The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 1 – ORGANIZATION AND DESCRIPTION
OF BUSINESS
Grey Cloak Tech Inc. (the “Company”)
was incorporated in the State of Nevada on December 19, 2014. The Company was formed to provide cloud based software to detect
advertising fraud on the internet.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The financial statements of the Company
have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates
The preparation of financial statements
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 at the date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash includes cash in banks, money market
funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible
to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.
Fixed Assets
Property and equipment are stated at cost.
Depreciation is provided on a straight-line basis over the estimated useful lives of the assets, as follows:
Description
|
Estimated Life
|
Computer equipment
|
3 years
|
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
The estimated useful lives are based on the
nature of the assets as well as current operating strategy and legal considerations such as contractual life. Future events, such
as property expansions, property developments, new competition, or new regulations, could result in a change in the manner in which
the Company uses certain assets requiring a change in the estimated useful lives of such assets.
Maintenance and repairs that neither materially
add to the value of the asset nor appreciably prolong its life are charged to expense as incurred. Gains or losses on disposition
of property and equipment are included in the statements of operations. There were no dispositions during the periods presented.
Website
The Company capitalizes the costs associated
with the development of the Company’s website pursuant to ASC Topic 350. Other costs related to the maintenance of the website
are expensed as incurred. Amortization is provided over the estimated useful lives of 3 years using the straight-line method. The
Company has commenced amortization upon completion of the Company’s fully operational website. Amortization expense for the
years ended December 31, 2016 and 2015 was $933 and $700, respectively.
Revenue Recognition
We recognize revenue when all of the following
conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the product or service has been provided
to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of
our fees is probable.
The Company will record revenue when
it is realizable and earned and the computer programming services or marketing services have been rendered to the customers. Additionally,
the Company will record revenue from the sale of its software when the software is delivered to the customer or it will be recognized
ratably throughout the term of the contract.
Concentration
One customer accounted for 100% and
85% of total revenue earned during the years ended December 31, 2016 and 2015, respectively. 100% and 100% of the accounts receivable
is due from this customer at December 31, 2016 and 2015, respectively.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Advertising
Advertising costs are anticipated to be expensed
as incurred; however, there were advertising costs included in general and administrative expenses for the years ended December
31, 2016 and 2015.
Income Taxes
The Company accounts for income taxes
using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability
method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred
tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed
more likely than not to be realized. As of December 31, 2016 and 2015, the Company did not have any amounts recorded pertaining
to uncertain tax positions.
Fair Value Measurements
The Company adopted the provisions of
ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain
financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair
values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes
a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Level 1 — quoted
prices in active markets for identical assets or liabilities
Level 2 — quoted
prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs
that are unobservable (for example cash flow modeling inputs based on assumptions)
The derivative liabilities in connection with
the conversion feature of the convertible debt, classified as a Level 3 liability, is the only financial liability measure at fair
value on a recurring basis.
The change in Level 3 financial instrument
is as follows:
Balance, January 1, 2016
|
|
$ -
|
Issued during the year ended December 31, 2016
|
|
982,481
|
Change in fair value recognized in operations
|
|
1,423,715
|
Converted during the year ended December 31, 2016
|
|
(367,244)
|
Balance, December 31, 2016
|
|
$ 2,038,952
|
Convertible Instruments
The Company evaluates and account for
conversion options embedded in convertible instruments in accordance with ASC 815 “
Derivatives and Hedging Activities
”.
Applicable GAAP requires companies
to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments
according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the
hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value
under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms
as the embedded derivative instrument would be considered a derivative instrument.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
The Company accounts for convertible instruments
(when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows:
The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt
instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note
transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over
the term of the related debt to their stated date of redemption.
The Company accounts for the conversion of
convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked
derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any
difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities. During the year ending December
31, 2016, the Company recognized a gain on extinguishment of $47,969 from the conversion of convertible debt with a bifurcated
conversion option.
