties. Receipt of such notices shall be deemed to occur on the date of actual receipt if delivered by registered or certified mail, if sent by facsimile or e-mail six (6) hours from the time of transmission (provided such facsimile or E-mail is sent within two hours prior to the end of normal business hours on a business day or, if not, on the next business day) and confirmed in writing by next-day delivery service, or one (1) business day after it is sent by nationally-recognized, next-day delivery service.
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11. SUCCESSORS AND ASSIGNS
Neither this Agreement nor any of the rights or obligations under this Agreement, may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any Party hereto without the prior written consent of the other Party hereto, and any such assignment without such prior written consent shall be null and void; provided, however, that Buyer may, without the prior written consent of Seller, assign all or any portion of its rights and obligations under this Agreement to one (1) or more of its direct or indirect wholly-owned subsidiaries. Subject to the preceding sentence, this Agreement shall be binding upon, shall inure to the benefit of, and shall be enforceable by the Parties hereto and their permitted successors and assigns. No assignment shall relieve the assigning Party of any of its obligations hereunder.
12. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS
(a) This Agreement, all Schedules and Exhibits hereto, and all agreements and instruments to be delivered by the parties pursuant hereto represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersede all prior oral and written and all contemporaneous oral negotiations, commitments and understandings between such parties. This Agreement may only be modified or amended by a written instrument executed by the parties hereto.
(b) If the provisions of any Exhibit or Schedule to this Agreement are inconsistent with the provisions of this Agreement, the provisions of the Agreement shall prevail. The Exhibits and Schedules attached hereto are hereby incorporated as integral parts of this Agreement.
13. SEVERABILITY
Any provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction.
14. EXPENSES
Except as otherwise expressly provided herein, each party will pay all their respective fees and expenses (including, without limitation, legal and accounting fees and expenses) incurred by them in connection with the transactions contemplated hereby. Seller shall be responsible for payment of all sales or transfer taxes arising out of the conveyance of the Assets.
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15. GOVERNING LAW/JURISDICTION
This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties hereto (a) submits to the exclusive jurisdiction of any state or federal court sitting in the State of New York in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in any other court and (e) waives any right it may have to a trial by jury with respect to any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Each party is entitled to bring an action for temporary or preliminary injunctive relief at any time in any court of competent jurisdiction in order to prevent irreparable injury that might result from a breach of this Agreement.
16. SECTION HEADINGS
The section headings are for the convenience of the parties and in no way alter, modify, amend, limit, or restrict the contractual obligations of the Parties.
17. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. Counterparts may be executed and delivered using electronic means, which in each case will have the same effect as a counterpart manually signed and delivered.
18. PREVAILING PARTY
If either Party brings a claim or lawsuit against the other party to this Agreement to interpret or enforce any of the terms of this Agreement, the prevailing party shall, in addition to all other damages, be entitled to reasonable attorneys’ fees and costs, costs of witnesses, and costs of investigation from the non-prevailing Party.
19. THIRD PARTY BENEFICIARIES
This Agreement is not intended to and shall not be construed to give any third party any interest or rights (including, without limitation, any third-party beneficiary rights) with respect to or in connection with any agreement or provision contained herein or contemplated hereby.
20. FURTHER ASSURANCES
Each of the Parties hereto shall from time to time at the request of the other Party hereto, and without further consideration, execute and deliver to such other Party such further instruments of assignment, transfer, conveyance and confirmation and take such other action as the other party may reasonably request in order to more effectively fulfill the purposes of this Agreement.
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21. CONSULTATION WITH INDEPENDENT COUNSEL
The Parties have had the opportunity to consult with their own legal counsel and other advisors and are entering into this Agreement voluntarily and with a full understanding of the meaning and legal effects of each provision contained in this Agreement. In the event of any dispute regarding the interpretation of any provision of this Agreement, the Parties agree that this Agreement and the provisions hereof shall not be construed against any one party as the drafter of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Asset Acquisition Agreement has been duly executed by the Parties hereto as of the date first above written.
| CANB: | Can B̅ Corp. | ||
| By: | |||
| Name: | Marco Alfonsi, CEO | ||
| BUYER: | TN Botanicals, LLC | ||
| Can B̅ Corp., its Manager | |||
| By: | |||
| Name: | Marco Alfonsi, CEO | ||
| SELLER: | Music City Botanicals, LLC | ||
| By: | |||
| Name: | Rickey Minton | ||
| Title: | Manager | ||
| By: | |||
| Name: | David Stock | ||
| Title: | Manager | ||
| By: | |||
| Name: | Lance Lin | ||
| Title: | Manager | ||
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Schedule 1.01(a)
Equipment
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Schedule 1.01(b)
Inventory
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Schedule 1.01(f)
Products
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Schedule 2.06
Liabilities
Initials: _____, _____, _____, ____ |
Schedule 2.08
Intellectual Property
Initials: _____, _____, _____, ____ |
Schedule 2.09
Contracts
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Schedule 2.12
Customers and Suppliers
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Exhibit 21.1
List of Can B̅ Corp. Subsidiaries
| Entity Name | State of Organization | ID Number | ||||
| Duramed Inc. | Nevada | E0549052018-1 | ||||
| Duramed MI, LLC (formerly DuramedNJ LLC) | Nevada | E0250182019-7 | ||||
| Imbibe Wellness Solutions, LLC (formerly Radical Tactical LLC) | Nevada | E0221262019-2 | ||||
| Pure Health Products, LLC | New York | 5031585 | ||||
| Pivt Labs, LLC (formerly NY Hemp Depot LLC) | Nevada | E0315972019-0 | ||||
| Green Grow Farms, Inc. | New York | 5503424 | ||||
| Botanical Biotech LLC | Nevada | E12967242021-8 | ||||
| TN Botanicals LLC | Nevada | E16531022021-1 | ||||
| CO Botanicals LLC | Nevada | E16529372021-0 | ||||
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Marco Alfonsi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Can B Corp.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; | |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
| a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Dated: August 16, 2021 | By: | /s/ Marco Alfonsi |
| Marco Alfonsi, Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Stanley L. Teeple, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Can B Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; | |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
| Dated: August 16, 2021 | By: | /s/ Stanley L. Teeple |
| Stanley L. Teeple, Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Can B Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Marco Alfonsi, Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 16, 2021 | By: | /s/ Marco Alfonsi |
Marco Alfonsi Chief Executive Officer | ||
| (Principal Executive Officer) |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Can B Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Marco Alfonsi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 16, 2021 | By: | /s/ Stanley L. Teeple |
Stanley L. Teeple, Chief Financial Officer (Principal Financial Officer) |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.