Can B Corp (CANB)

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My Thoughts On Nasdaq Listing And Proposed Share Restructure


There is absolutely nothing random or capricious about the 8-k CANB filed on 11/15/19, which announced CANB’s intention to meet the final criteria for Nasdaq uplisting — a $4 price — by performing a 1:300 reverse split in January 2020 or later

https://www.otcmarkets.com/filing/conv_pdf?id=13746497&guid=IDaSUKL-szm3G3h


To the contrary, the prospect of a reverse split occurring sometime in the future is something that CANB investors have known since June 2019, when CANB submitted their application to the Nasdaq:

Canbiola, Inc. (the “Company”) submitted an application to be listed on The Nasdaq Capital Market® on June 4, 2019. The Company intends to diligently pursue its application in order to have its securities listed on the Nasdaq Stock Market.

https://www.otcmarkets.com/filing/conv_pdf?id=13484913&guid=yRKSUW-VfXVyW3h


Given that CANB has currently met all significant criteria for Nasdaq listing with the exception of a $4 share price, the entire purpose of the proposed share restructuring is to meet this final criteria for Nasdaq uplisting

The timing of a reverse split is completely up to CANB, but it cannot take place for at least 40 days after 11/15/19, so this isn’t happening tomorrow, this week or anytime this month, and in all probability the earliest possible date for any R/S is January 2020

Here is the specific language on the 40 day rule:

“Under SEC regulations, the Reverse Split may become effective no sooner than 40 days after we mail the Notice of Stockholder Action Taken by Written Consent to our stockholders. This notice is first being mailed to our stockholders on or about November [ ], 2019.”

40 days takes us to the final week in December, which is a holiday week, so it looks like sometime in January 2020 is the absolute earliest that CANB could perform the reverse split

CANB could also decide to hold off on performing the reverse split until February, March, April or some later date in 2020

CANB could also decide not to execute a reverse split at all

It’s important to point out that this filing is not some type of mandate to perform a reverse split; rather, it gives CANB the option of doing so starting in January 2020 or anytime thereafter

It is obviously to CANB’s advantage to choose the timing that is most optimal for the stock and all shareholders

Here is the stated purpose of the proposed reverse split:

“The Board of Directors proposed the Reverse Split to improve the Company’s capital structure and to meet the listing requirements as part of the Company’s application to the Nasdaq Capital Market.”

As an OTC QB stock, CANB has raised money in 2019 with the best type of financing a stock can receive — private placements from accredited investors at zero discount to market prices

In fact, accredited investors knew CANB applied to the Nasdaq in June when they gave CANB $4,000,000 at $.029 in late July

They were obviously confident in a positive outcome, and that includes a positive outcome of any R/S required to reach the $4 criteria for uplisting to the Nasdaq

$4M doesn’t grow on trees

Here’s the Nasdaq application announcement in June 2019:

Canbiola, Inc. (the “Company”) submitted an application to be listed on The Nasdaq Capital Market® on June 4, 2019. The Company intends to diligently pursue its application in order to have its securities listed on the Nasdaq Stock Market.

https://www.otcmarkets.com/filing/conv_pdf?id=13484913&guid=yRKSUW-VfXVyW3h


Here’s the $4,000,000 private placement at $.029 announced in late July:

On July 31, 2019, Canbiola, Inc. (the “Company”) closed a private offering in which it sold a total of 135,748,275 shares of its common stock (the “Shares”) to various accredited investors at $0.029 per share, for gross proceeds totaling $3,936,700. All Shares were issued pursuant to Section 4(a)(2) of the Securities Act.

https://www.otcmarkets.com/filing/conv_pdf?id=13570451&guid=OKaSUWPupYSGLyh


There are several reasons why OTC stocks typically perform reverse splits that have nothing to do with a Nasdaq uplisting — however, none of these reasons apply to CANB

Future Dilution due to Convertible Debt — Does not apply, CANB has zero convertible debt

Convertible debt needs to be discharged by issuing shares and the number of shares outstanding is bumping up along the number of shares authorized, so the company has no choice but to either increase the number of shares outstanding or perform a reverse split in order to accommodate these additional shares — CANB has zero convertible debt, so this situation doesn’t apply here


Management owns preferred shares and wants to reclaim majority ownership in the company — also doesn’t apply here

This situation occurs when management sets the terms of the reverse split to apply differently to their preferred shares vs common shares — the common shares are subject to the reverse split and the preferred shares are protected from the reverse split — there is no language in CANB’s filing that protects the preferred shares, but I contacted the company just to confirm: “Everybody is in the same boat, if we do go ahead and perform the reverse, all shares will be included.”