Common Stock Purchase Warrants
The Company classifies as equity any
contracts that require physical settlement or net-share settlement or provide a choice of net-cash settlement or settlement in
the Company’s own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own
stock as defined in ASC 815-40 ("Contracts in Entity's Own Equity"). The Company classifies as assets or liabilities
any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and
if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical
settlement or net-share settlement). The Company assesses classification of common stock purchase warrants and other free standing
derivatives at each reporting date to determine whether a change in classification is required.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 3 – GOING CONCERN
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Company has generated minimal revenues from operations. Since
its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring
start up costs and expenses. As a result, the Company incurred accumulated net losses from Inception (December 19, 2014) through
the period ended December 31, 2016 of $4,121,307. In addition, the Company’s development activities since inception have
been financially sustained through equity financing. Management plans to seek funding through debt and equity financing.
NOTE 4 – RELATED PARTY
For the year ended December 31, 2015,
the Company had expenses totaling $46,082 to a company owned by an officer and director and to the officer and director for consulting
fees, which is included in general and administrative expenses – related party on the accompanying statement of operations.
As of December 31, 2015, there was no accounts payable to the related party.
For the year ended December 31, 2015,
the Company had expenses totaling $31,920 to former officer for consulting fees, which is included in general and administrative
expenses – related party on the accompanying statement of operations. As of December 31, 2015, there was no accounts payable
to the related party.
For the year ended December 31, 2015,
the Company had expenses totaling $28,000 to former officer for salaries, which is included in general and administrative expenses
– related party on the accompanying statement of operations. As of December 31, 2015, there was no accounts payable to the
related party.
For the years ended December 31, 2016
and 2015, the Company had expenses totaling $96,000 and $40,000, respectively, to an officer and director for salaries, which is
included in general and administrative expenses – related party on the accompanying statement of operations. As of December
31, 2016, there was no accounts payable – related party.
For the years ended December 31, 2016,
the Company had expenses totaling $107,150 and $69,637 to a company owned by an officer and director for consulting fees, which
is included in general and administrative expenses – related party on the accompanying statement of operations. As of December
31, 2016, there was $19,799 in accounts payable – related party.
For the year ended December 31, 2015,
the Company had expenses totaling $197,618 to a director for the fair value of warrants issued for consulting fees, which is included
in general and administrative expenses – related party on the accompanying statement of operations.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 5 – NOTES PAYABLE
On June 9, 2016, the Company executed
a promissory note for $20,000. The loan bears interest at 18% per annum and is due on December 9, 2016. The Company issued 60,000
shares of common stock to the lender as part of this note. The fair value of the shares were recorded as a debt discount and amortized
over the life of the loan.
During the year ended December 31, 2016,
the Company recorded interest expense of $1,800 and amortization of debt discount of $13,200.
During the year ended December 31, 2016,
the Company allowed the lender to assign the debt to another third party. The third party and the Company agreed to extend the
maturity date to June 9, 2017 and the debt became convertible into common stock at a rate of $0.04. During December 2016, the entire
principal amount of the debt was converted into 500,000 shares of common stock and the accrued interest was paid in full with cash.
NOTE 6 – NOTES PAYABLE –
RELATED PARTY
On July 28, 2016, the Company received
a loan of $15,000 from an officer and director of the Company. The loan bears interest at 8% per annum and due the earlier of January
27, 2017 or when the Company receives financing of over $45,000. As of the date of this filing, the debt is in default and the
Company is renegotiating the debt.
NOTE 7 – CONVERTIBLE DEBT
On January 23, 2016, the Company executed
a convertible promissory note for $50,000. The loan had an original issue discount of $6,000 and legal fees of $1,000. The loan
bears interest at 8% per annum and is due on January 23, 2017. The lender has the right to convert the principal amount and unpaid
interest of the loan on or after 180 days to convert at a rate of 56% of the lowest trading price during the prior 20 days of conversion.
On July 21, 2016, the Company allowed the lender to transfer the principal balance and accrued interest to three entities. The
principal balance of the loan was increased to include the accrued interest to date. Once the lender had the right to convert,
the Company recorded a derivative liability. On August 22, 2016, one of the lenders agreed to convert their entire amount of principal
and interest of $38,735 into 576,406 shares of common stock.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 7 – CONVERTIBLE DEBT (continued)
On March 7, 2016, the Company executed a convertible
promissory note for $100,000. The loan bears interest at 10% per annum and is due on December 7, 2016. The lender has the right
to convert the principal amount and unpaid interest of the loan at $0.10 per share if the market price is greater than $0.25. If
the market price is less than or equal to $0.25 but greater than $0.10, then the conversion price is $0.05. If the market price
is less than or equal to $0.10 then the conversion price is $0.02. On May 5, 2016, the Company amended the terms of the note and
issued 600,000 warrants as part of the loan agreement which was effective as of March 7, 2017. The Company calculated the debt
discount based on the allocated fair value of the beneficial conversion feature and the fair value of the warrants. The Company
recorded a debt discount of $100,000. On September 30, 2016, the Company received $50,000 from the lender and extension of the
maturity date of the loan and in exchange agreed to modify the conversion rate and the exercise price of the warrants. The Company
agreed to reduce the exercise price of the warrants from $0.80 to $0.10.
