It's now time for a genuine analysis of the annual report:
I certainly could have spent two minutes glancing at the annual report and them jump to conclusions, but I opted to read the entire lengthy filing and here are the highlights:
The following is pretty standard auditor language and take note these are independently full audits of 2018 and 2019 financials.
“the financial statements present fairly, in all material respects, the financial position of the company as of December 2019 and 2018, in conformity with accounting principles generally accepted in the U.S.A.”
“we are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and PCAOB.”
“We conducted our audits in accordance with the standards of the PCAOB. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.”
“Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.”
The above absolutely validates that Canb is not a scam or fraudulent company. What company that is trying to defraud or scam investors commits to completing full independent audits for the past two years?
Growth
"Nu Wellness its independent pharmacy brand targets the over three-thousand independent retail drug stores nationally with its first product schedule for roll-out in the 1st quarter 2020.
The Seven Chakras brand is targeted toward health clubs, spas, and beauty lines and is expecting a major launch in 2nd quarter 2020 to include a full line of related topical products both
with and without CBD."
Also, highlighting the following to address past claims of "criminal activity" by the board members:
From the filing:
Director or Officer Involvement in Certain Legal Proceedings
“Our current directors and executive officers have not been involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.”
These are facts that fully refute any claims that the board and executives with Canb are “convicted scam artists”.
Financial highlights from 2018 to 2019:
Revenue:
2018: $668k
2019: $2.3 million
Increase: 345%
Profit:
2018: $263k
2019: $1.7 million
Increase: 646%
Gross Margins:
2018: 39%
2019: 74%
OpEx:
2018: $3.7 million
2019: $6.3 million
Increase: 70%
OpLoss:
2018: $3.4 million
2019: $4.6 million
Increase: 34%
Assets
2018: $3.7 million
2019: $6.9 million
Increase: 86%
Liabilities
2018: $205k
2019: $565k
Increase: 176%
Cash:
2018: $808k
2019: $47k
Decrease: 94%
Working capital
2018: $939k
2019: $2.9 million
Increase: 209%
Stockholder Equity:
2018: $3.5 million
2019: $6.4 million
Increase: 83%
Certainly there are concerning items, which is not uncommon for a speculative young company. These have also existed on previous filings.
The high accounts receivable of $1.2 million is essentially cash that will be paid to Canb, however it mostly comprises of medical billing that is notoriously slow to pay. That contributes greatly to the cash flow issue. And the statement that they would need to raise more capital via the sales of share is nothing new for any company trying to reach profitability. The private placements are technically also the sale of shares, just off the open market. Also very important, liabilities are only a half million, which is a differentiator compared to other companies that often have $10-$20 million in liabilities.
The late payments on accounts payable are of course of concern, however they are not defaults of a loan, and it’s not indicated as to who the “certain vendors” are. The bad debt expense is most likely due to Duramed being a health care provide, with the majority of revenue coming from insurance carriers. It’s common across the health care industry for insurance carriers to cut down invoices for various reasons, many of which are not fair to the provider. You can only dispute it to a certain degree, before crossing the line and losing.
Overall, it’s great to see revenue growth of several hundred percent in sector that performed poorly in 2019. Given that Canb is only trading 1.5x revenue, there is plenty of room to go up for a speculative company. It's nice that they do more than retail, since we are seeing the struggles of the companies that are "retail only"