Before getting into an analysis of the proposed reverse split, it’s important to review the timeline of this process so that everything can be placed into its proper context

In June 2019, CANB signaled their intention to uplist to the Nasdaq when they filed an 8-k stating:

Canbiola, Inc. (the “Company”) submitted an application to be listed on The Nasdaq Capital Market® on June 4, 2019. The Company intends to diligently pursue its application in order to have its securities listed on the Nasdaq Stock Market.


At the time of this submission, CANB had already satisfied the vast majority of requirements to list on the Nasdaq

However, there were 3 criteria remaining to meet eligibility for Nasdaq listing on the Nasdaq Capital Market using the “Equity Standard”:

1)Majority of Board of Directors must be independent

2)Shareholder Equity of $5M

3)Stock price of $4

You can see the criteria to list on the Nasdaq Capital market on page 9-10 here:

https://listingcenter.nasdaq.com/assets/initialguide.pdf


Since the Nasdaq application was submitted in June, they have formed a majority independent board of directors, so that takes us down to 2 unmet criteria

According to the Q3 10-Q, shareholder equity as of 9/30/19 was $6.5M, so by that date they met the shareholder equity standard of $5M

https://www.otcmarkets.com/filing/conv_pdf?id=13570451&guid=pnqSUe5HEtN0o3h


So now with an independent board of directors and over $6.5M in shareholder equity, there was only 1 criteria left to meet in order to uplist to the Nasdaq and that is the $4 share price

The only way to get from the current share price to $4 is with a share restructuring — there is no other way to do it

So if CANB wants to be on the Nasdaq in 2020, a reverse split isn’t a choice or one of several options available to make that happen

It’s the only method


— — —


Aside from the reverse split enabling CANB to meet the final criteria necessary to uplist to the Nasdaq, it also comes with several immediate advantages

It changes the optics of a stock

When a stock is trading at .02 or .05 or .10 or .25, the vast majority of investors who participate in the market won’t even consider buying it

A stock trading at $5 brings in a completely different segment of prospective investors, especially when that stock has not only applied for Nasdaq listing, but currently meets all uplisting criteria and is awaiting a final decision from the Nasdaq

Though a reverse split doesn’t change the market capitalization or the value of any shareholder’s position, the resulting float will be tiny, which is a universally favorable characteristic of any stock

And with CANB possessing zero convertible debt, in conjunction with having raised $6M in private placements at zero discount to market over the past year, along with a very tight share structure, its attractiveness to investors should increase significantly

In terms of its application to the Nasdaq itself, CANB’s higher share price and excellent share structure allows them to look more worthy of becoming the first OTC CBD Oil stock to uplist

Think about it this way

A penny stock at $.02 with a bloated share structure awaiting a final decision from the Nasdaq vs the exact same company trading at $6 with an extremely refined share structure

That’s the difference between a Steak-umm and a Porterhouse

The Nasdaq prefers a Porterhouse every time, particularly in a situation like this when CANB is looking to become the 1st CBD Oil stock to uplist from the OTC


— — —


CANB is not comparable to other OTC stocks that have proposed or enacted a reverse split

There is nothing typical about CANB’s current situation

This is an historic opportunity to become the very first OTC CBD Oil stock to uplist to the Nasdaq

Unlike other CBD Oil stocks trading on the OTC that may be candidates to uplist, CANB has the right formulation, Pure CBD with no THC

That’s very important because THC is a Schedule I cannabinoid and perceived as a threat to public safety — this is why the FDA throughout 2019 has repeatedly referred to THC in CBD products as a psychoactive contaminant and impurity, and why Dr. Gottlieb, Aurora Cannabis and Mile High Labs have all opined that Pure CBD (CBD Isolate) would be the first formulation to receive FDA approval for national sales:

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=152642225


So Pure CBD is the heavy favorite to be the FDA’s choice of formulation for CBD products in 2020

Pure CBD also appears to be Congress’ choice as well when it comes to the formulation of CBD that will be legalized in Foods and Dietary Supplements, which Jonathan Miller has projected will happen on or before 12/20/19:

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=152764167



That gives CANB a very good chance at becoming the 1st CBD Oil stock on the OTC to uplist to the Nasdaq

But the formulation of Pure CBD is certainly not CANB’s only attribute that separates it from the rest of the field

There are a multitude of characteristics possessed by CANB that make it an atypical stock, not just in comparison to other CBD Oil stocks on the OTC, but also in comparison to OTC stocks that have performed reverse splits in the past:

Unparalleled annual revenue growth of 500%

Fantastic Medical Advisory Board composed of 8 MDs

Best-in-Class financing having raised $6,000,000 in private placements at $.029 during past 12 months — $2M in Dec 2018 and $4M in August 2019 — both of which occurred at zero discount to market prices

Zero convertible debt

Complete vertical integration from seed to sale — grower, processor, manufacturer, retailer

Partnerships with Mile High Labs and Shi Farms:

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=152720570


So there are many reasons to like CANB as an investment:

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=152804629

— — —

I feel really good about the timing when I think about the avalanche of companies that will be applying to the Nasdaq once the first CBD Oil stock uplists from the OTC or enters from the private sector via an IPO, signaling that the Nasdaq is open for business when it comes to the CBD Sector

Because the field of applicants will become a lot more crowded once that seal is broken

So it definitely makes sense to apply and meet all listing requirements as early as feasibly possible to beat everybody else to the punch

It’s not commented on very often around here, but CANB has been filing annual audited financials since 2017, even when they were an OTC pink stock

In 2018, they uplisted from the pink sheets to the QB

So for an OTC stock, in terms of having multiple years of audited financials and QB status, CANB definitely looks the part

People are going to bet on CANB becoming the first OTC CBD Oil stock to uplist to the Nasdaq

This is a speculative sector and speculative money is known to be drawn to situations like this

The only reservation I have about the potential timing of this share restructuring stems from the current sentiment in the CBD space

2019 has been a brutal year for the entire CBD sector largely due to the lack of regulatory clarity, which has acted to heighten anxiety and decrease excitement amongst investors; however, that doesn’t change the fact that CBD remains a sector with very high potential rewards for early investors — the consensus of analysts covering this space is that the CBD industry in America will balloon to $20B by 2024-2025, with the possibility of Hemp and CBD growing to become as big or possibly bigger than Marijuana and THC

While the sector remains in a state of limbo awaiting some type of regulatory clarity from the FDA, there are some reasons for optimism that we will see this happen within the next few weeks and months

It’s also important to point out that sector sentiment can turn on a dime, as we have all witnessed many times in the cannabis sector — a bear market can turn into a bull market literally overnight

And there are several potential catalysts for sentiment to change in late 2019 and early 2020

12/20/19 Legalization of Pure CBD in Dietary Supplements and Food:

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=152693945


SAFE Banking Act — Jan/Feb 2020 — Opens up Banking and Investment in Hemp-CBD Industry


Interim Regulations/Enforcement Discretion — Jan/Feb/Mar/April 2020 — Dr. Hahn New CBD-Friendly FDA Commissioner — Congress passing legislation directing FDA to announce Enforcement Discretion Policy for CBD Products:

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=152769839


There are many factors to consider when evaluating the ramifications of a reverse split for a very unique CBD Oil stock like CANB at a very unique time in the history of the CBD sector

CANB has a very reasonable chance of becoming the first CBD Oil stock on the OTC to uplist to the Nasdaq in 2020

The bottom line for me as an investor is that if CANB is going to be a successful stock, they are going to be successful with or without a change in share structure

But without a change in share structure, they’ll never meet criteria for Nasdaq


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