On August 22, 2016, the Company executed a
convertible promissory note for up to $300,000 and has received a total of $30,000 with an original issue discount of $5,000 in
the first tranche. The loan bears interest at 8% per annum. The first tranche is due on August 22, 2017. In the event of default,
the interest rate increases to 22% per annum. The lender has the right to convert the principal amount and unpaid interest of the
loan at a rate of 56% of the lowest trading price during the prior 20 days of conversion. However, if the stock price is below
$0.10 then the loan can convert at a rate of 46% of the lowest trading price during the prior 20 days of conversion. Additionally,
the Company issued 60,000 warrants as part the convertible promissory note. The warrants have an exercise price of $0.50 and can
be exercised for 5 years. The fair value of the warrants were recorded as a debt discount and amortized over one year. On October
27, 2016, the Company received the second tranche of $30,000 with an original issue discount of $5,000. The second tranche is due
on October 27, 2017.
On August 26, 2016, the Company executed a
convertible promissory note for $55,000. The loan bears interest at 12% per annum. The loan is due on May 1, 2017. In the event
of default, the interest rate increases to 22% per annum. The lender has the right to convert the principal amount and unpaid interest
of the loan on or after 180 days to convert at a rate of either the lesser of $0.20 or 50% of the lowest trading price during the
prior 20 days of conversion. On September 7, 2016, the Company and the lender mutually agreed to remove the waiting period on the
conversion and the Company recorded a derivative liability. During the year ended December 31, 2016, the lender converted $15,000
plus accrued interest of $69 into 259,484 shares of common stock.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 7 – CONVERTIBLE DEBT (continued)
On September 7, 2016, the Company executed
a convertible promissory note for $50,000. The loan bears interest at 12% per annum and interest payments are due monthly. The
loan is due on September 6, 2017. In the event of default, the interest rate increases to 20% per annum. The lender has the right
to convert the principal amount and unpaid interest of the loan on or after 180 days to convert at a rate of either the lesser
of $0.40 or 50% of the lowest trading price during the prior 20 days of conversion.
On September 22, 2016, the Company executed
a convertible promissory note for $5,000. The loan bears interest at 12% per annum. The loan is due on December 31, 2016. In the
event of default, the interest rate increases to 22% per annum. The lender has the right to convert the principal amount and unpaid
interest of the loan on or after 180 days to convert at a rate of either the lesser of $0.20 or 50% of the lowest trading price
during the prior 20 days of conversion.
On September 22, 2016, the Company executed
a convertible promissory note for $5,000. The loan bears interest at 12% per annum. The loan is due on December 31, 2016. In the
event of default, the interest rate increases to 22% per annum. The lender has the right to convert the principal amount and unpaid
interest of the loan on or after 180 days to convert at a rate of either the lesser of $0.20 or 50% of the lowest trading price
during the prior 20 days of conversion.
On October 5, 2016, the Company executed a
convertible promissory note for $55,000 with an original issue discount of $10,000. The loan bears interest at 12% per annum. The
loan is due on December 31, 2016. In the event of default, the interest rate increases to 22% per annum. The lender has the right
to convert the principal amount and unpaid interest of the loan on or after 180 days to convert at a rate of either the lesser
of $0.20 or 50% of the lowest trading price during the prior 20 days of conversion.
On November 16, 2016, the Company executed
a convertible promissory note for $55,000. The loan bears interest at 12% per annum. The loan is due on August 17, 2017. In the
event of default, the interest rate increases to 18% per annum. The lender has the right to convert the principal amount and unpaid
interest of the loan at a rate of 45% of the lowest trading price during the prior 20 days of conversion. The loan has prepayment
defaults in the event the Company repays the debt prior to maturity.
On November 29, 2016, the Company executed
a convertible promissory note for $86,250 with an original issue discount of $9,000 and prepaid interest of $2,250. The loan bears
interest at a fixed amount of $2,250. The loan is due on February 28, 2017. The lender has the right to convert the principal amount
and unpaid interest of the loan at a rate of 70% of the lowest closing bid price during the prior 25 days of conversion.
During the year ended December 31, 2016,
the Company recorded interest expense of $18,433 and amortization of debt discount of $218,819.
The Company has determined that the
conversion feature embedded in the notes referred to above that contain a potential variable conversion amount constitutes a derivative
which has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated
debt.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 8 – INCOME TAX
The provisions for federal income tax
at 34% for the years ended December 31, 2016 and 2015 consist of the following:
|
|
Year Ended December 31, 2015
|
|
Year Ended December 31, 2015
|
Income tax expense (benefit) at statutory rate
|
|
$
|
(1,179,800
|
)
|
|
$
|
(248,500
|
)
|
Permanent differences
|
|
|
931,900
|
|
|
|
87,700
|
|
Change in valuation allowance
|
|
|
247,900
|
|
|
|
160,800
|
|
Income tax benefit
|
|
$
|
—
|
|
|
$
|
—
|
|
The tax effects of temporary differences
that give rise to the Company’s net deferred tax assets as of December 31, 2016 and 2015 are as follows:
|
|
Year Ended December 31, 2016
|
|
Year Ended December 31, 2015
|
Net operating loss
|
|
$
|
408,700
|
|
|
$
|
160,800
|
|
Valuation allowance
|
|
|
(408,700
|
)
|
|
|
(160,800
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company has approximately $1,179,800
of net operating losses (“NOL”) carried forward to offset taxable income in future years which expire commencing in
fiscal 2034. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers
the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this
assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets
relating to NOLs for every period because it is more likely than not that all of the deferred tax assets will not be realized.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 9 – STOCKHOLDERS’ EQUITY
Authorized Stock
The Company has authorized 75,000,000 common
shares with a par value of $0.001 per share. Each common share entitles the holder to one vote on any matter on which action
of the stockholders of the corporation is sought. During February 2017, the Company increased authorized number of shares to 500,000,000.
Also, the Company increased the preferred stock to 75,000,000 shares and designated 25,000,000 shares of preferred stock to Series
A Convertible Preferred Stock.
Common Share Issuances
On January 30, 2015 the Company issued 3,290,000
units to unaffiliated investors in a Regulation D 506 private placement for proceeds of $329,000. Each unit consists of one share
of common stock and one common stock purchase warrant. Each common stock purchase warrant entitles the holder to purchase one share
of common stock for each warrant at an exercise price of $0.50 and expire on December 31, 2016.
On February 9, 2015 the Company issued
10,000 units for proceeds of $1,000 to an unaffiliated investor in the private placement disclosed above.
On September 28, 2015, the Company issued
250,000 shares of common stock to an investor for cash totaling $100,000.
On November 9, 2015, the Company issued
125,000 units to two investors for cash totaling $50,000. Each unit consists of one share of common stock and one common stock
purchase warrant. Each common stock purchase warrant entitles the holder to purchase one share of common stock for each warrant
at an exercise price of $0.40 and expire on November 9, 2018.
On November 13, 2015, the Company issued
50,000 shares of common stock to an investor that exercised their warrants for cash totaling $25,000.
On January 5, 2016, the Company issued
10,000 shares of common stock to an investor that exercised their warrants for cash totaling $5,000.
On February 2, 2016, the Company issued 484,183
shares of common stock for the cashless exercise of 650,000 warrants.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 9 – STOCKHOLDERS’ EQUITY(continued)
On April 20, 2016, the Company issued
65,000 shares of common stock to investors that exercised their warrants for cash totaling $32,500.
On June 9, 2016, the Company agreed to issue
60,000 shares of common stock to the lender as part of the note payable.
On August 22, 2016, the Company issued 576,406
shares of common stock for the conversion of debt totaling $38,735 and gain on settlement of debt of $3,016.
On September 9, 2016, the Company issued 259,484
shares of common stock for the conversion of debt totaling $15,069.
On September 30, 2016, the Company issued 469,537
shares of common stock for the cashless exercise of 600,000 warrants with an exercise price of $0.10.
On December 9, 2016, the Company issued 500,000
shares of common stock for the conversion of debt totaling $20,000.
Warrant Issuances
On September 28, 2015, the Company granted
650,000 warrants to an individual for consulting services. The warrants can purchase 650,000 shares of common stock with an exercise
price of $0.25 and expire on September 28, 2018. Of the total, 350,000 warrants vest immediately and the remaining 300,000 warrants
will vest 33.33% upon the acquisition of 17 million IP addresses, 33.33% upon the acquisition of additional 17 million IP addresses
and 33.33% upon the acquisition of additional 16 million IP addresses. On February 2, 2016, the Company agreed to waive the vesting
provision and the individual executed a cashless exercise of 650,000 warrants and received 484,183 shares of common stock.
On March 4, 2016, the Company entered into
a consulting services agreement to provide business development services and issued 600,000 warrants. The warrants allow the holder
to purchase 600,000 shares of common stock at an exercise price of $0.80 per share and are exercisable for 2 years. On May 5, 2016,
the Company and the consultant agreed to rescind the agreement.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 9 – STOCKHOLDERS’ EQUITY(continued)
On August 1, 2016, the Company entered
into a consulting services agreement with a third party entity for an indefinite period of time. The services will continue until
either party provides thirty days written notice of termination. The compensation for the agreement is 6,500,000 cashless exercise
warrants. The warrants are exercisable at $0.12 per share and have a life of three years. The first 500,000 warrants vest immediately
and the remaining 6,000,000 warrants vest upon consummation of a transaction as defined in the agreement, during the term of the
consulting agreement or the six month period after the termination.
On August 22, 2016, the Company granted 60,000
warrants as part of convertible debt. The warrants allow the holder to purchase 60,000 shares of common stock at an exercise price
of $0.51 per share and are exercisable for 5 years.
As of December 31, 2016, there were 9,756,250
warrants outstanding, of which 2,756,250 are fully vested.
NOTE 10 – SUBSEQUENT EVENTS
On January 23, 2017, the Company issued
1,555,119 shares of common stock for debt conversion of $52,252 which consists of $50,000 in principal and $2,250 in accrued interest.
On February 22, 2017, the Company issued
289,000 shares of common stock for debt conversion of $8,011 which consists of $7,511 in principal and $500 in fees.
On February 23, 2017, the Company increased
authorized number of shares to 500,000,000. Also, the Company increased the preferred stock to 75,000,000 shares and designated
25,000,000 shares of preferred stock to Series A Convertible Preferred Stock. The designation was completed in March 31, 2017.
On February 24, 2017, the Company executed
a convertible promissory note for $85,000. The loan bears interest at 12% per annum. The loan is due on November 24, 2017. In the
event of default, the interest rate increases to 24% per annum. The lender has the right to convert the principal amount and unpaid
interest of the loan on or after 180 days to convert at a rate of 45% of the lowest trading price during the prior 20 days of conversion.
On March 6, 2017, the Company issued
300,000 shares of common stock for debt conversion of $8,100 which consists of $7,600 in principal and $500 in fees.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 10 – SUBSEQUENT EVENTS
(continued)
On March 1, 2017, the Company issued
616,895 shares of common stock for debt conversion of $16,656 which consists of $14,889 in principal, $1,267 in accrued interest
and $500 in fees.
On March 14, 2017, the Company issued
1,578,926 shares of common stock for debt conversion of $42,631 which consists of $40,000 in principal and $2,631 in accrued interest.
On March 28, 2017, the Company issued
711,111 shares of common stock for warrant exercise.
On March 31, 2017, the Company entered
into a Share Exchange Agreement by and among the Company, ShareRails, LLC, Joseph Nejman, Dmitry Chourpo and Joseph Nejman, in
his capacity as the Selling Members’ Representative whereby we issued and exchanged 91,619,170 shares of our common and 2,857,685
shares of our Series A Convertible Preferred Stock for all of the outstanding units of ShareRails, LLC, a Delaware limited liability
company (“
ShareRails
”). Through this exchange of securities pursuant to the Exchange Agreement (the “
Exchange
”),
ShareRails is now our wholly-owned subsidiary.
On March 31, 2017, the Company entered
into an Employment Agreement with Joseph Nejman, our President. Pursuant to Mr. Nejman’s Employment Agreement, we have agreed
to pay Mr. Nejman an annual base salary of $140,000, and he may receive employee stock options as determined by the Board of Directors.
Any employee stock options granted will vest immediately upon the consummation of aggregate equity financing by the Company equal
to $2,000,000 that results from Mr. Nejman’s direct efforts. Mr. Nejman is eligible to receive a 20% commission on gross
sales that are a direct result of his sales efforts, up to a maximum of his base salary in any calendar year. Mr. Nejman’s
employment is “at will” and either party may terminate the agreement at any time. If terminated without Cause or as
a result of Constructive Termination, Mr. Nejman will receive severance equal to three months pay at his most recent Base Salary.
If Mr. Nejman is terminated for Cause, Disability or death, or voluntarily resigns, he will not receive any severance, only unpaid
salary as of the date of termination and vested benefits.
On March 31, 2017, the Company entered into
an Employment Agreement with William Bossung, our Chief Financial Officer. Pursuant to Mr. Bossung’s Employment Agreement,
we have agreed to pay Mr. Bossung an annual base salary of $140,000, and he may receive employee stock options as determined by
the Board of Directors. Any employee stock options granted will vest immediately upon the consummation of aggregate equity financing
by the Company equal to $2,000,000 that results from Mr. Bossung’s direct efforts. Mr. Bossung is eligible to receive a 20%
commission on gross sales that are a direct result of his sales efforts, up to a maximum of his base salary in any calendar year.
Mr. Bossung’s employment is “at will” and either party may terminate the agreement at any time. If terminated
without Cause or as a result of Constructive Termination, Mr. Bossung will receive severance equal to three months pay at his most
recent Base Salary. If Mr. Bossung is terminated for Cause, Disability or death, or voluntarily resigns, he will not receive any
severance, only unpaid salary as of the date of termination and vested benefits.
GREY CLOAK TECH INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 and 2015
NOTE 10 – SUBSEQUENT EVENTS
(continued)
On March 31, 2017, the Company entered into
a Development Services Agreement with Covely Information Systems, a company owned and operated by Fred Covely, our Chief Executive
Officer (the “
Covely Agreement
”). Pursuant to the Covely Agreement, we have agreed to pay Covely Information
Services for services depending on monthly programming hours and hosting fees, as billed by Covely Information Systems. Billing
will be variable and based on the income we receive from one of our clients and other services performed on our behalf. Payment
is subject to deferment to the following month for any portion we are unable to pay because of insufficient capital. Covely Information
Systems is an independent contractor and either party may terminate the agreement at any time. If the Covely Agreement is terminated
for any reason, Covely Information Systems will not receive any severance, only the amount due for services performed prior to
the date of termination.
On April 1, 2017, the Company entered into
a Development Services Agreement with Dimicho Pty. Ltd., a company owned and operated by Dmitry Chourpo, one of the founders and
prior owners of ShareRails (the “
Dimicho Agreement
”). Pursuant to the Dimicho Agreement, we have agreed to pay
Dimicho Pty. Ltd. $8,000 per month for development and support of our software applications and web services. The payment is subject
to deferment to the following month for any portion we are unable to pay because of insufficient capital. Dimicho Pty. Ltd. will
dedicate no less than one full-time development resource exclusively to our client needs, work projects and business interest.
Dimicho Pty. Ltd. is an independent contractor and either party may terminate the agreement at any time. If the Dimicho Agreement
is terminated for any reason, Dimicho Pty. Ltd. will not receive any severance, only the amount due for services performed prior
to the date of termination.
On March 31, 2017, the Company issued 6,280,745
shares of common stock, restricted in accordance with Rule 144, to Brad Holden, a former member of ShareRails, in connection with
the Exchange and to satisfy obligations owed to Mr. Holden by ShareRails, our wholly-owned subsidiary.
On March 31, 2017, the Company issued a total
of 13,307,405 shares of Series A Convertible Preferred Stock to officers, directors and shareholders.
On March 31, 2017, the Company issued a total
of 7,550,000 shares of common stock to officers, directors and shareholders of the Company in exchange for 1,261,333 shares of
Series A Convertible Preferred stock.
On March 31, 2017, the Company issued a total
of 9,191,387 shares of Series A Convertible Preferred Stock to officers and shareholders in exchange for 55,148,320 shares of common
stock.